The cool trap (or, why Jeff Bezos should have ditched the Fire Phone)
Austin Carr has a story in this month’s Fast Company about Amazon’s failed effort to become a smartphone maker. There are lots of interesting details about why the Fire Phone flopped, how Amazon CEO Jeff Bezos micro-managed the project, pushing for trifling add-ons like a 3D “dynamic perspective” feature, and where Amazon’s secretive Lab126 stands now that their keystone project is a dud.
You could (and should) read Carr’s piece as a catalog of Bezos’s flaws as a manager, and a preview of the blizzard of challenges Amazon is going to have to navigate in the coming months. But it also doubles as a diagnosis of a larger problem within the C-suites of corporate America – namely, a lurking, dangerous obsession with coolness.
It’s no secret that brands want to be cool. (Exhibit A: Taco Bell’s CEO’s perma-cringe-inducing invocation of “on cleek.”) Partly, that’s because cool companies command a premium in today’s youth-obsessed tech economy. (Try getting a boring B2B software company a $10 billion pre-revenue valuation.) But the status anxiety of today’s corporate chieftains doesn’t seem to be doing much to help those companies – and might be hurting them more deeply than they realize.
In Bezos’s case, the coolness itch manifested in a desire to make more products aimed at the top end of the consumer market – whether those were scripted TV shows, smartphones, or personal assistant canisters. (The ghost of Steve Jobs seems to loom particularly large over Amazon; an insider quoted by Fast Company said that the Fire Phone was designed to signal a “repositioning of the brand away from being so utilitarian and toward becoming more of a lifestyle brand like Apple.”) Simply being the best retailer in the world – and the best distributed computing service, and the best commercial logistics innovator, and the best e-commerce marketplace – isn’t enough for Bezos. He seems to covet the approval of coastal elites who coo over new iPhones and attend glitzy TV premieres – people like him and his friends, in other words.
As it happens, I’ve also been reading Nicholas Carlson’s fun new book on Marissa Mayer and Yahoo. I was reminded of one passage in particular this morning. It’s from 2011, a dark era in Yahoo’s pre-Mayer existence, and it revolves around then-Yahoo CEO Carol Bartz’s realization that what Yahoo needed most was to do the same thing Amazon is trying to do now – move upmarket, quickly:
[A] company called Hunch did a study comparing Gmail and Yahoo Mail users. It found that Yahoo Mail users were overweight women aged eighteen to forty-nine who lived in the Midwest and had never traveled outside their own country. They owned CDs. They had high school degrees. Gmail users were typically thin men aged eighteen to thirty-four with college degrees. They lived in cities and had traveled to five or more countries. They had MP3s. Yahoo users liked magazines; Gmail users liked blogs.
As hard as building cool is, competing with cool is even harder. In both Yahoo and Amazon’s case, billions of dollars have now been spent trying to woo a more sophisticated user base, with little success. (The New York Times Magazine excerpt of Carlson’s book has a good rundown of failed attempts to bring upscale flair to Yahoo, and so far, none of Amazon’s premium options have taken off.) But I’m not even sure the payoff would be worth it, even if these efforts did succeed. There simply aren’t that many rich, urbane sophisticates, relative to the number of overall customers Amazon and Yahoo serve. And the macroeconomic barbell effect means that while Amazon and Yahoo could theoretically succeed by catering to the wealthy, they also have an opportunity to seize a larger share of a growing market for cheap goods and services. What if Amazon had taken the billions it spent on the Fire Phone and used it to lower the cost of Amazon Prime, or develop a new packing technology that allowed it to eke out slightly higher margins on basic consumer goods while cutting prices?
The other problem with coolness as a corporate teleology is that coolness often gets diluted by mass adoption. Uber was arguably a cooler company when it was used mainly by rich people, but it needed the accessibility and cheap pricing structure of UberX in order to grow. Facebook was cooler when it was just college students, but it’s orders of magnitude more useful as a service now that everyone’s on it. Coolness isn’t a goal in itself, it’s simply what allows your company’s products to proliferate – at which point the cool factor tends to disappear.
It’s great that companies like Amazon and Yahoo are willing to make huge gambles on untested product areas. But aside from CEOs’ desire to appeal to their own social equals, I’m not sure why these companies are so intent on turning themselves into aspirational lifestyle brands. There’s no guarantee of success if the strategy works, and if you’re wrong – especially if hardware is involved – you’ve just thrown away billions of dollars and neglected more functional parts of your business for years on end.
If 2014 was the year of corporate cool-chasing, I’m hoping that this year, we’ll see CEOs get a little more confident in the businesses they already have. Jeff Bezos may not have Dre, or a charmed reputation among cosmopolitan tastemakers, but he can ship a 36-pack of paper towels to my house in a day, for half the cost I’d pay at CVS. That’s cool enough for me.