The Fire Phone Debacle and What It Means For Amazon's Future

HughPickens.com points out an article at Fast Company that dug into the creation of Amazon's floundering Fire Phone to figure out why the company pushed so hard to bring it to market. The piece is an indictment of Jeff Bezos's determination to make the Fire Phone into a competitor for an already-saturated high-end smartphone market. "This wasn't some vague guideline from an executive busy running other parts of the business; based on interviews with more than three dozen current and former employees, most of whom were deeply involved with the project, the CEO drove every aspect of the phone’s creation from the outset."

Now that Amazon's growth is slowing and profits have yet to be seen, investors and analysts have run out of patience for gambles like this one. "What makes the Fire Phone a particularly troubling adventure, however, is that Amazon’s CEO seemingly lost track of the essential driver of his company’s brand. It’s understandable that Bezos would want to give Amazon a premium shine, but to focus on a high-end product, instead of the kind of service that has always distinguished the company, proved misguided."

Comments

"Growth is slowing"

[pipedwho]

Gotta love investors that shiver at a slowdown of the second derivative of the growth curve. Amazon is still growing and the growth is increasing, just not a fast enough increase of growth growing.

Amazon is a huge successful brand with multiple obvious methods of income from product retail to cloud services.

This seems like a bunch of investors not liking how Bezos is spending their money.

Re:where did Amazon service suffer as a result?

[SternisheFan]

Firephone will go down as the Atari ET of phones, and didn't I read somewhere that Amazon has got a new phone coming out for 2015? They should stick to what they're good at, people already know how to find Amazon when they want to.

VERY INACCURATE

[Anonymous Coward]

I was an an engineer in that team during the first incarnation of the project. The article is very very inaccurate.

- team was not scrapped by jeff, at least not until large number of people walked out due to mismanagement
- prototypes that worked (and were of phone size & shape) existed more than 2 years before launch but then (as mentioned) team walked and it all had to be scrapped
- hw team often undercut sw team by replacing components and not telling anyone about it
- hw team often made mistakes of the very basic variety (two separate sets of pull-ups on a single i2c bus)
- some parts choices were motivated by personal interests of people in the hw team, even against their own data & analyses. This was allowed to proceed
- some of the management made the team look very foolish in front of vendors (asking questions that made no sense in the current millennium)
- sw team was kept busy by endless meetings with no end in sight, which significantly cut into any chance of productivity

Re:VERY INACCURATE

[JanneM]

It is just the nature of a combined software / hardware solution that hardware teams tend to win. They have tangible manufacturing, costs and physical limitations that managers understand. While software has very different kinds of limitations -- often human limitations -- that managers don't understand.

Basically so, yes. Although - and I say this as a software person - there's good reason for that to be the case. Hardware incurs per-unit costs, so any design change that makes it cheaper to build will be paid back million-fold. If that increases the cost/time of developing the software you have to show that increase is higher than all the money you save in manufacturing. Unless the hardware changes are truly extreme, that is unlikely to be the case with a volume consumer product. Software has no unit margin cost, so the same logic doesn't apply in reverse.

The Rashomon reference was not an idle one, by the way. No matter how honest and well-intentioned, you're unlikely to have an unbiased or particularly correct view of what happened if you were involved directly in something. It's great to hear the point of view - but that's what it is, a point of view. Other teams and people at other levels certainly have others, and it'd be foolhardy to try to understand what happened based on ony one or two of them.

Amazon is waiting for a competitor

[EmperorOfCanada]

At this point in Amazon's key markets such as the US there is no Pepsi to Amazon's coke. This is actually a dangerous thing for a large company for they could start attributing their wild success to all kinds of the wrong things including simply a divine blessing. The risk for Amazon is that if this situation continues for too long that the competitor won't simply be competitive but will actually leverage any weaknesses that Amazon develops.

For instance I heard a rumour that Microsoft wanted to really take on Word Perfect. So they looked at WP's finances and realized that WP was not a lean company at all. Yet profit margins were really slim. So Microsoft didn't need to really go head to head with WP in all markets in a giant slug fest but that they only needed to reduce WP's revenue by 5% which would mean they would start taking losses. So MS found the easiest 5% to go for and took it with ease. Then with WP on the ropes MS was able to clean up the other 95%.

I also read that in the early days of MS getting into the C++ IDE world that they couldn't make any headway against Borland C++. So a new guy running the C++ project asked the marketing people what C++ programmers wanted; which turned out to be templates. But those were the elite of C++ programmers. So he re-asked the question to the typical C++ programmer and they said that they wanted to find an easy way to make Windows programs (windows was new and much programming was still in DOS at the time). So he released VisualStudio 1.0 which had easy wizards to get a windows program up and running and it was years before VS eventually got around to noodling with templates. But I remember the last version of Borland C++ that I used was all blah blah blah about their wonderful implementation of templates.

So I see Amazon as Borland C++ or Word Perfect 4.2. They are kings of their universe and there is no real competitor on the horizon. And then boom headshot and they were gone. I am certain that if you went to a tech conference 6 months before each of these two products died and suggested that in 2 years the products wouldn't basically be in use that people would have laughed you out of the room.

So at this point Amazon looks eternal and each of their many many mistakes seem to be tolerable. But I will give an example of a WP mistake. They were slightly worried about MS Windows and this crappy little word product. So they thought by dragging their feet with on Windows version that they stood a chance of actually killing windows entirely and keeping the world on DOS. I suspect that many seemingly smart executives nodded approvingly at this brilliant plan.

Re:where did Amazon service suffer as a result?

[Herkum01]

Jeff Bezos isn't giving us investors enough money

Amazon has never given ANY investors any money, speculators on the other hand and Jeff Bezos himself has done remarkably well. If you your benchmark for wildly successful is wrapped in the stock price you are 100% correct. If you are an investor looking for a return, Amazon has basically done nothing.

So what if their sales have been wildly successful, can they actually make any money doing it is the problem.