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Amazon Lessons [Growth
Posted on February 22, 2018 @ 07:15:00 AM by Paul Meagher

The Amazon is the largest river in the world. One of the reasons Jeff Bezos named his company after this river is because he intended his original online bookstore to be the biggest in the world.

Today I want to explore what it takes to be the biggest river in the world. I'm sure Jeff Bezos understands perfectly well why the Amazon is the biggest river. It is possible that he is using this knowledge to scale his own company.

One of the main reasons the Amazon river is the largest river in the world is because it has a Strahler number of 12. A Strahler number is a way of classifying streams based on the number and size of tributaries that feed into it. It is easiest to understand this numbering system by seeing an example:

The number assigned to a stream segment only increases when 1) two streams join, and 2) the number of both these rivers is 1 less then the stream they combine to form. When you get to the end of the Amazon river, adding a small tributary with Strahler number 1 does not increase the Strahler number of the river. It is only when two massive streams with Strahler numbers of 11 combine that the Strahler number of the ensuring stream becomes 12.

In the early days of Amazon the company, it grew by adding hard to find books to its inventory. Alot of small revenue streams from book sales fed into Amazon. Now that Amazon is a huge company, adding small revenue streams makes very little difference to its revenue flow. To grow significantly bigger, Amazon has to merge with some huge revenue streams such as grocery shopping and entertainment.

A stream is the visible manifestation of groundwater. The presence or absence of water stored in soil determines the flow characteristics of a river. Groundwater is like the customers that feed a business. The size of the Amazon river is a reflection of the groundwater that it has accumulated.

To compete against Amazon the company you would have to take the flow from one or more of its revenue streams. Amazon would be unlikely to notice flow lost as a result diverting small revenue streams, but it would likely notice if you tried to divert a revenue stream with a high Strahler number. The key is to not to get noticed by Amazon until you have a high enough Strahler number that you can fight back or maintain your ground. You may eventually decide to sell your flow back to Amazon.

Can a startup go from a small tributary to a huge river the size of Amazon without alot of merging? Very unlikely. The history of all the behemoths of industry is one of acquiring companies to become bigger companies. They merge like the Amazon river to become bigger companies.

In conclusion, the study of river networks may offer some insight into how companies grow over time.

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