A false-color satellite photograph of the Amazon River in Brazil. (Photo credit: Wikipedia)
Rivers become amazingly complex in their last few miles. If you have not yet done that try and navigate the Amazon delta from the sea up the river – it is an enlightening experience. As a former ships master, I have had the privilege of navigating up a number of rivers – Ganges, Amazon, St Lawrence, Houston, Delaware, Hudson, Nile, Mississippi, and many others. The complexity of the naturally evolved network of the rivers’ last miles must be seen to be believed. You can get lost for your entire life in the intricate network if you do not retain tight control over your perspective. Today, GPS would be a big help but even then you will need a good map and good navigation skills.
Here are a few pictures from Google maps of the last miles of the rivers that I navigated:
The last mile of every network is almost always the most intricate, complex and difficult to navigate. Think of the human body. The 60,000 miles of blood vessels move blood from the heart to various organs and disperse into smaller veins as they go. To get to our fingertips, blood travels in the smallest blood vessels, capillaries, which are less than 1mm long each. So you can imagine how sophisticated the network is and utmost caution is needed at all times. The same applies to businesses. If you get it right – you will win. Amazon is in news for its attempts to set up the last mile services. This will put them in competition with FedEx and UPS in the territory they have owned for decades. Their core competence is delivery to the last miles. Will Amazon be able to outcompete them? In Amazon’s arsenal is predictive shipping. At the beginning of this year, Amazon has received a patent for its “anticipatory shipping” technique. Possessing intimate knowledge of their customers, sometimes even more than the customers themselves, Amazon can control the entire end-to-end supply chain, they can create shops, they can change the entire e-commerce sphere. The odds seem to be in their favour. They can hire and learn from UPS or FedEx. Infrastructure can be bought off the shelf. They also have very high quality self-developed software. But the jury is still out. If they fail – they will lose their shirt. The last mile of every network can bankrupt a company because of the sheer complexity, cost and customisation involved. Surely, you wouldn’t want to be in a situation where there was only $5,000 left in your company’s pocket. Not everyone would be as lucky as the founder of FedEx who gambled that amount and turned it into $32,000, just enough to save the company back in the 1970s. For many others, bankruptcy was inevitable. Webvan filed for bankruptcy in 2001 for being over-optimistic about its “last mile” while the real issue lied in how to get customers to the first mile. Good Amazon waited. Why? Because their strategies build on each other. If Amazon succeeds, it will build a 5-STAR Business Network that will give it a substantial, lasting competitive advantage – over not only retailers, but also courier companies and distributors. At a later stage, once it has figured out its own network, it can outsource what is not considered necessary. What will it outsource? Practically everything except for customer facing interface. Because that gives it immense strength in the 5-STAR Business Network. Its ability to understand customers and make them the right offers. Fulfilment can be modularised and outsourced – but only once Amazon knows the best way to do it themselves.