THE WORLD’S INNOVATIVE 50 MOST COMPANIES
Picture your ideal neighborhood. What does it look like? Is it manicured, with buildings set in a pattern so that everything flows together, designed for perfection? Or is it gritty and spontaneous, the kind of place where a restaurant might move into the space that used to house a dry cleaner? Boxes bearing the Amazon logo can arrive at doorsteps in either of these environments, of course, but Amazon’s founder and CEO, Jeff Bezos, prefers the second type. “I think neighborhoods, cities, and towns that have evolved are more interesting and delightful than ones that have been carefully top-down planned,” he tells me when I meet him at Amazon’s Seattle headquarters in November. “There’s just something very human” about them, he says. It’s a surprising answer from a man known for his disciplined adherence to Six Sigma–style processes and data-driven decision making. But it’s also revealing. Over its nearly 22 years, Amazon has moved into one sector after another and gentrified it, even if that meant tearing down its own existing structures. Amazon’s Echo smart speaker rose on the lot where its Fire Phone flamed out. The latest version of Amazon’s streaming music service, Amazon Music Unlimited, was constructed on top of its initial music store, Amazon MP3, which opened nine years ago. Amazon Studios’ Emmy Award–winning original TV shows are built upon a crowdsourcing platform that the company first introduced in 2010 for aspiring scriptwriters. Even the company’s fashion business—amazon is now the second-largest seller of apparel in the U.S., according to Morgan Stanley—evolved from brand experiments in outdoor furniture (2004), home goods (2008), electronic accessories (2009), diapers (2014), and now perishables such as organic, fair-trade-certified coffee. Unlike Apple, Google, and Microsoft, Amazon is not fixated on a tightly designed ecosystem of interlocking apps and services. Bezos instead
emphasizes platforms that each serves its own customers in the best and fastest possible way. “Our customers are loyal to us right up until the second somebody offers them a better service,” he says. “And I love that. It’s super-motivating for us.” That impulse has spawned an awesome stream of creative firsts. Just this past year, Prime Video became available in more than 200 countries and territories, following the November debut of The Grand Tour, Amazon’s mostwatched premiere ever. Twitch, the streaming video-game network that Amazon acquired in 2014, unveiled its first three original titles from its recently formed studios. Amazon invested millions in startups that will build voice-control apps for the intelligent assistant Alexa and give her thousands of new skills. The company opened two dozen new fulfillment centers, became the largest online store in India, and made its first delivery by autonomous drone in the United Kingdom.
Bezos’s strategy of continuous evolution has allowed the company to experiment in adjacent areas—and then build them into franchises. The website that once sold only books now lets anyone set up a storefront and sell just about anything. The warehouse and logistics capabilities that Amazon built to sort, pack, and ship those books are available, for a price, to any seller. Amazon Web Services, which grew out of the company’s own e-commerce infrastructure needs, has become a $13 billion business that not only powers the likes of Airbnb and Netflix, but stores your Kindle e-book library and makes it possible for Alexa to tell you whether or not you’ll need an umbrella today.
Amazon is a singular enterprise, one that rises to the top of Fast Company’s Most Innovative Companies list because it has continued to be nimble even as it has achieved enviable scale. To truly understand how Bezos is meshing size and agility in 2017, though, you need to look beyond sales figures ($100 billion in 2015) and the stock price (up more than 300% in the past five years) and consider three initiatives that drive Amazon today: Prime, the company’s rapidly proliferating $99-per-year membership program; an incursion into the physical world with brick-and-mortar stores, something the company has long resisted; and a restless rethinking of logistics, epitomized by a new fulfillment center an hour outside Seattle that features high-tech robots working alongside human workers like a factory of the future.
Our mobile-first, on-demand world finds its roots in Amazon’s founding idea: that digital commerce will radically reshape our marketplace. The company’s impact has already been staggering. In January, the nonprofit Institute for Local Self-reliance conducted a survey of nearly 3,000 independent businesses, half of them retailers, asking them to cite the biggest threats they faced. Competition from chains and big-box stores, health care, finding employees, and rising rents all ranked near the bottom as modest concerns. “Way above everything was competition from Amazon,” says ILSR codirector Stacy Mitchell. (The study also found that Amazon’s expansion in 2015 led to a net loss across all businesses of 149,000 jobs.)
Despite all the twists and surprises in recent decades— all the newcomers with youth, funding, and can-do enthusiasm—amazon remains the undisputed leader, a startup at heart still striving to remake our expectations. And to repeatedly remake itself.
“OUR CUSTOMERS ARE LOYAL TO US RIGHT UP UNTIL THE SECOND SOMEBODY OFFERS THEM A BETTER SERVICE,” CEO BEZOS SAYS. “AND I LOVE THAT. IT’S SUPERMOTIVATING FOR US.”
Nearly all of Amazon’s most recent innovations share a connection to Prime, which by some estimates accounts for 60% of the total dollar value of all merchandise sold on the site. Between 40 million and 50 million people in the United States use Prime, and, according to Morgan Stanley, those customers spend around $2,500 on Amazon annually, more than four times what nonmembers spend. (Amazon refuses to offer any hard numbers related to Prime membership—that would be competitor focused rather than customer obsessed, as the executives there say—but it will confirm that Prime members spend more and shop across a greater number of categories than other users.)
If you somehow manage to take advantage of every Prime membership feature, it’s undeniably a good bargain. Along with free two-day shipping for millions of products, and tens of thousands of items available at your door in an hour or less through Prime Now, there is one-hour restaurant delivery, a free e-book a month (including the entire Harry Potter series), and ad-free viewing of a streaming video-game channel on Twitch—all included in the annual fee. You can get early access to Amazon’s best deals, 20% off diapers, and unlimited photo storage. For a few more dollars, Prime can be upgraded to include unlimited audiobooks, grocery delivery, and a subscription to HBO that can be watched on Amazon’s Fire TV streaming media player. More than 50 “benefits” were added for members around the globe in the second half of 2016 alone, says Greg Greeley, Amazon’s global VP in charge of Prime. “I would like to say that the team thinks, ‘Oh, boy, we’ll take a deep breath here,’ ” he says. “But the way this company [is], it wouldn’t surprise me if we continue to keep accelerating.”
What Amazon Prime is selling most of all is time. Every executive I spoke to, when asked about how it all fits together, cites this desire to get you whatever you want in the shortest window possible. Stephenie Landry, the Amazon vice president who launched Prime Now in 2014 and has overseen its expansion into 49 cities in seven countries, explains that her business merely has to answer two questions: “Do you have what I want, and can you get it to me when I need it?” The rest of the customer experience is built around answering both questions in the affirmative.
The more products and services Amazon is able to cram into Prime, the more likely users are to renew their membership and buy more stuff, which gives Amazon more data about their tastes and what they are likely to buy next. That information is used to spin out new products and services, such as the Dash button, which replenishes popular items with a tap, and Alexa, which is built, in part, for shopping. “You can just say, ‘Alexa, reorder toothpaste,’ ” says Bezos. “And it knows which kind of toothpaste.” That’s why he has repeatedly called Prime the company’s “flywheel”: a device used in engines that provides constant energy. It is both an accelerant to Amazon’s forward motion and a beneficiary.
Bezos says that people have been asking him for 20 years whether he would ever open physical stores. The answer, consistently, has been no. “I’ve answered pretty much the same way the whole time, which is that we will if we have a differentiated idea,” Bezos tells me. Yet today, suddenly, Amazon has four concepts in the works.
Why the shift? In part it links “THE WAY THIS COMPANY [IS], IT WOULDN’T SURPRISE ME IF WE CONTINUE TO KEEP ACCELERATING,” SAYS GREG GREELEY, AMAZON’S HEAD OF PRIME.
02 | GOOGLE FOR DEVELOPING A PHOTOGRAPHIC MEMORY
At its best, Google marries awesome computing resources with algorithmic intelligence to create popular services that no one else can match: Search, Maps, Gmail, and Youtube have been massive hits because they centralize content and make it easy to find what you want. With an estimated 1 trillion–plus images now taken annually, storing and presenting photos has become Google’s next big project—and a powerful way to pull users even further into its orbit. “We thought we could apply machine intelligence in an impactful way around photos and videos to make it easier [for users] to enjoy what they create,” says VP of Google Photos Anil Subharwal. Launched in May 2015, Google Photos coalesces a user’s images across hard drives and devices, as well as closet shoeboxes, thanks to the Photoscan app, which debuted last November and digitizes old prints. Drawing from Google’s image-recognition and AI capabilities, the service’s Assistant feature can also curate images into movie montages, animations, and collages. (One movie format, called Lullaby, stitches together images of your sleeping baby.) More than 200 million users have embraced Google Photos—an indication of how the company’s restless invention continues to transform culture. “People still scroll [through images] today,” Subharwal says. “We plan to do more to make even that first page of recent photos smarter.”
03 | UBER For accelerating autonomous driving
While experts debated whether self-driving cars would be commercially available in 5 or 10 years, Uber raced ahead and put vehicles on the road. Last August, it launched a program in Pittsburgh that allowed people to summon a self-driving car from their phones. At the same time, Uber acquired autonomous-trucking startup Otto. Together, these moves put the company, valued at $68 billion, at the forefront of transportation’s next wave. “The biggest asset and advantage [of our self-driving efforts] is being part of the larger Uber network,” says Raffi Krikorian, engineering director at the company’s Advanced Technologies Center in Pittsburgh. 1 A smart pilot Uber deliberately chose Pittsburgh for its first fleet because of the city’s erratic weather and winding roads. “If we can drive in Pittsburgh, we [know we] have the features we need to go and drive in other cities,” Krikorian says. The project has since expanded to Phoenix.
2
Automotive allies
Last summer, Uber signed a $300 million deal with
Volvo, which provides the company’s current fleet of humanassisted self-driving cars. The partners intend to debut a fully autonomous one by 2021.
3
Connected roads
In October, Otto completed the first self-driving 18-wheeler delivery (of 50,000 cans of Budweiser). “[One day] our self-driving Ubers will [be able to] drive highways because the truck team is tackling it,” says Krikorian, “and the trucks will drive in cities because Ubers are [there].”
04 | APPLE FOR BAKING IN ITS ADVANTAGES
Apple isn’t, at its core, a chip company, yet its silicon engineering group shipped four microprocessors in 2016, each paired to a new product, including the iphone 7 and Airpods. Apple’s commitment to designing the very foundations of its hardware, rather than merely buying them off the shelf, gives it a sustaining advantage in creating the most compelling consumer-electronics experiences. “We pick the projects where we feel like we can make a difference—the big customer impacting features,” says Anand Shimpi, who works on hardware technologies at Apple. So the stunning depth-of-field effect from the iphone 7 camera? That’s directly enabled by the new A10 chip. “The actual production of the stored portrait image is because of things that we put into the [image signal processor],” Shimpi says. As Apple has expanded into new product lines, its silicon team has had to figure out how to realize the vision of the company’s systems and design teams. And it can’t just shove the A10 where it doesn’t belong. The S2 chip, for example, was developed to give the second-generation Apple Watch its lauded performance improvements without sacrificing battery life, and the magic trick of how Airpods simultaneously deliver music to two separate wireless devices is a direct result of programming embedded within their W1 chip. “We want to improve without compromise,” says Shimpi. It’s this mind-set that helped Apple’s “rebuilding year” of fiscal 2016 generate more than $215 billion in revenue and almost $46 billion in profit.
05 | SNAP FOR BRINGING CRACK LE AND POP TO A NEW WAY OF SEEING THE WORLD
On a late summer evening in Phoenix, a group of Alpha Chi Omega sisters sit in the stands of the Arizona Diamondbacks stadium and take selfies. They capture duck-face snaps with each other, with churros, and with each other with churros. A bored camera operator spots them in the outfield stands, and two middle-aged MLB announcers have a field day, mocking the women’s youthful self-absorption. “That’s the best one of 300 pictures I’ve taken of myself today!” one commentator cracks. “Here’s my first bite of the churro!” chirps his coconspirator. “Here’s my second bite of the churro!” “Peralta knocks it into center! . . . And nobody noticed.” The clip went viral because, from the perspective of the MLB broadcast crew, the students seemed disconnected from events on the field. But the sorority sisters weren’t living their lives for the TV cameras. They were, in fact, having a great time at the game—via Snapchat. Consumers, advertisers, influencers, media brands, and rivals are increasingly viewing the world through Snapchat’s lens. In the past
18 months, the photo- and video-sharing app has released a slew of bold (and brazenly imitated) features, from absurdist digital masks to face-swapping to group chat, which have vaulted it to the vanguard of social communication. Snap, as the company is now known, claims more than 150 million daily users, and it reportedly exceeded its lofty goal to generate more than $300 million in revenue for 2016. Its introduction of location-based image enhancements, known as geofilters, and Spectacles, its sunglasses that record 10 seconds of video from the wearer’s point of view, inspired genuine consumer fanaticism for augmented reality and wearable computing in a way that overhyped rivals from Magic Leap to Google haven’t matched. As Snap is expected to go public this year, deconstructing the principles underpinning its products is more important than ever. After all, the only people who underestimate Snap are those who don’t take the time to see what’s right in front of their face.
When Snapchat rebranded last September to Snap, CEO Evan Spiegel proclaimed it a camera company. At first blush, it’s a curious bit of branding—kevin Systrom, founder of Snapchat rival Instagram, ardently argues that he runs a communications company—but Snap’s framing is intentional. Camera technologies have driven some of the most important developments in media. In 1888, Thomas Edison’s Kinetograph gave birth to motion pictures, and provided Edison with early control over the film industry. In 1957, NBC upgraded to color broadcasting, largely so its owner, RCA, could sell color TVS. Kodak, once one of the world’s most valuable brands, continues to sell off imaging patents to a new generation of camera-obsessed companies, including Facebook, Google, and Apple.
Visual information is a conduit for the digitized relationships of the modern era, and Snap effortlessly navigates this confluence of image, communication, and entertainment. Its most impressive illusion is that its app design feels casual or even random, when in fact, it’s a carefully thought-out experience, constantly being honed for maximum engagement. Whether it’s offering up cartoon ghost Snapcode Stickers for you to add a new friend or puppy-nose filters to apply to your face, Snapchat’s interface reinforces that it’s for fun. “They treat their core product like a utility, and they aren’t overly precious about it, ” says Ryan Rimsnider, Taco Bell’s senior manager of social strategy. “And if they are, they certainly don’t act like it.”
For the past two decades, user-interface design has put a premium on an intuitive placement of functions. By contrast, Snapchat forces users to play around. Its design operates like a speakeasy, requiring you to feel for the secret door or have a friend who knows the passcode to unlock the next room. Many of Snapchat’s features, such as long-pressing on your face to bring up filters or being able to convert yourself into an emoji, need to be discovered. Adding people to follow, whether they’re celebrities or your friends, is another clandestine game, one that rewards good creators rather than merely famous people. And Snap doesn’t generally issue press releases announcing app updates, preferring that users are surprised when they find new features on their own. Snapchat is therefore free to experiment more aggressively than competitors with UI shifts and features— and even break its own rules without breaking the app. This is why Snapchat has been able to evolve from only allowing photos taken in the moment, which would disappear in 10 seconds, to adding Memories, which makes old content searchable, without a revolt.
Ultimately, what Snap offers users is control. “They just want to provide crazy tools that enable fans to create stories with no end,” says Rimsnider. Take Snapchat’s augmented-reality lenses. These silly filters solve an important problem: They give people something to do when they share. Puking a digital rainbow, one of Snapchat’s photo enhancements, is a prop to overcome stage fright when messaging friends.
Stories, a collection of images and video that capture a user’s day and last 24 hours, has become the centerpiece
of the Snapchat experience. “Snapchat is the reality show about your life that you shoot and edit yourself,” says Jason Stein, CEO of both the marketing agency Laundry Service and Cycle, a media startup. Indeed, some of the most renowned Snapchatters, such as Julz Goddard (better known as Yesjulz), effectively use the app to produce a series starring themselves. “I was talking to different networks about a reality show, but I wasn’t really excited about other people having creative control over my content and my image,” Goddard says. “Then I was like, Wow, this Snapchat is incredible. Everyone in the world can have their very own television network.”
Snap is watching what its users create and deploying those insights to woo Hollywood talent to embrace the platform as a new entertainment medium. The company is in talks with talent agencies and media companies to create scripted and unscripted “Snapchat shows” for the platform. The Snap twist, according to one Hollywood insider: The four-minute-long series would be divided into 10- to 60-second chapters, much like users’ Stories are structured. When Snap internally produced its own test program—the election-year series Good Luck America—it even had the crew shoot host Peter Hamby off-center, at arm’s length, to create the impression that he was filming himself. In dealings with traditional media partners such as NBC, which creates The Voice on Snapchat and a recurring Jimmy Fallon segment, Snap has offered shot-by-shot analytics from Good Luck America, showing how pacing that’s too slow, or shots that are too dull, will lose viewers in the middle of a video. Ultimately, Snap sees user-generated
and Hollywood content evolving codependently, with each building off the other.
Similarly, Snap’s advertising business directly benefits from the tools it creates for Snapchatters. The design team that builds Snap’s consumer features also creates its advertising products; every tool for marketers began its life delighting users. For example, Snapchat’s Discover channels, which feature original content from media brands such as National Geographic and Vice, introduced the idea that you swipe up to learn more about a given story. “After months of training the behavior,” says Kenny Mitchell, Gatorade’s director of consumer engagement, “Snapchat then launched Snap Ads that allow for consumers to swipe up to get more info.”
Snap’s most intriguing ad product has been sponsored lenses, which has attracted the world’s best brand marketers, including Disney, Mcdonald’s, and Starbucks. For Cinco de Mayo, Taco Bell released a filter that turned people’s heads into, yes, giant tacos. By most estimates, Taco Bell spent between $500,000 and $750,000 on a filter that was viewed 224 million times in a single day. That’s double the views of a Super Bowl ad for one-tenth the price, and, unlike TV viewers, Snapchat’s audience is actively using, sharing, and having fun with an ad.
Users are already accustomed to adorning their faces with gags to make their friends laugh, so it doesn’t matter that the gag is sponsored. Snap goes so far as to measure what it calls “play time”—how long a user might toy with a giant taco on their face, even if they never take a photo
DESIGNER REBECCA MINKOFF COMPARES SPECTACLES TO A PARTY DRESS OR SHOES, AN OVERT PIECE OF FLAIR THAT CALLS ATTENTION TO ITS INTENT.
wearing it. Because it’s still valuable engagement. “They’re really trying to make social ads suck less,” says Winston Binch, chief digital officer of Deutsch North America, which works closely with Taco Bell’s social strategy team. “They’re not trying to reappropriate other digital advertising norms. They want to maintain the integrity of the experience.”
In November, Snap introduced yet another strategy to make its platform even more addictive, capable, and advertiser-friendly: hardware. Snap Spectacles transform Snapchat the app into a brash sunglasses-camera that takes circular videos. Spectacles, or Specs, as Snap employees call them, eliminate that final point of friction of pulling a phone from one’s pocket to capture life’s spontaneity. They encourage sharing by design: When they initially pair with your phone, Specs actually film your first snap without warning. (After that, a tap of the frame initiates recording.) “Having a pair has already made a dent in the type of content I’m making,” says Mike Platco, a Snapchat artist and influencer. “It has made me more excited to post ‘in the moment’ videos that are less focused on a large narrative and more about bringing my audience in on the cool stuff I get to do.”
Recently I wore Specs during a Chicago birthday bar crawl, capturing scenes that I’d never have filmed with my phone. Walking into each dive felt Scorsese-esque as I filmed it, as if I was shooting my own Goodfellas, but grittier. With both of my hands free to stuff my face, I captured a late-night tamale run as a tube of masa flying right below the camera. If I wanted a selfie, I had to have one of those cinematic moments of staring placidly into a bathroom mirror. Unlike Google Glass, which prompted “Glasshole” bans at New York and San Francisco bars, Specs are designed to be nonthreatening. (A playfully twirling LED light broadcasts that they’re filming.)
Spectacles ingeniously package this face camera into something that people might actually want to wear. “It’s a classic shape reinvented,” says fashion designer Rebecca Minkoff of the Ray-ban–inspired shades, which come in black, coral, and teal. She thought Glass was hideous, but compares Spectacles to a party dress or shoes, an overt piece of flair that calls attention to its intent rather than hiding it.
Specs, which Snap conspicuously branded a “toy” when it announced them last fall, are likely just the first physical camera that the company will introduce. Reports have circulated that it has considered other forms of wearable cameras, as well as drones. Snap has already tested selling a number of pieces of official merchandise, such as beach towels and backpacks, that hint at how the company thinks about bridging the real and digital worlds. When Snapchat introduced official playing cards, they were more or less a normal deck of cards, save for one thing: They came with instructions for a game called Snapkings. To play, a group of friends in the same room sets the cards on the table, but the game unfolds on Snapchat itself. If you draw a 3, you are instructed to “Snap yourself while making your grossest selfie face.” If you pull out a 9, you have to “Bust a rhyme for a 10-second Snap.” Much as with lenses, the cards initiate a Snap session, transforming a mellow Friday night into fodder for an expanding universe of good times.
Despite Snap’s relentless creativity and distinct perspective, its future success isn’t assured. Facebook has been rapidly adding Snapchat-like features into Facebook, Whatsapp, and, most notably, Instagram. The rise of Instagram Stories, the 24-hour video-sharing tool that blatantly mimics Snapchat Stories, precipitated Snap’s decision to pursue an IPO, according to one source. “It definitely caught them off guard,” says a person who does business with Snap. “It’s a huge threat.” With Facebook trying to choke off its rival’s global expansion, investors could also inhibit Snap’s progress by dogging its stock if user and revenue growth don’t exceed the high bar Facebook set for social media.
But Spiegel and company understand instinctually that power has shifted. The kids know what they’re doing. They know what they like. And Snap isn’t afraid to tell media companies and advertisers, Hey, shoot this more like the kids do. What those career baseball broadcasters missed as they jeered the Alpha Chi sisters? Those duck-faced women were now the ones in control of the cameras, and they have countless stories to tell.
Additional reporting/writing by Jeff Beer, Claire Dodson, and Nicole Laporte