Amazon is well-know for its obsession with customer experience. Key insight for Amazon was that, perhaps counter-intuitively, adding other sellers to their platform, was a good thing for their business as a whole. For customers, more sellers means a broader, more available selection, leading to a higher customer satisfaction, resulting in growth. Amazon can leverage that growth to lower costs and offer better pricing.
Amazon’s belief is modeled below. Kick-off the model by adding a seller. What happens to Amazon’s growth?
[…] this is how we think about growing our company. We look for virtuous cycles everywhere: things that are complete closed-loop and that, as you inject energy into each piece of them, [lets] the flywheel spins faster and faster.
Jeff Wike, Our Virtuous Cycle
Amazon deems this a “virtuous” cycle, because it leads to fast, reinforcing growth.
Virtuous cycles like these do not contain balancing, negative feedback loops. This makes them prone to rage out of control. For instance, in the above model, try aggressively raising the prices. What are the effects? Are you able to stay in control or does the system run away with you?
What virtuous cycles do you distinguish for your business?
What reinforcing loops could you leverage for the good?
Are there any loops that require balancing, negative feedback loops?