I witnessed at first hand a failure of Amazon proportions
Why a Brazilian credit card company and Amazon failed equally despite being so different when it comes to product mindset?
If you are not from Brazil (and I know most of you aren’t), Cielo is a name that doesn’t ring any bells. I’ve worked for a subsidiary company of theirs from 2013 to 2019 and I was close to a lot of their tech initiatives regarding payments on that period. Cielo is, until today, the biggest credit card acquirer in the country.
Don’t stop reading if you don’t know (or don’t care about) the company . The only thing I need you to know is that Amazon is one of the best Product companies in the world, and Cielo is a fossil that never made it past implementing scrum. I’ll talk about a business from São Paulo, but it could very well be any other legacy company, from Wuhan to Austin.
One of the few things they have in common is that both of them failed miserably when trying to get into the mobile market. Lets dive in and discover why so different companies had the same fate when trying out a new product.
A tale of two failures: Fire phone and Lio+
Back In 2014, both the iPhone 6 and Galaxy S5 were hitting the shelves. Samsung and Apple enjoyed a vast leadership advantage, and if someone could challenge the market status quo, it was Amazon.
Jeff Bezos dream smartphone was set to revolutionize the industry with its no-glasses 3D effects, 13 megapixel camera and a whopping 2.2Ghz processor…
It didn’t.
Sales were shy, the media came down hard on the phone’s performance and the retail price dropped almost 70% on the first year after release. Long story short, Amazon pulled back from the idea of selling smartphones and ended up with a US$ 170 million loss on the endeavor.
Two years later, in 2018, Cielo would see itself on a similar situation.
Strapping a payment terminal to a phone cover was the original concept that eventually became an entire smartphone with an integrated terminal on the back called Lio+. Brazil payment industry was booming at the time and every idea seemed like a good one.
Cielo failed so hard that besides the sponsored media during launch, no Brazilian tech blog ever mentioned the contraption gain. There are no publicly available sales numbers, no “1 year later” reviews, and I only know this story because I worked there during development and release.
What went wrong?
There is an amazing article done by Fast Company in 2015 that covers a lot of ground on Fire Phone’s story. I’m using this article as my main source of reference and you should check it out if you haven’t.
I don’t want to focus on why the devices were bad, but why they were shipped in a bad way. Let’s make a quick rundown of problems that both Cielo and Amazon faced, ultimately leading to the fiasco I’ve just mentioned.
Low product team empowerment
For different reasons, both business relied heavily on Highest Payed Person Opinion (HIPPO) to define Product strategy.
As reported by Fast Company, Jeff was very active during Fire Phone’s development, and while some of his decisions didn’t make sense, nobody would go against the guy that “invented” Amazon and Kindle.
Similarly, Cielo, being a legacy company, had a very strong “command & control” culture. The opinion of top executives was more important than specialist’s arguments.
At the end of the day, both teams developed something that didn’t make sense because their bosses told them to do so.
Poor discovery
I remember seeing prototypes of what would become the Lio+ laying around on R&D lab. A lot of canvas, prototypes and whiteboards full of notes and insights, none of them from customers.
Similarly, Amazon relied heavily on assumptions based on competition alone (namely, Apple) and past personnel experience.
Hardware discovery, specially for classified projects, is very different from the ones we make for running software, I know, but the point is the same: both companies assumed what the customer wanted, they did not discovered it.
Poor perception of oneself strengths and weaknesses
What ultimately led executives to push for a product that was completely detached from the market was a poor perception of how they were perceived by the public.
Amazon wanted to be a hip, fetish brand in the likes of Apple. They were not. When Jobs took the stage, he was a Rockstar, holding the future on his hands. Bezos, on the contrary, was just a “CEO, Entrepreneur, born in 1964” trying to sell a gadget that would increase sales with an always-on store connection.
Cielo was affected by a similar poison. A lot of smaller, more agile and technology savvier business were eating away Cielo’s share of the market at the date. Cielo was pushing for an innovative image that ultimately was not how consumers saw them.
Why did it happen?
Let’s go back to the start: Amazon and Cielo have nothing in common when it comes to Product culture. It’s easy to point fingers and say why Cielo failed, but it’s darn weird to see the same story inside Amazon. A mature Product business should never make the same mistakes of a legacy one.
The thing is that Product culture is heavily oriented towards startups on early stages. There are very different realities inside big companies that are not covered by the overall Product community.
I’ve mostly worked for enterprise companies, and they all share three characteristics that are very much present on giants like Amazon: high complexity, executive culture and market arrogance.
High complexity
A commonplace in project management, “complexity” is an underestimated topic on the Product literature. The more moving parts you have inside an organization, should they be systems, people or both, harder it is to assure the quality of what is being built.
“Complexity […] can hinder the clear identification of goals and objectives, […] or it can even affect project outcomes.“ — Complexity and Project Management: A General Overview
Big companies are complex entities with tons of stakeholders that need to be in constant alignment for the development of a good product. Complexity is responsible for making companies slow, just like its absence make startups nimble and agile.
Organizations such as Amazon can mitigate this problem, but it’s never really gone. This is a reality for every enterprise company, be they agile, lean, or not.
Executive culture
Following up on complexity, executive culture is born from the need of those close to the delivery to rely on those closer to management. On a small startup, there is not much distance between the PM and the founder. On a large scale business, the PM is but a tinny piece under the feet of an all powerful director.
HIPPOS are ten times worse the more process and people they have under them. If a top-down comes from a close hierarchy, there is way more room to question. When a top-down comes from several floors above you, you have not much option other then to comply.
Highlighting a quote from the Fast Company article:
“In essence, we were not building the phone for the customer — we were building it for Jeff”
Market arrogance
If something goes south for a startup, they go bankrupt. If the same happens for a big company, they’ll have an uncomfortable shareholder meeting and business should go on as usual.
Enterprise level business have the luxury to fail on the market phase of their Product and still be comfortable. Either because they have other streams of revenue or because they are so much profitable, big business don’t need to mind about the discovery phase so much.
This phenomenon is way worse if we are talking about near or full market monopolies. Cielo and Amazon both, despite having so different cultures, knew that if their phones floped, nothing major would happen. Product Market Fit has never been at stake.
what were the consequences?
Once again, despite having nothing in common, Amazon and Cielo had both similar fates after the embarrassing launch of their phones:
Nothing happened…
Sure, both lost some millions, their share prices might have dipped a little, but business went as usual. Cielo is still the biggest credit acquirer in Brazil, Amazon is still… well, Amazon. There was no real consequences to those missteps.
There is a lesson here to be taken, but not the one you might have anticipated. From a purely business point of view, “too big to fail” is true when it comes to product development.
The lesson is not about the importance of discovery, Product mindset or team empowerment. It’s about corporate privilege and how smaller business can botch their chances of success by trying to mimic big player actions.
Cielo, Amazon, or any other enterprise level company can get away with failure. Most of the market can’t.
The next time you try to implement “Netflix technology”, “Spotify team organization”, “Micrsoft data product management”, remember the tales I’ve told. If they change their mind and decide that they’ve failed, big companies will simply keep on going, while you are left holding the short end of the stick.
