Is there a user that is not well served by Amazon.com?

Question

Is there a user that is not well served by Amazon.com? If so, how would you redesign Amazon.com to serve that user?

Answer Structure

A good strategy for decomposing and structuring your answer for product design questions is the CIRCLES Method™ from Lewis Lin’s book Decode and Conquer. We will use it as guideline to answer the question. The method can be summarized as:

C — Ask clarifying questions to narrow the scope (Context).

I — Identify the users as personas like food lovers, soccer moms, etc.

R — Report on their needs. Describe their behaviors and based on those behaviors what are their needs and describe use cases.

C — Cut through and prioritize needs you will address.

L — List at least 3 solutions.

E — Evaluate the tradeoffs for these solutions

S — Summarize:

  • Which solution you would recommend
  • Recap what the solution does and why is it beneficial
  • Why you prefer this solution

Tip: When thinking about different product categories for Amazon, ask yourself: “What would be an unexpected category?”

Answer Example

Ask a clarifying question

INTERVIEWEE: Is this question related to the U.S. market or Global market? (Ask a clarifying question to narrow the scope of the question — using the first C of the CIRCLES Method™)

INTERVIEWER: Just the U.S.

INTERVIEWEE: Okay, could I take a few minutes to think about this problem?

INTERVIEWER: Please do.

(The interviewee uses her notepad to brainstorm new product categories for the U.S. market. Since Amazon sells just about everything, she begins to think about unexpected types of products.)

Identifying use cases

INTERVIEWEE: Okay. First, I would like to talk about different types of customers Amazon is currently not serving. And then discuss how Amazon could modify its website to support them. (Identifying use cases — using a combo of I and R from CIRCLES Method™)

A few types of customers come to mind, such as:

  • people that need to order prescriptions drugs,
  • home buyers,
  • car buyers, and
  • people looking to buy airline tickets.

These represent four large markets, but there are other criteria besides market size that are important to consider in order to pick the best opportunity for Amazon.

(The interviewee draws the following table and fills it out as she is talking.)

Prioritize use cases

Besides market size, I think competition, regulation, and implementation complexity are three criteria that need to be evaluated in order for us to determine the best opportunity. (Prioritize use cases — using the second C from the CIRCLES Method™)

Let’s start by estimating the size of the markets:

  • I have read a bit about the online Airline Ticket market and my guess is that the market is about $200B.
  • Car dealers take about 10% margin from selling cars, so I would make a rough estimation based on how often households buy new cars every year. To simplify this calculation, I am not including sales of used cars in the estimation. There are about 100M households in the U.S. If they buy say two cars every 10 years, with an average price of $30K per car, my calculation is 100M * 2 cars * $30K / 10 years, which is $600B. With car dealers taking about 10% for sales commission, the car selling market is about $60B.
  • Real estate agents make about 5% from the sale of a house, and I know that about $1T or more was spent in purchasing new houses last year so I would estimate this market to be 5% of $1T or $50B.
  • And for the pharmacy business like Walgreens and CVS, I will make a rough estimate based on how much people spend on prescription drugs per year. There are about 300M people in the U.S. Say 100M are people 60 years of age and older and 100M people are between 30 and 59 years old. To simplify things, I will assume that the rest of the population does not have a need for prescription drugs. Now, my guess is that the older population spends on average $3,000 a year on prescription drugs, while the younger segment spends about $500. Then 100M * $3k + 100M *$500 results in a $350B market.

Let’s talk about the Competition. I believe the pharmacy market has the smallest number of players, maybe two: CVS and Walgreens. The other markets have multiple players.

Let’s talk about regulation. The drugstore market is highly regulated, much more than the other markets. Nevertheless, Walgreens and CVS offer online pharmacy services, so I assume running an online pharmacy store is feasible.

Let’s talk about implementation complexity. Selling houses and selling cars would be hard because buyers usually have a need to physically try the product before buying. Selling airline tickets online is not complex but the competition is fierce. However, selling prescription drugs online, regulation notwithstanding, is something Amazon could implement fast given its world-class fulfillment, and delivery infrastructure.

Overall, my recommendation would be to go after the online pharmacy market. It is the largest market, has a few players, and although it is highly regulated, this is not an unsurmountable barrier as existing players show. Most importantly, Amazon can become the top player because of various competitive advantages, such as a very large customer base that is used to ordering multiple products from Amazon; a world class fulfillment infrastructure, unmatched by any other business; and excellent customer service ratings.

INTERVIEWER: Sounds reasonable. Now how would you modify Amazon’s website to implement this category?

INTERVIEWEE: In order to understand the functional requirements needed to support selling prescriptions drugs online, I want to first walk through the different steps needed for someone to order prescription drugs through a pharmacy:

  • A patient goes to the doctor and either gets a paper prescription or the doctor’s office sends the prescription digitally to the patient’s preferred pharmacy. So there is probably a system in place for Walgreens, for example, to receive the prescription and associate it with the patient’s name.
  • Then a person goes to the pharmacy, picks up the order and pays. Sometimes the patient will need the pharmacist to give instructions on how to take the medication.
  • Most of the time the patient’s insurance information is already in the pharmacy’s system. It’s likely the doctor’s office sends the insurance information with the prescription. If the insurance information is not in the system, the pharmacy will ask the patient to provide it.

So, the key phases that I think should be supported online to enable someone to order a prescription drug are:

  • Authenticate the user
  • Finding the prescription in the system
  • Entering insurance information into the system
  • Ordering the prescription
  • Choosing delivery method and paying
  • Finding instructions on medication usage

List at least 3 solutions

Now, I will brainstorm ideas on how the website could be modified to support this process. (List at least 3 solutions — using L from the CIRCLES Method™)

First, I would add “pharmacy” as an additional category to the existing list Amazon displays next to the search field.

Second, the user would need to be asked for additional authentication information besides username and password to enter the pharmacy site, since this market is so regulated. For example, asking for the last last four digits of the user’s social security number or driver’s license number are good choices. Biometrics authentication would be ideal, but that is probably not feasible yet.

Now, either the prescription has been entered into the system by the doctor’s office or the person has a paper prescription. To allow the doctor’s office to enter the prescription into Amazon’s system, a backend solution would be created and integrated with the doctor’s office system. If the prescription is written on paper, the site should allow the person to enter a scanned version of the prescription, similar to the way banks allow customers to upload scanned checks using the camera on their phone. Amazon could add this functionality to their mobile app and show a thumbnail image of the uploaded prescription as part of the ordering information.

The patient’s insurance information can be entered by the doctor’s office since they ask for it during the patient check-in process. If the doctor’s office cannot do this, then Amazon’s website should enable the patient to enter their insurance information by hand or by uploading a scanned image of the patient’s insurance card.

The payment flow should be similar to Amazon’s current shopping cart interface, except that it should show how much the insurance company is paying and what the user owes, in order to keep the user informed.

And finally, the site could provide a link to instructions on how the user should use the prescription drug.

There are many other features we could add, but these are the main features an MVP should have.

Evaluate tradeoffs

A drawback (Evaluating tradeoffs — using E from the CIRCLES Method™) with this solution is that it doesn’t allow for a surrogate to order prescription drugs for the patient, when the patient is too sick to place an order online. So that would be something that needs to be implemented.

Summarize

So to wrap up (Summarizing — using S from the CIRCLES Method™), I would chose ordering prescription drugs as the most promising category, because it offers the largest market, there are few players, and Amazon has the best customer service and fulfillment infrastructure in the world which would beat the competition in online pharmacy services. The main challenge is government regulation but Walgreens and CVS already offer online services, so it is not insurmountable.