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A Site Selection Web Exclusive, February 2019
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The Five Key Mistakes Amazon Made

ONLINE INSIDER
According to The Wall Street Journal, more than 30 commercial and multifamily properties had changed hands in the area over the 93 days between Amazon’s commitment to invest in Long Island City and its withdrawal last week.
Photo by Kevin P. Coughlin courtesy of the Office of Governor Andrew M. Cuomo

by RON STARNER

While some have gleefully heaped criticism on New York over the demise of the Amazon HQ2 deal on Long Island, the world’s largest Everything Store might consider something new: Embrace humility and try to learn some lessons of its own.

Gone are 25,000 planned jobs and potentially billions of dollars in planned investment for the Big Apple, as has been extensively reported. The collapse of the union between a trillion-dollar company and a city of 9 million people can teach us a lot, but only if we’re willing to learn. That learning should start with Amazon, which by any objective analysis committed a series of pivotal errors. Let’s explore the top five:

Mistake No. 1: Amazon conducted a public but not transparent site search. From the day it launched the North American search for a second headquarters until the day it announced its selection of New York City, Northern Virginia and Nashville as winners, Amazon designed every move to maximize public attention. What the company arrogantly refused to do, however, was let anyone peek behind the curtain to see what the wizard — aka, Jeff Bezos, the world’s wealthiest human — was up to.


Amazon acted as though it never saw any of this coming, and that’s unfathomable for a firm with virtually unlimited resources to conduct due diligence in a site search.

While we were all entertained (or stunned, depending on your point of view) by the cavalcade of bids from 238 communities in three nations, and then the added spectacle of seeing 20 finalists further up the ante, the company shared little of was actually happening behind the scenes. We were not told, for example, that the search had morphed into a scouting mission for three sites. We were not told that HQ2 would really be HQ2 and HQ3. We were not told how long to hold our collective breath before the golden tickets would be awarded. Amazon wasn’t talking. Many wondered aloud what they were hiding, and why. As John C. Maxwell once noted, “Transparency breeds legitimacy.”

Cuomo
Just one week before Amazon’s pullout, New York Governor Andrew Cuomo referenced their expected job creation totals in calling on the State Legislature to enact a congestion pricing plan to fund the MTA’s capital program in order to prevent a nearly 30-percent MTA fare hike or further deterioration of the transit system.
Photo courtesy of the Office of Governor Andrew M. Cuomo

Mistake No. 2: Amazon thought it could control the narrative. It was obvious from day one that Amazon’s marketing gurus thought they could control the arc of the reporting on the quest for HQ2’s pot of gold, but the real narrative turned out much differently. The national media focused as much on the horse-race nature and sideshow atmosphere of the contest as it did on the substance of the search. Handicapping of finalist locations came from every quarter: Forbes, Curbed, The Huffington Post, The New York Times, The Wall Street Journal, and even the paper owned by Bezos: The Washington Post.

Lost in all this speculation, however, was any real analysis — except in a few quarters — of what should have been the driving factor all along: talent. Site Selection, EMSI, REMI and a few others did their part, but it was hard to get anyone to notice as long as Amazon kept dangling the 25,000-job carrot in front of 20 communities’ noses. Amazon’s PR spin machine did eventually lose control of the story, and opinions soured as more clear-thinking people began to see this play for publicity for what it was.

Mistake No. 3: By referencing incentives in two of the top three criteria in its RFP, Amazon unwittingly elevated the issue of incentives above talent in the minds of many. “Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process,” the RFP stated. Amazon then listed the incentives it wanted: “land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions.”

That’s an awfully full shopping cart.

All along, Amazon wanted us to believe that the search was actually a race for talent, a fiction quickly eviscerated when the inevitable bidding war erupted. New Jersey offered Amazon $7 billion; Maryland raised the ante to $8.5 billion. And we’re still in the dark as to how much money many of the other finalists put on the table.

Mistake No. 4: Amazon grossly underestimated the opposition it would encounter in New York. Even though Bill de Blasio was elected mayor of New York City on a platform that made many free-market capitalists cringe, Amazon acted as though it would have little trouble in seeing its dreams become reality in Long Island City. Those dreams quickly collided with local politics. The same forces that propelled de Blasio and Alexandra Ocasio-Cortez to office in New York City erupted against Amazon, erecting a wall of opposition more impenetrable than the one President Trump’s promised.


All along, Amazon wanted us to believe that the search was actually a race for talent, a fiction quickly eviscerated when the inevitable bidding war erupted.

By the time the dust settled, national and local groups including the Action Center on Race and the Economy, the Center for Popular Democracy, Demand Progress, Good Jobs First, Jobs with Justice, the Partnership for Working Families, SumOfUs, ALIGN NY, CAAAV: Organizing Asian Communities, DRUM – Desis Rising Up and Moving, Make the Road New York, New York Communities for Change, and Jews for Racial and Economic Justice had all lined up against it.

Whether or not these groups raised valid objections is not even the point. The point is that Amazon acted as though it never saw any of this coming, and that’s unfathomable for a firm with virtually unlimited resources to conduct due diligence in a site search.

Tishman
Even as Amazon left Long Island City unfulfilled, Macy's and New York-Presbyterian have committed to filling the remaining space at The JACX, Tishman Speyer's 1.2 million-sq.-ft. creative office development currently under construction in the city’s Queens Plaza district.
Photo by Jesse David Harris courtesy of Tishman Speyer

Mistake No. 5: By pinning the blame on New York in its statement abandoning its HQ2 plans, Amazon showed its benign neglect for the valuable lessons it should have learned. This is perhaps the biggest mistake of all, because it shows an arrogant disinterest in grasping the obvious. One paragraph from the company’s statement speaks volumes: “For Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long term. While polls show that 70 percent of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.”

Everything the company said in that statement is true, but it leaves out so much, namely Amazon’s role in the collapse of the deal. By not being willing to do the hard work of corporate site selection — the on-the-ground fence-mending and coalition-building that takes years and investment of considerable resources and political capital — Amazon signaled that it would rather take the easy way out: Blame opposition groups and move on.

While many will lament that Amazon chose to walk away rather than fight, perhaps we should all thank Amazon for reinforcing the value of real site selection. It justified the notion that, when it comes to corporate site selection, there is no substitute for hard work and getting to know people beyond fleeting visits and surface conversations. In a world where machine learning and artificial intelligence threaten to replace much of human decision-making, the downfall of the world’s most tech-enabled company, however temporary, is almost reassuring.


By not being willing to do the hard work of corporate site selection … Amazon signaled that it would rather take the easy way out: Blame opposition groups and move on.

In an age where everyone is obsessed with data analysis and number-crunching, the Amazon HQ2 debacle in New York could have been prevented with the one thing that was sorely lacking from the outset of this process: wisdom.

Ron Starner
Executive Vice President of Conway, Inc.

Ron Starner

Ron Starner is Executive Vice President of Conway Inc. He has been with Conway for 16 years and serves as editor of the TrustBelt Report and lead organizer of the annual TrustBelt Conference. He also writes extensively for Site Selection and Conway's Custom Content Publishing Division. His Twitter handle is @RonStarner.

  




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