Jeff Bezos' latest annual letter to Amazon shareholders was well shared but is full of insight into how Amazon retain agility as they scale. It was released a couple of weeks back, but I'm capturing my key takeouts here as my way of logging some those insights (this is how I roll). Bezos talks about how they avoid disruption and stagnation – and how their focus is always on how to remain a ‘Day One’ business – in other words a large company that still acts like a startup:
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Bezos emphasizes four key ways in which they fend off becoming a ‘Day Two’ business:
- True customer obsession:- There are many ways to centre a business, says Bezos – competitor, technology, product or business model focused, but ‘obsessive customer focus’ is in his view the most useful since customers are always ‘beautifully, wonderfully dissatisfied, even when they report being happy and business is great’, and a desire to delight customers will therefore drive continuous invention and progression. He uses the example of Amazon Prime, as being something which customers didn’t ask for directly, but which has been built around an understanding of customer need and which has been enormously successful (they reportedly now have 66 million Prime customers)
- Resist Proxies:- Bezos also talks about how, as companies get larger and more complex, there is a tendency to manage to proxies, and gives the example of process as proxy. Good process serves you so you can serve customers, but if you’re not careful the process can become the proxy for the result you want. This means you stop looking at outcomes and just make sure you’re doing the process right. Great customer experience, he says, doesn’t only come from surveys and research but ‘starts with heart, intuition, curiosity, play, guts, taste’.
- Embrace external trends:- he talks about the importance of getting on to the big, powerful trends quickly, where many large companies resist change: ‘If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind’. He uses the example of how Amazon use machine learning and algorithms now in everything from visible things like the development of drone delivery, Amazon Go, and Alexa, to far less visible things such as demand forecasting, product search ranking and recommendations, merchandising placements, translations, and even fraud detection.
- High Velocity decision making:- Day 2 companies, he says, make high-quality decisions, but they make them slowly. Retaining the energy, momentum and dynamism of Day 1, requires high-quality, high-velocity decisions. It’s therefore important not to have a one-size-fits-all decision-making process. A light-weight process can be applied to reversible, less complex decisions. Most decisions can probably be made with around 70% of the information you wish you had – waiting for more means you’ll be too slow in many cases. Quick course correction if necessary, and jumping on misalignment quickly, is better than slow, costly decision-making. At Amazon they also use the phrase “disagree and commit.” As a helpful way of saving time if there is a conviction on a particular direction but a lack of consensus.
Powerful points that nicely echo some of the concepts that I talk about in my book.
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