The authors lay out the leadership principles of what it means to be “Amazonian.” Working backwards is all about starting with the customer perspective, working backwards step-by-step, questioning assumptions until you figure out exactly what you want to build and how you want to deliver it. It is all about seeking truth. This process takes more time on the front end, but it is much less expensive and difficult to course correct in the early innings rather than at the stage where you have an operating business
Especially in the early days, one bad customer experience can influence hundreds if not thousands a future customers. That is why Jeff was so maniacal about customer service. What distinguishes Amazon is that it’s leadership principles are deeply integrated into every person process and function across the company.
The 14 Amazon leadership principles
Invent and simplify
Leaders are right, a lot
Learn and be curious
Hire and develop the best
Insist on the highest standards
Bias for action
Have backbone; disagree and commit
Tensions don’t work, mechanisms do.
Three core mechanisms to help translate the principles into action include the annual goal setting, the S team goalsetting plan and annual compensation packages to tie customer service with rewards. These operating plans are meant to intertwine the individual and company goals so that everything is self reinforcing and mutually beneficial. This takes tremendous planning and effort but it helps align every one in the organization.
Amazon is different in the sense that the senior team focuses relentlessly on execution and details, not just strategy. Compensation very much tied to long-term Equity performance which ties to how well the company is serving customers
The bar raiser program is one of Amazon’s most successful and widespread applications. It is used as an efficient way to hire appropriate people in a way that is scalable, teachable, and that contains feedback loops for the team and the interviewee. This ensures a sustainable way to hire great people who always raise the bar for the company as a whole. The interview starts with a phone call. If likely to hire they will be brought in for a behavioral and bar raiser section. Four or five various people interview the candidate and there is a written segment that follows with their thoughts and takeaways. Then there is a group discussion for the feedback is collectively read and the candidate discussed. If the group decides to move forward they will do reference checks and then hire the candidate if they choose to do so
One way Amazon has combated the friction that comes with becoming a large organization is what they call single threaded leadership. This person heads up on autonomous team who does nothing but focuses on this major initiative and they have complete responsibility and accountability for it. The best way to fail is to make that thing somebody’s part-time job
what matters is not quite speed, but velocity (speed + vector)
Be aware of where their exist dependencies – whether technical, organizational, or otherwise – that slow you and your progress down as you have to rely on others to accomplish what you need. Too many dependencies are said to be tightly coupled. Amazon had to shift to small, autonomous teams but are now famous two pizza rule. Micro services are offered by small independent teams that are able to move quickly and independently yet offer great service and features
Amazon does not focus or spend time on morale boosting events. Instead, they focus on attracting world-class talent and empowering them to build things that scale. Focusing on controllable input methods rather than uncontrollable output methods leads to sustainable and meaningful growth. A high morale is an output and not an input
Two pizza themes are most effective in product development and each team is given specific metrics that are agreed-upon which helps keep everyone aligned and on task. However, Amazon found out that it was not the size of the team which predicted predicted success Patty right leader who are the necessary skills experience authority and capacity to build a team and lead to success
The highest salary but Amazon is $160,000. There are no bonuses or anything else any sort of extra compensation if you stock the thus between 18 and 24 months. This is difficult if you’re looking for a short term hip and satisfaction but very lucrative if you believe in Amazon and it’s long-term prospects
Amazon was able to move into a completely tangential business with AWS through its single threaded leader ship principle that ruthlessly iterates and keeps customer service top of mind
What I got out of it
A great, inside look into what makes Amazon, Amazon. Always start with what the customer wants and work backwards from there.
Writings taken from Bezos’ annual shareholders letters with a bit of organization and context
In fact, when we lower prices, we go against the math that we can do, which always says that the smart move is to raise prices. We have significant data related to price elasticity. With fair accuracy, we can predict that a price reduction of a certain % will result in an increase in units sold of a certain percentage…Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com. We’ve made similar judgments around Free Super Saver Shipping and Amazon Prime, both of which are expensive in the short term and – we believe – important and valuable in the long term
Our pricing objective is to earn customer trust, not to optimize short-term profit dollars. We take it as an article of faith that pricing in this manner is the best way to grow our aggregate profit dollars over the long term. We may make less per item, but by consistently earning trust we will sell many more items. therefore, we offer low prices across our entire product range. For the same reason, we continue to invest in our free shipping programs, including Amazon Prime. Customers are well informed and smart, and they evaluate the total cost, including delivery charges, when making their purchasing decisions. In the last 12 months, customers worldwide have saved more than $800m by taking advantage of our free shipping offers
Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empowerothersto unleashtheircreativity – to pursuetheirdreams
Our heavy investments in Prime, AWS, Kindle, digital media, and customer experience in general strike some as too generous, shareholder indifferent, or even at odd with being a for-profit company. “Amazon, as far as I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers,” writes one outside observer. But I don’t think so. To me, trying to dole out improvements in a just-in-time fashion would be too clever by half. It would be risky in a world as fast-moving as the one we all live in. More fundamentally, I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in the new business arenas. Take a long-term view, and the interest of customers and shareholders align.
A dreamy business offering has at least 4 characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades. When you find one of these, don’t just swipe right, get married
I’m talking about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long term, and the taking of professional pride in operational excellence. Through that lens, AWS and Amazon retail are very similar indeed
In business, every once in a while, when you step up to the plate, you can score one thousand runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments
Many characterized as AWS as a bold – and unusual – bet when we started. “What does this have to do with selling books?” We could have stuck to the knitting. I’m glad we didn’t. Or did we? Maybe the knitting has as much to do with our approach as the arena. AWS is customer obsessed, inventive and experimental, long-term oriented, and cares deeply about operational excellence
Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being too slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.
Recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. no amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision. So, opt for “disagree and commit.”
…We show him this problem and he looks at it. He stares at it for a while and says, “Cosign.” I’m like, “What do you mean,” and Yosanta says, “That’s the answer.” And I’m like, “That’s the answer?” Yeah, let me show you.” He sits us down. He writes out 3 pages of detailed algebra. Everything crosses out, and the answer is cosign, and I say, “Listen, Yosanta, did you just do that in your head?” And he says, “No, that would be impossible. Three years ago I solved a very similar problem, and I was able to map this problem onto that problem, and then it was immediately obvious that the answer was cosign.” That was an important moment for me because it was the very moment when I realized I was never going to be a great theoretical physicist, and so I started doing some soul-searching. in most occupations, if you’re in the ninetieth percentile or above, you’re going to contribute. In theoretical physics, you’ve got to be like, one of the top fifty people in the world, or you’re really just not helping out much. It was very clear. I saw the writing on the wall and changed my major very quickly to electrical engineering and computer science.
The way you earn trust, the way you develop a reputation is by doing hard things well over and over. The reason, for example, that the US military, in all polls, has such high credibility and reputation is because, over and over again, decade after decade, it has done hard things well. It really is that simple. It’s also that complicated. It’s not easy to do hard things well, but that’s how you earn trust. And trust, of course, is an overloaded word. It means so many different things. It’s integrity, but it’s also competence. It’s doing what you said you were going to do – and delivering. And so we deliver billions of packages every year; we say we’re going to do that and then we actually do it. And it’s also taking controversial stances. People like it when you say, “NO, we’re not going to do it that way. I know you want us to do it that way, but we’re not going to.” And even if they disagree, they might say, “We kind of respect that, though. They know who they are.”
What I got out of it
Inspiring and motivating – a peek into an incredible thinker, his vision, his thought process
Stone attempts to describe the Amazon story, its founder and how Wall St. and the world’s perception has changed these 20+ years
Bezos is a visionary who has redefined customer service and runs his company like a chess grandmaster. He is extremely difficult to work for, intense and micromanaged but casts a reality distortion field and paints a vision people who work at Amazon are passionate and committed to
The idea of an everything store which would serve as an intermediary between producers and consumers was hatched during his time at DE Shaw, a technologically advanced hedge fund
Regret minimization framework – put yourself on your deathbed and imagine what you’d regret. If you’re facing a difficult decision, this exercise is very helpful to gain perspective
Bezos recognized early on the importance of having transparent customer reviews in order to gain trust and provide a better shopping experience
Focus on customers, not competitors
Bezos is frugal about his operations but can be very aggressive and bold with acquisitions or new lines of business when he feels it is appropriate
Always take and implement the best ideas from those who came before you, even if not in your direct field
Had a pretty clear vision from the beginning of being the starting point for people’s shopping experience as they trusted Amazon would have pretty much anything you could want
6 core values – customer obsession, frugality, innovation, bias for action, ownership, high bar for talent
It is the goal of nearly every tech company to become a platform others can/need to use. Amazon achieved this with its distribution system, marketplace and later through AWS
Leadership – have backbone; disagree and commit; be vocally self-critical; think big; bias for action
Bezos learned a lot from Walmart execs about the finer points of retailing and distribution and about every day low prices and customer loyalty from Costco. There are retailers who work to figure out how to charge customers more and those who work to try to charge customers less. Amazon is the latter
It is almost always harder to be kind than clever
Has had the dream of colonizing and traveling through space since he was a child and took his first step with his company, Blue Origin who’s mission is to create an enduring human presence in space. Many people close to Jeff say he is accumulating wealth in order to pursue his space dreams
Jeff Wilke was brought in in 1999 to revamp amazon’s distribution and logistics network which would one day be the most automated and efficient system of its kind
AWS is an incredible business which allows individuals or companies of any size to rent computing capacity. It scales infinitely and while the margins are slim it is incredibly profitable. It helps give start ups and individuals a more equal footing to established players. It has helped spur innovation as this once large fixed cost has turned into a variable cost which can scale in proportion to your business
Influenced by a book called Creation by Steve Grand. Instead of trying to predict what people want, offer the smallest amounts of infrastructure to developers, get out of the way and see what happens and then iterate. AWS helps startups, individuals and companies achieve this business strategy
Far better to cannibalize yourself than have somebody else do it. This belief along with Christensen’s The Innovator’s Dilemma fueled Bezos and co. to dive fully into developing an ebook reader which would control the customer’s entire reading experience, much like Apple did with music and its iPod. As Amazon grew and its scale and influence increased, it sought more favorable terms with book publishers for physical books and also to begin growing the online catalogue for ebooks. Amazon aggressively pressured both large and small publishers and created some bad karma with suppliers. Many inside the company were also unsure of these new tactics as those who were onboard with Bezos’ vision and ruthless enough to achieve it whatever the costs were promoted while others were phased out
Start with the customer and work backwards
Many people talk about the truth but Bezos actively seeks it out and embraces it. He is also not tethered to conventional ways of thinking – only the laws of physics limits him and everything else is open to discussion
Zappos was at first not interested in being acquired so Bezos and team created endless.com which pressured Zappos enough for them to reconsider. Zappos built great relationships with its suppliers like Nike who was afraid of putting their goods on Amazon because they were afraid their newest and most expensive styles would immediately go into the “bargain bin” because of Amazon’s focus on low prices. This was very much the same worry book publishers had with the switch to ebooks and their $9.99 price tag
Successful Companies tend to be loved (whole foods, Costco, Disney) or feared (Microsoft, Goldman Sachs). Bezos wrote a memo describing how he wants Amazon to act in order to be more loved – polite, risk taking, winners, inventing, empowering others, conviction, authenticity, thinking big…
Bezos believes truth arises when different perspectives and beliefs are argued transparently, even sometimes explosively
The question “will amazon enter this area or do this…” Is almost inevitably yes, eventually. It may just move from the everything store to the everything everything
“We don’t have any single big advantage, but we do have thousands of small advantages
What I got out of it
Bezos is a visionary who is difficult to work for but gets the most out of his people in order to bring about the most customer obsessed company in the word to keep expanding and innovating. Fascinating culture and company and will be interesting to see how the company fares in the future and which markets they try to penetrate
Rudeness is not cool.
Defeating tiny guys is not cool.
Close-following is not cool.
Young is cool.
Risk taking is cool.
Winning is cool.
Polite is cool.
Defeating bigger, unsympathetic guys is cool.
Inventing is cool.
Explorers are cool.
Conquerors are not cool.
Obsessing over competitors is not cool.
Empowering others is cool.
Capturing all the value only for the company is not cool.
Brandt allows the reader to get into Bezos’ head and his decision making process
Bezos obsessed with customer service
Was a huge tinkerer as a kid and always one of the smartest in his class
Was very excited about the growth of the Internet and wanted to take advantage of it by trying to become the worlds largest online retailer. The huge amount of books and the ability to sort, search and organize them made it a logical choice as computers could do this very easily
Whenever he had a difficult decision to make, he would write down the essentials and create a deal flow type analysis
Had the mindset of launching everything before it’s ready and figuring it out as you go
Despite his intelligence, confidence and focus, he was poor at getting this across to potential investors
Set a standard where any new hire would have to be better than the people currently working there. Kept the quality of their people very high and ever increasing
Since the beginning said that for Amazon to be profitable would be stupid as they were taking the money and building a moat and innovating
Bezos started looking at acquiring and/or investing in companies – everything from Sotheby’s to IMDB in order to grow his market and customer base
Made many acquisitions but wasn’t until 2007 that the nest major step was taken – the kindle. It forever changed the book publishing industry
Amazon has kept acquiring and focusing fiercely on the customer experience, preferring to invest in the future and innovate than make a profit
What I got out of it
Bezos’ focus and obsession with customer service is core to Amazon’s success and he will continue using this framework for future innovations and acquisitions. Interesting to get a peek into Bezos’ background, influences and thought processes
Amazon patented the one click to buy technology and this upset many people since it was so broad
Spent a lot of time with his grandfather on a ranch where the entrepreneurial spirit took hold. Learned to be self dependent and stubborn
Doesn’t know biological father
Bezos is a variation of “besos” as his step father was Cuban
His family invested early on and he was very honest with them – telling them not to invest if they weren’t ready to lose it all
Bezos set himself apart with his selection and customer service
The Amazon website launched in 1995
The idea of negative reviews confused many competitors but it was all a part of creating the most customer centric experience possible
Got VC money from Kleiner Perkins which valued the company at $60M and one year later (1997) took the company public. One year after that it was valued at $5B
He originally did not want to be part of the distribution side but as his orders free he couldn’t rely on third parties. He built some of the most advanced and efficient warehouses in the world
Soon turned to selling music as well as books
Amazon’s stock got crushed in the dot com crash but rebounded soon after when he showed that amazon could be profitable if that was the goal