Amazon is one of the biggest tech giants, with a market cap of over $1.3tn.
It has a history of making bold bets into new areas, many of which become category defining; AWS, Kindle, Audible to name just three examples.
Jeff Bezos, the founder and former CEO, fostered a ruthless and competitive culture.
This culture has often been described as ‘bruising’ and ‘inhumane’. Not to mention the conditions at warehouses.
These issues aside, I want to understand what can we learn from the positive aspects of Amazon’s culture? What principles helped them continuously innovate?
In his yearly shareholder letters, Bezos frequently returned to fundamental themes that together were called his ‘Day 1’ mentality.
This means they treat every day at Amazon as though it is ‘Day 1’ of a new startup.
What does this mean? How did this help Amazon become the giant it is today?
Let’s get to it 🚀
Every year Jeff Bezos wrote a letter to the shareholders of Amazon, the company he founded and ran as CEO for over 20 years.
The letters were wide ranging and reflected the challenges of the day, but there was a consistent business philosophy that remained threaded throughout.
These business principles can be summarised as the ‘Day 1’ mindset.
The core of the Day 1 idea was the attempt is to keep the agility, innovation, and customer focus that characterizes a start-up, even as the company grew large.
Every day is a new day in business, and nobody can afford to be complacent.
These principles underpinned the culture at Amazon, and ultimately led to the enormous success that it has achieved.
Here are four of the most important.
1. Put the customer at the centre
“There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. ” ~ Jeff Bezos
Bezos knew that the customer didn’t always know what they wanted. So you have to imagine something better for them sometimes. Nobody ever asked Amazon to create Amazon Prime, but it turns out that millions of people want to use Prime.
It’s like the saying from Ford, that if he had asked his customers what they would have wanted they would have asked for a faster horse!
But even if the customer isn’t always right, a relentless focus on making them happy is key.
“Build something people want” is the YC motto.
This same advice keeps coming back again and again in different forms.
Companies are often distracted by other things - short term profitability, getting better technology, worrying about competitors etc.
But a lazer focus on customers creates the conditions to continuously improve your business and stay ahead of your competition.
2. Make decisions quickly
“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 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.” ~ Jeff Bezos
Day 1 mindset means taking decisions at a high velocity.
For startups, taking decisions slowly will kill the company. When companies reach a certain size, the decision process will often start slow down.
This is not intentional, it’s just as teams grow there are more layers of approval and more stakeholders to consult. Before you know it it takes you 6 months to agree to a new feature.
Fighting this is really difficult. Amazon clearly managed to some degree, as they have arguably been able to deploy new products faster than their competitors.
A critical idea to help maintain a high speed of decision velocity is to ‘disagree and commit’.
Maintaining a culture of health disagreement is key. If a team can have internal disagreement on something, but then make a decision and the whole team get behind it, that’s a team that is going to get things done.
This requires developing trust between team members. Read more about how to build trust in my previous article Why your management style is backwards.
If a decision can be easily reversed at a later date, make the damn decision and move on as quickly as possible.
3. Resist proxies
“A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won’t find any of it in a survey.” ~ Jeff Bezos
When companies grow, they can often fall into the trap of ‘managing to proxies’. What is a proxy? Well its something that stands in for something else.
For example market research as a proxy for customer preferences. Or process as a proxy for outcomes.
The risk that Jeff is highlighting here is that an organisation can become disconnected from reality. Disconnected from what customers want.
You have to deeply understand your customer.
All this is I think a way to say you need to focus on outcomes over process.
4. Maintain a long term focus
“When I have a good quarterly conference call with Wall Street, people will stop me and say, ‘Congratulations on your quarter,’ and I say, ‘Thank you,’ but what I’m really thinking is that quarter was baked three years ago” ~ Jeff Bezos
Amazon famously didn’t make a profit for many years. As a public company, it resisted the pressures of Wall St for short term quarterly profitability, and instead plowed its profits right back into the business.
Thinking beyond the immediate quarter, taking a longer term view is so rare that if you are able to think in longer time horizons it can pay huge dividends.
Startups are plagued by short term thinking. Part of this is necessary, if you don’t have much runway you are necessarily pushed into thinking short term. And to some extent that’s necessary - you can’t think long term if you can’t survive the short term.
But as far as possible keep an eye to the long term future, to where you are heading.
Amazon is one of the largest companies in the world, and a long way from being a startup. To some extent it has lost focus on these four principles in recent years.
But even as it grew into the monster it is today, Jeff wanted to preserve the startup mentality as long as possible.
Shortly before he retired, Jeff was asked at an annual staff all-hands meeting “what does Day 2 look like?”.
He paused for a moment, before answering;
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Whatever business you are in, fostering this culture can help you to stay ahead of the competition.
I hope you found this useful.
Until next time,
Jamie
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