I am fascinated by Amazon. ”The four” sets out how powerful Amazon is becoming. Whatever your opinion of Amazon, there are lessons to be learned from a management perspective. The key question; haphazard or deliberate leadership?
Hence “Working Backwards: Insights, Stories, and Secrets from Inside Amazon”. Covering core themes
- customer obsession instead of competitor obsession
- willingness to think long term, with a longer investment horizon than most of our peers
- eagerness to invent, which of course goes hand in hand with failure
- taking professional pride in operational excellence
And 14 leadership principles as the cultural cornerstones.
- Customer obsession
- Invent and simplify
- Seek diverse perspectives and work to disconfirm their beliefs
- Learn and be curious
- Hire and develop the best
- Insist on the highest standards
- Think big
- Bias for action
- Earn trust
- Dive deep
- Have backbone; disagree and commit
- Deliver results
Textbook stuff. Customer focus, ownership, high standards, action, talent, but Amazon seems to be one of the companies that has succeeded in implementing what for most companies are just words on a wall.
To quote the book: Organisational culture comes about in one of two ways. It’s either decisively defined, nurtured and protected from the inception of the organisation; or—more typically—it comes about haphazardly as a collective sum of the beliefs, experiences and behaviours of those on the team. Either way, you will have a culture. For better or worse, Amazon is very deliberate about culture. They do that by hiring the best (they want missionaries, not mercenaries), small, flexible and autonomous teams (applying the two-pizza rule), one thread leadership (single focus), written narrative (no PowerPoints allowed), reward systems that focus on the long term (equity), embracing innovation, entrepreneurship, failure and metrics.
In Amazon, the leadership principles are deeply ingrained in every significant process and function at the company. Their recruitment (Bar raise), strategy development (S-teams), decision making, organisation structure, Here are a few highlights:
Single thread leadership
Read “Humanocracy” and “The Phoenix project”. Amazon has found a way to solve this by introducing single-threaded leadership. The best way to fail at inventing something is by making it somebody’s part-time job. Many companies find themselves struggling against their own bureaucratic drag, which appears in the form of layer upon layer of permission, ownership, and accountability, all working against fast, decisive forward progress. The answer lies in an Amazon innovation called “single-threaded leadership,” in which a single person, unencumbered by competing responsibilities, owns a single major initiative and heads up a separable, largely autonomous team to deliver its goals.
Combine single tread with two pizza, and you create a microservices-based architecture, similar to, for example, Haier. Read “Rebel organisations”
Amazon relies far more on the written word to develop and communicate ideas than most companies, and this difference makes for a huge competitive advantage. The eerie silence at the beginning of Amazon meetings. The ban on PowerPoint and the shift to narratives. How narratives produce clear thinking and stimulate valuable discussion. The payoff: the “narrative information multiplier.” A written narrative contains seven to nine times the information density of our typical PowerPoint presentation. The reason writing a good 4-page memo is harder than “writing” a 20-page PowerPoint is because the narrative structure of a good memo forces better thought and a better understanding of what’s more important than what and how things are related. In all meetings, the most senior attendees tend to speak last to avoid influencing others.
Working Backwards is a systematic way to vet ideas and create new products. Its key tenet is to start by defining the customer experience, then iteratively work backwards from that point until the team achieves clarity of thought around what to build. These two elements form the Working Backwards process—starting from the customer experience and working backwards from that by writing a press release that literally announces the product as if it were ready to launch and an FAQ anticipating the tough questions. Ending with the mock-ups. The visual representations would show exactly how the new service would look on the Amazon website. Mock-ups should be detailed, showing the entire customer experience from landing page to purchase—screen design, buttons, text, the sequence of clicks, everything. It’s not unusual for an Amazon team to write ten drafts of the PR/FAQ or more, and to meet with their senior leaders five times or more to iterate, debate, and refine the idea. The press release (PR) portion is a few paragraphs, always less than one page. The frequently asked questions (FAQ) should be five pages or less.
The press release components
Every company, and in particular start-ups that are pitching can learn from this:
- Heading: Name the product in a way the reader (i.e., your target customers) will understand. One sentence under the title.
- Subheading: Describe the customer for the product and what benefits they will gain from using it. One sentence only underneath the heading.
- Summary Paragraph: Begin with the city, media outlet, and your proposed launch date. Give a summary of the product and the benefit.
- Problem Paragraph: This is where you describe the problem that your product is designed to solve. Make sure that you write this paragraph from the customer’s point of view.
- Solution Paragraph(s): Describe your product in some detail and how it simply and easily solves the customer’s problem. For more complex products, you may need more than one paragraph.
- Quotes and Getting Started: Add one quote from you or your company’s spokesperson and a second quote from a hypothetical customer in which they describe the benefit they are getting from using your new product. Describe how easy it is to get started, and provide a link to your website where customers can get more information and purchase the product. Metrics
Manage your inputs, not your outputs. All too often, companies pay attention to the wrong signals or lack the ability to see into key business trends, even while they feel positively awash in data. Once you have developed a solid understanding of how your process works along with a robust set of metrics, you can devote energy to improving the process.
- When Amazon teams come across a surprise or a perplexing problem with the data, they are relentless until they discover the root cause.
- They use consistent and familiar formatting to speed interpretation
- Amazon focus on variances and don’t waste time on the expected
- They keep operational and strategic discussions separate
The Correction of Errors (COE) process, based upon the requires the team who had a significant error or problem to write a document describing the problem or error and to drill down on what caused it by asking and answering “Why?” five times in order to get to the true root cause.
Amazon wants to be a large company that’s also an invention machine. They want to combine the extraordinary customer-serving capabilities that are enabled by size with the speed of movement, nimbleness, and risk-acceptance mentality normally associated with entrepreneurial start-ups. To invent, you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Naturally, if you don’t have the budget to invest, don’t do it. But, even with a limited budget, you can be successful over time if your approach is patient and frugal. Being Amazonian means approaching invention with long-term thinking and customer obsession, ensuring that the Leadership Principles guide the way, and deploying the practices to drive execution. Amazon will stick with it for five, six, seven years—all the while keeping the investment manageable, constantly learning and improving—until it gains momentum and acceptance. The other key is frugality. Read “Frugal innovation“.
Attitude to failure
Even when a project does not achieve its goals or is deemed a failure, if the effort was admirable and adherent to Amazon practices and principles, the result for the individual is neither dismissal nor shame. Failure is almost always understood as the failure of a group, a process, a system, as much as that of a single person—many people have been involved, made comments, shaped the idea, and given approvals along the way. For the company, then, failure is typically viewed as an experiment from which a great deal can be learned that can lead to change and improvement. Very often, failure is temporary and eventually gives birth to success.
Learnings from Kindle, Prime and AWS
The book then talks you through how they developed the Kindle, Prime, Prime video and AWS. And how the structure and principles helped them to become a success. To summarise:
- Focus on “who” and “how” decision, not a “what” decision.
- Single thread leadership
- Autonomous teams
- Avoid the skills-forward path
- Bias for action
- Customer obsession
- Ban PowerPoint
- Revise the compensation structure for leaders so that it encourages long-term commitment and long-term decision-making.
- Define culture and leadership principles
Everything in Amazon is deliberate and considered. Nothing in this book and the way Amazon is rocket science. All principles are mentioned in lots of business books. The only difference is the commitment to define and enforce expected practice and behaviour. Otherwise, it is just random and haphazard leadership.