Summary
A well-crafted and well-researched look at multiple Amazon and Jeff Bezos initiatives from 2010 to 2021 and reads like fiction. I just missed a deeper insight into the departments that truly drove Amazon’s growth during that time.
Key Takeaways
- Assessing business ideas
- If they work, will they grow to become big businesses?
- If the company didn’t pursue them aggressively now, would it miss an opportunity?
- Don’t think incrementally, think exponentially.
- Don’t settle for less because you run into difficulties. Any vision can become reality as long as you have the will, determination and perseverance.
- A 50% reduction in time was considered “not serious”. By continuining to push and invent their way around a problem, Amazon’s machine learning team brought the time down by 98+% (40 years to months).
- Minimum Viable Product -> Minimum Lovable Product
- “What would we be proud to take to the market?”
- Leverage the power of existing players. Establish partnerships with players who already have an incentive to partner with you. Create an opportunity that attracts them, so they spend their time and effort, rather than simply giving them money.
- Amazon: stubborn on vision, flexible on details.
- One-way and two-ways doors = irreversible and reversible decisions
- There are multiple paths to yes
- Pursue operating leverage: growing revenues at a faster rate than expenses
- To grow operating leverage, ask:
- How can you reduce operational costs while maintaining sales growth?
- How can you maximize the productivity of every hour you are getting from your employees?
- Where can automation and algorithm stem the growth in headcount or replace employees altogether?
- To grow operating leverage, ask:
- Bezos: “We do not charge more because we can’t figure out how to make it cost less. We invent to make it cost less.”
- Invert, always invert. Can’t make a decision or selection? How can you flip the process on its head and let the other side put in the time and effort to make the decision easy (or for you)?
- Sellers, partners and humans generally desire “no surprises” and “less uncertainty”
What I got out of it
A thorough understanding of how Amazon operates (internally and externally), how it evaluates and pursues opportunities, and the drive it exhibits to better serve its customers – but at what cost?
While I cannot believe that this is the way, if not the only way, to be a true (business) inventor, I also cannot deny that modern revolutionary businessmen we all look up to – Jeff Bezos, Elon Musk and the late Walt Disney and Steve Jobs – share similar traits:
- An insane attention to detail
- Extreme focus on 1 or a few things that give asymmetric returns
- Realizing a vision that many consider crazy, maintaining crazy deadlines, pushing others more than anyone has ever pushed them…and ultimately willing that vision into existince with dogged determination.
- Showing others that the only restraints we have are the ones we place on ourselves.
Having these people show that any vision, no matter how crazy, can become reality is inspiring, but I cannot help but think there is a way to get there without seeming like a tyrant.
Chapter Summary Notes
Uber Product Manager
Amazon’s 14 leadership principles
Assessing ideas:
- If they work, will they grow to become big businesses?
- If the company didn’t pursue them aggressively now, would it miss an opportunity?
Bezos considers science fiction blueprints for an exciting future.
Don’t think incrementally, think exponentially.
With AWS, Fire phone and Alexa, Bezos was heavily involved. Like Steve Jobs, Elon Musk or Walt Disney, Bezos had a grand vision, pushed people, micro-managed to excellence and never settled for less or what is possible now. Always pushing boundaries and setting goals that others thought were unrealistic – they simply hadn’t shifted their mind to think exponentially. They thought in what was common, not what was possible.
A 50% reduction in time was considered “not serious”. After pushing the machine learning team further, they brought the time down 98+% (40 years to months).
One way to speed up was to acquire existing solutions/businesses.
Minimum Viable Product -> Minimum Lovable Product
“What would we be proud to take to the market?”
Post-launch Amazon changed Echo’s organizational structure from functional to Amazon’s “two-pizza” teams, each devoted to a specific Amazon domain. Each team was run by a “single-threaded leader” who had ultimate control and absolute accountability over their success or failure. To yoke them all together, a “north star” document was created, which crystallized the strategy of a global, voice-enabled computing platform.
Result: quick progress and iteration, but over time makes the product overly complex.
Next step in evolution: “find all the places that customers are suffering from our organizational structure.” -> Address pain points, simplify processes and flows and address two-sigma events.
Post-launch Amazon grew Amazon Echo quickly by creating integrations:
- Alexa Skills Kit so other companies can build voice-enabled apps on top of it
- Alexa Voice Service so makers of products can integrate Alexa into their own devices.
Again, leverage the power of existing players. Establish partnerships with players who already have an incentive to partner with you. Create an opportunity that attracts them, so they spend their time and effort, rather than simply giving them money. The opportunity is the money.
A Name Too Boring To Notice
Start with the needs of the customer and work backwards (backward chaining).
List the advantages and drawbacks.
Which problem can be solved (with technology)?
Envision the outcome and get to work.
Amazon’s leadership template
- Hard-driving
- Maniacal about the customer
- IQ over EQ
- Raw force of will over innate leadership ability
- Create an environment in which there were no other options but to succeed.
- The only way to get to good decisions is to passionately debate hard problems.
Bezos: Amazon is “stubborn on vision, flexible on details.”
Make groups work on parallel tracks to compete to fulfil the ideal and solve a longstanding problem.
Cowboys and Killers
Bezos: “Don’t come to me with a plan that assumes I will only make a certain level of investment. Tell me how to win. Then tell me how much it costs.” – on Amazon’s initial plan to enter India.
Bezos: “There are two ways of building a business. Many times, you aim, aim, aim, and then shoot. Or, you shoot, shoot, shoot, and then aim a little bit. That is what you want to do here. Don’t spend a lot of time on analysis and precision. Keep trying stuff.” – on what Amazon needs to do to win in India.
“Democracy Dies in Darkness”
Jeffisms:
- One-way and two-ways doors = irreversible and reversible decisions
- Double the experimentation equals twice the innovation
- Data overrules hierarchy
- There are multiple paths to yes
Washington Post turnaround:
- Operate within its means
- Embrace technology
- Rapid experimentation
- Optimism about the opportunities of the internet instead of despair
Bezos: “You’ve suffered all the pain of the internet but haven’t yet fully enjoyed its gifts. Distribution is free, and you have a massive audience.”
- Partner with existing newspapers & userbases
- “Weave a rope” by connecting the Washington Post with Amazon Fire & Prime.
- Content system (Arc Publishing) that managed online publishing, blogging, podcasting, and advertising – first for internet use, then licensed it to other companies.
Prakash: “The most important thing Jeff has brought is a culture of experimentation. None of us feels that if we spend money and screw up some big project we’re going to have to face an auditing committee. We are not afraid to fail.”
Bombing Hollywood & Ingredients of Epic Storytelling
Bezos: reduce complex issues down to their most essential essence and find the basic things they have in common.
Bezos wanted to make Amazon Studios “the scientific studio”. Remake every kind of business into one that employs the scientific method with computer science, experimentation, and copious amounts of data.
Ingredients of epic storytelling
- A heroic protagonist who experiences growth and change
- A compelling antagonist
- Wish fulfilment (e.g. the protagonist has hidden abilities, such as superpowers or magic)
- Moral choices
- Diverse worldbuilding (different geographic landscapes)
- The urgency to watch the next episode (cliffhangers)
- Civilizational high stakes (a global threat to humanity like an alien invasion – or a devastating pandemic)
- Humour
- Betrayal
- Positive emotions (love, joy, hope)
- Negative emotions (loss, sorrow)
- Violence
The Selection Machine
Two of Amazon’s growth drivers
- Flywheel
- Pursuit of operating leverage: growing revenues at a faster rate than expenses
To grow operating leverage, ask
- How can you reduce operational costs while maintaining sales growth?
- How can you maximize the productivity of every hour you are getting from your employees?
- Where can automation and algorithm stem the growth in headcount or replace employees altogether?
More Jeffisms
- “Focus on lower cost structure. It is better to have low costs and then charge to maximize your value versus charging to cover costs.”
- “Having a stupid rate card equals stupid thingshappening. Rate cards must be equal to the value.”
- “We do not charge more because we can’t figure out how to make it cost less. We invent to make it cost less.”
- “We should be able to fulfil 100% of the 3P (third-party) business. I do not know what the debate is, yes, we must fulfil low priced selection, it is crucial.”
- “Averages are bad measures. I want to see actuals, highs, lows and why – not an average. An average is just lazy.”
The question is not quantity or quality. It’s quantity and quality. The question is: how to make it happen?
Amazon’s Future is CRaP
CRaP = Can’t Realize A Profit
Bezos places prospective business opportunities into one of two buckets:
- Land rushes: the moment is ripe, rivals are circling and Amazon has to move quickly or it loses out.
- Everything else: the company can bide its time and patiently experiment.
The Last Mile
Clark’s strengths: a sharp, analytical mind and a masterful ability to dive into the most intricate level of detail to identify problems and negative trends. He possessed a crucial skill at Amazon that was about to prove exceedingly useful: he could take Bezos’s ambitious visions, convert them into something approximating reality, and then grow them into systems that didn’t blow apart at Amazon’s tremendous size.
The Gold Mine in the Backyard
Watch out for a product/service/department’s revenue and profitability being obscured by a single revenue driver – as was the case with advertising hiding stagnation in online retail in 2017.
A/B test everything and use data to make more informed decisions.
Bezos: “Day two is stasis, followed by irrelevance, followed by an excruciating, painful decline, followed by death. And that is why it is always Day one.”
Business characteristics Bezos loves
- Customers aren’t transported off Amazon, but kept within the ecosystem, feeding the flywheel.
- Few people are needed; the system is largely self-service.
- Once the technology is in place, it produces tremendous (operational) leverage, a windfall that can finance new inventions.
Gradatim Ferociter
A Potemkin village: a dysfunctional culture concealed beneath an industrious façade.
Blue Origin CEO Bob Smith: things that all businesses need to do
- Have good financials
- Have a good HR process
- Have leaders that know how to lead and develop and have large teams
License To Operate
Amazon’s HQ2 – instead of developing numerous offices in multiple cities, Amazon would announce its intention to create a second headquarters. It would then open the site selection process to all cities in North America and allow them to compete for a prize of some fifty thousand jobs and $5 billion in capital investments over a span of fifteen years. Such a process could highlight what communities coveted about the company instead of what its critics feared about it.
Lesson: invert, always invert. Can’t make a decision or selection? How can you flip the process on its head and let the other side put in the time and effort to make the decision easy (or for you)?
“Capital goes where it is welcome and stays where it is well treated.”
Reckoning
Sellers, partners and humans generally desire “no surprises” and “less uncertainty” (Bernie Thompson – Plugable Technologies).
Splitting the company apart wouldn’t help Amazon’s sellers, partners, or customers, and there was little legal basis for shutting down private-label lines like AmazonBasics. After all, retailers as far back as the Great A&P had studied what sold well, cultivated house brands at lower prices, and provided customers with an additional choice on their shelves.
Kurt Zumwalt, Amazon’s treasurer: “This is not a typical corporate conglomerate like Berkshire Hathaway or General Electric. Almost every aspect of Amazon is built around subtly increasing its connection to customers. The power of the business model is the combination of the sum of its self-reinforcing businesses and services, enabled by world-class technology, operational excellence, and a rigorous review and measurement process.”
Pandemic
Old military adage: supply chains win wars.
Dave Clark: “There’s a group of people who love us no matter what we do, and there’s a group of people who really don’t like us, no matter what we do.”
Over the course of two and a half decades, Bezos had taken an idea to sell books on a new medium called the Web, and through invention, the unencumbered embrace of technology, and the ruthless pursuit of leverage, spun it into a global empire worth more than one and a half-trillion dollars.