Book: The Amazon Way

amazonway“The Amazon Way: 14 Leadership Principles Behind the World’s Most Disruptive Company” by John Rossman

  • “Consider ‘obsession’ versus ‘satisfaction.’ Typical management strives to create and measure ‘customer satisfaction.’ They work to create a slightly more satisfied customer than the competitor and measure the experience in various ways. What if, instead , you ‘obsessed’ over your customer? What would you need to do to delight your customers (this includes internal customers) but do so with the same or improved cost and efficiency? You would likely have to change many things about business.”
  • “Leaders at Amazon learn how to automate their processes and work to continually reduce manual steps, interventions, and labor costs. Making your customer interactions self-service is the key strategy to a accomplish this goal”
  • “start by asking a lot more and deeper questions than you normally do with your colleagues. Secondly, don’t just trust. Instead, trust and verify. When this becomes the norm in a company, then asking for details is no longer seen as a challenge to someone’s competency. Finally, create and manage service level commitments on all capabilities— and hold your partners accountable.”
  • “instrumentation. Teams are typically able dramatically increase the collection and use of real-time data in processes and use the data to give insights to reduce errors, improve cycle time, and decrease costs by applying automation and seeking instrumentation.”
  • “Jeff doesn’t focus on margins. He’s more focused on free cash flow— that is, the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Why? Because he believes the Internet’s potential for growth is gargantuan and still fundamentally unexploited. To Jeff, the year is 1889, and the Oklahoma Land Rush is on— or, as he likes to put it, it’s still Day 1 of the Internet. So he’s ready to slash prices and create programs like free shipping to cultivate customer loyalty and drive sales growth toward the unimaginable heights he foresees. Then he invests the revenue generated back into “the holy trinity”: price, selection, and availability (more on this later).”
Customer Obsession
  • “Price, selection, and availability…these are the three durable and universal customer desires that Amazon thinks of as its holy trinity.”
  • “For nearly two decades, Jeff has proven that he is willing to make less on an item— or an entire line of products— in the short term to guarantee the long -term growth of the business.”
  • “The Andon Cord is one way to force people to pay attention to the needs of their internal or external customers—by literally shutting down the business until those needs are met.”
  • ““If you’re competitor-focused, you have to wait until there is a competitor doing something,” Jeff explains. “Being customer-focused allows you to be more pioneering.””
  • “There are two ways to extend a business. Take inventory of what you’re good at and extend out from your skills. Or determine what your customers need and work backward, even if it requires learning new skills.”
Ownership
  • ““the open kimono.” If you weren’t willing to be completely honest about where you, your project, or your numbers stood, then there was simply no chance of attaining your goals. You had to open your kimono and willingly expose the faults, errors, and limitations of your situation.”
  • “Here’s what didn’t work, why it didn’t work, and how we’re going to change.”
  • “Accountability is not painless. But it’s the only sure path to achievement.”
  • “Ownership means not only mastering your domain but also being willing to go beyond the boundaries of your role whenever it’s needed to improve customer experience or fix a problem.”
  • “Whenever possible, take over the dependencies so you don’t have to rely on someone else.”
  • “If that is impossible, negotiate and manage unambiguous and clear commitments from others.”
  • “Create hedges wherever possible. For every dependency, devise a fallback plan— a redundancy in a supply chain, for example.”
Invent and Simplify
  • “No matter what your job, you are expected to improve on the processes in ways that ultimately enhance the customer experience and lower costs.”
  • “The most radical and transformative of inventions are often those that empower others to unleash their creativity— to pursue their dreams.”
  • “capabilities are designed from the user backwards.”
  • “Process innovation can be enormously powerful, but when it is practiced without an emphasis on simplicity , the result is bureaucracy— the multiplication of processes for their own sake.”
  • “Strong processes with measurable outcomes eliminate bureaucracy and expose underperformers.”
  • “One of Jeff’s favorite techniques is to create a forcing function—a set of guidelines, restrictions, or commitments that force a desirable outcome without having to manage all the details of making it happen.”
  • “Direct head count for a particular project would typically include system development engineers (SDEs), technical program managers, and people who negotiated contracts, such as vendor managers.”
  • “All other head count— all the people that don’t directly create a better customer experience— was considered indirect. The forcing function was that acquiring direct head count was relatively easy to get approved. However, indirect head count was constrained and had to be justified by demonstrating that it would decrease with scale in the business.”
  • “We used many functions and algorithms to reward high-performing sellers— for example, by having them vault to the top of search results. In this way, the third-party marketplace evolved into a highly efficient, self-governing meritocracy.”
  • “When a merchant submits a product for listing in Amazon’s catalog, Item Authority searches the catalog for matches. It either approves assigning that offer to a page, authorizes creation of a new page, or rejects the submission with an error. And it does this tens of millions of times per day. This “Matching” technology enables the creation of high quality Single Detail Pages (SDP) that help Amazon provide a great experience for our customers. It relies heavily on search technology (using A9), auto-classification, custom rules, and machine learning techniques for success. The ideal candidate thrives in a fast-paced environment, understands elements of matching, search, and machine learning, and will help us build features that reduce merchant friction and drive revenue for Amazon.”
  • “Stumbles are a part of life, but at Amazon. com , it is imperative that you learn something useful from them.”
Are Right, A Lot
  • “they are expected to learn from their mistake, develop specific insights into the reason for that mistake, and share those insights with the rest of the company.”
  • “But at Amazon, PowerPoint slides were not allowed. If you needed to explain a new feature or investment to the S-Team or to Jeff himself, you began by writing a five- to seven-page essay. After you finished that, you reviewed it and trimmed it down to maybe two pages of text for the executives.”
  • “Jeff believes that reliance on PowerPoint presentations dumbs down the conversation and does not push teams to think all the way through their topic.”
  • “When you have to write your ideas out in complete sentences and complete paragraphs, it forces a deeper clarity of thinking.” By contrast, in the typical PowerPoint show, “You get very little information, you get bullet points. This is easy for the presenter, but difficult for the audience.”
  • “Crafting the future press release forced us to articulate for ourselves what would be newsworthy about the product at the very end of the development process. This is a great way to define clear and lofty goals , requirements, and objectives and to build broad understanding from the start of a program or enterprise change.”
  • “Write the release as if you are writing at some future point in time when success has been achieved and realized. For example, when looking forward to the introduction of a new product, writing a press release as if at the day of product launch is good, but even better is a date sometime after launch, when true success can be discussed.”
  • “Discuss why the initiative is important to customers or other key stakeholders. How did the customer experience improve? What benefits have customers received? Then discuss other reasons why it was important.”
  • “Set audacious, clear, and measurable goals, including financial results, operating objectives, and market share.”
  • “Outline the principles used that led to success. This is the trickiest and most important step. Describe the hard things accomplished, the important decisions along the way, and the design principles that led to success.”
  • “Amazon.com ’s ‘gladiator culture.’ Because the numbers provide crystal -clear, incontrovertible proof of which leaders are right a lot, Amazon.com operates to as close to a true meritocracy as possible.”
  • “It was not the title but rather who’s got the best idea. Who’s bringing the solution to the table? That’s what was most important.”
  • “It takes foresight to do leadership-by-the-numbers correctly. You must embed real-time metrics from the very start of a program, because they are nearly impossible to retrofit.”
  • “Instrumentation as a critical feature provided the dashboard to understand performance and issues in a real-time manner. In pursuit of true instrumentation, Amazon.com is constantly developing its real-time capabilities. During my time at the organization, Amazon. com tracked its performance against roughly five hundred measurable goals, nearly 80 percent of which had to do with customer objectives.”
Learn and Be Curious
  • “Hubris has been the downfall of many societies, companies, and leaders. Adopting a beginner’s mind-set by valuing learning, being curious, always asking “why,” and looking for opportunities and competitive threats in unusual places will help a successful team avoid hubris and the tragic downfall that surely follows.”
Hire and Develop the Best
  • “As leaders, we were expected to work with laggards like these to improve their performance into the A + category— or else find some way to incent these people to leave. As a result, Amazon.com experienced systematic and significant turnover during my years there. Jeff told us to focus our positive reinforcement on our A + people; he was comfortable with a high degree of churn below that standard.”
Insist on Highest Standards
  • “Jeff believed that his workforce, like his technology, should be constantly improving. He believed every new hire should improve the talent pool, just as every new technological process should improve efficiency and eliminate operational friction.”
  • “What’s probably most impressive is that everything at Amazon.com has an SLA—everything. For instance, the time between an image’s upload and the moment it appears on the website has an SLA. So does the time it takes to change a third party’s inventory from ten to eight. If it can be measured, it is— and an exceptionally high standard of service is attached to it.”
  • “some of the worst leaders I encountered at Amazon.com were the ones who hid behind ridiculous standard critiques. They became parrots of ideology, instead of being pragmatic in its application. Like any good idea or concept , the idea of high standards can be carried to a nonproductive extreme.”
  • “More than a few ex- Amazon.com employees have described the organization as a large company that functions like a start-up— meaning, I believe, that they feel as if they were required to do excellent work at a frenetic, breakneck pace, while still adhering to time-consuming processes like the long- form written narrative and other elaborate communication processes.”
  • “None of the fourteen principles mentions the need for a healthy work-life balance. That is not an accident. Jeff expects all of his people to function as both owners and leaders. He wants you to drive the business as if it were your own car, not some weekend rental.”
Think Big
  • “Leaders create and communicate a bold direction that inspires results.”
  • “one of the most important factors in Amazon.com ’s massive success—the willingness to sacrifice this year’s profits to invest in long-term customer loyalty and product opportunities that will create bigger profits next year and for years thereafter.”
  • “maintaining low margins— and deliberately eschewing short-term profits—is a brilliant strategy in the tumultuous age of the Internet. Not only do low prices drive customer loyalty, but they also discourage competition. If you want to jump into the fray against Amazon.com , you can’t just match them on value— you have to significantly beat them. But that’s easier said than done. Jeff has left very little room to huddle beneath Amazon.com ’s price umbrella, leaving most competitors out in the soaking rain.”
  • Free Cash Flow: “Jeff believed then, as he does now, that without constant innovation, a company will stagnate. And the primary ingredient for investment in innovation is FCF.”
  • “Take a long -term view , and the interests of customers and shareholders align.”
  • regret-minimization framework: “I wanted to project myself forward to age 80 and say, ‘Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.'”
Bias for Action
  • “this bias for action and willingness to be wrong doesn’t mean you can also be wrong repeatedly. Unlike Thomas Edison, leaders at Amazon don’t get two thousand tries at developing just the right filament for the light bulb.”
  • “If you are not inventing for your customers and improving their experience every day— even in ways that may hurt short -term financial results—then someone else will.”
  • “Many current and ex-employees at Amazon.com —especially in the early days—complained to me that they were occasionally not given the resources they needed to build things properly. There is continuous pressure to get things done as quickly as possible, which sometimes leads people to apply Band-Aids to problems rather than address the underlying issues. Some say Amazon would be better served by slowing down and moving at a more deliberate pace.”
  • “If you double the number of experiments you do per year, you’re going to double your inventiveness.”
  • “So how do you successfully balance a bias for action with the ability to be right a lot? By developing and monitoring the metrics.”
Frugality
  • “Jeff’s salary is $ 81,840— just $ 14,000 more than the average Facebook intern makes.”
  • “many Amazon ex-employees cite the company’s cheapness as the number one reason they jumped ship. Many people have warned that Amazon.com ’s policy of hiring temporary-contract workers could lead to low-quality work and inconsistent productivity and waste resources on extra training.”
  • “Parking at the company’s offices in South Lake Union costs $ 220 a month, and Amazon reimburses employees— for $ 180. Conference room tables are a collection of blond-wood door desks shoved together side by side. The vending machines take credit cards, and food in the company cafeterias is not subsidized. New hires get a backpack with a power adapter, a laptop dock, and orientation materials. When they resign, they’re asked to hand in all that equipment— including the backpack.”
  • “The company pays enough to attract quality talent— but not enough to make people fat and happy or to create the country-club atmosphere Jeff is trying to avoid.”
Earn Trust
  • “Jeff understands that a lack of trust perpetuates fear. If you fail to earn the trust of your team members, fear eventually becomes their primary driver. They will fear your opinions . They will fear your decisions and evaluations. They will fear failure. They will fear you. Once fear becomes dominant, the organization can barely operate, let alone be vocally self-critical.”
  • “Open Your Kimono. Learn to take accountability and admit faults—not recklessly or in a way that lets people exploit you but rather in a way that demonstrates honesty and pursuit of improvement.”
  • “Take the Hit. When bad thing happen, resist the temptation to point the finger. As leader of a team, you need to accept responsibility for both the good and the bad.”
  • “Build Up Your Team Members. This is the opposite of taking the hit. Whenever appropriate, make sure you praise your team members in front of their peers and superiors.”
  • “Ditch the Leash. Allow your team members freedom to explore new ideas and to be creative . If people feel that you are micromanaging them, they will stop trusting you.”
  • “Accept Confrontation. Fighting is not good , but neither is false agreement. When there is a difference of opinion, promote open discussion. Explore solutions with the intent to solve problems.”
  • “Find the Value in Each Person. We all have weaknesses, but we also have strengths. Everyone brings something different to the table. Find what is unique in each individual and use that unique strength for the good of the team.”
  • “What truly matters isn’t team size— it’s autonomy and accountability. The Two-Pizza Team is about trusting a small faction within an organization to operate independently and with agility.”
  • “not every organization has the underlying culture of trust needed to make autonomous teams work effectively. If you work in a company that is dominated by fear, start trying to turn that atmosphere around. Once trust begins to flourish, creativity and innovation can flourish as well.”
Dive Deep
  • “Leaders who are constantly digging deep into a challenge—curious leaders— dismantle silos and bureaucracy.”
  • “to dive deep, you need metrics and systems designed to collect and analyze them accurately, consistently, and quickly.”
  • “▪ Write a description of the problem. This helps you formalize the problem and helps ensure that the entire team understands and is focused on the same problem.
    ▪ Ask Why the problem happens, and write the answer down below the problem description.
    ▪ If the answer you just provided doesn’t identify the root cause of the problem, ask Why again, and write that answer down.
    ▪ Loop back through the second and third steps until the team is in agreement that the problem’s root cause has been identified. This may take fewer than five Whys or more, depending on the complexity of the problem.”
Have Backbone; Disagree and Commit
  • “If you want to succeed in Jeff’s relentless and fiercely competitive world, you cannot:
    ▪ Feel sorry for yourself
    ▪ Give away your power
    ▪ Shy away from change
    ▪ Waste energy on things you cannot control
    ▪ Worry about pleasing others
    ▪ Fear taking calculated risks
    ▪ Dwell on the past
    ▪ Make the same mistakes over and over
    ▪ Resent others’ success
    ▪ Give up after failure
    ▪ Feel the world owes you anything; or
    ▪ Expect immediate results”
Deliver Results
  • “At the end of the day, it’s all about outcomes at Amazon. com. If you violate all of the other principles —if you fail to obsess over the customer, communicate vaguely, hire second-rate people, ignore details, and so on— but consistently deliver outstanding business results, then all will be forgiven .”
Conclusion
  • “Jeff understands that striking a common-sense balance is crucial—not trying to follow a set of rules as if they constitute a recipe for success.”
  • “Lending too much importance to any one of the principles can upend the entire framework and ruin the desired effect.”
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