The Amazon Way: Principles 1-7

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I just finished reading “The Amazon Way - 14 Leadership Principles Behind the World’s Most Disruptive Company” by John Rossman. The book was recommended to me by my manager at Expedia (a former Amazon employee himself) as a good case study for how Amazon operates. The principles covered in the book are dogma for Amazon employees: from warehouse worker to vice president, each employee is expected to exemplify the principles in every decision they make.

This post explores the first 7 principles and highlights a few insights that I had from each.

1. Obsess Over the Customer

  • Let the customer drive everything that you do
    • Jeff Bezos is known to physically bring an empty chair in the room in meetings, to make sure no one forgets the voice of the customer
  • Never leave a bitter taste in the customer’s mouth
    • “We noticed you had poor video playback, so here’s a full refund for the movie you just rented. We hope you use our service again!”
  • The flywheel of growth
    • Traffic —> Sellers —> Selection and Convenience —> Customer Experience —> Traffic…
    • Growth fuels a Lower Cost Structure, which leads to Lower Prices, which also leads to a better customer experience (part of the flywheel of growth)

2. Take Ownership of Results

  • You own your dependencies.
    • Control your dependencies, if possible. If not possible to control your dependencies, have strict agreements with them with contracts and Service Level Agreements (SLAs) defined.
  • For each dependency, you should have a hedge against it: if the dependency fails, what will you do to back it up?
    • “it was a dependency issue” is never a good excuse.
  • Never say “that’s not my job.”
    • Everyone is an owner of the business, the health of the business is everyone’s job

3. Innovate and Simplify

  • Design capabilities “From the user backwards”.
    • For simple users, design simple solutions. Also allow more sophisticated to fiddle with complicated UIs as an “opt-in” feature.
  • Mimicry is often smarter and less risky for businesses…
    • Let the other guy find a market and determine a product, then slide in and make that product better!
  • Forcing Functions
    • Managers apply constraints to their organization to force creativity.

4. Leaders are Right - A lot

  • Powerpoints are not allowed — 5-7 page essays trimmed down to 2 pages are preferred
    • The act of writing the essay allows you to digest the idea in a deeper way and uncover corner cases that may have been overlooked otherwise.
  • Future Press Releases — Press release written in the future that highlights the successes of a product or idea under development
    • A type of forcing function, future press releases hold leaders accountable for their ideas.
  • Set up instrumentation (real-time data collection) to determine product success
    • Decisions should be made from data instead of from instinct.

5. Hire and Develop the Best

  • How “fungible is a candidate
    • The degree to which a candidate is capable at expanding in to new roles / business areas
  • Every hire is a reflection on those who hired him or her
    • Making a candidate’s successes reflect well on those that hired, and candidate’s failures reflect poorly, gives the hiring committee more skin in the game.
  • Don’t reward B+ players, only A+ are compensated well.
    • Weeds out those who are only “just ok” at their jobs

6. Insist on the Highest Standards

  • Everyone should behave as a leader at the company
    • The principles outlined so far seem to apply just to “leaders” in their vocabulary: that’s because everyone is supposed to act and behave as a leader at the company
  • Service level agreements (SLA)
    • SLAs set expectations for both internal and external facing services. Instrumentation is set up to measure every SLA in real time. Any deviation should be detected and remedied immediately.
  • None of the 14 principles include a “healthy work life balance”…
    • Jeff’s expectations are often unreasonably high. If you can’t exceed them, you’re out.

7. Think Big

  • Amazon is still a “Day One” company
    • In Jeff’s mind, Amazon still has a long way to go. Every day is “Day One”
  • Optimize for Free Cash Flow (FCF) instead of earnings or percentage margins.
    • Your business will invest in different ways to optimize for FCF vs Earnings. FCF fuels innovation, and optimizing for it is an investment in the long term instead of in short term profits.
  • Regret Minimization Framework
    • “Which choice will look best when you consider it not 6 months or 1 year from now, but decades in the future? Chances are that’s the right option.”

I’ll cover the remaining 7 principles in the next installation.

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