Since its humble origins as an online bookseller that debuted out of founder Jeff Bezos’ garage in 1994, online retail giant Amazon has grown to become a category leader in dozens of high-tech spaces. More than 25 years later a firm that was generating $20,000 a week in sales within 30 days of its inception has exploded to become an $861 billion corporate titan with a fast-growing footprint in consumer devices, cloud computing and streaming media, among dozens of other spaces.
Figuring out the inner workings that drives Amazon’s operational excellence may seem an impossible challenge, but the secret to the company’s success is simpler than most would expect, says John Rossman, a former Amazon executive who helped launch and scale the firm’s marketplace business. Drawing from his experience, Rossman now advises start-ups and corporations on how to become digital leaders.
“It isn’t just about becoming speedier (efficient at staying in motion) or more agile (able to create change),” he says. “Rather, it’s about striving to achieve operational excellence and always striving to raise the bar at every turn.”
As Rossman explains in his recent book, “Think Like Amazon: 50½ Ideas to Become a Digital Leader,” expanding into digital and accelerating business growth doesn’t have to be time-consuming or difficult if you apply these forward-looking shifts in strategy and thinking.
1. Obsess over great customer service
“When you’re truly obsessed with raising the bar for customers, it doesn’t just become your No. 1 priority — it also becomes your No. 2 and No. 3 priorities as well,” says Rossman.
“Most companies pay the idea lip service. But when you’re truly obsessed with the topic, it means that you’re spending an amount of time, effort and energy pursuing it that appears strange to others,” he says.
Amazon frequently pushes itself hard and expends seemingly exorbitant amounts of effort and capital to improve the shopping, returns and customer-service experiences for its shoppers, says Rossman. But it also uses this singular level of focus to innovate to a degree that almost seems irresponsible to rivals, who often balk at the time and cost required to achieve business breakthroughs and puzzle through difficult strategic challenges, inadvertently leaving Amazon to reap the rewards.
Amazon boxes are seen stacked for delivery in New York City.
Mike Segar | Reuters
“If you think back, in the year 2000 the company announced everyday free shipping to the industry — and the industry’s response was that it was ridiculous and unsustainable,” Rossman recalls. “But today, thanks to Amazon’s singular level of customer focus, it’s become the everyday norm.”
He also references how easy Amazon makes it to obtain a refund on purchases. “If you think about it, it’s counterintuitive; most companies don’t want to make it easier for customers to get their money back. But Amazon instead takes the long-term view that if customers are happier, they’ll make more purchases.”
Rossman adds that one of his favorite Bezos concept is the ability to return an item purchased online to an Amazon bookstore or Kohl’s outlet without even needing to bring the box or receipt. You just hand off the item and it’s gone. Yet another way the company is working to surprise, delight and go well beyond customers’ expectations.”
2. Utilize other people’s work
“It’s important to provide tools and incentives that encourage other actors in your organization’s ecosystem (e.g. customers or sellers) to help tackle hard challenges on your behalf,” explains Rossman.
“Or, in other words, to capitalize on OPW — other people’s work. You could argue that, to a degree, from the way Amazon leverages customer reviews for third-party sellers’ product information, its entire marketplace has been built on the back of this strategy,” he says.
To make this business strategy work, though, says Rossman, three core pillars need to be place. You need to (1) provide a well-thought-out incentive system to encourage others’ participation; (2) offer powerful, user-friendly tools that can help them and (3) make sure you’re effectively governing these systems and solutions to offer the best user experience possible.
3. Eliminate hierarchy to fast-track decisions
“I truly believe that Bezos’ No. 1 concern when it comes to Amazon isn’t supply chain disruption, government regulation or outside interference, but bureaucracy,” says Rossman. “He’s always worked hard to promote entrepreneurial thinking and speed up internal activity where possible, and makes a point at every turn to promote a sense of urgency in the business.”
In fact, says Rossman, Amazon is famous for its focus on “two-pizza” teams (which are up to 10 people in size — no bigger than two pizzas will feed) who retain complete end-to-end ownership of core business features and capabilities. From the company’s online imaging and cloud computing services to its item-return process, he explains, two-pizza teams have helped craft some of Amazon’s most defining features.
This approach, which allows members of these teams to enjoy more autonomy, accountability and ownership of any business function, increases the firm’s agility and ability to make decisions on a dime, Rossman explains.
“When you have a small team that’s in charge of a feature or capability and completely focused and obsessed with creating world-class experiences,” he says, “the service they’re powering becomes more nimble, more scalable and more focused.”
“Leaders are right a lot,” according to Amazon’s operating principles, as Rossman explains in his book. As opposed to most organizations, whose senior leaders manage large teams of subordinates tasked with making day-to-day decisions, the company instead entrusts individual executives with stewardship of big ideas from the beginning. Serving as chief product officers for these respective concepts, which are initially assigned minimal budget and head count, these leaders instead personally assess and invent every aspect of the project from its genesis.
According to Rossman, this framework forces talented, yet often otherwise aloof leaders (who may have stepped away from day-to-day work to focus on general management tasks over time) to rekindle their entrepreneurial spirit and think more like “builders.” As a result, he says, projects benefit from their years of expertise and insight, and attention to detail. Likewise, leaders themselves benefit by becoming more immersed in everyday operating realities, better attuned to the marketplace, and more astute at problem-solving — all to each respective initiative’s upside.
5. Take a more objective approach to hiring
Every modern organization is competing to attract top talent today. But fundamental hiring mistakes often occur when firms are in a rush to fill positions, Rossman says, which can lead to lasting problems, especially if candidates lack the skill set or adaptability needed to evolve as market realities and job responsibilities shift over time.
To avoid these challenges, every open position at Amazon isn’t just assigned a hiring committee but also a “bar raiser” — a member of the hiring committee who hails from a different department and group than the team to which the new hire will be assigned.
This objective observer (who remains removed from team politics and has the power to veto decisions) not only works to prevent manager bias but keeps the company from hiring mistakes made in haste. They also make a point to screen candidates to ensure they exhibit the values and principles that Amazon promotes on the job, and bring skills to the table that are adaptable to future scenarios, noting that job responsibilities frequently evolve over time.
6. Avoid creating a country club environment
No matter how well your business does or how big it becomes, it’s important to stay hungry, even when you’re successful, Rossman asserts. If you’re not constantly looking for ways to step up your game or experimenting with new solutions, like Amazon does, you’re selling yourself short and suboptimizing your team’s potential, he says.
“I remember a meeting with Bezos where he turned in the direction of Microsoft’s campus and said that if we [became a country club like them], we’d be dead in the water,” Rossman recalls. “The point being that even if you’re doing well in the marketplace, you always have to work hard and not hold back to ensure that you and your staff are creating a future that’s every bit as bright as the one you may have inherited.”
7. Write down a clear plan before executing
At Amazon no major new initiative is undertaken until employees write out a six-page document proposing new business ideas or opportunities, which then undergoes extensive management review.
“Amazon spends a lot of time writing, debating and reviewing future plans,” says Rossman. “Going through this process creates a disciplined approach to strategic planning that also helps the company maintain its focus and avoid wasting resources spinning its wheels in less-productive directions.”
Rossman says this writing exercise challenges employees to think more critically about various concepts, which then improves their overall focus. In addition, those crafting these proposals are also challenged to write out future-facing press releases and FAQ documents that imagine what these solutions will ultimately look like and the core function they will serve, defining metrics by which their performance will be gauged.
Because the process encourages submitters to vet ideas extensively from a conceptual standpoint before actual hands-on testing occurs, it ultimately allows the company save on time and resources that would otherwise be spent pursuing these learnings. It’s only after concepts have made their way to print and undergone extensive discussion and debate that they float up to a team that decides which ventures deserve to be funded and which need retooling.
8. Test theories quickly and cheaply
Amazon is always working to help employees make better decisions faster, says Rossman. Part of the way it does so is by framing them around the concept of one-way and two-way doors.
“A one-way-door decision — similar to getting married — is one that’s really difficult and expensive to undo,” he explains. “On the other hand, two-way-door decisions are those smaller, less permanent choices you make that you can test, revise and (if you need to) sometimes put down and come back to later.
It turns out that most decisions are two-way-door decisions. As business leaders, we tend to overestimate their importance or impact and escalate these decisions up the corporate ladder, or delay or pass the buck on decision-making as a result.
Break these two-way-door decisions up into smaller, step-by-step choices to get better about coming up with ways to quickly- and cost-affordably experiment with different approaches to problem-solving.
“A better approach to tackling them is to break these two-way-door decisions up into smaller, step-by-step choices to get better about coming up with ways to quickly- and cost-affordably experiment with different approaches to problem-solving.”
A decision is just a type of hypothesis, he reminds. If you’re uncertain about which choice to make when making a decision, the best thing you can do is figure out how to test your theories quickly and cheaply, learn something from them, and rapidly pivot, adapt, or move along based on the feedback received.
9. Be willing to change
Ultimately, though, as much as Amazon champions these principles, don’t be fooled, says Rossman. Building and maintaining a competitive advantage going forward isn’t about having to think like any one single organization. Rather, he recommends taking a larger, more comprehensive view on future-proofing and building a competitive advantage and asking yourself what you and your organization are willing to do differently to achieve better results.
“Finding ways to get ahead more frequently in tomorrow’s digital world is simply about finding ways to practice exercising better business habits,” he points out.
“It’s about asking yourself what new skills you’re willing to invest in, what new efforts you’re willing to pursue and what you’re willing to work hard at and constantly improve upon in order to achieve Amazon’s results.