Love 'Em or Hate 'Em - There's Always More to Be Learned from 'Em

"Amazon dot com". Just saying the words can both stimulate innovative thinking or "kindle the spirits" of a battlefield business general manager to wake up in a cold sweat. Regardless of your individual perspective, Jeff Bezos' annual letter is well-worth the read and provides unique Amazon insights into the marketplace, and an crisp executive summary of "everything Amazon". If your business is already "e-commerce powered" - congratulations - there's something in here for you and your business. If your business is pure bricks and mortar - there's some unique thoughts for you as well - including an inspiring idea or two to help you bring your business into the digital age.

Below are my personal favorites and highlights - as well as the link to the entire text, which I would encourage you to invest the 15 minutes to do so - this week!

Results: This year, Amazon became the fastest company ever to reach $100 billion in annual sales. Also this year, Amazon Web Services is reaching $10 billion in annual sales … doing so at a pace even faster than Amazon.com achieved that milestone.

• The Customer: Our success is about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence.
• On Culture: It is created slowly over time by the people and by events – by the stories of past success and failure that become a deep part of the company lore. If it’s a distinctive culture, it will fit certain people like a custom-made glove. The reason cultures are so stable in time is because people self-select. Someone energized by competitive zeal may select and be happy in one culture, while someone who loves to pioneer and invent may choose another.
• Innovation: To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten.

Business Highlights:

• Prime: Now offers members one-hour delivery - and was launched only 111 days after we dreamed it up. In that time, a small team built a customer-facing app, secured a location for a warehouse, figure out which 25,000 items to sell, got those items stocked, and scaled up.
• Marketplace: We took two big swings and missed – with Auctions and zShops before we launched Marketplace over 15 years ago. We learned from our failures - and today 50% of units sold on Amazon are sold by 3rd-party sellers (over 70,000 entrepreneurs with sales of more than $100,000).
• Globalization: In addition to nourishing our big offerings, we work to globalize them. To globalize Marketplace and expand the opportunities available to sellers, we built selling tools that empowered entrepreneurs in 172 countries to reach customers in 189 countries last year. For Example, in India: Amazon Tatkal launched a specially designed studio-on-wheels offering a suite of services including registration, imaging and cataloging - enabling businesses to get into online selling in under 60 minutes. A program called Chai Cart deploys mobile carts to a city’s business district, connects with small business owners, and teaches how to sell online. In a period of four months, the team traveled across 31 cities and engaged with over 10,000 new sellers.
• AWS: Just over 10 years ago, AWS started with a simple storage service. Today, AWS offers more than 70 services for compute, storage, databases, analytics, Internet of Things, and big enterprise applications. We could have asked “What does this have to do with selling books?” I’m glad we didn’t. AWS is customer obsessed, inventive and experimental, long-term oriented, and cares deeply about operational excellence.

Summary

• We 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.
• There are some traps that high-performing large orgs can fall into as a matter of course, and we’ll have to learn how to guard against them. One common pitfall for large organizations – one that hurts speed and inventiveness – is “one-size-fits-all” decision making.
• Some decisions are consequential and nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. “If you walk through and don’t like it - you can’t get back to where you were before”. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible - a Type 2 Decision. You can reopen the door and go back. Type 2 decisions can and should be made quickly by high judgment individuals/small groups.
• As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.

Full Amazon Annual Letter Link.