Mid-Michigan
Before Jeff Bezos left his role as CEO of Amazon, he had taken the company he founded from zero to nearly $1.7 trillion in market value. His approach was relentless in building the most dominant, customer-focused company in modern history. But relentless doesn’t mean inevitable. Bezos was also guided by 11 principles we can all learn from.
Start-Up Lessons
Employ a “regret minimization framework.” When Bezos was contemplating starting Amazon, he used a mental exercise he calls a “regret minimization framework.” He thought that when he turned 80 and looked back on his life, he wanted to minimize the number of regrets he had. “I knew that when I was 80, I was not going to regret having tried…to participate in this thing called the internet that I thought was going to be a really big deal.”
Identify the right opportunity. Books were Amazon’s first products, but his goal wasn’t to build a book business. It was to build an internet business, because he saw that the internet was growing at an amazing rate. It made sense to start with books because there were more than three million available titles and shipping them was relatively easy and cheap.
Make your value greater than the cost. In 1994, to get people to go on a computer, dial up an internet connection, and buy, you’d better have something they can’t get anywhere else. Bezos offered low prices, limitless selection, and flawless fulfillment. He concluded that if Amazon could make customers’ lives easier and better in a tangible way, they’ll probably buy just about anything from the site.
Operating Lessons
Get customer-obsessed. Bezos says, “the number one thing that has made us successful, by far, is obsessive, compulsive focus on the customer.” That means “offering our customers compelling value”—creating a company people couldn’t live without. He made every new product team write a press release at the start, so they could think about what they were doing from the perspective of a customer’s first encounter with the product.
Worry about customers, not competitors. Bezos told his team not to fear competitors, because they’re never going to send us money. He said to only worry about what really matters. “Be afraid of your customers, because those are the folks who have the money.”
Keep the focus long-term. Amazon didn’t turn a profit for quite some time. Bezos told Wall Street, “a fundamental measure of our success will be the shareholder value we create over the long term.” Prime free shipping for $79 lost money in the short term on all the customers who purchased a lot. But it boosted sales tremendously, which fed the bigger, long-term plan.
Make the flywheel spin faster. To bring in more customers, Bezos aimed for a large selection of products, at low prices, with terrific customer service. That larger number of customers would then attract third-party sellers, increasing the selection of products and attracting even more customers. Bigger sales volume would get better prices from suppliers, and those lower costs would fund growth, making the flywheel spin even faster.
Understand the kind of decision you’re making. Bezos notes most decisions are less consequential Type 1 “two-way doors,” where if you make the wrong choice, you can go back. Then, he says, “there are decisions that are irreversible and highly consequential; we call them one-way doors, or Type 2 decisions.” The key is to know which type of decision you’re making. Don’t take too long to make Type I decisions. But be sure to take enough time to make Type 2 decisions when there’s no going back.
Brand Lessons
Give people a mission. Bezos asks, “How do you hire great people and keep them from leaving?” He says you give them “first of all, a great mission—something that has real purpose, that has meaning.” That’s how you wind up with intense missionaries instead of pragmatic mercenaries.
Nurture your culture. According to Bezos, Amazon’s intense culture was “created slowly over time…by the stories of past success and failure that become a deep part of the company lore.” By recognizing that history, and guarding it carefully, Bezos says, “we’ve collected a large group of like-minded people.”
Listen to critics, but not all the time. Bezos says that when criticized, “First, look in a mirror and decide if you’re critics are right. If they’re right, change.” But he notes that when you’re on a mission, you should expect criticism. He advises that “If you can’t afford to be misunderstood, don’t do anything new or innovative.”