Working Backwards: Insights, Stories, and Secrets from Inside Amazon

by Colin Bryar

“We have an unshakeable conviction that the long-term interests of shareowners are perfectly aligned with the interests of customers.”2 In other words, while it’s true that shareholder value stems from growth in profit, Amazon believes that long-term growth is best produced by putting the customer first.

“Our culture is four things: customer obsession instead of competitor obsession; willingness to think long term, with a longer investment horizon than most of our peers; eagerness to invent, which of course goes hand in hand with failure; and then, finally, taking professional pride in operational excellence.”

the Bar Raiser hiring process that ensures that the company continues to acquire top talent; a bias for separable teams run by leaders with a singular focus that optimizes for speed of delivery and innovation; the use of written narratives instead of slide decks to ensure that deep understanding of complex issues drives well-informed decisions; a relentless focus on input metrics to ensure that teams work on activities that propel the business. And finally there is the product development process that gives this book its name: working backwards from the desired customer experience.

“We need to plant many seeds,” he would say, “because we don’t know which one of those seeds will grow into a mighty oak.” It

The customer is also at the center of how we analyze and manage performance metrics. Our emphasis is on what we call controllable input metrics, rather than output metrics. Controllable input metrics (e.g., reducing internal costs so you can affordably lower product prices, adding new items for sale on the website, or reducing standard delivery time) measure the set of activities that, if done well, will yield the desired results, or output metrics (such as monthly revenue and stock price). We detail these metrics as well as how to discover and track them in chapter six.

Amazon’s Leadership Principles6 Customer Obsession. Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers. Ownership. Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say, “that’s not my job.” Invent and Simplify. Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time. Are Right, A Lot. Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs. Learn and Be Curious. Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them. Hire and Develop the Best. Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice. Insist on the Highest Standards. Leaders have relentlessly high stan...

There’s a saying often heard at Amazon: “Good intentions don’t work. Mechanisms do.”

Three foundational mechanisms are: the annual planning process; the S-Team goals process (the S-Team consists of the senior vice presidents and direct reports to Jeff Bezos); and Amazon’s compensation plan, which aligns incentives with what’s best for customers and the company over the long term.

Team goals are aggressive enough that Amazon only expects about three-quarters of them to be fully achieved during the year. Hitting every one of them would be a clear sign that the bar had been set too low.

At many companies, when the senior leadership meets, they tend to focus more on big-picture, high-level strategy issues than on execution. At Amazon, it’s the opposite. Amazon leaders toil over the execution details and regularly embody the Dive Deep leadership principle, which states: “Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdotes differ. No task is beneath them.”

The finance team tracks the S-Team goals throughout the year with a status of green, yellow, and red.

There’s no magic number of principles and mechanisms that every company will need. The magic lives in the moments when the principles are put into practice.

According to Sequoia Capital, the average startup in Silicon Valley spends 990 hours to hire 12 software engineers!1 That’s more than 80 hours per hire, and all that time taken away from a team that’s already understaffed and working on deadline only adds to the urgency to staff up.

Brent Gleeson, a leadership coach and Navy SEAL combat veteran, writes, “Organizational culture comes about in one of two ways. It’s either decisively defined, nurtured and protected from the inception of the organization; or—more typically—it comes about haphazardly as a collective sum of the beliefs, experiences and behaviors of those on the team. Either way, you will have a culture. For better or worse.”2

Thus, contrary to common lore, the Bar Raiser program, as it later came to be known, wasn’t a top-down initiative from Jeff but rather a response to a specific problem that needed to be addressed.

The Bar Raiser was granted the extraordinary power to veto any hire and override the hiring manager.

The method that Amazon interviewers use for drilling down goes by the acronym STAR (Situation, Task, Action, Result): “What was the situation?” “What were you tasked with?” “What actions did you take?” “What was the result?”

(At the start of the meeting, you may want to explain to the candidate that you will be taking notes and why.)

If you do not take complete and detailed notes, expect a visit from your Bar Raiser.

Written feedback is expected to be specific, detailed, and filled with examples from the interview to address the Leadership Principles assigned to the interviewer.

The effective Bar Raiser uses the Socratic method, asking questions that jump-start the critical thinking process, to lead and guide the dialogue with the goal that everyone, or at least the majority, will arrive at the same conclusion about the candidate.

The answer lies in an Amazon innovation called “single-threaded leadership,” in which a single person, unencumbered by competing responsibilities, owns a single major initiative and heads up a separable, largely autonomous team to deliver its goals.

This gave rise to a process called New Project Initiatives (NPI), whose job was global prioritization.

Here’s how NPI worked: Once every quarter, teams submitted projects they thought were worth doing that would require resources from outside their own team—which basically meant almost every project of reasonable size. It took quite a bit of work to prepare and submit an NPI request. You needed a “one-pager”; a written summary of the idea; an initial rough estimate of which teams would be impacted; a consumer adoption model, if applicable; a P&L; and an explanation of why it was strategically important for Amazon to embark on the initiative immediately.

A two-pizza team will: Be small. No more than ten people. Be autonomous. They should have no need to coordinate with other teams to get their work done. With the new service-based software architecture in place, any team could simply refer to the published application programming interfaces (APIs) for other teams. (More on this new software architecture to follow.) Be evaluated by a well-defined “fitness function.” This is the sum of a weighted series of metrics. Example: a team that is in charge of adding selection in a product category might be evaluated on: a) how many new distinct items were added for the period (50 percent weighting) b) how many units of those new distinct items were sold (30 percent weighting) c) how many page views those distinct items received (20 percent weighting) Be monitored in real time. A team’s real-time score on its fitness function would be displayed on a dashboard next to all the other two-pizza teams’ scores. Be the business owner. The team will own and be responsible for all aspects of its area of focus, including design, technology, and business results. This paradigm shift eliminates the all-too-often heard excuses such as, “We built what the business folks asked us to, they just asked for the wrong product,” or “If the tech team had actually delivered what we asked for and did it on time, we would have hit our numbers.” Be led by a multidisciplined top-flight leader. The leader must have deep technical expertise, know how to hire ...

This journey is also a great example of another phrase you’ll hear at Amazon: be stubborn on the vision but flexible on the details.

Amazon uses two main forms of narrative. The first is known as the “six-pager.” It is used to describe, review, or propose just about any type of idea, process, or business. The second narrative form is the PR/FAQ. This one is specifically linked to the Working Backwards process for new product development.

One widely accepted rule of thumb, the so-called 6x6 Rule, sets a maximum of six bullet points, each with no more than six words. Other guidelines suggest limiting text to no more than 40 words per slide, and presentations to no more than 20 slides.

Tufte’s essay proposes a solution. “For serious presentations,” he writes, “it will be useful to replace PowerPoint slides with paper handouts showing words, numbers, data graphics, images together. High-resolution handouts allow viewers to contextualize, compare, narrate, and recast evidence. In contrast, data-thin, forgetful displays tend to make audiences ignorant and passive, and also to diminish the credibility of the presenter.”

We mentioned earlier the estimated reading speed of three minutes per page, which led to the six-page limit. If yours is a 30-minute meeting, a three-page narrative would therefore be more appropriate. Our goal has been to leave two-thirds of the meeting time for discussing what we’ve read.

Narratives are designed to increase the quantity and quality of effective communication in your organization—by an order of magnitude over traditional methods. Creating such solid narratives requires hard work and some risk-taking. Good ones take many days to write.

The FAQ section, as it developed, included both external and internal questions. External FAQs are the ones you would expect to hear from the press or customers. “Where can I purchase a new Amazon Echo?” or “How does Alexa work?”

Internal FAQs are the questions that your team and the executive leadership will ask. “How can we make a 44-inch TV with an HD display that can retail for $1,999 at a 25 percent gross margin?” or “How will we make a Kindle reader that connects to carrier networks to download books without customers having to sign a contract with a carrier?” or “How many new software engineers and data scientists do we need to hire for this new initiative?”

The Metrics Life Cycle When the retail, operations, and finance teams began to construct the initial Amazon WBR, they turned to a well-known Six Sigma process improvement method called DMAIC, an acronym for Define-Measure-Analyze-Improve-Control.

Donald Wheeler, in his book Understanding Variation, explains: Before you can improve any system … you must understand how the inputs affect the outputs of the system. You must be able to change the inputs (and possibly the system) in order to achieve the desired results. This will require a sustained effort, constancy of purpose, and an environment where continual improvement is the operating philosophy.

Amazon employs many techniques to ensure that anecdotes reach the teams that own and operate a service. One example is a program called the Voice of the Customer. The customer service department routinely collects and summarizes customer feedback and presents it during the WBR, though not necessarily every week.

At Amazon, understanding what’s normal is the responsibility of the metrics owner, whether that’s an individual contributor or a manager of thousands. Many statistical methods, such as XMR control charts,3 can highlight when a process is out of control.

On the flip side, when we were planning our e-book business, we decided to get into the hardware game with Kindle. The reason: invention works well where differentiation matters. In the company’s early days, the hardware that powered

At most companies, reducing a leader’s scope would be considered a demotion, and in fact there were many VPs and directors who saw each of these changes in that way. At Amazon, it was not a demotion. It was a signal that we were thinking big and investing in digital for the long term.

In April 2005, we also acquired Mobipocket, a small company based in France that had built a software application for viewing and reading books on PCs and mobile devices. We used the Mobipocket software as the basis for the software on the first Kindle.

These two features—wireless delivery and the E Ink screen—proved to be two of the keys to making the Kindle great. Wireless delivery meant that customers could search, browse, buy, download, and start reading a new book in under 60 seconds. The E Ink screen’s paper-like display meant that, unlike with an iPad, you could read by the pool, and its low power consumption meant you could read throughout a 12-hour plane flight without worrying about the device dying on you. We take these features for granted today, but in those days they were unheard of.

In every survey, the top answers remained the same: one of the biggest reasons people didn’t order online was that they didn’t want to pay for shipping.

The institutional no refers to the tendency for well-meaning people within large organizations to say no to new ideas. The errors caused by the institutional no are typically errors of omission, that is, something a company doesn’t do versus something it does.