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

by Colin Bryar

Self-Service Order Fulfillment (SSOF),

being run by a single-threaded leader like Tom. As Jeff Wilke explains, “Separable means almost as separable organizationally as APIs are for software. Single-threaded means they don’t work on anything else.”8

The Payback

be stubborn on the vision but flexible on the details.

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. In this chapter, we’ll focus on the six-pager and in the following chapter we’ll look at the PR/FAQ.

The End of PowerPoint at S-Team Meetings

The reason writing a good 4 page memo is harder than “writing” a 20 page powerpoint is because the narrative structure of a good memo forces better thought and better understanding of what’s more important than what, and how things are related. Powerpoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas.

How to Write an Effective Six-Pager

How to Write an Effective Six-Pager

Dear PowerPoint: It’s Not You, It’s Us Our decision-making process simply has not kept up with the rapid growth in the size and complexity of our business. We therefore advocate that, effective immediately, we stop using PowerPoint at S-Team meetings and start using six-page narratives instead. What’s Wrong with Using PowerPoint?

Conclusion PowerPoint could only carry us so far, and we’re thankful for its service, but the time has come to move on. Written narratives will convey our ideas in a deeper, stronger, more capable fashion while adding a key additional benefit: they will act as a forcing function that shapes sharper, more complete analysis. Six-page narratives are also incredibly inclusive communication, precisely because the interaction between the presenter and audience is zero during reading. No biases matter other than the clarity of reasoning. This change will strengthen not just the pitch, but the product—and the company—as well.

An Amazon quarterly business review, for instance, might be broken down like this instead: Introduction Tenets Accomplishments Misses Proposals for Next Period Headcount P&L FAQ

QBR at Amazon

The New Meeting Format

Working Backwards

Working as Jeff’s shadow was a bit like drinking from a fire hose.

Nice sentence

Sometimes the “setup time” would consume too much of the meeting: teams, rightfully proud of their recent accomplishments, wanted to talk about them at the expense of the important decisions we needed to know about, so by the time the team recapped their progress, there was not enough time left for what actually needed to get done.

It was clear that half-baked mock-ups were no better, perhaps worse, than no mock-ups at all. To Jeff, a half-baked mock-up was evidence of half-baked thinking.

Jeff wanted us to know that we couldn’t just charge down the first available and most convenient path to chase after this opportunity. We needed to think through our plan in detail.

The Kindle Press Release

(We tell the whole Kindle story in chapter seven.)

The Features and Benefits of the PR/FAQ

The PR/FAQ process creates a framework for rapidly iterating and incorporating feedback and reinforces a detailed, data-oriented, and fact-based method of decision-making.

The goal isn’t to explain all the excellent work you have done but rather to share the distilled thinking that has come from that work.

Press Release Components

Heading: Name the product in a way the reader (i.e., your target customers) will understand. One sentence under the title.

Subheading: Describe the customer for the product and what benefits they will gain from using it.

Summary Paragraph: Begin with the city, media outlet, and your proposed launch date.

Problem Paragraph: This is where you describe the problem that your product is designed to solve.

Solution Paragraph(s): Describe your product in some detail and how it simply and easily solves the customer’s problem.

Quotes and Getting Started: Add one quote from you or your company’s spokesperson and a second quote from a hypothetical customer in which they describe the benefit they are getting from using your new product.

FAQ Components

Here are some of the typical areas to address. Consumer Needs and Total Addressable Market (TAM) How many consumers have this need or problem? How big is the need? For how many consumers is this problem big enough that they are willing to spend money to do something about it? If so, how much money would they be willing to spend? How many of these consumers have the characteristics/capabilities/constraints necessary to make use of the product?

don’t have enough space on their front porch for this product don’t have a front porch or similar outdoor area with access to the street at all (e.g., most apartment dwellers) don’t have a suitable source of electricity wouldn’t be pleased to have a large storage/mailbox on their front porch don’t receive many deliveries or deliveries that need refrigeration don’t live in areas where package theft is a problem don’t have interest or ability to pay $299 to answer the need

Economics and P&L

Dependencies

Metrics

In this chapter, we’ll show you how to select and measure metrics that will enable you to focus on which activities will drive your business in a meaningful and positive direction.

Staying Close to the Business

DMAIC,

Define

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.2

Amazon takes this philosophy to heart, focusing most of its effort on leading indicators (we call these “controllable input metrics”) rather than lagging indicators (“output metrics”). Input metrics track things like selection, price, or convenience—factors that Amazon can control through actions such as adding items to the catalog, lowering cost so prices can be lowered, or positioning inventory to facilitate faster delivery to customers. Output metrics—things like orders, revenue, and profit—are important, but they generally can’t be directly manipulated in a sustainable manner over the long term. Input metrics measure things that, done right, bring about the desired results in your output metrics.

1. The Flywheel: Input Metrics Lead to Output Metrics and Back Again

In 2001 Jeff drew the simple diagram below on a napkin to illustrate Amazon’s virtuous cycle, also called the “Amazon flywheel.” This sketch, inspired by the flywheel concept in Jim Collins’s book Good to Great, is a model of how a set of controllable input metrics drives a single key output metric—in this case, growth. In this closed-loop system, as you inject energy into any one element, or all of them, the flywheel spins faster:

2. Identify the Correct, Controllable Input Metrics

We soon saw that an increase in the number of detail pages, while seeming to improve selection, did not produce a rise in sales, the output metric. Analysis showed that the teams, while chasing an increase in the number of items, had sometimes purchased products that were not in high demand. This activity did cause a bump in a different output metric—the cost of holding inventory—and the low-demand items took up valuable space in fulfillment centers that should have been reserved for items that were in high demand.

Measure

The next step after determining which tools to use is to collect the data and present it in a usable format. Often the data you want will be scattered across different systems and may take some serious software resources to compile, aggregate, and display correctly. Do not compromise here. Make the investment. If you don’t, you may find that you are flying blind with respect to some important aspect of the business.

If the metric is important, find out a way to do a separate measurement or gather customer anecdotes and see if the information trues up with the metric you’re looking at.

Analyze This stage has been given many different labels by different teams—reducing variance, making the process predictable, getting the process under control, to name a few. But the Analyze stage is all about developing a comprehensive understanding of what drives your metrics.

Perhaps the most widely used technique at Amazon for these situations is the Correction of Errors (COE) process, based upon the “Five Whys” method developed at Toyota and used by many companies worldwide.