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

by Colin Bryar

invention works well where differentiation matters.

In this part of the book, we look at four key examples of successful Amazonian invention—Kindle, Amazon Prime, Prime Video, and Amazon Web Services (AWS)—

In 1999 Jeff wrote, “We must be committed to constant improvement, experimentation, and innovation in every initiative. We love to be pioneers, it’s in the DNA of the company, and it’s a good thing, too, because we’ll need that pioneering spirit to succeed.”

For my career path, this could either mean getting one of the best seats on a rocket ship or working for years on a small business that never gets off the ground.

Retailers who outsourced e-commerce lacked the ability to ideate and test new products like Super Saver Shipping, Prime, or Fulfillment by Amazon (FBA). They could only pick from a menu of options from their outsourced provider. At best, they would be fast followers of what the innovators built.

Furthermore, outsourcing in this context offers a classic example of short-term decisions with devastating long-term implications.

The combination of Gregg (device hardware), Felix and Neil (cloud software), and Ian (product and business), and the respective teams that they built, were critical to the success of the Kindle.

Kindle team

The overarching theme in the design stage was that our electronic book reader should “get out of the way” so the reader could make a direct connection with the content. Once the person started reading, they should not notice they were using a device.

For this to work, he pushed hard for the Kindle to have a 3G modem so that it could connect to a wireless carrier network (Sprint was our first partner) and automatically download new e-books as soon as they were available. The feature was named Whispernet.

Whispernet

These two features—wireless delivery and the E Ink screen—proved to be two of the keys to making the Kindle great.

On October 24, 2008, she devoted an entire episode of her show to Kindle, gushing, “It’s absolutely my new favorite favorite thing in the world.”

Amazon customers cared about three main things that we could deliver for them: Price. Is the price low enough? Selection. Does Amazon have a wide range of products—ideally everything? Convenience. Is the product in stock, and can I get it quickly? Can I easily find or discover the product?

you cannot rest on your laurels.

One way in which we tracked our shipping performance was with a metric called “Click to Deliver.” This was the total amount of time from the moment the customer placed an order (click) to the moment the package arrived at its final destination (deliver).

three criteria that any new marketing initiative would have to meet to go forward:

It had to be affordable

It had to drive the right customer behavior

It had to be a better use of funds than the obvious alternative, which was to invest those same funds into actions that would improve the customer experience, such as lowering prices even further or improving our in-stock rate.

Many companies have the “business people” tell the “technical people” what to build. There’s little discussion back and forth, and the teams stay in their own lanes. Amazon is not like this at all. It’s everyone’s job to obsess over customers and think of inventive ways to delight them.

“strong general athlete” (SGA).

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. Staying the current course offers managers comfort and certainty—even if the price of that short-term certainty is instability and value destruction later on.

As we discussed in chapter six, price, selection, and convenience are three key elements of Amazon’s flywheel.

When he sent a team an idea, it did not need to be implemented, but it definitely needed to be evaluated and that evaluation needed to be communicated back to him.

What came next was a clear expression of another one of Amazon’s Leadership Principles in action, Have Backbone; Disagree and Commit: “Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.”

The teams involved were in a flat-out sprint with long hours for the duration of the project, which internally was called Futurama.

Jeff announced to shareholders in 2018, “13 years post-launch, we have exceeded 100 million paid Prime members globally.”5

Jeff would say something like this to a leader who had just laid an egg: “Why would I fire you now? I just made a million-dollar investment in you. Now you have an obligation to make that investment pay off. Figure out and clearly document where you went wrong. Share what you have learned with other leaders throughout the company. Be sure you don’t make the same mistake again, and help others avoid making it the first time.”

I can’t say that everyone at Amazon was always pleased with this compensation philosophy. We all have a need to be rewarded for an important accomplishment, and we want to receive our reward in a timely fashion. But for those who thought and acted long term, and hung around, it paid off.

But one implication of being at the earth’s most customer-centric company is that you don’t spend money on things that don’t benefit customers.

The two big, revolutionary breakthrough features of the Netflix service were subscription and streaming.

Amazon and Apple were the leaders in premium movie and TV distribution, but we offered downloads only (and you had to purchase or rent each movie or show).

It turns out that, like Amazon, Netflix has a track record of long-term thinking and willingness to be misunderstood for long periods of time, both of which have contributed to their great success.

“wheel of death.”

One alarming statistic shows why: we estimated that 95 percent of Netflix’s streams came either through their website, the three main game consoles (Xbox, PlayStation, and Nintendo Wii), or through the iPad and iPhone.

As time went on, we realized that Amazon Video On Demand was stuck in the middle of the value chain—the valley, really. We didn’t control the upstream end of content development. We didn’t control the downstream end of playback devices. We were essentially a digital distribution system, with nothing unique or proprietary about it.

No wonder we kept slamming into barriers on both ends of the value chain—content development and distribution on devices.

the value chain.

All it really takes to get a production going is commitment and, most important of all, capital.

Now we began to operate like a Hollywood studio, with the continuing and important difference that we compensated our team in the same way we compensated all Amazon leaders: no short-term performance targets.

I’m getting up to speed on what we are doing with web services and your name came up. Can you tell me what you are doing, if anything, with web services?

Getting updates

What elements of being Amazonian enabled Amazon to move into this completely separate line of business?

Why was Amazon able to master cloud computing well before its potential competitors, including entrenched companies with large businesses to protect and well-capitalized web-based tech companies?

“yesterday’s ‘wow’ quickly becomes today’s ‘ordinary.’”

I would look at a dashboard that displayed such information as how many people had read the email, how many had clicked on the links in the email, and how many incremental referral fees were generated as a result of the email.

it is because of Amazon’s innovative spirit combined with the patience that comes with long-term thinking.

“How do I start? Where do I start? What do I actually do to bring some of the aspects of being Amazonian into my business?”

Ban PowerPoint as a tool to discuss complicated topics and start using six-page narratives and PR/FAQ documents

Establish the Bar Raiser hiring process.

Focus on controllable input metrics.

Move to an organizational structure that accommodates autonomous teams with single-threaded leaders.