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

by Colin Bryar

Morale is, in a sense, an output metric, whereas freedom to invent and build is an input metric. If you clear the impediment to building, morale takes care of itself.

The team had a well-defined purpose.

The boundaries of ownership were well understood.

The metrics used to measure progress were agreed upon.

The manager would be comfortable mentoring and diving deep in areas ranging from technical challenges to financial modeling and business performance. Although we did identify a few such brilliant managers, they turned out to be notoriously difficult to find in sufficient numbers, even at Amazon.

We found instead that two-pizza teams could also operate successfully in a matrix organization model, where each team member would have a solid-line reporting relationship to a functional manager who matched their job description—for example, director of software development or director of product management—and a dotted-line reporting relationship to their two-pizza manager. This meant that individual two-pizza team managers could lead successfully even without expertise in every single discipline required on their team. This functional matrix ultimately became the most common structure,

Sometimes You Need More Than Two Pizzas

the biggest predictor of a team’s success was not whether it was small but whether it had a leader with the appropriate skills, authority, and experience to staff and manage a team whose sole focus was to get the job done.

What was originally known as a two-pizza team leader (2PTL) evolved into what is now known as a single-threaded leader (STL). The STL extends the basic model of separable teams to deliver their key benefits at any scale the project demands. Today, despite their initial success, few people at Amazon still talk about two-pizza teams.

“The best way to fail at inventing something is by making it somebody’s part-time job.”

FBA launched in September 2006 and became a huge success. Third-party sellers loved it because, by offering them warehouse space for their products, Amazon turned warehousing into a variable cost for them instead of a fixed cost.

Amazon VP Tom Killalea aptly observed, a good rule of thumb to see if a team has sufficient autonomy is deployment—can the team build and roll out their changes without coupling, coordination, and approvals from other teams? If the answer is no, then one solution is to carve out a small piece of functionality that can be autonomous and repeat.

during our time with Amazon, most PR/FAQs never made it to a stage where they were launched as actual products. What this means is that a product manager will put in a lot of time exploring product ideas that never get to market.

The fact that most PR/FAQs don’t get approved is a feature, not a bug. Spending time up front to think through all the details of a product, and to determine—without committing precious software development resources—which products not to build, preserves your company’s resources to build products that will yield the highest impact for customers and your business.

This process enables a product team and the company leadership to gain a thorough understanding of the opportunity and the constraints. Leadership and management are often about deciding what not to do rather than what to do. Bringing clarity to why you aren’t doing something is often as important as having clarity about what you are doing.

“We shouldn’t be afraid of taking on hard problems if solving them would unlock substantial value.”

the PR/FAQ is a living document. Once it is approved by the leadership team, it will almost certainly still be edited and changed (a process that should be directed by or reviewed with the leadership team).

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.

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”).

Thus, the discussion moved away from a tiered subscription pricing strategy and toward a cost-following strategy. “Cost following” means that your pricing model is driven primarily by your costs, which are then passed on to your customer.