Amazon is a very misunderstood organisation, say former top executives

Amazon has been one of the stand-out global business performers of recent times and a firm that has richly rewarded shareholders over the longer term and especially during the Covid-19 pandemic. It wins plaudits for its innovation and criticisms for some of its competitive practices.

According to two of its former senior management figures, Colin Bryar and Bill Carr, it is, however, a very misunderstood organisation, one of the key motivations for their book, Working Backwards, the title refers to Amazon’s mission to put the customer first.

The authors are certainly well placed to comment. Bryar rose to become Jeff Bezos’s technical advisor, giving him a front row seat for the launch of Amazon Prime and its web services division while Carr’s steep trajectory at the firm saw him launch the company’s global digital and music businesses.

Their book is partly a narrative of their experiences at the global tech company and part attempt to impart transferable lessons from its success. If readers are looking for a simple magic formula, however, they will be disappointed. There’s no easy way of copying Amazon’s model.

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Nonetheless, the authors have distilled some of the principles and operating practices through which the company has enjoyed phenomenal success and others can apply some of this thinking to their own enterprises.

As Carr explains, Amazon created its own way of doing things partly through studying the success of other world-beating corporations such as Toyota, GE and P&G. The all-powerful influence of Bezos is never far from the narrative, however, and the author feels that the founder’s legacy is more than the businesses he created, it’s the visionary management approach he has refined and deployed. Not that Bezos is going anywhere any time soon, despite his announcement last month that he was stepping down as chief executive.

“Anyone who thinks he won’t be a very powerful force at Amazon for many years doesn’t know Jeff or the company. He is going to continue to be involved in defining the future of the company as he has been doing. He has changed his role but he remains the chairman and the largest single shareholder,” Carr tells The Irish Times.

Carr recounts how he interviewed for his job at the company behind a divider in a staff breakout room in 1999. In the early days Bezos packed and shipped boxes and could get a handle on most aspects of operations from a short walk from his office.

Leadership principles

With the business growing phenomenally in the early noughties, an important HR initiative in 2004 changed things. Leadership principles and operating practices were defined and codified. Amazon’s 14 leadership principles provide simple ground rules such as putting the customer first, staying curious, thinking big and earning trust.

The philosophy is best summed up by four principles: obsess about customers not competitors; take a longer investment horizon than your peers; be eager to invent and tolerate failure as part of this, and finally take pride in operational excellence.

Carr agrees that taking a longer-term view has been central to the success of the firm. Most companies are guided by quarterly or at best 12-month horizons. Bezos thinks in windows of 10-20 years, says Carr, with an emphasis on long-term growth over short-term profitability. That’s one of the reasons, the book suggests, why the company was often misunderstood by Wall Street; Bezos never obsessed about the company’s valuation.

“At management meetings, Jeff would say: ‘Some of you may have noticed that the stock has gone up 30 per cent in the past few months. I would discourage you all from feeling 30 per cent smarter. You’re going to feel pretty bad when the stock goes down 30 per cent because you will feel 30 per cent dumber’.”

Another secret of Amazon’s success has been a focus at an atomic level on customer needs that don’t change that much over time, he observes. “At the retail level, for example, people will always want to shop at a store with the greatest selection, lowest prices and fastest delivery. If you work continuously on these things you deliver more value for customers and the stock price will follow.”

Under-promising and over-delivering were the cornerstones of the business from day one. When it was focussed on retailing books, Amazon invested in priority deliveries of packages but didn’t tell its customers. Obsession with pleasing was also drummed into practices.

As Carr explains, if a customer bought a coffee-table book and the title had a scratch on the cover, the customer would be contacted and told about it. If the book wasn’t required urgently, they would be told that Amazon would happily source a new one but that would take a couple of days extra. Customers were delighted with this attention to detail.

The IT platform on which Amazon built its bookstore provided a gateway into the many faceted digital-based business it is today, but as Carr and Bryant explain in the book, success in new ventures wasn’t inevitable and required brave long-term decisions.

Carr admits he was at first reluctant to accept the role that led him to become vice president of Amazon’s digital music and video divisions. It would take several years for most of the efforts in these areas to bear fruit. In the years up to his departure in 2014 he says he either observed, participated or led the development of the Kindle ebook reader, the Fire tablet, Fire TV, Prime Video, Amazon Music, Amazon Studios, the voice-activated Echo and the underlying Alexa voice-assistant technology.

“The fact that we entered as total beginners and emerged as industry leaders is in no small part a result of our adherence to being Amazonian in our principles and our way of thinking, including thinking big, thinking long-term, being obsessed with customers, being willing to be misunderstood for a long time and being frugal – principles that few companies are capable of maintaining in the face of quarterly reporting requirements.”

There were notable big failures for Amazon along the way including the ill-fated Fire smartphone. Failure is tolerated, if not encouraged, at the company. As Bezos puts it, using baseball terminology: “We all know that if we swing for the fences you are going to strike out a lot but you’re also going to hit home runs.”

Carr elaborates: “A small number of very big winners can pay for a lot of failed experiments. The magnitude of your inventions and therefore your mistakes need to grow in lockstep with the growth of your organisation.”

While Amazon’s success is beyond question, some of the corporation’s aggressive commercial practices have been the subject of growing controversy in recent years. While his book doesn’t dwell on these – with the authors stating in their introduction that such issues around the firm are not within the scope of their book – Carr acknowledges the importance of these issues when questioned.

Ultimately, companies such as Amazon and other Big Tech firms need to address the issue of public trust, he says, but he stops short of criticising his former employer: “The question is, are we acting in ways that are good for the people who work for us, the communities we operate in, or the world as a whole? Companies should be open to feedback, should not resist it and should consider remedies based on what they are hearing. The definition of earning customer trust has changed.”

Amazon’s ways

Customer obsession: Start with the customer and work back is a key Amazon mantra. Managers are encouraged to earn and keep customer trust and to pay attention to competitors but to obsess over customers.

Reports not PowerPoint: Slick graphics and the seductive charms of talented presenters can sometimes blind you to a lack of substance in what's being presented. Instead, Amazon insists on old-style business reports. As the authors put it: "The act of writing forces the writer to think and synthesise more deeply. It's a daunting task to get all the relevant facts and all of one's arguments into a coherent understandable document and it should be."

Bar-raiser hiring: Amazon has a rigorous and often lengthy hiring process that seeks to find the best possible person for each role. Specifically trained 'bar-raiser' managers ensure there is an open, accurate and fair assessment of candidates and no group-think in hiring decisions, encouraging and facilitating better choices.

Think big: Thinking small is considered a self-fulfilling prophecy. At Amazon, leaders are encouraged to communicate a bold direction that inspires results.

Frugality: Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention. There are no extra points for growing headcount, budget size or fixed expense.

Working Backwards – insights, stories, and secrets from inside Amazon by Colin Bryar and Bill Carr is published by St Martin's Press.