14 Leadership Principles from Amazon that they use every day, whether they’re discussing ideas for new projects or deciding on the best approach to solving a problem. It is just one of the things that makes Amazon peculiar.
#1: 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.
This comes from the top, so if you are after that job at Amazon and you remember nothing else, remember this first principle. Jeff Bezos, Amazon founder and CEO (pictured left), famously drove the product development of the Kindle to satisfy what he felt was what customers needed and directly against the advice of designers and engineers. Bezos is quoted as saying:
We’re not competitor obsessed, we’re customer obsessed. We start with what the customer needs and we work backwards.
#2: 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.”
Sacrificing long-term value for short-term gain is certainly something that Amazon could never be accused of doing. Since it was founded in 1996, under Bezos’s leadership Amazon has never declared a profit, instead ploughing billions back into the business. As the Wall Street Journal explained, for the full financial year in 2014, Amazon recorded a loss of $241 million, with operating expenses rising to $88.8 billion, which was up 20% on the year and effectively wiped out sales of $89 billion. Amazon shareholders have been very patient!
#3: 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.
This shows itself very clearly in the the make-up of their ‘2-pizza teams’, or 2PTs, as they are called. Bezos believes that many teams are simply too big, which stifles innovation. And so, they need to be the right size to ensure accountability, autonomy, and to deliver innovation, rather than become mired in bureaucracy. Bezos has said about the ideal team size:
If you can’t feed a team with two pizzas, it’s too large
#4: Are Right, A Lot – Leaders are right a lot. They have strong business judgement and good instincts.
Amazon expects a lot from its leaders. This fourth principle, however, echoes the words of Peter Drucker (pictured right), the legendary management guru and thinker, who, in an often-quoted phrase, said: Management is doing things right; leadership is doing the right things.
Bezos famously and publicly roasted a team leader for lacking what he saw as good business judgement:
This document was clearly written by the B team. Can someone get me the A team document? I don’t want to waste my time with the B team document.
#5: 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.
Whilst Amazon has been accused of sucking up all of the available talent in and around Seattle, a recent article in the New Yorker provided some cutting insight into the recruitment policy of Amazon:
The key to understanding Amazon is the hiring process,” one former employee said. “You’re not hired to do a particular job—you’re hired to be an Amazonian. Lots of managers had to take the Myers-Briggs personality tests. Eighty per cent of them came in two or three similar categories, and Bezos is the same: introverted, detail-oriented, engineer-type personality. Not musicians, designers, salesmen. The vast majority fall within the same personality type—people who graduate at the top of their class at M.I.T. and have no idea what to say to a woman in a bar.
#6: Insist on the Highest Standards – Leaders have relentlessly high standards – many people may think these standards are unreasonably high. Leaders are continually raising the bar and driving their teams to deliver high quality products, services and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.
In December 2011, Bezos declared his pride that Amazon had managed to get 99.9% of packages to its customers before Christmas. Whilst this was an amazing feat, he also went on to state that this still wasn’t good enough, as he declared that, “We’re not satisfied until it’s 100%.” Thus, the demands on leaders, even for a stand-out performance, are relentless.
#7: Think Big – Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.
Something that has certainly informed the Bezos vision for the company from its earliest days to the current time. Amazon didn’t come to dominate its various markets without the breadth of vision needed to drive that growth. Bezos was attracted to developing an online store precisely because of the growth potential he saw in the market. When working for D.E. Shaw & Co, Bezos saw a statistic that suggested that world wide web usage was rising at an astonishing 2.300% per month. He immediately saw the potential for growing and becoming big online and this, it is suggested, was the moment that he saw the potential for building an online business and started him on the path to becoming a successful entrepreneur.
#8: Bias for Action – Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.
When Amazon first announced that they were proposing to start deliveries using drones, many dismissed it as a joke and others saw it as highly impractical, not just from a technical standpoint, but significantly from a regulatory perspective too. But few would now doubt that drone deliveries may be coming to a doorstep near you some time soon. In a recent interview, Bezos declared that his job was to encourage his teams to make ‘bold bets’ and that a few big successes, such as KIndle and Prime, compensate for the dozens of things that didn’t work. He said:
I’ve made billions of dollars of failures at Amazon.com. Literally billions. … Companies that don’t embrace failure and continue to experiment eventually get in the desperate position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence.
#9: Frugality – We try not to spend money on things that don’t matter to customers. Frugality breeds resourcefulness, self-sufficiency, and invention. There are no extra points for headcount, budget size, or fixed expense.
Frugality goes to the heart of the company culture that Bezos started from his garage back in 1994. Bezos famously made desks from old doors and the door-desk remained a feature of the company even after the business went public. The idea lives on in the regular “Door-Desk Award”, which is given to the employee who comes up with the best idea that creates savings for the company and delivers lower prices to their customers. Bezos has said of frugality:
Frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.
#10: Vocally Self Critical – Leaders do not believe their or their team’s body odor smells of perfume. Leaders come forward with problems or information, even when doing so is awkward or embarrassing. Leaders benchmark themselves and their teams against the best.
A somewhat strangely-worded principle and slightly contradictory when you consider the way in which we are anecdotally led to believe that Bezos has roasted managers who he feels haven’t lived up to expectations. Nevertheless, by his own admission, Bezos is not ashamed to point to the many failures that the company has had, because they are by far outweighed by the outstanding successes that sustain the innovation and development of Amazon. As a general leadership principle this is a solid example of how a good servant-leader should behave and benchmarking against the best also helps to show where the organization can deliver outstanding performance.
#11: Earn Trust of Others – Leaders are sincerely open-minded, genuinely listen, and are willing to examine their strongest convictions with humility.
No leader can expect to provide vision and direction to their team without the all-important ingredient of trust. Bezos believes that business works best when you know that everyone is relying upon you and trust stems from each member of their team knowing their job and trusting them to do what they are good at:
I think one thing I find very motivating — and I think this is probably a very common form of motivation or cause of motivation — is… I love people counting on me, and so, you know, today it’s so easy to be motivated, because we have millions of customers counting on us at Amazon.com. We’ve got thousands of investors counting on us. And we’re a team of thousands of employees all counting on each other. That’s fun.
#12: Dive Deep – Leaders operate at all levels, stay connected to the details, and audit frequently. No task is beneath them.
More influences from the ideas of servant-leadership here in terms of ‘no task is beneath them’, whereas the idea of managing the details is important in terms of really understanding what is going on in the business. This principle brings to mind that famous dictum for the effective management of any business or team: What gets measured gets managed.
#13: 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.
While this is an admirable facet of an innovative business, we also have a window on Bezos’s own approach to employees who disagree with him and challenge him on issues that he feels strongly about. It is suggested that Bezos is not above ‘pulling rank’, when the need arises:
Do I need to go down and get the certificate that says I’m CEO of the company to get you to stop challenging me on this?
#14: Deliver Results – Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.
By principle 14 some of these have got a little repetitive, but the delivery of results very much ties into the idea of the effectiveness of the 2-pizza teams from the third principle and the importance of measurement from the 12th. The Amazon culture is pervaded by innovation and frugality and the effective Amazonian is constantly challenged to see how things can be done better and more cost-effectively in order to deliver better prices to the customer and an improved service.