Amazon’s secret sauce: customer obsession

I was watching this great advert documentary about Amazon on the BBC this week.

It’s a rocking organisation that most of us mere mortals watch with wonder.

From packing and selling books in a garage over the internet, it’s become a global behemoth (although Alibaba is bigger in China).  Amazon generated almost $75 billion in revenues in 2013, up 22% on the prior year.  Just here in good old blighty, every person in Britain spends over £70 a year on Amazon.   And with Amazon Prime, Instant Video, Kindle Fire, Amazon Web Services, Cloud Player, Mayday and more, the innovations and growth seem to just keep on going.

How did it happen?

Well, the BBC’s documentary about Amazon’s Retail Revolution charts the course of Jeff Bezos, a frustrated Wall Street banker by origin, from creating Amazon in Silicon Valley to becoming the mighty size it is today.

At the core of this growth is the management mantra at Amazon, a 12-point list of values that are embedded into the fibre and being of the company and every employee in it.

That 12-point list of values is clearly shown on their website, and it’s worth repeating here:

Whether you are an individual contributor or the manager of a large team, you are an Amazon leader. These are our leadership principles and every Amazonian is guided by these principles.

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. 

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." 

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. 

Are Right, A Lot
Leaders are right a lot. They have strong business judgment and good instincts. 

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. 

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. 

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. 

Bias for Action
Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking. 

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. 

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. 

Earn Trust of Others
Leaders are sincerely open-minded, genuinely listen, and are willing to examine their strongest convictions with humility. 

Dive Deep
Leaders operate at all levels, stay connected to the details, and audit frequently. No task is beneath them. 

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. 

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. 

Every business can learn from these core values and, for me, Amazon is just as much an innovator in the retail technology space as Apple.  In fact, in many ways more so.

Take the fact that when they launched Amazon Cloud Player for Music, it immediately switched on access to all the back catalogue of any and all music you may have purchased on Amazon in the past.  For me, that was a decade’s worth of CDs immediately available to download or play through the cloud whilst travelling.

Love it.

Similarly, Mayday is a video support service that every bank is waking up to see.  It’s the future of customer service.  Get stuck any time, and Mayday is there to sort it out.

Love it.

Equally, Instant Video.  When Amazon started to get into competing with iTunes and Netflix, it immediately offered Amazon Prime customers access to library of 1,000’s of films and TV series for free.  No charge.

Love it.

So what’s not to love about Amazon?

I guess it’s losses.

Amazon doesn’t make money.

In fact, it usually loses money by investing so much in innovation, R&D and experimentation.

For all of those $75 billion of revenues in 2013, the company’s net income was just $274 million or $0.59 per share.  In 2012, it had net losses of $39 million.

That’s what happens when you’re customer obsessed rather than financially obsessed.

It hasn’t stopped investors loving them as they see Amazon as the future of retail, as they do with Alibaba in China.

When Alibaba’s IPO goes to market soon, the company may get a valuation higher than Amazon and eBay combined.

This is the future of retail.

Interestingly the BBC note that what Bezos really did is combine financial management with technology innovation to revolutionise retail:

Having Wall Street thinking at the very top of the company has given Amazon its edge in the ultra-competitive retail business. But that advantage is built on technology, where efficiencies in constructing its unique supply chain depend on incremental improvements in the algorithms that run the whole complex process.

I wonder who will be the Jeff Bezos of banking?

 

Postnote:

Just a thought, but take a close look at Amazon coins  and Amazon bitcoins.