Working Backwards

Top 3 Quotes

• “We need to plant many seeds,” he would say, “because we don’t know which one of those seeds will grow into a mighty oak." - Jeff Bezos
• “We want missionaries, not mercenaries.” - Jeff Bezos
• “The best way to fail at inventing something is by making it somebody’s part-time job.” - Jeff Bezos

Book Notes

Use a disciplined hiring process to avoid hiring pitfalls

Hiring is heavily biased (confirmation bias, personal bias, urgency). To get around this, Amazon uses an eight steps "Bar Raiser" hiring process:

1. Job Description: must be specific and focused
2. Résumé Review: the recruiter looks for a match between resume and JD
3. Phone Screen: 1 hour, 45 minutes focused on behavioral questions
4. In-House Interview: 5-7 hours. Use behavioral interviewing to assess how a candidates's past behavior maps to leadership principles.
5. Written Feedback: Specific, detailed, and filled with examples from the interview. Block out fifteen minutes immediately afterward to complete the feedback.
6. Debrief/Hiring Meeting: The goal that everyone will arrive at a hire/no-hire decision.
7. Reference Check: Ask “If given the chance, would you hire this person again?”
8. Offer: Check in with the candidate at least once a week until he or she makes a final decision. Enlist other people to help close the deal.

Use STAR (Situation, Task, Action, Result) for behavioral interviews: “What was the situation?” “What were you tasked with?” “What actions did you take?” “What was the result?”

Single-threaded teams drive faster innovation

Dependencies slow innovation and create disempowered teams:

• Team size grows linearly, lines of communication grow exponentially.
• Too much of any kind of dependency not only slows down the pace of innovation but also leads to disempowered teams (not in control of their own destiny).

The solution: single-threaded (two-pizza) teams:

• Small and autonomous (no more than ten people).
• Sometimes you need more than two pizzas - better to think of them as “single-threaded,” meaning you only work on one thing at a time.
• Moving to single-threaded teams takes time and requires careful management. It will raise questions about authority and power, jurisdiction, and “turf.”

Be prepared to move fast:

• “Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow."

Amazon ditched powerpoint in favor of written narratives

• Why? Forces clarity of thought/understanding.
• Efficiency – written narratives contain 7-9x the information density of PowerPoint presentations. People read 3x faster than presenters can talk.
• Amazon uses two forms of written narratives: the 6-page memo and the PR/FAQ.
• Jeff Bezos Reading Tip: Assume each sentence is wrong until you can prove otherwise.

Amazon starts with the desired customer experience and works backwards

• Typically, a press release is written at the end of the product development process. At Amazon, it's written at the beginning.
• The cost of changing course in the PR/FAQ writing stage is much lower than after you’ve launched and have an operating business to manage.
• Restricting the length of the document develops better thinkers and communicators.
• Most PR/FAQs don’t get approved. This is a feature, not a bug.
• Figure out what the customers’ needs and then ask, “Do we have the skills necessary to build something that meets those needs?
• The FAQ should address consumer needs and Total Addressable Market (TAM): How many consumers have this need or problem? How big is the need? For how many consumers is this problem big enough that they are willing to spend money to do something about it?

Optimize controllable inputs

Amazon uses the flywheel from Jim Collin's book Good to Great. It's a model of how a set of controllable input metrics drive Amazon's growth.

• Align your metrics with the customer experience: focus on input metrics, which are things customers care about: low prices, big selection, fast shipping.
• Output metrics, such as revenue and free cash flow, are what you’d typically see in a company’s financial report. Customers don’t care about those.
• Focus on leading indicators (or “controllable input metrics”) rather than lagging indicators (“output metrics”).
• Audit your metrics – make sure your tools are measuring what you think they're measuring.
• When you see an anomaly, keep asking “Why?” until you get to the real culprit.
• Consistent and familiar formatting speeds interpretation.
• Focus on variances. Don’t waste time on the expected.

Be frugal, but invest big when opportunity strikes

• Frugality is key. You can’t afford to pursue inventions for very long if you spend your money on things that don’t lead to a better customer experience,
• Once Amazon had a clear product plan and vision, they invested big.
• The PR/FAQ process improves your odds of success but by no means guarantees it.

Distinguish one-way and two-way decisions

• Some decisions are consequential and irreversible—one-way doors— these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. We can call these Type 1 decisions.
• Most decisions are changeable, reversible—they’re two-way doors. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.

To win in digital, Amazon needed to move to either end of the value chain

• Amazon's competitive advantage in physical media was based on having the broadest selection of items available on a single website. But this could not be a competitive advantage in digital media, where the barrier to entry was low.

Consumer insights can pave the way to innovation

Amazon realized that shipping promotions drove significantly higher growth than any other type of promotion. The perceived value of free shipping was higher than straight discounting of product prices. This led to the development of Amazon Prime.