Jeff Bezos on the 4 differences between “Day 1” companies and “Day 2” companies

In his recent letter to shareholders, Jeff Bezos explains how he plans to keep Amazon a “Day 1” company.

A “Day 1” company is defined by vitality. But a “Day 2” company is defined by “statis… irrelevance… excruciating, painful decline… death.”

1. Focus on customers first.

Bezos writes, “You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused.”

Amazon has chosen to be customer-focused, because “customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.”

(This also why you should focus on customers before you focus on profits.)

2. Resist proxies for your customers.

It’s a common tendency to replace your customers with other things—things that, themselves, are worthy things for a business to care about.

One danger is to make process a proxy for your customers:

Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing…. You stop looking at outcomes and just make sure you’re doing the process right…. It’s always worth asking, ‘do we own the process or does the process own us?’

Market research can also become another proxy for your customers:

‘Fifty-five percent of beta testers report being satisfied with this feature. That is up from 47% in the first survey.’ That’s hard to interpret and could unintentionally mislead.

Instead:

Good inventors and designers deeply understand their customer…. They study and understand many anecdotes rather than only the averages you’ll find on surveys…. A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won’t find any of it in a survey.

3. Be quick to embrace external trends.

Bezos writes that “if you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.”

Don’t resist change.

4. Make high quality decisions at a high velocity.

Most companies make high quality decisions, they just make them too slowly.

There are four ways Bezos tries to do this at Amazon:

First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong?

Second, 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.”

Third, use the phrase ‘disagree and commit.’… If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.”

Fourth, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision…. ‘You’ve worn me down’ is an awful decision-making process.

Read Jeff Bezos’ entire letter to Amazon shareholders.

Also recommended: The Everything Store: Jeff Bezos and the Age of Amazon.

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