About the book

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• Pages: 304

Quotes

Some random quotes from beginning to end order. For the full context, please buy and read the book. I do this to help myself to quickly get the main ideas of the book.

Introduction

Its most significant initiatives have often been criticized and even derided as folly. Time and again, Amazon has proved the doubters wrong

Our culture is four things and the description has held true since Amazon's earliest days back in 1997:

• Obsess Over Customers: customer obsession instead of competitor obsession
• It's All About the Long Term: willingness to thin long term, with a longer investment horizon than most of our peers
• We will learn from both our successes and failures: eagerness to invent, which of course goes hand in hand with failure
• Operational Excellence: taking professional pride in operational excellence

Part One: Being Amazonian

1. Building Blocks: Leadership Principles and Mechanisms

Amazon's Leadership Principles (read online)

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.

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.”

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.

4. Are Right, A Lot

Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.

5. Learn and Be Curious

Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.

6. 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. We work on behalf of our people to invent mechanisms for development like Career Choice.

7. 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 drive 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.

8. 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.

9. Bias for Action

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

10. 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.

11. Earn Trust

Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team's body odor smells of perfume. They benchmark themselves and their teams against the best.

12. Dive Deep

Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.

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.

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.

15. Strive to be Earth's Best Employer

Leaders work every day to create a safer, more productive, higher performing, more diverse, and more just work environment. They lead with empathy, have fun at work, and make it easy for others to have fun. Leaders ask themselves: Are my fellow employees growing? Are they empowered? Are they ready for what's next? Leaders have a vision for and commitment to their employees' personal success, whether that be at Amazon or elsewhere.

16. Success and Scale Bring Broad Responsibility

We started in a garage, but we're not there anymore. We are big, we impact the world, and we are far from perfect. We must be humble and thoughtful about even the secondary effects of our actions. Our local communities, planet, and future generations need us to be better every day. We must begin each day with a determination to make better, do better, and be better for our customers, our employees, our partners, and the world at large. And we must end every day knowing we can do even more tomorrow. Leaders create more than they consume and always leave things better than how they found them.

Mechanisms: Reinforcing the Leadership Principles

No company can rely on good intentions like "We must try harder!" or "Next time remember to ..." to improve a process, solve a problem, or fix a mistake. That's because people already had good intentions when the problems cropped up in the first place. Amazon realized early on that if you don't change the underlying condition that created a problem. you should expect the problem to recur

There's no magic number of principles and mechanisms that every company will need. The magic lives in the moments when the principles are put into practice. You'll develop the number that's right for you, provided that you focus on how these principles will give clarity to your company's vision and drive the right behaviors to create meaningful value for your shareholders and stakeholders over the long term - even when the CEO is not in the room

It's important too to allow your principles to evolve when necessary - to revise, cut and add as the company grows and changes. Learn and Be Curious was the most recent addition for Amazon. Being Vocally Self-Critical was dropped, with much of its content merged into Earn Trust. Adding, subtracting, and modifying your principles in response to change or deeper understanding is a sign that you're probably doing things right

Strong leadership principles represent a company's vision and enable good and fast decisions throughout the company. Codifying those principles is huge step forward, as we've seen. but there is another step that is equally important: to embed them into everyone of your company's core processes, including hiring, performance management, planning, operating cadence, and career development

2. Hiring: Amazon's Unique Bar Raiser Process

"Tell me something about yourself that isn't apparent by reading your résumé"

"We want missionaries, not mercenaries"

Missionaries, as Jeff defined the term, would not only believe in Amazon's mission but also embody its Leadership Principles. They would also stick around: we wanted people who would thrive and work at Amazon for five-plus year, not the 18-24 months typical of Silicon Valley

There are 8 steps in the Bar Raiser hiring process:

1. Job Description

It is difficult, if not impossible, to make the right hire without creating a well-defined and clearly written JD, which the interviewers use to evaluate the candidates. A good job description must be specific and focused. The hiring process will inevitably run into trouble - even fail - if the JD does not clearly articulate the job responsibilities and required skills. The people doing the phone screens and in-person interviews need to be clear on the JD so they can ask the right questions to collect the information required to make their decision

2. Résumé Review

If the candidates the recruiter selects meet the hiring manager's expectations, that's a sign that the JD is clearly written and specific. If the selected candidates are off target, the JD probably needs work

3. Phone Screen

The questions, formulated in advance by the hiring manager, are designed to solicit examples of the candidate's past behavior ("Tell me a time when you ..."). In most cases, the questionable candidate will not get the job, and a lot of time will have been wasted in the process. The hiring manager should not bring a candidate in for the time-consuming and expensive interview loop unless they are inclined to hire them after the phone interview

4. In-House Interview

Typically, the most effective loops consist of 5-7 interviewers. First, everyone must have been properly trained in the company's interviewing process. Second. no loop participant should be more than one level below the level of the position the candidate will hold. Nor should there be an interviewer who would become a direct report of the candidate

Behavioral interviewing

Eventually the most important goals of the interview process became clear: to assess how well a candidate's past behavior and ways of working map to the Amazon Leadership Principles

Behavioral Interviewing involves assigning one or more of the Leadership Principles to each member of the interview panel, who in turn poses questions that map to their assigned leadership principle, seeking to elicit 2 kinds of data. First the interviewer wants the candidate to provide detailed examples of what they personally contributed to solving hard problems or how they performed in work situations like the ones they will experience at Amazon. Second, the interview wants to learn how the candidate accomplished their goals and whether their methods align with the Amazon Leadership Principles

General, open-ended questions such as "Tell me about your career" or "Walk me through your résumé" are usually a waste of time and will not produce the kind of specific information you're after. When asked such questions, most candidates will take the opportunity to deliver a positive, perhaps slightly glorified narrative of their career

Instead if the interviewer owns the principle of Insist on the Highest Standards, they might ask "Can you give me an example of a time when your team proposed to launch a new product or initiative and you pushed back on their plan because you didn't think it was good enough?". After the candidate answers, the interviewer probes further. Each follow-up question is designed to acquire specific information, which is particularly important in determining exactly what role the candidate played in some past accomplishment. Some candidates conflate or exaggerate the important of their role versus the team's accomplishments in a successful endeavor. More humble candidates understate their role because they don't want to look like they are bragging. In both cases, it's crucial that the interviewer prob carefully for the truth.

The method that Amazon interviewers use for drilling down goes by the acronym STAR (Situation, Task, Action, Result): "What was the situation?" - "What were you tasked with?" - "What actions did you take?" - "What was the result?"

Interviewers are also trained to maintain control of the interview. We've all been in a situation where the candidate, perhaps seeking to avoid a question, goes on long detours designed to deflect. Or perhaps they are just nervous, and speaking aloud is their way of calming their nerves. In such cases, interviewers know to politely cut the candidate short and move on to the next question

The Bar Raiser

The Bar Raiser is involved in every interview loop, and ensures the process is followed and bad hiring decisions are avoided. They are also there to set a good example for other interviews. In addition to conducting one of the interviews, the Bar Raiser coaches others on interviewing techniques, asks probing questions in the debrief, makes sure that personal biases do not affect the hiring decisions, and determines whether the candidate meets or exceeds the hiring bar set by the company

5. Written Feedback

Written feedback is essential to an effective hiring process, and this means that every interviewer must take detailed notes - as close to a verbatim record as possible. Written feedback is expected to be specific, detailed, and filled with examples from the interview to address the Leadership Principles assigned to the interviewer. The feedback should be written shortly after the interview is complete to ensure that nothing of value is forgotten We found it wise to block out 15 minutes immediately afterward to complete the feedback. The write-up should be thorough and clear enough that the author need not be resent for their conclusions the be understood. Oral feedback offered in lieu of the written is simply unacceptable

There are only 4 options: strongly included to hire, inclined to hire, not inclined to hire, or strongly not inclined to hire. There is no "undecided" option

To avoid bias, the interviewer may not see or discuss other members' votes, comments, or feedback until their own feedback has been submitted

6. Debrief/Hiring Meeting

The meeting begins by everyone reading all the interview feedback. Afterward, the Bar Raiser may kick off the meeting by asking "Now that everyone has had a chance to read all the feedback, would anyone like to change their vote?" In a 5-person interview loop, this means that the initial vote is given while in possession of 1/5 of the data. This additional data may either confirm an initial vote or lead to a change in vote. Either outcome is valid and appropriate; there is no shame in changing your vote based on the presence of additional data

The effective Bar Raiser uses the Socratic method, asking questions that jump-start the critical thinking process, to lead and guide the dialogue with the goal that everyone, or at least the majority, will arrive at the same conclusion about the candidate. The meeting is concluded with a decision from the hiring manager to hire or not hire

It is extremely rare for a Bar Raiser to exercise their veto power, only 3 instances from 4000 interviews over the course of 15 years

It's worth noting that many companies do not have a debrief meeting. Instead, the recruiter and the person making the hiring decision review the written feedback and discuss it between the two of them. The Amazon debrief meeting is an opportunity for each interviewer to learn from others and to develop their ability to assess talent

7. Reference Check

The hiring manager or recruiter next asks the candidate to supply 4 or 5 references. Ideally, the references will include former managers, peers and subordinates, and others who have worked directly with the candidate, possibly for many years

The hiring manager, not the recruiter, then calls the references to further explore and confirm the candidate's skills and past performance. One question that often gets a telling response is "If given the chance, would you hire this person again?". Another is "Of the people you have managed or worked with, in what percentile would you place this candidate?"

8. Offer Through Onboarding

At many companies, the hiring manager has the recruiter make the offer. This is another mistake. The hiring manager should personally make the offer and sell him/her on the role and company. You have have chosen the candidate, but that doesn't mean the candidate has chosen you. You must assume that good employees are being actively pursued by other companies, including their current employer. There is always a risk that you could lose the candidate. This is why the hiring manager and team members must remain involved in this part of the process. It's important to keep the candidate excited, not only about the company but also the team members they'll be working with

After the offer is made, a team member should check in with the candidate at least once a week until he or she makes a final decision. The goal in this final phase is to get to know the candidate better and to figure out what key factors will affect their decision on the offer. Sometimes you'll be surprised by what you learn

Hire and Develop the Best

The Amazon Bar Raiser process has been instrumental in reinforcing a key Amazon leadership principle: Hire and Develop the Best. It has proved to be a scalable way of identify and attract leaders who themselves become instrumental in growing and expanding Amazon across the globe

Of great importance, the Amazon hiring process has a flywheel effect - it pays greater and greater dividends the longer it is used. Ideally, the bar continues to be set higher, su much that, eventually, employees should be a ble to say to themselves "I'm glad I joined when I did. If I interviewed for a job today, I'm not sure I'd be hired!"

3. Organizing: Separable, Single-Threaded Leadership

When the company was smaller, you could enlist help or check for possible conflicts by just asking around - everyone often knew each other fairly well. At scale, the same task became long and laborious. You'd have to figure out who you needed to talk to, whether their office was in your building, and who they reported to

You had to balance each one against the priorities you already had, then decide which (if any) you could support based on your own best judgement about their merits. To get a sense of how much drag these escalating organizational dependencies were adding to the average Amazon project, you had to multiply that effort as much as 5 or 10 times

Too much any kind of dependency not only slows down the pace of innovation but also creates a dispiriting second-order effect: disempowered teams. When a team is tasked with solving a particular problem and is judge by their solution, they should expect to have the tools and authority to complete the job. Their success should be a source of team pride. Few teams were fully in control of their own destiny, and many were frustrated by the slow pace of delivery that was beyond their control. Disempowered workers increasingly became discouraged, unable to pursue innovative ideas in the face of so much structural resistance

A two-pizza team, a team would not be larger than the number of people that could be adequately fed by two large pizza, will:

• Be small
• Be autonomous
• Be evaluated by a well-defined "fitness" function
• Be monitored in real time
• Be the business owners
• Be led by a multidisciplined top-flight leaders
• Be self-funding
• Be approved in advanced by the S-team

Single-threaded team (STL) is run by a single-threaded leader. Separable means almost as separable organizationally as APIs are for software. Single-threaded means they don't work on anything else. STL teams have fewer organizational dependencies than other conventional teams. They clearly demarcate the boundaries of what they own and where the interests of other teams begin and end. The STL delivers high-velocity innovation, which in turn makes amazon nimble and responsive even at its now-massive scale. Free the hindrance of excess dependencies, innovators at every level can experiment and innovate faster leading to more sharply defined products and a higher level of engagement for their creators. Ownership and accountability are much easier to establish under the STL model, keeping teams properly focused and accurately aligned with company strategies

"Be stubborn on the vision but flexible on the details"

4. Communicating: Narratives and the Six-Pager

Narratives are designed to increase the quantity and quality of effective communication in your organization - by an order of magnitude over traditional methods. Creating such solid narratives requires hard work and some risk-taking. Good ones may take days to write. But as we've seen this model imposes duties and expectations upo the audience as well. They must objectively and thoroughly evaluate the idea, not the team or the pitch, and suggest wys to improve it

5. Working Backwards: Start with the Desired Customer Experience

The PR (Press Release) gives the reader the highlights of the customer experience. The FAQ (Frequently Asked Questions) provides all the salient details of the customer experience as well as a clear-eyed and thorough assessment of how expensive and challenging it will be for the company to build the product or create the service

The PR/FAQ process creates a framework for rapidly iterating and incorporating feedback and reinforces a detailed, data-oriented, and fact-based method of decision-making. We found that it can be used to develop ideas and initiatives - a new compensation policy, for example - as well ass products and services

Another one of the biggest benefits of a written PR/FAQ is that it enables the team to truly understand the specific constraints and problems that would prevent a new product idea from being viable and aligning on them. If, after the PR/FAQ process, the leadership team still believes in the product and wants it to become a reality, the process will have given them a thorough understanding of the problems that would need to be solved in order to move forward with it

"We shouldn't be afraid of taking on hard problems if solving them would unlock substantial value"

Read the sample Melinda PR/FAQ in the book

• Press Release
• Frequently Asked Questions
• Total Addressable Market (TAM)
• Economics and P&L (Profit & Lost)
• Dependencies
• Feasibility
• Go Ahead?

6. Metrics: Manage Your Inputs, Not Your Outputs

The Metrics Lifecycle

Define

First you need to select and define the metrics you want to measure. The right choice of metrics will delivery clear, actionable guidance. A poor choice will result in a statement of the obvious, a nonspecific presentation of everything your company is doing

• Better customer experience leads to more traffic
• More traffic attracts more sellers seeking those buyers
• More sellers lead to wider selection
• Wider selection enhances customer experience, completing the circle
• The cycle drives growth, which in turn lowers cost structure
• Lower costs leads to lower prices, improving customer experience, and the flywheel spins faster

The key is to persistently debate as you go. Once you have metrics solidified, you can then set a standard and measure teams against that standard

Measure

Building tools to collect the metrics data you need may sound rather simple, but - like choosing the metrics themselves - we've found that it takes time and concerted effort to get the collection tools right

The next step after determining which tools to use is to collect the data and present it in a usable format. Often the data you want will be scattered across different systems and may take some serous software resources to compile, aggregate, and display correctly. Do not compromise here. Make the investment. If you don't, you may find that you are flying blind with respect to some important aspect of the business

Analyze

This stage is all about developing a comprehensive understanding of what drives your metrics. Until you know all the external factors that impact the process, it will be difficult to implement positive changes

The objective in this stage is separating signals from noise in data and then identifying and addressing root causes

Improve

Once you have developed a solid understanding of how your process works along with a robust set of metrics, you can devote energy to improving the process

Control

This final stage is all about ensuring that your processes are operating in normally and performance is not degrading over time. Another thing that can happen in this stage is that you'll identify processes that can be automated. Once a process is well understood and the decision-making logic can be encoded in software or hardware, it's a potential candidate for automation

The WBR: Metics at Work (Weekly Business Review)

The Deck

• The deck represents a data-driven, end-to-end view of the business
• It's mostly charts, graphs, and data tables
• How many metrics should you review?
• Emerging patterns are a key point of focus
• Graphs plot results against comparable prior periods
• Graphs show 2 or more timelines, for example. trailing 6-week and trailing 12-month
• Anecdotes and exception reporting are woven into the deck

The Meeting

A well-run WBR meeting is defined by intense customer focus, deep dives into complex challenges, and insistence oh high standards and operational excellence

• Use consistent and familiar formatting to speed interpretation
• Focus on variances and don't waste time on the expected
• Business owners own metrics and are prepared to explain variances
• Keep operational and strategic discussions separate
• Try not to browbeat (it's not the inquisition): mistake should be a learning experience for all. If people come afraid of pointing out their own mistakes because they will feel humiliated in front of their peers, it's human nature for them to do whatever they can do to hide those mistakes in future meetings
• Make transition easy

Anatomy of a Metrics Chart

Read the sample charts in the book

• output metrics show results. Input metrics provide guidance
• not every chart compares against goals
• data combined with anecdote to tell the whole story

Numerical data become more powerful when combined with real-life customer stories

"Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdotes differ. No task is beneath them"

Data and anecdotes make a powerful combination when they're in sync, and they are a valuable check on one another when they are not

Controllable input metrics are a quantitative (diving deep with data) and qualitative (anecdotes) way of measuring how well the organization is satisfying these customer interests so that the output metrics trend the way the company desires. Properly evaluating your business and striving to improve each week requires a willingness to openly discuss failures, learn from them, and always look for inventions that will delight customers even more

Part Two: The Invention Machine at Work

"I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment. Most large organization embrace this idea of invention, but are not willing to suffer the string of failed experiments necessary to get there"

Naturally, if you don't have the budget to invent, don't do it. But, even with a limited budget, you can be successful over time if your budget approach is patient and frugal. Many company will give up on an initiative if it oes not produce the kind of returns they are looking for within a handful of years. You can'f afford to pursue inventions for very long if you spend your money on things that don't lead to a better customer experience, keep the team small, stay focused on improving the customer experience, limit marketing spent and manage the P&L carefully

"We must be committed to constant improvement, experimentation, and innovation in every initiative. We love being pioneers, it's in the DNA of the company, and it's a good thing, too, because we'll need that pioneering spirit succeed"

7. Kindle

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 long periods of time, and being frugal, principles that few companies are capable of maintaining in the face of quarterly reporting requirements and the daily gyrations of the stock market. Many companies with a lot more capital than Amazon had at the time tried and failed to build a digital business. Even if your company is smaller than your competitors, adhering to these principles will enable you to punch above your weight

Though the shift to digital was already beginning to happen, no one could predict when the tide would really turn. No one wanted to get in too early, with a product that did not yet have a market. But no one wanted to miss the moment either and be unable to catch up

To work through the details of our approach to digital books, music, and video, we spent roughly 6 months researching the digital media landscape and meeting as a leadership team with Jeff on a weekly basis to review and brainstorm countless ideas and concepts

The invention approach required the endurance to evaluate and discard many options and ideas. So, as we were considering which path to take - build or buy - we took countless meetings with different companies in the digital media business. In parallel, we were writing some of our first PR/FAQ for digital media products

We would always figure out what the customers' needs were and then ask ourselves, "Do we have the skills necessary to build something that meets those needs? If not, how can we build or acquire them?"

Music was the first category to move to digital in the marketplace, but Apple had a big head start and our sessions did not produce a PR/FAQ for a music device or service idea that was sufficiently compelling. Video had not gone digital yet, which seemed like an opportunity, but it became apparent that there were a number of barriers to creating a great video experience at that time. These included getting the rights from the studios to offer their movies and TV shows digitally, the time it would take to download massive video files over the slow (at the time) internet, and uncertainty about how customers would play these video files on their TVs. Based on these factors, we decided to make a big investment of people and funds in e-books and a reading device that establish much smaller teams to work on music and video

The other reason for starting with books was that the e-book business as a whole was tiny; there was no good way to read e-books on a device other than a PC, and reading on a PC was definitely not a good experience. We believed that customers would want the e-book equivalent of the iTunes/iPod experience: an app paired with a mobile device that offered consumer any book ever written, the content available at a low price that they could buy, download nad start reading in seconds. But we would need to invent the device ourselves, and the potential development time might take years

The only way we had a chance at success was to put in place strong leaders, so Steve set out to find a subject matter expert with knowledge of the industry to lead out team in creating a great hardware device. There was considerable risk by putting so much on the shoulders of senior external hires like Gregg Zehr. How could we sure that he would become Amazonian? The culture of Silicon Valley is markedly different from Amazon's culture. How would he learn and adapt to our peculiar processed like Bar Raiser, PR/FAQs, and six-pagers

We'd known the Kindle would take time and money to develop, but by the middle of 2005, it became clear that it was taking much longer and consuming more funds than we had anticipated, "How much more money are you willing to invest in Kindle?" Jef calmly turned to our CFO, smiled, shrugged his shoulders, and asked the rhetorical question, "How much money do we have?" That was his way of signaling the strategic importance of Kindle and assuring the team that he was not putting the company at risk with the size of the investment. In Jeff's view, it was way too early to give on the project

Jeff wanted Kindle to be like the BlackBerry - no wires, never a need to connect to your PC. Not only did we want us to eliminate sideloading altogether, he wanted to build the bookstore right into the device so you could shop and read on the go

The other key feature we debated was the use of E Int, a nascent technology, we recognized there would be some trade-offs. E Ink screens were black-and-white only, so the Kindle could not support color graphics or video. The transition from one page to the next was slow. But the E Ink screen was much easier on the eyes than the traditional backlit computer screen and was readable in direct sunlight. It would also allow for a much longer battery life, enabling the device to stay on for up to 1 week without needing a charge. Both of these features were ways for the Kindle to "get out of the way" so customers would forget they were reading on a Machine

These 2 factors - wirelessly delivery and the E Ink screen - proved to be 2 of they keys to making the Kindle great

Another issue we had to manage was the availability of titles: selection did matter. As we prepared for launch, we decided it would be necessary to push publishers to digitize many more of their books - only a fraction of their lists was available in e-book form at the time. We knew that to have a successful e-book business, we would need to have a library of millions of e-book titles - ideally, we would eventually offer a digital copy of every book that had ever been in print

Then it was time to think about pricing. The goal was to find a price point that would compel consumers to start buying and reading e-books. While we made money on most of the books we sold and our overall margins on e-book sales were positive, the early P&L for this business projected little returns in the near term. We were making a big up-front investment in the customer experience, investing some near-term profit in order to get the e-book business and our digital media and devices business off the ground

After the huge boost we got from Oprah, all the doubters and naysayers and questioners jumped on the bandwagon - Kindle was a hit! While Oprah was an important accelerant, long-term sales of the Kindle were ensured by the excellence of the product itself

8. Prime

After all, retail customers don't care about a company's revenue - they care about what they get back in return for parting with their hard-earned dollars. Amazon customers care about 3 main things that we could deliver for them" -Price: is the price low enough? -Selection: Does Amazon have a wide range of products - ideally everything? -Convenience: is the product in stock, and can I get it quickly? Can i easily find or discover the product?

We asked them for the top reasons why they didn't place an online order, and what would make them shop online more frequently. In every survey, the top answers remained the same: one of the biggest reasons people didn't order online was that they didn't want to pay for shipping. The data we'd collected over the years through many tests just reinforced this. 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. Free shipping drove sales. We just had to figure out a sustainable way to offer free shipping

Relying on promotions over the long term can be a slippery slope for any retailer, especially on-off promotions. There is danger in training your customers to delay purchases until the next deal comes along

Amazon Prime is a great example of the tremendous value you can unlock by ruthlessly applying the principles of customer obsession and long-term thinking to a problem - in this case, increasing revenue growth. We were able to give customers what they had long wanted while generating free cash flow for Amazon that was dramatically higher than if we had tried to squeeze as much as possible from the status quo

9. Prime Video

"We want Prime to be such a good value, you'd be irresponsible to not be a member."

Once again, getting to this point involved significant hurdles, among them making the right investments in streaming technology and applications for mobile and TV devices, overcoming resistance from reluctant device manufacturers, creating our own line of successful devices, and making right eight- and nine-figure investments in movies and TV shows. We achieved this by combining a long-term perspective with continuous improvement in our digital video customer experience over more than 10 years

As it turned out, download speed was much more important to customers than image quality. Remember that in December 2005, YouTube had burst onto the scene. It offered user-generated content, no popular movies or TV shows. The video was low-resolutino and played in a small frame on your PC. Consumers were not bothered by the low-quality video, and Youtube began to attract tens of millions of viewers. Weeks after our launch, Apple launched the capability to watch movies and shows on an iPod screen, even tinier than the YouTube frame. Customers ate that up, too. Fast. Easy. iPod compatible. Everything that Unbox was not

A few days after launch Jeff called Steve Kessel, me, and Neil into his office. He was disappointed that we hadn't set high enough standards for the quality of the customer experience, and he was frustrated that we had let our customers down

In retrospect, it is easy to see t he mistakes. We had rushed Unbox out the door before it was ready. We didn't want to come in second to Apple so we were in a frenzy to ship Unbox and shit it fast. This was directly antithetical to the notion of focusing on the customer, not the competitor. We had prioritized speed, press coverage, and competitor obsession over the customer experience

"Why should I fire you now? I just made a million-dollar investment in you. Now you have an obligation to make that investment pay off. Figure out and clearly document where you went wrong. Share what you have learned with other leaders throughout the company. Be sure you don't make the same mistake again, and help others avoid making it the first time"

In retrospect, in seems obvious that the Netflix launch was a significant threat, because streaming + subscription would prove to be the magic combination in the digital video business. And they were smart and savvy about how they launched it by including the steaming titles as free/included for DVD subscribers. This eliminates the hurdle of getting people to pay for a subscription service from a cold start

We have been selling the same TV shows on Unbox for $2.99 an episode, which was cheaper than buying a DVD, and making them available the day after broadcast. Now, with Hulu, you could watch many of the same shows, just as soon, and for free. Suddenly our $2.99 was a lousy deal, and a bunch of our top-selling TV shows were not selling at all. We had no opportunity to influence the studios on this matter because 2 of them - News Corp and NBC Universal - owned Hulu. They had created the service in response to the growth of YouTube and its sale, in 2006, just 6 months after its launch, to Google for $1.65 billion. The studios figured they could create a similar service, offering Hollywood content, and sell it for even bigger bucks, just as fast

"It's an 'oh-by-the-way' offering," he said. When Netflix started, they dint' have a great selection of movies and TV shows either, not good enough that customers would value as a part of their existing subscription. Netflix was essentially saying, "The service you pay for is great and, oh, by the way, here is something extra for you to watch." As we spoke, 3 years later, most Netflix customers were exclusively streamers. They never rented a DVD. The transition might not have been as smooth and seamless if Netflix had started the streaming offering as a separate subscription service from launch. Actually, it's unlikely that many consumers would have been willing to pay a subscription fee at all

There is a difficult chicken-and-egg problem with a subscription service. You need to have a great offering to attract paying subscribers. To be able to afford a great offering, you need a lof of paying subscribers. It's a challenging cold-start problem that generally requires a large up-front investment, which you can hopefully pay back with subscriber growth in future years.

Throughout the development of these projects, we adhered to Amazon's distinctive management practices. Above all, they are examples of Amazonian long-term thinking, customer obsession, willing to invent, and operational excellent. Throughout, we were stubborn on the vision and flexible on the details

10. AWS

As we've already seen, in the early 2000s, the transformation from physical media to digital media posed an existential threat to Amazon's business. Roughly 75% of Amazon's business at that time consisted of selling physical books, CDs, and DVDs to customers. We had to invent or risk becoming an irrelevant has been in media sales. The term "cloud computing" - the on-demand delivery of IT resources such as computing power and data storage over the internet with pay-as-you-go pricing without having to buy, own, and maintain physical data centers and servers - wasn't widely used in the early 2000s, and Amazon was likely not to many people's list of companies that were well positioned to offer it. Further, it involved an entirely new class of customer for Amazon: software developers

They found Amazon Web Services easier to use than some of our existing internal software tools they had been working with to build amazon.com. At this point there was little doubt that web services were going to become a new way of building things. We just didn't know how big it could be or how quickly developers would adopt it. Within a year, we had a pretty good idea - over 25,000 developers enrolled in the program and were constantly surprising us with what they built

Bias for Action is an important leadership principle at Amazon, and with AWS we were certainly under time pressure to launch this product before our competitors did. But Bias for Action doesn't obviate the need for the painstaking aspects of the Working Backwards process. We did not allow ourselves to be so driven by what our competitors might do that we would launch a product without first having thought very carefully about how our customers would use it and benefit from it. To put it another way, Working Backwards was the process that enabled us to put into action the principle of Customer Obsession

What began as a little experiment of sending out product data XML to our affiliates has grown into one of the major divisions of the Amazon business one that brought in $35 billion in revenue in 2019. In recognizing the potential of this little seed to become the mighty oak of AWS, Jeff and others at Amazon embodied the Amazonian principles of Ownership, Invent and Simplify, and Think Big

Conclusion

Defining the basics of the culture, articulating leadership principles, regularizing essential practices - Bar Raiser hiring, teams with single-threaded leaders, written narratives, Working Backwards, focusing on input metrics - all these things have proved to be essential to us in other endeavors

Working in separable, single-threaded teams can be intense, and the organization has to be constructed in a way that allows for autonomy. The Working Backwards process requires the individual to present ideas in a narrative form and to accept the critique of anyone in the room. Focusing on input metrics is unfamiliar to those schooled in traditional evaluation methods. Making a commitment to long-term "return on work" investment - through equity ownership - is hardly the norm for Western companies that link compensation to the achievement of short-term goals

Even when a project does not achieve its goals or is deemed a failure, if the effort was admirable and adherent to Amazon practices and principles, the result for the individual is neither dismissal nor shame. Failure is almost always understood as the failure of a group, a process, a system, as much as that of a single person - many people have been involved, made comments, shaped the idea, and given approvals along the way. For the company, failure is typically viewed as an experiment from which a great deal can be learned that can lead to change and improvement. Very often, failure is temporary and eventually gives birth to success