6 Lessons That Powered Amazon’s Success
💡JC's Newsletter #77
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In JC’s Newsletter, I share the articles, documentaries and books that I enjoyed the most in the last week, including a must-read.
Let’s talk about this together on LinkedIn or on Twitter. Enjoy!
💡Must-read
👉 How to Build an Invention Machine — 6 Lessons That Powered Amazon’s Success (FirstRoundReview)
I loved the recent book from Colin Bryar and Bill Carr (Working Backwards) as it shares in great detail the mechanisms that Amazon uses to invent and perform. The summary below is a great overview:
Colin Bryar and Bill Carr have plenty of insider tales to tell. Bryar joined Amazon in 1998, as the Director for Amazon Associates and Amazon Web Services Programs. He also spent two invaluable years as Jeff Bezos' technical advisor or "shadow," and later served as the COO for IMDb.com
Here's how Bryar and Carr describe the cogs:
14 leadership principles, including "Have backbone" and "Dive deep."
Four cultural pillars: long-term thinking, customer obsession, the spirit of invention, and pride in operational excellence.
Five very specific processes: how Amazon hires, how they organize into single-threaded teams, how they communicate using narratives, how they use the working backwards process for product development, and then finally, how they measure and operate the business by focusing on input metrics.
At Alan, we use 5 big values that can be understood through 20 leadership principles. Leadership principles substantiate the values with concrete examples of how we do things at Alan.
LESSON #1: SLOW DOWN TO INNOVATE
"Take AWS. It reached $10 billion in revenue in less than four years. But what's remarkable is that they didn't get there by forming a team, writing a lot of code, and then testing and iterating. In fact, it took more than 18 months before the engineers actually started to write code. Instead, they spent that time thinking deeply about the customers they were trying to serve and forming a clear vision for what AWS should be," he says.
"Moving fast isn't about moving quickly, throwing stuff over the fence, or launching it in an app to see how it sticks. Stopping to think about the value you're trying to create for the customer and the problem you're trying to solve is essential, especially when you're moving into a brand-new area," says Bryar.
That is one of our biggest topics of discussions internally: how to combine “bias to action” and “digging deeper”. What is the balance we want? For what kind of problems should we spend more time understanding it all? And for what kind of problems do we want to go as fast as possible?
LESSON #2: BRAINSTORM AROUND THE CUSTOMER'S NEEDS, NOT YOUR SKILL-SET
Like the AWS process, Carr and Kessel spent more than 18 months coming up with different product ideas.
“Second, we didn't outsource it to an OEM or ODM to design and build this for us. Instead, we hired up Greg Zehr from Palm to build up that team."
We also try to have a huge bias for building at Alan, meaning we prefer to build things, to differentiate ourselves and invent new products. Depending on externalities often slows us down middle-term.
LESSON #3: STAY FLEXIBLE ON THE DETAILS, BUT DON'T LET INNOVATION BECOME A PART-TIME JOB.
Amazon has an attitude of being stubborn on the vision but flexible on the details.
This is where Amazon's solution of single-threaded leadership, or having a leader and team work on one thing and nothing else, comes in. "It gives them the appropriate focus to ensure they can devote time and attention to make the business a success," says Carr.
One of my favorite quotes is: “The best way to fail at inventing something is by making it somebody’s part-time job.”
LESSON #4: BUILD BY WORKING BACKWARDS.
Our process for finding new product ideas should come down to this: What helps you make the right decision to take the next step and figure out if A) this is the customer problem you want to solve, and B) this is the customer experience that solves that problem?
If you can't describe something that sounds compelling and that people really want and need in a one-page press release, then there's no point in building it.
Now to the FAQs. "Those are designed to help address the challenges that will undoubtedly crop up for a product that doesn't yet exist. What solutions do I need to come up with to actually build it?" says Carr. "The FAQ can be many pages long for a complex project. The thinking is that by iterating on it with the senior leadership team, when they give the green light, everyone is operating from the same basis of understanding the risks. So when a project fails, they're not going to blame the team unless there are issues of execution."
Ultimately, these business decisions are complicated. These processes and frameworks that Amazon has put in place are designed to stack the odds in your favor, but at the end of the day, it's not a true experiment if you know that it's going to work beforehand.
We are using more and more a similar approach to Press Release / FAQs at Alan for big projects. It is very helpful to think long-term, and ask all the good questions.
LESSON #5: INTENTIONS DON'T WORK, MECHANISMS DO.
Correction of errors report. "Whether it's a technical glitch or an error in the analog world, teams are responsible for coming up with this report. It's a very clinical study about what happened," says Bryar. "We use the five whys approach from Toyota to keep going down to the next level of detail until you've identified all of the root causes because it's usually not just one thing that caused an error. Then those teams have the responsibility to fix what they've identified. It's not fun to talk about how you caused an outage on this portion of the app, but it's an essential process."
The Andon cord. "This one was also borrowed from Toyota. If someone working on an assembly line encounters the same problem on multiple cars, they can pull a cord which stops the entire production line, and they don't restart until they figure out what the problem is," says Carr. [...] Bezos then gave the reps the power to 'pull the Andon cord,' — meaning the item is no longer available to sell on the detail page until the issue is fixed."
LESSON #6: GREAT OPERATORS DIVE INTO THE DETAILS
To be a good operator, you can't just focus on those output metrics — you need to identify the controllable input metrics.
These input metrics are usually customer-related. "Is the customer experience getting better this week than it was last week?
He shares some sample input metrics that Amazon closely monitors. "For the retail business, what are the prices down to the product level, compared to what's out there on the market? How many new items were added? How many are in stock and ready to ship via Amazon Prime? What is the average delivery time? What was the number of orders? How many promises did we miss? What was the number of defects?" he says.
Diving into the details ≠ micromanagement. '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,'" he says. They're skeptical about whether that metric is really measuring what you mean it to measure.
"Take the annual planning process in 2010. The leadership team sets what they call S-team goals, which are important enough for them to monitor. There were 452 of them that year, and they were very, very detailed goals. How much selection are we going to add for this category? Are we going to bring down the latency of this AWS service, from X to Y? That was the level of detail that Bezos and his direct reports got to," he says.
My view is that the role of a leader is to be able to see the forest AND the details on the trees. Being able to dive deep to understand the business very well, while being able to take a step back at the same time, and think holistically.
🏯 Building a company
In addition to selected articles, I share one of Alan's leadership principles every week - the same one that I share internally every Wednesday.
👉Alaners don't fear being contrarians and are often right
At Alan, we believe in deviating from crowd behaviour, that is, acting differently. If you want to create something unconventional, why follow the classical way?
We would never have gotten the insurance approval if we had listened to the people around us. "It will take you years," "You can't do it," "Do it another way." We moved forward for a long time without being understood, but we proved that it could be done!
That doesn't mean that you should always go against the grain, but rather that you should be smart enough to stand out when you need to.
👉 Quentin Clark: Lessons From Working with Bill Gates (20VC)
The weight of words in leadership: every word you say has a big impact.
Don't remove an opportunity to learn from someone even if they didn't do it the way you wanted. Don't do things for them. Share your expectation for the outcome
👉Why We Should Copy More (Chinese Characteristics)
Every war in the recent history of Chinese internet has been equally savage. Copying has been framed in the West as a destination where innovation goes to die. But what if it's the starting point?
As it is the first phase, companies that do copy shouldn't be automatically dismissed. Going through the product histories of Tencent, everything started as a copy before being transformed into something incredibly innovative.
Copy ⇒ Localise ⇒ Combine = Innovation
🗞In the news
📱Technology
👉Will Apple Mail threaten the newsletter boom? (Plateformer)
Apple announced Mail Privacy Protection, which will limit the amount of data that people who send you emails can collect about you.
The new feature helps users prevent senders from knowing when they open an email, and masks their IP address so it can’t be linked to other online activity or used to determine their location.
Benton brings some powerful numbers to buttress his worries: “The most recent market-share numbers from Litmus, for May 2021, 93.5% of all email opens on phones come in Apple Mail on iPhones or iPads,” he writes. “On desktop, Apple Mail on Mac is responsible for 58.4% of all email opens.”
👉Google Unit DeepMind Tried—and Failed—to Win AI Autonomy From Parent (WSJ)
DeepMind has about 1,000 staff members, most of them researchers and engineers. In 2019, DeepMind’s pretax losses widened to £477 million
The cost of investing in breakthrough machine learning :)
🏥 Healthcare
👉Global Insurance Pools statistics and trends: An overview of health insurance (McKinsey)
Health insurance continued to be the fastest-growing segment: it achieved 6.9 and 5.9 percent growth in 2018 and 2019.
Top-performing regions by way of contribution to the €69 billion absolute growth in total health premiums in 2019 were North America, at 63 percent, and developing APAC, at 22 percent. North America is the largest private health market by premium volume and has been consistently driving the global growth of health premiums, with growth of 5 percent in 2019. The developed markets in Western Europe and developed APAC grew at 4 percent in 2019.
The global health insurance market’s average combined ratio remained steady at around 98 percent from 2015 to 2019. Net claims ratios in most Western European nations, including France, Germany, Italy, Spain, and the United Kingdom, remained stable in the range of 70 to 85 percent from 2015 to 2019.
In 2016, China’s government released the “Healthy China 2030” blueprint to push the development of health insurance products.
ZhongAn launched China’s first “million yuan health insurance” product, which offers millions of yuan in coverage for premiums costing in the hundreds. The product proved popular—and other players were quick to follow.
The private health market in Eastern Europe grew at a CAGR of 9 percent from 2016 to 2019, led by Hungary and Romania at 32 percent and 34 percent CAGR, respectively. In Hungary, growth can be partially attributed to plans to develop private cooperation with the country’s public health system. Private health insurance in Romania grew rapidly following the installation of the country’s new fiscal code in 2016; the code increased the deductibility ceiling for calculating taxable income, which was specifically intended to boost the development of the health insurance market.
💚 Alan
👉🇫🇷Pourquoi Alan Baby est-elle une appli gratuite ? (Alan Blog)
One of our product managers working at Alan Baby has written an article about why Alan Baby is free, why it is free and until when? Very interesting on the reasons to develop such a product.
👉 🇫🇷🇧🇪 "On vise plusieurs centaines de millions d'euros en Belgique" (Trends FR )
I had the opportunity to express myself on Alan's presence on the Belgian market in Trends FR
🔨 A Useful tool
👉Documenting your company knowledge (Notion)
We use Notion as a kind of intranet, it contains a lot of information, it's like an intranet, only more practical!
Collaboration in the pages is simple, fluid, you can tag other users of your company, create remarkable pages, tables and that without coding or mastering the advanced features.
I invite you to try it, even for your personal organization!
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Let’s talk about this together on LinkedIn or on Twitter. Have a good week!