When Bezos leaves office, revisit the Amazon management philosophy

When Bezos leaves office, revisit the Amazon management philosophy

Amazon is really a company worth studying. Its legend is not only from Bezos’ personal legendary halo, but also from its continuous innovation attempts to subvert itself and break boundaries. Finally, and more importantly, Amazon has created a set of tellable and reusable management philosophy. In this article, we will take a look at the logic behind Amazon’s management philosophy.

The book “Working backwards” is quite heavy. The two authors, Colin Bryar and Bill Carr, are both senior Amazon executives. Among them, Colin joined Amazon in 1998 and served as the “shadow” of Jeff Bezos (personal business assistant) for two years. ) . Bill joined Amazon in 1999 and has been with the company for more than 15 years as the head of Amazon’s digital business, including Amazon Music, Prime Video and Amazon Studios. This book is divided into two parts. The first part is a summary of the core management process, and the second part focuses on application cases. The framework and logic are clear and recommended for reading.

When Bezos leaves office, revisit the Amazon management philosophy

The first part of Amazon’s management guidelines

1. Amazon’s core 14 management principles

Amazon’s early management philosophy only exists in Jeff Bezos’s mind, but it is not institutionalized. In the process of the company’s continuous development and growth, the following fourteen core principles have been gradually precipitated:

  • Customer Obsession (Customer First) : When leaders make decisions, they start with user needs and then make decisions. Although the company pays attention to competitors, its permanent focus is on users.
  • Ownership (dare to take responsibility) : Leaders are those who take responsibility. They do not sacrifice long-term thinking for short-term interests, they put the company’s interests first, and they never shirk.
  • Invent and Simplify (innovate in the simplest way) : Leaders always have the spirit of innovation and continue to simplify the path. We are obsessed with innovation and are not afraid of being misunderstood for a long time.
  • Are Right, a Lot : Leaders always have far-sighted thinking and can verify their thinking in a variety of ways.
  • Learn and Be Curious : This is easy to understand, stay foolish, stay hungry.
  • Hire and Develop the best : Leaders continue to create an innovative environment for their subordinates, provide good suggestions, continuously improve recruitment and upgrade standards, and achieve self-iteration of the organization.
  • ON at The Highest Standard insist (highest standard) : Relentless word Bezos liked, leaders need to continue to improve standards.
  • Think Big : Leaders need to think boldly, think differently, and continue to find ways to better serve customers.
  • Bias for Action : Only fast is not broken. Many decisions are reversible. The speed of action is the most important. Of course, risk also needs to be measured.
  • Frugality : Retail companies must have a culture of frugality, control all controllable costs, and maintain efficiency.
  • Earn Trust : Leaders need patience, sincerely communicate with subordinates, win trust, and need continuous self-criticism.
  • Dive Deep : Leaders need to understand the details, continuously review the business, and be alert to abnormal numbers, even in the details.
  • Have Backbone; Disagree and Commit : When the leader disagrees, he must clearly express his opinion, even if the atmosphere is awkward, and once the direction is set, the rest is unconditional execution.
  • Deliver Results : Leaders must manage input metrics well and deliver satisfactory answers on time and according to quality.

Amazon’s management guidelines implementation mechanism : Amazon’s planning for the coming year begins in the summer, which is a highly intensive and painful process. S-teams (the highest decision-making committee) initially set high-level goals-based on CEO or CFO and other executive goals (for example, revenue growth of 50%) , S-team’s goals will have more details, such as revenue goals will be split Understand the different businesses in each region, etc.

The team formulates OP1 and OP2 : Once the highest goal is determined, each team will start to formulate its own OP1. These goals include performance evaluation in the past year, goals achieved and summary lessons for not achieving goals; goals to be achieved in the second year; details The income statement; the required resource support, etc.

Each team will align its own OP1 with the company’s finance and HR departments. The latter will coordinate each team’s goals with the S-team’s goals. This process often changes its draft. Before the holiday promotion season in the fourth quarter, the target will be revised to reflect the latest progress of the business, this is OP2. Finally, S-team will select the most important ones from the OP goals of each team to become the S-team Goal -that is, prioritize the team goals, and Amazon executives are aware of these details. (Dive Deep) .

Amazon’s long-term incentive method : long-term thinking is one of the underlying foundations for Amazon’s survival, and the company’s incentive mechanism is also built on the same basis-the highest basic salary for employees is $160,000 (regardless of hierarchy) , and the rest are based on equity Form issuance. To truly tie the company’s long-term destiny to the benefits of employees, it naturally also screens employees who lack long-term vision.

2. Amazon’s recruitment: Bar raiser system

Limitations of traditional recruitment: randomness and prejudice . The typical drawbacks of the traditional recruitment process include lack of preparation . Even the smartest recruiters may randomly ask some untargeted questions. The second common problem is bias . People tend to recruit people with similar backgrounds (both Subconsciously) . Relevant data from Sequoia Capital shows that Silicon Valley startups need to spend 990 hours to recruit 12 engineers, that is, more than 80 hours/recruitment of employees, which is not a small time cost.

The birth of Amazon’s Bar Rasier system . When it comes to Amazon recruitment, the most famous questions are those random “brain holes”-for example, how many passengers does LAX at Los Angeles Airport transport each year? These questions can test an interviewer’s immediate response ability, but they are not very helpful for whether they are suitable for the company culture and organizational culture. As the scale of Amazon continues to grow, there is an increasing need for a large-scale recruitment system to ensure the operation of the company. At this time, the Bar Raiser system came into being.

As the name suggests, Bar Rasier (raise the bar, constantly improving standards, in line with Amazon’s values) is a recruitment system and a collective name for a category of recruiters. These recruiters will undergo a series of standard training in the overall Amazon recruitment process Play a pivotal role. Bar Raiser has no additional salary, but will have a special logo (honorary title) in the intranet system .

Specifically, Amazon’s recruitment process can be divided into the following steps:

  • Job Description: The core of this piece is that Amazon’s JD is not written by the HR department, but by the head of the recruitment department.
  • Resume review: Screen suitable candidates through resumes. If the target candidates are screened out, consider whether the JD is written correctly.
  • Phone Screen: The head of the recruitment department will spend about 45 minutes asking some pre-set Bahaviour questions, the main goal is to screen employees who meet Amazon’s core values. Candidates will ask questions in the last 15 minutes. Generally speaking, the pass rate of this step is 25%.
  • In-House Interview Loop: 5~7 hours of on-site interview, you need to pass the interview of about 7 interviewers, and you must pass the head of the recruitment department, the head of HR and the bar raiser. It is necessary to avoid being interviewers with colleagues whose target positions are lower than one level, and it is necessary to avoid situations in which subordinates interview their superiors in the future.
  • Written feedback: It contains the choice of whether to recruit or not. It must be filled out as soon as possible after the interview (often within 15 minutes) to ensure the integrity of the feedback.
  • Debrief Hiring meeting: The goal of this meeting is to decide whether to hire or not. The supervisor of the hiring staff will make a decision, but the Bar raiser needs to pass it. The latter rarely uses a veto power. According to Amazon’s internal research, in the 4000 recruitment process, there are only 3 cases where Bar Raiser denies the recruitment.
  • Reference check: The department head will call the recommender to further confirm the candidate’s situation, but this step is not very useful now.
  • Offer through onboarding: Once the offer is approved, the head of the candidate’s application department will personally call the offer for this opportunity. It is important to know that recruitment is a two-way selection process, and excellent candidates often have multiple choices.

3. Amazon’s organizational guidance-Single threaded Leader (special leadership system)

Scale is always the enemy of efficiency. Amazon has shown sustained and amazing growth since 1994. This is accompanied by the rapid expansion of the organization. The interdependence between organizations has increased day by day. The company colleagues spend more and more time on synchronization and collaboration, and the efficiency is increasing. The lower.

The problem that Amazon encounters seems to be a problem that all growth companies will encounter. The author Colin once led a team to develop an Amazon Associates project at Amazon. The main purpose is to let other websites carry Amazon products, and then the platform will give CPS share. During the development of this system, we encountered code-side collaboration (every change must be synchronized with other departments to avoid system paralysis) and data-side collaboration (relevant development data needs to be approved layer by layer) , and the overall development efficiency is very low.

The solution is not better collaboration . Faced with this problem, the natural first idea is to increase the frequency of synchronization and collaboration, but Amazon is not satisfied with the status quo. They feel that the collaboration between teams does not need to be improved, but needs to be cancelled . Jeff Bezos applies the API concept to describe the relationship between different teams. He believes that the ideal relationship should be that each team modularizes and encapsulates its own functions , and there is a loose cooperation relationship between different teams without the need for close contact. Each team has sufficient autonomy and innovation efficiency.

The first solution is NPI (New Project Initiatives) . To put it simply, Amazon internally generates the NPI process, the main purpose of which is to prioritize internal projects company-wide. Each team needs to prepare an NPI project application in advance, including the project introduction, the team that needs to be coordinated, P&L, etc. The most difficult thing is to predict the needs of users in advance, so the forecasts given by the regular project team are very broad. For example, the investment range is 4 million to 20 million U.S. dollars. All in all, the NPI project design process is cumbersome and difficult to evaluate, and it is not liked within Amazon.

The second attempt is Two-pizza Team . In Bezos’ view, instead of racking their brains to deepen the synergy, it is better to think about how to remove them from the root. He believes that the software engineer team can be divided into smaller independent teams, without mutual coordination. In the end, Amazon formed the theory of Two-pizza team, which mainly includes the following elements:

  • Scale: must be less than 10 people;
  • Autonomy: have the final say within the scope of responsibility;
  • Evaluation: Fitness function will be used as the core method to continuously evaluate the team’s progress;
  • Real-time monitoring: real-time monitoring of progress;
  • Owner: is the first responsible person within the scope of responsibility;
  • Leaders must be competent: able to lead such an independent team in all aspects, including recruitment ability, etc.;
  • Self-hematopoiesis: Able to be self-sufficient;
  • S-team’s prior approval is required.

Challenges encountered by the Two pizza team approach. In the beginning, the Two-pizza team approach was implemented in software engineering, product design and other teams, but from beginning to end, this solution did not penetrate all departments of Amazon. For example, the retail team, HR team, and legal team were not used. The latter actually interacted with each other. The dependence of is not so strong.

In addition, Fitness Function is the core of evaluating the effectiveness of independent team work, but how to define an optimal Fitness Function has become a difficult point . In addition, independent teams have higher requirements for leadership. Finally, in many cases, a team larger than Two-pizza is actually needed. Gradually, Amazon discovered that leadership plays a key role in it, not a simple organizational form.

Single Threaded Leader (special leader) . In a series of practices, Amazon found that the use of dedicated leadership is the most effective way to solve some important issues of cross-departmental coordination. For example, the FBA (Fullfillment By Amazon) project initially provided services for merchants to use Amazon logistics infrastructure. Both the retail and logistics teams thought this idea was good, but no one was really responsible for at least one year, and the progress of the project was slow.

Amazon appointed a special VP for FBA in 2005, and it was successfully launched in September 2006, becoming an important part of Amazon’s flywheel. In fact, Amazon has adopted the method of dedicated leadership in the subsequent digitalization and other important new business layouts (we will discuss in detail in the case of Chapter 2 later) .

4. Amazon internal communication: cancel PPT, embrace Word

If you walk into any Amazon conference room at this time, you will be surprised by one thing- the 20 minutes of astonishing silence at the beginning of the meeting , and these 20 minutes the participants did nothing but read attentively. Related materials .

The Amazon S-team conference in prehistoric times. Generally, several S-goals will be discussed at the core, and the relevant team will make a PPT report. Often it happens is that the effect of reporting less than expected, in the form of PPT report makes it difficult to focus on the real process, and with the business more complex, and more difficult linear PPT report showing the truth, and even let The meeting focused on some unimportant details , wasting time and inefficient. Finally, PPT reporting has very high requirements on the presentation skills of the reporter, but this is contrary to the core of the report itself. This series of phenomena made Bezos think about whether there was a problem with the reporting method itself.

A paper makes a difference . In 2004, Bezos and Colin read a Yale University professor’s paper on a trip, which happened to analyze the shortcomings of the PPT report, and the article proposed at the end that to solve these problems, it is best to return to the text form, which is Return to Word.

In June 2004, under Jeff’s instruction, Colin sent an email to all Amazon S-teams, stating that the future meeting will take the form of Word and cancel the original PPT form. At the beginning, many members still expressed their incomprehension, but gradually, Amazon formed a consensus on the form of reporting materials, no more than 6 pages of word , no formatting skills (such as reducing the font size, etc.) , you can put some unimportant The information is in the appendix.

The essentials of a good Word report. One of the benefits of a 6-page report is to force the reporter to think deeply in advance and summarize the main points , but PPT can actually be mixed. Generally speaking, Amazon’s 6-page report contains the introduction of the problem, the key points to solve the problem, the main achievements, the main mistakes, the key points of the next stage, the need for human resources , P&L, FAQ and appendices. The length of the material is related to the length of the meeting. 6 pages are suitable for a 1-hour meeting. It is best to read one-third of the time and two-thirds to discuss. If the meeting is only half an hour, it is best to prepare only 3 pages. paper.

Giving effective feedback based on materials is the core of meeting efficiency. Jeff Bezos can always give unique and effective feedback. The reason behind this is that he first assumed that every sentence behind the material was wrong, unless they could Get proof (true tough) .

5. Amazon develops new products: starting from the goal, reverse development (Working Backwards)

Speaking of Amazon’s digital strategy . In 2004, Amazon decided to start a digital strategy. The author Bill moved from retail business to digital business VP. How did Amazon start this new business? At the beginning Bill and his team convened some MBA students as usual to do research on market space and opportunities, and showed the detailed research results to Jeff Bezos.

After listening to the report several times, Bezos asked a question: ” Where are your samples ?” The truth is that Bill and the others have no samples at all, but Bezos’s core focus is on their products. What is the difference compared to competing products? Differentiated advantages . After several meetings and discussions, the results were unsatisfactory, Jeff Bezos suggested, why not start with writing the product concept specification (Press Release) ? This is Amazon’s characteristic PR/FAQ method and the starting point for its development of new business & products.

PR/FAQ method: The PR part generally contains some pictures and text, and the length is less than one page, while the FAQ part can be as long as 5 pages (the total length is less than 6 pages, which meets the regulations) . The general material sponsor is the creative initiator or the project leader. In the one-hour discussion meeting, everyone will express their opinions (the most senior said at the end, so as not to affect the expression of others) .

The PR section generally includes the opening title, subtitles, summary of the phenomenon, problem description, solutions, and related arguments (such as user speeches) . The FAQ section generally includes market space and user demand issues, economic issues (P&L), resource coordination issues (such as relying on operators), operability issues (difficulties that need to be broken through), etc.

6. Amazon’s process control: grasp Input Metrics, not Output

Amazon’s WBR (Weekly Business Review) system. Amazon has always kept a close track of its own business. A weekly review is one of the important regular systems, and what points WBR needs to pay attention to becomes the first problem to be solved. The answer given by Amazon is to focus on input elements. (Input Metrics, such as supply) , rather than output elements (Output Metrics, such as stock prices) .

How to define input elements? Amazon focuses on leading indicators , not lagging indicators. Amazon’s retail business has always focused on the three core elements of multiple (rich choices) , borders (faster, more user-friendly experience) , and price (cheaper) , and Bezos’s flywheel effect has always focused on these three elements ( As shown in the figure below) , the logical sequence of the flywheel effect is: good user experience-more buyers-more sellers-richer choices-better experience, this is the first layer of flywheel; the second layer of flywheel is greater income Scale-more optimized cost structure-lower price-better user experience-larger revenue scale. The flywheel effect focuses on typical Input Metrics.

When Bezos leaves office, revisit the Amazon management philosophy

Another case of Input Metrics-indicator definitions are constantly changing. Focusing on how to provide users with richer choices, one of the initial definitions of the indicator is to increase the number of product pages from the supply side . Later, Amazon discovered that the team had created many product pages that were not in demand in order to complete the KPI. After that, this metric was optimized to the consumption traffic of related pages pages that no one browses were useless) ; it was further optimized to the proportion of consumption traffic on the inventory product page (not counted as unstocked) ; and finally optimized to inventory products , And the proportion of product page traffic that can be delivered within 2 days . It can be seen that Amazon’s input elements are also constantly iterating.

DMAIC process: Amazon monitors the business in compliance with Define-Measure-Analyze-Improve-Control . As mentioned above, the most important thing in the Measure step is to collect the core Metrics data in real time. The analysis part is provided by many different teams to provide relevant comments; after understanding the problem, the next step is to improve the relevant situation; finally, to ensure Continuously operate efficiently and achieve controllable processes.

The core point of WBR . Every time WBR starts, it presents a series of core data. These data will be compared with the previous data in detail, reflecting the details of business operations and changing trends. To fully understand these data, Amazon executives must know the business details (Amazon Dive Deep culture) . In addition, the core structure of the material should be kept constant so that participants can quickly understand and understand the changing trends. The core focus of WBR is the trend of change and the reasons behind the analysis. Normalized indicators are not the focus (don’t over-interpret it, and take time to explain random changes) .

The second part of Amazon’s theoretical practice case

1. KINDLE: The bridgehead of Amazon’s digital strategy

Influenced by Jobs, Amazon is determined to embrace digitalization. In 2003, Colin and Jeff Bezos and an Amazon SVP were invited to visit Apple headquarters and were received by Jobs. Jobs showed them the first application that Apple was about to launch on Windows. Jobs said it was the best Windows application ever. As long as you have a computer, you can have an iPod connected to it and consume digital music anytime, anywhere.

Jobs said that physical products such as CDs and tapes will disappear in the future, and Amazon will become the last place to buy CDs decently. You can still have high profit margins because CDs will become more and more difficult to find in the future. Hearing these words, Bezos must have black lines on his face. Obviously, becoming an exclusive CD seller in the digital age does not sound like a sexy business.

A few months later, Bezos appointed an Amazon digital services special leading (Single threaded Leader) Steve Kessel, which will no longer report to the person in charge of the Amazon retail, and report directly to Bezos, showing the importance of the digital business. In addition, Bill, the author of this book, has also become a member of Steve’s core team.

After investigation, the e-book direction was finally selected . After 6 months of market research, the three core directions of Amazon’s digitalization are books, music, and film. The first thing Amazon needs to solve is the strategic choice. Is it to be a fast follower or leader in the industry?

In Jeff Bezos’s view, it is almost impossible to become a celebrity by making iPod imitations, and the digitalization of film and television was relatively difficult at the time (infrastructure such as broadband is immature) . Finally, Amazon chose e-books as the core direction. In Bezos’s view, just as a content integrator (as shown in the figure below), the barriers in the digital field are not high. You must expand to the content or the terminal to have the barriers. So Amazon first chose the hardware, that is, to develop a unique e-book. Reader, this is the origin of Kindle thinking.

When Bezos leaves office, revisit the Amazon management philosophy

Choose internal R&D to accumulate creativity and ability. Bezos’ decision has caused great doubts within the company. The core is that Amazon has not developed hardware. This will be a huge investment with no prospects. Based on the Bias for action principle, once the boss has made a decision, his subordinates must implement it with all their strength.

In the PR / FAQ session, the team determined the numbers have to be software ecosystem (such as app store) target hardware and seamless. In addition, Amazon chose to develop hardware by an internal team instead of outsourcing it. The core is that internal R&D can accumulate creativity and development capabilities, while outsourcing is difficult to achieve this effect.

To this end, Amazon recruited Greg Zehr as the head of the hardware development team. The latter’s previous work companies included Apple and others, and it was responsible for opening up Amazon’s hardware laboratory in Silicon Valley.

Go all out . Amazon began to fully invest in Kindle research and development, recruiting a series of talents, Bezos himself is also deeply involved, and even jokingly called ” Kindle Chief Product Officer .” In 2005, at an OP1 S-team meeting, the Kindle project, regardless of time and money investment, was a bit far beyond the initial expectations, so someone asked Bezos: “How much are you willing to invest in Kindle?” Bezos asked with a smile CFO: “How much money do we have on the account?”, which means All-in.

Kindle has two Killer functions . One is the instant content update. This idea comes from BlackBerry. Bezos himself likes the BlackBerry design very much. It can check emails anytime and anywhere (for a long time, email is the QQ and WeChat of Europeans and Americans) . Bezos thinks that every time the content is updated like the iPod The user experience of connecting to a computer is very poor. They have done a survey and regular users update their iPod once a year on average .

So Bezos decided that Kindle must have a wireless network (3G began to develop at that time) , and users can update it anytime and anywhere. In the end, the “Whispernet” function was implemented, and due to the small size of the e-book, this business actually brought controllable new costs to Amazon. Another major feature is the use of electronic ink screens (E-ink) . The trade-off at the time was that such a technology could only display black and white images and had a slow refresh rate, but it could satisfy Amazon’s definition of a good e-reader— —Let the book disappear in the hands of the reader (the reading feeling is close to the physical book) , and the battery life is strong.

In the end Kindle chose to use the electronic ink screen. In fact, these two features have also become the core advantages of Kindle, in addition to the massive content options (the initial 90,000 e-books) , and the low price ($9.99 per copy, almost zero gross profit) .

Kindle became an instant hit . Kindle was released in November 2007, with a retail price of US$399, which is US$100 more expensive than competing Sony’s, but it became a hit based on a good user experience. In 2008, American national idol Oprah publicly stated in the program that Kindle was her favorite product, and sales exploded further.

2. Prime members: Amazon’s long-term ambition

Let’s start with an urgent email . In mid-October 2004, several senior Amazon leaders received an email from Bezos: The general idea is that we should not be satisfied with the status quo. We should continue to improve the user experience, especially on the delivery side. We should launch a free service before the end of the year. Shipping membership plan. Just like a cry in the calm night sky, Bezos’s voice has become a “sacred decree” that must be executed within the company, even if it is a seemingly impossible task (the fourth quarter was originally the busiest season of the promotion season) .

Amazon Super Saving Shipping was born. Bezos’ mail is by no means aimless. In fact, the free shipping service has been brewing within Amazon for a long time, and it has been tested on a large scale. As early as the beginning of 2002, Amazon once launched a free shipping service for orders over 99 US dollars (subsequently reduced to 25 US dollars) . At that time, it was mainly for services that were not sensitive to delivery time, that is, it took 3 to 5 days to deliver the goods. Deliver to consumers.

As predicted in the previous period, the free shipping program allows consumers to buy more goods and increase the single order value. However, Super Saving Shipping has not been popularized on the platform. On the one hand, many consumers are unwilling to wait so long to receive the goods; on the other hand, price-sensitive consumers are unwilling to purchase more items to avoid shipping. In Jeff Bezos’s view, Amazon is providing users with “Fast and expensive” and “Free and slow” choices. He believes that “Fast and free” is the best user choice.

Prime was relaunched under the pressure of growth . In the third quarter of 2004, Amazon’s revenue increased by 29% year-on-year, and FCF increased by 76%. On the surface, it looks glamorous, but if compared with the same period in 2003, the growth rate in all aspects is significantly slowing down (as shown in the figure below) , Amazon is also facing growth The company tried various methods to revive growth, such as nationwide marketing, but the results were not as good as expected (not comparable to marketing expenses, Bezos hates advertising) .

The company chose to return to Input Metrics for consideration. For the three core input elements of Price, Selection and Convenience , a conclusion was reached during continuous discussions. The company performed well in providing a variety of options and lowering the price of the flywheel, but still in terms of providing convenience to users. There are things that can be done, the most important of which is to reduce the cost of shipping for users . Relevant research also shows that the sales incentives for users free of mail are often significantly greater than the same degree of price discounts.

When Bezos leaves office, revisit the Amazon management philosophy

From the slow process to Bezos’ decisiveness. In fact, Amazon’s need for a loyal member project has been discussed within the company since 2000. The necessary conditions for this membership are: 1) the user must be able to afford it; 2) the relationship between the user and Amazon must be promoted, and more transactions must be reached; 3) the capital efficiency should be higher than before to promote Amazon’s flywheel effect.

Regarding the specific implementation plan for members, there are also many internal discussions. One of the software engineers Charlie put forward a suggestion: ” Why can’t consumers pay the annual fee and get free shipping ?” Finally, Charlie became a Prime member of technology, user experience and financial manager. One of the biggest uncertainties is that Amazon does not know whether the membership fee is enough to cover the excess shipping cost. If the answer is no, then this service is not sustainable and it is meaningless for users.

” Institutional No ” is a proper term for large companies in Amazon to choose conservative play in order to avoid risks. The Prime membership program has slow progress in Amazon at the initial stage, and there is no special leadership. Risks and operational difficulties are very important reasons. (Bezos proposed exempting shipping for high unit price products, but it is difficult to achieve technically in the end) .

In the end, Bezos’ insistence on Prime did not give up because of the low efficiency of the system, which gave birth to the email in mid-October 2004. Finally, the Prime membership program was launched in February 2005 (for this reason, Amazon specifically postponed the earnings conference call) . In fact, the first to join Prime members were some heavy Amazon users (buy more, and the original freight charges were also more) , but Prime members actually increased the cost of the platform. However, long-term persistence has made Prime members an important part of Amazon’s flywheel. In 2018, Amazon announced that Prime members had reached 100 million, and in the shareholder letter in 2021, Amazon announced more than 200 million.

3. Prime Video: Amazon insists not to give up in exchange for gains

An early failed attempt at Amazon Unbox . Amazon’s video business attempts can be traced back to mid-2004. When Amazon announced its digital strategy, video was one of the three major directions, which corresponds to Amazon’s physical DVD business. At the beginning of 2000, Netflix’s DVD online rental business was in full swing, while Amazon believed that video downloading was the future of the industry and developed Amazon Unbox.

However, video downloading was restricted by many conditions at the time . For example, it takes 1 to 2 hours to download a movie (under broadband conditions) . For example, it is difficult for computers and TVs to communicate with each other, so movies downloaded on the computer side cannot be watched on the TV side. In addition, Amazon also hopes to provide users with some special features, such as the multi-terminal share content library function (a movie can be downloaded multiple times) . However, Amazon Unbox ultimately failed due to the slow download speed of the movie, and too many bugs in Microsoft’s MDR encryption software that prevented many users from downloading it.

Bill gave himself a D , but Amazon still gave him a chance. In the self-evaluation that year, the author of this book, Bill, gave himself a D. He thought his performance in 2006 was terrible and Amazon Unbox failed for various reasons. If it is in another company, Bill will probably be fired, but perhaps because video is not an important direction of Amazon’s digital strategy, and more importantly, because of Amazon’s long-term belief that to innovate is to accept failure. Jeff Bezos feels that have invested millions of dollars in you, and you have to make those investments worth the price next time.

From OTT to the living room market has achieved initial success. Amazon’s video business faced many problems in the early stage, including the problem of difficult content acquisition due to the content window period (at that time, after Hollywood movie theaters were offline, they would enter DVD, pay TV and other different level channels, and it was difficult for Amazon to get the source of the film) . At the 2006 business review meeting, Josh, an employee who understands content, business, and technology, proposed an idea of ​​cooperating with TiVo, an OTT service provider , and recommended that Amazon enter the large-screen market (not the small-screen PC market) from the OTT market. ) , Amazon’s content can be downloaded to TiVo’s set-top box in advance to provide users with a better experience. In 2007, Amazon released Unbox on the TiVo platform and provided a watch-and-download mode, which achieved initial results.

Amazon Video struggled to break through-pressure from competitors . In 2007, Netflix became an instant hit with the combination of two major models of paid subscription and streaming media, becoming the leader in the streaming media video field. However, like other players in the industry, Amazon did not pay enough attention to this competitor in the early stage , until later Netflix formed an unsurpassed advantage (it can be seen that Amazon also has the usual problems of large companies) .

In 2008, Amazon relaunched the Amazon Video On Demand service, which is a video integration app, also launched on the TV platform. However, competition between Amazon makes the hardware, Microsoft, Sony and other competing pairs (such as game consoles) have rejected the introduction of Amazon’s video applications , but Netflix has no pressure in this respect (there were data, 95% Netflix users either from official website , Or from the three major game console channels, namely Xbox, PlayStation, Wii) . And Hulu’s appearance , or as a shareholder owns NBC and Fox, with massive copyright content, but also makes Amazon’s video service to shame.

Bezos : Bonus that makes the video business become a Prime member . The fate of Amazon’s video business has been difficult, and the internal team has also thought of many ways to highlight its uniqueness, such as positioning certain special content categories from the content. Bezos proposed at a conference: “Let’s use the video service as an extension of Prime membership, just like Netflix’s streaming media was originally a bonus service for DVD rental.”

Bezos’ proposal solves the problem of the cold start of Amazon’s video business- the paradox of enough content and enough users . Bezos believes that Prime members will be more competitive with video, and no one can provide users with exactly the same comprehensive services whether it is for e-commerce or streaming media competitors. In 2011, Prime Video was officially released as a service for Prime members (prior to this, free shipping was the core value of Prime members) .

Based on thinking similar to the Kindle strategy, in the field of digital content, there are no barriers to only a content integration platform. Amazon either enters content production or hardware manufacturing, and Amazon chooses to do both. First, Amazon made its own hardware. The first hardware was the Kindle Fire Tablet, followed by Fire TV and so on.

In addition, Amazon has officially established its own Studio to develop original content. In Bill’s view, Hollywood can provide a large supply of creative personnel (supply-side prosperity) , which is the biggest guarantee for Amazon’s entry into original content, and its biggest challenge is how to grasp or Screen out the best script or idea. In addition, Amazon has also made some innovative attempts, such as launching the pilot episode on the platform in advance, and deciding whether to recommend projects based on viewing data.

From a trend point of view, Amazon’s streaming media business is still worth looking forward to. On the one hand, there will be the most expensive series in history, “Lord of the Rings” (it is said to have invested 500 million US dollars in a season) . On the other hand, Amazon recently acquired MGM for 8.45 billion US dollars, further consolidating the copyright layout.

When Bezos leaves office, revisit the Amazon management philosophy

4. AWS: “Unintentional” Inserting Willows and Willows

A developer tool that originated from Amazon’s CPS business. At the beginning of 2000, 75% of Amazon’s revenue still came from selling books, CDs and DVDs. The author of this book, Colin, is mainly responsible for the Amazon Associate project (Amazon’s CPS project, and other websites earn share fees for Amazon diversion) . However, as the business becomes larger and larger, relevant website developers have put forward higher requirements for the aesthetics and design of Amazon plug-ins.

Therefore, Colin led the development of the underlying tool SDK, allowing website developers to develop the appearance of related plug-ins. This tool was unexpectedly loved by developers and created many ideas that even Amazon itself could not think of. After Bezos understood a series of situations and brilliant data, he realized that this is a big opportunity and the company should double its investment in this field.

In July 2002, Amazon launched the initial version of AWS. The main function is to provide API interface services for Amazon CPS project website developers. After the release of this service, it was welcomed by Amazon internal engineers (it is easier to use than some internal development tools) . An API service finally enabled Amazon to provide early website development services for physical merchants such as Target. Therefore, the early AWS actually has nothing to do with the AWS that everyone realizes now.

AWS turned into a universal tool. In the summer of 2003, Colin transferred to Bezos’ personal assistant, and former assistant Andy Jassy became the head of AWS (he also became Bezos’ successor ) . Because AWS is welcomed by developers, it has gradually broken through the early positioning of only the Amazon retail system API, positioning it as a general-purpose tool for developers.

In fact, Amazon is also aware that some “undifferentiated heavy lifting” is becoming a common burden for start-ups. For example, the CEO of Flickr once said that half of the time is spent on basic technical issues. On the other hand, Amazon’s years of hard work in the retail industry have accumulated the ability to store and process massive amounts of data, which also provides a prerequisite for AWS to become a cloud service.

Finally, Amazon knows that these advantages are not unique to itself, so the Bias for action guidelines are applied here, and Amazon must seize the first-in advantage. In fact, when other competitors realized that cloud computing would be possible, Amazon AWS did establish a certain first-in advantage.

Among the many new functions, Amazon S3 (simple storage function) and Amazon EC2 (elastic computing function) have become core functions. Jeff Bezos meets with the AWS team at least every two weeks to fully promote the development of new businesses. In the AWS pricing process, Amazon mainly adopted the Cost following method, that is, pricing mainly depends on the cost (storage and bandwidth costs are the core) , and these decisions come from Amazon’s PR/FAQ development process.

Of course, AWS has grown into a mega business with an annual revenue of $50 billion, and the story behind it goes far beyond that. Perhaps because the author of this book is only involved in the early stages of the business, more stories about the rise of AWS have not been disclosed, leaving us to follow-up research.

to sum up

Taoists say that “the movement of the anti-Tao” means that things will inevitably go to their own opposites. One of its extended meanings is that the core of a company’s evergreenness is to include its own opposites . Amazon’s innovative approach is exactly the same. When physical books, DVDs and CDs are the main revenue, the development of digital business is a typical example. In short, Amazon is definitely a company worthy of repeated research, whether from an industry perspective or a management perspective.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/when-bezos-leaves-office-revisit-the-amazon-management-philosophy/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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