Only a small number of people in 1994 were aware of the future potential of the internet. At the time, Bezos was employed by the hedge fund D.E. Shaw & Co., where he shared an idea with a number of his coworkers to create an online retailer that would eventually serve as the primary point of contact between manufacturers and consumers and offer virtually every good imaginable. How he developed Amazon is described in the book, The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone.
He left his well-paying career after becoming inspired by the internet’s quick growth to devote all of his time to creating the online store of his dreams. He uprooted himself and relocated to Seattle, where he started Amazon in his garage.
But he soon understood that he couldn’t just pull his Everything Store out of thin air. In order to create his product variety, he would have to initially restrict himself to just a few product categories. After careful consideration, he selected novels.
What happened next was an unparalleled success tale that perfectly captures Jeff Bezos’ eccentric style of thinking. And in The Everything Store, you’ll read about that. You’ll learn about some of Amazon’s drawbacks in addition to the strategies for the company’s success and the types of concepts that influenced Jeff Bezos when he founded it.
Amazon has led the charge in elevating customer focus across all global industries from the very beginning. The online business gradually introduced new features and functions that some people at first thought were unwarranted but were always designed with the customer in mind.
For instance, Amazon adopted the customer review option over opposition from publishers, giving consumers access to independent and frequently critical information in addition to publisher blurbs. Similar to the choice to allow merchants and private sellers to sell old goods, which at first encountered internal opposition, ultimately proved to be exactly what customers desired.
To meet consumers’ demands for receiving their orders as soon as possible, Amazon also works continuously to improve its logistics and delivery processes. Customers cannot see the complexity of Amazon’s fulfillment operations.
One significant advantage of e-commerce over traditional business that Jeff Bezos noticed right away was how simple it was to study customer behavior, which Amazon now conducts almost compulsively. Customers receive product recommendations every time they visit the website based on how they have previously used the site. Increased sales have been a regular result of this feature as clients learned about pertinent products that they otherwise would not have found.
Clearly, a nearly obsessive consumer orientation drives Jeff Bezos and Amazon. And Amazon formulates this in its business model as follows: “Our mission is to be Earth’s most customer-centric company,” it says quite ostentatiously. The only thing worse at the company’s headquarters would be if Jeff Bezos forwarded an email with a customer complaint to which he had merely responded with a “?”
This phrase may not seem relevant for the billion-dollar business that Amazon is now, but it is perfect for a business that began in a garage and has had to compete on the market with thin profit margins. Even today, Amazon is distinguished by a frugalness that some may consider excessive. Jeff Bezos, meanwhile, is adamant that constraints spur innovation and thriftiness helps the business focus on the most crucial aspects, such as customer pleasure.
Employees at Amazon are required to pay for their parking permits, there are no free refreshments provided at work, they must share a room when traveling on business, and supervisors even have to pay for their own flights. The corporate culture of Amazon is generally tough and has a structure of intense competition. “You can labor long, hard, or smart, but at Amazon you can’t choose two out of three,” reads the company’s motto.
This is very evident in Amazon’s fulfillment centers, where low-paid workers are required to walk up to 30 kilometers each day to retrieve merchandise. These enormous halls are incredibly quiet despite all the activity because staff risk being fired for talking to one another.
And last, since its founding, Amazon has hired tens of thousands of temporary workers on several occasions, oftentimes during peak times like the holiday season, only to fire the majority of them afterwards. The strategy used by Amazon is straightforward: it develops fulfillment centers in underdeveloped areas, which are initially well-received since many people think they would help the local economy. However, Amazon is only taking advantage of the chance to hire inexpensive labor and then terminates the employees when the busy season has passed, fully aware that the area will have more temporary workers available the next time the company needs them.
The corporate culture of Amazon is distinctive in that no one makes presentations at internal meetings, for instance. Instead, workers must submit a six-page paper outlining their ideas, which must be read out by everyone in the conference, including Bezos, in silence. This process can take up to 30 minutes. Bezos thinks that by making his staff think critically about their ideas, they will be better able to deliver them.
The two-pizza restriction is another oddity of Amazon.com. No team inside the organization ought to have more members than can be served by two pizzas. Because Bezos believes that large group meetings are ineffective, the entire organization is divided into independent units that each have less than ten people. And for resources, these groups compete with one another. The major issues preventing customers from being a little happier must all be resolved.
According to reports, Bezos once said, “Communication is bad!” He prefers a decentralized structure versus time-consuming brainstorming sessions with a large number of participants because small groups can create creative ideas in such a structure. He thinks that tiny groups’ primary benefit is their agility. Ideas may be put into action more swiftly, getting to the client’s advantage more fast.
The majority of Amazon’s meetings are heavily data driven, and all employees are required to back up their claims with concrete evidence. In other words, these meetings don’t focus on anecdotes from customers but rather large Excel sheets with important performance indicators that are pertinent to the entire business. The adage “numbers don’t lie” holds true for anything that is analyzed using numbers, from customer behavior to the success of marketing initiatives.
According to Bezos, Amazon’s biggest asset is its readiness to be misunderstood by others. This partially also holds true for their business strategy. The frequent short-term losses that Amazon experiences are a topic of discussion among outsiders. They fail to realize that the business is focused on the long term and is willing to suffer short-term losses if doing so would ultimately help it achieve its objectives.
Amazon spent a lot of money building its infrastructure over a long period of time, and many investors worried about the company’s losses. However, it is now evident that these significant expenditures enabled Amazon to firmly establish itself as a leading global online retailer, therefore giving it the authority to print money at a later date.
Bezos advocates doing pretty much anything necessary to proactively please customers. Even while it costs money initially, building a devoted customer base will ultimately pay off financially for the business.
The e-book serves as an intriguing illustration. Bezos chose to charge $9.99 each book when the e-book gained popularity. Amazon lost about $5 on each book sold since it paid the same amount for copies of the e-books as it did for printed versions. Bezos agreed to this because he believed that publishers would eventually have to drop their pricing and because he wanted to make Amazon the leading e-book store. In the end, this is how the company passed the $1 billion mark and made way for the Kindle’s phenomenal success.
The primary distinction between Amazon and other businesses is its intense long-term concentration. Bezos had a huge vision from the beginning, and he realized it would take decades for it to materialize. The non-Amazon and private projects that Jeff Bezos works on are more examples of his long-term thinking.
He is currently providing funding for the development of a subterranean clock in Texas that will require little maintenance and run for 10,000 years. The Clock of the Long Now will only chime once a year, according to Danny Hills, its creator. Once every 100 years, the “century hand” rotates, and a cuckoo emerges from the clock to sing after each millennium.
If all goes according to plan, this famous creation will become a popular destination. The purpose of the clock is to promote long-term thinking and give individuals a sense of longer time horizons. It also seeks to alter our understanding of time.
Check out my related post: Two pizzas at a meeting anyone?