Amazon: Going the Startup Way — The Future of Organisations (Part II)
This article is a continuation of: The Future of Organisations: What sets Amazon & Reliance apart from companies like GE?
Amazon, whose valuation exceeds $1.7 Trillion, fends off complacency by functioning like a startup even after two decades of existence. Its Day 1 approach, ingrained in the company’s constitution by CEO, Jeff Bezos, in his 1997 letter to shareholders, has established a sense of urgency in every process. A startup is innovative in its ideas, aggressive in its approach, and fearless in its execution, and Amazon, with its multifaceted business model, has thus far proved that its Day 1 approach has indeed been a success.
Bezos, who has inspired his company to never take its eye off the game, says that Amazon behaves like it’s Day 1, every single day. And that is what every organisation must do. A steady or growing revenue must not be reason to graduate to the feeling of becoming bigger and heavier. If an organisation digresses from its agenda of innovation, what comes after Day 1 will be Day 2. And Day 2, according to Bezos, means doom. When asked what Day 2 will look like, he replied, “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.” Companies like GE, Nokia, Blackberry, Intel, and others, are cautionary tales for this idea.
Amazon’s Startup Culture
Amazon’s customer obsession has acted as fuel for innovation and the company has always been a testing ground for inventions in products and processes, unafraid of failure. A part of this innovation is adopting the startup way.
Customer obsession, the core principle at Amazon, has been the central force in its Day 1 approach. It forms the basis of their continuous drive for innovation. Bezos’s famous philosophy of giving the customers what they want even before they know they want it has been the reason behind many innovations, especially Amazon Prime.
Amazon’s innovation doesn’t stop with their products and services. One of its most successful innovations has been in its HR. The ‘two-pizza’ rule applied to all its teams epitomises frugality in legacy companies.
The two-pizza rule is simple. Build teams small enough to be fed by two pizzas. Small teams own a process from beginning to end, and each person holds themselves accountable for failures and successes. Constraints breed resourcefulness, says Amazon, and that leads to innovation. With budgets and authority of their own, these two-pizza teams have complete control of their projects, ensuring effective and expeditious execution.
Like a startup is characterised, Amazon under Bezos is well known for its type 2 decisions, the kind of decisions that must be taken immediately. This risk-taking mentality of Bezos has been one of the major factors in the company’s success. Fire Phone, an investment gone bad, is one example. As soon as it was established that it was not a money-making venture, Amazon wasted no time in scrapping it and diverting the capital into more profitable avenues.
Some risky investments have paid off. And more. Like Amazon Prime Video, it’s streaming platform. The ability to accept failure and focus on the next big thing has been an admirable quality in Amazon, an aspect that has been largely responsible for maintaining a startup culture in the organisation. Bezos accepts failure as the price they have to pay for innovating. The culture of experimentation is so ingrained in the psyche of Amazon that in his 2015 annual report, Bezos wrote that, “…failure and invention are inseparable twins”.
Bezos is quite adamant in not letting his company fall into the trap of one-size-fits-all kind of decision-making, a trait he associates with large companies, and which stands in the way of inventiveness. This constant inventiveness, which never comes at the cost of maintaining its existing business, has earned Amazon the epithet of an ambidextrous organisation.
This inventiveness comes with an example. In 2015, Amazon India wanted to find out the major constraints small business owners faced in selling their products online. A program, Amazon Chai Cart, was designed for this process. Three-wheeled mobile carts travelled around cities, serving tea, water, and lemonade to small business owners and interacting with them to understand their concerns. It was discovered that these business owners were extremely interested in selling online but were under the impression that the process was tedious. The solution for this was Amazon Tatkal, a studio on wheels, that provided scanning, cataloguing, and a suite of other business-launching services to help them kickstart their operations.
Amazon, being a fairly flat organisation, encourages every employee, regardless of departments or designations, to take the initiative and be proactive. Knowing Amazon’s thirst for innovation, there are multiple avenues waiting to be inventive. In his crusade to prevent Day 2, we can trust Jeff Bezos to take the company to the next level.
In Amazon’s case, even being a behemoth in its chosen sector (which is every sector), it has been the disruptor rather than the disrupted. And in a tale that spans twenty years, that is a success, especially when the S&P list has proven to be a difficult list to stay on.
In my book, The New Age Organisation, I identify five fundamental forces driving the change and offer actionable practices on how organisations should respond to the changes, to sustain and achieve business growth.
Aravind Chinchure is the author of a new book, The New Age Organisation: How to Navigate Rapid Disruption and Lead in the Fourth Industrial Revolution, which offers a new organisational framework and a new leadership approach to build agile and responsive organisation.