How did Jeff Bezos scale Amazon without destroying its entrepreneurial culture?
By boris, May 17, 2016
Running a start-up is profoundly different than running a big company. When you’re small, founders are close to the action and can make sure all the important things happen. But as a start-up scales, founders can’t have their hands in everything: many companies lose focus on the customer; decisions get bogged down; and there are hiring mistakes. We’ve all seen these things happen to good start-ups.
Amazon’s magic is that it’s a behemoth of a company that still operates like a founder-driven start-up in several key areas. This is partly because Bezos has a strong cultural influence throughout the company. But, he also developed some unique tools to institutionalize his core values in the company. For example…
1. Customer Focus
Amazon has a unique product development process: before starting any new project, the product manager writes an internal press release ‘announcing’ the product. This working backwards approach helps the team fully understand the product’s value proposition to its customers (e.g. what problem is it solving). A former director at Amazon described the approach this way: “We try to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
If the team can’t come up with a compelling press release, they either need to refine their thinking or maybe the product just isn’t worth making in the first place.
While distilling the customer needs and benefits in a concise press release is a great exercise, there’s still the question of how the product team come to truly understand these customer needs and challenges. Amazon keeps managers close to the customer by having them regularly work customer service. We had a similar policy at AbeBooks.
Amazon’s Two-Pizza rule is pretty widely known: if a project team can eat more than two pizzas, then it’s too large. This means they break up a big project into smaller projects, where the smaller project teams can stay nimble and be less subject to complex governance.
The supporting piece is that every product at Amazon should have an API, just as if it were developed for an external client. This decouples the speed of development between different product teams, and offers a clean hand-off between the two. Its Bezos’ vision of a decentralized company where small groups can innovate and move quickly independently of everyone else.
When a company reaches the scale when it’s no longer possible for the founder to be hands-on in each decision, it better have good people in place.
Early on, Bezos implemented “bar raisers” at Amazon. These are Amazon employees who are skilled evaluators and interview job candidates. Bar raisers can veto any candidate, even for positions that are completely out of their area of expertise. Bezos has said this program helps weed out the “cultural misfits” at Amazon and makes sure the company makes good hiring choices by forcing several diverse employees to sign off on a candidate.
Another important hiring tactic is Amazon’s ability to keep acquired founders on board. For example, Mike George joined Amazon in 1998 through Junglee’s acquisition. He has since become Bezos’ go-to person for many new initiatives: he launched the marketplace, ran payments, and is now heading up the Alexa unit.
Keeping acquired founders on board is particularly tough: someone founds a company because they want to be a leader, not a follower. Entrepreneurs have a difficult time when the acquiring company tries telling them how to run the business they have created and grown. Amazon has been successful at keeping founders around by giving them lots of latitude.
For founders of early-stage start-ups: you may be thinking more about getting your product out the door or acquiring your first 1,000 or 100,000 customers rather than any challenges associated with scaling. But some of these tools can be really important early on (20–30 employees). It’s never too early to start thinking about implementing the right processes and tools that will help your company grow without losing its focus.
Originally published at versionone.vc on May 17, 2016.