Jeff Bezos on How to shape the future

Once a year, Jeff Bezos publishes a letter to Amazon shareholders. In 2017, he released his 20th annual letter, where he gives us a glimpse into his business worldview and management philosophy.

Obsessing over customer outcomes, resisting proxies, embracing external trends, and making high-velocity decisions are the keys to avoiding stasis within companies. Bezos compares “Day 1” companies, which are companies at the beginning of their potential, with “Day 2” companies.

“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1,” he writes. What strategies and tactics can companies deploy to keep the vitality of Day 1, then? Here is how Bezos answers this question in his letter:

True Customer Obsession

Companies can orient their mission toward various directions: they can be competitor focused, they can be product focused, or they can be technology focused.

“But in my view, obsessive customer focus is by far the most protective of Day 1 vitality” Bezos writes.

“The reason: Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen,” Bezos adds.

Bezos credits Amazon’s success on their precise focus on customer outcomes. He said Amazon always focuses on delighting customers, even if that means inventing something totally new, like Amazon Prime.

Resist Proxies

Proxies are processes put in place within organizations. They are market research foreseeing industry trends or customer surveys that are usually difficult to interpret and could unintentionally mislead organizations.

“As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2,” Bezos writes.

Embrace External Trends

Machine learning and artificial intelligence are among the external trends that Amazon has eagerly adopted. The autonomous Prime Air delivery drones, the Amazon Go convenience store that uses machine vision to eliminate checkout lines, and Alexa, the cloud-based AI assistant, are practical applications of Amazon’s engagement with embracing big trends.

“The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind,” Bezos says.

High-Velocity Decision Making

Although making high-quality, high-velocity decisions is easy for start-ups, it can be very challenging for large companies. Bezos gives his thoughts about how to maintain a dynamic decision-making process and, thus, maintain the energy of Day 1:

• There is no one-size-fits-all decision making process.
• Most decisions should probably be made with somewhere around 70% of the information you wish you had (waiting for 90% is probably too slow.) However, be good at quickly recognizing and correcting bad decisions.
• Use the phrase “disagree and commit.” In other words, don’t slow the decision cycle by feeling an obligation to convince the whole team. Simply get their commitment.
• Recognize true misalignment issues early and escalate them immediately.

Bezos is well-known for his long-term approach to innovation. For 20 years, he has been assuring his shareholders that Amazon would be focusing on long-term market leadership rather than short-term profitability. For him and everyone at Amazon, it’s always going to be Day 1.

You can find Jeff Bezos’s most recent letter to shareholders, along with a copy of the original from 1997 at https://www.amazon.com/p/feature/z6o9g6sysxur57t.