The A to Z of Agile fuelling the future of Amazon
Traditionally a seller of books, Amazon have expanded into a number of seemingly unrelated and customer focused fields, from film and television production to the latest in voice interface technologies with the Alexa voice assistant. These divergent product segments are reflective of Amazon’s understanding of their customers’ changing expectations and their use of Agile methods.
Customers and their needs have always influenced how Amazon construct their internal and external operations, logistics, product development and technological architecture. Thanks to the adaptation of Agile personnel management and governance, Amazon can harness the latest in technology and innovation to change and evolve according to their customer.
In this article we will analyze how Amazon have become the world’s most valuable company thanks to their use of Agile, but importantly we will focus on how using Agile as an end-to-end holistic mindset, rather than just a software development process, has transformed their capacity to deliver rapid customer-centric value, across the whole organization. We will conclude this analysis with a matrix to illustrate how Amazon have holistically applied the 12 Principles of Agile Business Manifesto.
Continuous Customer Centricity
Amazon have long led the way in online retailing or ‘e-tailing’ due to their obsessive customer focus and refined interactions across all customer touch-points. Amazon were the first online retailer to develop a ‘customer review’ function that allowed customers to make informed and empowered purchasing decisions.
These reviews weren’t just beneficial to the customer, but were also useful to Amazon as it gave them key insights into what their customers were experiencing when using their website and buying products. Amazon leveraged this feedback to improve the end-to-end management of their merchant policies, increasing quality assurance and the provision of service standards.
“We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” — Jeff Bezos, Founder & CEO of Amazon
This review system is an example of how Amazon turned a simple tool into an internal continuous process of improvement, by directly communicating with the customer and feeding this information back into their service delivery, improving their quality controls and encouraging merchants to perform and provide increasingly better products.
The application of this review tool exemplifies their use of Agile’s belief in iterative customer-based reflection, with each iterative cycle striving to generate new outcomes and improvements for the product and the customer.
Two Pizza Approach
Centering their business around the customer is the driver of their success with the customer seen as an intrinsic influencer in how Amazon should work to roll-out products and experiences customers want, and need, by approaching product development with a de-centralised team model, Amazon uses small focused teams to rapidly design and develop products for their allocated customer segments.
Using a decentralized approach Amazon applies the Agile principle of small customer segment teams who rapidly design and develop products, through their ‘Two Pizza Teams’ (the size of the team should reflect how many people could eat two pizzas), who provide each customer segment with a dedicated product development team that distills and ideates on their specific customer needs.
The use of small teams in Agile enables rapid ideation and development, at a lower cost and risk to the overall company, with most product cycles at Amazon currently being between 10–15 days. The reduced team numbers allow for a higher degree of focus on each segment’s needs, helping reduce the level of bureaucracy and paperwork associated with larger product development teams.
“In the old world, you devoted 30% of your time to building a great service and 70% of your time to shouting about it. In the new world, that inverts.”
- Jeff Bezos Founder & CEO
In Agile the reduction of bureaucracy and paperwork allows teams to turn their focus to what their customer and their service experience demands, rather than what their company requires, which is clearly a high priority at Amazon.
Freedom to Fail
Thanks to the ‘Two Pizza Team’ model, each customer base is individually catered for with the division of resources across these teams costing less, lowering the overall company risk of large product failure.
“One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practise!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment”
- Jeff Bezos, Founder & CEO, Annual Report 2015
Amazon are not afraid of failure, in fact they warmly welcome the risk of failure and pride themselves on a ‘startup’ style of risk acceptance. Werner Vogels the CTO of Amazon, has repeatedly stated that failure is at the core of their elasticity and without it, the agility of Amazon would be compromised.
The acceptance of failure and the willingness to take risks is a key feature of Agile thanks to the use of their smaller teams, the outlay of resources tends to be less, so if a few lines fail, Amazon’s overall productivity is unlikely to be affected.
Equally to experiment, innovate and create the next level of customer experience, it is important that all employees feel free and able to take risks that will open doors to new opportunities, reflecting the Agile principle of risk acceptance in order to facilitate rapid development cycles and customer-centric outcomes.
The Agile Architecture
Scalability of the technological architecture is the backend foundation of Amazon’s use of Agile, as they can both scale up and grow specific segments, whilst freely scaling down and reducing others.
The ability to scale and move their infrastructure is a critical success factor built into the architectural ideology of Amazon and Agile. Using a decentralized mode of operation, and a modularized mindset Amazon are able to stretch and reduce their technological infrastructure, enabling adaption to changing customer expectations.
For example, there are multiple streams of customer feedback that must be funnelled and distilled into their relevant ‘Two Pizza Teams’. In order to streamline and manage this incoming data, Amazon have adopted lean cloud based services filtered through APIs. The use of APIs and Enterprise Services Buses to distill customer-based data results in an elastic and efficient infrastructure.
Agility within enterprise architecture is often a dream for large companies, as the implementation and commitment to complex ERPs and CRMs can restrict the capacity to quickly change, and adopt new policy and procedure. Thanks to the Agile principle of cross-functional collaboration and organizational flexibility, Amazon have successfully aligned business and information technology to promote innovation, and foster customer-centric product development.
The Kaizen Method
Bottom-Up Cross-Functional Collaboration
To establish and define the processes that influence the construction of both their technological architecture and production cycles, Amazon have adopted a front-line Kaizen approach to quality improvement. The Kaizen method requires each member of senior management to annually spend at least one working day on the front-line. The bottom-up approach helps uncover operational issues surrounding the daily task requirements of factory or warehouse workers, helping senior management understand where abnormalities or issues lie.
This process instils greater empathy and awareness about the issues facing front-line workers, facilitating cross-functional awareness, and a desire to improve their processes from the bottom-up.
An example of how this method can improve processes was when Jeff Bezos CEO worked on the packing floor, and suffered an accident whilst reaching for a box of hair products; the glass bottles from the package fell and broke on the floor, causing a slip hazard.
In this moment Bezos realized that this accident could have led to a serious occupational health and safety incident, and may have impacted on Amazon’s delivery times. Bezos determined that regulations regarding packing materials, contents and position of the packages in the warehouse needed to be adjusted to prevent future accidents. Without this experience Bezos may not have understood the value in defining packaging and processing standards.
The Kaizen approach enables Amazon to continuously improve each task within the production and shipping lines by iterating and ideating on received customer feedback, along with the identified front-line issues. This Agile improvement process allows Amazon to quickly iterate the overall employee and customer experience by redefining their processes to fit the changing requirements of their business, and the expectations of their customers.
Amazon does Agile
Aligning Amazon to the 12 Principles of Agile
To help explicate and conclude our analysis of Amazon’s use of Agile, we have aligned the methods discussed in this article with the 12 Principles of Agile Business Manifesto. These principles transfer the original principles of the Manifesto for Agile Software Development into a business context, providing a comprehensive set of guidelines for legacy organizations that are striving to be Agile.
Download the matrix here.
If you are interested in getting a deeper insight into how Amazon delivers direct value to their customers across four interrelated areas: core product innovation, added-value services, shopping experience and communication, check out our report below:
If you are looking to transition your organisation into an Agile mindset we have a wealth of resources and consulting services available to you at www.lhbs.com.