Five lessons we can learn about leadership from this letter by Amazon CEO Jeff Bezos
30 May 2018 -
These are the principles for success that Amazon CEO Jeff Bezos outlined in 1997
You may have heard about Amazon’s approach to meetings. Now a letter from its CEO Jeff Bezos that was sent to shareholders in 1997 is making waves online. The letter predicted the company’s rise from online bookseller to e-commerce giant 21 years ago – and its lessons still apply today. Here is what managers can learn.
1. AMAZON FOCUSED ON LONG-TERM RESULTS
Jeff Bezos’ 1997 letter highlights his commitment to a long-term business vision. This includes continually enhancing customer service, new technology and analytics.
Jeff Bezos explained: “We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.”
Investors who backed Jeff Bezos’ long-term strategy have benefited substantially. Amazon went public in 1997, and industry analysts estimate that a $100 investment in Amazon's IPO back then, would be worth more than $100,000 today.
2. AT AMAZON, CUSTOMER SATISFACTION COMES BEFORE COMPETITIVE RIVALRY
A recent poll of more than 10,000 UK shoppers ranked Amazon as champions of customer satisfaction rankings this year.
This is no accident. “We will continue to focus relentlessly on our customers,” Jeff Bezos stated.
Latterly known as the ‘customer obsession’, Jeff Bezos proposes that all business ideas should start with assessing the needs and behaviour of the customer first, and then working backwards. In this model, bosses are led by their consumers rather than their competitors.
The successful Amazon Kindle tablet, for example, was produced for customers who wanted a device that contained their favourite books, which they could easily read on the move. Other customer-focused enhancements include so-called 1-click shopping and the inclusion of peer reviews.
3. AMAZON HAS STUCK TO A LEAN STRUCTURE
Amazon survived the bumps and bruises of the economic crash partly due to its lean organisational structure. Ensuring investors’ funds would be used wisely, Jeff Bezos pledged in 1997: “We will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost-conscious culture, particularly in a business incurring net losses.”
As opposed to traditional, highly bureaucratic organisations, Amazon, like other tech start-ups, has tried to minimise spending on unnecessary processes or personnel. This includes encouraging less ‘top-down’ management, instead prioritising collaboration and inspiration at all levels to drive performance and innovation. Lean Enterprise Research Centre research has shown that 60% of companies have processes in place, which do not add significant value to the business.
4. AMAZON RETAINS TALENTED EMPLOYEES
Talented employees with an entrepreneurial mindset are the lifeblood of any business, as echoed by Jeff Bezos. Not only did the Seattle-based chief promise, in his 1997 investors’ letter to focus on hiring and retaining top talent, he also sought to incentivise the best candidates with stock options, rather than a cash salary, in order to attract employees who ‘think as an owner.’
Over more than two decades, Bezos’ recruitment drive has seen the company’s employee numbers swell to more than 566,000 people worldwide – more than Microsoft and Google combined.
Among the raft of criteria Jeff Bezos and his team use to assess talent, Amazon's CEO recently admitted asking the following three questions before hiring anyone:
- Will you admire this person? He wanted hiring managers to admire the people they were bringing on to their teams, not just the other way around.
- Will this person improve their team’s effectiveness? Bezos says he wants new hire to bring added value to their teams.
- Does this person have superstar qualities? Amazon look for candidates who also have a distinctive skill or interest to contribute to the company’s culture.
5. AMAZON BELIEVES IN PROFESSIONAL DEVELOPMENT
Bezos’ willingness to adopt the ‘beginner’s mind’ is a key lesson for managers.
In his 1997 statement he warned: “We now know vastly more about online commerce than when Amazon.com was founded, but we still have so much to learn. Though we are optimistic, we must remain vigilant and maintain a sense of urgency.
“The challenges and hurdles we will face to make our long-term vision for Amazon.com a reality is several: aggressive, capable, well-funded competition; considerable growth challenges and execution risk; the risks of product and geographic expansion; and the need for large continuing investments to meet an expanding market opportunity.”
Bezos also explained studious leaders challenge everything, opening doors to new and innovative solutions.
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