Note: While reading a book whenever I come across something interesting, I highlight it on my Kindle. Later I turn those highlights into a blogpost. It is not a complete summary of the book. These are my notes which I intend to go back to later. Let’s start!
The Wish.com and AliExpress websites were crowded with products and difficult for novice online shoppers to navigate. But customers seemed to relish the treasure hunt–like pursuit of disposable fashion, such as $12 faux leather sneakers. In 2014, Wish raised $69 million from venture capitalists and was featured in the Wall Street Journal. After one conversation about the startup, Bezos looked at Sebastian Gunningham and said, “You’re on this, right?” Gunningham later noted that “Wish inspired us. They hit a nerve.”
George also instituted a dramatic change in the Alexa group’s structure. It had been a functional organization, with centralized engineering, product management, and marketing teams. But that wasn’t growing smoothly or fast enough for Bezos’s liking. George instead reorganized Alexa around the Amazonian ideal of fast-moving “two pizza” teams, each devoted to a specific Alexa domain, like music, weather, lighting, thermostats, video devices, and so on. Each team was run by a so-called “single-threaded leader” who had ultimate control and absolute accountability over their success or failure. (The phrase comes from computer science terminology; a single-threaded program executes one command at a time.) Alexa, like Amazon itself, became a land of countless CEOs, each operating autonomously. To yoke them all together, George oversaw the creation of a “north star” document, to crystalize the strategy of a global, voice-enabled computing platform. Meanwhile Bezos approved all these changes and stayed intimately involved, attending product reviews and reading the Friday night compilation of updates from all the various two-pizza teams, and responding with detailed questions or problems that the groups would then have to fix over the weekend. Alexa execs, like leaders elsewhere in Amazon, became frequent recipients of the CEO’s escalation emails, in which he forwarded a customer complaint accompanied by a single question mark and then expected a response within twenty-four hours. He was also the chief evangelist for Alexa within the company. “What are you doing for Alexa?” he asked other executives, as he had for AWS years before. Everyone in the company had to include Alexa in the OP1 documents they presented to the S-team, describing their plans for the coming year.
In those early weeks of brainstorming, the IHM crew considered whether they should develop Macy’s-style department stores, electronics stores, or Walmart-style supercenters. Bezos had no particular opinion about what they should sell, just that he wanted to disrupt traditional retail. One discarded idea involved two-floor outlets, with mobile robots swarming over an upper level packed with merchandise. Conveyor belts and other robots would then deliver them to customers’ waiting vehicles below. Amazon executives like to say and repeat compulsively that they start with the needs of the customer and “work backwards.” Ruminating on the act of shopping in regular stores, Puerini’s team made lists of their advantages, such as the instant gratification of walking out with desired items. They also made a list of the drawbacks, chief among them the frustration of waiting in checkout lines. People “are busy. They probably have something they’d rather be doing,” Puerini said. After months of research into customer needs and feasible technology, Amazon’s crack team of type A disrupters felt that the waiting problem was one they could solve with technology. The PR FAQs from the time—with Bezos’s handwriting scrawled in the margin, according to people who saw drafts—coined a trademark for a system that didn’t yet exist: “Just Walk Out technology.” Having envisioned the outcome, they would now try to invent a system that would allow shoppers to select items from shelves and get automatically charged without ever queueing up to pay. A few months after launching, in the fall of 2013, Agarwal and his deputies returned to Seattle to present their annual road map to Bezos and the S-team as part of the company’s annual OP1 planning process. Their six-page narrative offered a range of conservative to more aggressive investment options for how to expand in India and catch up with six-year-old Flipkart in sales and other critical benchmarks. It also outlined prospects for an experimental advertising campaign, so that the company could test what resonated with Indian consumers. By then, Amazon’s China bet was souring, so Bezos did not want to relinquish his shot at what seemed like the world’s next largest prize. In most OP1 sessions, he usually spoke last, not to sway the group with his formidable opinion. But this time, he interjected while Agarwal was still giving his presentation. “You guys are going to fail,” he bluntly told the Indian crew. “I don’t need computer scientists in India. I need cowboys. “Don’t come to me with a plan that assumes I will only make a certain level of investment,” Bezos continued, according to the recollection of two executives who were there. “Tell me how to win. Then tell me how much it costs.” Another Indian executive at the meeting, Amit Deshpande, says the message was: “Go big and take risks. Make it happen. We have your back.”
AWS’s culture was a microcosm of Amazon’s: tough, unrelenting, and focused on meeting impossibly high standards. Jassy and his fellow managers asked searing questions of their underlings and hammered anyone without suitable answers or who didn’t embrace accountability for a problem within their purview. Daily operations were driven by data-filled six-page narratives and the obsessive contemplation of the needs of customers. When employees returned strong results, attention always turned to the ways in which they could have done better. One former executive described the mentality this way: “We were really good at going up to the gold medal podium and complaining that our medals weren’t shiny enough.” Engineers were given pagers and were assigned to on-call rotations, when they were expected to be available at all hours to address system outages. If a serious technical problem erupted while the pagers were muted during meetings at AWS, Amazon’s pager program would automatically circumvent “silent mode” and the meeting would erupt in a rolling orchestra of electronic pings.
Bezos liked to say that “good intentions don’t work, but mechanisms do.” Inside AWS, Jassy applied that adage ferociously. The rhythms of a week at AWS revolved around several formal “mechanisms” or well-honed processes or rituals. Ideas for new services, their names, pricing changes, and marketing plans were meticulously written as six-page documents and presented to Jassy in his twentieth-floor meeting room, dubbed “the Chop” (the name Jassy and his roommate had given their Harvard dorm room, from a novel they were assigned in European literature, Stendhal’s The Charterhouse of Parma). Executives asked hard technical questions and Jassy usually spoke last. Colleagues said he exhibited almost inhuman levels of discipline, sitting in meetings for ten hours a day and digesting dense and complex documents without flagging. The highlights of the AWS week were two Wednesday morning meetings. Jassy ran the ninety-minute midday business review, where the top two hundred managers discussed the minute details of customers, competitive developments, and the financial health of each product unit. But the real centerpiece of the week was the forum that preceded that meeting: the two-hour operations review to assess the technical performance of each web service. Held in the large conference room on the third floor, it was run by the intimidating and direct Charlie Bell, the former space shuttle engineer. AWS execs and engineers typically describe this remarkable session with a combination of awe and post-traumatic stress disorder. Around the big table at the center sat more than forty vice presidents and directors, while hundreds of others (almost all of whom are men) stood in the wings or listened over the phone from around the world. On one side of the room was a multicolored roulette wheel, with different web services, like EC2, Redshift, and Aurora, listed around the perimeter. Each week the wheel was spun (until 2014 when there were too many services and software mimicked the function of the wheel), with the goal being, Jassy said, to make sure managers were “on top of the key metrics of their service all week long, because they know there’s a chance they may have to speak to it in detail.” Getting selected could be a career-defining moment at AWS. Managers could boost their prospects with a comprehensive and confident presentation. But if they employed ambiguous language, erred with their data, or conveyed even the whiff of bullshit, then Charlie Bell swooped in, sometimes with awesomely patronizing flair. For managers, a failure to deeply understand and communicate the operational posture of their service could amount to career death.
With Bezos spending his time on newer initiatives like Alexa, he was leaving the daily maneuverings in Amazon’s consumer business to his retail chief. That September, in the midst of the Google Express expansion, Wilke was conducting a quarterly business review with the Amazon Prime team and asked his top lieutenants to propose a response to the threat. His deputies pitched expanding the selection of items that were available to Prime members for same-day delivery at an extra charge. Wilke didn’t think that would be enough to match the new offerings, rejected the idea, and, as he put it later, “blew up the meeting.” Wilke announced that he wanted to attack this problem from a totally different angle. They were going to form an independent team to build a service that was separate from the Amazon website and singularly devoted to ultra-fast delivery. The goal, he declared, was to launch it within a hundred days. Dave Clark, Amazon’s head of operations, would oversee the effort in conjunction with Herrington. In her new job, Landry’s first task was writing the PR FAQ, the preliminary press release that conjured the kind of service that Wilke wanted. The paper and its subsequent revisions described a smartphone app-based service that Landry first dubbed Amazon Magic, and then Amazon ASAP. She proposed forming three separate teams, each with a magic-themed name, which would all take different approaches toward the same goal of ultra-fast delivery. One group would develop a retail service, code-named Houdini, which would store and sell a limited selection of the most popular products on Amazon from strategically located urban warehouses. That would allow Amazon to deliver frequently purchased items to customers within a few hours. Another group would take a third-party marketplace approach, dubbed Copperfield. That team would seek to form partnerships with retail and grocery stores and list the products they had on their shelves on a new Amazon smartphone app, just like Google Express and Instacart. Finally, a third group was formed to pursue an idea called Presto. It called for assembling an even smaller selection of top-selling products and driving them around in a truck or van to deliver items in less than ten minutes to surrounding neighborhoods. This approach proved complex and risked overlapping with the others, causing confusion, so it was quickly shelved. Bezos approved these plans but wasn’t as immersed in their development as he was in new technology projects, like Alexa. He reviewed the weekly updates that Landry emailed the S-team and occasionally responded with questions. He did make one significant contribution though: in a November 2014 meeting, he scrapped the Amazon ASAP name and rechristened the service Prime Now, to tie it more closely to Amazon’s expanding subscription club. Landry and her team had to scramble to change their branding at the last minute.
Logistics employees who worked on the California service said this hub-and-spoke model ended up being inefficient and unreliable; one said that Amazon was “basically stapling a $10 or $20 bill to every order.” The Fresh team also tracked a metric called “perfect deliveries”—when an order was promptly delivered and included every item. They found they were hitting that target less than 70 percent of the time.
Herrington’s memo pointed out that Walmart, Carrefour, Tesco, Metro AG, and Kroger were the world’s five largest retailers at the time. “All of them anchor their customer relationship in groceries,” he wrote. If Amazon’s retail business was going to grow to $400 billion in gross merchandise sales, it needed to transform a model based on infrequent shopping for relatively high-priced goods to more regular shopping for low-priced essentials. In other words, if the company was going to join the ranks of the biggest retailers, the S-team had to figure out a way to profitably sell supermarket items. If they didn’t, Amazon was going to be vulnerable to rivals who already enjoyed the shopping frequency and cost advantages of the grocery model. He concluded the memo by subtly needling his colleagues, including Bezos, who considered himself implacably bold. “We should be less timid in investing in this future,” Herrington wrote. “We have the capacity to put a much more significant bet on the table, if we have the will.”
- Other “Jeffisms,” recorded by the FBA team in their annual OP1 planning session with Bezos, further shaped their perspective. Among his greatest hits, recorded in a memo that was later passed to me:
- “Focus on lowering cost structure. It is better to have low costs and then charge to maximize your value versus charging to cover costs.”
- “Having a stupid rate card equals stupid things happen. Rate cards must be equal to the value.”
- “We do not charge more because we can’t figure out how to make it cost less. We invent to make it cost less.”
- “We should be able to fulfill 100% of the 3P business. I do not know what the debate is, yes, we must fulfill low priced selection, it is crucial.”
- “Averages are bad measures. I want to see actuals, highs, lows and why—not an average. An average is just lazy.”
- By 2014, after more than a decade of such blunt guidance, the service became profitable for the first time and the number of sellers using FBA was growing briskly. “Don’t pretend that anyone else on the project was some kind of genius, because that is just not true,” said Neil Ackerman, a former FBA executive. “Jeff was the one who challenged everyone to lower fees and not focus on income, but instead to put our attention to adding sellers and growing selection. He knew that was how we could get the business to scale and become profitable. Jeff always said that when you focus on the business inputs, then the outputs such as revenue and income will take care of themselves.”