How do you explain the management style of Jeff Bezos, who built an empire worth over $3 trillion from a garage out of Seattle with just ten employees? Moreover, he achieved this in only twenty-five years and in a business line that did not exist at the time. What are the business secrets of this maverick man who created Amazon? Here are 5 Jeff Bezos management styles you may not have known.
He founded Amazon in 1994 when very few people knew about the internet. The idea was to sell books online. "Why books?" he was once asked. And his answer was simple and logical. Books had the most expansive category, and he felt he could build a versatile selection. His research showed that there were over three million books in print in 1994. Comparatively, the largest bookstore at that time had only 150,000 titles in its racks. In other words, he visualized, well ahead of his time, how an online bookstore could make the difference. He executed the correct strategy and the correct time.
"I don't think I would regret trying and failing. And I suspect I would always be haunted by the decision that I didn't try"- Jeff Bezos. This quote explains the philosophy of his life and leadership. He believed in trying out new things and exploring the blue oceans. Consequently, some people admire Jeff Bezos management style, and there are those equally critical of him.
Lets now look at his five management styles you may not have known:
1. Have a beginner's mind:
One of Jeff Bezos' management styles' most critical aspects is maintaining a 'beginner's mind". He believed that in a complex world like ours with exploding technology and scientific breaks, one needs to be a domain expert. There is no room for anyone having mediocre knowledge or being a 'jack of all trade.' You have to be a master. Research has shown that, on average, it takes about 10,000 hours for one to master a subject. But sometimes, being an expert in your domain means that you tend to get trapped by the knowledge. One fails to look at things freshly. Hence, we need to avoid this trap and keep our childlike curiosity lifelong.
As a leader, Jeff Bezos believed in the maxim of "let curiosity be your compass." And he relentlessly pursued new areas without giving up even in times of adversity. It was this burning curiosity that made him move from selling books to other items. As a result, Amazon, today is the largest retailer in the world. According to Amazon's mission statement, "Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."
Jeff believed that the key to the invention was to look at things freshly, even if you are the domain expert. You have to be intentional about keeping the beginner's mind while being an expert.
Jeff strongly believed in taking risks and experimenting with things. Basically for him, a business idea without risk probably already exists."If you have a business idea with no risk, it's probably already being done. You've got to have something that might not work. It will be, in many ways, an experiment. We take risks all the time; we talk about failure." https://www.fastcompany.com/90360687/jeff-bezos-business-advice-5-tips-from-amazons-remars
One of Jeff Bezos' management style's fundamental principles was that he encouraged people to take bold bets. He knew that the bold bets, the unconventional thinking called for experiments. While no one could predict the result of such experiments, not taking risks was not something acceptable at Amazon. For him, one big success from dozens of failed experiments was sufficient.
From the launching of online books to promoting e-book reading, leading to Kindle devices, was risky propositions with no precedent. It was his relentless pursuit of taking risks that helped him to succeed. At the same time, not all risks taken by Jeff Bezos were successful. According to him, "I have lost millions of dollars in failed projects." His idea of investing in Pet.com was one of those failures.
This was one of the companies which took advantage of the dot com boom of business ventures. With a business model similar to Amazon, Pet.com sold pet food and accessories online and delivered them to their customers. The Initial Public Offering of the Company was successful, and many investors, including Amazon, participated. However, Pet.com could not sustain the business model, and within a few months, the company closed shop.
Amazon Fire Phone:
This was another fancy Jeff Bezos project that cost him millions of dollars losses. After launching Kindle, he realized that there was a potential to have a superior product than Kindle – a smartphone. After that, the idea of Amazon Fire Phone was born. With its own operating system, this smartphone had many new features that other phones lacked. It also had five cameras and boasted of Dynamic Perspective – a 3D visualization without special glasses. Fire Phone was launched when iPhone6 was released. The Fire phone was priced at $650.
According to reports, while the iPhone sold over ten million units in the first few months of release, the Fire Phone sold around 35,000 units in the first two months. Users did not like the Fire Phone's rustic design. Though ahead of the time, significant features like Dynamic Perspective did not catch the users' fancy. https://www.youtube.com/watch?v=6trOg2IK2Zg. Very soon, Amazon abandoned the product at a loss of over $170 million.
But the same team, which developed the Fire Phone, went on to launch the amazingly successful Amazon Echo and Amazon Alexa. The lessons learned from the failure of the Fire Phone helped them to develop these successful products.
According to Jeff Bezos, "We believe in failing early and iterating until we get it right. When this process works, our failures are relatively small in size. When we hit on something that is really working for customers, we double-down on it." Jeff Bezos's management style firmly believed that companies that don't experiment and take risks and fail to embrace failures do not survive in the long run.
Furthermore, he attributes the support from his family to his boldness to take risks. Basically, he feels that you dare to take risks when you have a loving and supportive family. Unconditional love promotes daring risks. When you know that somebody is got your back, this confidence helps people take risks and succeed. He cites the love from his parents, grandparents, siblings, and wife, who supported him without any reservation, making him the richest man in the world at one point.
3.Focus on Customers:
Amazon is one of the most customer-oriented companies in the world. The single-minded focus on serving the customer helped Amazon to be the largest retailer. Jeff Bezos' management style focused on having a customer-centric approach. According to him, the most critical code is customer obsession. "The first and by far, the most important principle is customer obsession as opposed to competitor obsession."
Further, he feels that many companies talk about being customer-focused, but they are competitor-focused in reality. And being a competitor-focused might win in the short run, but companies will not sustain this belief and grow. Whereas companies focused on customer obsession find it easy to grow because they are continually addressing the customers' needs.
In 1997 Amazon faced one of the most significant challenges. Barnes and Noble, the largest bookstore in the US, launched their website, creating direct competition to the newly emerging Amazon, which was just two years old. The team panicked, but Jeff Bezos as the leader remained cool. The odds were clearly against Amazon. They were a small company with 125 employees and a turnover of $60 million.
In contrast, Barnes and Noble was a giant with 30,000 staff strength and a $3 billion turnover. It was a David versus Goliath fight. Added to the panic was George Colony of Forrester Research, who proclaimed "Amazon.Toast". Many people in the press, on Wall Street, and inside the company thought the critic was correct, and Amazon was finished.
Jeff Bezos' management styles and his leadership skills were on the test. He got telephone calls from his investors, customers and, even the families of his staff enquiring about the challenge posed by Barnes and Noble. He gathered his team into a room and told them, "It is okay to be afraid. But do not be afraid of our competitors because they are not going to send us any money. Be afraid of our customers. We should stay focused on them instead of obsessing over our big competitor; we will be fine".
And he urged the team to ignore the external threats and focus on delighting the customer. This focus on customer obsession worked. Amazon was one of the few companies that survived the Dot Com burst in early 2000.
In Touch with Customers
Though the company has grown in size and scale, Jeff tries to keep with the customers by reading the emails he gets every day. He gets hundreds of emails from the customers who give him suggestions, ideas, criticisms, complaints, and compliments. Afterwards, he forwards these emails to the relevant teams to study the complaints, opinions, or recommendations. The teams implement the corrective measures after analysis of the findings from the study.
An all-caps email from an aggrieved parent that gift didn't show up on time is an anecdote of a deeper systemic problem. Sending a complimentary gift might cool down the particular parent. But the issue which caused the delay remains and has to be resolved. "Don't fix the symptoms, fix the root cause," Jeff urges his teams.
This focus on putting the customer at the centre of everything and focusing on improving operational excellence has been the principal reason behind the success of Amazon. Customer delight has been the cornerstone of Jeff Bezos' management style, which helped the company grow.
4. Its always Day 1:
On 7 November 2016, the downtown of Seattle saw a new Amazon building's inauguration. It has a blazing sign across the 36-story tower, "Hello World," greeting the customers, employees and, the public. But uniquely, the building is called "Day 1".
The building was named "Day 1" in line with Jeff Bezos' management style which, firmly believes that Amazon should always be in the same mood as Day 1 when it was a start-up. Therefore, it should always be in a start-up mode. Conversely, this meant that the company, a leader in the retail world, should not lose out on its agility, creative ability, and the excitement to grow – the qualities it started with.
Further, Day 1 is a recurring theme in Jeff's letters to his shareholders, right from 1997. One unique aspect of this letter is that the term "Day 1" appears in every note and ends with the sentence, "As always, I attach a copy of our original 1997 letter. Our approach remains the same, and it's still Day 1." https://www.businessinsider.in/strategy/news/jeff-bezos-philosophy-for-amazon-is-that-its-always-day-1-heres-what-that-means-and-why-it-works/articleshow/72459617.cms Because of this, Jeff Bezos is averse to Amazon slipping to a Day 2 mode. According to Jeff, Day 2 is stasis. When the companies enter into Day 2 mode, it would become irrelevant and descend on a slippery slope. Therefore, he insists that Amazon has to be on Day 1, always. But the question is how to maintain the Day 1 culture in a giant organization with 700,000 employees and operations across the globe and multiple business lines.
Focus on the core values
When Companies achieve the scale of Amazon, they often lose the skill and the entrepreneurial spirit they demonstrated when they were small. Companies in the early stages of their growth, or the Day 1 mode, are focused on the business's core aspect and less bureaucratic. The initial focus they would have had on the important of People and Processes gets diluted with the layers of hierarchy that gets built in the Company.
For instance, let us take the customer obsession that Amazon is famous for. In a smaller entity, every single person is focused on this core objective. As the scale grows, middle managers, senior managers, and various layers get built up in the company structure. They lose touch with the customer. The customer's interaction is through proxies, like sales matrix, customer satisfaction surveys, and other process reports. This makes the decision-making velocity slow down and losing the reality with the customer.
Maintain the Day 1 Mentality
The ultimate aim is to maintain the Day 1 mentality with the giant scale of Amazon. Achieving this balance is not easy. However, once this stage is reached, companies are better-positioned for change and can easily continue their successful run. Jeff Bezos likens this to the analogy of a big boxer in a boxing ring. A big fighter can easily take a punch or two from his opponent because of his size. But he should also be agile enough to avoid punches from the opponent and win the round.
The Day 1 mentality across the company encourages effective and open communication between the teams. It dilutes the layers of management and control that automatically get built-in as the company grows. The CEO is accessible to customers and employees. This helps in easy flow of views and opinions and exchange of ideas for the company's benefit. You grow up to become Goliath but retain the sharpness and effectiveness of David.
Because of the Day 1 approach Jeff practiced when the stock price of Amazon hit rock bottom of below $1, he did not panic. Given that many of his employees also had stock options, the gloom spread across the company. But Jeff was convinced about his business model. Based on his internal metrics, he knew how many customers they had and what was going on in every department. Since he knew that they had high fixed costs, and as soon as they reached the scale's threshold, the required profits would roll in. So, they worked hard to hit the target. Today, Amazon sells 12 million products online and has over 197 million visitors to its web pages every month!
5.No Plan B:
We always heard of having an option or a standby plan if the original plan fails. But Jeff Bezos management style does not believe in Plan B. For him having a Plan B means having less focus on Plan A. According to Jeff, full focus and energy should be invested in making Plan A work. Going through every step meticulously, modelling the outcomes, planning all logistics should be done for Plan A. So that Plan A becomes foolproof.
Planning to have a Plan B means that one has not spent enough time planning Plan A. Having a Plan A might give the Managers a sense of comfort, making them feel that they can resort to Plan B if this fails. And this sense of comfort can be dangerous. According to Jeff, Plan B is always inferior to Plan A, "That is why it is called Plan B." Hence not taking steps for Plan A to succeed is a recipe for disaster and defocus.
Working only on Plan A means that the whole team is 100% committed to making the Plan succeed. They know that enough homework has gone into the planning to ensure that Plan A succeeds.
He was the first centibillionaire on the Forbes wealth index and the second richest human globally (as of the end of Jan 2021). He is the finest example of success to show that one can succeed if we have a clear focus in life and are bold enough to take risks and hunt in unfamiliar territory. Jeff Bezos net worth was US$ 189.6 billion as of 11 February 2021, according to Forbes Jeff Bezos (forbes.com).
There are scores of controversies and opinions about the employment practices at Amazon and his aggressive behaviour. Jeff Bezos management style was put to the test several times. With a label of the"World's Worst Boss" and was always denied the chance to the world's top CEO list. Despite all this, he built an empire from a garage to the world's largest departmental store. He also owns a space travel company and a newspaper.
That is Jeff Bezos management style for you - enigmatic, charming, and absolutely ruthless.