Episode 51 Steve Anderson, an expert in strategic risk and business growth, and author of ‘The Bezos Letters: 14 Principles to Grow your Business like Amazon’, talks about Amazon’s customer-obsession winning strategy, focusing on the principles found in Bezos’ annual letters to shareholders.
Episode 51
Episode Summary
Amazon's customer obsession.
As declared by Amazon’s mission statement, the business’ goal is “to be Earth’s most customer-centric company”, by therefore being obsessively focused on the customer. For this vision to become reality, Amazon shaped its culture around positive principles directed towards building a good environment for continuous growth and innovation.
However, the consequences were not always positive for the employees, and Amazon has recently been getting a lot of negative press around the issue.
Encouraging successful failure.
Starting with the positives, Amazon has been incredibly successful at creating an environment that encourages its employees to take risks and strive for innovation and growth without fearing the consequences. What Steve Anderson highlights is how employees are usually not afraid of taking risks, but what they fear is the reaction that comes after they have failed. Instead, Amazon supports its risk-takers and encourages the adoption of this mindset in many ways. An example is the “Just do it” award, given to people who have tried something new that could have benefitted the company, but failed. Other great ways to do so are discussed in the episode and are worth checking out.
The downsides of customer obsession.
In the online world where businesses operate nowadays, customer-centricity is always celebrated and considered the main business objective. However, when it comes to customer-obsession, there is a significant risk that this practice can be prioritised at the expense of other success factors, like employee experience.
It is not surprising that Amazon has received negative comments on their employees’ working conditions and satisfaction, especially for those in fulfilment centres. Steve Anderson is convinced that in the next couple of years Amazon will focus great efforts into improving its workers’ conditions, and one way he mentions is through the creation of algorithms which alternate employees between different tasks so that they don’t work the same muscles repeatedly.
Will employee experience become Amazon’s 15th principle? It will be interesting to see what the future holds and Amazon’s different takes on how they plan to do it.
This article summarises podcast episode 51 ” Has Customer Obsession Gone Too Far?" recorded by CX Insider. For more information, listen to the episode or contact Steve on his LinkedIn profile.
Written by Alessia Trabucco
Full episode transcript
Steve: Businesses, many, I won't say all, but many want employees to take risk because they keep telling them 'you need to innovate'. We as a business need to innovate. But the problem comes when they do try and experiment, try something new, try something they haven't done before, and it fails. Then the question becomes, OK, what's the reaction? Is that employee punished because of the failure? Is it encouraged? Meaning what did you learn from that? Let's not make that mistake again. And what are the next steps you're going to take?
Valentina: Hello, everyone. In today's episode, I am joined by Steve Anderson, who's going to talk about his book, The Bezos Letters 14 Principles to Grow Your Business like Amazon. We will cover Amazon's secret sauce to success, but also what Amazon has not been doing quite well. And their next big bet is going to be as Amazon's customer obsession gone too far? And what can we learn from that? Is the big question those. Steve Anderson, an expert in strategic risk and business growth, professional speaker and author of a bestselling book, The Bazos Letters: 14 Principles to Grow Your Business, like Amazon with over 35 years of experience. Steve has been advising businesses on how to utilize technology and mitigate risk. I invited Steve to our podcast studio aka Zencastr and asked him whether he could explain some of the principles mentioned in his book. The principles were originally extracted from Bezos's annual letters to shareholders, further analyzed and split into 14 different principles, which altogether create repeatable growth cycles to put everything into a perspective. Steve will tell you how he got the idea of writing a book about one of the fastest growing companies in the world.
Steve: My actual career is in the insurance industry. And so first half of that was selling insurance to businesses primarily. And then I got very interested and involved in technology and how it applies to that industry. And so the last 25 years, I have had my own business doing research, writing, speaking and consulting around technology. And that's, in my world, a very broad term. And how insurance agents and insurance companies can use it to better engage with their customers. So part of that, a few years ago, I came up with this idea or thought that the biggest risk businesses take today is actually not taking enough risk because technology's developing so rapidly that businesses don't have the time they used to to kind of sit back and say OK, let's see how this plays out. Well, I don't know if this is going to help us or hurt us in today's world. They need to do it faster, which means they're going to make decisions and moves that are going to be more risky. And that's OK. So as I was researching that idea and that thought, I was looking at companies who had done it well and those that had not done it well. And certainly we have actually quite a few examples of those companies actually that are no longer with us, meaning they hadn't made some of those transitions.
Well, and that's Blockbuster and BlackBerry and Kodak. And in the U.S., Sears, a retail store. There are lots of examples of companies who actually waited too long to make changes because customers were starting to change faster than they were. And that led me to those companies that had done it well. And then, as you mentioned in your introduction, Amazon is at the top of that list in terms of success. They have done a lot well. And I was curious, what had they done and are there things that we can learn? When I came across the shareholder letters that Jeff Bezos CEO started writing in 1997 and actually have written up until last year, 2020, and that'll be his last letter as CEO as he's transitioning to a new position. And I think what really amazed me was how much teaching Bezos does in those letters. And the phrase I use is his secrets to growing Amazon are hidden in plain sight in those letters. And so I read through every single one of them, extracted, as you mentioned, different principles, put them in, you know, group them in four cycles. Test, build, accelerate and scale and then 14 principles that I believe he used to grow Amazon that can apply and help any business owner who wants to grow to think differently about how to do that.
Valentina: The very first principle that is introduced in the book is about encouraging successful failure. Probably all of you who are listening to the podcast right now have done a personal development course or read a self-help book about adopting the mindset of a risk taker, or at least you've heard about the concept at one point in your lives. Katie Stabler, a CX consultant who joined our podcast and episode 43, called Why Planning to Fail Really Means Planning. Dwaine uses this premise in a slightly different context.
We all aspire for perfection. You know, we have processes in place of supporters. We have quality assurance. We have, you know, risk tolerance. All of these things are aimed to make us the best that we can be. But at the end of the day, people can fail. Systems come failures. And we've seen very clearly over the past year and a half that external environments can impactors, i.e., Covid.
Valentina: In Steve's interpretation, he explains why it is necessary that this philosophy is being applied in all functions across the company.
Steve: Well, so the real concept behind that first principle and current successful failure is the idea that businesses many, I won't say all, but many, want employees to take risk because they keep telling them you need to innovate. We as a business need to innovate. But the problem comes when. They do try and experiment, try something new, try something they haven't done before, and it fails. Then the question becomes, OK, what's the reaction? Right. Is that employee punished because of the failure? Is it encouraged? Meaning what did you learn from that? Let's not make that mistake again. And what are the next steps you're going to take? So I'm convinced that employees aren't afraid of failure, but they are afraid of the consequences of failure. And so the idea behind the principal is creating an environment in your business that encourages experimentation, which means you're going to you're going to have failures. In fact, Bezos says Amazon is the best place in the world to work because we actually encourage failure, because we understand that those are the steps you need to take in order to invent new ways of doing things.
Valentina: Embracing failure is a great starting point for whatever you are trying to achieve. But how do you make your employees adopt this mindset? Luckily, we can learn from companies which are already putting this principle into practice.
Steve: Well, I think it's a couple of things. One is certainly a mindset of leadership, whatever that looks like. And frankly, it could be just you and a couple of employees that are starting up a new business or it could be a larger organization. So one's a mindset, meaning, well, I'll give you Amazon's examples. They actually have a couple of awards for. I'm calling it this. They call it, they just do it award, which is an award to an employee who tried something new even and it didn't work, but it helped the company move forward by learning new things about what to do. And it's actually a Nike tennis shoe. So it's not money. It's not not a huge trophy, but it is a encouragement to employees and a message that says we want you to be risk takers. And in fact, that's one of the Amazon's leadership principles. One is default to action. And two is, you know, to to not hold back when you're looking at doing something new and different. And let me give you another, again, practical example. At Amazon, that I think is a really interesting tool for our business owners. And I'm going to try not I'm going to try and do this in a short manner so I could go on for a while. So cut me off if I go too long.
In 2004, Jeff Bezos banned PowerPoint keynote, any slide oriented presentation at Amazon, which was the practice up to that point. Right. You kind of normal business, right? You go to a presentation. You have your slides. Here are the key points. Here's what we think is going to work and all of those kinds of things. He banned it because he said it's lazy and in its place. What he requires and they do that today is that every decision that needs to be made. Has to start with what's called a six page narrative. And at that, I had a meeting that's called I Need a decision whether we should move forward with building the Kindle big, right? Big idea. Well, that started with that team who was bringing and pitching that idea, literally writing a maximum of six pages narrative about the project. That narrative starts with a future press release. What is the press release going to look like on the day the Kindle was released? And then it goes into effect use, here's the common questions we think people will ask. Here's the things we see as the biggest problems with this project. Here's how we think we can solve those problems. When that meeting starts, that physical printed paper, this is not sent out as an email beforehand. This is literally only sent and given out at the meeting. The first 10, 15, 30 minutes of that meeting is spent, everybody reading that narrative, and then they open it up for discussion. Crazy thing to do, right? Because you want people to have time to look at it beforehand and all those things, what Bazo says is executives are busy and they'll tell you they read it and they did. And so we take that first time. Like a study hall and make sure that everybody literally is on the same page. And I've done that myself, so I have started a new company. I pitched a bunch of investors and we did a six page narrative, as in that meeting where I was pitching in people to invest in this company. It was really hard to do. And it was really fascinating, the quality of the discussion. Versus kind of going through a slide deck and people interrupting, and I'm having to say I'll cover that in a couple of slides. Right. Common things. But now everybody knows all the information. Now we can ask and poke holes in it. We can ask questions about, have you thought about this? All of those kinds of things. So that, I believe, is one of Amazon's really secret sources of how they are able to continue to invent new things.
I also want to make another point here, because I think it's really important. Amazon does not tolerate incompetence. So this is not making the same mistake over and over again. That is absolutely not tolerate it. But this is being willing to try something new that's never been done before. And I could point to all kinds of things that over the years Amazon has invented that literally now for us are normal. We don't even think about them being brand new. I mean, something as simple as online reviews. Amazon invented that. And at the time, it was four books and the publishers were irate. What do you mean you're going to let customers say what they liked or didn't like about a book? What? We're in the business of selling books. What a Bazo say. If a customer doesn't buy a book because it's not going to resonate with them, that's a win for the customer and for Amazon. But they also are going to discover books they might not have looked at before because of what someone else said about the book or because the rating was so high. And so, again. Crazy idea at the time. That's now normal. Do you even think about buying something without looking at reviews?
Valentina: In twenty twenty one, being customer centric is a must. It's like starting a business and not having a website. And Amazon for sure is one of the most customer centric companies in the world. Even in the early years of Amazon, Bezos couldn't emphasize more that CLX was at the heart of everything they were doing. He once said, We're not competitor obsessed. We're customer obsessed. We started with what the customer needs and we work backwards. I guess I know what you're thinking. Potato, tomato. Customer obsession. Customer experience. What difference does it make, really?
Steve: In the 1997 letter, the very first letter and part of what's interesting is every letter sent is that the end of the letters say, ‘as is my custom, I attach a copy of our 1997 letter’. So Bazos thinks that letter is extremely important because for 20, whatever whatever it is now, 26 years, 25 years, he's attached a copy of that letter, but he talks about being customer obsessed in that very first letter. And again, I've always thought that choice of words was very interesting, because obviously, you know, we hear about, as you say, customer centricity, customer focus, customer experience. We have all these words around what happens with the customer and how a company engages with their customers. But obsession seems to take it to a different level. And I think. A business focusing on the customer and having customer centricity is great, but I'm not sure they take it far enough. And Amazon. Tries. They don't oh, I mean, they do fail. But this idea of obsessing over the customer is just core in how they think. And I've said it a couple of times at Amazon. If it's better for the customer, they probably will do it. I mean, another great example is Amazon Marketplace, third party sellers. Again, early 2000s and crazy idea who in their right mind would allow their competitors to come into and have their products literally side by side to Amazon's products. But what Bezos said was if a third party seller has the product in stock and we don't, if their price is better than ours, then it's better for the customer and therefore better for Amazon and our shareholders. Now, the business side is we charge those third party sellers a fee to be on that platform. So now we make money. And on what they're selling. And, you know, again, over the years, the majority of products sold on Amazon are sold through third party sellers, not Amazon own products.
Valentina: Despite the fact that many business leaders aspire to succeed like Amazon in the last couple of years, they've been facing massive backlash over the working conditions in fulfillment centers. And as a Jency Wiegert vocal, quickly, if there's something we don't like, stereotypically speaking, of course, it would feel wrong not to mention something that Amazon had been doing wrong.
Steve: The Amazon certainly over the last few years has gotten some negative press, I'll say it that way. Right. And you know, in one of those, you know, is working conditions at fulfillment centers. Right. And and I've been exploring this thought or idea of can customer obsession go too far? And I think I have an answer that in the in the last letter, the 2020 letter that Jeff Bezos roads and again, I mentioned, that'll be that is the last letter he will write as CEO of Amazon. He adds in there that. They are adding a new vision, not replacing, so their original vision was to be the most customer centric company in the world, and that's been in their regulatory filings. That's been, you know, all over for actually a long time. But they are adding businesses, adding, we also want to be the best place to work, the best and safest place to work. And so now they're putting efforts into how can we improve that fulfillment center workers life, basically. And and here's something that I think is interesting about Amazon. When they and I would say right now, when Bezos becomes convinced they're wrong, that they need to do something new, they do it. And I think we will see over the next few years a real effort to improve the fulfillment center workers lives.
Steve: And I've been I've had the opportunity to physically visit to different fulfillment centers. This was in nineteen twenty nineteen before the world shut down. And it's a it's a hard place to work. I mean, when when when the focus is on customers and getting them their package. As you said, Adam, you know, today that means somebody's got to pick that thing off the shelf and put it in a box and get it on a truck and get it to somebody's front porch. And that logistics is incredible. And that's where they the the individual and I'd say plural are that are doing that, really the lots of pressure on them to work fast. Right. And and so one of the things they're doing and again, these are just little things that are starting to come out, but they are creating algorithms so that an employee at a fulfillment center actually is rotated to different jobs that require different muscle groups. So they're not always doing the same motion every day. And again, from the insurance industry, you know, worker safety and worker's compensation and employee injuries are a big part of what we work on. I mean, that is groundbreaking in terms of a thought process of how to build a safer work environment.
Valentina: Looking into the future, it's logically impossible for Amazon to keep growing infinitely. So what future steps can we expect from Amazon and in the short term? Will employee experience become the Amazon's 15th principle for success?
Steve: Bezos identified in his letters, you know, several big bets that Amazon has made. And we talked about. Yes, that's a big bet. We talked about marketplace. He considers that a big bet. So the question is, you know, what's their next big bet? And interestingly enough, I think it might be their Project Kiper. So and this is where you can bring in Blue Origin. So Bezos Space Company. But Project Kiper and they're well underway with this, will be deploying low earth orbit satellites to provide literally worldwide high speed Internet access. Elon Musk at SpaceX is doing that also. I. It'll be interesting to see Amazon's different take on how they do it. But Bezos has said, you know, this might be our fourth big bet. And so that'll I'll be very interested at watching that pretty closely, actually. Be very interested to see, you know, what that looks like as as time goes on.
Valentina: To summarize the key takeaways from today's episode. The first one would definitely be to encourage successful failure, as it is the only way to survive and thrive in a constantly changing environment. This process is as old as humanity itself. And people throughout the centuries have tried to define it in an economical and philosophical context. From Joseph Schumpeter and his concept of creative destruction to Heraclitus, everything changes and nothing stands still. I hope you like this episode. And please don't forget to give us alike and share your ideas in Arlington feature. And I will see you next time.
