Working Backwards by Colin Bryar & Bill Carr

(New York: St. Martin's Press, 2021-02-09), 304

A summary of Amazon's leadership philosophy:

  • Four Core Principles
    1. Customer obsession
    2. Long-term thinking and investment horizon
    3. Eagerness to invent (and acceptance of failure)
    4. Pride in operational excellence
  • 14 Leadership Principles
    • Customer Obsession
    • Ownership
    • Invent and Simplify
    • Are Right, A Lot
    • Learn and Be Curious
    • Hire and Develop the Best
    • Insist on the Highest Standards
    • Think Big
    • Bias for Action
    • Frugality
    • Earn Trust
    • Dive Deep
    • Have Backbone; Disagree and Commit
    • Deliver Results
    • Strive to be Earth’s Best Employer
    • Success and Scale Bring Broad Responsibility
  • Practical Methodologies
    • Bar Raiser hiring process: minimize personal bias and maximize making data-based hiring decisions based on the substance of each candidate's work and how that work maps to a set of principles
    • Single-Threaded Ownership: For each initiative or project, there is a single leader whose focus is that project and that project alone, and that leader oversees teams of people whose attention is similarly focused on that one project.
    • Written narratives to ensure deep understanding of complex issues
    • Working backwards: Before you start building, write a Press Release to clearly define how the new idea or product will benefit customers and create a list of Frequently Asked Questions to resolve tough issues up front.
    • Input Metrics: Focus on controllable input metrics rather than output metrics.

Notes


Contents


Introduction

  • Goal of this book: show you the unique principles and processes at Amazon with enough detail that you can implement them if you want (x)
  • Secret of success: "We have an unshakeable conviction that the long-term interests of shareowners are perfectly aligned with the interest of customers." (x, 2010 Amazon Shareholder Letter)
  • Four Core Principles:
    1. Customer obsession
    2. Long-term thinking and investment horizon
    3. Eagerness to invent (and acceptance of failure)
    4. Pride in operational excellence
  • 14 Leadership Principles
  • Practical Methodologies
    • Bar Raiser hiring process
    • STO
    • Written narratives to ensure deep understanding of complex issues
    • Working backwards from the desired customer experience (PR/FAQ)
    • Focus on input metrics
  • Motto: "Work hard, have fun, make history."
  • Colin Bryar was "Jeff's shadow" (CoS, technical advisor) for two years
    • "Part of my role as Jeff's shadow was to help him be as effective as possible." (99)
  • Jeff Bezos regular office hours : 10am-7pm
  • Innovation: "We need to plant many seeds because we don't know which one of those seeds will grow into a mighty oak." (xv)

Part One: Being Amazonian

Chapter 1: Building Blocks: Leadership Principles and Mechanisms

Summary: The development of the 14 Amazon Leadership Principles, plus mechanisms (check and balances) to ensure they are enforced

  • Jeff Bezos in the early days of Amazon:
    • "It has to be perfect" (8)
    • "Always underpromise and overdeliver" to ensure customer expectations are exceeded (9)
    • "You can work long, hard, or smart, but at Amazon.com you can't choose two out of three." (9)
  • 14 Leadership Principles
    • Customer Obsession: Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.
    • Ownership: Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job.”
    • Invent and Simplify: Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time.
    • Are Right, A Lot: Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.
    • Learn and Be Curious: Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.
    • Hire and Develop the Best: Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.
    • Insist on the Highest Standards: Leaders have relentlessly high standards—many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high-quality products, services, and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.
    • Think Big: Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.
    • Bias for Action: Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.
    • Frugality: Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention. There are no extra points for growing headcount, budget size, or fixed expense.
    • Earn Trust: Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.
    • Dive Deep: Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.
    • Have Backbone; Disagree and Commit: Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.
    • Deliver Results: Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.
    • Strive to be Earth’s Best Employer: Leaders work every day to create a safer, more productive, higher performing, more diverse, and more just work environment. They lead with empathy, have fun at work, and make it easy for others to have fun. Leaders ask themselves: Are my fellow employees growing? Are they empowered? Are they ready for what’s next? Leaders have a vision for and commitment to their employees’ personal success, whether that be at Amazon or elsewhere.
    • Success and Scale Bring Broad Responsibility: We started in a garage, but we’re not there anymore. We are big, we impact the world, and we are far from perfect. We must be humble and thoughtful about even the secondary effects of our actions. Our local communities, planet, and future generations need us to be better every day. We must begin each day with a determination to make better, do better, and be better for our customers, our employees, our partners, and the world at large. And we must end every day knowing we can do even more tomorrow. Leaders create more than they consume and always leave things better than how they found them.
  • Mechanisms: "Good intentions don't work. Mechanisms do." (17)
    • Annual Planning Process: STO must be aligned with precise goal-setting to align each team
      • S-Team drafts high-level objectives (4-8 weeks in the summer)
      • OP1: bottom-up proposal from each group; reviewed and reworked if needed by leadership (complete before holidays)
        • Assessment of past performance: goal achieved, goals missed, lessons learned
        • Key initiatives for the following year
        • P&L
        • Requests for resources with justification
      • OP2: actualize and re-project, finalize each team's goals and resources available (January)
    • S-Team Goals Process:
      • S-Team identifies the most important goals from each OP1 (large in number, detailed, aggressive)
      • Formulated as SMART goals
      • Aggressiveness calibrated at 75% completion
      • Finance tracks S-Team goals (green/yellow/red status) and presents quarterly to S-Team; meetings focused more on execution than strategy
    • Compensation Plan:
      • Money talks: "Leadership principles speak softly in comparison to financial incentives" (21)
      • Compensation of senior leaders heavily weighted toward equity earned over several years
      • Amazon's compensation is simple and oriented toward the long term

Chapter 2: Hiring: Amazon's Unique Bar Raiser Process

Summary: The Bar Raiser process is designed to minimize personal bias and maximize making data-based hiring decisions based on the substance of each candidate's work and how that work maps to a set of principles.

  • The stakes are high in hiring key roles, and a hiring process demands the same rigor as other significant business decisions (25)
  • A successful process is: simple to understand, can easily be taught to new people, does not depend on scarce resources (such as a single individual), and has a feedback loop to ensure continual improvement (34)
  • Bar Raiser: scalable, repeatable, formal process for consistently making appropriate and successful hiring decisions. Every new hire should "raise the bar".
  • Each hiring process has a "Bar Raiser", a trained interviewer who has veto power on the candidate.
  • "Managers who failed to put int the time (in addition to their day job) to recruit and interview didn't last. There is no substitute for working long, hard, and smart at Amazon." (36)
  • Bar Raiser Process:
    • Job Description: written by the hiring manager, specific and focused
    • Resume Review: by hiring manager and recruiter (good resumes indicate good JD)
    • Phone Screen: role and background; 45 min of pre-determined questions designed to solicit examples of past behavior focused on the Leadership Principles; 15 min of candidate questions
      • Don't proceed to interview loop if unsure about the candidate (many factor but maybe 1 in 4 pass phone screen on avg)
    • In-House Interview: 5-7 interviews (including at least hiring manager, recruiter, Bar Raiser, but excluding any future direct reports of the candidate)
      • Behavioral Interviewing: to assess how well a candidate's past behavior map to the Leadership Principles—what did they personally contribute in similar situations (STAR) and how did this align with the Leadership Principles?
      • The Bar Raiser: ensure the process is followed and bad hiring decisions are avoided;
    • Written Feedback: complete detail written feedback immediately after the interview, which includes a clear hiring recommendation
    • Debrief/Hiring Meeting: run by the Bar Raiser, with the opportunity to change your vote with additional data, concluding in a majority/consensus decision
    • Reference Check: rarely exercised because it rarely changes the hiring decision, but two good questions include:
      • "Given the chance, would you hire this person again?"
      • "Of the people you have managed/worked with, in what percentile would you place this candidate?"
    • Offer Through Onboarding: hiring manager personally makes the offer and sells the candidate on the role and company; seek to uncover and address any concerns they have about accepting the offer
      • book bomb! (48)

Chapter 3: Organizing: Separable, Single-Threaded Leadership

Summary: For each initiative or project, there is a single leader whose focus is that project and that project alone, and that leader oversees teams of people whose attention is similarly focused on that one project. "The best way to fail at inventing something is by making it somebody's part-time job" and "Separable means almost as separable organizationally as APIs are for software. Single-threaded means they don't work on anything else."

  • Background
    • "Our explosive growth was slowing down our pace of innovation. We were spending more time coordinating and less time building." (54)
    • Overlap creates dependencies, dependencies require coordination (55)
    • "Every dependency creates drag" (55), but "In the areas where we controlled our own destiny we were able to move fast (59)
    • The true problem to solve is the cost of coordinating between teams (61)
    • Jeff: each team build a clearly documented API for loosely coupled interaction (61)
    • Use New Product Initiatives (NPI) process to allocate resources: submit detailed proposal (one-pager, teams required, P&L, strategic justification), then decided centrally what to resource (62)
    • Morale: "Other companies have morale-boosting projects and groups with names like 'Fun Club' and 'Culture Committee'...Amazon's approach to morale was to attract world-class talent and create an environment in which they had maximum latitude to invent and build things to delight customers." (morale is an output metric, not an input metric you focus on) (64)
  • Two-pizza teams
    • Be small: <10 people
    • Be autonomous: no need to coordinate with others to get their work done, rely on APIs
    • Be evaluated by a well-defined "fitness function" (eventually reverted to input metrics)
    • Be monitored in real time: dashboard of score on fitness function vs all other teams
    • Be the business owner: own all areas including technology and business results
    • be led by a multidisciplined top-flight leader: the leader must have deep technical expertise, know how to hire world-class software engineers and product managers, and possess excellent business judgment;
      • Be this kind of manager: "The manager would be comfortable mentoring and diving deep in areas ranging from technical challenges to financial modeling and business performance. Although we did identify a few such brilliant managers, they turned out to be notoriously difficult to find in sufficient numbers, even at Amazon" (74)
      • "The biggest predictor of a team's success was not whether it was small but whether it had a leader with the appropriate skills, authority, and experience to staff and manage a team whose sole focus was to get the job done." (74)
    • Be self-funding: team's work pays for itself
    • Be approved in advance by the S-Team
    • "Today the advantages of microservices-based architecture are well understood" (69)...but then Amazon published this: Scaling up the Prime Video audio/video monitoring service and reducing costs by 90%: "The move from a distributed microservices architecture to a monolith application helped achieve higher scale, resilience, and reduce costs."
    • Most successful teams invested in removing dependencies and building instrumentation before building new features (70)
    • Most used a functional matrix org, with dotted lines to the two-pizza leader
  • Single-Threaded Leader
    • Separable teams: "Separable means almost as separable organizationally as APIs are for software. Single-threaded means they don't work on anything else." (76)
    • "Be stubborn on the vision but flexible on the details" (78)

Chapter 4: Communicating: Narratives and the Six-Pager

Summary: Following Tufte's lead, Amazon reads a prepared narrative for the first 1/3 of every meeting, which forces clarity of thinking and deep engagement by the reviewing audience.

  • Edward Tufte identified issues they had communicating complex information in PowerPoint
  • Jeff: "The narrative structure of a good memo forces better thought and better understanding" of importance and relation (83)
  • Drawbacks of PowerPoint: lack of information density, not all information contained in the deck (also in the presentation), highly variable based on skill of presenter, ideas are fragmented
  • Benefits of memo: higher information density, higher information I/O (reading vs listening), facilitates interconnected ideas, forces clarity of thought, level playing field and scalable consumption
  • Format: state, support, conclude
  • Narratives distributed and read in silence for the first third of the meeting; comments and discussion for the remaining 2/3
  • Jeff on providing feedback: assume each sentence is wrong until you're able to prove otherwise (95)

Chapter 5: Working Backwards: Start with the Desired Customer Experience

Summary: Working backwards is a systematic way to vet ideas and create new products by defining the customer experience and then iteratively working backwards toward clarity of what to build. This uses the PR/FAQ.

  • Start by writing a press release announcing the product as if it were ready to launch and an FAQ anticipating the tough questions
  • "To Jeff, a half-baked mock-up was evidence of half-baked thinking" (103)
  • An idea in writing (narrative) frees you from the quantitative demands of Excel and visual seduction of PowerPoint (104)
  • PR:
    • 1 page max
    • Heading, subheading, summary paragraph, problem paragraph, solution paragraph(s), quotes
  • FAQ:
    • 5 pages max
    • internal question to address customer concerns, and external questions to address risks and challenges from various internal stakeholders (106)
    • Gives the details of the customer experience and a thorough assessment of how expensive and challenging it will be to build (107)
    • Question focus areas include: consumer needs and TAM, economics and P&L, dependencies, feasibility
    • Draft PR/FAQ, read in meeting and gather feedback (most senior last), circulate minutes and feedback notes, revise, repeat (108)

Chapter 6: Metrics: Manage Your Inputs, Not Your Outputs

Summary: Focus on the controllable input metrics—the activities you directly control—which ultimately affect output metrics such as share price.

  • See this article: 2023-05-18 This is How Amazon Measures Itself
  • Weekly Business Review (WBR): fractal to adopt to any part of the business
  • Metrics come from DMAIC (from Six Sigma):
    • Define
      • "Before you can improve a system you must understand how the input affect the outputs of the system." (124, cf. Understanding Variation bib)
      • Focus on leading indicators ("controllable input metrics") rather than lagging indicators; input metrics measure things that, done right, bring about the desired results in your output metrics (125)
      • (Amazon's preferred output metric to track is free cash flow per share)
      • Amazon flywheel inspired by Good to Great (125)
      • Challenging to get right, eg: instead of "number of pages", use "number of detailed pages ready for 2-day shipping"
      • "With the wrong input metrics or an input metric that is too crude, your efforts may not be rewarded with an improvement in your output metrics. The right input metrics get the entire organization focused on the things that matter most. Finding exactly the right one is an iterative process that needs to happen with every input metric." (128)
    • Measure - set up instrumentation
      • Remove bias in your metrics: the finance team seeks to uncover and report the unbiased truth.
      • Align your metrics with the customer experience, and audit your metrics as needed
      • Invest in instrumenting your business
    • Analyze - understand what drives your metrics
      • 5-whys to get at root cause
    • Improve
      • Make changes on a solid foundation of understanding
    • Control
      • Ensure processes are operating normally and not degrading over time
  • Weekly Business Review (WBR) Deck
    • The deck is a data-driven, end-to-end view of the business
    • Mostly charts, graphs, and data tables (except for a few anecdotes)
    • Emerging patters are a key point of focus
    • Plot results against a comparable prior period
    • Graphs show two or more timelines (i.e. trailing 6-week and 12-month)
    • Include anecdotes and exception reporting
    • Use consistent formatting to speed digestion: Solid black current, grey for prior period, grey points for forecast, data points with data labels, grey dashed for YoY growth, summary metrics below chart (Plan, Actual, YoY, etc.)
  • Weekly Business Review (WBR) Meeting
    • All executives participate (Deep Dive), and include junior team members for development
    • Focus on variances and don't waste time on the expected. Business owners report on variances
    • WBR is tactical: don't discuss strategic topics here

Part Two: The Invention Machine at Work

Introduction to Part II

  • Approach invention with long-term thinking, customer-obsession, patience, and frugality. Failure happens and is a learning opportunity (156)
  • Invent by Working Backwards from the customer, rather than Skills Forward from what you already know (157)
  • Most decisions are reversible (160)

Chapter 7: Kindle

_Summary: _

  • Jeff visited Steve Jobs in 2003 to get a demo of iTunes, which partially influenced their decision to stand up their media division
  • "Jeff was a student of history and regularly reminded us that if a company didn't or couldn't change and adapt to meeting shifting consumer needs, it was doomed." (167)
  • "Amazon's approach was always to start from the customer and work backwards. We would figure out what the customers' needs were and then ask ourselves, 'Do we have the skills necessary to build something that meets those needs? If not, how can we build or acquire them?'" (177)
  • If your long-term success and survival is predicated on having a specific capability you need to have a plan to build or buy that capability: you can't cede it by outsourcing it (179)

Chapter 8: Prime

Summary: Amazon Prime is a great example of the tremendous value you can unlock by ruthlessly applying the principles of customer obsession and long-term thinking to a problem.

  • Stick to the process and surrender to where it's taking you (190)
  • Marketing campaign: "The campaign drove a bump-up in sales, but we ultimately decided not to fully move forward with it. The modest sales uplift was nowhere near enough to justify the $50 million per year we estimated we'd have to spend on an effective national marketing campaign. The better investment was to plow that money back into improving the customer experience." (193)
  • "Customer expectations are not static. They rise over time, which means you cannot rest on your laurels." (198)
  • "There's an important difference between airlines and retailers. Once a plane takes off, its empty seats have no value. Therefore, airlines, in exchange for loyalty, can give away marginal inventory that would otherwise go unsold. Whereas in retail, giving away either product or shipping fees always has a cost." (201)
  • A Prime-like idea came from an engineer: "It's everyone's job to obsess over customers and think of inventive ways to delight them." (202)
    • Generalism: be a Strong General Athlete (SGA): "These customer-obsessed, inventive, long-term thinkers take prde in operational excellence and embody the Amazon Leadership Principles" (202)
  • Forecasting: "We couldn't even accurately estimate the cost, because our models could not really predict how customers would react, so we were relying more on judgment and educated guesses than on data." (203)
  • "Institutional No": "The seductive but ultimately wrong path of staying the course, making a serious error of omission as a result" (203), or "the tendency for well-meaning people within large organizations to say no to new ideas" (204)
  • "When Jeff sent a team an idea, it did not need to be implemented, but it definitely needed to be evaluated and that evaluation needed to be communicated back to him." (206)
  • Analysis paralysis: "The October surprise email [that kicked off the effort to launch Prime] arose out of his realization that you simply could not prove a priori that free shipping would work. You just had to try it." (207)

Chapter 9: Prime Video

_Summary: _

  • Failure: "Why would I fire you now? I just made a million-dollar investment in you Now you have an obligation to make that investment pay off. Figure out and clearly document where you went wrong. Share what you have learned with other leaders throughout the company. Be sure you don't make the same mistake again, and help others avoid making it the first time." (218)
  • Leaders should be like Howard Hughes in his inspection of the rivets on the H-1: set and insist on high standards (219)
  • "Like Amazon, Netflix has a track record of long-term thinking and willingness to be misunderstood for long periods of time, both of which have contributed to their great success." (225)
  • Generalism (be like this): "He was a well-rounded business athlete with an MBA from Kellogg who could tackle any problem whether it pertained to content, finance, product, or otherwise. whatever it was, if I gave it to Cameron, he would grab hold of it and figure it out." (231)

Chapter 10: AWS

Summary: The lesson of AWS is to really work backwards from the desired customer use case, even if that is unlike anything that has been done before or it slows you down. It's easier to rework a PR/FAQ than a product line you already launched.

  • Origins: providing affiliate data in XML for customized display on affiliate's websites
  • 2006 Shareholder Letter: focus on the new emerging businesses, even if it means the total business only went from $10B to $10.01B (248)
  • "Working backwards was the process that enabled us to put into action the principle of Customer Obsession." (258)

Conclusion: Being Amazonian Beyond Amazon

  • "Being Amazonian" is not easy, but its fractal nature means it can be adopted by many different organizations (259)
  • "Failure is typically viewed as an experiment from which a great deal can be learned that can lead to change and improvement." (260)

Topic: Management, Amazon

Source

Bibliography

file:(2023-06-02-Working Backwards)

Created: 2023-05-18-Thu
Updated: 2023-07-31-Mon