John Rossman uses his experience as an Amazon manager to teach modern leaders to think, plan and beat the competition just like Jeff Bezos.
Amazon’s innovative, customer-centric approach is illustrated through fifty ideas that can be applied to your company to become the new digital leader.
Organize the culture of your digital company
Ideas to steer a company’s culture in the right direction in the digital age:
- Start thinking long-term and plan in this way, in this way you can invest differently than other companies. Furthermore, identifying long-term risks allows to obtain a strategic advantage. As Bezos states: “If you work on a three-year plan then you compete against many, but if you invest in a seven-year plan then the competition will be less because very few companies decide to follow this strategy.”
- Make employees passionate about the company’s mission to achieve success and overcome moments of crisis. Identify the employee’s passion and guide it so as to link it to the company’s mission. This can be achieved by constantly communicating the mission and creating enthusiasm for the company’s success.
- If business stagnates, acknowledge the situation and discuss it by identifying the causes and asking questions whose answers will define the new path, for example: “How to make your own self-service?”, “What annoys the customer?” and so on. Communicate the new plan clearly and implement actions consistent with it.
- Create an obsession for the customer using parameters to measure their satisfaction not only through surveys, but for example by measuring waiting times or experiencing the customer experience firsthand, so Amazon found that the customer experience is influenced by the flexibility, speed and quality of delivery. Make customer obsession everyone’s job.
- Make sure you have an environment where honest conversations are welcome, where getting along is no longer important than being right. For example, identify times when the conversation is not honest and ask the two sides to be more sincere, slow down some meetings to discuss better or ask why five times to get to the heart of the matter.
- Free yourself from bureaucracy, allow employees to make decisions and get leaders to take responsibility if the results are not achieved. Better manage who is employed by you. For example, try not to delegate what you can do alone, if it is not possible, make sure that the communication is clear, do not rely only on trust, but trust and verify.
- Create a non-monetary incentive structure but based on shares of the same company (stock grant), so as to promote the idea that everyone works for the good of the company and its success is everyone’s success.
- Success can push you not to risk and to be on the safe side. Find ways to keep the tension on innovation. For example, develop plans that could be used by competitors to hinder your business, create response strategies and move on to the preventive offensive.
- Promote innovation with projects defined as “betting”. Before launching the project, create the objectives and parameters to measure them over time. If these are correct, the team in charge of the project will have greater autonomy, which implies greater creativity. Keep teams small (maximum ten members). The result of the project must not only be good but fantastic.
- Senior leaders need to know every detail of the project the team is working on.
- Every great innovation is exposed to criticism because it challenges conventions. Be prepared for negative reactions.
- Your support organizations such as: human resources, legal and financial office must participate fully in a project and not be an obstacle to the culture of “yes, it can be done”. For example, you can ask more questions about the situation and the objectives, articulate and quantify the real risks or create a tender for the development of alternative solutions.
- Don’t let bureaucracy and organizational structure stifle innovation, promote passion for problem solving and clear communication. Make everyone interested in the success of the project.
- Give awards to employees who exceed expectations. For example Amazon rewards its inventors with a puzzle piece every time they create something innovative.
- Focus on frugality, for example ask yourself: “How can I cut costs by 50% and improve customer satisfaction and proceeds?”. Such questions and limitations can increase innovation.
From these ideas we can summarize three key principles on which Amazon focuses: obsession for customers at all levels of the company, long-term planning, implementation of a culture focused on frugality to increase attention to detail and innovation.
15 ideas for a successful strategy in a digital company:
1.What does it mean to become a digital company? It can be summarized in two characteristics: speed, that is, the ability to move in a direction quickly and accurately, and agility, the ability to predict market changes and to be able to quickly implement changes to adapt. There are three secrets to being digital: 1) compete differently by focusing on customer experience, less bureaucratic business practices and innovative business models benefited by new technology; 2) implement new management philosophies and learn to take on greater responsibilities, delegating less and less; 3) be able to adapt quickly to change, with faster processes. In a nutshell, becoming digital means simplifying through the help of technology and not being afraid of failures.
2. Think big but act small: find ways to test the success of the product before producing it, an example can be Google Cardboard with which the company tests the interest in VR without investing to create a more complex product . To innovate you need to experiment, for example Amazon Echo and Dash Button were initially available only in limited quantities, once the success was confirmed Amazon made them available to everyone.
3. Can your services or products be offered through a platform? First of all you have to identify your basic features and functionality and secondly the advantages. According to Amazon’s strategy, the basic functionality of a platform must be self-service.
4. By becoming digital, you need to decentralize some IT features by distributing them to the various teams to create speed and agility. Finance, human resources, sensitive data systems and the cloud should be centralized systems.
5. Use teams of up to ten people (in Amazon called teams of 2 pizzas). These teams are more independent and can drive innovation faster. Set parameters to measure team effectiveness.
6. Do not let past beliefs or conventions guide the future, adapt to changes even while appearing inconsistent with past statements. For example Bezos in 2009 stated that Amazon did not need advertising, while now the strategy has completely changed in that sense.
7. Create an improvement plan for everything, take advantage of new technology to solve problems and continually improve processes. For example, Amazon has introduced the “Six Sigma” process that follows the DMAIC improvement cycle, that is, definition, measurement, analysis, implementation and control. Through this cycle, the use of technology and the help of employees focused on troubleshooting, Amazon has improved its parcel scanning, tracking and delivery system to excellence.
8. For simple and repetitive processes, find someone who does them for you without, however, putting your brand and consumer experience at risk, to do this by taking advantage of technology. Take customer reviews on Amazon, the Marketplace, or Amazon Flex as an example. Amazon takes advantage of its sellers, partners and customers to complete a part of its work, but at the same time it is responsible for the result and the quality. In fact, it provides partners and customers with technological tools through which it sets guidelines and restrictions to force a certain result.
9. Reinforcing functions (set of guidelines and limits) are essential to be certain of a certain result. For example in Amazon Marketplace, third-party sellers receive a score for each successful transaction, a high score will make the seller rise directly to the top of the search list, in this way Amazon reinforces an excellent result with a reward, using technology that it makes the whole process automatic.
10. Create a systematic model of your processes, a flywheel that presents each process and consequence. For example, for the Amazon Marketplace, low prices and an excellent experience lead to an increase in customers, this leads to higher revenues which leads to an increase in sellers, also implying an increase in the choice of products which ultimately leads to a reduction in prices and an increase in experience, so the cycle repeats itself. By defining your flywheel you can eliminate the processes that create friction to speed up and improve the cycle.
11. Eliminate friction in the customer experience and make it simpler and more fluid, this is the greatest innovation and one of the basic ingredients of Amazon’s success.
12. Discover the lasting needs of your customers and satisfy them by exceeding their expectations and making it difficult for the competition to imitate you, for example Amazon offers a wide selection (thanks to the Marketplace), rapid delivery and never stops innovating and looking for new methods to improve the experience.
13. Always try to see opportunities from a different perspective, always challenge the status quo and innovate. For example, you can start with extreme questions such as “How can customer contact be reduced by 90%?” and then going backwards towards something more realistic, in this way the quantity of the ideas produced increases.
14. Don’t get trapped in your primary business, explore the value chain and look for expansion opportunities, some useful strategies are: define the sector and the value chain, define revenues and profits and compare the various value chains from left to right , creating a column chart for margins and revenues.
15. Do not entrust the strategic functions of the company to third parties. For example, Yahoo granted Google the license to be its search engine, entrusting the “operating system” of a central part of its business to third parties.
Innovation and technology can help a digital company
- Create and use parameters to measure customer experience and the operational and financial aspect of the company. It designs real-time data collection systems and organizes meetings to constantly analyze and re-evaluate both the parameters used and the data obtained. Search for the causes of the problems and plan corrective actions. The data collected must be accurate and in real time.
- Outline well-defined and simple key processes, always ask for high standards for your processes so as to avoid bureaucracy. We have already talked about some processes used by Amazon such as: team of two pizzas, customers, self-service, parameters and so on. Always remember that process simplicity is the cure for bureaucracy.
- Try as much as you can to automate processes starting from mathematical equations to define and measure them. Formula: 1) choose a key process, 2) define the factors that influence the process (parameters), 3) create a formula using variables. Example: 1) average time in which a technician completes a job, 2) average time for the technician to move from one job to another, 3) percentage of times a repair is completed in a visit. The resulting formula would be: 8 hx the percentage of completion at the first visit / average completion time + average time between two jobs = actual daily capacity. In this way each variable becomes a parameter, you can analyze the various problems that influence each of them and build better processes.
- Use the new technology to better understand the customer experience and find new ways to improve it also through experiments, such as Amazon Dash Wand or Amazon Go: a chain of stores with which Amazon aims to provide a simplified shopping experience.
- It always integrates IT security in the creation and planning of new processes or technologies, avoiding audits and inspections.
- Define a planning process in which:
- the various teams analyze the results obtained,
- identify the objectives for the next year and the required budget,
- management prepares a strategic plan and all teams must explain how they will support it,
- ideas for improvements or innovations are defined,
- deep reflection is encouraged, plans are put in writing,
- the meetings begin by carefully reading the plan,
- the process is defined so that all teams are tied to the overall strategy,
- you have an overview of all the projects that the various teams are working on.
The main element is clarity.
- Divide the staff directly and indirectly. At Amazon, direct employees are those who help the company grow or innovate processes, indirect employees are management, customer support, etc. in this way the best ideas are assigned to the direct staff while the indirect one is improved or eliminated as needed. This process is important for planning growth and innovation.
- As the leader of a digital company you must always be aware of new technologies and discuss them with your technical team. Invest in customized software.
- Study and take advantage of artificial intelligence and discover new ways in which you can facilitate and simplify your processes.
Best apply the listed strategies
- Maintain high-speed decision making. Divide the decisions into: one-way decisions, that is, which cannot be reversed and therefore require a slower decision-making process, and two-way, that is, reversible decisions. Employees should be encouraged to make two-way decisions without requesting approval to speed up decision making.
- Define a precise and not rushed hiring process, which also analyzes the candidate’s growth abilities. Amazon is appointed to an employee, outside the hiring team, specifically trained to analyze the candidate and evaluate whether he will be able to grow and adapt to new roles or new areas of competence of the company.
- Put your ideas in writing through complete and precise descriptions, abandon the presentations with the slides. The description of an idea as if it were a narrative is a reinforcing function that leads to clarity.
- Clearly announce future plans. Amazon creates an internal press release to announce the new products, so as to better define the objectives and requirements and communicate them clearly to the whole company.
- Before starting a project, he creates a series of questions and answers for the user but also for the employees of the company. In this way, new ideas are discovered to improve the product or its operation is clarified.
- Before creating a product, create “characters” (the type of customer for the product) and “travel maps” (the description of the customer’s life before and after the product) to identify key problems or unmet requirements .
- Create innovations by improving the content learned, for example create a reading club as a group activity to broaden the points of view.
- What are the key elements of your brand and what are the promises you make to the customer? Always try to keep them constant by creating parameters to measure and manage them.