The average large company dies at age 30 — Here are 4 strategies Jeff Bezos uses to make sure Amazon isn't one of them

Kim Kulish/Getty imagesAmazon is 24 years old. Jeff Bezos knows that if he isn’t careful, Amazon could be just another big company that dies by age 30. Here are the strategies he uses to make sure that doesn’t happen.
  • Jeff Bezos keeps talking about the fact that Amazon is going to die some day.
  • That’s because the average US public company only lives to be about 30 years old.
  • But there are some strategies leaders can use to stay innovative and delay a company’s death.
  • Bezos outlined 4 strategies he uses to stay in “Day 1,” the growth phase of a company, in his 2017 shareholder letter.
  • They are: true customer obsession, resisting proxies, embracing external trends, and high-velocity decision making.

“Amazon is not too big to fail. In fact, I predict Amazon will fail.”

That’s what Jeff Bezos, CEO and founder of Amazon, said to his staff during an all-hands meeting in 2018.

“Amazon will go bankrupt,” he continued. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years.”

Bezos is right. The average US public company is dying younger than ever, around age 30, according to Martin Reeves, a strategist who gave a popular TED talk about how to build a company that lasts for 100 years.

Another startling statistic: Reeves says 32% of companies won’t exist 5 years from now, whether they’re acquired or they flat-out fail.

How do you keep a company from dying?

Bezos says his goal is not to keep Amazon from dying, it’s to keep it from dying during his lifetime. To do this, he uses an innovation philosophy dubbed “Day 1.”

I recently gave a talk on Bezos’ Day 1 strategies at an Axel Springer Leadership Summit in Germany. Here’s the playbook Bezos uses to build a company that lasts.

Imagine if your CEO stood in front of your company and said, “We’re going to die.” That’s what Jeff Bezos has done over and over again.

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Bezos has repeatedly said that he expects Amazon will one day go out of business.

That’s not because the company isn’t doing great right now. It’s because if you look at the stats, all companies eventually die and get replaced.

It turns out companies are dying younger than ever. The average US public company only lives to be about 30 years old.

Alyson Shontell/Business Insider

Perhaps more startling: 32% of companies won’t exist five years from now, according to strategist Martin Reeves, who gave a TED Talk on how to build a 100-year-old company.

So, how do you delay a company’s inevitable death? Jeff Bezos’ answer:

Alyson Shontell/Business Insider

Bezos has been talking about Day 1 for decades. He works in a building on Amazon’s headquarters called “Day 1.”

Today, he signs his shareholder letters with, “It remains Day 1.”

“Day 1” is the innovation and growth phase of a company.

What’s Day 2?

If you’re a CEO, you don’t want to find out.

Bezos uses four strategies to “remain in Day 1.” The first is to delight customers.

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Bezos believes that if you’re truly obsessed with pleasing your customers, you will come up with innovations that they will love, that they never could have articulated.

“No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples,” Bezos wrote in his 2017 shareholder letter.

This belief is popular among innovators. Apple cofounder Steve Jobs famously disliked focus groups. He felt people often didn’t know what they wanted until you showed it to them.

The second strategy Bezos uses is to resist thinking, “We’ve always done it this way.” Don’t let your processes own you.

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You should constantly be questioning whether or not there’s a better way to do something, Bezos says.

“Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organisations,” Bezos wrote.

“You stop looking at outcomes and just make sure you’re doing the process right. Gulp… The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.”

Trying to hold on to the way things were is also a bad strategy. Instead, you should notice what’s happening in your industry and get on board.

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With the pace of technological change, no company can afford to hold on to the good old days and resist new trends.

It is better to disrupt yourself than to be disrupted. So if you notice things changing, get ahead of of it rather than resist it.

The final strategy Bezos recommends is to make decisions quickly. He uses a phrase with his leadership team, “disagree and commit” to help them get aligned on tough decisions.

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Ideally, a leader will feel 100% confident making a decision.

Unfortunately, this isn’t practical. And if you wait until you feel 100% confident or have all of the information, the opportunity will likely have passed and you’ll have moved too slowly.

Bezos points out that it’s often not that damaging to be wrong. Failures can be scaled back if you realise your error and move quickly.

What happens when your leadership team disagrees on a way forward?

Bezos uses a phrase “disagree and commit” to save time. He uses this when a consensus with his team not be reached, and a decision needs to be made.

It is not, however, an ask for the team (or him) to cave. It is instead a promise to get aligned after healthy discourse so the entire company can move forward productively.

“It’s a genuine disagreement of opinion, a candid expression of my view, a chance for the team to weigh my view, and a quick, sincere commitment to go their way,” Bezos says.

If you slip out of Day 1, you’ll wind up in Day 2. And then, RIP!

Alyson Shontell/Business Insider

An Amazon employee asked Jeff Bezos what “Day 2” means.

Day 2 is the beginning of the end.

“To be sure, this kind of [company] decline would happen in extreme slow motion,” Bezos explains of the Day 2 scenario.

“An established company might harvest Day 2 for decades, but the final result would still come.”

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