There is a sign outside the first Australian warehouse for Amazon which says in enormous letters “Welcome Amazonians. It’s still day one! Are you ready to make a difference?”
The sign was proudly set down at the entrance – exactly where employees would walk in from the car park — according to the first photos of the Dandenong South site.
To Australians, this might seem a strange thing for a company to say to its employees. Who wants to be trapped at a workplace where it’s always the same day?
The slogan is well familiar in Amazon’s home base in the US, where it has been used for two decades to motivate both employees and shareholders. So what does it mean and where does it come from?
Amazon became a public company in 1997. That year founder and chief executive Jeff Bezos wrote a letter to shareholders — something that he has since done regularly – which outlined his vision for the firm.
“This is Day 1 for the internet and, if we execute well, for Amazon.com,” he wrote at the time.
“Today, online commerce saves customers money and precious time. Tomorrow, through personalisation, online commerce will accelerate the very process of discovery.”
Bezos explained how the company was “all about the long term” in solidifying and extending its early lead in the online retail market.
“The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity and correspondingly stronger returns on invested capital,” he said.
“Because of our emphasis on the long term, we may make decisions and weigh trade-offs differently than some companies.”
And despite acknowledging that the approach was “not without risk” and needs “serious investment and crisp execution” against the incumbent retailers, Bezos has immovably stuck with the long-term strategy since.
Hence Amazon has been, and still is, in “day 1”.
It may have put some investors offside 20 years ago, but in retrospect, there aren’t many arguments against the day 1 strategy. Amazon floated on the NASDAQ in May 1997 with a first day closing share price of $US1.96, adjusted for splits. Today the stock price is at $US1,105, which is a mind-blowing 563-fold increase.
In its latest quarterly results, Amazon beat market expectations to post $US43.7 billion in revenue. The company is forecasting between $56 billion and $60.5 billion for the lucrative Christmas quarter, which would be 28% to 38% growth from the same time last year.
Bezos briefly became the wealthiest person in the world in July, and retook that title five days ago with $117 billion to his name.
Perhaps this meme that went viral this year sums it up best:
So will Amazon ever get to Day 2? Bezos addressed this hypothetical in this year’s letter to shareholders.
“I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic,” he wrote in April.
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Bezos said that established companies may spend decades in day 2, but “the final result” always comes after that.
He admitted that he didn’t have all the answers to avoiding day 2.
“Here’s a starter pack of essentials for Day 1 defence: customer obsession, a sceptical view of proxies, the eager adoption of external trends, and high velocity decision making.”
You can read below Bezos’ full explanation of each of those four essentials:
True Customer Obsession
There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.
Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. 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.
Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen.
As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2.
A common example is process as proxy. 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. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. 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.
Another example: market research and customer surveys can become proxies for customers — something that’s especially dangerous when you’re inventing and designing products. “Fifty-five per cent of beta testers report being satisfied with this feature. That is up from 47% in the first survey.” That’s hard to interpret and could unintentionally mislead.
Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you’ll find on surveys. They live with the design.
I’m not against beta testing or surveys. But you, the product or service owner, must understand the customer, have a vision, and love the offering. Then, beta testing and research can help you find your blind spots. A remarkable customer experience starts with heart, intuition, curiosity, play, guts, taste. You won’t find any of it in a survey.
Embrace External Trends
The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.
These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organisations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.
Over the past decades computers have broadly automated tasks that programmers could describe with clear rules and algorithms. Modern machine learning techniques now allow us to do the same for tasks where describing the precise rules is much harder.
At Amazon, we’ve been engaged in the practical application of machine learning for many years now. Some of this work is highly visible: our autonomous Prime Air delivery drones; the Amazon Go convenience store that uses machine vision to eliminate checkout lines; and Alexa, our cloud-based AI assistant. (We still struggle to keep Echo in stock, despite our best efforts. A high-quality problem, but a problem. We’re working on it.)
But much of what we do with machine learning happens beneath the surface. Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type — quietly but meaningfully improving core operations.
Inside AWS, we’re excited to lower the costs and barriers to machine learning and AI so organisations of all sizes can take advantage of these advanced techniques.
Using our pre-packaged versions of popular deep learning frameworks running on P2 compute instances (optimised for this workload), customers are already developing powerful systems ranging everywhere from early disease detection to increasing crop yields. And we’ve also made Amazon’s higher level services available in a convenient form. Amazon Lex (what’s inside Alexa), Amazon Polly, and Amazon Rekognition remove the heavy lifting from natural language understanding, speech generation, and image analysis. They can be accessed with simple API calls — no machine learning expertise required. Watch this space. Much more to come.
High-Velocity Decision Making
Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organisations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business — plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.
First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong? I wrote about this in more detail in last year’s letter.
Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognising and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.
Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.
This isn’t one way. If you’re the boss, you should do this too. I disagree and commit all the time. We recently greenlit a particular Amazon Studios original. I told the team my view: debatable whether it would be interesting enough, complicated to produce, the business terms aren’t that good, and we have lots of other opportunities. They had a completely different opinion and wanted to go ahead. I wrote back right away with “I disagree and commit and hope it becomes the most watched thing we’ve ever made.” Consider how much slower this decision cycle would have been if the team had actually had to convince me rather than simply get my commitment.
Note what this example is not: it’s not me thinking to myself “well, these guys are wrong and missing the point, but this isn’t worth me chasing.” 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.
And given that this team has already brought home 11 Emmys, 6 Golden Globes, and 3 Oscars, I’m just glad they let me in the room at all!
Fourth, recognise true misalignment issues early and escalate them immediately.
Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.
I’ve seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third party sellers to compete directly against us on our own product detail pages — that was a big one. Many smart, well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team.
“You’ve worn me down” is an awful decision-making process. It’s slow and de-energizing. Go for quick escalation instead — it’s better.
So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world’s trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.