Did you know that Amazon started with only five employees who were responsible for the technical part of the website? It 's true! In the beginning the company could only count with a few workers that didn't even have a desk to work.
And so? What did Jeff Bezos do to make his company grow? Well, Steve Anderson and Karen Anderson tell in their book, "The Bezos Letters", that the great founder of Amazon followed a few principles that worked as a formula to keep the company's constant growth.
Maybe you're not believing that Jeff Bezos has followed a formula that made Amazon one of the biggest companies in the world.
But what if we tell you that in Bezos' letters to his shareholders we can find several lessons that can make any business grow?
The letters from the visionary Amazon's founder can help any company in the world to achieve a new level.
Are you curious about the lessons drawn from Jeff Bezos' letters? Then, keep reading this summary and you will understand not only the logic behind the letters, but also learn how to apply it in any business or organization!
From the studies of Jeff Bezos' letters to the shareholders, Steve Anderson and Karen Anderson could drawn 14 principles that were applied by the Amazon's founder that can help any company grow.
In only 289 pages, the authors presented not only the principles, but also some facts about Amazon and some of the letters that were sent by Bezos to the shareholders.
Steve Anderson, one of the authors, is CEO and co-founder of the company Catalyit.
The author, a trusted authority on risk, has more than 35 years of experience helping the insurance industries to integrate and leverage technologies. He also works analyzing business management and social media.
Karen Anderson is a best-seller author who worked for the Wall Street Journal and USA Today. She also had several work experiences in the book industry, such as author, editor and specialist in direct response marketer.
This book is recommended for CEOs and new entrepreneurs who aim to grow their companies through the implementation of innovative ideas.
Michael Hyatt, CEO of Michael Hyatt & Company, claims that reading the book "The Bezos Letters" is like having Jeff Bezos as your business coach.
By reading this book you will learn the importance of:
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The authors explain that the principles presented in this book were not declared by Jeff Bezos or by Amazon.
However, to present the principles found on those letters, Steve Anderson and Karen Anderson studied the letters written by Bezos to the shareholders.
The authors' goal is to help other companies and organizations to grow by applying the 14 principles that were identified in the letters.
They claim that it was discovered Growth Cycles that repeat itselves and that were applied to almost every Jeff Bezos initiatives.
The Growth Cycles are: test, build, accelerate and scale. The 14 principles identified can be found in those four cycles.
Nothing new can be achieved without testing. Therefore, all Amazon's employees are encouraged to test new ideas to improve the company's performance.
But, do the employees really feel encouraged to test? What if they fail?
Well, if a test doesn't go as planned, no one gets punished. In fact, the workers are stimulated to study what didn't work in order to learn from what went wrong.
As it was explained in the book "The Bezos Letters", the testing cycle has three principles in order to be effective, and we will now check how each one works.
It is impossible to innovate without taking risks, and Jeff Bezos realized this from the beginning. Actually, few people know, but the great Amazon founder has already invested in ideas that made him lose millions of dollars.
But the point is, for Bezos, when we take risks and fail, we have the opportunity to learn from our mistakes and to apply what we have learned. In other words, we change what went wrong into a "successful failure".
Would you make room for third parties to sell the same products as you inside your company? It sounds like a bad idea, right?
Well, Jeff Bezos did that when he allowed other sellers to sell inside his business. The result? Every item sold by others within the website yielded 15% of sale price for the company.
However, he wouldn't be the businessman that he is, if he bit off more than he could chew.
The authors Steve Anderson and Karen Anderson explained that even when an idea has a lot of potential, Bezos bets low, he tests the limits and the results until the final investment is made.
As Jeff Bezos stated in one of his letters on 2015:
"One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment."
Therefore, do not create innovation departments. You should encourage experimentation at all levels of the organization. At Amazon, all the employees are stimulated to do experimentation.
That way, all workers should think about new ways of executing their tasks and make experiments.
For Jeff Bezos, invention and innovation require experimentation, and experimentation can lead to failure, but failures can result in learning and learning can result in a better idea.
At Amazon, the best ideas have to be transformed into initiatives. And the company generally invests in ideas that are based on what the clients want.
Steve Anderson and Karen Anderson enlightened in their book, "The Bezos Letters", that Jeff Bezos preaches the need to have a long-term vision, because every initiative needs to be built on a solid foundation that can last for several years.
In the build cycle, three principles are applied and they'll be explained below.
You might apply in your company the famous saying: "the client is always right". Well, Jeff Bezos takes this to a whole new level, he preaches obsession over the customers.
For Amazon, it is necessary to get into the customers' head in order to know what they want.
Clients that feel respected and well served generally buy again, and the best part of it, they bring with them new clients. Therefore, in order to make a company grow, it is essential to be customer obsessed.
What is the most important metric in your company? For Jeff Bezos, the data that matters the most are the ones related to customers and revenue growth. And that's the reason why Amazon applies long-term thinking.
By investing in long-term thinking, the company ends up focusing on the customers' experience, causing the membership rate to increase, even if this causes costs in the short-term.
Do you want your business to be big today or do you prefer it to be big over a long period of time?
The authors Steve and Karen claim that long-term thinking can be applied to any business and, to do so, all you need is to make a few adjustments.
Do you know what the flywheel premise is? According to Jeff Haden:
"The premise of the flywheel is simple. A flywheel is an incredibly heavy wheel that takes huge effort to push. Keep pushing and the flywheel builds momentum. Keep pushing and eventually it starts to help turn itself and generate its own momentum—and that's when a company goes from good to great."
And how can this be applied to a business? Well, first the company must set what the company goal is.
Then, what attitudes can help the company to achieve this goal. That way, all the company activities must be gears of spoke adding force to spin the flywheel to move your business where you want to go.
According to the book "The Bezos Letters", the flywheel premisse helps companies to focus time and effort only into activities that can push the company towards its goal.
If a product or idea has already passed through the test cycle or the build cycle, then it is time to accelerate. Accelerating means boosting growth.
Bezos makes it clear in his business that it is impossible to accelerate without making quick decisions.
The focus on accelerating is one of the reasons why Amazon has grown so much and in such a high-velocity.
Therefore, let's check which principles can accelerate a company's growth.
Are your employees authorized to make decisions? For Jeff Bezos, high-velocity decision making is essential for a business growth, therefore, everyone is empowered to make decisions.
This might sound confusing, but it's not. At Amazon, the decisions are divided into two types.
According to Steve Anderson and Karen Anderson, the type 1 decisions are those that need to be analyzed and that can cause irreversible consequences. The type 2 decisions are those that are reversible and can be changed without causing big losses.
Bezos strategy for decision making starts by recognizing that not all decisions should be treated in the same way. To make high-velocity decisions and maximize your return-on-risk, the first step is to understand the type of decision you have to make.
Therefore, all employees in the company are encouraged to make type 2 decisions. That way, those responsible for making type 1 decisions can have time to focus on the most important decisions.
And it doesn't matter whether a decision is type 1 or 2, the focus should always be on the customer.
Have you ever thought that having space for a lot of physical books is hard? Well, Bezos did it and invented Kindle. Now, whoever has a Kindle can buy several books, read them and keep them on the cloud, without taking up space at home and paying less for it.
What about Echo and Alexa? Being able to search, play music, do everything without having to do it manually.
For Amazon, great ideas are the ones that simplify what is complex. Therefore, always think about different ways to make the customers' lives easier.
Amazon would not be in the position it is today without investing in technology. And it's thanks to that investment that the company grows in an impressive way.
Technology evolves in an unparalleled way, and whoever is not ready to use it can end up becoming obsolete, thus, giving space to competition.
Technology is capable of accelerating time, therefore there is no time to evaluate risks and, with the rapid technological advancement, inaction is a bigger problem than action.
Every owner is cautious before making a decision. That way, Bezos encourages every employee to act as if they own the company.
In the book "The Bezos Letters", the authors present that encouraging ownership is part of Amazon's culture, and to make every employee feel like they own the company, some actions can be taken.
Jeff Bezos, for example, doesn't use the term "shareholders", he uses the term "shareowners" in order to make the investors feel part of the company. The employees can also receive stocks to feel like owners.
And there's more, every employee is free to make type 2 decisions, thus, this causes empowerment and ownership behaviour.
Owners take care of their business, that way, ownership attitude is a culture that preserves the company in the long run.
Scaling, for Jeff Bezos, means achieving growth without sacrificing who you are or what you offer.
In order to scale you have to commit to high standards and not sacrifice quality to achieve greater profitability. And to accomplish this, the company not only needs to have innovation as part of its culture, but also a willingness to take risks for the customer's benefit.
Scale is the last cycle, and after that it is necessary to start the process of testing new ideas again.
So, what about checking the last principles that were found on Bezos' letters?
Amazon has kept the same culture since the beginning of the company, even after having more than 600 thousand employees.
When Jeff Bezos was asked about how to preserve the company culture after all the growth, he replied:
"So, the real question for me is, how do you go about maintaining a Day 1 culture?"
The culture and mindset of "Day 1" are always present in Bezos' letters.
But what really is the "Day 1" culture? Bezos wrote in his 1997 letter:
"There's so much stuff that has yet to be invented. There's so much new that's going to happen. People don't have any idea yet how impactful the Internet is going to be and that this is still Day 1 in such a big way."
In other words, for Amazon Day 1 culture is to keep a startup mindset, always looking for innovation and high standards.
Have you ever wondered about your company's culture? Are your employees aware of it?
Whoever works in the business world has to keep this saying in mind:
"If you think it's expensive to hire a professional, wait until you hire an amateur."
The Principle 12 of the book "The Bezos Letters" presents that, the more a company grows, the more it should invest in high standards. And the only way to keep high standards is by hiring good professionals.
Once you lower your standards during a hiring process, your hiring standards will go down further and further.
Remember: a company that becomes mediocre can't keep up with high standards.
For Jeff Bezos, the metrics that matter the most are data and money. However, he doesn't trust only on data. Bezos likes to study anecdotal information to make sure that data is not misleading the company.
When the company is growing, data is essential. Even so, it's necessary to combine data with intuition and instincts. After all, intuition is a survival mechanism. And, if combined with data, it becomes a powerful weapon.
According to the authors Steve Anderson and Karen Anderson, there is a sentence that is always present in Bezos' letters:
"As always, I attach a copy of our original 1997 letter. It remains Day 1."
The concept of "Day 1" represents all the principles that helped Amazon to become the company it is today. That's a way to remember all the initial values and the obsession over the client.
The main goal of the startups is to gain clients and to outstand. That way, they explore every new opportunity to grow and attract clients. That's one of the main secrets for Amazon's growth.
Thus, always keep the mindset of a startup that seeks innovation and wants to win sales.
As we saw, one of the principles that Amazon follows is the obsession over the customer. Do you really know your customers? Do you know what their problems are and how to solve them? The reading of "Quem é Seu cliente" will help you to understand your current customers and how to achieve new sales.
And of course, Amazon wouldn't be nothing without the constant innovation encouragement. So, why don't you read "A Estratégia da Inovação Radical"? In this summary, the author Pedro Waengertner will teach you the principles used by the companies from the Silicon Valley to increase your profits.
Finally, Jeff Bezos makes clear in his letters that it is impossible to innovate without betting in new ideas and taking risks. But of course, dealing with failure is not easy. So, we suggest the reading of "How to Fail at Almost Everything and Still Win Big" to learn to change failure into success.
The 14 principles followed by Jeff Bezos were essential to make Amazon the company it is today, so, what about remembering some of the strategies that were emphasized in the book "The Bezos Letters"?
We were not joking when we said that reading this book is like having Jeff Bezos as your business coach, right?
We hope you can apply the principles found by Steve Anderson and Karen Anderson in order to make your company grow in the same way that Jeff Bezos did with Amazon.
And, if you want to read the complete book "The Bezos Letters", you can click in the image below:
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