Notes: Working Backwards - 1 | Summaries: Must Read Books for Entrepreneurs - Entrepreneurship PDF Download

Summary

• “Working Backwards” by Colin Bryar and Bill Carr (2021) is a book that explores the principles and processes that internet juggernaut Amazon.com has employed to become one of the most successful companies in history. The authors are highly qualified to write about Amazon’s business practices; both served a cumulative 27 years as senior executives within the company and worked directly with founder and CEO Jeff Bezos. Both are firm in their conviction that “Amazon’s concrete, replicable principles and practices can be learned by anyone and scaled throughout a company.”
• Amazon’s success is, in part, attributable to two key ideas: the company’s long term perspective (and willingness to take big risks and not worry about short term results) and its singular, obsessive focus on the end-customer. The book’s title refers to the Amazon practice of “working backwards” from the optimal customer experience in order to develop compelling goods and services. [Note: critics of the company might argue that Amazon's success is predicated on anti-competitive behavior, anti-union labor practices, cutthroat pricing, and tax avoidance schemes--these might be valid criticisms but they are not the focus of this book.]
• The book is divided into two parts. The first part describes the specific principles and processes that Amazon uses to succeed, innovate and gain a competitive advantage in the marketplace. In many ways, these processes are innovations in themselves—they certainly buck the conventional wisdom adhered to by other corporations. In this part of the book, readers learn about the Amazon Leadership Principles (a set of 14 guiding values), planning process, written narratives (used in lieu of PowerPoint), product development process, hiring process, and autonomous teams led by single-threaded leaders who are laser-focused on a single task or responsibility. The goal is to cultivate a scalable, fast, autonomous organization, clear-thinking, and smart organization that is highly adaptable and good at spotting, vetting, and executing on new opportunities.
• The second part of the book looks at four case studies consisting of four important product launches and how the principles and processes covered by the first part of the book were instrumental in the business rationale and development process. Readers learn about the development of the Kindle eBook platform (Amazon’s first digital media business), the Prime membership program (Amazon’s consumer loyalty program that ignited retail sales growth), Prime Video (which helped the company transition from physical media to digital media), and AWS (the web services division that came to dominate present-day Amazon’s revenue).
• I’m not sure how broad the appeal of this book will be, which is a shame as I thoroughly enjoyed it. There’s a great deal of institutional wisdom along with practical (albeit unconventional) thinking for curious readers to chew on. Outside observers might focus on Amazon’s big product innovations, their stellar revenue growth, and stratospheric market valuation. But, as the authors so capably remind us, these are merely outputs—the logical consequences of the “invention machine” that Jeff Bezos and his team built. The real innovations are under the hood: the institutional culture and corporate mechanisms that enable innovation, invention, and smart-decisions to flourish.
• Pros: Part 1 is info-dense and introduces a range of novel corporate practices in great detail. The narratives (six-pagers and PR/FAQ) which replace PowerPoint for meetings and presentations are of particular interest.
  Cons: Subject matter may only appeal to a narrow audience. Part 2 is good, but could have been abbreviated or better incorporated alongside Part 1.
  Verdict: 7/10

Highlights

Introduction

• Amazon’s success is attributable to it’s long-term perspective and singular focus on the end-customer.
• Per Jeff Bezos, the company culture is based on four things:
  1. Customer obsession instead of competitor obsession.
  2. A willingness to think long term (with a longer investment horizon than competitors).
  3. An imperative to invent—and accept the frequent failures that arise from this objective.
  4. Professional pride in operational excellence.
• Jeff Bezos: “We need to plant many seeds because we don’t know which one of those seeds will grow into a mighty oak.”
• Book aims to explain “Amazon’s peculiar behavior and how it has produced exceptional results.”
• “Amazon’s concrete, replicable principles and practices can be learned by anyone and scaled throughout a company.”

Part 1: Being Amazonian

This part of the book explores the principles and processes that Amazon uses to invent and innovate.

Chapter 1. Building Blocks: Leadership Principles and Mechanisms

• “Amazon established a set of principles and mechanisms, enabling the company to grow from a single founder to several hundred thousand employees while remaining stubbornly true to its mission of obsessing over customers to create long-term shareholder value.”
• Amazon’s Leadership Principles are ingrained in every significant process and function at the company.
• Jeff Bezos: “You can write down your corporate culture, but when you do so, you’re discovering it, uncovering it—not creating it.”
• Amazon’s 14 Leadership Principles:
  1. Customer Obsession: “Leaders start with the customer and work backwards.”
  2. Ownership: “Leaders are owners. They think long term...”
  3. Invent and Simplify: “Look for new ideas from everywhere...”
  4. Are Right, A Lot: “They seek diverse perspectives and work to disconfirm their beliefs.”
  5. Learn and Be Curious: “Leaders are never done learning...”
  6. Hire and Develop the Best: “Leaders raise the performance bar with every hire and promotion.”
  7. Insist on the Highest Standards: “Leaders have relentlessly high standards...”
  8. Think Big: “Thinking small is a self-fulfilling prophecy.”
  9. Bias for Action: “Speed matters in business. Many decisions and actions are reversible and do not need extensive study.”
  10. Frugality: “Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention.”
  11. Earn Trust: “They are vocally self-critical, even when doing so is awkward or embarrassing.”
  12. Dive Deep: “Leaders operate at all levels...no task is beneath them.”
  13. Have Backbone; Disagree and Commit: Respectfully challenge decisions, show conviction, don’t compromise out of convenience, but commit fully once a direction is set.
  14. Deliver Results: “Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion.”
• Mechanisms: The processes through which the Leadership Principles are realized.
  • “Good intentions don’t work. Mechanisms do.”
  • Amazon’s mechanisms translate the principles into action.
  • Three key mechanisms for the senior management team:
• Annual planning
  • Requires 4-8 weeks. Begins the summer before the calendar year (with the executive team, aka “S-Team).
  • “This intensity is deliberate, because a poorly defined plan—or worse, no plan at all—can incur a much greater downstream cost.”
  • High-level objectives are defined and then business units and divisions develop their own operating plans.
• Goals planning (S-Team goals)
  • Executive team reviews the operating plans from different corporate divisions/business units and select the most important ones to prioritize.
  • Goals must be Specific, Measurable, Attainable, Relevant, and Timely (SMART).
  • “Goals are aggressive enough that Amazon only expects about three-quarters of them to be fully achieved during the year.”
  • Most corporate executives focus on big-picture, high-level matters. Amazon executives focus on execution details (per the Deep Dive leadership principle).
• Compensation plan
  • Amazon eschews standard “performance-based” executive compensation.
  • Amazon sets a maximum base salary of $160,000 for all employees (some executives may receive signing bonuses).
  • The bulk of employee compensation is in Amazon equity. This aligns and rewards employees with the long-term success of the company.

Chapter 2. Hiring: Amazon’s Unique Bar Raiser Process

“When you consider the potential positive and negative impacts of an important hire, not to mention the precious time dedicated to it, it is shocking to consider how little rigor and analysis most companies put into their hiring process.”

• Problems with conventional hiring approaches:
  • Interviewers often lack a clear objective and ask questions that do not help with uncovering ideal candidates.
  • Interviewer feedback is not written down, not specific-enough, and not targeted enough (no specificity nor purpose).
  • Unstructured meetings a susceptible to groupthink and confirmation bias resulting in suboptimal hiring decisions.
  • Short-term costs are that positions are not filled. Long-term costs are that poor hires are made damaging the company for long periods of time.
• The Bar Raiser: The name for Amazon’s hiring process.
  • Amazon believes its approach to hiring gives it a big competitive advantage.
  • It is a “scalable, repeatable, formal process for consistently making appropriate and successful hiring decisions.”
  • Amazon Bar Raisers are employees who receive special training regarding the hiring process.
  • These trained individuals are always involved in the hiring process.
  • “Every new hire should “raise the bar,” that is, be better in one important way (or more) than the other members of the team they join.”
• Key steps in the Amazon hiring process:
  • Job description: You cannot hire the right person for the job if you don’t have a clearly defined job description. This is an essential point-of-reference for interviewers. “A good description must be specific and focused.”
  • Resume Review: Resumes should meet the requirements spelled out in the job description.
  • Phone Screen: 45-60 minute call with the hiring manager (once resumes are screened). Based on initial data, hiring manager decides if they would be inclined to hire the candidate based on preliminary data. If so, the candidate will be invited to the next step.
  • In-House Interview Loop: 5-7 hours of in-person interviewing. Includes hiring, manager, recruiter, and a Bar Raiser (highly trained interviewer). Ideally 5-7 interviewers—all participants will have some interview training. No participants will be more than one level below the position of the candidate’s position. Pool of interviewers should not include the prospective boss.
  • Behavioral interviewing: The process of evaluating a candidate’s past behavior and their compatibility with Amazon’s Leadership Principles. Each interviewer is assigned one or more of the 14 Principles to focus on in their interview (in order to learn how specifically the candidate aligns with the assigned principle).
  • Example: “Can you give me an example of a time when your team proposed to launch a new product or initiative and you pushed back on their plan because you didn’t think it was good enough?”
• STAR questions (Situation, Task, Action, Result):
  • What was the situation?
  • What were you tasked with?
  • What actions did you take?
  • What was the result?
• The Bar Raiser: Coaches others on interviewing techniques and helps the team make an optimal, objective hiring decision.
• Written Feedback: Interviewers generate detailed notes “as close to a verbatim record as possible.”
  • Note comprise the feedback you share with fellow interview loop participants.
  • Written feedback must be thorough, detailed, and specific.
  • The report should be written shortly after completion of the interview.
  • Oral feedback is unacceptable.
  • Written feedback includes hiring recommendation based on four possible options: strongly inclined to hire, inclined to hire, not inclined to hire, or strongly not inclined to hire.
  • Interviewers do not discuss their feedback until submitting their own report (to avoid bias).
• Debrief/Hiring Meeting: After written feedback is submitted, the interview team meets to debrief and make the hiring decision. Team reviews interview feedback and has a chance to change their vote based on the cumulative information.
  • “The Amazon debrief meeting is an opportunity for each interviewer to learn from others and develop their ability to assess talent.”
  • Bar Raisers often spend more time coaching the interview team than reviewing the candidate (per the Amazon emphasis on internal learning and improvement).
• Reference Check: This step only confirms the hiring decision. It is de-emphasized in the Amazon process.
• Offer through Onboarding: The hiring manager makes the offer and sells the opportunity to the candidate (not the recruiting manager). “You may have chosen the candidate, but that doesn’t mean the candidate has chosen you.”

Chapter 3. Organizing: Separable, Single-Threaded Leadership

• Velocity, a measure of speed and direction, is critical for a business.
• “With all other things being equal, the organization that moves faster will innovate more, simply because it will be able to conduct a higher number of experiments per unit of time.”
• Single-Threaded Leadership is Amazon’s mechanism whereby individuals are responsible for single, focused initiatives.
  • These leaders have specialized responsibilities rather than a broad set of responsibilities.
  • They run teams that are largely autonomous.
• Dependencies can slow down innovation and the rate at which corporate teams operate.
  • When a team cannot operate independently, its progress slows to whatever or wherever the gating dependency resides.
  • As organizations become more interdependent and complex, an inordinate amount of time is spent on internal communication and coordination.
  • Tightly coupled systems occur when a software architecture contains a large number of technical dependencies.
• Amazon-specific dependencies that needed to be overcome:
  • Shared code: Early on, Amazon had a single monolithic program called Obidos.
  • Shared data: Similarly, Amazon had a single database for products, orders, shipments, etc. called “ACB.”
  • Organizational: Teams had to navigate bureaucratic layers to secure project approval, prioritization, and resource allocation.
• “Too much of any kind of dependency not only slows down the pace of innovation but also creates a dispiriting second-order effect: disempowered teams.”
• Amazon determined that improving coordination and communication doesn’t resolve the problem of dependencies.
  • Amazon instead looked to eliminate dependencies.
  • Per Jeff Bezos: Eliminate communication rather than encourage it in order to make Amazon a place where “builders can build.”
• Amazon switched to a modular system that reduced tightly coupled dependencies.
  • Software teams built API interfaces (application program interfaces) for their systems and services.
  • “An API is a set of routines, protocols, and tools for building software applications and defining how software components should interact.”
• “Morale is...an output metric, whereas freedom to invent and build is an input metric. If you clear the impediment to building, morale takes care of itself.”
• Two-Pizza Teams: An early Amazon approach to creating more autonomous teams.
  • Teams were no bigger than the number of people who could be fed by two large pizzas (no more than 10 people).
  • Amazon’s software architecture was highly influenced by this approach (e.g. modular APIs for services and data).
  • “The solution is to encapsulate, that is, assign ownership of a given block of code or part of a database to one team. Anyone else who wants something from that walled-off area must make a well-documented service request via an API.”
  • The menu analogy for APIs: When a diner visits a restaurant, they don’t go into the kitchen and prepare their own meal. The diner orders off a menu and requests what they want. The request goes to the kitchen where the meal is prepared. What occurs in the kitchen is entirely up to the staff, their only obligation is to deliver what you requested.
  • “Today the advantages of a microservices-based architecture are well understood...the benefits include improved agility, developer productivity, scalability, and a better ability to resolve and recover from outages and failures.”
  • These teams worked best for product development (technical teams). They didn’t work so well for other functions.
  • This approach was later replaced with single-threaded leadership (see below)
• Additional observations on autonomous teams:
  • Autonomous teams are built for speed.
  • If an autonomous team is poorly aligned, they can veer off course quickly.
  • Autonomous teams should have a clearly defined purpose, clearly defined boundaries, and useful metrics for tracking progress.
  • It’s up to the team to figure out the specifics of how they will achieve their goal.
  • The most successful teams made initial investments in removing dependencies and building infrastructure and instrumentation before adding new features (aka they laid the groundwork for future innovation).
  • Start slow in order to move fast.
• Jeff Bezos: “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...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.”
• Single-Threaded Leaders
  • Leaders whose focus is to get a specific job done. They don’t work on anything else.
  • “Separable, single-threaded teams have fewer organizational dependencies than conventional teams.”
  • Dave Limp (Amazon SVP): “The best way to fail at inventing something is by making it somebody’s part-time job.”
  • Ask yourself: Is your team autonomous? Can they roll out changes without coordination or approval from other teams?
• “Be stubborn on the vision but flexible on the details.”