What are the Amazon Leadership Principles that have helped to make Amazon one of the most successful companies in the world? What Can We Learn From Jeff Bezos' Leadership Style?
As the creator of Amazon, the 18th biggest company in the world (Forbes Global 500 2018) it is not surprising that lots of people want to know about Jeff Bezos.
Since founding the business in 1994 with nothing more than a business plan, he has grown Amazon from zero to an annual turnover of $178,000,000,000 in just 25 years.
It is a phenomenal feat of entrepreneurism by anyone’s standards and it has spawned hundreds of articles, blogs, books, and videos about the man, what makes him special and what we can learn from him.
When a business has grown so quickly, adapted so quickly to market demands, and adopted the practices that support such dramatic change it is clear that its leaders are adept at the leadership skills identified in my first two articles:
Leadership for Change and 7 Leadership Qualities to Drive Change
So how to make this piece different?
I think it is important to do two things. Firstly, separate fact from fiction, and secondly look at how Bezos has been consistent and how he has evolved.
The popular story is that Amazon was started by Bezos in his garage. But this American Dream portrayal of the story is misleading and not helpful if you want to get at the real lessons.
Bezos was a well-educated and well-trained investor. Having graduated from Princeton his career enabled him to experience the creation of international trade networks at Fitel, which led to him becoming head of customer service. He then moved into banking and finally, before starting Amazon he joined a hedge fund and became a senior vice president of the company by the time he was 30.
It was then he came up with the idea, that would become Amazon, and left to start up his business.
His vision for Amazon was born out of his career experience and his business experience gave him the confidence to create a credible business plan he could pitch to potential investors.
The story that he started Amazon in his garage is wildly misleading because it implies, he had little money. But this is not the case.
There are a number of stories about how he got started. They range from him meeting with 60 of his friends, family, and contacts and raising £1mn dollars, to his parents trusting him with most of their life savings, in the region of $300,000.
So this is no rags to riches story.
What this period of Bezos’s Illustrates is the importance of belief in your resourcefulness, the vision to see an opportunity, the ability to pitch an idea, and the courage to take the first step.
In the various books and articles, to which Bezos has contributed, he is very open about the role his parents, grandparents and early life experiences played in helping him to form the ethos of Amazon.
In an interview with the Miami Herald he refers to his grandfather’s “fix and mend” approach to life on the family farm. Whether it was fixing machinery or tending to the needs of the livestock he figured it out himself. A philosophy Bezos took with him and firmly embedded in the Amazon culture.
Another of Bezos’s foundation stones is his focus and attention to customer service. It was his belief that the internet provided an opportunity to improve the lives of Amazon’s customers, that was the initial impetus for his thinking. But by 1999 his approach to the internet had changed.
In an interview with CNN in 1999 he reveals this change in his thinking, much to the bemusement of the interviewer. The internet was no longer a driver of the business, but a tool by which amazing customer experience could be delivered.
This interview shows the fundamental difference that Bezos brought to Amazon that enabled it to become so successful. While most CEOs of publicly quoted companies are driven by shareholder value, Bezos is driven by customer value.
His argument being that shareholders will get their returns if the customers are happy and the customer base is growing.
This is a very similar approach to Steve Jobs at Apple. His intuition was about the experience consumers wanted with their IT products.
Bezos’s intuition led him to focus on the service customers wanted from their shopping experience.
To drive this home, he had to buck the pressure from the institutional investors and back his own judgment by opening vast distribution centers with large numbers of employees.
This was a very different business model to the original plan and emerged in Bezos’s thinking as he learned what it would take to deliver the customer experience, he knew people wanted.
Suddenly Amazon was investing in property and cutting-edge developments in IT technology because the services he needed to deliver the online customer experience didn’t exist anywhere else. They had to be invented by Amazon. As of March 2018, Amazon had over 7,500 patents in technology.
The 14 company values that are the backbone of the business and ensure that Bezos’s vision and ethics are lived to, can be found on the Amazon’s jobs website.
Called the Amazon Leadership Principles they clearly set out what is expected of every employee at every level in the business, they have served to attract the type of employee and leader that Bezos wants in the business to take it forward.
But these principles have also created problems for Amazon, with accusations of their workers being driven to work at unsustainably high levels and at low rates of pay. And in 2014 this led to Bezos being described as the “World’s worst boss” by the ITUC. Another similarity he shares is with Steve Jobs, who was also widely regarded as a terrible boss to work for.
In the following video with Business Insider filmed in 2014 Bezos talks about his leadership principles and how they've helped him succeed.
When Bezos started Amazon his business plan was very specific, to sell books cheaply online and disrupt the existing retail book market.
As this strategy worked, he realized that music and video could also be sold on the Amazon platform.
In this interview with Bloomberg he explains what propelled him to diversify into different product areas.
A simple email to 1000 Amazon customers, asking what else they would like to buy. In short market research. But something else emerged.
As the need for robust IT infrastructure grew it was realized that they were now sitting on a physical and intellectual resource they could leverage.
And Amazon Web Services was born. In 2018 it accounted for $26Bn, approximately 15% of the total.
As the core Amazon customer base increased, they realized that they could rival Apple’s iTunes and offer streaming media. This ultimately led to them becoming mainstream program producers for their own online TV channel. Most notably when they took the Top Gear franchise after the BBC canceled the show.
Amazon now has many other commercial interests including grocery retail both online and with a revolutionary new, automated, staff-free shopping concept, Amazon Go .
One of the biggest innovations was to open the Amazon online platform. Firstly, to self-publishing authors, this revolutionized the publishing industry and as a result, against all predictions of just a few years ago, more books were published by more new authors than ever before. This has driven a growth in book buying, again against predictions.
Secondly, he made it possible for small online sellers to sell their products through the Amazon platform. At a stroke massively increasing the product range that can be accessed and as a result, further growing the customer base.
With imagination, determination and a dogged commitment to Amazon's Leadership Principles Bezos has pushed Amazon out of the normally defined categories of business; as this narrow-minded interviewer (repeated from earlier) discovered when he tried to trap Bezos into admitting that he was confusing his investors.
There has been so much analysis of Bezos and his leadership style and Amazon's leadership principles that it would be impossible to list all of the lessons distilled by all of the writers and commentators who have been interested in his achievements.
It can also be difficult to see how the practices of a multi-multi-billionaire are in any way applicable to a small business, a not for profit or an individual in a career. But they are!
I believe these are the key skills that Bezos possesses and that you must develop, if you want to create a successful enterprise, at any level.
Bezos did not set out to be a multi-billionaire, his objective was to make it easier and cheaper to buy books by breaking the stranglehold of the traditional publishing companies.
Once he had achieved that he saw that it could be done with other markets and he then had the credibility and resources to make it happen.
Amazon's leadership principles provide plenty of lessons you can apply whatever the level of your business or professional career.
Dene Stuart:
Dene Stuart is the founder of the Exceptional Leader Academy. Through his experiences of a 35-year commercial career as a leader in the corporate world and as an employer in his own businesses, he has identified 7 key principles of Exceptional Leadership and the skills you must develop if you want to be truly effective as a leader. He has captured these principles in The Exceptional Leader Inventory which you can download FREE from exceptionalleaderacademy.com
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