(Seems like there was an error in my counting somewhere so I have fixed the number of days in the post title now)
This is the concluding part of this 2-part series on Ram Charan’s The Amazon Management System. As was earlier mentioned, its an easy read and gives a good insight on the working of the company that is pioneering in many ways.
Amazon continues to amaze the management consultants worldwide. Like all management writing, the book keeps mixing Amazon with Bezos’ personality as is the case with every first gen entrepreneur’s successful venture.
Ram Charan’s book is no different. He dissects the entire mantra of Amazon’s success and consolidates them into six building blocks. They are detailed below –
- Building Block 1 – Customer Obsessed Business model: The book emphasizes that over the years Amazon has built a strong culture of customer orientation. For everything, customer is kept as the center of Amazon’s universe. Bezos believes that companies that stay focused on customer are always going to be relevant. So, he has driven this culture in the company. That is visible in almost all businesses that Amazon runs. However, the book does not tell why did this strategy not work in the multiple cases where the company failed.
- Building Block 2 – Continuous Bar-Raising Talent Pool: Ram Charan emphasizes that Amazon and Bezos invest a lot in hiring the best talent in the market. The system shown by Ram Charan highlights the concept of ‘bar-raiser’ in the interview panel. The purpose of the bar raiser is to try to assess whether the new hire is going to raise the talent bar in the company or not. An interesting concept that the book explores is that of ‘Builder vs Owners’ to provide an insight into the environment that is stitched around this talent pool.
- Building Block 3 – AI powered Data And Metrics System: The book dedicates a very significant portion to the various metrics that help in deciding the every aspect of decision making and day to day working of the organization. The key thing is that these metrics are ultra-detailed. In one example, the metrics run into 25 pages, scaled down from 70 pages. Topped with almost real-time delivery, this makes it easy to make instant decision, rather than making monthly or quarterly decisions. This one aspect differentiates Amazon in many ways from others. The mere access to information with very thin hierarchy makes it easy for teams to make decisions. Another aspect covered is the empowerment done at the right levels. For example, the book reflects upon the significance of having the front line staff to make decisions on product listing etc or even removal. This is not routine in many places. But is commonplace in Amazon. Perhaps due to the large size of catalogue.
- Building Block 4 – Ground-Breaking Invention Machine: What is really clear is the fact that Amazon is an radical innovation and ground-breaking invention machine. As compared to many other companies that have one big invention and then years of complacency, Amazon has only increased its bouquet of radical inventions. This is emphasized in the book with the invention process instilled in the culture of the company –
- Thinking really big
- Use of a Press Release kind of deep dive document
- Acceptance of failure as a pillar for success, not just in words
- Immense appetite and patience for things to shape up
- Building Block 5 – High-velocity and High-Quality Decision Making: The book further goes to identify decision making as a key to the high velocity that the company has achieved in execution. Once an idea has been successfully agreed upon then execution requires very quick decision making. Bezos practices (and so does Amazon), the principle of ‘Disagree and commit’. The decision making has a tiered view, as per the book , – reversible and irreversible decisions. Reversible are highly decentralized as there is a state of return in case of a failure. Irreversible ones are the ones where decision making is more centralised and so involves the top leaders from the company. However, speed is kept as the essential element of overall decision making irrespective of the nature of the decision.
- Building Block 6 – Forever Day-1 culture: Lastly, Ram Charan highlights the fabled ‘Day 1 culture’ imbibed in the organization. The best way to summarize is the excerpt from the book where it quotes Bezos –
‘Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by Death. And that is what it is always Day 1.”
The book further emphasizes on the 14 Amazon leadership principles of –
- Customer Obsession
- Invent and Simplify
- Are Right, a Lot
- Learn and Be Curious
- Hire and Develop the Best
- Insist on Highest Standards
- Think Big
- Bias for Action
- Earn Trust
- Dive Deep
- Have backbone; Disagree and Commit
- Deliver Results
You can read through from their careers site here.
The book is a good and easy read as I already mentioned. However, there are many things it doesnt answer.
- What external factors helped in Amazon’s success?
- Why were the stock pile of failures is so high if the building blocks are so strong?
- The book is silent on all the articles that were published about the working culture within the company.
- Aspects like marketing that propelled the organisation.
- And many more…
Below are my lessons from the book.
- Amazon has a very deep market research thinking in its DNA – One of the key findings that I saw in the book was the emphasis on data-driven decision making. The Building Block 3 gives a broader view of the AI implementation and the metrics based organisational thinking. This also means Amazon is tracking much more data that we imagine we are knowingly providing it. Here is an article that tells you what all Amazon tracks. Its amateurish in writing but takes the point home.
- Amazon has strong execution orientation with rigor coming from the top i.e. with Bezos himself – Quite often I come across a lot of talented people who soon in their career decide that they do not want to ‘get their hands dirty’ and are more interested in managing others or for ‘strategic’ work. What the book clearly demonstrates is the ability of Amazon to build execution focus at scale with ‘no exceptions’. I think this is a very important lesson that people at various stages of their career can learn from the book.
- Engineers have a unique ability to simplify management work – Old saying says managers create work. I also see it happening in multiple realms of life – at work, in conversations with my friends etc. However, with the different books I have studied (this is fifth after Steve Jobs, From Zero to One, Losing my Virginity and How Google Works), my conclusion is that engineers tend to simplify things. This one aspect makes them better at managing things at scale.
- Amazon may have a succession problem in the post Bezos era whenever it starts – The book is heavily shadowed by the Bezos personality. One can literally see the page after page where you feel that Ram Charan has cross border from the company to the founder. This to me is a problem. As it tells that Amazon may have a succession problem. There is hardly any discussion about any leader other than Bezos. While it would be naive to assume that there is no succession planning, it is important to explore, whether they would be able to continue this upward swing or not? This only time will tell.
The first part of this blog is here.
Stay tuned for more content in coming days… Stay safe and stay healthy!