Driving Strategic Change at Amazon.com

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by: Idris Mootee

remember eight years ago I was speaking to a hundred or so of Organic
folks during one of our global meetings. I was talking about how
strategy happens and how disruptive business models emerge. Someone
from the audience asked me a question about how did Jeff Bezos came up
with this brilliant strategy of selling books online. I believed she
was asking about the thinking process sand if there is magic formula
that we can put to use for our clients. My answer was “The formula was
simple, quit your job and rent a car and drive across the country from
Chicago to Seattle. Make sure you stop and eat at the same places as he
did.” The audience laughed.

Over the years many had questioned the survivability of Amazon and questioned whether his strategy was sustainable. Today, the company has grown beyond an Internet start-up and becoming an institution. On a flight home from Chicago, I was reading the latest HBR story on Amazon and Bezos. This one is an interesting one. The
article looks into what’s different about strategy formulation at
Amazon and how do ideas come under consideration, and how are
commitments made? The bigger questions was ‘is it a matter of one
ingredient–Jeff Bezos–or is it an institutional capability?’ Here are
some excerpt, it is a good read:

is setting strategic direction for Amazon? At the very beginning it was
just you, sitting in a car on the way from New York to Seattle, making
all the plans. Are you still making them all?

heavens, no. We have a group called the S Team–S meaning “senior”–that
stays abreast of what the company is working on and delves into
strategy issues. It meets for about four hours every Tuesday. Once or
twice a year the S Team also gets together in a two-day meeting where
different ideas are explored. Homework is assigned ahead of time. A lot
of the things discussed in those meetings are not that urgent–we’re a
few years out and can really think and talk about them at length.
Eventually we have to choose just a couple of things, if they’re big,
and make bets. The key is to ensure that this happens fractally, too,
not just at the top. The guy who leads Fulfillment by Amazon, which is
the web service we provide to let people use our fulfillment center
network as a big computer peripheral, is making sure the strategic
thinking happens for that business in a similar way. At different scale
levels it’s happening everywhere in the company. And the most important
thing is that all of it is informed by a cultural point of view.
There’s a great Alan Kay quote: “Perspective is worth 80 IQ points.”
Some of our strategic capability comes from that.

How would you describe that cultural point of view?

we are willing to plant seeds and wait a long time for them to turn
into trees. I’m very proud of this piece of our culture, because I
think it is somewhat rare. We’re not always asking ourselves what’s
going to happen in the next quarter, and focusing on optics, and doing
those other things that make it very difficult for some publicly traded
companies to have the right strategy.

you know when you’re planting one of those seeds that it’s, say, an
acorn and it’s going to turn into an oak? Do you have a strong vision
of how things will materialize? Or does the shape emerge along the way?

may not know that it’s going to turn into an oak, but at least we know
that it can turn out to be that big. I think you need to make sure with
the things you choose that you are able to say, “If we can get this to
work, it will be big.” An important question to ask is, “Is it big
enough to be meaningful to the company as a whole if we’re very
successful?” Every new business we’ve ever engaged in has initially
been seen as a distraction by people externally, and sometimes even
internally. They’ll say, “Why are you expanding outside of media
products? Why are you going international? Why are you entering the
marketplace business with third-party sellers?” We’re getting it now
with our new infrastructure web services: “Why take on this new set of
developer customers?” These are fair questions. There’s nothing wrong
with asking them. But they all have at their heart one of the reasons
that it’s so difficult for incumbent companies to pursue new
initiatives. It’s because even if they are wild successes, they have no
meaningful impact on the company’s economics for years. What I have
found–and this is an empirical observation; I see no reason why it
should be the case, but it tends to be–is that when we plant a seed, it
tends to take five to seven years before it has a meaningful impact on
the economics of the company.

Original Post: http://mootee.typepad.com/innovation_playground/2007/12/driving-strateg.html