Amazon went from $0 to $150 billion in market cap is just 20 years. What can you learn from its success and apply to your own firm?
One of the basic rules of successful business building is to take ideas from other industries and modify them to fit your own. This “outsider” thinking frequently leads to new ideas that you can apply as an advisor to give you first mover and innovator advantage.
With that mindset, I tore into the new book by Brad Stone called, The Everything Store, about the rise, fall and rise again of that behemoth of technology—Amazon.
Boy, what an eye-opening read. Makes me NOT want to shop at Amazon.com.
Stone did a phenomenal job of getting inside the company and inside the head of founder Jeff Bezos. The result is a gripping tale of maniacal focus that led to the creation of one of the world’s preeminent brands. But it came at a tremendous cost to employees, vendors, competitors and mom and pop businesses around the country.
Two Ways to Build a Business
In terms of attitude, there are a couple ways that you can build a huge business.
1. You can take a “I don’t give a sh*t what anybody thinks, I’m going to play tough, be demanding, and mow over anybody and anything in my way to get what I want,” approach. This “fear-based” approach pretty much sums up Amazon as described in Stone’s book. Of course, Bezos’ wife begs to differ.
2. You can take a more positive approach to building a product or service and use smarts, hard work, and a “let’s increase the pie for everybody” attitude. In this scenario, you build a business that (for the most part) accommodates all stakeholders—clients, employees, investors and community.
Full disclosure—I lean toward the positive approach.
Interestingly, some of the most prominent companies in the world were founded by leaders who exhibited the fear-based, scorched earth approach. People like Steve Jobs, Bill Gates, and Jeff Bezos fit this bill.
Bezos was a remorseless taskmaster who seemed to be missing an empathy gene. How he treated employees who didn’t measure up to his high standards, suppliers who wouldn’t meet his demands, and competitors who wouldn’t sell their business to him, was brutal.
Despite the barbaric culture, Amazon grew from $0 to a $150 billion market cap company in just 20 years.
So, with the success of Amazon, Apple (under Jobs), and Microsoft (under early Bill Gates), can we conclude that the “everybody be damned” approach is the best way to build a multi-billion dollar company?
While those three companies are prime examples of the nasty approach to business building, other companies have taken a different approach.
Mark Zuckerberg at Facebook, Yvon Chouinard at Patagonia, and Howard Schultz at Starbucks have taken a milder and stakeholder-friendly approach yet still built hugely successful companies with well-respected brands.
And in our industry, Warren Buffett comes to mind as a “nice guy” manager who built a fortune north of $50 billion.
Even though I’m not cut out of the Bezos or Jobs mold of belittling employees in front of their peers or squeezing every last penny out of suppliers, there are some good lessons to be learned from those folks.
Here are 7 lessons I gleaned from “the everything store,” that you can use as you build your company.
7 Business Building Lessons
1. Set high expectations. Bezos is a super achiever and he expected the people around him to aspire to super achieverdom too—and that’s appropriate. Unfortunately, when his acolytes fell short, he had no filter and ripped into them. This caused massive staff turnover and very low morale. Lesson—set high expectations and when someone falls short, let them know but do it in a way that doesn’t belittle them or send them into a panic attack.
2. Think and act disruptively. Bezos, Jobs, and Gates in his early days, were disruptive thinkers. They couldn’t care less about the way things were normally done. They tried to see around the corner. They tried to move three steps ahead of the crowd. They made the “impossible” seem possible by setting unrealistic expectations and expecting people to come up with inventive ways to meet them. Lesson—you won’t run away from the crowd unless you create your own crowd. Reimagine the way things are done in your firm. Take a day each quarter to get offsite and dream about ways to blow up the status quo that enable you to do a better job for your clients.
3. Think and act big. Bezos had no problem in this department. He knew from the beginning that he was on a mission to create “the everything store.” The trick was to convince and inspire his team to believe along with him. What got Amazon from $0 to its first billion in sales was not the same thing that skyrocketed it to its next $10 billion in sales. They had to continually reinvent. Lesson—small thinkers stay small. Rather than trying to grow your business by 15% this year, take your current revenue and add a zero to it. This 10x thinking will require you to develop a new strategy so you can grow by an order of magnitude instead of just incrementally.
4. Continually raise the hiring bar. Amazon touts the idea of hiring and developing the best people. By doing this, you’ll gain a huge competitive advantage as you outsmart and out hustle the competition. Unfortunately, Amazon’s workplace reputation and relatively stingy compensation plan and perks didn’t exactly encourage the best people to knock on the company’s door. Lesson—practice what you preach. Create a work environment that is attractive to high achievers and pull out all the stops to bring them on board and keep them continually challenged and refreshed. And, pay your best people well. As my wife says, “If you want to become a billionaire, you better spawn a bunch of multi-millionaires along the way.”
5. Have a bias for taking action. As Amazon says, “Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.” The key word here is “calculated.” Taking action just for the sake of trying to move fast will backfire. Lesson–endless meetings to study and debate new ideas will keep you trailing the pack. Hire smart people, give them room to run, and don’t trash them when one of their ideas inevitably fails. If an employee fears the consequences of failure, they’ll never take calculated risks and your business will flat line.
6. Be frugal—to a point. Frugality breeds creativity as you have to come up with inventive ways to get things done on a limited budget. Unfortunately, Amazon probably took this to an extreme. Employees had to pay for parking. Executives had to fly coach. Desks were made out of doors. There was no free cafeteria food. These things, while seemingly small, made it difficult for Amazon to recruit top employees because its competitors such as Google and Facebook offered perks galore and were viewed as extremely employee-friendly firms to work for. Lesson—a culture of frugality can be a competitive advantage as long as you are frugal in the right areas (think Southwest Airlines). Skimping on employee perks or creating an uninviting work environment will exclude you from getting top talent. Conversely, eliminating waste and developing creative ways to solve problems and build new products with frugal budgets can lead to massive innovation. Remember, Facebook was started out of a dorm room.
7. Be obsessive about the customer. Amazon usually did a good job taking care of its customers and making the shopping experience easy. As a result, sales grew rapidly. To drive home its point about obsessing over the customer, the company often left an empty chair at the table in important meetings. Why? Because that chair represented the customer and Bezos didn’t want anybody to forget who they were serving. Lesson—reimagine how you can serve your clients better, faster, deeper, and with greater care. How can you dramatically improve their experience in working with you? How can you make their life simpler, easier and more profitable?
Dramatically growing your business takes hard work. I hope these 7 lessons will make it a bit easier for you.
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