The question that Amazon answers to set its strategy

Edited excerpt from The Institutional Yes, an interview with Jeff Bezos by Julia Kirby and Thomas A. Stewart:

It helps to base your strategy on things that won’t change. When I’m talking with people outside the company, there’s a question that comes up very commonly: “What’s going to change in the next five to ten years?” But I very rarely get asked “What’s not going to change in the next five to ten years?” At Amazon we’re always trying to figure that out, because you can really spin up flywheels around those things. All the energy you invest in them today will still be paying you dividends ten years from now. Whereas if you base your strategy first and foremost on more transitory things—who your competitors are, what kind of technologies are available, and so on—those things are going to change so rapidly that you’re going to have to change your strategy very rapidly, too.

For our business, most of them turn out to be customer insights. Look at what’s important to the customers in our consumer-facing business. They want selection, low prices, and fast delivery. This can be different from business to business: There are companies serving other customers who wouldn’t put price, for example, in that set. But having found out what those things are for our customers, I can’t imagine that ten years from now they are going to say, “I love Amazon, but if only they could deliver my products a little more slowly.” And they’re not going to, ten years from now, say, “I really love Amazon, but I wish their prices were a little higher.” So we know that when we put energy into defect reduction, which reduces our cost structure and thereby allows lower prices, that will be paying us dividends ten years from now. If we keep putting energy into that flywheel, ten years from now it’ll be spinning faster and faster.

A lot of our strategy comes from having very deep points of view about things like this, believing that they are going to be stable over time, and making sure our activities line up with them.

Of course there could also come a day when one of those things turns out to be wrong. So it’s important to have some kind of mechanism to figure out if you’re wrong about a deeply held precept.

3 thoughts on “The question that Amazon answers to set its strategy

  1. “I love Amazon but if only they could treat their staff better ” I am ready to have a slower delivery for that or “fair” prices for this.

  2. Pingback: How Amazon resists short-term thinking | A Founder's Notebook

  3. Pingback: How startups can continue to innovate over long time periods | A Founder's Notebook

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