Working Backwards: Insights, Stories, and Secrets from Inside Amazon

Introduction

To say that Amazon is an unconventional company is an understatement. Its most significant initiatives have often been criticized and even derided as folly. One business pundit dubbed it Amazon.toast.¹ Time and again, Amazon has proved the doubters wrong. Established competitors and aspiring newcomers have studied the company from the outside, hoping to uncover the secrets of its success and build upon them. Though many have adopted one or more of its famous principles and practices, even Amazon’s most fervent believers haven’t managed to duplicate the culture of innovation that continues to drive the company further into the lead.

Of course, the company has also come under scrutiny, even under fire, for some of its business methods. Some take issue with its impact on the business world and even on our society as a whole.* These issues are obviously important, both because they affect the lives of people and communities and because, increasingly, failure to address them can have a serious reputational and financial impact on a company. But they are beyond the scope of what we can cover in-depth in this book, which is primarily about showing you some of the unique principles and processes at Amazon with enough detail that you will be able to implement them if you choose to.

We spent a combined total of 27 years at Amazon, and we were there for some of the most pivotal moments of its development and growth. Any time either of us mentions that we worked at the company, we are immediately asked some version of a question that tries to get at the essential causes of its singular success. Analysts, competitors, and even customers have tried to sum it up in terms of the Amazon business model or corporate culture, but the simplest and best distillation is still that of founder Jeff Bezos (hereafter referred to as Jeff): We have an unshakeable conviction that the long-term interests of shareowners are perfectly aligned with the interests of customers.² In other words, while it’s true that shareholder value stems from growth in profit, Amazon believes that long-term growth is best produced by putting the customer first.

If you held this conviction, what kind of company would you build? In a talk at the 2018 Air, Space and Cyber Conference, Jeff described Amazon this way: Our culture is four things: customer obsession instead of competitor obsession; willingness to think long term, with a longer investment horizon than most of our peers; eagerness to invent, which of course goes hand in hand with failure; and then, finally, taking professional pride in operational excellence.

That description has held true since Amazon’s earliest days. In its first shareholder letter back in 1997, Amazon’s first year as a public company, you’ll find the phrases Obsess Over Customers, It’s All About the Long Term, and We will continue to learn from both our successes and our failures. One year later the term Operational Excellence entered the discussion, completing the four-faceted description of Amazon’s corporate culture that endures today. Over the ensuing years, the wording has been tweaked to reflect lessons learned and scars earned, but Amazon has never wavered in its commitment to these four core principles. And they are in large part the reason that in 2015 Amazon became the company that reached $100 billion in annual sales faster than any other in the world. Remarkably, that same year Amazon Web Services (AWS) was reaching $10 billion in annual sales—at an even faster pace than the one Amazon had set.³

Of course, these four cultural touchstones don’t quite get at the how, that is, how people can work, individually and collectively, to ensure that they are maintained. And so Jeff and his leadership team crafted a set of 14 Leadership Principles, as well as a broad set of explicit, practical methodologies, that constantly reinforce its cultural goals. These include: the Bar Raiser hiring process that ensures that the company continues to acquire top talent; a bias for separable teams run by leaders with a singular focus that optimizes for speed of delivery and innovation; the use of written narratives instead of slide decks to ensure that deep understanding of complex issues drives well-informed decisions; a relentless focus on input metrics to ensure that teams work on activities that propel the business. And finally there is the product development process that gives this book its name: working backwards from the desired customer experience.

Many of the business problems that Amazon faces are no different from those faced by every other company, small or large. The difference is how Amazon keeps coming up with uniquely Amazonian solutions to those problems. Taken together, these elements combine to form a way of thinking, managing, and working that we refer to as being Amazonian, a term that we coined for the purposes of this book. Both of us, Colin and Bill, were in the room, and—along with other senior leaders—we shaped and refined what it means to be Amazonian. We both worked extensively with Jeff and were actively involved in creating a number of Amazon’s most enduring successes (not to mention some of its notable flops) in what was the most invigorating professional experience of our lives.

Colin

My first job out of college was designing and building database applications at Oracle. After that, I co-founded a company called Server Technologies Group with two colleagues. We wanted to use our experience in large-scale database systems to help companies move their business activities to the then-nascent Web. Our customers included Boeing, Microsoft, and a small company called Amazon. We recognized that Amazon was something special, and in 1998 we moved to Amazon, where I worked for 12 years as an executive, two of them in a role that brought me into the room with Jeff during an extraordinary period in Amazon’s growth and innovation. Those two years began in the summer of 2003 when Jeff asked me to become his technical advisor, a role that is known colloquially as Jeff’s shadow, and is similar to a chief of staff role at other companies.

The position had been formalized about 18 months earlier when Andy Jassy, now CEO of Amazon Web Services, became Jeff’s first full-time technical advisor. It had two main responsibilities. One was to help Jeff be as effective as possible. The other was, as Jeff put it to me, to model and learn from each other so that the person who held the position could eventually move on to a bigger role in the company.

Both Jeff and Andy made it clear that this was not the role of an observer or auditor, nor was it a training role. I would be expected to contribute immediately: to come up with ideas, take risks, and be a sounding board for Jeff. Before I took the job, I asked for the weekend to think about it and called a couple of friends—one had a comparable role assisting the CEO of a Fortune 10 company, and another was the right-hand man of a prominent government official. They both said, in effect, Are you crazy? This is a once-in-a-lifetime chance. Why didn’t you take the job on the spot? They also told me my schedule would not be my own, and that I’d learn more than I could possibly imagine. One of them told me that while he learned a huge amount on the job, it was not exactly fun work.

Most of what my friends told me was true of being Jeff’s shadow, with the notable exception that my job actually was a lot of fun. Once, we were traveling to New York for a series of meetings and events, including a tennis exhibition in Grand Central Terminal to promote Amazon’s new apparel store. On the flight, Jeff asked me if I’d mind hitting some tennis balls with him when we landed so he could practice for the event, as his game was a bit rusty—he’d last played two years earlier in a charity event with Bill Gates, Andre Agassi, and Pete Sampras, and before that, who knows? I told him I’d played two weeks earlier at the local park with my buddy John. So you have me beat on the A-list tennis partners, I said, but I’ve got you on recency. I’m calling it a push. We’ll have to settle the rest on the tennis court this evening. Jeff laughed and said it was a deal.

This story is atypical—95 percent of the time I spent with Jeff was focused on internal work issues rather than external events like conferences, public speeches, and sports matches. But it’s typical in that he faced challenging situations such as this one—playing a sport he almost never practiced in front of a big crowd—with optimism, humor, and his well-known infectious laugh. This is the same spirit with which he faced his daily business decisions that were bigger than most people make in their whole careers. He truly embodies the Amazon motto, Work hard, have fun, make history.

I worked with him during his regular office hours from ten in the morning to seven in the evening. Most days entailed between five and seven meetings with product or executive teams. Before and after Jeff’s office hours I worked with those teams to help them prepare for their interactions with him so they’d be more productive for everyone. I already knew what it was like to be on the receiving end of an endless flood of ideas from him and then be asked to accomplish things quickly and with standards that could seem unreasonably high. I was often asked, How do you think Jeff will respond to this idea? My standard answer was, I can’t predict what he’ll say, but these are the principles that typically inform his response.…

During my time with Jeff, several pivotal Amazon businesses came to life, including Amazon Prime, Amazon Web Services, Kindle, and Fulfillment by Amazon. Several Amazon business processes, now firmly entrenched in being Amazonian, were introduced, including writing narratives and using the Working Backwards process.

I was aware of my good fortune and the rare opportunity my job afforded me to work side by side with Jeff and the Amazon senior leadership on a daily basis for over two years. I was determined to take advantage of every minute. I’d view activities such as car rides, lunches, and walking to meetings as precious learning opportunities I did not want to miss. One time a friend saw me writing down a long list of items in a notebook and asked what I was doing. I responded, Well, I have a five-hour flight to New York with Jeff later this week and I want to make sure I have at least five hours’ worth of questions and topics in case there’s any free time. When I write about what led to Jeff making key decisions in this book, I can do so because I often directly asked him for his specific thinking behind his insights, as the reasoning behind them was often more illuminating than the insights themselves.

Bill

My path to Amazon was circuitous. After college I worked in sales for a few years before getting my MBA. I then took a sales job at Procter & Gamble before becoming one of P&G’s account analysts for Kmart. Wanting to work in technology, I left P&G for a job at a software startup called Evare. In May 1999, at the suggestion of a college friend, I interviewed for a position at Amazon. The company was still housed in a single building on Second Avenue in Seattle. Space was so cramped that one of my interviews was conducted in a break room where, on the other side of a cubicle divider, people were getting coffee and chatting. I was offered a job as product manager in video (VHS and DVD), and remained at the company in various roles for the next 15 years.

For the first five years of my tenure, I worked in Amazon’s largest business at that time, the U.S. physical media group—books, music, video—where I rose through the ranks to director. In January 2004, just a few months after Jeff invited Colin to become his technical advisor, my manager and good friend Steve Kessel dropped a similarly unexpected bombshell on me. He was going to be promoted to senior vice president and, at Jeff’s request, take over the company’s digital business. He told me that I was to be promoted to vice president and that he wanted me to join him.

Steve informed me that Jeff had decided the time was right for Amazon to start enabling our customers to buy and read/watch/listen to books/videos/music digitally. The company was at a crossroads. Though the books, CD, and VHS/DVD business was Amazon’s most popular, changes in internet and device technology, as well as the emergence of Napster and Apple iPod/iTunes, made it clear that this would not last. We expected that the physical media business would decline over time due to the shift to digital. We felt we had to act right away.

Jeff often used an analogy in those days when describing our efforts to innovate and build new businesses. We need to plant many seeds, he would say, because we don’t know which one of those seeds will grow into a mighty oak. It was an apt analogy. The oak is one of the sturdiest and longest-living trees in the forest. Each tree produces thousands of acorns for every one tree that eventually rises to the sky.

In retrospect, this was a renaissance era at Amazon. The seeds Amazon planted beginning in 2004 would grow into the Kindle e-book reader, the Fire tablet, Fire TV, Amazon Prime Video, Amazon Music, Amazon Studios, our voice-activated Echo speaker, and the underlying Alexa voice assistant technology. They would become some of Amazon’s strongest and fastest-growing new businesses and value drivers. By 2018, these business units had created devices and services used daily by tens of millions of consumers around the world, generating tens of billions in annual revenue for Amazon.

I was fortunate enough throughout the decade to sit in either the driver’s seat or a passenger seat (with a great view) for these new product initiatives. My role would evolve over the years, and I would become the owner and leader of Amazon’s worldwide digital music and video business and engineering organizations. My team and I led the launch, development, and growth of the services that are known today as Amazon Music, Prime Video, and Amazon Studios. Through this experience, I had the opportunity to observe, participate in, and learn from the development and invention not only of these new products but also of a set of new Amazon processes, the combination of which would propel the company’s second stage of growth, which has made it one of the most valuable companies on earth.

Working Backwards on an Amazon Book

We became friends through my wife, Lynn, and Colin’s wife, Sarah, who became close friends when they both landed on the Amazon Toys category team in 2000 after earning their MBAs. Our friendship grew through our mutual love of golf and regular trips to play Bandon Dunes. We decided to write this book in 2018, when we observed two trends. The first was that Amazon’s popularity had exploded, having become omnipresent in the media. People clearly craved to learn more about Amazon. The second was that Amazon was consistently misunderstood, which we experienced during our years on the inside. Wall Street analysts couldn’t comprehend why Amazon didn’t make a profit, as the company reinvested its cash in new products to drive future growth. And the press was often baffled by and critical of each new Amazon product, including Kindle, Prime, and Amazon Web Services.

Both of us moved on from Amazon to pursue new endeavors—Colin in 2010 and Bill in 2014—but we were forever shaped by our Amazon experiences. We worked with a variety of companies and investors in venture capital. Typical of the kind of thing we heard in our work was this remark by the CEO of a Fortune 100 company: I don’t understand how Amazon does it. They are able to build and win in so many different businesses from retail, to AWS, to digital media. Meanwhile, we have been at this for more than 30 years, and we still haven’t mastered our core business.

We realized that there was a gap in the marketplace. There was no source, no book to answer the questions and explain Amazon’s peculiar behavior and how it has produced exceptional results. We know the answers to those questions, and that is what we will share with you in these pages.

Since leaving Amazon, we have both introduced many of its elements to our new organizations, to great effect. But we find that when we talk to colleagues about introducing Amazon’s principles to their workplace, they often respond with some version of, But you had a lot more resources and money, not to mention Jeff Bezos. We don’t.

We’re here to tell you that you do not need Amazon’s capital (in fact Amazon was capital constrained for most of our years there), nor do you need Jeff Bezos (though if he is available to work on your project, we’d highly recommend him!). Amazon’s concrete, replicable principles and practices can be learned by anyone and refined and scaled throughout a company. After reading this book, we hope you’ll see that being Amazonian is not a mystical leadership cult but a flexible mindset. You can take the elements that you need as you need them, then tweak and customize them as conditions warrant. The concept also has a wonderful fractal quality, meaning it can add benefit at any scale. We have witnessed the successful adoption of these elements across companies ranging from a ten-person startup to a global enterprise with hundreds of thousands of employees.

Here we will guide you toward being Amazonian in your own way, within your own organization. We’ll offer specific, practical advice expressed through some of our favorite Amazon lore: the events, stories, conversations, personalities, jokes, and more that we have accumulated over the years.

We don’t claim that being Amazonian is the only way to build a high-performing organization. As Jeff has written, The world, thankfully, is full of many high-performing, highly distinctive corporate cultures. We never claim that our approach is the right one—just that it’s ours…⁴

Now it can also be yours.

Part One

Being Amazonian

Introduction to Part One

In the first half of this book, we will lay out in detail some of the crucial principles and processes that define being Amazonian. These ways of working—patiently honed over the years—have enabled Amazon’s remarkable efficiency and its record-breaking growth. They have made Amazon’s culture one in which invention thrives and delighting customers is highly prioritized. We will tell some of the origin stories of these principles and processes to demonstrate that they were solutions to problems that were impeding our ability to invent freely and satisfy our customers consistently.

The Amazon Leadership Principles are the main focus of chapter one. In the very early days of the company, when it consisted of a handful of people working out of three small rooms, there were no formal leadership principles because, in a sense, Jeff was the leadership principles. He wrote the job descriptions, interviewed candidates, packed and shipped boxes, and read every email that went out to customers. Taking part in every aspect of the business allowed him to communicate the Amazon philosophy informally to the relatively small group of employees. But the company expanded so quickly that it was soon impossible to communicate it that way anymore. Thus, the need for the Leadership Principles. We tell the story of the process by which they were created—itself a quintessentially Amazonian story—and we describe how they are infused into every capillary of the company’s operation.

Hand in hand with the Leadership Principles go the mechanisms, which we also discuss in chapter one. These are the consistent, repeated processes that ensure the Leadership Principles are reinforced year to year and day to day in the company. We enumerate the method by which Amazon generates its yearly plans and goals for each individual team and for the company as a whole, and how it creates alignment between the team goals and the company goals. We also describe Amazon’s distinctive compensation policy, which reinforces collaboration and long-term focus over intramural competition and orientation toward short-term gains.

In chapter two, we discuss the Bar Raiser, Amazon’s unique hiring process. Like the Leadership Principles, we created the Bar Raiser because the company was growing extremely fast. One of the major pitfalls of needing to hire a lot of new people very quickly is urgency bias: the tendency to overlook a candidate’s flaws because you are overwhelmed with work and need bodies. The Bar Raiser provides teams with methods to make the strongest hires efficiently and quickly, but without cutting corners.

In a company known for its inventiveness, separable, single-threaded leadership has been one of Amazon’s most useful inventions. We discuss it in chapter three. This is the organizational strategy that minimizes the drag on efficiency created by intra-organizational dependencies. The basic premise is, for each initiative or project, there is a single leader whose focus is that project and that project alone, and that leader oversees teams of people whose attention is similarly focused on that one project. This chapter is as much the story of how we arrived at single-threaded leadership as it is a description of it: we outline the problems it was created to solve, and the imperfect solutions we developed before we came to the one that really works. We’ll also discuss how and why we had to completely change the way we built and deployed technology in order to make separable, single-threaded teams a reality.

We also found that what really works in meetings is not what most companies do in meetings. As much as we respect PowerPoint as a visual communication tool and speaking aid, we learned the hard way that it’s not the best format to communicate complex information about initiatives and ongoing projects in a one-hour meeting. We found, instead, that a six-page narrative written by a given team is the method that best enables everyone in a meeting to get up to speed quickly and efficiently on the project that team is working on. At the same time, the process of composing that narrative requires the team itself to reflect on the work they’ve been doing or propose to do, and to articulate it clearly to others, thereby sharpening their own thinking about that work. We discuss the details of this genre of narrative—and give an example of one—in chapter four.

In chapter five, we discuss how new ideas and products are developed at Amazon: Working Backwards from the desired customer experience. Before we start building, we write a Press Release to clearly define how the new idea or product will benefit customers, and we create a list of Frequently Asked Questions to resolve the tough issues up front. We carefully and critically study and modify each of these documents until we’re satisfied before we move on to the next step.

The customer is also at the center of how we analyze and manage performance metrics. Our emphasis is on what we call controllable input metrics, rather than output metrics. Controllable input metrics (e.g., reducing internal costs so you can affordably lower product prices, adding new items for sale on the website, or reducing standard delivery time) measure the set of activities that, if done well, will yield the desired results, or output metrics (such as monthly revenue and stock price). We detail these metrics as well as how to discover and track them in chapter six.

Part one does not comprise an exhaustive list of principles and processes developed at Amazon. We selected the ones that we think best illustrate what it means to be Amazonian. We will show you how we arrived at each one of them. And we will give you concrete, actionable information that will help you hone the methods by which your company or organization, big or small, can maximize its potential to serve its customers.

1

Building Blocks

Leadership Principles and Mechanisms

The development of the 14 Amazon Leadership Principles. How they’re infused into everyday work. Checks and balances (mechanisms) reinforce them. Why they confer a significant competitive advantage. How they can be applied in your company.

Amazon.com opened for business in July 1995, staffed by a handful of people handpicked by Jeff Bezos. In 1994, Jeff had read a report that projected annual internet usage growth at 2,300 percent. He was then a senior vice president at D. E. Shaw & Co., a New York hedge fund specializing in sophisticated mathematical models to exploit market inefficiencies. He decided that getting in on the growth of the Web was a once-in-a-lifetime opportunity, so he gave up his lucrative and promising career and drove west with his wife, MacKenzie, to start an internet business.

Along the way to Seattle, he wrote his business plan. He identified several reasons why the book category was underserved and well suited to online commerce. He outlined how he could create a new and compelling experience for book-buying customers. To begin with, books were relatively lightweight and came in fairly uniform sizes, meaning they would be easy and inexpensive to warehouse, pack, and ship. Second, while more than 100 million books had been written and more than a million titles were in print in 1994, even a Barnes & Noble mega-bookstore could stock only tens of thousands of titles. An online bookstore, on the other hand, could offer not just the books that could fit in a brick-and-mortar store but any book in print. Third, there were two large book-distribution companies, Ingram and Baker & Taylor, that acted as intermediaries between publishers and retailers and maintained huge inventories in vast warehouses. They kept detailed electronic catalogs of books in print to make it easy for bookstores and libraries to order from them. Jeff realized that he could combine the infrastructure that Ingram and Baker & Taylor had created—warehouses full of books ready to be shipped, plus an electronic catalog of those books—with the growing infrastructure of the Web, making it possible for consumers to find and buy any book in print and get it shipped directly to their homes. Finally, the site could use technology to analyze the behavior of customers and create a unique, personalized experience for each one of them.

The first Amazonians worked elbow to elbow in three small rooms, upstairs from a converted basement filled mostly with overstock from the army surplus store across the street. Desks, including Jeff’s, had been fashioned out of doors affixed to four-by-fours with metal angle brackets. A padlocked plywood door in that basement secured the first Amazon distribution center, a room measuring perhaps 400 square feet that had last served as the practice space for a local band whose name was still spray-painted on the door.

In such close quarters, Jeff could take the pulse of the company—from software development to finance and operations—by turning his chair around or poking his head through the doorway of an adjoining room. He knew everyone who worked for the company and, apart from writing the all-important software, he had done each of their jobs alongside them while they learned the ropes. And, never shy about how he wanted things done, he began to instill guiding principles, like customer obsession and unrelentingly high standards, into every step his small team