Steve Anderson

Steve Anderson

The Bezos Letters: 14 Principles to Grow Your Business Like Amazon

Genre
Business & Money

About the Author
Steve Anderson is an expert in strategic risk and business growth. Drawing on decades of experience in the insurance industry, he wrote The Bezos Letters: 14 Principles to Grow Your Business Like Amazon, which has become a Wall Street Journal, USA Today, and international best-seller. With hundreds of thousands of followers, Steve has been handpicked by LinkedIn as one of the world’s most influential thought leaders.


 

 

How Jeff Bezos Skyrocketed Amazon’s Growth with a “Day 1” Mindset

How Jeff Bezos Skyrocketed Amazon’s Growth with a “Day 1” Mindset

In The Bezos Letters: 14 Principles to Grow Your Business Like Amazon, Steve Anderson provides a rare glimpse into the mindset of Amazon founder and CEO Jeff Bezos. Anderson analyzes Bezos' letters to shareholders to uncover 14 growth principles that businesses can apply to keep customers happy, maintain company culture, and ultimately, to accelerate growth. The following is an excerpt from the book.

It’s still Day One for this country, and even in the face of today’s humbling challenges, I have never been more optimistic about our future. —Jeff Bezos (July 2020 Opening Statement to Congress)

As always, I attach a copy of our original 1997 letter. It remains Day 1. —Bezos (2018 Letter)

BELIEVE IT’S ALWAYS “DAY 1″

What does “Day 1” really mean? It’s obviously incredibly important to Bezos. He refers back to his 1997 Letter every year, reminding shareowners that it will always be Day 1 at Amazon. 

But here’s what’s interesting … Day 1 is a concept, not a date. So why is the idea of Day 1 so important to Jeff Bezos?

When I studied the Shareholder Letters along with other documents and interviews of Bezos, two things became clear.

First, Day 1 is representative of all the leadership principles that have helped make Amazon what it is today. It is the anchor for acknowledging and remembering their beginning values and their dogged focus on serving the needs of customers and even “delighting” customers. 

Anderson deconstructs Jeff Bezos’ 21 letters to Amazon shareowners through his unique lens of risk. Get a copy of the book here.

Second, Day 1 is a mindset, not a list of steps or strategies. It is the mentality through which all decisions are made. It is designed to keep everyone in the company focused on doing what is right in each situation, not just what is possible given Amazon’s size and influence. Because, like a child’s tower of building blocks, if the foundation isn’t stable, the tower will come tumbling down. And then it’s Day 2. Bezos describes Day 2 as: 

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1. —Bezos (2016 Letter)

On Day 1, there are few—if any—things more important than customers. 

Like employees living paycheck-to-paycheck, many businesses live customer-to-customer at the beginning. In the early days, some businesses are only one or two customers away from catastrophe. 

When Amazon was first launching, Bezos said he knew they were going to make it in the first thirty days. But given the small revenue per customer from book sales, there is no way they could grow without adding customers. They absolutely needed to scale. In fact, they needed to add customers and earn repeat business from each of those customers to become the company they are today.

Thus, from Day 1 on, Amazon has been obsessed with earning business and repeat business. It’s obsessed with understanding its customers, what they want, and what they want to avoid. Amazon makes virtually every decision with that in mind. 

As Bezos describes it:

You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality. —Bezos (2016 Letter)

RESIST PROXIES

A key part of Amazon’s “It’s always Day 1” philosophy is what Bezos calls “resisting proxies.” In simple terms, proxies (in this context) are any form of excuse people use to blame others for less-than-ideal actions or decisions. They give people an excuse to distance themselves from their actions. Common examples of proxies include policies, procedures, processes, and sometimes even orders from another person.

To grow like Amazon and remain a Day 1 company, you must resist letting proxies dictate what your team does. When you get to the point where procedures rigidly dictate everything your team does—without even questioning those procedures—you start to move from Day 1 to Day 2.

Have you ever been frustrated by a company representative who couldn’t help you with an issue because of “company policy,” “procedures don’t allow for that,” or they were “only following orders”? If so, you have experienced an employee not resisting proxies. At Amazon, “company policy” or any other proxy is no excuse for doing the wrong thing for the customer. 

Of course, every business needs procedures and processes in place to get things done. They need rules and best practices to operate efficiently. But those policies, procedures, rules, and other proxies should never be used as excuses for not doing the right thing when it comes to serving customers well. 

Thus, another way of saying what Bezos describes as “resisting proxies” would be the admonition to “be okay with deviating from policies and procedures” when it is the right thing to do for the customer. Policies and procedures are intended to help guide decisions, but not at the expense of the needs of the customer.

To grow like Amazon and remain a Day 1 company, you must resist letting proxies dictate what your team does. When you get to the point where procedures rigidly dictate everything your team does—without even questioning those procedures—you start to move from Day 1 to Day 2.

EMBRACE EXTERNAL TRENDS

Even intelligent and successful companies can have a hard time recognizing how a new trend could up-end their entire business model. In Bezos’ words, 

These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. —Bezos (2016 Letter)

The biggest impediment to realizing how new trends will impact an organization is the company’s attitude toward risk-taking, particularly if the trend is new. Whenever a company becomes entrenched in “doing it the way it’s always been done,” leadership and the rank-and-file will resist taking risks—and new trends often look risky. In this environment, an employee might believe any type of failure could torpedo their career. For many, it’s just not worth it. And thus begins the process of becoming a Day 2 company.

On Day 1, however, companies are aware of external trends for the very reason that they are new and vulnerable to bigger or more established competitors. So, they look for ways to use trends to grow and serve their customers better. The trick is to keep that Day 1 mindset, even when you’ve grown into a $100 billion company. What are consumers demanding from other businesses? What are other successful companies starting to do? How can you use that information to serve your customers better?

The Bezos Letters features 14 principles inspired by Amazon founder and CEO Jeff Bezos.

SPEED TRUMPS PERFECTION

On Day 1, decisions are made fast. Somebody with authority is available to quickly make a decision. Usually that person is the founder. Often, that person is the only person in the company. 

On Day 1 you can’t wait for perfect and complete information to make a decision. You make the best decision you can with the information you have. But you have to move quickly. As Bezos puts it, a Day 1 culture emphasizes speed over perfection when making decisions. In the context of Day 1, this admonition by Bezos bears repeating:

… most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure. —Bezos (2016 Letter)

This is closely related to one of Amazon’s core Leadership Principles, namely to:

HAVE BACKBONE; DISAGREE AND COMMIT

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

And what about bad decisions? Not a problem.

If you make a Type 2 decision and it turns out to be a bad one, you just quickly make a new decision using the information you gained from your mistake. In other words, a side benefit to the high-velocity decision-making that comes with building a Day 1 culture is the ability and willingness to quickly make another decision when something doesn’t go according to plan.

COMMIT TO A DAY 1 CULTURE BY ACTING AND THINKING LIKE A STARTUP

Bezos’ Day 1 mindset can be applied to any type of business in any industry, from startup to large and mature companies. It’s not easy to be a Day 1 business, but the key is to remember Day 1 is a mindset. Applying Day 1 thinking to a mature company helps you avoid waste and stay focused on what made you successful in the first place. 

Working in a startup is draining with long hours and often great sacrifices. But it can also be exhilarating. When a company matures, it is natural for leadership to lose focus on the small (or big) details that helped it grow. Amazon avoids that by using visible and invisible cues and reinforcing the importance of a Day 1 culture in everything they do—from “door desks” to building names, it’s all about remembering the key values you started with. 

It can be exhausting to maintain the focus and passion you had when your business was truly in Day 1. But I assure you it is much more exhausting to lose your Day 1 thinking, turn the company calendar to Day 2, and see your company fall into the “excruciating, painful decline” that Bezos describes. 

To be sure, this kind of decline will happen in slow motion. Months or years of lost focus builds negative momentum. So, the longer you wait, the harder it will be to turn back the calendar to Day 1. No matter what, there will never be a better time than today to start building a Day 1 culture. If you have slipped into Day 2 months or even years ago, you will either slip further into Day 2 or take action to turn back the calendar to Day 1.

In his 2016 Letter, Bezos answered the question, 

“Jeff, what does Day 2 look like?”

I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?”

Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making. —Bezos (2016 Letter)

To put it in other words, your business is either growing or dying. There is no middle ground. And the only way to avoid Day 2 is to … believe it is always Day 1.

APPLICATION

BELIEVE IT’S ALWAYS DAY 1

Q: If your business is more than five years old, ask yourself: What did we do early on that I wish we were still doing now?

Q: If your business is less than five years old, ask yourself: Ten years from now, even though I hope we’re making a lot more money, I hope we haven’t stopped doing … what?

Q: No matter how young or old your business is, ask yourself: What can I do regularly to model a “Day 1” mindset? 


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