LEADERSHIP IN ENTREPRENEURSHIP
The Winning Characteristics of Jeff Bezos Behind Amazon’s Success
Six main winning traits have defined Jeff Bezos and Amazon’s success over the last 25 years
Jeff Bezos is probably the most successful business leader alive, as over the past 25 years he has transformed an online bookstore startup into a diversified company currently valued at $1.6 trillion. Today Amazon is a digital retailing juggernaut, a web services provider, media producer, and manufacturer of personal technology devices such as Kindle and Echo, and its founder owns the Washington Post and Blue Origin, a space exploration company. Jeff Bezos currently is deemed the richest person in the world.
His winning characteristics
I. Experimentation: an inventive mindset combined with a desire to test new things
Bezos is full of experiments; Amazon and his personal DNA are embedded with a continuous desire for experimentation, and he is believed to have said:
If you want big winners, then you have to be willing to have many failures, with one big winner taking care of a thousand failed experiments — Jeff Bezos, founder and CEO of Amazon
Bezo’s experiments are not aimless and tend to connect to the overall vision of Amazon’s corporate strategy, where it is today, and what it wants to become within the digital economy.
2. Strategic business diversity
While traditionally strategy has been about a focus on scale or differentiation, Amazon doesn’t look like it’s focusing on anything, and this seeming lack of focus seems to be working for it. In simple terms, Bezos has changed the traditional rules of strategy.
From the traditional point of view of business strategy, businesses were selling one product to one customer and what Amazon is arguing is that the digital economy is all about connecting products and customers. Traditionally this was the classic razor and blade strategy where one can sell you a cheap razor to make money on the blade. In terms of Amazon, they sell cheap Kindles to make money on e-books.
However, the major difference today with Amazon is that in the classic examples of the razor and the blade, the two items were in the same industries, complementing and supplementing one another, while today in the digital era, these two items need not be in the same industry anymore.
For example, Amazon is currently active in the Entertainment and movies industry, competing with Hollywood giants to gain and retain its Prime customers who are more loyal, buy 3–4 times more than the non-Prime customers, and are less price-sensitive.
If a typical Amazon customer were to calculate the economic gains and benefits of two-day free shipping as a Prime customer, they may not find it beneficial, but when Amazon throws in some TV shows and movies that are found only on Amazon, the math falls apart.
Even Jeff Bezos has said publicly that every time Amazon wins a Golden Globe Award, the retail side of its business sells more shoes. He believes that Amazon is the only company in the world that has figured out how winning Golden Globe Awards can translate into selling more products in online commerce.
Another example: Amazon has a lending business where it gives loans to small and medium enterprises, which could completely undermine banks’ business models soon. If Amazon decides to compete with banks, it can offer loans to merchants at such a low cost that banks would never be able to compete. Loans can serve as Amazon’s blades to sell more razors, here being products on the marketplace that Amazon is focused on making revenues out of. In this example, whereby a certain business can make another business model’s core value proposition its razor, banks will have a very hard time competing with Amazon. And this is the key change that Jeff Bezos has utilized to strengthen Amazon’s competitive strength.
Furthermore, this strategy helps connect customers and products through the classic network effect flywheel whereby the more buyers Amazon has, the more sellers it gains, and the more sellers it attracts, the more buyers flock to the platform as they can find a wider range of products. Making it difficult scenario for any new or even established player to compete with Amazon.
3. Capabilities rather than traditional boundaries
While traditionally we used to define focus by traditional industry boundaries, meaning that if one is an online retailer, going into some other business is a lack of focus, Amazon has defined focus based on its capabilities, and based on this point of view, Amazon had defined three fundamental core capabilities.
- A high degree of customer focus: not only in its culture but also in its capability in terms of how it can handle and leverage data to gain customer insights
- Logistics: Amazon is now a world-class logistics player that utilizes frontier technology such as robotics and computer vision, in its warehouse to make it much more efficient
- Technology: a good example is Amazon Web Services
And everything that Amazon is doing is in one way or another connected to nurturing, reinforcing, and growing these capabilities. And it may even take some steps backward to take a step forward. What this means is that, because Amazon is customer-obsessed, it will find ways to satisfy customers, and if that means developing new skills that it doesn’t have, then it will work backward to build those skills.
For example, when Amazon started building Kindle, it did not have the hardware business experience but it knew that as the industry developed, people were beginning to read more and more online, and Amazon needed to make it easier for consumers to read the electronic version. Amazon spent three years acquiring the hardware manufacturing capability and the acquired Kindle know-how has helped it launch the ‘Echo’ and many other devices.
4. A winning leadership style
Bezos’s leadership style rests upon three pillars:
- Long-term focus: Bezos does not think of next year, but rather five years out, and sometimes even further; a mindset that can be replicated in many other organizations as long as the CEO has the conviction to articulate the vision to the board and shareholders. This trait can be seen in other successful companies such as Netflix, Mastercard, and Tesla. Bezos has carried this long-term conviction from the early days of Amazon’s inception when his businesses were unprofitable, launching AWS in the early 2000s when the majority of Wall Street was not sure what Bezos was trying to do, arguing that ‘Amazon is an online retailer that has no business being in web services which is IBM’s territory, a B2B business rather than B2C’. And investors have continuously increased their trust in Bezo’s forward-looking philosophy as it has paid off time and time again
- Customer obsession: Bezos emphasizes that Amazon is not a competitor-focused, product-focused, or technology-focused company, but rather a customer-focused one
- Willingness to experiment: and fail, and he has built that culture across the organization
- A ‘hard-charger’ attitude: Bezos’s personality trait is an all-around hard charger similar to Steve Jobs. While some people find this characteristic exhilarating to work with, some tend to find it very tough
You can work long, hard, or smart, but at Amazon, you can need two out of the three to survive — Jeff Bezos, founder and CEO of Amazon
- A very thoughtful communication style: at Amazon, there are no PowerPoints and people write six-page memos, which everybody when their meeting starts, sits down and reads the memo and then engages in thoughtful meetings and discussions
5. Attracting, retaining, and nurturing talent
Bezos believes that he needs to surround himself with people better than himself, and in the competitive technology industry of the US that includes the Google-s, Microsoft-s, and Facebook-s of the world, Bezos has managed to attract and nurture talent through 3 main tactics:
- Becoming a winning team with an exciting business trajectory
- Fostering Amazon’s culture of experimentation and innovation, where ideas do not get bogged down by bureaucracy and processes, is a very liberating proposition to people who are willing to take on the ownership of building something
- Providing a wider range of opportunities for talent to experiment. So when one thinks about other tech companies, such as Facebook or Google, they’re much more narrow in focus, being active in social media or search advertising, whereas with Amazon, there are much broader opportunities for talent to immerse in and experiment with
6. Robust acquisition strategy
While some acquisitions such as Kiva have been obvious choices to help Amazon improve logistics and warehouse operations, other more strategic acquisitions have been focused on long-term goals.
For example, the purchase of Whole Foods at a 27% premium, an offline retail store, has been a long-term investment into the food and grocery industry despite being a low-margin business. Bezos believes that food and grocery is a high-frequency business with a normal customer making a high number of purchases per week, and if Amazon could convince customers to purchase groceries online then it will become a habit and gradually these customers will end up buying other products on Amazon; in other words, reinforcing the online retail network effects flywheel.
The controversies
While Jeff Bezos’ many winning traits and mindsets have helped shaped Amazon, there have been some backlashes along the way.
1. Organizational level — lack of employee-centricity
Amazon’s customer-centricity has come to the detriment of its employee’s happiness, with workers complaining about safety and the right kind of equipment during COVID, being pushed too hard with little breaks, with a large need for speed and efficiency to make sure customers always get what they are promised.
Either Amazon hasn’t done a good job at delivering employee happiness or has failed at public relations. Despite potential arguments that Amazon may put front as to the many perks and benefits of being an Amazon employee, it seems that Amazon lacks a bit of empathy and a sense of care for its employees, and this is an area for Amazon to work on.
2. Organizational level — decimating mom-&-pop shops and growing environmental concerns
Amazon has also been criticized for the fact that it has decimated mom-and-pop shops through its monopolistic scale and launch of private label products and confronted with environmental concerns about its boxes, packaging, and emission issues. And till date, it has done little to address these concerns.
Amazon needs to take into account that millennials who are in love with its value proposition are also extremely environmentally friendly and becoming more so, and this may have negative repercussions in the future that need to be carefully dealt with. Furthermore, with growing concerns, regulators will most probably move in to address the monopoly and environmental concerns at Amazon.
3. Personal level — empathy
The one major weakness in Bezos’ leadership that stands out, at least in the public forums, is the lack of empathy. Successful leaders should have three qualities:
- Competency: which he certainly is as discussed above
- Character: he seems to have good character, with no news on personal scandals, apart from issues in his personal life
- Compassion: the former two characteristics make people respect you, but what makes people love you is when you show compassion, and it does not seem that the general public or his employees tend to think of him in that way. He comes across as a hard-charging and driven individual, which is great for the business, but empathy is seemingly lacking right now
4. Personal level — wealth backlashes
While some argue that should anyone be this rich, in essence, there is nothing wrong with being rich, if you have been successful and done it with hard work and ingenuity. But how one uses their wealth is something that will define Jeff Bezos in the future. Bill Gates is a great example of how a rich individual has used his wealth, influence, and expertise towards a force that is good for humanity through his foundation and other non-profit activities. And in the future, Jeff Bezos will have to take similar strides also.
Two key lessons for aspiring entrepreneurs
- Be customer-obsessed: every company claims this, but not every company does it. Management meetings are focused on financials, the competition, and the product, with rare conversations about the customers. While Jeff Bezos always tells his employee to think of the imaginary chair in which a customer is sitting there during the meeting because that’s the person that they need to focus on. This mentality keeps pushing Amazon to innovate
- Have conviction and passion: while this goes against conventional wisdom, Amazon Web Services is a great contradictory example. However, combine your conviction with experimentation and connect the dots toward a future vision. It was this type of conviction that helped Bezos leave his job, move to Seattle, and start the online bookstore.
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