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Growing Your Business Like Amazon With Steve Anderson | Ep. 325

BDD 325 | Growing Business Like Amazon

 

The brand Amazon is no stranger to us all. Jesse Cole talks to Steve Anderson, the President of  Anderson Network and the bestselling author of The Bezos Letters: The 14 Principles to Grow Your Business Like Amazon, about how you can grow your business like Amazon. Steve breaks down these concepts from his book and reveals his learnings and discoveries from the company’s marketing, branding, and customer service schemes. He also walks us through how Amazon grew through written plans and efficient company culture, sharing how the Amazon Marketplace evolved into the success that it is today.

Listen to the podcast here:

Growing Your Business Like Amazon With Steve Anderson

Our guest is Steve Anderson, the bestselling author of Bezos Letters: The 14 Principles To Grow Your Business Like Amazon. When I first read the book, I earmarked almost every page. Steve, I am fired up to connect with you to take us into the mind of Jeff Bezos. Welcome to the show.

It’s my pleasure, Jesse. Thanks for having me.

I know the more Amazon grows, the more you’re going to continue to share what they’re doing. It’s fascinating and as we’re doing this interview, it’s challenging times with the Coronavirus. They are having to be innovative even more. I want to get into at least a little bit of the origin of the book. To come up with it and say, “We’re going to look at every letter he writes about it,” share about how that happened.

My background is in the insurance industry in the first twenty years or so, working in insurance agencies, selling insurance and doing all of that. I then got a real interest in technology, all the computers, social media, websites and all that stuff. Many years ago, I pivoted to helping the industry, primarily insurance agents and brokers to understand the new technology that’s coming, how to apply it and how to use it. Research, writing, speaking, consulting, is what I’ve done for many years. A few years ago, as technology continue to develop rapidly, I came to the realization that the biggest risk businesses face is not taking enough risk, not experimenting, not looking at what’s next, not adapting, all of those things.

The first book idea, the working title was The Risk Dilemma: Is Your Business Taking Too Much Risk Or Not Enough? That started me researching and looking at companies that didn’t adapt well. Some of the names you are familiar with are Blockbuster, Kodak, Blackberry, Sears and some of those. Some companies had done it well. I’m looking at, “Why? What did they do? What’s different?” That’s when I came across Amazon, known as an inventive and innovative company. I came across the shareholder letters and read a couple of them. Over a 3 or 4-day period, I went through and read every single letter in order. At the time, 20 letters, now they’re 22. I realized Bezos had laid out hidden in plain sight his plan for growing Amazon. I say at this point often, I don’t know what your audience thinks about Amazon. Some people hate them. Some people don’t like Bezos at all.

They probably use them though.

As I say, most do. I asked people to put that aside because it’s hard to argue that they are one of the most successful companies maybe ever. My question was, how did he do it? He laid that out in the letters. Long story, book writing and all of the iterations to finally end up what was published and the fourteen principles. These are my principles that I gleaned out of those letters that I believe Amazon used that any business can use. They’ll have to adapt. It’s unlikely that you’re going to be the next Amazon. There were some unique things, but that doesn’t mean you can’t learn from how they have grown. We certainly are seeing that in experimentation, inventive and innovative nature, even up to now.

It’s fascinating because the risk is something that’s probably not talked about as much in business. We talk about similar things, growing our business, but not about taking a risk and intentional risk. As we see the speed of invention and innovation, the risk is everything. There’s no one teaching risks. I want to get into some of the ideas in the book because they are unbelievably practical. We could put it in Amazon terms in how we can use them. I love this one. In my book, I talk about taking small bets. You talk about how Amazon and through the letters, Jeff shares, “Bet little on big ideas.” I love that because everyone takes up to an extent some small bets that you won’t lose and you won’t win that much. Bet little on big ideas, share that one, Steve.

Inventing on behalf of the customer is the core of customer obsession. Click To Tweet

At Amazon, they experiment all the time. When you hear Amazon shutting something down or it didn’t work, that’s positive for Amazon. They don’t see it as negative. Let me give you a couple of examples of big bets that started out small. Some of them you know. Amazon Prime, it started in early 2000s. They had experimented with different ways of helping consumers buy more by not having to pay for shipping. That was a barrier. That was a friction point for people to buy more because then they’d see, “It’s $795,” or whatever the shipping cost is. I still do that if I’m shopping online. I finally get to that final order page and go, “It’s not that price. It’s this price because I have to pay for shipping.”

The problem at Amazon was Bezos said, “I want to do free shipping.” Membership fee, they’ll pay for it. Everybody at Amazon, all those top leaders said, “This is crazy. We can’t afford to do that. That fee won’t pay for our cost to shipping.” Bezos had an intuitive feeling and what I call gut that if it’s better for their customers, it will be better for Amazon and ultimately for the shareholders. Now it’s estimated that Prime members spend 2.4 times as much money at Amazon than non-Prime and it’s paid off. Now you see, many years later, Walmart Plus. They’re trying to get into it, but Amazon pioneered it. An idea that started small but it has turned into one of their big bets.

We’ve been talking about the shipping forever. Merchandise for the Savannah Bananas, we’re fortunate that it goes all over the world. A $24 shirt is not $24, it’s $30.50 or whatever. That’s a friction point. We looked at that. We looked at the numbers as an example. We said, “How much did shipping cost us last year in overall merchandise revenue?” We looked at it and it was 3%. That’s thousands of dollars but 3%. We said, “If we don’t sell anymore, we sell the exact same and we lose 3%, will we be okay?” We said, “Yes.” We made all free shipping. We don’t have the Amazon Prime $99. We took it. What happened is our orders have increased by almost 25%. If your goal is to create more fans, to create more people that want to be into your system, it’s a win. Even though it is costing us more per person, we’re still getting more people to experience and there’s still profit in there.

That’s exactly what Amazon has experienced. People bought more when that friction point was removed. That’s a great story, Jesse. You have had that same experience.

We had to. I love that Bezos said, “None of the big failures matters. Betting on big ideas is a good offense that outweighs all the little ideas that don’t work,” as you referenced. What are some starting points? I love this too, Steve. I don’t know how much you share this, but the play to learn over play to win is amazing. How are we playing to learn? Instead of, “We’re going to win,” it’s, “What are we learning?” Talk about that mindset.

A couple of things. One, that goes back to this experimentation mindset. He says several times in the letters, “I believe Amazon is the best place for an employee to fail.” That goes back to that first growth principle of encouraged successful failure. That is counterintuitive for almost every business because you’ve got to win. If you don’t win, you’re a failure. Bezos understood then and understands even now, that if you’re not experimenting, you’re not moving the needle. That idea of you bet small, you start experiments small, and you find out where those big ideas are, and then you start betting bigger and bigger. That’s why the fourteen principles are broken into four cycles. You test, you build on the successes, you accelerate as you go on and then you scale as you move forward. That’s one of the frameworks around which we’ve built the idea of these growth principles.

I love starting with the test because that’s the best place to start, but few companies get there. They’re too afraid to test. You mentioned with the bet little, they started Amazon with the free super saver shipping on orders of over $25. What other examples did Amazon do as far as like, “We’re going to do this bet a little that may not hurt us,” that may be easier for a company to understand?

Bezos has identified three big bets over many years. Amazon Prime is one. Amazon Web Services is the other. We could talk about that, but the one I want to talk about is Amazon Marketplace. In early 2000s, they were looking to grow. They came up with this idea of allowing third parties, non-Amazon products, on their platform. It’s a big pushback. How can we do that? They had two failed experiments before they got to the marketplace. The first was Amazon Auctions. They tried to compete with eBay and it was an utter failure. He writes about that in one of the earlier letters where he says, “We had few people coming to Amazon Auctions. I think my mom did.” He’s lighthearted there, but people didn’t go to Amazon to participate in an auction. If they’re going to do that, they go to eBay.

They pivoted to what they called zShops. Third parties could be on the Amazon website but it was a whole completely different section of the website whereas a customer you had to log in to a different place. It’s friction. People didn’t want to go over there, they wanted to come to Amazon. They finally realized, and Bezos pushed this, “We need to put third-party sellers on exactly the same sales page as we have for our products.” Think about that. It’s counterintuitive. Why would you open up something you have built and spent millions of dollars building a website, clients coming there to buy stuff from Amazon, why would you allow third parties to compete directly with you on your page? I’ve already said it and you know why. If it’s better for the customer, it will ultimately be better for Amazon and our shareholders.

BDD 325 | Growing Business Like Amazon
Growing Business Like Amazon: Amazon is the best place for an employee to fail.

 

What Bezos said was, “If a third-party seller has inventory and we don’t, it’s better for the customer. If a third-party seller has a better price than we’re able to get, it’s better for the customer and it will ultimately be better for us.” Let’s be clear, Amazon gets a commission off of every one of those sales. They’re allowing access and they’re making money in an area they probably wouldn’t before. That goes back to the Flywheel. That’s principle number six. The whole idea of more customers coming to the platform is better for Amazon and for third-party sellers. It allows more negotiation to the manufacturers to reduce pricing, which brings more customers. It’s that loop that Amazon calls the Virtuous Cycle that allows customers to come. The success is there. You can’t argue with me that Amazon hasn’t been successful.

The Flywheel is a fascinating concept. It’s tough to teach. We’ve been talking about it for months.

People always ask, “What’s the most important principle?” There are fourteen and there’s a reason why there are fourteen. It’s like asking, “Which child do you love best?” If I had to pick, I would say the Flywheel is the most important one. It’s exactly what you said. It’s the hardest one to grasp, to learn and to put into practice, but if you can get it and understand it, you look at Amazon, their Flywheel is still driving their business. Everything they do, you can bring back to the Flywheel they created in early 2000.

Did they start the Flywheel at the lowest possible prices?

For them, yes. There are three customer pillars that Bezos identifies at Amazon, wide selection, low prices and fast delivery. That’s Amazon. That doesn’t mean your business should be low prices. What is that pillar for your business? That’s where the difficulty comes. As you said, trying to get your head around what is our Flywheel and it can take a while.

That could get us going for a while. I want to stay on customer obsession and think about counterintuitive things. I thought back to a few years ago when we said fans could bring food into our stadium. That’s counterintuitive. You charge for food.

That’s where you make your money.

We have all-inclusive foods. If you’re bringing in food anyway, it doesn’t hurt us as much. You think about those things. What is the best possible experience? Solution-focused over problem-focused. Bezos wants to solve problems before they happen. How does that go into maybe the testing or building this customer obsession?

Writing is such a core cultural mindset. Click To Tweet

One of the phrases Bezos uses a lot is, “We invent on behalf of the customer.” He says this. There is no customer that asked for Prime but we internally said, “What can we do to make the experience better?” In your case, I’d love to talk to you and ask you some questions because you intuitively knew that a friction point for people coming to a game was like the friction point of going to the movie. You want some popcorn, you want a drink, you want something else, and now it’s not the movie. It’s all these other things. That’s a friction point. Frankly, movies, you, entertainment, you’re competing against 60-inch screens in somebody’s family room.

It’s a lot more convenient. Why should I go to the ballpark? In your case, because I can be entertained. I can have a good time with the family and all of those reasons. You’ve removed some of that friction. Inventing on behalf of the customer is the core of customer obsession. I’m fascinated with why he used the word obsession. Most businesses think about customer focus, customer experience, customer service and all of those kinds of things. From the first letter in 1997, Bezos used the word, obsession. That’s a different context and a different mindset of how to think about what you do for customers.

This is how you’ve inspired me. I love that. We now say, “We’re fanatic about fans,” because everything we talked about is fans. Fans First is the name of our company, so fanatic about fans. If you’re fanatic about it, it’s that same type of obsession with enthusiasm that you’re exhilarated by it. You mentioned invention. I want to talk about this because I love that Bezos makes invention part of each person’s job description. You shared that. Can you explain that? The invention is not something you think, “You’re coming with us. Let’s talk about your inventions.”

The idea behind that, I got that from interviewing several people who had worked at Amazon. What they told me was that the only research and development department that Amazon has is called the Lab126. That’s specifically for the hardware. That is where Kindle came out of. That is where the Fire Phone came out of. That is where Echo came out of. That is a different skillset. At Amazon, if I’m a six-month-old employee working somewhere, I’m encouraged to look at what my job is, figure out how it can be done better and try it for me personally first. If it looks like it’s going to work, bring it to my supervisor and say, “Here’s what I’ve done. Here’s where it can be better. Here’s why. Here’s the data, Here’s the improvement.” Literally, I could be tasked now for being the spearhead for bringing that to a bigger team, maybe to the whole department. That mindset of always looking for improvement is incorporated in everybody that works at Amazon.

How do you teach that? Practicing dynamic invention and innovation, how do you teach that with the culture?

It’s reinforced. I’ll go back to encourage successful failure. One of the questions I ask companies is, “What’s your employee bonus program for the most successful failure?” Too many businesses punish failure either overtly or covertly. If employees know that if I try an idea and it doesn’t work, that I’m going to be punished or my career’s going to be damaged, I’m not going to. It’s a culture that you have to develop within your organization. It’s got to be top-down. It’s got to be, “Yes, we’ve got to push this.” I also have to say here, Amazon is intolerant of incompetence. You are always expected to bring your A-game. If you’re doing stupid things, you’re not going to last. If you’re doing experimentation and you’re thinking through the implications in how could this be better and it doesn’t work out the way you thought. One, what did you learn from it that you can share with the team so they don’t make the same mistakes? How do we move this forward?

It’s changing the consequences dramatically of what happens. Sara Blakely, the inventor of Spanx, every day when she was a kid at the dinner table, her dad would say, “What did you fail at today?”

I heard that interview and I was fascinated by that idea. That is the core mindset that we need to have.

Jeff Bezos said, “I believe we are the best place in the world to fail. Failure and invention are inseparable twins. To invent, you have to experiment. If you know in advance that it’s going to work, it’s not an experiment.” He makes it as part of the culture and that’s fascinating. He also has the Just Do It Award. There are all these things, “Just do it, just test it, just experiment it.” You mentioned Lab126 and also you talked in your book about Weblab. Should every company have some type of lab? Explain the labs again.

BDD 325 | Growing Business Like Amazon
Growing Business Like Amazon: Too many businesses punish failure either overtly or covertly.

 

Lab 126 is where hardware was developed. That’s a different skillset. Even at Lab126 when you talk about failure at Amazon, one of their biggest failures came out of Lab126. It was Jeff Bezos’s pet project, which was the Fire Phone. When I talk about the Fire Phone, few people even know that Amazon built a phone and tried to sell it. Why? Because it was an utter failure. Here’s what’s interesting. That was Bezos’s pet project and he was like, “It didn’t work.” Four months after he announced the Fire Phone, he got his first demonstration of what was to become the Amazon Echo and Alexa. All of that work with the phone, they were able to transition and pivot into a device that listens and responds to your questions.

That was combining hardware, the Echo device, Amazon Web Services, and machine learning, which we now know as Alexa. That’s key. The other thing you mentioned was Weblab. It is a testing platform for its internal operations, so a lot of website testing. When you look at Amazon’s website, I can guarantee you that there was significant testing for every single element that’s on that website. In the industry, it’s called A/B testing. You try this version and you try that version. You send certain numbers to each. You’ll look at the data that people click more here or buy more with this button or this color or this link. That’s Weblab and they’re doing hundreds of experiments every year to refine their process, but also to improve the customer experience. When I ask people, “Do you shop on Amazon?” Most people say, “Yes.” I then ask, “Why?” Almost always the top 1, 2 or 3 answer is it’s easy. That’s intentional.

That’s a question I know our group experience coordinator asked. She said, “How can we make it easier for every single person to work for us?” I was like, “That’s a question Amazon probably asks every single day. It starts asking, “Why do people come?” Sometimes it’s not why they say it is. They might say, “I want to get out,” then ask why again and keep going. It’s the five levels of why to get there. I love this, Steve. It is fascinating what you did in your book, which was powerful. I can’t tell enough entrepreneurs, you need to read it. You have questions at the end of each chapter that you can ask your team. In the test and experiment phase, what would you say are 1 or 2 of the best questions that you can ask your team to start this innovative culture?

I would start with, “What are the friction points I have in my business that my customers experience?” I doubt you’re going to know. What I recommend is some form of a secret shopper. A friend or hire somebody, get a college kid that doesn’t know anything and have them go through. If it’s online, have them order. If it’s calling up, have them call up and get customer service question. I don’t know what it is for your business. Have them write down their experience. I’m convinced that most business owners don’t have a clue anymore what happens. They maybe are more removed. They’re not on the front line. Interestingly enough at Amazon, everyone including top executives are required to answer customer service questions for some time. It may be an eight-hour day, but to try and keep close to what people are asking and keep close to the customer, so they understand better the process and how they can improve it.

As my audience know, we started this a few years ago, we do an undercover fan. Every night, one of our staff, including myself, goes undercover as a fan. We park the car with the fans. We walk in with the fans. We sit with the fans. We eat with fans. What I do, even though it’s harder, I go incognito but a lot of them know my voice. For people that don’t, I sit with them saying, “What’s the best part? I’ve never been to a Bananas game. Have you? What do you enjoy? What are the best?” You get to hear all this information by sitting with them in their actual experience and not just talk. You have to be next to them. I couldn’t agree with you more on that.

I suspect you don’t wear your yellow outfit.

I go full incognito. I wear a regular hat, sunglasses and a t-shirt. I go relaxed. There’s a video. We film it every year when I do it. It’s undercover and it’s a lot of fun. The questions Amazon always asks, you bring this up in the book based on looking at all the letters. You mentioned a few them. Who is the customer? What is the customer’s problem or opportunity? What is the most important customer benefit? How do you know what the customer needs? What does the customer experience look like? Is this how a company should evaluate what to do next?

I think so. It’s a good place to start. Your business is going to be different than what Amazon does. You’ve got to translate that into what makes sense for your product mix. Maybe you’re a service consulting company. Whatever it is, you’ve got to translate that. Thinking about one, what’s my ideal customer? Two, what’s their experience and how can we improve that? What aren’t we doing now that we could be doing? We’re doing this episode during the pandemic crisis here in the US. There are a lot of businesses asking that question.

Hiring someone is not about skills and abilities but about the person and who they are. Click To Tweet

It was interesting. I mentioned before we started, Bezos sent a letter out to all employees, all the Amazonians across the world. He talked about, “We’re at a tough time. We’re in uncharted waters now.” He’s setting being realistic, “Here’s what we’re doing. Here are all the things that we’re thinking about.” He ends up saying, “Be safe. We will get through this together.” That’s important too in terms of your staff to communicate when you have situations like this. You’ve got a plan and they can be comfortable. “It’s strange. It’s unprecedented and we will get through this. Here’s the plan for how we’re going to do that.”

It’s great leadership. It also goes into long-term thinking. You talk a lot about that in your book. How can you change short-term rewards to encourage long-term term thinking? What is Amazon doing here?

What’s interesting is given the crisis, for the last several years, Bezos had said, “My focus is 3 to 5 to 7 years out.” What he said in this letter though is, “My entire thinking is on the pandemic. I’m spending and we are meeting every day to figure out what else we can do to improve it for our own employees.” They’ve got fulfillment center workers and they’ve got all kinds of stuff. They’re doing all kinds of things there. At the same time, they’re going, “I know they’re thinking but what about when this is over? What are the things that we are going to need to prepare for?”

Their transportation system right now is under great stress because the orders have skyrocketed. He said in 1997 and think about this, “We are building something important, something we can tell our grandchildren about.” He said a few days ago, “What we are doing is important to a lot of people. We are prioritizing getting those essentials out to those people that count on us that can’t get out.” To me, it’s that same idea. This is not just a business. This is something important. We have a job to do here that’s important for us to do.

You come back to that 1997 letter and how it has everything and you share that. I think about the big picture of this and vision casting. Bob Iger with Disney did leadership by press release a lot. What he would do is say something about the vision, what the company stands for and where they’re going. My thoughts on this are thinking like, “Why isn’t every leader sharing something, writing it down, taking the time to do a narrative like Amazon does about every year, every quarter, whatever it is, where we’re going as much for their team as it is also for their customers.

I think the shareholder letters as much for the employees as for the shareholders and certainly those outside. For most businesses, they aren’t used to thinking deeply and writing it down. At Amazon, writing is such a core cultural mindset. They write things down because they believe it’s important and they believe the process of writing it down helps you think better.

One of your principles is making complexity simple too. That’s probably an area of how you do it. Also as a writer going through this process, the more you write, you’re like, “That doesn’t make as much sense. Let’s keep going or pivot and change.”

I pivoted from the original book to what this book was. That was an interesting mindset thought process.

I want to keep going to a few more things. Type-one, type-two decisions and 70% Rule, that’s good for every company to know as well.

BDD 325 | Growing Business Like Amazon
Growing Business Like Amazon: Writing your plans can help you think better.

 

High-velocity decision-making. We’re seeing that here at Amazon over the last few months or so. It’s interesting to me to look at. They announced a few weeks ago that they were hiring 100,000 additional employees to help with this huge volume increase. As people are at home and ordering more and being able to get those out. He says in this letter, “We want those people who are out of a job, restaurant workers and others that are temporarily laid off to come work for us in the meantime until your job comes back.” Thinking in the decision-making process. They can make decisions quickly. They don’t have to think about and go to multiple layers. That’s interesting in our current situation.

Bezos breaks decisions into two, type-one and type-two. Type-one decisions are big bet the farm decisions. You make those slowly and intentionally with as much data as you possibly can get. Type-two decisions are quick and easily reversible and that’s the difference. Type-one decisions are hard to reverse once made. Type-two decisions are easily reversible, and so move forward, default to action. At Amazon, they don’t have lots of layers of approval. They push down. That experimenting mindset helps them push down decisions to a lower level so they can make decisions quickly. We’re seeing that now in how they’ve been able to pivot much faster than any other business that I can think of.

I forget which letter it is, but you shared in one of his letters that one of his big fears was that as you get bigger, the decisions slow down because they’re seen as heavyweight decisions. We’re only a few years old with Savannah Bananas. We’ve been doing this for a lot longer, but I remember our staff called it the Wild Wild West when we first started because no one knew who we were. We were like, “Let’s throw out that video.” Now because we’ve built a bigger following that we think our videos always have to be to this standard or this thing, and we’re not constantly doing it. It does slow us down. How do you change that mindset within the staff to say, “They’re not as heavyweight decisions, let’s keep rolling?”

Amazon has a couple of tools that help with that. One is what’s called the two-pizza teams. The idea of two-pizza teams is a team that should be no bigger than you can feed with two large pizzas. That’s probably 8 to 12 people

With my team, it’s probably four.

You have to manage that. The idea there is small teams move faster. They may have hundreds of teams like that at Amazon for a big project, but every team is responsible for their piece of that project. The idea is, if you don’t trust that team to make decisions without higher-level approval, then you need to get a different team, and to understand that they’re going to make mistakes. One of the leadership principles at Amazon, so different than the growth principles with their leadership principles, is disagree and commit. Meaning, it’s often hard to get 100% agreement. Jeff says he does this often. He says, “I don’t agree with this decision. I don’t think it’s going to work, but I commit if that’s what you think we should do. I disagree but I fully commit to supporting you in every way and I hope I’m wrong.”

That does so much as a leader, Steve. I remember vividly when I was with my first team. I said, “We’re going to have a game at midnight on a Friday night. The owner was like, “What are you talking about? Friday nights are our biggest nights, biggest revenue, biggest fans. Why would you put it at midnight?” I was like, “Because it’s something new and it’s something different. We can go after a group we’ve never got before the second shift and the third shift.” He goes, “I don’t think it’s going to work, but I trust you’ll do it.” You better believe from my standpoint, I worked my butt off to make it work. I called every company in the world and we sold out the game. He was like, “I was wrong.” By taking that, “I disagree, I commit,” they almost wanted this prove mindset, “I’m going to do it,” which is not a bad thing.

What Bezos says is, “If that team had to take the time to convince me, it slows the process.” Defaulting to action is better than 100% perfect. You mentioned 70% information. Bezos says that you should make decisions with at most 70% of the information you wish you had because you’ll never have 100%. It’s moving, failing, iterating, success and doing more. It’s that process. The biggest problem in a successful company is that they’re successful because there’s a natural tendency to protect what got us there. It’s like your owner. He said, “Friday nights are our best night, that’s what got us here. We have to protect that,” as opposed to experimenting, “Maybe there’s something else we can do one night. Let’s try it.”

Do the hard things early so it becomes easier later. Click To Tweet

It’s always the small test. That’s why I love this so much because the companies that I talk to and work with are like, “That sounds too crazy for us.” What’s the worst thing that will happen? When we came out with Dolce & Banana underwear and did a whole ad with our guy wearing a black and white commercial, pouring water over his head, we had a few fans that are like, “You guys went too far.” Most of them were like, “This was fun.” Now we sell underwear. People were buying underwear, which doesn’t make any sense for a baseball team, because of a small bet where we didn’t take ourselves too seriously. That’s important. I do want to go to high standards. This is important in bringing people on board, the high standards. You said that during hiring meetings, they ask certain questions. Do you remember those? Can you share those? Those were fascinating.

In the 1997 letter, he talks about hiring and one of the things he says is, “We’re going to default to ownership.” That’s one of the principles, which is you need employees to think like owners. In the ‘98 letter, he talks more about hiring and this focus on high standards. What’s amazing to me is how Amazon has been able to continue to grow. They have almost 700,000 employees at the end of 2019. He writes, “During our hiring meetings, we ask people to consider three questions before making a decision.” Those three are one, will you admire this person? It’s not about skills. It’s not about abilities.

It’s about the person and who they are. Will you admire them if they become part of your team? The second question is will this person raise the average level of effectiveness of the group they’re entering? That is this idea of focus on high standards. Elsewhere Bezos says, “This is a hard place to work. We have high standards here, but high standards attract others with high standards.” A-players want to work with A-players. B-players don’t want to hire A-players because they make them look bad. That’s the idea behind it. Interestingly, the third question is, along what dimension might this person be a superstar? It’s not skills-focused, but what else can this person bring to the team?

It may not be work and skill-related and the example he uses in the letter is that there is an employee at the time who was a National Spelling Bee champion. He says, “It is fun to be able to walk down the hall and ask the individual to spell, “Onomatopoeia.” Part of the mindset there is in what other way are these people creative? They’ll bring that creativity into their work. Amazon at their headquarters has a full orchestra of volunteers who play instruments, come and play and they play concerts a couple of times a month. It all goes to that creativity that’s necessary for experimentation and invention.

Our director of film and production is a singer and plays the guitar. We didn’t know that at first, then all of a sudden, he’s like, “I can sing that.” He’s singing songs for our music videos. We’re like, “This is amazing.” We never knew that diversity and that creativity. For us, we haven’t hired anybody in the baseball industry. We’ve hired people outside and people that have started as interns right out of college because we don’t want people that think the traditional way. It’s like how much does Amazon wants people from Walmart? It’s a different mindset and thinking. I want to finish with a little bit of rapid-fire. I’m going to get practical with a couple of games here. Jeff Bezos, based on his letters, is running a baseball team like ours. The baseball team has sold its games. I’m getting very personal and practical.

You want some great help here. I’ll try my best.

I’m reading through this and a lot of people are looking for help in their next move. Using some of the principles that you developed, where would he look next if he was running a baseball team based on the letters? What would you think?

What comes to mind is Amazon Web Services. A little bit background that may help you think. In mid-2000s, Amazon had a problem. Their IT infrastructure internally was a bottleneck for experimentation and invention. People had to go to IT to get things done. Bezos made a mandate that we will no longer do that. We will distribute that. IT is responsible for building the tools that other departments need. Here’s the idea. They did that. All of their website and all of their eCommerce, all of the stuff they had built, they realized they had become good at managing computing infrastructure. That’s where AWS came about. At one point they had a meeting and they said, “We’re good at this. There might be other people who would want to tap into what we’re good at so they don’t have to do it.

That’s where AWS grew out of. It’s a multibillion-dollar business now. Are there things you’re good at that others could tap into? Here’s the key, maybe it’s not baseball. You have to decide whether you want to make that pivot or not. AWS is not a core eCommerce website platform. It’s over here but they realized, “We’re good at it.” They were able then to leverage that same idea into a whole second business. As Warren Buffett said, it’s highly unusual for a company to be successful in multiple different areas like that. You said video, maybe it’s marketing. I don’t know that you want to do that but maybe there’s a team you can build over there starting small that might be something different that you can bring.

BDD 325 | Growing Business Like Amazon
Growing Business Like Amazon: Don’t talk about your product. Talk about who you serve over and over again.

 

You started the question you ask about the friction points in customer experience, but also if you’ve solved your own problem. For us, on how to map the experience and how to create and have these ideapaloozas. We started teaching that. We started hosting workshops. We started hosting keynotes.

You’re already starting down that particular way.

If you can solve your own problem, it’s not necessarily your customers’. If there’s a problem that you solved internally for yourself, other people are probably going to. That’s a good innovation there to think for companies as well, which I love.

In terms of specifically baseball, it’s continuing to look like Amazon’s core business, the eCommerce businesses. In some ways, it’s pretty much the same as it has been. It’s just bigger.

They started selling books, then they went to CDs.

Books, they started because it was the easiest place to start. He iterated more. Maybe it’s, are there other areas we could do the same thing? For other cities, for example. Part of it is how much do we want to scale?

Let’s start with small bets and it’s good. Know what you’re the best at and know how you can serve. We’ve evolved and come up with a faster baseball game that we’re going to start potentially bringing two different cities, one city at a time as a small bet. I see the same thing. I’m fascinated by it. I’ve been grilling you for a while. That was a tough one, Steve. You get to grill me now. It’s flip the script. You are the host of Business Done Differently. You can ask me one question.

I got one interesting hand-written note and I haven’t gotten too many of those from people who’ve read the book. You had talked about fan first in correlating with customer obsession. Where did that come from? You said you started out in utter failure in the beginning. What changed or what impacted you in your thinking to be able to make that shift? It’s been successful now but at the time, it was scary, I would assume.

I’ve never been asked that question. I’ve never shared this before. A few years ago, I started my own company called Team Cole and Associates. It sounded like a law firm or accounting service or whatever. It was about helping teams and coming up with ideas. We kept saying, “That’s not saying who we serve and what we do. What could be the name of our company that would cover what we do and how we think?” We named it Fans First Entertainment. We said, “What’s our mission?” Fans first, entertain always. What’s every decision we make? Is it fans first? What do we want our people always thinking? Fans first, entertain always.

Now, we’re pivoting to more thinking about entertain always as people are at home and going through the virus and everything. That whole fans first, entertain always, we simplified it to make it who we are. That customer obsession into that fans first, who are you talking about? Don’t talk about your product. Talk about who you serve over and over again, like what Bezos gets in the letters. That’s a tremendous question. I love it. I want to finish with two final ones here. What’s a quick win if someone can read this and get off and say, “I’m going to talk to my team. I’m going to do this to become a more innovative culture like Amazon and start thinking like Jeff Bezos?”

What are some ideas you might have had that you want to experiment with? Maybe a new product and maybe a new service. Something you could do that’s small. Here’s what I would encourage as part of that thinking. If you have a new idea, new product, new service, something you want to try, the first step is to write it out. Amazon has a process called a six-page narrative. I did this for a project I’m working on. We were presenting to a group of people looking for some investors. The small group I was working with, I convince them not to do a traditional PowerPoint presentation but to write out a narrative. At Amazon, PowerPoint keynote is banned. The fastest way to get fired at Amazon is to come in with a PowerPoint. What they do is a narrative.

We wrote a future press release and I dated it. Here’s what we have built. Here’s what we’re releasing. It forces you to think through all of the iterations. What is it that you think you’re putting together? The second piece that we did was an FAQ, Frequently Asked Questions. We did customer first. There were four parties that could be involved with this project. We started creating, what are the questions? What is the simple answer? Almost one sit and answer. What’s the discussion about the answer? What it is you think you’re creating as opposed to, “We have this great idea,” and all of a sudden, we end up not where we thought we were because we didn’t think through it.

When you look at Amazon and their invention process, that is key to their success. It helps them think through beforehand. If it doesn’t work out the way they thought, they now have a document to go back to say, “What did we miss? What did we not understand?” After action review is built into the process, that’s how you can learn and iterate. It was the hardest thing I’ve done in a long time. I had written about it. I had not done it. It was incredibly powerful. I presented physical papers. I did not send it out beforehand. I did a quick 5-minute introduction, “Here’s what we’re going to do.” I handed it out. There were about twenty people in the meeting. I said, “We’re spending the first fifteen minutes and you were to read this to yourself and make notes of questions that you have on the paper. Fifteen minutes, quiet and then I opened it up, “What are your questions?”

What did you learn?

Those are great questions. Everybody was on the same page. What was fascinating is it was probably an hour and a half discussion and later, people would have a question and somebody would say, “That’s question seven.” People were referring back to the handout. The discussion was much richer as opposed to information where people are interrupting with questions, “Let’s get it all out. Here’s all the data, here’s what we think, now. What are your questions?” It was a much more focused and productive discussion

Now you’re ready to rock and roll. Do the hard things early, so it becomes easier later. That’s one of the ways that Amazon works fast. Steve, you’ve inspired me again and you may not know it, but what’s going to happen is that I’m going to send you a narrative. I’m going to send you a future press release and some FAQ of our next big step. That is something that everybody can do. I can’t thank you enough for being on this show. The inspiration and what your book’s done. This is something that every business owner should put into practice. Steve, thank you for sharing so much.

Jessie, thank you. I thoroughly enjoyed the conversation.

I appreciate you.

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About Steve Anderson

BDD 325 | Growing Business Like AmazonSteve Anderson, MA, is a trusted authority on risk, technology, productivity, and innovation. He has over 35 years of experience in the insurance industry. He is also the author of The Bezos Letters: 14 Principles to Grow Your Business Like Amazon (Morgan James, September 2019).

Anderson is a professional speaker, writer, and “futurist.” His speaking portfolio includes presentations on the future of technology, the influence of social platforms, how businesses can leverage the internet, and how they can assess and use risk to their advantage.

He was chosen as one of the original 150 LinkedIn Influencers and has over 340,000 followers.

For the past two decades he has served as the president of The Anderson Network. Prior to that, he served eight years as Vice President of Cadenhead Shreffler Insurance, and 12 years at Gilbride Insurance Agency.

He is a Certified Insurance Counselor with numerous honors earned including #10 Influencer to Know in the World of Insurtech; Insurance’s Top 100 Individual Influencers on Twitter; and an Insurance Automaton Award recipient.

He serves as the co-chair for Independent Insurance Agents and Brokers of America’s ACT API Workgroup. For the past quarter-century, he has been a member of the faculty for The National Alliance for Insurance Education Research. He has co-hosted The Digital Broker Podcast over the past year and a half.

He holds a B.S. in Business Administration and Economics from Taylor University and a master’s degree in Legal Studies with an emphasis in Insurance Law from University of the District of Columbia, David A. Clarke School of Law.

Steve and his wife, Karen, have two married daughters, and seven young grandchildren. They live in historic Franklin, Tennessee

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