Amazon Unbounded by Brad Stone recounts the recent history of Amazon and is a follow-up to his previous book The Everything Store. The book details the meteoric rise in the valuation of the company, the many new services offered, and the demanding management style of Jeff Bezos and colleagues. The outsider perspective is critical but fair, curious and critical. A light read that will leave you more informed about what goes on inside the everything store.
Read: 1x | First: July 2021
Summary Review of Amazon Unbounded
Part I: Innovation
The first part of the book describes the rise of Amazon starting in 2010. It is crazy, from our vantage point now, to think that about 10 years ago Amazon was worth around $80 billion, less than 5% of the current $1.7 trillion it’s worth now. The same goes for the number of employees, which has risen from 33k to 950k (1 in 153 employees in the US are working for Amazon). If nothing else, this book is a story about how to scale a business through constant innovation.
‘Do more with less’ and ‘think big’ are two of Amazon’s leadership principles. Amazon is constantly trying to reinvent products that the customer wants and doing this at a scale and pace that others are not trying it at. What stood out from these pages is that even though a product fails (e.g. the Fire Phone), the lessons and technology from the product production are taken into account.
Innovation is still a hard thing to pull off. The company has had many misses and for several projects, the pay-off is years away. The intuition that Jeff Bezos has developed over the years (coupled with data) is what sometimes has moved unprofitable projects forward that in the end might turn out to be winners (e.g. cashier-less shops). The same can be said for the development of Alexa, which took many iterations before it became a product that did its job well enough.
Being a strong leader did have its downsides, as many in the Fire Phone group had their doubts about the viability but didn’t dare speak up to Bezos. Thus a balance between vision (top-down) and ground-level feedback (bottom-up) was possibly skewed too much in favour of the former.
The focus on customers is what has made Amazon successful. Throughout this book, you will see that this principle supersedes other concerns such as the quality of life of employees (using a ranked-firing/stack-ranking system such as Netflix also has) or the sellers on Amazon marketplace. The former did possibly improve, for white-collar workers that is, as the forced firing was abandoned later on.
Jeff Bezos personally buys the Washington Post and through instilling some good lessons from Amazon turns the paper profitable. It seems that the move is both altruistic (preserving good reporting) and in the end a great business decision. Later chapters do point out how the association of him and the paper, and the battle with Donald Trump, might have had negative externalities. A government contract that was awarded to Microsoft (worth more than $10 billion) might have been theirs be it not for the feud between Bezos and Trump (but who knows, this is a counterfactual after all).
Amazon Studios tried to be as scientific (data-driven) as the engineers at Amazon had been, but soon they would find out that the creativity needed to make hits didn’t match their formulas. Going with experienced script/plot-writers did solve this later on. Though, now that I’m writing this, I do remember that House of Cards was something that Netflix had conceived based on a lot of data from what customers wanted/liked. So I guess both ways can work.
“The biggest needle movers will be things that customers don’t know to ask for” – Jeff Bezos, in a letter to shareholders
- Minimum lovable product – as an alternative to minimable viable product
- Single-threaded leader – each team needs to have someone who is responsible for this task, and this task only
- For a start-up (as I’m running) this does ring true, but I think also needs to be adjusted to you yourself having one task/hat on for a period of time and then switching task/thread/hat for another part of the day
- Chapter four also mentions that Prime day needs to mean one thing, something I have to remind myself of a lot of times, you can only be one thing in the minds of customers
- Start with the needs of the customers and work backwards from that – e.g. people don’t want to wait in line at the supermarket so remove the checkout part (through cameras that track what you take of the shelves)
- “Stubborn on vision, flexible on details” – Jeff Bezos
- Amazon spent more than $22 billion on R&D in 2017, eclipsing Google and the other tech companies (and cleverly, but I would say justifiable, the tax system)
- “Keep trying things” – Jeff Bezos, on their India expansion, and the need to go fast and try, try again
- Two-way door decisions – a mental model of decisions that they could make that were reverseable (vs one-way doors), making it (mentally) easier to make a choice to do something as it could still be reversed later on
- Amazon was very secretive about their financials and hid the profits they made from AWS for a long time to not give competitors ideas
Part II: Leverage
Amazon’s flywheel (also see Turning the Flywheel) is the virtuous cycle that guides their business. It consists of offering lower prices, which lead to the loyalty of (Prime) customers, which leads to more sales, which leads to more sellers, that offer lower prices (or better quality products/wider selection), repeat. Whilst growing, Amazon also had a focus on growing the revenue faster than the expenses. The question they have repeatedly asked themselves is as follows: “How could they reduce costs in their operations while maintaining sales growth?” (note that this excludes R&D costs, which are a huge part of the business).
The company has been accused of using profits from some parts of the business (AWS) to fund other parts of the empire (Amazon marketplace). And in a way this is true, and possibly anti-competitive. At the same time, the S-team and Bezos, in particular, were aware that every part of the business should carry itself. One example is that when advertising showed to be hugely profitable on their website, they still hammered that the marketplace should be profitable without this part. Automating many pieces of the business is what marked this era of Amazon.
- Many changes at this time led to disgruntled sellers, who were being outsmarted by other sellers with fake reviews and knock-off products
- Amazon expanded into unprofitable, but staple, products (CRaP) to become even a bigger part of someones life/shopping habits
Part III: Invincibility