The Digital Leader Newsletter — Strategies and Techniques for Change Agents, Strategists, and Innovators.
I won’t do this often. Promise. Mahan Tavakoli and I had a great conversation on the Partnering Leadership Podcast. This week’s The Digital Leader Newsletter is the transcript from that conversation (edited for brevity)
You can listen to the podcast here: Partnering Leadership Podcast
Welcome to Partnering Leadership. I'm really excited this week to be welcoming John Rossman. He's the author of The Amazon Way book series. He's a former Amazon leader, and he is a managing partner at Rossman Partners. They're an advisory firm helping clients compete in the digital era.
John's most recent book is The Amazon Way: Amazon's 14 Leadership Principles. I really enjoyed reading the book and the conversation with John. It helped clarify my thinking concerning innovation and how all of our organizations can be more innovative, not just tech companies.
Mahan. Thank you. Thanks for the prep you've done for this and our conversation.
I absolutely love the Amazon way and the insights you share. And most specifically, these are lessons for all of us leading organizations on how we can lead better organizations ourselves. So before we get to that, though, John, I would love to know whereabouts you grew up and how your upbringing impacted the kind of leader you eventually became.
I grew up in Portland, Oregon. I was the youngest of four kids. My parent’s priority was always education. Of all the great things that I got from my family, what influenced me the most is the commitment to always learning and being willing to change one’s mind about things.
That comes across in your work also, John, under recommendations that you make to all kinds of leaders, which is that need for constant learning and ongoing development. Now just curious, you spent time consulting different career opportunities at one point, then decided to go through 23 interviews over four months to get a position at Amazon.
What was it with Amazon? And these were the Amazon “dot-bomb” days. Not the Amazon we know today that got you so excited working for this organization.
It was late 2001 to early 2002 when I was interviewing. If you remember back, then those were pretty dire days of the entire tech economy. The dot-bomb era really happened. Not only did venture capital dry up, but technology spending dried up too. I was leading a data integration technology company at the time.
Amazon was still thinking through what was the marketplace strategy was going to be. It was actually their third try at a third-party selling approach. So it was clear they were reconciling something, and they were just taking their time to get to know me. At one point, I started to think it was personal, but it really was everybody figuring out what the program would be. But when I started, I was at a tremendous advantage because I knew everybody and what all the open questions were that we needed to figure out. And I understood how to navigate pretty well. So it was a tremendous orientation opportunity for me.
So you had deep expertise coming to Amazon, and you learned a lot while you were at Amazon, which specifically then comes to your book Amazon way and 14 leadership principles. Part of what I love about how this is done at Amazon is that its part of the culture rather than a poster on the wall, John.
And what I wonder is how has Amazon made it part of the organization's culture? Because I see so many organizations with principles, they literally are laminated cards that people have to pull out and look at or posters on the wall rather than principles that the executives and people in the organization are living and deciding by.
It's about leadership. How do we make decisions? How do we think about leadership? How do we work together? How do we hold each other accountable? What are our priorities?
I was at Amazon from early 2002 through late 2005. The leadership principles weren't codified. We were using them, and we could talk about them, but you couldn't say you couldn't even show like, Hey, what are the leadership principles? And it was sometime after I left Amazon that they codified these leadership principles.
And they've made a couple of little edits since then, but not many. And the key is really for the senior people at the company, not a group within the company, but the senior people, the company to be aware of their answers to those questions of how do we want to compete? How do we want to work together?
What sort of tone from the top do we want to set? How do we want to hold each other accountable? And then the willingness to practice those slow down conversations and not only focus on what decision or choice we have, but how are we making that choice? What's the underlying principle or perspective or tenant that we're putting in place relative to that, and then keep practicing that.
Those are the tribal things that you build as a tribe. When you get comfortable with what they are, Write them down, practice them some more, be willing to adjust them, but it really is about leaderships living these principles, which makes them effective.
This is the third edition of the Amazon way, with a lot of new material, but one of the new pieces is an appendix about building your own leadership principles. Because principles really help an organization scale purposefully, if you don't specify your principles, which helps specify your culture, then it becomes the culture coming from other companies or different people's perspectives on what the culture is versus a common view of what that culture is.
Taking the time to be clear about your perspective on these topics is a valuable exercise for any organization.
As you guide organizations on coming up with their leadership principles, what balance do you strike within the level of aspiration in the kind of organization that the leaders want to be versus the way the organization is operating because it sounds like Amazon codified these principles by looking at what was in practice primarily rather than just coming up with a pure future aspiration? How do you strike a balance in guiding your client organizations?
There could be multiple points of view on this, but you need to be fairly aspirational on your principles. But the most important thing you do is figure out the mechanisms, the little tools, and strategies that we put in place to actually manifest or practice the leadership principle.
So, for example, one of Amazon's leadership principles is about customer obsession. Customer centricity can be an essential part of a company's principles and culture. How do you actually practice customer-centricity? How do you do that? There are lots of ways you can do that.
Aspirationally, what's the principle? Where do we want to be? But close in, what did we actually do to start practicing it? Start supporting it, and put it into action.
Now, your book has been transformative in my thinking in a couple of different areas. One of them, you touched on John in that much of the innovation at Amazon has not been what people typically think of as innovation. It's been through operational excellence and customer intimacy that you talk about; there's been a lot of operational excellence around that. So do you mind talking a little bit about that aspect and how it ties into innovation?
Amazon, from the beginning, knew that they wanted to be the world's most customer-centric company ever, that they wanted to have at their core, be inventors and builders. But they knew that to do those things and to hit customer expectations, they had to be operationally excellent.
This trifecta of customer obsession, invention, and operational excellence was always what we were working towards. And when you commit to operational excellence and certain service level agreements, SLA's, and high bar expectations for how you hit customer promise. What that oftentimes will do is to force you to take steps that are actually innovative steps to hit that.
For example, when Amazon says we want 99.9% of all customer deliveries to be what they call the perfect order, they had to invent so many different approaches in their fulfillment network with other partners to do that.
So Bezos is on record of saying that 80% of all Amazon's innovations come from operational excellence. The heart of that operational excellence is data, specifically metrics, and using those metrics as your guide to where's their noise, where's their friction, where's their imperfections, and then bringing people together to action those metrics.
How do we hit our SLA? When we start hitting our SLA, how do we raise the SLA and get to that? These become your competitive motes because others can't easily follow you into these high bar commitment levels to customer experiences. And so, I've never had a challenge in bringing together that operational excellence is the heart and soul of innovation.
At some point, you will see a transformational or what you might call big "I" innovation, but most innovation is little “i” innovation. How do we improve this quality? How do we improve the cost? How do we shorten lead times? How do we do things on a real-time basis? How do we predict what the next step is for the customer and bring that to them? All of those types of operational excellent questions are what leads you to innovate.
I find people look at the end product of many iterations of that operational excellence and think that innovation came about as a result of a group of senior leaders sitting in a room and coming up with an innovative idea, including right now with Amazon, you could literally take your package without putting it in a package. Go to the UPS store and give it to them. It's a real innovation. It has removed a lot of friction in the customer return and, therefore, the satisfaction for the customer. It is not a big breakthrough idea based on an offsite or sitting together and coming up with ideas. But it has come about as a result of what you say is continual operational excellence and turning the knob on that operational excellence.
One of the real keys is how do you organize around it. How do you resource it? And so if you have these metrics, you have an understanding of where the friction is, where the imperfections are, where the costs, where the quality is, but if you don't resource it so that teams can take action on it to build something better, that's I think more of the challenge is making sure that you resource these teams to take action relative to those fairly quickly. Don't put a ton of bureaucracy or process around which items they pursue. If they've got data and rationalize it to themselves, and they can do it in a small iterative manner, empower teams to do that quickly. And that picks up the pace of this type of innovation.
And you've repeatedly mentioned, metrics are a key part of that. One of the things you highlight is that we often choose metrics that tell us how great we are doing at all levels in organizations rather than the metrics that can help us improve operations. So Amazon has a different view on all the metrics that they measure.
The goal is always to find the noise. Find the imperfection. Find the friction. If your metrics aren't telling you that, you've got the wrong metrics. But what happens in most organizations is you measure to the average you measure to the mean, and you end up telling yourself that you're doing a good job versus calibrating and finding the noise in that function or that step, or that customer experienced that operational step where there is imperfection and then zeroing in metrics there. One of the tricks to doing that is service level agreements, SLA's. So take the 99th percentile for that metric, like maybe it's a service response time.
Instead of measuring the average for the service response time, measure the 99th worst service response times that we have. It takes you to the very top of what that service response time is. And then zero in there, that's zeroing in on where the imperfection is and then figure out well, is "A” is that a good enough experience? And "B" is then how we would improve within that little area of noise?
At one level, it sounds like we're still using metrics to drive change, but it's a completely different view to zero in focus on where the opportunity is in that data and metrics. Most organizations find metrics as a way to say we're doing a good job.
That is a powerful statement by itself, John, because I imagine, first of all, some systems and structures such as compensation, therefore, cannot be tied into meeting some of the metrics. The kind of nurtured culture and environment embraces that vulnerability and desire for constant improvement rather than one that just celebrates and glorifies successes.
The real risk is if you're in a great business and a healthy organization and all you do is more or less, say, “we're doing a good job” and congratulate each other; you develop over time what Warren Buffett calls “the ABC’s” — which is arrogance, bureaucracy, and complacency.
“My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency," Buffett said. "When these corporate cancers metastasize, even the strongest of companies can falter.” — Warren Buffett
Part of this is about staying humble, we're not perfect. Our pursuit is to be relentless about perfection. And so, you stay humble in your pursuit of that. So one of the little stories about Amazon is if you actually go to relentless.com, that URL belongs to Amazon, that was one of the early names that Bezos considered for Amazon and didn't choose, but he keeps that domain alive as a message to the employees that we are going to be relentless about the pursuit of getting to perfection. Even though we know we will never get there, we will be relentless about operational excellence in those things that impact customers and impact scaling.
I imagine that also goes to making Amazon that day one organization or what I love. Andy Grove said only the paranoid survive in that the executives at Amazon continued focusing on day one and being paranoid, even though they have had much success in the past few years.
That gets to a number of the leadership principles at Amazon, in particular, long-term thinking and invent and simplify and being a day one organization has always been Jeff's way of saying that we're going to be a company that invests early in the internet, digital capabilities versus waiting and seeing how they impact the market and potentially being the victim of that disruption.
In the 2015 shareholder letter. He breaks down what's it mean to be a day one company versus a day two company. And what can you do to become a be basically a day two organization that is complacent and fairly comfortable in today's business? They aren't being eager about inventing tomorrow's business.
That’s what Amazon means by being a day one organization, which is we are going to be eager about inventing tomorrow's business. When you're a successful organization, if you think about the horizons of your business, horizon one is the business you're operating today.
Horizon two is the one that's just over this planning cycle. Horizon three is really the business that could be tomorrow. How many of us actually have growth? Plan and an innovation portfolio that has room in it, both horizon one opportunities. Those might be some of your operational excellence innovations, your horizon two, and your horizon three innovations.
Your horizon, three innovations might be truly new business models or concepts that today sound silly. They could never happen. They will never impact. But instead, you invest just in education around those so that you're prepared better of when should we do a little experiment, try something out, build some organizational experience on this so that you can pick the time when to start investing, building capabilities versus waiting for the market to tell you, oh, you're late.
Now you have to react. And reacting is expensive and risky.
To be able to do that, the organization needs to have what you say, controlled experiments. This is another one of those concepts, John, that you really clarified for me. One of my frustrations is typically hearing many people, especially out of Silicon valley say celebrate failure. And I don't know, I don't see too many people celebrating failure or wanting to fail, but you frame it differently on how small bets can actually help move the organization forward. So what's the difference between celebrating failure and what you talk about should be done and how Amazon approaches this.
The mantra of “fail fast” or “fail forward” is about experimentation, and by “failing,” what we're saying is we're testing something, and we're getting a result. And sometimes that result is a “failure,” just as valuable as a “success.”
But the term “failure” is overloaded. It gets confused with poor management, poor decision-making being slow, being unresponsive, all of those things that none of us would ascribe as good business hygiene or leadership. And so I recommend not using the term failure. We either need to be talking about experimentation, which is that deliberate process of having a hypothesis testing that hypothesis, hopefully as quickly as possible, and then proceeding on it, or our culture and our management hygiene and how we work together as an organization because that clarifies it for everybody.
We were either talking about experimentation, or we're talking about how we conduct ourselves and how we work together. We're not talking about this confusing term of failing and failing fast.
Now the experiment might work, proving your hypothesis or not work this proving the hypothesis, but it is not an excuse for failing in the execution.
So it is experimentation, and as you say, small experiments to test out what works when executed and implemented effectively.
When you're taking a new product, a new service, a new go-to-market approach, it's not this binary success or failure; it's oftentimes someplace in the middle. Really what you're doing is you're refining exactly how it has to work, exactly what is the pricing needed to be, exactly what's our operational model around this so that you're perfecting what the go-to-market approach is for before you scale it. But I work a lot with organizations, and this innovation portfolio works, and one of the mistakes made is they have a promising idea, a promising concept. Still, we haven't proved out exactly what the customer experience should be, we haven't proved out exactly what the unit cost should be, we haven't proved out exactly what the maintenance or the ongoing field support models need to be, or any of those things. But the company gets impatient. They start playing what I call budget roulette. It's okay, how early are we going to go? We've got a winning idea. They get impatient. And they force the business, the team, the leader to scale prematurely. It's still a good concept, but they haven't perfected enough to scale it. And so understanding how to be patient and stay in that agile innovation space versus picking your point on when you scale it.
Here are all the things we have to understand and prove before we're ready to scale. If you go about it that way, then you're really specifying that this is my experimentation space. This is my scaling space. And you can set everybody's expectations as to this is the journey we have to go through, hopefully as quickly as possible, and then we'll be ready to scale it.
Companies get impatient, and that's one of the mistakes they make when they're thinking about how to innovate and go to market with a new concept truly.
I had heard a lot about and read about the six-page memos at Amazon and future press releases. I'm not sure about these for myself if I fully understood the value of the writing culture. And I imagine there are executives all across the globe that write down; I'll have people writing six-page memos without fully understanding the intentionality behind it.
So Amazon is a writing culture. Can you explain why that purpose serves and how that benefits the organization and can benefit all of us as we lead our organizations?
I break this down in the book, and I use this mechanism a lot with my clients where you're. You're trying to achieve clarity and good decision-making upfront before we start running our experiments before we make big commitments to some initiative.
And so Amazon's approach is, we would write six-page narratives. We would write future press releases. We would write FAQ's. All that did was to help get the team communicating. How is this going to work? We always inserted the customer as the center of these documents and work backward to what we would do. It would get us to the point of debate, and then having to write it down forces you to have discipline in your ability to communicate it to others, which then gets us to the review meetings. Right? Review meetings start with 15 to 20 minutes of silence, where the meeting would read the memo and then have conversations. It's actually more demanding for the senior decision-maker.
It is also a tremendous opportunity for them to both influence exactly. This is what the killer feature needs to be, or the customer experience, or here's the dumb, major risk you're going to have until let's put that early in our experimentation cycle here. It allows the senior decision-makers to make the most important decisions, which are resource deployment and resource allocation decisions. We don't have that much expendable or fungible resources. And so choosing, do I do option A or option B or program C. Those are the most important decisions I think organizations make, and you equip them so much better to make those decisions and be deliberate.
This gets to one of the things in my experience organizations don't do when they have. Three options in front of them because the clarification isn't that good. They do a little bit of A, a little bit of B, a little bit of C, versus having a good option B and a good option C. Nope we're going full force on to option A, and that's what allows you to win typically is narrowing the number of new things you're doing in the organization and gaining organizational commitment to making this new product, this new service successful. So again, it's about resource allocation, making good decisions, having clarity. And then when you decide what you're going to do, and you go into your agile processes, everybody understands what the endpoints are, what our risks are, who the customer is, what the use cases are, exactly how it should look and feel like those things go so much better because, we thought them through upfront better, not perfect, but better. And so those development cycles go better, and our experimentation goes better.
John, I've spent a lot of time thinking about it. And there is so much more value to doing it this way. Everything from the clarity takes on the part of the person and the team that is writing this to the cognitive biases that come into play. When people present their thoughts to the lack of focus at times, we have on concepts that, in this instance, with everyone sitting down and reading it in silence, it takes some of those biases away.
Let's talk about one of those biases. What typically happens to the idea with the better speaker and maybe the more dynamic presenter, that one's going to work versus the one that maybe that's not the person's forte. There are great engineers or great operators, but they're not that great in front of the room, in an audience.
What do you really want to make your decisions based on who the better presenter is? Or do you want to base your decisions based on what idea, what investment is better for our organization? And this type of mechanism takes that type of bias, which you're talking about, out of the equation or minimizes it. It's just about tamping these things down and creating a better environment for the best ideas to win, which is what we want.
Well, John Rossman, I'm furious at you because these ideas and thoughts have been staying in my head on my walks and some of my runs, as I've been thinking them though you do a great job in your book.
However, It won't easily be implemented. People really need to dig deep to understand the value of each of the principles that you share and implement them in their organizations.
Proceed with it on an agile basis; one of your early questions was about leadership principles. Try those things out for a while. Be agile about them. Test and learn. That's how we personally build new habits and new understanding.
That's how an organization truly makes transformational change happen. Don't expect it to be easy, but also take it down into bite-size components. I talk about my work; these books aren't about Amazon. They're about what other teams and other people can take from Amazon and think about an act to put into their own business, whether it's an Amazon's language or not find your own language, find your own mechanisms, but find a way to invent and create the future of your business.
That is really what digital disruption is about: we all have to become better innovators and operators.
I want to highlight a couple of things as we wrap up again; as I mentioned throughout John, you've helped me view a couple of things that I had heard repeatedly very differently, one concerning metrics, one with respect specifically to this whole concept of experimentation rather than celebrating failure.
So there is a lot of value in this. And as you say, we all need to experiment more as we learn; it is not for any leaders or organizations wanting to become Amazon. It's understanding these principles, seeing the ones that resonate the best testing, and seeing what works best in their organizations. So I really appreciate the thoughts you've shared in the Amazon way and taking the time to share this and your perspective with the partnering leadership community.
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About The Digital Leader Newsletter
This is a newsletter for change agents, strategists, and innovators. The Digital Leader Newsletter is a weekly coaching session focusing on customer-centricity, innovation, and strategy. We deliver practical theory, examples, tools, and techniques to help you build better strategies, better plans, better solutions — but most of all, to think and communicate better.