the alchemy of Amazon

By Natalie Gordon

Two locations, one hot topic. As our guests gathered at the Heddon Street Kitchen for the second in our series of London Executive Dinners there was a sense of excitement. And three weeks later across the Atlantic it was in the air once again, this time as we welcomed guests to the Ace Hotel in Chicago. Our speaker Phil Green had promised to unlock the ‘alchemy of Amazon’ and give an insider’s perspective on the company he worked at for 8 years. A company that he describes as the one truly great company he has worked for.

Phil was clear from the start that while he has worked for some good companies, it takes something special to be great. And it’s that something special that he focused on. It wasn’t about how you can beat Amazon at their own game, or even how to compete with them, it’s about understanding what makes them so successful, understanding what it takes to continually evolve and come out on top. Whether his audiences have what it takes, that’s up to us.

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A formula for success yesterday, today, and tomorrow

The ultimate goal and strategy of the company is to ensure that every activity offers the maximum value to its customers at the lowest price, and to always be totally customer focused. Within this mission the key to Amazon’s success is in part down to their recognition of the need to continually evolve. Today, the expected life of a Fortune 500 company is only 15 years; most will not survive in the long term. The real story here is about those 12% of companies who successfully adapt and stay relevant.

The Amazon of today looks nothing like it did when it started out as an online book retailer. Amazon is very clearly a success story founded on the back of the internet and the growth of internet penetration. Yet, slowly but surely, in the background, Amazon was recognising the value of data, using it to power systems to improve customer experience and more. Along that journey, Amazon has truly pivoted into a company which can thrive in the data age. It’s all about that ability to lay the groundwork for what’s next. To evolve.

So how did they manage to do that? Phil touched on a few elements from personal experience.

Creating the right culture

The company understood early on that that they may need to adapt in ways they couldn’t yet anticipate. To do this they encouraged employees to work with open minds, to consider what could be, to think bigger, wider, and to think the unexpected.

A culture like this has to be actively managed, it’s not something that happens by accident or overnight. If you reward people trying to do difficult things and taking risks these will be your best employees. That's what really makes the difference at Amazon. Allowing employees to take risks within the organisation helps them to grow: they learn, they develop, they're engaged, they're excited, they bring their best work. If you stop them taking risks, they will become scared to experiment. They will stop thinking, and they will stop growing. They just take their pay-check until there's a bigger one.

That’s not how it is at Amazon. They famously demand a lot of their people. It’s been said that working at Amazon is like slave labour but it didn’t feel that way for Phil, he describes it as the easiest place he’s ever worked. For him this is down to the workforce philosophy which really epitomises teamwork. Each employee must bring their 'A game' every day, not to keep up but because you didn’t want to let the team down.

This environment may not be for everyone but for people who truly want to be the best they can be, it’s an opportunity in a million and it's not always the most talented people who succeed, but the ones who make the most of their talent. And to do that you need to be in the right place with the right support and have the right attitude.

Truly excellent companies are separated from the average in this way, by nurturing people and investments and aligning them to a simple strategy - in this case to be totally customer focused - which they can get behind.

Fail small, fail fast

Over the years that commitment to offering maximum value to customers and a culture that encourages innovation has led to experiments. As Amazon knows well, not every experiment is a success, but the reality is if you fail small, you fail fast. When you create that culture, you allow people to take risks, measured risks, but risks. Nobody learns to walk without learning to fall down, yet we believe companies can succeed without making failures. It’s like thinking you can make it to a gold medal having never trained, when you’re in competition with someone that’s been training all their life, every single day. Who do you think is more equipped to succeed?

Amazon know that you have to fail to succeed; and you have to build a framework to allow people to fail successfully, so they can take the learnings and grow stronger. Amazon's marketplace businesses were born out of a failure to try and copy eBay and have auctions. Amazon's own search algorithm was a failed attempt to build google. Yet today, it powers Amazons retail business. There are many examples of failures that have led to successful other businesses.

Cash is king

Amazon’s core ‘cash is king’ approach allows it to continue to invest, making many small experiments in these new business ideas, new categories, new countries, and new business models. Not all of them are successful, but overall, the model they’ve used has been overwhelmingly successful. Every pound or dollar wasted is a pound that cannot be reinvested to improve the organisation. So there is a focus on driving cost out in order to run more experiments. When asked how Amazon choose which projects to back Phil explained that they use their leadership principles as their North Star: if the project isn’t going to deliver value to the customer it doesn’t get the green light.

Disruption from within

4th generation companies like Amazon are consciously creating discontinuity. They operate in a world in which change is expected not feared. Amazon’s decision to launch an e-book business is a good example. Not only did it decide to disrupt their biggest category, they also built a hardware company to do it, which was unheard of. They knew if they didn’t do it, someone else would. And, in that position, playing catchup is harder than taking the lead in the first place. If someone else had launched e-books before Amazon, it could have been Amazon’s downfall. And, had that happened, Alexa too would never have come to fruition. It took that leap of faith, in the long term, which was all due to Amazon’s core belief system: that by creating that disruption internally, that innovation drives longer lasting success.

The buy-in to play the long-game

Ultimately, Amazon’s investors shared a belief in leadership from the start that many didn’t, and they were willing to take a long term bet on the company. The management team set the expectation that building the business was going to be hard - that the plan was a long-term one and could fail. However, they also demonstrated that it was about growth and scale, rather than profitability as growth. Right from the start they had a long term plan and support from their investors. Ultimately, this meant they had the freedom to create all of the above. To disrupt the market, and themselves.

So what can we learn from the alchemy of Amazon?

Phil lifted the lid on Amazon and presented the company’s blueprint for success in a way that was exciting and enlightening.

He’s right, it may not be for everyone but it is definitely impressive. We can all learn a great deal from their drive to invest in innovation and invest in the future, because if we don’t someone else will. His drive and passion is infectious and it’s clear that we all will need that passion and desire within our businesses if we are to be truly successful. Only by ensuring our employees have complete belief in one strategy and purpose, and making sure they are brave enough to innovate will we hope to continually evolve and succeed amidst disruption as Amazon have managed to do.

If you think your company could do with applying some of Amazon’s alchemy, give us a call to see how Egremont can super charge your business.

To find out more, please get in touch with Natalie Gordon: nataliegordon@egremontgroup.com / +44 (0) 20 7298 7878

more about our speaker

Philip Green is a highly qualified management accountant, having worked for various retail, FMCG and tech companies over the last 20 years - eight years of which were spent working for Amazon, where he held various finance roles and learned, first-hand, about scaling a business. His most recent role was leading finance for Amazon’s European Operations, before joining Deliveroo as CFO in June 2016. Phil left Deliveroo in early 2018 to pursue a portfolio career, helping early stage companies scale across various industries.

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