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1/ What can we learn from Amazon's shareholder letters about how to build a customer-centric company?
A thread!
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A thread!
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2/ The idea of customer centricity is a well-worn phrase for Bezos.
In his very first shareholder letter in 1997, he stated that one of Amazon’s guiding principles was to “obsess over customers”
In his very first shareholder letter in 1997, he stated that one of Amazon’s guiding principles was to “obsess over customers”
3/ The reason he choose books as the first product was not because he particularly like books, but because it was a perfect product for an internet marketplace that consumers couldn’t get elsewhere.
4/ Books are easy to ship, non-perishable and there's a huge catalog that is prohibitively expensive to stock in a retail store where you had marginal costs to add shelf space.
5/ In the 1998 shareholder letter, Bezos said the aim was to build “the world’s most customer-centric company.”
6/ He said that “we hold as axiomatic that customer are perceptive and smart.”
7/ Due to the quarterly earnings driven nature of Wall St., many public companies tend to cut corners or sacrifice goodwill with customers to make the numbers look better and he explicitly called this out.
8/ He also pointed out for the first time that Amazon employees should worry not about competition, but customers, a theme he would repeat many times.
9/ Bezos also wasn’t afraid to measure and brag about Amazon’s customer-centricity. In the 2001 and 2002 letters, he showed that they were the highest rated company on the American Customer Satisfaction Index.
10/ In the 2009 letter, he talks about the decision to start the Kindle business. He contrasts the “working forward” approach that most companies take where they look at existing skills and competencies and see what else to do with them.
11/ Amazon instead focused on working backward from customer needs. This not only ensured there was a market for the product but forced the company to constantly be learning.
12/ Not mentioned by Bezos here, but I think important, is that Amazon’s most successful products had elements of skills forward. Both AWS and the FBA/marketplace were “scratch your own itch” products that Amazon built internally then release publicly.
13/ @BenThompson does a great analysis of this in his 2017 piece explaining the logic behind Amazon’s acquisition of Whole Foods - stratechery.com/2017/amazons-n…
14/ They also were able to do this because of the org structure of the company which focused on modular units, or primitives, that had to be self-reliant
This made it easy to spin out into new business units (more on this in a future thread)
This made it easy to spin out into new business units (more on this in a future thread)
15/ Also in 2009, Bezos talked about how Amazon focused on customer desires that wouldn’t change over time.
16/ He knew that in ten years, customers were still going to want low prices, vast selection and fast delivery so investments into those areas would compound and pay dividends over time.
17/ Bezos also frequently mentioned the pace of innovation and shipping of new products even as the company got larger. In the 2015 letter, he mentioned AWS’s number of features and services doubling, even though it was already at a pretty big scale.
18/ This goes back, in part, to Amazon’s Day 1 philosophy - you must keep innovating and taking risk.
19/ But also speaks to the customer centricity - as AWS customers wanted more and more cloud services, Amazon kept building them.
They were working backward from customer requests.
They were working backward from customer requests.
20/ In the 2016 letter, Bezos talked about AWS’s customer centricity again: by that time they had dropped their price 51 times, even though there was little competitive pressure to do so.
21/ They also rolled a feature that actively told customers where they could spend less money!
Bezos has always believed that the short term hit to the bottom line is more than made up for by the long term trust that creates with consumers.
Bezos has always believed that the short term hit to the bottom line is more than made up for by the long term trust that creates with consumers.
22/ In summary, in order to be customer-centric, you must:
1. Treat your customers as perceptive as smart, not dumb
2. Work backwards from customer needs, not forward from existing skills
3. Focus on customer desires that won't change over time
1. Treat your customers as perceptive as smart, not dumb
2. Work backwards from customer needs, not forward from existing skills
3. Focus on customer desires that won't change over time
