This podcast focuses on lessons from Amazon.com’s success based on its recent performance results and a few lessons and takeaways that can be beneficial to others. Now a lot has been talked about over the years on how Amazon has excelled in both customer experience as well as operational excellence. But as the company continues to improve and excel year after year, we are compelled to revisit the topic and its performance. Just recently, Amazon and Jeff Bezos released the annual shareholder letter describing the organization’s performance. That’s what we will discuss today.

We can learn a number of things from this report especially about how an organization like Amazon has achieved its current stature and position in the industry. In general, reports like these can be very useful in understanding the psyche of the organizations, what drives them to do better and excel, and then see the impact of that in the results and outcomes.

So, in this podcast, I will go over some of those points that Jeff Bezos has highlighted in that report and what others – both businesses as well as individuals – can learn from Amazon.

Key Facts

First, I would like to highlight some important facts that Jeff Bezos mentions in the opening of his letter. And that has to do with Amazon being ranked as number one in various customer surveys. Amazon it seems was ranked as number one in the American Customer Satisfaction Index for the 8th year in a row – it was also ranked number one for the 5th year in a row in the U.K. Customer Satisfaction Index, which is put out by the Institute of Customer Service – it was also ranked as the #1 business on LinkedIn’s 2018 Top Companies list – and it was number one for 3rd year in a row on the Reputation Quotient, which is released annually by the Harris Poll. For those who don’t know, Reputation Quotient issued by the Harris Poll quantifies the reputation ratings for the 100 most visible companies and they have been doing this for the last 19 years or so. Additionally, Amazons’ India site – Amazon.in – has become the fastest growing marketplace in India, and the most visited site on both desktop and mobile, and also boasts the most downloaded shopping app in India in 2017.

Jeff Bezos then goes on to highlight three elements that in his view drives this level of performance. He highlights them as unrelenting customer obsession, ingenuity, and commitment to operational excellence.

So, let’s look at Amazon’s performance on various fronts.

Before we get into the potential reasons for Amazon’s success, let’s briefly review its performance over the last year.

First, its prime membership has grown to exceed 100 million subscribers. That means 100 million subscribers consider it worthwhile and of value to pay the $99 annual membership fees. More than that, this membership has now expanded to include more countries outside the USA.

Second, Amazon’s cloud platform called AWS or Amazon Web Services has grown to provide thousands of cloud based services making it easier for cloud developers to build digital systems and applications. Also, the fact that it’s annual conference on cloud computing services exceeds 100,000 attendees and participants, says a lot about the popularity of its cloud computing services.

Third, Amazon marketplace that enables third party sellers to sell on Amazon has grown substantially. Although the actual number is not known but it is in the millions and just in 2017, 300,000 businesses started selling on the Amazon platform. That’s a staggering number of businesses and shows the power of the platform. If the sellers on the platform has reached such a high number, this naturally would attract even larger number of shoppers.

Fourth, Amazon has also started to venture in the brick and mortar business, something that is new for the organization. For example, it has launched a new store called Amazon Go that requires no checkout. It uses a number of technologies including computer vision, sensor fusion, and deep learning, which all come together to create a Just Walk Out shopping experience for customers. Also, Amazon has acquired Whole Foods in an effort to making high-quality, natural and organic food available for everyone. They are also offering these products for delivery to prime members in certain markets. Amazon is also identifying in store Whole Foods shoppers who are prime members and have begun to offer special benefits and services to them.

Amazon also continues to excel in the area of Prime Video. For example, in 2017, Prime Video Direct secured subscription video rights for more than 3,000 feature films and committed over $18 million in royalties to independent filmmakers and other rights holders. Again, by bringing in more sellers and content producers on the platform, Amazon in a way is guaranteeing a wider adoption and use of its digital video membership.

At this point I am going to pause as the idea is not to list all of Amazon’s products and services. If we go through the full list, we will see that Amazon boasts similar results in the areas of selling music where it has 10s of millions of paid customers, Fashion where it continues to attract and host big brand and other clothing and fashion items, and even hardware devices where it has sold those to millions more customers.

Key Takeaways

So, in the next few minutes, let’s note some key takeaways that leaders in other organizations can use and apply to their organizations.

Customer Obsession: In his letter to the shareholders, Jeff mentions “unrelenting customer obsession” and commitment to operational excellence as two of the elements that drive Amazon’s performance. Both build on each other and you can’t have satisfied customers by missing any of the two. When we look at the surveys, indexes, rankings, etc. there is no doubt that customers rank Amazon as the best in serving its industry’s customer needs. And we see this in the rest of the market and in other cases that companies who succeed almost always have this level of customer obsession. Having this customer obsession then translates into behaviors within the organization that drives the quality of the organization’s systems, processes, and people – the three building blocks of any organization that in turn drives the quality of an organization’s products and services.

In the age where customers are more empowered than ever before in terms of being more knowledgeable, having access to more information, and having high expectations, it shouldn’t be too difficult to understand for the need to be obsessed with meeting and exceeding customer standards and expectations. All this along with the fact that customers can switch loyalties in a matter of seconds, organizations must have that level of obsession to be able to meet and exceed customer expectations.

The next takeaway and observation that we can make is that Consistent Growth Reflects Impact of a High Standards Culture: As we discussed earlier, Amazon has grown consistently and substantially in ALL areas of its business. This says a lot about its leadership and as we discussed earlier, the high standards that it has set for the almost 600,000 employee organization. For leaders of other organizations – whether small or large – this confirms years of observations, study, and research even more that a high quality culture established at the top almost always finds its way to permeate in all nooks and corners of the organization. And in this case, a culture set of high standards is showing phenomenal results in all parts of the Amazon Empire.

In fact, Jeff mentions the importance of high standards as the reason behind achieving this level of excellence in customer experience and the importance of inculcating a culture in the organization where it’s easy for people to achieve such high standards. When high standards are instilled in the culture, then obviously that will have an impact on people, processes, systems, and the products and services that the organization delivers to its internal and external customers.

So, the takeaway for the rest of us is that it’s important for the leadership to institute a culture of high standards within the organization. That culture can be instituted by committing to it, communicating it repeatedly to the staff, and to live by that commitment so it becomes a habit. And leaders know that even a small change made at the top can cause ripples in the organization and this can increase the quality of all deliverables, products and services that staff deliver to their internal and external customers. In Amazon’s case, as we will see later in this podcast that every business from online retail to cloud computing services to the sellers marketplace, experienced phenomenal growth. It’s obvious that the commitment and obsession with high standards set at the top of the organization has had an impact on all parts of the business.

The third observation that we can make has to do with the Power of an Innovation Culture: Jeff mentions “ingenuity” as another key element for its success. If we look closely, not a quarter goes by that we don’t hear about a new product or service from Amazon and this speaks volumes about Amazon’s amazing innovation culture. It’s not about the success of one product or service, rather we see the success of an innovation culture at play – a culture and a process that consistently pushes new products and services on a regular basis. And that’s the takeaway for the CEOs and for the rest of the business leaders and that is to focus on instituting a culture and a process that not only encourages innovation but has the processes and systems in place that will take those ideas and have them evaluated and tried. This then can result in innovative products and services from all corners of the organization. So, it’s not about relying on a set of heroes or one team – rather it’s about a process that encourages everyone to bring forth ideas, have them considered and evaluated for business and customer value. When the whole organization is motivated to innovate as part of their daily work, then the whole company feels invested in the process and the entire company wins.

Power of the Digital Platform: We have to address the elephant in the room and that’s Amazon’s digital platform on which it continues to win and grow. Amazon is one of the best examples that illustrates the power of the digital platform. A platform that is able to enroll both producers and buyers intelligently and then can find ways to retain them to use its services can grow at phenomenal rates. More than simply enrolling buyers and sellers on its platform, Amazon has gone deeper and wider to offer value added services to both of those communities. There is a reason that on one side it has 2 million sellers, hundreds of thousands of authors, millions of AWS developers, and on the other side it has hundreds of millions of customers. Amazon has done that by recognizing the needs of both communities and has made it easier and worthwhile for them to conduct their business on its platform. So, the takeaway for those who either have already built their digital platforms or are in the process of building them is that more than focusing to grow ones subscriber base, they should focus to understand the needs of the market’s audiences and then to build those on your platforms. Once that’s done, enrollment will become far easier. So, the mantra has shifted from “build it and they will come” to “build more value added services and features and they will come”.

The final takeaway is that despite all these accomplishments, Amazon considers itself in Day 1 of its innovation and progress. That says a lot about its relentless focus on tomorrow and what and how it can make its customers lives better. The company may be celebrating its successes but it’s not resting by any means. And as we have noted earlier, Amazon’s ongoing experimentation with new technologies related to machine learning, artificial intelligence, computer vision, and more can tell us what’s in store for Day 2 for us (still Day 1 from Amazon!) This poses an interesting challenge for the leadership and that is how to maintain that balance between celebrating your successes yet continuing your customer centric march toward continuous innovation, improvement, and achievement of business outcomes.

In summary, we see that the key drivers for Amazon’s success have been its customer obsession, its high standards culture, its focus on having a culture of innovation, and its efforts to continue to build its digital platform.

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