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Dhwaneet Bhatt

Book Review - Working Backwards

book-review, business4 min read

cover-image-of-the-book

Introduction

This book is written by Bill and Colin, who joined Amazon during late 1990s just after Amazon started, and have seen the transformation of the company from a retail business selling music CDs and books to the behemoth that Amazon is today.

The book is divided into two parts. The first part talks about the key principles of Amazon Leadership, several key processes at Amazon and links them to the success of the company in the market. The second part discusses the stories of how Kindle, Prime and AWS came to life and links them back to the principles and processes in the first part.

Summary

Part One

  1. Leadership Principles at Amazon - https://www.amazon.jobs/en/principles. There was a process coming at these principles and Jeff was personally involved in it.
  2. Bar Raiser - The only way company can maintain and scale its culture is to always make sure to hire the right people. Bar Raiser evolved as a process to do that. Hiring managers do not own the process, they are clients of the process. This process has been refined a lot to remove biases that affect an interview.
  3. Single Threaded Leadership - Make someone fully accountable for an initiative. Allow them to Fail, Learn, Repeat. “The best way to fail at inventing something is by making it somebody’s part-time job.”
  4. Communicating - Stop PowerPoint presentations and move to detailed 6-page narratives that drive meetings and decisions.
  5. Working Backwards - Launch every product with a PR/FAQ as if the product is already released. Work backwards from customer experience to question every decision.
  6. Metrics - Rather than focusing on output metrics, focus on input metrics you can control. Obsessing over input metrics will automatically improve output metrics.

Part Two

  1. Kindle - From selling physical books to getting into the hardware business - how it all happened. Working Backwards from customer experience - decisions like why they choose the E-Ink display, internet connected device that directly downloads books - customer convenience.
  2. Prime - Focusing obsessively on customer experience, even while reducing margins. Story of about Jeff always considered wowing the customer, and that even if Amazon could reduce margins or take losses but have the product in the customer's hands in two days, that would make Amazon so sticky that they could work on optimizing margins later. And yes the pressure from Jeff to launch this in weeks rather than months.
  3. Prime Video - A failed attempt at this - Amazon Unbox. Rise of Netflix and introduction of subscription model for movies when the standard was pay-per-watch. A successful launch and piggybacking on Prime subscription. "Any competitor might launch a Prime shipping clone, or they could potentially build a new Netflix-type service, but it was unlikely that any one of them would be able to do both."
  4. AWS - Roots of how they shifted from retail consumers to software developers as customers. It started with improving the Affiliate program by moving to an XML feed, and then incrementally applying this approach to multiple products before thinking - why don't we let developers develop anything they want on Amazon rather than being limited to retail?

Learnings

It is very easy to say we care about the customer experience, but at Amazon, it is "Customer Obsession", one of the original leadership principles, and every key success of Amazon can be linked back to this single principle. Jeff was very obsessed about the customer's experience. Working Backwards from customer experience and solving the problems is a novel way of thinking about things - maybe much more apparent now but back in the day no one thought like this.

By enabling product teams to move independently by introducing "the mandate", they could move faster and experiment. Experiments fail, but the point is that innovation is the by-product of successful experiments. This enabled single-threaded leadership.

Many startups innovate before going public but once they have the money, the company slows down. Not Amazon. The compensation structure of everyone at Amazon was tied to the long-term vision of the company rather than the short term goals. No bonuses, no big salary, just a competitive salary plus stocks of Amazon.

Amazon may have competitors but it is so diverse that it may outlast every single company out there. It does business in retail, entertainment and developer platform and no single company in the world can compete with it in all of the verticals.

Worthwhile Quotes

There’s a saying often heard at Amazon: “Good intentions don’t work. Mechanisms do.”

With all other things being equal, the organization that moves faster will innovate more, simply because it will be able to conduct a higher number of experiments per unit of time.

A good rule of thumb to see if a team has sufficient autonomy is deployment—can the team build and roll out their changes without coupling, coordination, and approvals from other teams? If the answer is no, then one solution is to carve out a small piece of functionality that can be autonomous and repeat.

Be stubborn on the vision but flexible on the details

We shouldn’t be afraid of taking on hard problems if solving them would unlock substantial value.

Start with the customer and work backwards by aligning your metrics with the customer experience.

The idea that Amazon, a pure e-commerce distributor of retail products made by others, would become a hardware company and make and sell its own reader device was controversial.

Most businesses don’t have the tools to evaluate the cost of not doing something. And when the cost is high, they only realize when it’s too late to change.

We don’t make money when we sell things. We make money when we help customers make purchase decisions.