The Latest from the ABM Experts
February 12, 2019
Jeff Bezos’ Philosophy On Growth (Part 1)
Written by Sangram Vajre
This post is based on a podcast where Sangram discusses what we can learn from Amazon’s first ever shareholder letter. This is Part 1 of 4. If you’d like to listen to more #FlipMyFunnel Podcast episodes, you can check them out here and listen to this episode below!
In 2018, Jeff Bezos became the richest man in the world, pushing Bill Gates and Warren Buffet to the silver and bronze positions. Amazon also reached a trillion dollar market cap in 2018; the only company to do so outside of Apple. We won’t even talk about their 600,000+ employees, it’s pretty clear that Bezos and his company are taking over the world.
Each year, Bezos shares the first ever shareholder letter he wrote back in 1977. 22 years later, there’s still so much we can learn from that debut letter. It was published at a time when Amazon had reached $147M in revenue growth with 1.5M customers.
To put that into perspective, Amazon launched in 1994 and went public in 1997. Talk about scale and growth.
That’s why we’ve taken this original shareholder letter and turned it into a four-part series on what we can learn from Jeff Bezos’ leadership. Part one is on his philosophy on growth. Later on, we’ll talk about customer obsession, employee as the owner, and what it means to be Day One.
How A Healthy Business Achieves Growth:
Here are two important takeaways on growth from the 1997 letter:
- To grow long-term, market leadership is the first measure of success.
Bezos defined market leadership clearly using three metrics
- Customer revenue growth
“From the beginning, our focus has been on offering our customers compelling value. We realized that the Web was, and still is, the World Wide Wait. Therefore, we set out to offer customers something they simply could not get any other way… We dramatically lowered prices, further increasing customer value.”
2) Number of repeat customers
If your churn rate is high, you’ll struggle. Too many companies don’t put enough stock in decreasing churn rate when repeat customers are the key to building a strong, healthy business.
“Repeat purchases and word of mouth have combined to make Amazon.com the market leader in online bookselling.
3) Strength of the brand
Brand is a key pillar of success. Brand can feel elusive, but often times your brand comes down to customer obsession. When our co-founder read Bezos’ letter, he inferred Bezos was saying that a strong brand is impossible if you don’t care about your customers as much as you should.
“Our goal remains to continue to solidify and extend our brand and customer base. This requires sustained investment in systems and infrastructure to support outstanding customer convenience, selection, and service while we grow.”
- Make bold Investments
“We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.”
Beyond these two takeaways on growth, what was so striking about the letter was how much it focused on their Why. Why they do things the way they do, why they think about things the way they do… when your organization and the world understands your Why, they have no questions around the decisions that you make. It’s clear because they know the underlying Why.
Even if some of their bold investments didn’t pay off, they were confident in their values so much that they knew they’d walk away from any “failures” learning something important. This is also important because it gives everyone in the organization permission to fail. When the permission comes direct from the CEO, people are more likely to believe it.
And it’s not just Amazon that’s done this, when you look at other market leaders in the world you quickly spot why they’re doing so well; they’re doing bold stuff. Stuff others are too timid to do because they’re afraid to fail.
This Week’s Challenge:
In Bezos’ first letter, he talks about the idea of being optimistic while at the same time having and maintaining a sense of urgency. So this week, shift your focus to the few things that you’re really good at as an organization. Double down on that.
Go harder and crazier than anyone else in the industry could think of going; that is what will separate you from the pack. And whatever you do, don’t lose the sense of urgency- it’s important to do it now.
“Though we are optimistic, we must remain vigilant and maintain a sense of urgency. The challenges and hurdles we will face to make our long-term vision for Amazon.com a reality are several… We feel good about what we’ve done, and even more excited about what we want to do. ”