So what does it take to create the world’s largest online retailer at the age of 49, amass a personal wealth of over $25.2 billion, and become the Top 30 Most Powerful people in the world?
Lets’ ask Jeff Bezos.
The company that started out from the garage has now changed the way we buy books and just about anything we can think off.
He’s also built a $100 Billion Empire based on books destroying local bookstores in the process. Most would say it’s awful. But to some, he’s reshaping the entire industry. Amazon is now one of the 100-largest companies in America.
Below, I’ll share Bezos’ amazing story and lessons from his life that Fortune and Forbes Didn’t tell you in Its Cover Story.
This is something you could use instantly to apply it to your own business.
#1 Be obsessed about your customers
If there is one thing you should know about Bezos’, is that he is obsessed about his customers.
“I can tell you that we have been doing this from the very beginning, and it’s the only reason that Amazon.com exists today in any form. We’ve always put customers first. When given the choice between obsessing over competitors and obsessing over customers, we always obsess over customers.”
It is because of this obsession that Amazon continues to thrive although it started way back when the internet was still new. It changed the way customers interacted and sets the benchmark of service quality and response.
“You could build a store online that simply could not exist in any other way. You could build a true superstore with exhaustive selection; and customers value selection.”
“The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.”
Amazon’s biggest leverage is taking pride in their Customer experience:
“If there’s one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience.”
#2 Keep a close eye on major trends
After graduating from Princeton University with a computer science and electrical engineering degree, Bezos worked at Fitel, a start-up, and then later landed a job at a Wall Street Investment Bankers Trust where he quickly rose to a Senior Vice President level.
During those periods of climbing up the career ladder, he discovered upon the usage on the neophyte World Wide Web was increasing at 2,300 percent a year. Because of that, he began to strategically study the Top mail-order businesses with an understanding that the web could soon replace the mail order.
He could see what was just round the corner. And he understood the importance of being ahead of the curve. Like his predecessors (Andrew Carnegie, John D. Rockefeller, JPMorgan), to be truly successful you must build an entire industry.
“If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table.”
#3 Take Bold but calculated Risks.
Your dreams may never come true if you do not take a risk on them. The ideas you need for life change is within reach if you would only take a chance on them.
But there’s a common confusion about taking risk too: We do not simply jump into something without giving it any thought or pre-assessment. This way of thinking usually leads to failure.
Good entrepreneurs don’t like risk; they seek to reduce risk…Starting a company is already risky, and then you systematically eliminate risk step by step in those early days….you kind of need to systematically identify risk and then as the company gets bigger and more robust, you can start taking risks again but in those early days a lot of it is about ‘okay I have a good idea, how do we reduce risk?’”
Bezos for one gave it a lot of thought and did his homework. Though he’s well aware that there is a slight chance it might fail.
In 1994, Jeff Bezos had to decide whether to quit his job as NYC hedge fund manager that pays over 6 figures a year to create an online bookstore that could possibly be huge or just fall flat on his face.
He then created a framework called the Regret Minimization Framework, which helped him realize he didn’t want to regret later for not taking a chance on his vision. So he decided to have a go…
“I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.”
[youtube height=”360″ width=”480″]http://www.youtube.com/watch?v=jwG_qR6XmDQ[/youtube]
“The framework I found which made the decision incredibly easy was what I called – which only a nerd would call – a ‘regret minimization framework’. So I wanted to project myself forward to age 80 and say, ‘Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.’”
In 1995, Bezos opened Amazon.com and told his several-hundred beta testers to spread the word. No advertising, no press. Within 30 days, the company had sold books in all 50 states and 45 foreign countries.
#4 Embrace the Fear of Failure.
If you never want to be criticized, for goodness sake don’t do anything new.
Fear is human nature’s ultimate motivation to learn. And so if you are willing to make Failure as part of your Job description as an entrepreneur, you’ll be alright.
John Trobough puts this into perspective: “All Entrepreneurs have to believe in themselves, but they also have to be willing to lose it all. There’s nothing more motivating than survival.”
Failure is part of the job as an entrepreneur. So if you don’t overemphasize it in your daily decision making, you’ll never be afraid of making the better decision.
“We are willing to go down a bunch of dark passageways, and occasionally we find something that really works.”
It’s all part of the Amazon company philosophy. Here are a few of Amazon’s failures:
- A9 Search
“So it’s okay though if you have a willingness to be misunderstood for long periods of time, if you have a willingness to fail, then what you can do is you can ramp up your rate of experimentation. So successful invention is inventions that customers care about. It’s actually relatively easy to invent new things that customers don’t care about. But successful invention, if you want to do a lot of that, you basically have to increase your rate of experimentation and that you can think of as a process – how do you go about organizing your systems, your people, all of your assets, your own daily life and how you spend time, how do you increase those things to increase your rate of experimentation? Because not all of your experiments are going to work.”
#5 It’s all about Delayed Gratification
In other words, you must think of the benefits you might experience in terms of years or decades. How long do you think Amazon took before it became profitable? A few months? One year?
For Jeff Bezos and Amazon.com, it took more than six years. Even so, the company made a razor-thin profit of only about $5 million out of nearly $1 billion invested.
Obviously, thinking long term requires an Ocean deep worth of patience. But, Bezos was in no hurry to make a quick profit because he wanted to keep prices low while reinvesting as much profit they made back into the company.
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people,” Bezos told Wired in 2011. “But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that.”
This is definitely no easy feat, especially if you’re the CEO of a Fortune 500 company with investors breathing down you neck. It requires you to being misunderstood for long periods of time.
“We’re very comfortable being misunderstood. We’ve had lots of practice.”
This delayed gratification strategy frustrated investors in the short-term but it paid off in a big way when Amazon survived the bursting of the dot-com bubble and started posting bigger profits year after year.
We can’t realize our potential as people or as companies unless we plan for the long term.
#6 Be Stubborn Yet Flexible
“The thing about inventing is you have to be both stubborn and flexible, more or less simultaneously.”
Bezos acknowledges that Great entrepreneurs need these two contradictory traits in order to succeed. To most people, it seems impossible to be both stubborn and flexible at the same time, but that’s exactly what Amazon has become. Bezos explains:
“If you’re not stubborn, you’ll give up on experiments too soon. And if you’re not flexible, you’ll pound your head against the wall and you won’t see a different solution to a problem you’re trying to solve.”
Just like Yin and Yang the Chinese philosophy of Taoism, stubbornness and flexibility are both opposing forces that can be extremely powerful if they can co-exist. Anything in life is also just about the same. Matter cannot exist without anti-matter and so on and so forth.
#7 Always Over deliver
When Bezos started Amazon he didn’t have a marketing budget. The only way his company would stand out was by giving their customer a reason to spread the word about their business.
And what better way than to deliver a great & wonderful experience so that their customers would be compelled to share and tell others about it.
“If you build a great experience, customers tell each other about that. Word of mouth is very powerful.”
#8 Use the “Two Pizza rule”
How do you increase productivity and creativity both at the same time? Well use Bezos’ golden “two pizza rule” in order to dictate how big a team should be. Bezos said he believed in “two pizza teams”: if a team couldn’t be fed with two pizzas, it was too big.
The truth behind this is that groups sometimes suffer from something called a “groupthink”, which means they tend to lose the creativity of each individual because they end up agreeing with one another.
From a Wall Street Journal profile:
One former executive recalled that, at an offsite retreat where some managers suggested that employees should start communicating more with each other, Mr. Bezos stood up and declared, “No, communication is terrible!” He wanted a decentralized, even disorganized company where independent ideas would prevail over groupthink.
The simple reasoning behind Bezos’ school of thought is that large teams are less efficient. It could be due to many factors, a weak link, a self-proclaimed leader who doesn’t get approval of his teammates, or even dependence on one another.
So the key is to try to keep teams small enough and allow them to work together on individual brilliance & creativity.
#9 Work to reduce prices for your customers
More often than not, companies are always looking for ways to maximize profit by cutting cost and raising prices. But Amazon’s success has always been the result of a personal obsession of Bezos’ to put his customers ahead of his own benefit.
If Amazon were to increase prices tomorrow, they would rake in bigger profits but instead, Bezos chooses to find all sorts of ways to cut costs and increase cost-effectiveness so that they will be able to charge their customers even less.
“There are two kinds of companies: those that work to try to charge more and those that work to charge less. One will be second.”
- Bezos’ scrapped Television advertising when it wasn’t enough to justify the cost for their customers, although the ads did give them a bump in sales.
- They offered “Free shipping” on orders over $25 because they knew the cost of shipping has held back many people from ordering online. While it was obvious that doing so would hurt them in the process, the flipside was that they had increased customer loyalty inadvertently. This is something which they couldn’t calculate and measure, but the reason and logic was there plus the results speaks for itself today.
- Amazon Prime’s Grand Design: WIRED reported that “every Prime member is about 8 times as valuable to Amazon as a non-Prime member.” Meaning Amazon makes so much money off Prime customers, that even if the company slashes the fees by dozens of dollars; they would still be making money.
#10 Innovation is key to sustainability
“What is dangerous is not to evolve”
Amazon started out as an e-book online retailer, but it hasn’t stopped expanding horizontally ever since its inception.
Amazon is the antithesis of Apple. Instead of focusing on a few core products like what Apple does, Amazon sells just about everything.
Bezos’ can be seen as trying to do so in many areas of his life and business by trying to build a 10,000-year clock using $42 Million of his own money. Some of his other side projects include; Blue Origin (a super secretive aerospace company)
It is obvious that Bezos’ school of thought is based on long term thinking which in turn would require innovation to carry out. If you read about his side projects closely, you can get a glimpse into the mind of a Maverick.
#11 Begin with a passionate idea and never follow the crowd
His speech at re: invent;
Never chase the hot thing….you need to position yourself and wait for the wave. And the way you do that is you pick something you’re passionate about. That’s the number one piece of advice that I’d give to someone that wants to start a company or start a new endeavor inside of a bigger company. Make sure it’s something you’re interested in, something you’re passionate about. Missionaries build better products…I’d take a missionary over a mercenary any day. Mercenaries want to flip the company and get rich, missionaries want to build a great product or service – and one of those paradoxes is usually the missionaries end up making more money anyway…..pick something you’re passionate about.”
#12 Invent by working backwards
“There are two ways to extend a business. Take inventory of what you are good at and extend out from your skills. Or determine what your customers need and work backwards, even if it requires learning new skills.”
Bezos’ adds that this has become the touchstone of how they invent things; most famously with the Kindle e-book reader.
Amazon was after all, an online retailer. But because he recognized that Amazon’s consumers needed a way to read the e-books that they were purchasing from his site, they decided to work backwards to meet that need. In the end, they had to learn how to become a maker of an electronic mobile device, which was no easy feat.
When Amazon finally released the first generation Kindle in 2007, it sold out within six hours. To this day, Kindle leads the e-reader market and continues to cash in sales of over a million dollars per week.
#13 Observe your competitors and copy
If you are ignorant of both your enemy and yourself, then you’re a fool. Sun Tzu, The Art of War.
“We watch our competitors, learn from them, see the things that they were doing for customers and copy those things as much as we can.”
I am reminded of a saying sometimes attributed to Pablo Picasso: “Good artists borrow; great artists steal.” If you ask yourself how that can be true, well a way does present itself.
A great artist can take an idea that was originally someone else’s and make it better than the original. Steve Jobs also said; “Good Artists Copy, great artists steal.”
#14 Be persistent with your vision
If you believed in your vision so strongly like Jeff Bezos did in 1994, there are bound to be people who just won’t get it. Maybe your idea is just too revolutionary, so obviously you need a tremendous amount of patience and persistence to stick through it.
Did you know that Amazon has been around for almost 20 years? Do you still remember what it was like back then with the computer and internet? Would you have a single clue back then that the World Wide Web was going global? I guess not.
Bezos could see it back then that people would be buying products and putting orders on the internet. He has said that those days were some of his most trying periods as an entrepreneur. He was trying to raise $1 million to get Amazon off the ground. Getting that $1 million just seemed too far-fetched at times.
He said he would talk to dozens of people, and only a few would give him a total of only about $50K.
Why was it so difficult? People didn’t know what the internet was. Bezos said “the first question most of those [investors] had was ‘what’s the internet?’” Think about that – most people didn’t know what the internet was. Bezos did, and he knew millions of people would be buying products off the web. That was how strongly he believed in his vision.
“think about the great expanse of time ahead of you and try to make sure that you’re planning for that in a way that’s going to leave you ultimately satisfied.”
#15 Understand Behavior & You’ll gain a window into the Future
“I very frequently get the question: ‘what’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘what’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two – because you can build a business strategy around the things that are stable in time….in our retail business, we know that customers want low prices and I know that’s going to be true 10 years from now. They want fast delivery, they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon, I just wish the prices were a little higher [or] I love Amazon, I just wish you’d deliver a little more slowly.’ Impossible [to imagine that future]. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long-term, you can afford to put a lot of energy into it.
Bezos’ is probably one of the most underestimated CEO’s on the block a decade ago. Today, he is one of the most respected ones. He probably doesn’t get enough recognition for what he does simply because Steve Jobs was around back then. But now, it seems that the throne to the crown is finally his. Named the 2012 Businessperson of the year by Fortune and also featured on Forbes as America’s Best Leaders, Jeff Bezos is one pro-customer, tightfisted risk-taker and visionary that people would ultimately remember for his work.
There is so much more that we can learn from him, but I couldn’t list it all down, so if you have anything to add about his philosophies, ideals or advice please put it in the comments. I look forward to having a good conversation about one of the World’s foremost Maverick.