The Institutional Yes
How Amazon’s CEO leads strategic change in a culture obsessed with today’s customer.
An Interview with Jeff Bezos by Julia Kirby and Thomas A. Stewart

There was an excellent article in HBR’s October 2007 edition that interviews Jeff Bezos, the founder and CEO of Amazon. They have been hugely successful in driving organic growth. I will excerpt the article over the next few postings, highlighting issues I feel are critical to organic growth from a leadership perspective.
I would like to welcome our newest set of Driving Organic Growth alumni. We had a great program!

SETTING STRATEGIC DIRECTION.

Who is setting strategic direction for Amazon? At the very beginning it was just you, sitting in a car on the way from New York to Seattle, making all the plans. Are you still making them all?

Oh, heavens, no. We have a group called the S Team—S meaning “senior”—that stays abreast of what the company is working on and delves into strategy issues. It meets for about four hours every Tuesday. (Growth is constantly on their agenda) Once or twice a year the S Team also gets together in a two-day meeting where different ideas are explored. Homework is assigned ahead of time. A lot of the things discussed in those meetings are not that urgent—we’re a few years out and can really think and talk about them at length. Eventually we have to choose just a couple of things, if they’re big, and make bets.
The key is to ensure that this happens fractally, too, not just at the top. The guy who leads Fulfillment by Amazon, which is the web service we provide to let people use our fulfillment center network as a big computer peripheral, is making sure the strategic thinking happens for that business in a similar way. At different scale levels it’s happening everywhere in the company. And the most important thing is that all of it is informed by a cultural point of view. There’s a great Alan Kay quote: “Perspective is worth 80 IQ points.” Some of our strategic capability comes from that.

How would you describe that cultural point of view?

First, we are willing to plant seeds and wait a long time for them to turn into trees. I’m very proud of this piece of our culture, because I think it is somewhat rare. We’re not always asking ourselves what’s going to happen in the next quarter, and focusing on optics, and doing those other things that make it very difficult for some publicly traded companies to have the right strategy.

Do you know when you’re planting one of those seeds that it’s, say, an acorn and it’s going to turn into an oak? Do you have a strong vision of how things will materialize? Or does the shape emerge along the way?

We may not know that it’s going to turn into an oak, but at least we know that it can turn out to be that big. I think you need to make sure with the things you choose that you are able to say, “If we can get this to work, it will be big.” An important question to ask is, “Is it big enough to be meaningful to the company as a whole if we’re very successful?”(As you will see in later postings, they use a simple set of what we call Decision Criteria. In addition to potential size, if the opportunity enables Amazon to offer more selection, lower cost, fast delivery and convenience to their target customers better than competition, they will go after it. Bezos treats these as digital criteria, not cumulative – an initiative must have all three criteria in addition to potential size)
Every new business we’ve ever engaged in has initially been seen as a distraction by people externally, and sometimes even internally. They’ll say, “Why are you expanding outside of media products? Why are you going international? Why are you entering the marketplace business with third-party sellers?” We’re getting it now with our new infrastructure web services: “Why take on this new set of developer customers?” (This is a typical reaction to expanding the addressable marketspace of your business) These are fair questions. There’s nothing wrong with asking them. But they all have at their heart one of the reasons that it’s so difficult for incumbent companies to pursue new initiatives. It’s because even if they are wild successes, they have no meaningful impact on the company’s economics for years. What I have found—and this is an empirical observation; I see no reason why it should be the case, but it tends to be—is that when we plant a seed, it tends to take five to seven years before it has a meaningful impact on the economics of the company. (This is NOT unusual when going to very new business designs and/or marketspaces)