Bezonomics by Brian Dumaine focuses on Jeff Bezos and Amazon and argues that Bezos’s focus on customer service and the accumulation and analysis of customer data are key to Amazon’s success.
It explores how Amazon has disrupted traditional retail and changed the way we shop, and also looks at the challenges the company faces as it continues to grow and expand into new industries.
Prime members are gold to Amazon.
They spend more than others, listen more, watch more, and read more than the non-privileged shoppers. And that privilege comes at a cost of $119 a year. Prime members are also relatively affluent and loyal. Amazon has made a tremendous effort and spent tens of billions of dollars to keep its gold customers happy and make sure they get what they want, when they want, and at a price they can’t refuse.
Amazon also meticulously allocates its media production and marketing costs whether a particular movie or show is adding or subtracting from its bottom line
What started off as a bad idea has now become a major business for the company. Prime Video, Prime Music, and Amazon Shipping all now pose a serious threat to major industry incumbents such as Netflix, Spotify, Apple Music, FedEx, and UPS.
Bezos is surrounded by what he calls the S-team, a team of loyal lieutenants.
The S-team consists of eighteen top executives who know how Bezos thinks, understand his values, and have a strong desire to ferret out the truth. Many have worked with Bezos for years, some over a decade, and rarely leave the company.
At one of his all-hands meetings, Bezos said, “I’m very happy that we don’t’ have a lot of turnover on the S-team. I don’t intend to change that—I like you guys a lot.”
The last mile
The last mile is where the delivery costs pile up.
The challenge for Amazon is that delivering goods is expensive. Make no mistake: while Bezos accepts high shipping fees as a price to be paid to keep Amazon’s flywheel spinning, shipping is also costing the company a fortune. The cost of a single delivery can range from $7 to $10. In most cases, the last-mile costs can be more than half of the total cost of the shipment.
To lower costs and improve speed, Amazon over the years has tried different approaches, including outsourcing its delivery efforts to FedEx, UPS, and even smaller, independent logistics companies that charge less than major couriers.
Not easy to do business if you are not the best
Third-party sellers who sell on Amazon’s Marketplace are constantly under threat.
Even though Amazon makes a fortune from independent merchants who sell on its platform, it doesn’t seem to hesitate to compete with them directly if given the opportunity. Some get crushed when Amazon decides to launch a category similar to their best-selling product.
Others get caught when merchants do anything it takes to compete with each other—sometimes ethically and sometimes not. For many, selling on Amazon means competing not only with more than 2 million third-party merchants but also with an endless array of look-alike Amazon-created products.
Amazon shoots first and asks later when it comes to doing business with third-party sellers. If Amazon ever gets a complaint about a seller dealing in counterfeit goods, shipping wrong or dangerous products, or running fake reviews—whether it’s true or not—you can expect the retailer to first get suspended.
Because of Amazon, the vendor is guilty until it’s proven innocent.
Mentors Of Jeff Bezos
Bezos requires some of his S-team members to mentor him.
A number of S-team executives, at some point in their careers, became Bezos’s technical advisors, more informally known as “shadows.
Early in Amazon’s history, Bezos would mentor a few select executives, but the effort wasn’t paying off as much as he hoped. So he selected Andy Jassy, a Harvard MBA with no technical background, as his first full-time shadow. Jassy eventually helped build and now runs AWS, the largest cloud service business in the world—an amazing accomplishment for someone with a non-tech background.
From that point on, the technical advisor program became an integral part of Amazon’s culture, and over the years, Bezos has put a string of successful executives through the program.
Up and Out!
Not everyone survived Amazon’s Navy SEAL-style ‘Up or Out’ culture.
Employees are encouraged to tear apart one another’s ideas in meetings. Long emails arrive late at midnight, followed by text messages explaining why they were not answered. Internal phone directory is setup in a way so colleagues can send secret feedback to one another’s bosses. At Amazon, it’s usual to see workers weeping at their desks.
It’s an extreme culture, but also a productive one and not for the faint of heart. And certainly, not everyone can survive such pressure and scrutiny. However, in the long run, both Jeff and Jobs ended up with a very loyal group of top-notch players whom they could trust to take on bigger responsibilities.
The Amazon Way
Bezonomics unveils the underlying principles Jeff Bezos uses at Amazon to achieve his dominance: customer obsession, extreme innovation, and long-term management, all supported by artificial intelligence.
Most importantly, Bezonomics answers the fundamental question: how are Amazon and its imitators affecting the way we live and what can we learn from them?
Amazon would go to great lengths to get its customers the best price and the fastest delivery.
even if that comes with a cost. And often, that means no free lunchroom for employees, and lavish expense accounts are out of the question. During one holiday season, Bezos even asked his executive team to work a series of night shifts in its Seattle warehouse to keep up with the sea of orders.
Amazon is also known for its contest to see who can pick items off the shelf the fastest.
The Weak Spots
Understand the weak spots of Amazon if you want your business to survive and thrive.
Amazon offers the broadest spectrum of products (but that doesn’t mean it can offer everything in existence).
Amazon offers low prices as well as fast delivery, but price and delivery alone don’t constitute the entire customer experience.
Amazon touches millions of lives on a scale no one thought possible (but in some way it has created a commodity business).
So if you must compete with Amazon, make sure you
- offer a special and often hard-to-find selection of niche goods.
- give a more differentiated level of service.
- touch customers personally through customized experiences.
Every big innovation at Amazon has survived the six-page narrative
Amazon’s biggest initiatives, such as Prime, Alexa, and AWS, had all gone through six-pagers. In fact, all complicated or data-driven decisions are subject to six-page reviews at Amazon.
As a new project progresses, the narrative gets revised and revised until the project is ready for prime time. In some instances, the six-pager eventually evolves into the actual press release for the product.
The genius of Prime model is that people are lazy
After a while, Prime members get addicted to the convenience of one-click buying and free and fast shopping and basically stop looking at other e-commerce sites, even if they can find a cheaper item there. Amazon has locked an army of price-insensitive shoppers into its ecosystem.
Working at enormous fulfillment centers isn’t an easy or pleasant job.
For those who move mountains of merchandise through its enormous warehouses, the work can be repetitive and stressful. Full-time associates work 10 hours a day, four days a week, with a half-hour lunch break and two 15-minute breaks.
Some people complain they don’t have adequate time to take bathroom breaks. They’re constantly under pressure to meet tough goals. It seems Amazon is squeezing every bit out of its industry-leading $15 minimum wage.
One worker describes the workplace as lacking “decency, respect, and dignity” and says it resembles a low-security prison where workers don’t have enough time for lunch, get penalized for taking sick days, and miss their productivity goals.
Thinking of the Future
Bezos thinks in terms of decades, even centuries.
While most leaders think in terms of the next quarter or perhaps two to three years, Bezos’s long-termism makes him think in terms of centuries. And he pushes his investors and employees to do the same.
Bezos made a lot of educated bets with Amazon. While some of them became huge winners like Prime and Kindle, others became big flops like Fire Phone and Pets.com.
Even when a product failed, as in the case of the Fire Phone with its late arrival to market, Amazon kept innovating because Bezos felt deeply that no matter the outcome, the effort always pays off in the long run. Amazon kept on learning from its failures, and so the Fire Phone eventually ended up in Amazon’s next-generation smart speaker, the Echo.
Bezos is similar to Jobs
Bezos is in some ways similar to Jobs when it comes to his brutal honesty.
In meetings, it’s not uncommon for Bezos to erupt into one of his well-documented ‘nutters’, which is a euphemism for his outbursts. Bezos would occasionally snap at unprepared team members: “I’m sorry; I took my stupid pills today”, “If I hear that idea again, I’m going to have to kill myself,”, “Are you lazy or just incompetent?”.
Having said that, his nutters indicate he’s being more clever than kind. Some who have worked closely with Bezos say his nutterings are justified because he’s almost always right.
Still, working at Amazon comes with perks.
Amazon realizes that working at fulfillment centers is tough and hopes that people will use these jobs as a stepping stone to a better career. For example, after an employee has been with Amazon for a year, they can take any training related to a job currently in demand. And Amazon will pay for 95% of the training fees.
Even if their goal is to become a nurse or programmer at another business, Amazon will pay for it. The idea is that a competitive wage plus benefits acts as a stepping stone for people who want to earn some money and have development opportunities to pursue their ideal careers.
Always Day One
For Bezos and Amazon, it’s Always Day One.
It’s worth knowing the Day 1 mentality of Amazon. It means basically thinking as if the company is in day 1. In day 1, every customer matters, every penny counts and every innovation makes a difference.
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.” – Jeff Bezos
If you go to Amazon headquarters, you will find a building named “Day 1” where Bezos’s office is located. When he moved buildings, he took the name with him. The plate reads:
“There’s so much stuff that has yet to be invented. There’s so much new that’s going to happen.”
Six Page Narrative at Meetings
Bezos requires a six-page narrative in his meetings.
Bezos prefers six-pagers to PowerPoint presentations simply because it requires the team to get the concept right and include all the crucial facts. Sometimes, teams work tirelessly for weeks to get this report off the ground. And when a team brings a six-pager to a meeting,
Bezos requires everyone to spend the first twenty minutes or so carefully absorbing the narrative. No one can fake reading it. Once the reading ends, the group engages in an animated, confrontational discussion, challenging premises, underlying facts, and the viability of the project from the customer’s point of view.
Bezos himself reads with a high level of concentration. He is absorbing all information while, at the same time, anticipating bumps and icy patches on the road. When all is set, he begins giving both strategic and tactical feedback on the narrative in minute detail.