Reference no: EM132948755
Case Study: Thinking Like Amazon
A Customer-Obsessed Mindset
Life at Amazon is characterized by a pervasive customer-obsessed mindset. Customer obsession is not just for top management, sales and marketing. Everyone is expected to be obsessed with knowing about and enhancing the impact of what they do for the customer. As John Rossman, who worked at Amazon for about four years and ran two of their businesses, explains, it's everyone's job to know and have empathy and passion for the customer. Make sure everyone knows it's their job. ... Know the details of the customer experience and what causes friction for customers.
"Although there are 14 leadership principles at Amazon, Leadership Principle 1 is 'Customer Obsession,' and it is the first among equals of Amazon's leadership principles.... To go from good to great, to 'see around the corner' for your customer, or to change an internal culture, obsession will deliver different insights."
Customer Metrics
Customer obsession at Amazon is enabled and driven by customer-driven metrics where real- time customer metrics are built into every aspect of the work.
In fact, Amazon doesn't start an activity or develop a capability unless and until the team has figured out how it will measure customers' response. Amazon builds in customer metrics as a "forcing function" from the outset. Thus, in his work as leader of Amazon's Third-Party Marketplace, Rossman articulated what Amazon's Marketplace would deliver:
'A third-party seller, in the middle of the night without talking to anyone, would be able to register, list an item, fulfill an order, and delight a customer as though Amazon the retailer had received the order.' This simple sentence imposed a tremendous amount of integration and operations coordination between Amazon Marketplace and our sellers.'"
Rossman then proceeded to develop real-time measures for each aspect of delivering this capability. Teams may spend weeks just thinking through the metrics.
"It takes foresight to lead by the numbers correctly. You must embed real-time metrics from the very start of a program because they are nearly impossible to retrofit. "."Today, you need real-time data, real-time monitoring, and real-time alarms when trouble is brewing-not lag- time metrics that hide the real issues for 24 hours or longer. Your business should operate like a nuclear reactor. If a problem arises, you need to be aware of it immediately."
The Planning Process at Amazon
At Amazon, the external customer viewpoint is built into activities and capabilities from the outset. No significant new activity can be undertaken at Amazon unless and until there is an exhaustive management review of a six-page document explaining the activity as a narrative.
The six-page narrative is supported by another document known as the PR/FAQ, which contains an imagined future press release describing the benefits customers are getting and answers to "frequently asked questions" about how the activity was developed. There is also a set of metrics by which customer benefits of the activity will be measured in real time.
These documents are rigorously reviewed by a group of senior managers before work on the activity begins. If approved, the activity is funded and incorporated in Amazon's annual planning process known as OP1, in which the relative merits of every activity and capability, present and future, are evaluated in terms of their contribution to value for customers.
Once an activity is approved and funded, the work begins, and the planning documents are steadily updated as more information becomes available.
Through its real-time customer metrics, each team reports in effect to the entire senior management, not just a direct boss. By removing middle management as a significant actor from the process with its own separate goals and priorities, Amazon largely eliminates inter- unit game-playing. Metrics covering the value that is being added to Amazon's external customers are available to everyone in real time.
Leaders As Owners
"Leaders are owners. They think long term and don't sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say, 'That's not my job.'"
Unlike most big organizations, executives at Amazon aren't accorded prestige or salary according to the size of their staffs or their budget. Senior managers are often put in charge of important initiatives with relatively modest staff resources. At Amazon, senior managers are doers, not merely overseers of others.
Amazon is known as a demanding place to work. It's not for everyone. You could say the company is 'aggressive.' Aggressive for results-that is, the right types of results. Aggressive for people to produce and have mastery of their domain. Aggressive for teams and leaders to achieve the impossible: perfection."
Two-Pizza Teams
Work is done to the extent possible in small, integrated autonomous multidisciplinary teams, known at Amazon as "two-pizza teams," i.e. a team that you could in principle feed with two pizzas.
At Amazon, Two-Pizza Teams work like semi-independent entrepreneurial hothouses. Insulated from the greater organization's bureaucracy, the Two-Pizza Teams encourage ambitious leaders, provide opportunity, and instill a sense of ownership."
Two-Pizza Teams are organized around capabilities and services as opposed to projects. Work is expected to continue for more than two years at a minimum, and it is improved through iteration."
Amazon's teams are remarkably independent and autonomous once their planning documents are approved.
The Two-Pizza Team is autonomous. It owns and is responsible for every aspect of its systems. One of the primary goals is to lower the communications overhead in organizations, including the number of meetings, coordination points, planning, testing, or releases. Teams that are more independent move faster."
How does a business develop agility through autonomous teams while maintaining high standards for success? As Rossman explains, "One of Amazon's secrets? Forcing functions."
A forcing function is a set of guidelines, restrictions, requirements, or commitments that "force," or direct, a desirable outcome without having to manage all the details of making it happen. Forcing functions are a powerful technique used at Amazon to enforce a strategy or change or to get a difficult project launched."
The forcing function enables Amazon to give its teams considerable autonomy. Rossman explains:
To create significant departure and disruption from current business practices, the teams within your company that are dedicated to creating innovation need to be separated from the teams representing the status quo. It's more about independence from the legacy business and having unfiltered communication and collaboration with a company's CEO or senior leader."
- Describe THREE (3) significant differences between the contemporary business environment that Amazon operates in and those of more traditional industries.
- Explain how they may affect the company in terms of management roles, planning, and organizational design. Briefly describe the organisation(s)' background e.g. key activities / products or services offered, profit or non-profit etc.