There are many legends surrounding the company's management techniques. Former managers reveal exclusively how they work and how they can be transferred to other companies.
Jeff Bezos: “He created a culture in which we live these principles every day.” Photo: AFP [M]
Dusseldorf. In Amazon conference rooms there is always a cushion marked “Customer” on a chair - so that this perspective is always kept in mind when making decisions. Teams for new projects are called “two-pizza teams” because they can only have enough members to feed everyone on two large American pizzas. And when a manager presents a new idea in a meeting, Powerpoint presentations are prohibited. Instead, he presents a fully formulated text of a maximum of six pages – ideally in the style of a press release.
To outsiders, many of Amazon's management principles seem bizarre. And yet, with this management philosophy that is sometimes reminiscent of a cult, company founder Jeff Bezos managed to build one of the most valuable companies in the world within a good 30 years. If Amazon were viewed as a country, it would be the 21st largest economy in the world with sales of more than $700 billion - ahead of Argentina or Sweden.
But which specific management techniques are really responsible for Amazon's success? And perhaps even more important for many managers: Which of these can be learned and applied in other companies?
Three former Amazon executives provide answers to these questions in their book “The Secret Playbook.” Marc Ebel, Georg Hesse and Amelie Rose spoke to 57 other ex-managers and identified the 20 most important success techniques from their overall experiences and checked their applicability.
The Handelsblatt exclusively evaluated their analysis in advance and spoke to other current and former top managers of the group. They openly report what they were able to transfer to their next career positions outside of the Amazon cosmos - and what they failed at. “The book really opens the black box of Amazon’s management principles for the first time,” says former Amazon manager Andrea Euenheim.
Integrate principles into everyday life
Euenheim worked for the US group for more than twelve years, in Germany and in Seattle, and also worked directly with Jeff Bezos. After her time at Amazon, she was on the board of the wholesaler Metro. She has now become self-employed as a consultant and sits on several supervisory boards. “I continue to apply a lot of what I learned at Amazon every day.”
In Amazon fulfillment centers, for example, there is the SOS area (Start of Shift), where the core corporate values introduced by Bezos, from “Dive deep” to “Ownership” to “Think big,” are painted on the floor. Managers and employees gather there before the start of the shift and discuss the most important news.
Book cover “The Secret Playbook”: “It’s okay to make mistakes as long as you draw the right conclusions from them.” Photo: Paul Meißner
The crucial point: Amazon's management principles are not hanging on the wall as empty promises. “Jeff Bezos created a culture in which we live these principles every day,” confirms top manager Sunny Jain, who is responsible for the FBA logistics service worldwide at Amazon. “The combination of the different leadership principles makes them so powerful, even magical,” he says. Almost every important decision is made on the basis of these principles, and they are applied in every meeting.
Amazon's management is built on three pillars, from which more or less all other management techniques are derived: Customer obsession is central, plus a strong culture of innovation and long-term thinking.
The customer: Taking people as a benchmark
“Many companies think of themselves as customer-oriented,” says Georg Hesse, co-author of the “Secret Playbook.” “But nowhere is this practiced as consistently as at Amazon.” After his time at Amazon, Hesse headed the companies Holidaycheck and Fashionette and is now head of the lottery company Omaze.
At Amazon, new ideas and products are always developed from the customer’s perspective. Bezos called this principle “working backwards.” First, you define which customer problem you want to solve or what benefit you want the customer to have. From there, thinking backwards, the right product or necessary service is developed.
Co-author Marc Ebel: Former executive at Amazon. Photo: Paul Meißner
This can also be easily transferred to other companies, says Euenheim: “It starts with every employee realizing who their customer actually is and what they can do to make this customer more satisfied.”
For this purpose, Amazon regularly collects customer feedback and reads it out verbatim in management meetings, linked to relevant data. The meeting is only over when the underlying problem has been identified, those responsible have been named and a date has been set for a proposed solution. “The Voice of the Customer”, as this principle is called, forces concrete decisions.
The numbers: Focus on the input
Daniel Raab has worked at Amazon for more than seven years, both in Germany and at the headquarters in Seattle. During his subsequent positions, he was surprised to see how many companies there are that still focus heavily on the profit and loss statement when controlling and base decisions on sales.
At Amazon he learned to work exclusively based on input metrics. In e-commerce, these include product availability, delivery speed or customer satisfaction. “These are the things that an employee can influence,” says Raab, who, after working at Pro Sieben, Fashionette and Marley Spoon, is now in the management of a gaming accessories retailer. “If things go right, sales will come by themselves.”
Raab is not the only former Amazon manager who has passed on this changed perspective on the numbers to later employers. According to the analysis by the authors of the “Secret Playbook”, switching to input key figures is the third management principle that can be transferred most successfully to other companies.
Helpful techniques
Management principles from Amazon that are easily transferable to other companies.
All decisions are justified with data, success is defined in measurable terms.
Weekly, monthly and quarterly business reviews, number-driven and Amazon-style: no excuses, self-criticism welcome.
Control via influenceable customer-side key figures such as product selection and price, not via sales.
All decisions are made from the customer's perspective; Customer benefit beats result optimization.
Systematic collection of customer feedback, which is incorporated into decision-making.
Powerpoint presentations are prohibited and will be replaced by written texts that everyone reads before the discussion.
Fundamental company values form the basis for behavior and all decisions.
Experienced managers ensure in the recruiting process that new employees increase the quality of the company.
Short mnemonics for each team that set the direction on important issues,
Ranking according to the Generalization Coefficient, which takes into account how important the technology is for Amazon according to the ex-executives, how often it was introduced elsewhere and how often the introduction was classified as successful.
This doesn't surprise Georg Hesse. “I recommend first introducing things that are easier to implement and do not require a fundamental cultural change,” he says. “Once you start to see some success, you can go deeper.”
This is also reflected in the study on which the book is based: the introduction of data focus and regular business reviews worked best. At Amazon, every decision is backed up with data. And the development of this data is systematically reviewed in weekly, monthly and quarterly meetings. This can be transferred without any problems, is the experience of many ex-Amazonians.
Decisions: Balance between personal responsibility and orientation
One peculiarity makes Amazon-style business reviews special, explains Vinzenz Greger, who worked at Amazon for twelve years in a variety of functions and is now in the management of Kaufland E-Commerce. No deviation from the goals will be glossed over and excuses will not be tolerated. Instead, self-criticism is rewarded. “It’s okay to make mistakes as long as you draw the right conclusions from them,” he says.
He also picked up the leadership principle “disagree and commit” from Amazon and successfully applied it. This means initially representing your own opinion stubbornly and with backbone in discussions. But once a decision has been made together, everyone has to fully support it.
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This applies to all levels of the hierarchy. “Everything depends on the managers,” warns Andrea Euenheim. “If employees are to work independently, they need orientation.”
“Top management must be convinced that this new method is relevant to the company’s success, and then must set an example and follow through,” says book co-author Hesse. “At Amazon, employees are given a lot of responsibility, but every single manager also knows their numbers in detail,” he says.
Don't do too much at once: Don't become like Amazon!
Some of Amazon's management principles are also extremely difficult to transfer to a company that previously worked differently, says Euenheim. For example, she calls the principle “Think big”. There is often a lack of courage to do things in a fundamentally new way. But it is not necessary to take on everything. “It’s an illusion to believe that you can create a second Amazon,” she says.
“As a former Amazon employee, for example, you imagine it would be too easy to get people away from Powerpoint and have them write documents,” reports ex-Amazon manager Hesse. For many, however, this is a very big cultural change. “I underestimated that too,” he admits.
Jeff Bezos: Should leaders follow an example? Photo: REUTERS
Long-term thinking is most difficult to establish in other companies, according to the assessments of the 57 ex-Amazon managers surveyed. “Long-termism is one of the basic pillars at Amazon, but it can only be implemented with the same consistency in very few other companies,” says co-author Marc Ebel, who worked for more than 16 years in a wide variety of positions at Amazon and now teaches as a professor of management and e-business at the International University in Augsburg. “This was where the former Amazon executives were most frustrated because in most cases the transfer didn’t work,” he says.
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The biggest mistake is trying too many Amazon management techniques at the same time, warns Ebel. “It should not be overlooked that each of these principles requires a change process and thus creates pain in the new company.”
“The advice is not: Become like Amazon,” adds his co-author Rose. “Think about what the business challenges are,” she says, “and then find the right tools and adapt them to the culture of the company.”
