Jeff Bezos released his latest — and last — letter to shareholders as CEO of the company. And it’s an extraordinary document, filled with lessons that demonstrate why the company continues to be successful. The biggest of these lessons is Amazon’s relentless focus on its Day One culture. There’s an old expression that states, "Culture eats strategy for breakfast." And while I’m convinced it’s not quite that simple, there’s definitely some truth in the statement. Amazon’s culture is undoubtedly a key component of the company’s success.
But what’s more interesting is that the same could be said for Google, Facebook, Apple, Microsoft, Uber, Airbnb, and a host of other digital giants — even though their cultures are very distinct. So, maybe it’s not one specific culture, but instead a broader "digital culture," one focused on customers and data and learning that’s at work here. The evidence suggests that’s the case.
In this episode of Thinks Out Loud, we’ll take a look at "digital culture" and offer some thoughts about what that means. We’ll dive into what you can learn from digital giants, as well as some upstarts too. And we’ll talk about, if culture eats strategy for breakfast, how you can make sure it doesn’t devour you too.
Want to learn more? Here are the show notes for you.
Thinks Out Loud Episode 325: Day One at Amazon and Developing a Digital Culture Headlines and Show Notes
Show Notes and Links
As always, here are the "regular" show notes, detailing links and news related to this week’s episode. Take note, there are a lot of links this week based on the wide-ranging discussion. Be sure to check out all those that matter for your business once you’ve given the episode a listen.
- Digital Transformation is All About Customers (Thinks Out Loud Episode 323)
- Amazon’s 2020 Letter to Shareholders from Jeff Bezos
- Customer Experience is Queen? What Does That Mean? (Thinks Out Loud Episode 190)
- Content is King, Customer Experience is Queen (Thinks Out Loud Episode 188)
- NortonLifeLock’s head of direct acquisition on the competitive advantage of great CX – Insider Intelligence Trends, Forecasts & Statistics
- How to Build a Digital Company (Thinks Out Loud 302) Tim Peter & Associates
- The Five Drivers of E-commerce and Digital Transformation for Your Business (Thinks Out Loud Episode 293)
- A Digital Transformation First Step: What You Can Do Right Now (Thinks Out Loud Episode 294)
- How To Run Your Business As If Google Didn’t Exist (Thinks Out Loud Episode 298)
- Amazon Go, Instant Gratification, and the Boring Future of Business (Thinks Out Loud Episode 265)
- We’re Living Through a Generational Shift to Digital (Thinks Out Loud Episode 317)
- Are You Destined to Lose to the Frightful Five? (Thinks Out Loud 303)
- Digital Gatekeepers and the Death of Organic Traffic (Thinks Out Loud Episode 247)
- How to Compete With Amazon (and Expedia and Google and…) (Thinks Out Loud Episode 221)
- Why Google Keeps Winning. And How You Can Win Too. (Thinks Out Loud Episode 263)
We have a couple of free downloads for you to help you navigate the current situation, which you can find right here:
- A Brief Introduction to Thinks Out Loud. As a bonus, we’ve also included this PDF document that highlights some of our core episodes to help you dig into what the show is about. We think it will help you capture the show’s essence while you’re working your way through the 300-plus episodes published so far. Download it here.
- Digital & E-commerce Maturity Matrix. As a bonus, here’s a PDF that can help you assess your company’s digital maturity. You can use this to better understand where your company excels and where its opportunities lie. And, of course, we’re here to help if you need it. The Digital & E-commerce Maturity Matrix rates your company’s effectiveness — Ad Hoc, Aware, Striving, Driving — in 6 key areas in digital today, including:
- Customer Focus
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Past Insights from Tim Peter Thinks
You might also want to check out these slides I had the pleasure of presenting recently about the key trends shaping marketing in the next year. Here are the slides for your reference:
Technical Details for Thinks Out Loud
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Running time: 24m 40s
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Transcript: Day One at Amazon and Developing a Digital Culture
Well, hello again, everyone. And welcome back to Thinks Out Loud, your source for all the digital marketing expertise your business needs. My name is Tim Peter. This is episode 325 of the Big Show, and there’s a lot to talk about today. Today, this is going to be a banger. This is going to be … as I said a couple of weeks ago, a barn burner. I guess that’s my new thing now, right? We’re going to do barn burners around here.
But I wanted to follow up on the episode from a couple of weeks ago where I was talking about how digital transformation is entirely about customers. There are multiple introductory things I kind of need to explain here. And the first is that people ask me all the time: why does a guy who spends the overwhelming majority of his time talking to hotels, to travel companies, to software service providers and the like spend so much time talking about, for instance, Amazon, or Facebook, or Google, or Apple, or Microsoft? Most of whom are in different businesses than that. Especially Amazon, who’s in retail.
Customers Expect Great Experiences Everywhere
And the reason is because they model the behaviors that customers expect. I’ve mentioned this before on the show that customer experience isn’t measured against companies who look exactly like you. If you’re a hotel, if you’re a restaurant, if you are a travel agency, if you are a software company, if you are a technology company, your customers aren’t comparing the experience that they have with you to companies that look like you. In a digital economy, your customers measure the experience that they have with your business against the best experiences that they have anywhere.
Whether you sell a different product or service than Amazon, Google, Facebook, Apple, or Microsoft, or Uber, or Airbnb, or Instacart, or any of those folks, you are still competing with them. How many times have you heard someone in your company say, "Well, why can’t we just do it the way Amazon does it?" Which is easy to say. It’s really hard to do in practice. Amazon has built its entire company to do it the way that Amazon does it.
Does Culture Truly Eat Strategy for Breakfast?
And that’s actually what I want to talk about today. I want to talk about culture, and how you build a company to be the way that you do the things you do. There’s a very famous quote usually attributed to Peter Drucker that says, "Culture eats strategy for breakfast." And there’s always that this question of: is that true, or is strategy more important? And I’ll tell you, in my experience and in the experience of the companies that I’ve worked with, and of companies that I’ve seen who do this well, I’m going to be really clear. It’s not really an either/or situation.
Like most things in life, the ‘and’ is really important. It’s not culture or strategy. It’s culture and strategy. Today, what I really want to talk about is Amazon’s culture, and what that means from a digital transformation perspective and why it’s so important you watch what companies like Amazon do.
Jeff Bezos’ Shareholder Letter and Amazon’s "Day One" Worldview
And I want to speak specifically to the shareholder letter that Jeff Bezos just wrote to Amazon shareholders. Bezos is, of course, retiring from his role as CEO of the company, and so this is his last chance as the chairman of the company, as the CEO of the company, as the guy running the company to state principles that are important to him and that he believes are important to the business.
There are some extraordinary quotes in it. Some things that are really worth noting. One, he taught talks about … I’m going to quote this at length. He talks about the fact that,
"…customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store. Driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical, physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the 21st century."
The Economic Value of Digital Culture
Now, think about what Bezos just said there. He’s talking about this incredible focus on the customer. He’s talking about this incredible focus on people wanting things fast. I’ve mentioned this many times on the show about how Bezos talks about the things that won’t change, and one of them is that people want things fast. He goes ahead and puts a number on it. What’s amazing is every single thing I’m about to talk about here is Bezos actually assigns an economic value to. He claims that what they’re doing is worth about $128 billion. Excuse me, $126 billion in value creation to consumers, plus another $38 billion to AWS customers. That’s about $165 billion in economic value.
A Relentless Focus on Customers…
Now, let’s be fair. I’m going to come back to this in a moment. But there’s probably some self-serving math in here, but the point is they’re thinking about it very much in terms of the numbers that matter. How do we put a value? How do we put a metric around the benefit we are providing our customer? Lots of you probably already know this. But when Amazon first started, Jeff Bezos originally wanted to call the company Relentless. He really felt we must be relentless in our focus on our customer, and it shows when you read something like this letter.
And Improving How They Treat… Employees?
What’s even more extraordinary is Bezos talks about Amazon wants to put an increased focus on its employees now. And I’m going to quote this at some length, so bear with me. This is the quote.
"Our increase in starting wage boosted local economies across the country by benefiting not only our own employees, but also other workers in the same community. The study showed that our pay raise resulted in a 4.7% increase in the average hourly wage among other employers in the same labor market. And we’re not done leading. If we want to be Earth’s best employer, we shouldn’t settle for 94% of employees saying they would recommend Amazon to a friend as a place to work. We have to aim for 100%, and we’ll do that continuing to lead on wages, on benefits, on upskilling opportunities, and in other ways that we will figure out over time."
Just look at the way Bezos uses metrics to codify that. What was the average increase in wage not just for their own employees, but for other employees in the labor market? What is the percentage of employees who say they would recommend Amazon as a place to work? That’s relentless. That’s unbelievable commitment… to a story at least. Obviously, with all of the things going on in Washington, and with the local states attorneys general, and things like that, some of this could be seen as Amazon’s way to show regulators that, "Look, we’re not such bad guys."
And of course it is. From their perspective, they’re not such bad guys. I’m going to be really fair here. I’m not here to defend Jeff Bezos. I’m not here to defend and Amazon. Quite the opposite, in many cases. But I don’t think Bezos is lying. I think he believes every word of what he’s saying. And yes, they and the other major gatekeepers all are guilty at one point or another of some problematic behaviors. That’s a fact. Whether or not it’s illegal — whether or not it should be illegal — that’s a debate for another day. But do they do anything that could be seen as problematic by anybody in a reasonable worldview? Yes, of course they do.
Customers Value This Commitment
Still, a significant share of their employees and a significant share of their customers clearly share Bezos’s perspective — or at least enough to continue to choose to use them. They continue to see revenue growth. Prime continues to have a large and growing membership. Lots of companies continue to use AWS for their cloud services. At least by those standards, they’re doing something right. And so, of course, they’re going to double down on that. And of course, they’re going to put the best possible spin, presentation, face, whatever you want to call it on those numbers.
But it comes back to this idea of being relentless, about how they measure relentless in terms of how they focus on the customer, or increasingly the employee.
The Frightful Five Demonstrate Digital Culture Every Day
And that’s the reason that I always talk about Amazon, and Google, and Facebook, and Apple, and Microsoft, and also Uber, and Airbnb, and Peloton, and DoorDash, and Instacart, and Salesforce, and HubSpot. It’s the same mindset at each of these companies. Not the exact same process. Not the exact same way they’re structured. Not the exact same strategy.
But culturally, how do we continue to improve for our stakeholders?
Whether those stakeholders are customers, whether they are employees, whether they are shareholders. And "how do we improve not just a little, but a lot? How do we ensure that we have the data that tells us what’s working and what isn’t? How do we ensure our customers, or our employees, or our shareholders … our various stakeholders are satisfied with our efforts?"
Amazon’s Culture vs. Apple’s Culture
The individual cultures for how they get there vary. The example I use all the time is Amazon hates meetings. You’ve probably seen this before. That you have to write everything down in a six page document. It can’t be any longer than that. Because the thinking is if you can’t write it down in six pages or fewer, you haven’t thought about it enough. And until you write that document and until you circulate it with the people you want to talk to, you’re not ready yet to have the meeting. That’s the way Amazon thinks about this.
Apple, by contrast, loves meetings. They love the creativity of getting people in a room and hashing things out. They believe that’s where creativity occurs. It’s not that there’s one culture that you have to have, or one strategy that you have to have. It’s that you have to have a vision of where you’re trying to go. It’s that you have values that you’re trying to uphold. It’s that you have processes that support and align with that vision and values that allow you to actually get where you’re trying to go. Just think about what the Jeff Bezos shareholder letter says about they want to be the number one company in the world for employees.
Rethinking Your Business: What Digital Transformation Means in Practice
I’m working with companies, for instance, in hospitality who are struggling to attract labor right now partly because of the stimulus, partly because of companies like Amazon, partly because of long standing practices. But they’re sitting there thinking about: "well, what do we do compared to what we’ve always done?" And the question isn’t: what do you do? The question, if you’re starting a hotel, or a restaurant, or a retail store, or a software company. Instead, it’s: "Where would you go? How would you set everything up given where we are today?"
If you were starting a company today, what would you do differently? What kind of culture would you have? What kind of strategy would you have? What kind of processes would you follow?
Because the world in 2021 is different than it was in 2011, or that it was in 2001, or ’91, or ’81, or ’71, or whenever your company got its start. This isn’t about responding to competitive pressures. I mean, that’s part of it, but it’s not the whole thing. It’s that the world has changed more in the last year than we’ve seen kind of ever. But it has changed dramatically in the last five to 10 years, and the five to 10 years before that, and the five to 10 years before that.
Amazon’s "Day 1" Company Culture Shows Digital Transformation in Practice
And Jeff Bezos still 24 years after writing his first shareholder letter in 1997, he still talks about Amazon being what he calls a "Day 1 company." Meaning that they’re always looking at it as if they’re starting from scratch from day one. If they were going to build a company that they wanted to be going forward, what kind of company would they build? And that’s the kind of culture that is necessary for digital transformation. That’s the kind of culture that does eat strategy for breakfast. Because if you have a good culture where people are aligned around that vision, and values, and the stories you tell about where you’re trying to get, and saying not: "How do we make it 5% better," or "How does it get 10% better?" But, instead, "How do we build a better company? A company that is better set up to succeed in the world as it is?"
There’s this story you’ve heard many, many, many times. It’s probably the most overused analogy from consultants, and business leaders, and the like, and I may have talked about this in a recent show. But the old Wayne Gretzky quote about, "We’re not going to skate to where the puck is. We’re going to skate to where it’s going." And I’m saying lots of people aren’t even skating to where the puck is. They’re skating to where the puck was.
The Culture You Don’t Want
I worked with a company a couple of years ago … a few years ago. And their culture depended on meetings. There were tons of meetings. There were tons of people getting together every day to talk about various things going on with the company. But what increasingly became clear was not that there was a problem with the meetings, but the reason they were having the meetings was the problem. And the reason was that if they could achieve consensus in the meeting, then it wouldn’t be anybody’s fault if something went wrong. Across the board, people in the company who were smart, talented, capable people were fearful that if they were to be held accountable for the problem, it might cost them their job.
And so they’d have these meetings where lots of people were there, so that later if something went wrong, any single person could say, "Well, it wasn’t just me who said this. We all said this. Everybody was on board with it." It was a CYA culture. And clearly that’s not a great way to run a business, because they’re not focused on a customer, and they’re not focused on employees, and they’re not focused on shareholders or other stakeholders. They’re not focused on the community at large. They’re focused on covering their butts. Not a great way to run a business.
I can tell you, the company is not doing so well. We eventually stopped working together because they were not prepared to implement lots of the things we talked about. It was too big a change for them. And I want to be clear. They face enormous competitive pressures. They were in a tough industry. I cannot guarantee that if they had done the things we’d talked about, they wouldn’t still have troubles.
I am reasonably confident that if they had done a chunk of the things we’d talked about, they’d be in a better position than they are right at the moment. And the biggest thing they had to change was their culture, and it’s not because they lacked a strategy. It’s not because they didn’t have smart people. It’s not because they didn’t have hardworking, committed people. They had all of those things.
Digital Culture Means a "Learning Culture"
What they didn’t have was a culture that focused on learnings. What they didn’t have was a culture that learned from mistakes, so that they could not repeat them. When people talk about a culture that welcomes mistakes, it doesn’t mean you go out of your way trying to make mistakes by any stretch. It doesn’t mean that you don’t try to get better. Learning isn’t learning if you keep repeating the same mistakes. It means that if you make a mistake, there’s a process for understanding what happened, for understanding what you can do differently to create a better result the next time, for rewarding the attempt, and also putting the necessary processes in place to ensure you make new mistakes the next time. Better mistakes. Smarter mistakes.
Because those are the things that lead to great results. Those are the things that lead to people not working out of fear, but working out of a commitment to creating a better environment for customers, or employees, or shareholders, or whichever stakeholders you put most important in your business. It’s not a question of what industry you’re in. It’s not a question of what business you have. It’s not a question to what your strategy is. It is a question of: do you create a culture that rewards learning? That rewards trying something new? That rewards focusing on numbers that actually tell you if you’re making progress towards your goal? That rewards you for looking at the world as it is and saying, "What kind of company do we want to create today?" And then making sure you have a strategy that points you in the right direction for how to do that.
Conclusion: Day One at Amazon and Developing a Digital Culture
It’s not culture or strategy. It is culture and strategy. I want to wrap up where I started with Jeff Bezos’s words. He said this 24 years ago. He said it in his most recent letter. "Today is Day 1. What kind of company are you trying to build?" Because that’s the culture that you need. That may not eat strategy for breakfast. Instead, it thinks of strategy as a core ingredient to the meal. And consuming them both, taking them in and living them, will give you the fuel to be the kind of company you need to be for where your customers, and your employees, and your shareholders, and your stakeholders want you to be. So, welcome to the start of Day 1. Let’s get going.
Show Closing and Credits
Now, looking at the clock on the wall, we are out of time for this week. I want to thank you once again for listening. I very much appreciate it. I know I say it all the time, but I really would not do this show without you. It means the world to me that you’re here. I want to remind you that you can find the show notes for today’s episode, as well as an archive of all our past episodes, by going to timpeter.com/podcast. Again, that’s timpeter.com/podcast. Just look for episode 325. While you’re there, don’t forget that you can click on the subscribe link in any of the episodes that you see to get Thinks Out Loud to deliver to your favorite podcatcher everything a week.
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