Jeff Bezos’s 7 Secrets to Running the Internet Retail World
For those people outside the Amazon (NASDAQ:AMZN) employee world (read: most of us), CEO Jeff Bezos remains somewhat of an enigma. The man is, of course, known for his ability to take an online bookseller and turn it into a multi-billion-dollar “Everything Store,” but few really understand the nature of the executive and what goes on inside the walls of Amazon’s Seattle headquarters that make it so wildly successful.
Bezos also certainly hasn’t helped clear up any speculations, as he rarely speaks at conferences and only gives interviews to publicize new products, but Bloomberg Businessweek writer Brad Stone took it upon himself recently to interview hundreds of current and former friends of the Amazon founder, to better understand Bezos’s business secrets and how he managed to become one of the world’s most successful men. Stone’s findings are set to be published in October, but Bloomberg ran a 10-piece excerpt from the book Thursday, and effectively clued us in on many keys to understanding Bezos, and what his subordinates know about him while his consumers live in oblivion.
Here are 10 takeaways that one can learn from Bloomberg’s 10-page Bezos piece, as we finally understand the fundamentals to Bezos’s business strategy and how he operates with his employees and competitors.
1. Bezos is Ruthless
This one shouldn’t exactly come as a surprise to readers, as most of the the world’s successful CEOs are hardly known for their warm and fuzzy sides, and with Bezos it’s no different. Stone highlights that Amazon’s culture is notorious for being confrontational, and Bezos has developed one as such because he “believes the truth shakes out when ideas and perspectives are banged against each other.”
The CEO definitely sticks to that principle. Though Bezos might be polite and charming in public, his minions know a different side of him, and note that he is capable of a harshness and acerbity that is almost unparalleled. That is evidenced by some of Bezos’s best lines relayed to Stone by Amazon veterans that include, “Are you lazy or just incompetent?” “I’m sorry, did I take my stupid pills today?” and a personal favorite “If I hear that idea again, I’m gonna have to kill myself.”
Certain Amazon employees and veterans have varying opinions on the brutal behavior of the CEO, but many understand that Bezos simply is primarily consumed with progressing Amazon’s performance and customer service, while putting personal company issues on the back burner. Stone highlights Kim Rachmeler, an executive who worked at Amazon for more than a decade, who explained, “This is not somebody who takes pleasure at tearing someone a new a–hole. He is not that kind of person. Jeff doesn’t tolerate stupidity, even accidental stupidity.”
2. Bezos Recruits Talent, Doesn’t Stand for Complacency
Unsurprisingly, Amazon is also a wizard at recruiting talent. Some employees stay, and some go when they can’t handle the “gladiator culture” that is Amazon, but the Seattle-based company has still managed to enlist 97,000 full-time and part-time employees — up 40 percent from the year before — and these new subordinates aren’t exactly given the warmest of welcomes.
Stone explains that they’re handed an industry-average base salary, a signing bonus spread over two years, and a grant of restricted stock units spread over four years. Amazon purposely backloads its stock grants toward the end of the four-year period so employees keep working hard and are never tempted by complacency, especially because managers in departments are instructed to dismiss the least effective workers. Oh, and new hires get a backpack with their orientation materials, but they’re required to hand it back when they resign.
3. Bezos Inspires Fear in Employees
Moving right along, it now shouldn’t come as a surprise that Bezos inspires fear in his employees that manage to stay on with the company. In fact, that might even be an understatement — as if Stone’s excerpt reveals any truth — it’s that one should not get on Bezos’ bad side. According to veterans, if employees fail to meet the CEO’s exacting standards — and that includes having the wrong answer, attempting to bluff, taking responsibility for someone else’s work, demonstrating uncertainty, or giving into internal politics — Bezos can all but blow a gasket, and it isn’t pretty.
That could explain why Bezos has a signature email that is known to instill panic in even the oldest veterans, and all it takes is one simple question mark. The Amazon CEO sends employees question mark emails when he receives news from a consumer that something they’ve purchased isn’t acting up to standards. Amazon workers usually have a few hours before they are forced to meet with Bezos to provide a thorough explanation for the glitch, but that is how Bezos ensures that his customers’ voices are always of utmost importance to company members.
4. Bezos Relies on Consumer Anecdotes
This one may come to a shock to consumers, but despite the billions of customers Bezos must answer to, the CEO has a public email address, and relies largely on customer complaints to dictate how his company moves foward and improves itself. Senior Vice President for North American Retail, Jeff Wilke, explains that, “Every anecdote from a customer matters. We research each of them because they tell us something about our processes. It’s an audit that is done for us by our customers. We treat them as precious sources of information.”
That surprises many who understand how considerably Amazon relies on metrics for its information, but it is still now illuminated that random customer anecdotes influence a lot of the company’s decisions, and that could explain why the “Everything Store” has been so capable of winning, at well, everything.
5. Bezos Relies on Numbers
So yes, Amazon takes consumer anecdotes into consideration, but as to be expected, most of its business is driven on hard numbers and metrics, and Stone highlights that Amazon departments dedicate entire days weekly to reviewing spreadsheets of data and figures relevant to their business.
At those meetings, the employees discern what’s working, what’s not, how customers are behaving, and how to move forward. One general manager who worked for Amazon for four years explained to Stone, “This is what, for employees, is so absolutely scary and impressive about the executive team. They force you to look at the numbers and answer every single question about why specific things happened. Because Amazon has so much volume, it’s a way to mae very quick decisions and not get into subjective debates. The data doesn’t lie.”
One day a week is also devoted to metrics meetings where retail managers gather to discuss defects and inventory turns, talk about the future, and discuss how different departments can interact. Bezos does not attend these meetings, but he is also never far away.
6. Bezos Employs Competitive Intelligence
Many of those data sheets that Amazon employees stare at for hours on end contain the metrics on Amazon’s competitors, or as it would like to maintain, lack thereof.
Amazon also has a special team that is in charge of taking care of those nettlesome challengers, and the group just might be as scary as it sounds: Competitive Intelligence. The secret squad has the important responsibility of tracking the success of Amazon rivals and then presenting data to senior executives, helping highlight strategies that could provide long-term fixes. Competitive Intelligence also pinpoints any emerging threats that could pose future competition, and it determines how long Amazon has until the new companies provide any risk, and how to do away with them.
7. Bezos Nukes the Competition
Lastly, we come to one of Amazon’s biggest not-so-secretive secrets: it must nuke the competition. When Competitive Intelligence highlights new rivals, it is the responsibility of Amazon employees to find ways to disengage these companies’ guns. How do they do it? It depends, but a lot of the time they smoke a competitor out.
Such was the case with Quidsi, as Stone highlights, which, known for its website Diapers.com, posed a threat to Amazon’s emerging baby products business in 2008. To sum up a multi-year-long turbulent process, Amazon first responded to Quidsi by offering a buyout, dropped its baby diapers’ prices 30 percent when that didn’t work, continued to offer unmatchable deals, and then eventually agreed to offer to buy Quidsi for $540 million just so Wal-Mart Stores (NYSE:WMT) couldn’t win the deal.
The brutal process was far from pretty, and Amazon came out of the negotations with a couple more enemies, but that’s how Bezos operates and maintains his company’s success — by assaulting and neutralizing incipient competitors. Thus, to Bezos’s customers, he’s charming; to his employees, he’s terrifying; to his competitors, he’s threatening; but to the world — he’s the best.
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