Top 7 takeaways from Amazon's shareholder letter

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Amazon is one of the world's biggest companies, and as of last year its biggest retailer. (Image via EPA)

Amazon has faced down tax controversyemployment scandals and failures such as the Fire Phone, but there is no doubt that it is one of the world’s cornerstone internet companies.

In this year’s shareholder letter founder and CEO Jeff Bezos defended his company’s culture, broadcast its successes with Prime, Amazon Web Services (AWS) and the marketplace, and called it an “invention machine”.

But in there were also insights from an entrepreneur who has presided over a company that has massively, and rapidly scaled products and services to become a $280 billion company and the largest retailer in the world.

As such, we’ve collated the top insights into business and entrepreneurship - use them wisely.

1. You won’t get anywhere without a bit of luck.

“Luck plays an outsized role in every endeavor, and I can assure you we’ve had a bountiful supply.”

2. Customer obsession is the key to success.

“Many companies describe themselves as customer-focused, but few walk the walk. Most big technology companies are competitor focused. They see what others are doing, and then work to fast follow. In contrast, 90 to 95 percent of what we build in AWS is driven by what customers tell us they want.”

3. Your culture will define you, for better or worse.

“They can be a source of advantage or disadvantage… The reason cultures are so stable in time is because people self-select. Someone energized by competitive zeal may select and be happy in one culture, while someone who loves to pioneer and invent may choose another... over the last two decades, we’ve collected a large group of like-minded people.”

4. Be a great place to fail.

“One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there.”

5. Take the 0.1 percent chance. Experiment.

“Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten.... This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”

6. Scale will allow you to do things you could only dream of.

“AWS, Marketplace and Prime are all examples of bold bets at Amazon that worked, and we’re fortunate to have those three big pillars. They have helped us grow into a large company, and there are certain things that only large companies can do. With a tip of the hat to our Seattle neighbors, no matter how good an entrepreneur you are, you’re not going to build an all-composite 787 [airplane] in your garage startup – not one you’d want to fly in anyway. Used well, our scale enables us to build services for customers that we could otherwise never even contemplate.”

7. But size can also destroy you, if you aren’t careful.

“There are some subtle traps that even high-performing large organizations can fall into as a matter of course...

“One common pitfall for large organizations – one that hurts speed and inventiveness – is “one-size-fits-all” decision making. Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors…

“As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.”

 

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