Jeff Bezos speaks on Thinking Long-Term, Customer Focus, and Innovation


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At the end of every Amazon letter to shareholders, including the latest 2016 Amazon letter to shareholders, Jeff Bezos includes a copy of his original 1997 letter. Since the very beginning, Jeff Bezos and Amazon’s thought process revolves around “It’s All About the Long Term”. In this interview, Bezos goes into more detail on thinking long-term, customer focus, and innovation. You can also read the transcription below it. In addition, you will also enjoy a previous post we’ve made: “Our profitability is not our customer’s problem” – Jeff Bezos

 

Jeff Bezos: What we're really focused on is thinking long term, putting the customer at the center of our universe, and inventing. Those are the three big ideas to think long term, because a lot of invention doesn't work. If you're going to invent, it means you're going to experiment, so you have to think long term. These three ideas, customer centricity, long term thinking, and a passion for invention, those go together. That's how we do it, and by the way, we have a lot of fun doing it that way.

 

Charlie: You have been known to be somebody who is going to plant seeds and just wait. How do you deal with the pressure, say Wall Street, or you have a dot com crash? I've never seen you panic. You stay the course, and you stick to your script. How do you do that? And how do you advise us to internalize that, as well, as a strategy?

 

Jeff Bezos: I think that if you're straightforward and clear about the way that you're going to operate, then you can operate in whatever way you choose. We don't even take a position on whether our way is the right way. We just claim it's our way.

 

Warren Buffet has a great saying along these lines. He says, "You can hold a ballet, and that can be successful. You can hold a rock concert, and that can be successful. Just don't hold a ballet and advertise it as a rock concert." You need to be clear with all of your stakeholders with, are you holding a ballet, or are you holding a rock concert? Then people get to self select in.

 

I don't think there's a particular recipe, but there are elements of what we do that I think help. One of them is that inside our culture, we understand that even though we have some big businesses, new businesses start out small. It would be very easy for, say, the person who runs our U.S. books category to say, "Why are we doing these experiments with things? That generated a tiny bit of revenue last year. Why don't we instead focus those resources and all that brainpower on the book's category, which is a big business for us?"

 

That would be a natural thing to have happen, but instead, inside Amazon, when a new business reaches some small milestone of sales, email messages go around, and everybody's giving virtual high fives for reaching that milestone. I think it's because we know from our past experiences that big things start small. The biggest oak starts from an acorn. If you want to do anything new, you've got to be willing to let that acorn grow into a little sapling, then finally into a small tree, and maybe one day, it'll be a big business on its own.

 

Charlie: In fact, that's one of the mottos for one of your initiatives, and forgive my pronunciation of the Latin, but Gradatim Ferociter, what does that mean to you?

 

Jeff Bezos: It means step-by-step ferociously. It's the motto for Blue Origin, and basically, you can't skip steps. You have to put one foot in front of the other. Things take time. There are no shortcuts, but you want to do those steps with passion and ferocity.

 

Charlie: What's amazing about your success is that your timing was good, too. How does an innovator actually identify that historical momentum, that Kitty Hawk moment? You recognized what was happening with the internet, and you said, "You know what? There's actually room for me to start with books and then move on." How do you do that? How do you find the time, and the momentum, and the zeitgeist?

 

Jeff Bezos: I think to some degree, you follow your passions, and you have to hope the wave catches you. I was always interested in computers. I was always interested in software. I was always a big reader, which made me alert to things like the internet and the possibility that you could build a bookstore online that would have universal selection. I think everybody has their own passion, their own thing that they're interested in. You're very alert to the things that are in the sphere of influence of that passion.

 

Charlie: So your passion has led you to change the world, frankly, with Amazon, but yet you've got Blue Origin, you've got Bezos Explorations. Why can't somebody like you just rest on your laurels? Go play golf.

 

Jeff Bezos: I love what I do. I also have four kids. I have a wife that I love. I have a lot of passions and interests. One of them is, at Amazon, the rate of change is so high, and I love that. I love the pace of change. I love the fact that I get to work with these big, smart teams. The people I work with are so smart. They're self selected for loving to invent on behalf of customers. Do I love every moment of every day? No. That's why they call it work. There are things that I don't enjoy, but if I'm really objective about it, and I look at it, I'm so lucky to be working alongside all these passionate people. I love it. Why would I go sit on a beach?

 

I think in a lot of the product categories, that ship sailed a long time ago.

 

Charlie: Meaning what?

 

Jeff Bezos: Meaning that we have-

 

Charlie: The purchasing power to compete with anybody [crosstalk 00:06:06]

 

Jeff Bezos: We have the volume relationships with suppliers. That playing field has been leveled.

 

Charlie: Okay.

 

Jeff Bezos: If you'd asked me that question 10 or 15 years ago, I'd have agreed with you that-

 

Charlie: That there was a challenge you had to overcome.

 

Jeff Bezos: But even then, our profitability is not our customers' problem. We don't take the point of view that we're going to price products at a particular margin for ourselves. We say we're going to price products competitively. If that means on that product that we lose money, that's okay, because we need to take care of the customer-earned trust. We'll figure out over time, and if we find we can't ever make money with that product, we'll stop selling it. We're not going to make customers pay for any of our inefficiencies, if you see what I'm saying.

 

Charlie: Did you lose money on the Kindle?

 

Jeff Bezos: Every new business that we have ever invested in, it has taken years ... Most businesses have either no impact on our financials for the first five to seven years, or a negative impact on our financials for the first five to seven years, and we do a lot of new things. The company is very healthy financially, doing very well. It's an outcome of customer obsession.

 

When we were declared Amazon dot toast, I think we had 150 employees. Barnes and Noble had 30,000 employees. Somebody wrote an article that said Amazon has had a great two-year run, but now the big boys have shown up, and they're going to steamroll them. We had an all hands meeting. I called all 150 employees together, and I said, "Look," because everybody's aware of it. Ever employee has read the Amazon dot toast article. Every mother of every employee has read the Amazon dot toast article and has called and said-

 

Charlie: Your father and mother who live here in New York.

 

Jeff Bezos: "Are you okay?" We had an all hands meeting, and I said, "Look, you should wake up worried, terrified, every morning, but don't be worried about our competitors, because they're never going to send us any money anyway. Let's be worried about our customers and stay heads down focused."

 

Most of these are big markets. Another way to answer your question about competitors and Walmart is to say, "Look, they can succeed fabulously, and it won't stop us from succeeding." These retail markets are huge. It often doesn't make sense for us to think of it as a pitched battle. Sometimes people think about business as it's kind of like a sporting event. There's a winner and a loser.

 

Charlie: It's not a zero sum game.

 

Jeff Bezos: It usually isn't. I'm sure there are cases where it is, but most often, industries succeed. I can tell you, I think eCommerce is succeeding. The way we think about it, nobody else has to fail for us to do well. I think eBooks is like that. I think there are going to be many winners. I think eBooks is going to be a huge industry.

 

Charlie: There are many competitors now. You've got Barnes and Noble as one of them.

 

Jeff Bezos: And there are going to continue to be.

 

Charlie: Sony is another now.

 

Jeff Bezos: And there'll be more.

 

Charlie: Apple is another.

 

Jeff Bezos: But I have a list of 50 competitors that we could walk through, all over the world, doing different things. Our focus is going to be, we'll try to pay attention to those competitors, but we're not going to obsess over them. We're going to obsess over readers, because those are the people who are buying that device. It's not just a business for us. It's a mission for us, and missionaries build better products.

 

Charlie: What is Jeff Bezos thinking about today in 2010, that we might not know anything about, that he thinks may be a reality in 2013 or 2015. Where is the-

 

Jeff Bezos: One of the things is the Amazon Web Services business. There is a business that probably is not-

 

Charlie: This is the Amazon cloud stuff?

 

Jeff Bezos: Yes. There's a business that's growing. It's in hyper growth phase. It's already a significant business. That's a business that probably is not getting as much attention as it deserves.

 

Charlie: Maybe they're a dominant player in the cloud business now?

 

Jeff Bezos: In the infrastructure part of it, which is the part that we play in, Amazon is by far the leader. It started mostly with startup companies, but now it's big enterprises adopting.

 

The best analogy I can give you for this is, it's like the electric grid. Right now, big companies build their own data centers. They buy their own servers, and they put it in. It's a lot of capex. There's a lot of price of admission. If you're going to operate a data center, you have to do it well. It doesn't differentiate you from your competitors. It's just a price of admission.

 

What we do at Amazon Web Services is we sell compute by the hour. We sell compute by the drink. It's just like buying electricity off the grid, instead of having your own power manufacturing, your own power generating plant.

 

Charlie: Were you surprised that Apple had to react to the iPhone question of the reception and the antenna? Do you think they rushed to market?

 

Jeff Bezos: I don't know.

 

Charlie: Does it damage them?

 

Jeff Bezos: No, not at all.

 

Charlie: You admit your mistake. You say, "We've tried to fix it," and move on.

 

Jeff Bezos: Yeah. Charlie, even great companies make mistakes. The key is they got to fix it.

 

Charlie: Where are you going that we might not know anything about here?

 

Jeff Bezos: I'll tell you something that I think is probably not that apparent but is getting a huge amount of focus inside the company, and it is apparel.

 

Charlie: Really?

 

Jeff Bezos: We're having a lot of sales growth in apparel. We bought a company called Zappos, sells shoes. We already had a really good shoe business before buying Zappos. You might think, "Why would anybody buy shoes online? Why would anybody buy clothes online?" Historically, clothing has always been the number one mail order category, even pre-internet. We make it really easy for people to try stuff on. This is a place where we're-

 

Charlie: You make it easy to try stuff on.

 

Jeff Bezos: By making it easy to return.

 

Charlie: Oh, I see, yeah.

 

Jeff Bezos: And we try to get people not to feel guilty about it. Buy three pairs of jeans, and return two of them. It's okay.

 

Charlie: It's okay with you.

 

Jeff Bezos: Don't worry about it. Yeah, it's okay with us.

 

Charlie: Keep the one that fits. Keep the one that fits.

 

Jeff Bezos: If you want a preview of where we're headed with apparel, go look at the denim category. Go look at women's jeans on Amazon, and you'll see. That will give you a little insight into our future.

 

Charlie: Part of what you hope will be happening already is happening in a big way, is that when people think about making a purchase, their first instinct is Amazon.

 

Jeff Bezos: What I want is for people to feel like Amazon is the most reliable, that they have earned trust. Trust, hard earned, easily lost. We want to make hard promises, like if you're an Amazon Prime member, we'll get you this tomorrow or in two days. We'll be very clear about it. You can pay $3.99 to get it tomorrow, or you can get it for free in two days, and that's a hard promise to make. We do a good job of keeping those promises, and that's how you earn trust. Make a hard promise, keep it.

 

If we can continue to earn trust, that's also what lets us branch out into new product categories, new businesses, because customers will give you the benefit of the doubt. They'll say, "You know, Amazon does a good job for me, so I'll try this Kindle."

 


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