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US$100 billion sales later, why Amazon still embraces failure

James Henderson | April 13, 2016
To invent, companies have to experiment, Bezos says

“What’s going on here?” wrote Amazon chief executive Jeff Bezos, in opening his annual letter to shareholders.

Fresh from reporting Amazon as the fastest company ever to reach $US100 billion in annual sales, with Amazon Web Services fast approaching at $US10 billion, the charismatic leader almost seemed bemused when tasked with comparing the tech giant’s contrasting business divisions.

“Both were planted as tiny seeds and both have grown organically without significant acquisitions into meaningful and large businesses, quickly,” Bezos wrote. “Superficially, the two could hardly be more different.

“One serves consumers and the other serves enterprises. One is famous for brown boxes and the other for APIs.

“Is it only a coincidence that two such dissimilar offerings grew so quickly under one roof?”

Acknowledging that “luck plays an outsized role in every endeavour”, and admitting Amazon has enjoyed “a bountiful supply”, Bezos’ analysis of Amazon’s two blossoming divisions brought about an unlikely comparison.

“Under the surface, the two are not so different after all,” he wrote. “They share a distinctive organisational culture that cares deeply about and acts with conviction on a small number of principles.

“I’m talking about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence.

“Through that lens, AWS and Amazon retail are very similar indeed.”

A question of culture?

Despite previous press murmurings questioning company culture - think back to the New York Times' exposé entitled Inside Amazon - Bezos accepted that corporate cultures, for better or for worse, “are enduring, stable and hard to change.”

Citing culture as a source of “advantage or disadvantage”, the American entrepreneur - with an estimated personal wealth of $US59.2 billion - believes key to Amazon’s success has been its ability to embrace failure, in the face of innovation.

“I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins,” he wrote. “To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”

For Bezos, most large organisations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there.

In his eyes, 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,” he wrote. “But you’re still going to be wrong nine times out of ten.

Jeff Bezos - CEO, Amazon
Jeff Bezos - CEO, Amazon


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