TRANSCRIPT
Peter:
Welcome to unpacking the digital shelf where we explore brand manufacturing in the digital Age. Hey everyone, Peter Crosby here from the digital shelf Institute, Amazon and the rest of the world has changed a lot since the last edition of John Rossman, his best-selling book on leadership and innovation. The Amazon way, the updated third edition has hit the digital and physical shelves. And the author joined me to talk about how those changes have impacted the classic leadership principles that made Amazon, the innovators they are in this new era Amazon's experience through massive growth have demonstrated that some changes need to be made changes that are instructive for brands that arriving a wave of change themselves. Here's that conversation, John, thank you so much for returning to the podcast as your third edition of the Amazon way hits the digital and physical shelves. What told you that it was time for an update? It was a hundred thousand copies sold, not, not enough for you. Was it like, uh, just, I need to,
John:
It's never enough, right? Like that's, that's what you learn from Amazon is it's never enough, right? So, you know, a few things prompted me on this edition. First was there were some kind of mild changes in the leadership principles. I wanted to go out and have an opportunity tunity to listen and talk to a number of Amazon leaders and just validate my understanding. And I think that's really the underlying amazing story is like how consistent these principles are, the mechanisms, how they use them, things like that. And I also, um, wanted to an opportunity to rewrite a couple of sections and the major additions were, um, Tom Ahlberg, who's the founding partner at Madrona capital, who was, uh, an early Amazon investor was on the board at Amazon for 23 years, wrote the forward, which, uh, at least in the, in the Seattle area is a, is a big Testament, uh, relative to the principles. And to some degree, the book I wrote a preface for the book, which we'll, we'll talk about in a bit. Um, and then I wrote a couple of new appendixes, one of the appendixes, cause this is, this is a type of assignment I do with some clients is help us build their own leadership principles. And so I kind of wrote like, Hey, here's my recipe book for writing your own leadership principles. Um, and so it was just an opportunity to refresh them.
Peter:
Yeah. Yeah. I mean, there's just been so much, so much has shifted since you wrote the book and, you know, just where Amazon has gone the pandemic, um, the, the innovations that they've delivered, the, you know, the, um, I think you mentioned two administrations transitioning the first being the pressing United States and the second being Jeff Bezos, uh, leaving and Andy Jassy coming in. So all of those things kind of set, set us up for yet another phase of interesting Amazon change, but hearing that these leadership principles remain in place, uh, I think is a Testament to, uh, how they work for Amazon and, and potentially you're the reason why he wrote this book worked for other organizations.
John:
You know, if you can get people aligned to priorities, how we make decisions, how we work together, how we hold each other accountable, what our mission is, you can get a lot more done a lot faster, right? Because you don't have to bring things to the center. You don't have to become your own mini bureaucracy. And that's the power of a good set of principles is getting alignment and letting leaders in teams run a bit faster. And so speed in the organization is just critical competitive factor, but you need to have a common kind of shared set of orientation on those factors. And that's what a good set of leadership principles does for an organization.
Peter:
I think it's particularly germane to our audience because when I speak to, to our, our audience and the executives that are kind of driving change at their organizations. So the core question that, that Jeff Bezos sort of ran all of this around was an existential one, right? I predict one day Amazon will fail. It will go bankrupt. We have to try and delay that day for as long as possible. And I think that that's oh, end quote. Um, and I think that that is exactly what our executives think about every day that brands either get this digital thing, right. And that fuels the growth of the next, uh, decade or more, or they don't.
John:
I think one of the silver linings out of the pandemic is a full on commitment to change and innovation where it was a bit, maybe half-hearted half committed, reluctant Tepe. It, that was, I think, you know, in general, some of the, especially in successful companies are reluctant to really, you know, run to the future. And the pandemic has, I think, amplified that appetite and like, oh yeah, not only do we have to do this, but the pandemic showed us that we can do this. We can make fast changes. We can operate nimbly, let's lean into it. And I think that's going to be one of the real silver linings out of the pandemic is not for everyone, but a lot of companies demonstrated themselves like, okay, we can do this.
Peter:
Yeah. So let's get right to it. You know, there, there are 14 prints. Well now actually you added a 15th,
John:
Peter. It's not blessed at this point. And I have a zero as close to zero hope as possible that this will actually get to them and everything, but there are 14 leadership principles and I did not write them.
Peter:
Oh, true. True, true. Uh, you, you broadcast them and put them in context. Right. I captured the story. Right. Did add a suggestion, but so I'm just gonna go to some that I really felt would resonate with our audience in terms of the, the challenges they're facing. And the first one that jumped out at me, you know, we all know about Amazon's customer obsession. The piece about that leadership principle that I really was drawn to in, in e-commerce and commerce in general is the end on cord. And a, did I say that right? And then B uh, is, uh, tell us about what that means.
John:
So the end on cord is a Japanese just-in-time manufacturing technique. And the philosophy is that any, anybody in the production line can stop the production line if there's a problem. So you don't pass problems down the line. And then everybody focuses on fixing that problem. So it's a TQ on the total quality management, um, Axiom and Amazon uses a, in a figurative way that they build tools and capabilities, and they actually have some roles around it, uh, of, uh, digital and Encore that allows them to stop production when there's a problem. So a customer service rep is able to pull an item off the website, make it a, not available if they have a sense that from a customer call or a customer feedback, or some customer facing issue that they see says, Hey, this is a systematic issue relative to this item. So that ability to not pass problems down the line and both the culture and the spirit that people are empowered, and they have the tools to do that. And they're rewarded for that. And then others gather around to fix that and get to the root cause. That's the spirit behind the end on court.
Peter:
And the thing that jumped out to me about this one for, for, for brands is that, uh, in this age of, of DTC opportunities where brands are increasingly getting closer and closer and more responsible for their consumers experience, they should be pulling and on cords, not only for their customers, are we serving our retailer and distributor partners, but also for our consumer experience. And I think that's interesting
John:
And then extend on that. Amazon has shown the willingness forever of taking fuller accountability for the customer experience than the part that they're directly responsible for. So if you think about fulfillment and the fact that at least up until the last couple of years ago, they weren't responsible for all aspects of fulfillment, especially in the third party selling business, which, which I helped launch. We graded and held our third party sellers to the same fulfillment metrics and customer expectations as Amazon, the retailer. And so being willing to step across the borders relative to the customer experience is really that cross enterprise and on chord. And that at the end of the day, it's our brand, it's our, it's the customer experience. And we've gotta be willing to step across the, the playing field or across the lines that we tend to respect, um, pretty traditionally in, in, uh, in business.
Peter:
So it was difficult conversations. And did you find that the end on cord kind of process was set by, you know, HR, like did, did they sort of, or where
New Speaker:
I could see you're like no HR or something
John:
Very much an operator, a mandate. And so, you know, you would have your metrics and your SLA plays, and when there's, when you would see an operating quality issue, you know, that's when the end on cord would be, would be pulled to kind of stop don't, don't make any more of this problem. Let's stop the production line and fix the problem,
Peter:
Boy, that, that, and that, that all has to be enabled and supported right from the top or it just the conflict that it would create, which I'm sure it creates anyway, but at least it's, it's sanctioned conflict, I guess.
John:
And the goal is getting quick action. Right. And, and, you know, when you stop production, it tends to get quick action.
Peter:
Yeah. So, uh, the, the next principle that stood out to me, um, one, cause I had trouble with the grammar, um, uh, but also to, uh, it's our right. A lot. So I was just missing the noun. But, um, but I just, but also that, um, yeah, I wanted you to talk about that principle about sort of clarity.
John:
Clearly that's not my grammar, that's actually Amazon's leadership principle of grammar, but I think that that authentic casual nature, and when you read the descriptions of these leadership principles, it comes across completely unique and Amazonian and differentiated and, and not stylistically, uh, conscious. And, and I think that makes them, you know, somewhat memorable and adorable. So yeah, so, so leaders are right comma a lot. If you are in the business of making bets in making decisions, it's the expectation that good leaders make good decisions more often than not. And if you can have that feeling that they're empowered to make decisions that the expectation is is that they are going to be accountable for them. Good leaders pay more attention into the things that feed them into helping to make good decisions. And, and th the idea is don't crowdsource your decision-making when you run a business, right? Like you are the leader, and you don't get to point the fingers at others relative to a decision that was core and centric to your business. And one
Peter:
Of the things, again, that, that stood out to me in this one is how leaders must communicate clarity. And that's the only way that innovation and success follows. Can you talk about sort of, what are the tools of, of that for a leader?
John:
Yeah. So clarity is a really important concept at Amazon. And to me, in, in, in my work and complexity, clarity is both completeness of thought and simplicity of thought. So there's a few different mechanisms on how you build clarity. The first is by writing, writing proposals, out, writing correction of errors, writing situations, problems, decisions out forces, whoever the author or author group is to actually get deeper into how do I explain this than you do when you just do email or a meeting or
Peter:
A power PowerPoint? God forbid,
John:
Writing is just a super power for forcing clarity of thought and clarity of communication. Remember communication, isn't there for the person communicating it's there for the receiver of the communication, right? And so, um, that helps you think it through and make sure that others actually understand the situation. Your recommendation is they're going to be able to give you better feedback. It helps make a better decision. So that's why clarity both for yourself, as well as the people you're collaborating with helps make better decisions.
Peter:
I love, I love. And the fake press release of course, is one of those sort of storied Amazon things where it forces you to sit down and describe what the future looks like. What will I, what will I Crow to the marketplace about? Because I we've gotten this right. Uh, and I think that's, uh, you know, as somebody who has written a few press releases in his life, uh, I know how challenging that can be. Cause all of a sudden, I go, oh my God, what, what really is this about? And, uh, yeah,
John:
The Fu the future press release is one of those great tools. It's an easy one to implement, versus some of the others take a bit more commitment and habit change, but a future press release announces not a point of launch, but after a new project, a new product, a new geography has been successful and you get super clear on why did my customers love this? Like what, what differentiates you to win in the market? You, you truly have to be differentiated. How, what is that differentiation from a customer point of view? And then you talk about what did I have to do to achieve it, right? And so it's pre mission. You're talking about the customer you're working backwards from the customer. Why were we successful? You start communicating better about what the mission is with others and this, the work that we have to do
Peter:
Next principle, it's number seven, insist on the highest standards. And, and I, I called this one out, because you said you you've had conversations in, in preparing the new edition with current and former Amazon employees. And you felt this one is the hardest one to consistently apply and to be used properly. Tell us what you discovered in your, in your refresh of it.
John:
Well, I think like any set of rules or guidelines, they have to be used with wisdom. You can twist any good idea typically into a bad outcome or for evil, evil ish purposes. And I think this principle I've seen, and you can see how it would be. You used as the easiest one from, uh, from somebody who doesn't actually understand when and how to apply these principles. You could always hold somebody to like, you know, the standard wasn't good enough. But if the job is moving fast, trialing something, then that principle of high standards might be misapplied. So it's just to me a good example of like everything you have to use it with wisdom, with good intent, really underlying principle of like, let's do a better job is the goal of this and help make people successful. And this is just one where, where I've seen, and I have, you know, testimony like, yeah, somebody kind of use this to, to really, um, in an inappropriate manner to hold somebody accountable for something, when that actually wasn't the right mission. Like, like no speed and testing was more important than having this high standard of maybe every little pixel or aspect of it being right. And that's where these leadership principles, the thing I really like about the Amazon leadership principles is the balance. It's not over-indexed on any one thing, but you do have to understand the whole playbook and apply them appropriately.
Peter:
Yeah. Um, I was thinking that probably part of that is making sure that the, the priority standard is clearly communicated. It goes back to clarity, like if speed is the speed, getting it to market and getting quick results is the highest priority, then your standard needs to be prioritized around that. And then other things fall beneath. If, if it's don't upset a customer, then you probably don't try it. Right. You know what I mean?
John:
Like that's right. That's right. Exactly.
Peter:
Yeah. So another one I was, I was very interested in was, um, principle number 10, frugality, you know, God, that's easier to pull off when you're a sort of a startup, uh, you know, I famously like they're, they're, um, the standards around sort of travel and things like that were remarkably cheap and didn't seem to prioritize, um, the wellbeing or comfort necessarily of their employees as they traveled the world for them. And things like that. I was just wondering sort of how it's evolved at the scale that they're at now. Yeah. And
John:
This was one of the interesting one to go talk to current and long time Amazon employees and ask like, you know, it's not the same frugal, um, company when I was there. What does frugality still mean? And it really has evolved into how do we do more with less, right? Like that's really what frugality is, is a constraint to help force innovation and help keep an eye on scale. So if your cost per unit, whatever your unit is in scaling, that really means that when we scale our cost per unit has to be getting better. That's an aspect of frugality versus like, you know, we can just throw more people at it. We don't have to worry about, you know, improving our unit costs on something. So for gallery today is really much more oriented towards constraints and doing more with less versus, you know, saving money on, you know, travel or team dinners or anything like that. I think you find a much more, um, modern, uh, perspective at Amazon relative to that type of expense than when I was there. When we were, when it was completely appropriate, right. We were fighting for our fiscal survival at that point. So pennies mattered pennies don't matter anymore on Amazon, unless those pennies are on millions of orders, then add up. So that's why you have to think about scaling when it comes to for galleries.
Peter:
The anecdote I love from that section was, you know, one of the early examples of frugality was that somebody took a door and put some legs on it, and that was their desk. Like, and that was celebrated. And, um, somebody, I think maybe in HR or I, didn't sorry, I love HR. I don't mean to bring somebody, uh, whether it's in an operations or something decided when a new office opened, uh, elsewhere around the globe actually had door tables built and shipped over. And Jeff Bezos said, you spent money on an effing symbol
John:
On a symbol that is frugality, right? Like there, it's just, it's just over. But, you know, that's, that's a great example where you have to use these things smartly, right? Like you can like, Hey, I'm, I'm, you know, using the symbol of the door test, but you're doing exactly the, of what the spirit of the principal is. And that's, that's where, you know, you gotta just be a heads up a participant in the game.
Peter:
Yeah. W for me, it was impossible to read this, uh, new edition without thinking of Amazon today. Uh, and one it's incredibly difficult to maintain a cultural north star as you grow, let alone, as you grow at this scale, like let's not kid each other, you know, like this is unprecedented growth across multiple lines of business. I mean, it's really, I'm sure there are, uh, you know, some business professor would tell me what the other case studies are that, but this seems, uh, kind of unprecedented to me. And, and the fact that these leadership principles at some level have held the test of time, I think is, is very impressive one. Then does that make sense to you?
John:
I think it's, I won't say wholly responsible, but plays a big role in Amazon being at the size. It is, and still having the attributes of entrepreneur ism ownership, action, accountability across the organization. And, and it really has helped them to not become as, as much of a bureaucracy that most companies would have become well before Amazon's lifecycle here.
Peter:
Yeah, I agree. And then the, the second reflection I had, uh, of course, uh, being someone who reads the news, uh, is that, you know, how Amazon is showing up too. It's, you know, if we think of this now as a potentially a stakeholder economy, Amazon's not really showing up for a lot of their stakeholders and particularly their employees. And, and, uh, I I've read a New York times that just recently had an incredibly detailed article on the experiences of being a worker in JFK, which is their only fulfillment center for New York city. And, and, um, the, uh, one of the quotes from the stories, what, what happened inside shows, how Jeff Bezos created the workplace of the future and pulled off the impossible during the pandemic, but also reveals what's standing in the way of his promise to do better by his employees. And my sense was that looking at the proposed a draft of a new leadership principle that you offer authored is that it came in part from, from that, you know, that kind of situation. Can you talk about your, you know, what led to your sort of draft principle number
John:
Six? So, um, I came to it from no judgment, no critical nature, but I played, uh, uh, uh, kind of, uh, an experiment and experiment was if, if Andy Jassy, the new CEO called me into his office and said, John, like, what would be your advice for us relative to this largely big tech narrative that is going on out there? What would your suggestion be? And my suggestion would be to start with a new leadership principle and that leadership principle would recognize these other shareholders that you, you comment about bigger than just employees, but certainly employees at the center of it. And the notion is both internally sending a message to employees and leaders that we have to always do the right thing for our shareholders. And externally that, that we've just raised the bar relative to how we are going to operate in our communities for employees.
John:
This is what we aspire to, I think, would set the stage for the next 25 years. What's important to understand about anybody about any company is kind of where do they come from? Right? Amazon comes from this entrepreneurial frugal scrappy, doubted underdog fighter mentality. And that's been great for the past 25 years. I don't, I think they have to let go of some of that for the next 25 years and their leadership principles, as, as we've talked about, are so critical to that culture. I go, if we're going to have real change happened here, it has to start with thinking about the role, the leadership principles play. And so I donate a candidate leadership principle that I think would help them both internally, as well as with the external narrative reset the stage just already, I would say more than hinted at this. I didn't have the benefit when I was writing this of his last shareholder letter.
John:
I wish I had, cause in that last shareholder letter, he addressed his head on the fact that Amazon needs a new vision for the employee experience and for employee safety. And he said, Amazon needs to be the world's safest employer period. And the interesting buried headline in this, and this is what I hope Amazon really understands as he goes, when we lead others follow. And that's the exact point is that Amazon being good has never been an Amazon's vernacular, leading has been in Amazon's vernacular. And so they need to take a position of leadership when it comes to our communities, when it comes to employees, when it comes to creating an environment where innovators can win, that's the environment that I think Amazon really needs to think about for the next 25 years. We need them to think about that for the next 25
Peter:
Years. And, and frankly, it's, it's an existential crisis for them and that's fine. I'm probably overstating it. But if you think about, you know, um, we were talking about this sort of off air beforehand, and you were saying, Amazon's always auto trying to automate what is manual, right. And that's, that's, um, good for the company. It's good for the bottom line. It's good for the people that are doing tasks that they could be reallocated to that have even more value. Right. Um, so, uh, I, you know, there's, so there's, Amazon can be just as innovative in your sort of new golden rule principle as they have been on their others. Right? And
John:
This principal has to coexist with all the other leadership principles. It's not a, a super principal or anything else. So you got to apply it at the right moment. You got to make choices between them, but all of these principles combined force you to do what you're hinting at, which is you have to innovate, right? Like, okay, I have to come up with a better solution so that I meet all of these, these objectives that my principals lay out.
Peter:
I mean, right now, I think if I remember the times article correctly, I might get this wrong. It was something like 150% turnover in their, in their, um, warehouse staff. And you can't hire people that were going to run out, literally run out of people who could possibly apply to Amazon. It would have to be everybody.
John:
And, you know, there's always two sides to all of these stories, which I always appreciate is a more robust data set that helps benchmark companies across each other. Right. Like, so I don't know. Well, what's the turnover at any other large fulfillment organization, uh, in this economy? My guess is, I don't know if 150% is that far out of the norm or not. Now there is the, the law of big numbers and you're, that's kind of what you're pointing at is like, even if a hundred percent, 50% is, is industry norm just given the size of Amazon and his employee base, that is a big numbers challenge right there. Um, and you know, they're going to figure it out through a number of different ways, but I truly think it starts with challenging themselves to a different standard. And, you know, just like they did, you know, a couple of years ago, one of the senators was getting after him about employee wages and they did a great move, which was, they just said, we agree, we're raising all wages next week to $15 an hour worldwide reset the bar relative to that job category across the retail norm.
John:
Guess what happened to the steam behind that argument dissipate? And that's, that's, that's why I think, you know, you need a principle like this to be both real internally, but it also would help dissipate some of the steam behind the arguments then, and then there's the whole arguments around, you know, anti-competitive behavior or, you know, things like that. It's like, guess what? That is not Amazon's role to be both the player and the referee, that's our policymakers, that's our enforcement agencies. They need to update policies, update laws, enforced the laws that we have, Amazon is doing exactly what they should be doing, which is optimizing within the rules.
Peter:
And so when you had dinner with Jeff last week and talk about, oh man, I bet he is one of those really long dining room tables where you'd be at one end and he'd be at the other and you shout back and forth to each other. No, it would be fascinating indeed. Um, so before we close, I, I've got to sort of challenge you with a question. Like, what was the, what is the leadership principle that you struggled with during your time there the most?
John:
Yeah, well, there were, there were, there were a couple, I I'd say, um, I learned so much every, uh, I always say like I just paid attention in class, right. I saw this story and I learned so much and I had the opportunity after Amazon to apply it in so many circumstances, all the little things in my work, but the principle that I think I really suffered from them and I still have to challenge myself today is really the think big principle. And, you know, it starts off, it says thinking small is a self-fulfilling prophecy leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers. I don't think that is in my natural DNA to think big and to, um, not follow the established path and for brands and, and brand manufacturers. I think that might be a challenge also like the playbook of being a brand.
John:
I think people feel like is, Hey, it's pretty well written. Like, you know, it's a to Z and this is how we do it. And I would, I would think bigger about who your customer is, the role that you can play within that entire customer experience. A powerful exercise I do is what's a bad day look like for your customer. I think it's natural to think about like the normal day, the happy day, when things are going well, what happens when things go wrong for your customer? And what can you learn from that? How can you help them out when things go wrong? That's when you, what, when that empathetic perspective can really take you into new areas, but just be willing to go bigger and broader than just the company you are today.
Peter:
Yeah. I love that. I, you know, I, and again, I go back to that point that I brought up earlier, which is needing to think you have to map journeys for both your customers and your consumers, uh, or, and, uh, and I think that that's, that's a challenge that I think brands are going to particularly obviously B to C brands need to tackle, but even in B2B, you know, th there's the distributor mindset, uh, and, uh, versus the actual end buyer of your products and they are, they are different journeys. And, uh, and, and particularly in the digital era. So there's certainly a lot of, of, uh, journey mapping and, and vision to go. Did you, did you discover any, any, um, different approaches that you could take that started to open your mind up to that mindset?
John:
One little use case that, that I always like to refer to is the, um, the water jug, um, the Brita water jug a few years ago, they launched a capability where the Brita filter would automatically reorder itself, uh, when the filter was used and the spokesperson talked about that running out is always a bad customer experience. And, and that's where looking broader than just the transaction, like running out is always a bad experience. Like that's, that's never a good experience. How do we help our customers to have never have that experience that shifts you into a little different problem solving paradigm than just, how do we fulfill an order?
Peter:
How do we do a subscription service or something like that? That
John:
Might be the, that might be the answer, but it starts with staying in the problem space a little deeper and getting deeper into like, oh, you mean every once in a while you run out, well, what happens when you were out? Why did you run out? You have to explore that, that problem space deeper. And then you'll come to potential opportunities, like a notification system, like a subscription system, um, other solutions to meet that. And that's the, the willingness to explore within that customer experience
Peter:
Or when it's, when it's running out of effectiveness, turn it brown.
New Speaker:
So, cause I've, I've
Peter:
Left filters in for six months, eight months. And, uh, I think I need a hint.
John:
Yes. Some flag something, but yeah, most companies are pretty stuck in their paradigm of a product that transaction in order. And, you know, we don't, we've grown numb to, you know, the, the friction or the, the points upstream and downstream from getting that order. Correct.
Peter:
Which I can imagine, you know, you've spent now years taking these principles and, uh, and working with companies to find what theirs are. Uh, and, and I, I imagine those journeys are really fascinating.
John:
Yeah. I've gotten to work. You know, the gates foundation was a long-term client of mine. I worked with them for, you know, nine years. I, I work in healthcare, I've worked in media, I've worked in tech. Um, and that's what I have found powerful. And what I learned from is, you know, I'm never the industry expert, I'm never the business expert, but I inject different ideas, different playbooks, different principles to help get a team to not just a better solution, but an understanding of like, oh, how do we incorporate that type of thinking or that type of approach in a broader fashion across our business, right? Like kind of reshaping culture. And I always find that to be, um, you know, not only effective, but I learned so much from it.
Peter:
Well, John, you know, especially cause in this, in this edition, you've added kind of those templates suggestions in the babble. Uh, where's the best place to send somebody to get this book? Well,
John:
You know, the number one bookstore in the world, amazon.com. So it's available,
New Speaker:
It's available
John:
In Kindle paperback in early August. It'll be available in audible. Uh, I have a sub-sect newsletters just search John Rossman. I'll send you a little weekly, uh, note and that's where you can reach me.
Peter:
That's awesome. John, thank you for coming back. Uh, the second time to the podcast, we have very few people that we've repeated and I'm delighted that, that you agreed to do this. Uh, and, um, and thanks for your, for your work on this book.
John:
Well, thanks for inviting me. It's always a pleasure. You do your, you do your homework and you've got a great audience. So thanks for, thanks for the opportunity. Thanks.
Peter:
Thanks again to John Rossman for bringing his leadership expertise to the DSI. Please share this with your colleagues who share your passion for the transformation and innovation of your organizations. Thanks for being part of our community.
