This July, Jeff Bezos stepped down as CEO of Amazon, a company he founded 24 years ago, and passed the baton to CEO of AWS Andy Jassy. Aside from the occasional interview about Amazon and AWS, we still haven’t seen much of Jassy. Still, I think the AWS re:Invent 2020 keynote was a good introduction into his mindset and thinking — and right off the bat, you can tell he embodies what Amazon is about.
Here are some highlights from his keynote:
It’s hard for any company to sustain for a long period of time
“If you look at the Fortune 500 just 50 years ago in 1970 you can see that only 83 companies or 17% of them are still in the Fortune 500. If you look at just 20 years ago the 2000 Fortune 500, only half of them are still in that list. It is really hard to build a business that lasts successfully for many years and to do it you’re going to have to reinvent yourself and often you are going to have to reinvent yourself multiple times over. And so, in the last nine months I’ve thought a lot about reinvention and what it takes to do reinvention well. And typically what you see is the desperate kind of reinvention. You see companies that are on the verge of falling apart or going bankrupt deciding they have to reinvent themselves. And when you wait to that point it’s a crapshoot whether you’re going to be successful or not. It’s a little bit like borrowing money. Everyone will tell you that you don’t want to have to be borrowing money when the business is in bad shape because you may not get the rates you want or you may not get money at all. You want to be reinventing when you’re healthy. You want to be reinventing all the time. And so we thought about what are the keys to reinvention and some of it is building the right reinvention culture and some of it is knowing what technology is available to you and jumping on it to make that reinvention happen. So I thought I would share with you today what we see as some of the keys to building that reinvention culture and then some of the things that we see being reinvented as we speak.”
So what does it take to reinvent?
“And I am going to list eight keys that I think are important if you want to build the right reinvention culture. And the first is that you have to have the leadership will to invent and reinvent, and those terms sometimes they are a little different, they are also similar. If you think about it, people often say invention is inventing a new product or service from whole cloth and reinvention is reimagining an existing concept. But if you’re going to reinvent and reimagine there’s a load of invention in there. Just look at what Airbnb has done in the hospitality space or what Peloton has done in the exercise bicycle space or look at what Stripe has done in the payment space. These are huge amounts of invention that has gone into reimagining these spaces. And so if you’re going to be a leader that’s going to reinvent you have got to be maniacal and relentless and tenacious about getting to the truth. You have to know what competitors are doing in your space. You have to know what your customers think about your product and where you sit relatively speaking. You have to know what’s working and what’s not working. And you will always have a lot of people inside the company who will try and obfuscate that data from you. Sometimes they think they are doing you a favor and sometimes it’s for self-preservation reasons but it’s hard to get at that data and you have to be relentless about it. You have to challenge people. Often people who know a lot more about a subject than you do but you have got to get to the truth. And then when you realize that there’s something you have to reinvent and change you have to have the courage to pick the company up and force them to change and move. And part of that is sometimes acknowledging that you can’t fight gravity.”
You can’t fight gravity
“If you step back and have conviction that something is going to change because it’s a better experience for customers, it is going to change. Whether you want it to or not, whether it’s convenient for you or not, it is going to change and there are a lot of examples of this. I think if you look at what Reed Hastings and Netflix did several years ago where they cannibalized their own DVD rental business because they saw where it was headed with streaming, I think that turned out to be a pretty good decision for them. I think if you look at Amazon in the late 90s we had this owned inventory retail business which meant we bought all this product from publishers and from distributors. We stored them in our warehouses and then we shipped them to customers. And what we started seeing was these companies like eBay and Half.com that were actually offering third-party sellers’ products and they were shipping the products to customers. And we had this huge animated debate inside the company on whether or not we should support that. And the reasons that we were concerned about it were we just didn’t believe anybody was going to take care of customers the same way that we did. And then also the whole culture was set up to be this owned inventory business. People worried, well if we worked with third-party sellers, how would our publishers or distributors feel? So it was a very hard decision but ultimately, we decided to build a marketplace and offer third-party sellers. And we did it because we know that you cannot fight gravity. It was better for customers. It provided them better selection and it gave them more assortment on price. Now that also turned out to be a good decision for us because we sell more than a half of our retail products through third-party sellers. But you have got to realize that if something’s going to happen it is going to happen regardless of whether you want it to or not. You’re much better off cannibalizing yourself than having someone do it to you and chasing it.”
Talent that’s hungry to reinvent
“The third thing you have got to make sure of is that you have talent that’s hungry to invent. Now this seems fairly obvious. Everybody says I have talent that wants to invent. But it’s not always true. A lot of people who have been at the company for a long time are very comfortable doing things the way they have been doing them for a long time. Have you ever noticed it’s often when you have new blood in the company that they are leading the transformation? And that’s not because existing people can’t lead reinvention. It's just that you’re asking them to reinvent something they built. It’s hard to rip up something you spent a lot of time and energy and dedication doing. And it means you have got to learn new skills and it means that you have got to actually be curious about getting trained on other technologies.”
Solve problems for customers
“Now, you want builders and talent that’s hungry to invent but you want to make sure you guard against the opposite which is that you have people who actually solve problems. That you want people to solve problems for customers as opposed to solving problems because they like the technology and they think it’s cool. And you see this a fair bit. You know if you look in the enterprise technology space there are some providers who are competitor focused. They look at what their competitors are doing and they try to fast follow and one up them. We have a competitor like that across the lake from us here in Washington. Then you have a number of other providers who are product focused and they say look, it’s great that you have an idea on a product Mr and Mrs Customer but leave that to the experts. And that’s the group that you have got to be careful about because they often are building things that they think are cool as opposed to what really solves the problems for customers. At AWS, we’re customer focused. What we build is driven by what you tell us matters to you. And even if you can’t articulate a feature we’ll try to read between the lines, understand what you’re trying to build, and invent on your behalf.”
“The fifth thing is speed. Speed disproportionately matters at every stage of your business and in every sized company. And I think that a number of leaders at enterprises have resigned themselves that they have to move slowly. It’s just the nature of how big they are. It’s the nature of their culture. They have engineering teams that tell them “Hey look, this is too risky. This is too big a lift.” Sometimes you control those teams into trying something and the first sign of a problem they throw up their arms and say “See.” Speed is not preordained. Speed is a choice. You can make this choice and you’ve got to set up a culture that has urgency and that actually wants to experiment because you can’t flip a switch and suddenly get speed. It doesn’t work like that. You’ve got to build muscle to get speed. You’ve got to be doing it all the time. And there is going to be time… Frankly I think that time is happening right now. It happens a lot more frequently than most companies realize. But there is going to be seminal moments where if you don’t have the ability to have speed you will not be able to reinvent when you need to.”
“Now one of the enemies of speed is complexity and you have to make sure that you don’t over complexify what you’re doing. When companies decide to make transformations and big shifts a huge plethora of companies descend on them and providers descend on them and tell them all the ways that you have got to use their products: “You need to use us for this even if you’re using these people for these three things, use for these two.” This company says: “Use us for this.” They don’t deal with the complexity that you have to deal with in managing all those different technologies and capabilities. The reality is for companies that are making big transformations and shifts, it is much easier to be successful if you predominantly choose a partner and you learn how to do it and you get momentum and you get success and you get real results for the company. Then later on if you want to layer on complexity and more providers, you should go for it. But it’s not a great way to start to a reinvention to have too much complexity upfront.”
What it means for Amazon
It’s still too early to know what kind of CEO Andy Jassy is going to be. We don’t know how he views M&A vs organic growth, whether he’s actually going to keep the Amazon playbook of reinvesting all of its profits for the future. It also remains to be seen whether he will pull a Tim Cook and focus somewhat on the stock (dividends, buybacks, splits, etc).
What we do know is that Jeff Bezos was notoriously absent on earnings calls, a tradition that Andy Jassy upheld for his first quarterly earnings as CEO. Because Andy Jassy was CEO of AWS before becoming CEO of Amazon, it will be interesting to see if Amazon becomes a cloud-first business, instead of retail-first, and what that even means if it is the case. Either way, judging by his re:Invent 2020 keynote and his top-level thoughts on reinvention and speed, it’s safe to say Andy Jassy is an Amazonian through and through. It would be shocking for me to see any culture drift under his management.