Working Backwards by Colin Bryar and Bill Carr

Date finished 24 Apr 2021

Always interesting to get insider insight into the big successful companies. Colin and Bill were at Amazon practically from the start and had front row seats. I’d heard about a bunch of Amazon’s practices so it’s interesting to read the detail and what problems they solved for Amazon. Not a ground-breaking book on ways of working, but with enough insights and background to make it worth recommending.

Notes

Amazons leadership principles

• Customer Obsession: Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.
• Ownership: Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job.”
• Invent and Simplify: Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time.
• Are Right, A Lot: Leaders are right a lot. They have strong business judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.
• Hire and Develop the Best: Leaders raise the performance bar with every hire and promotion. They recognise exceptional talent, and willingly move them throughout the organisation. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.
• Insist on the Highest Standards: Leaders have relentlessly high standards—many people may think these standards are unreasonably high. Leaders are continually raising the bar and driving their teams to deliver high-quality products, services, and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.
• Think Big: 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.
• Bias for Action: Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.
• Frugality: Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention. There are no extra points for growing headcount, budget size, or fixed expense.
• Learn and Be Curious: Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.
• Earn Trust: Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odour smells of perfume. They benchmark themselves and their teams against the best.
• Dive Deep: Leaders operate at all levels, stay connected to the details, audit frequently, and are sceptical when metrics and anecdote differ. No task is beneath them.
• Have Backbone; Disagree and Commit: Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.
• Deliver Results: Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.
• The magic lives in the moments when the principles are put into practice. Adding, subtracting, and modifying your principles in response to change or deeper understanding is a sign that you’re probably doing things right.
• They need to be embedded into the companies core processes, hiring, performance management, planning, operating cadence, and career development.

Mechanisms

• Reinforce the principles and translate them into action.

Annual planning

• 4 to 8 weeks of intensive work.
• Each group develops a granular operating plan to achieve the overarching goals.
• Assessment of past performance, including goals achieved, goals missed, and lessons learned.
• Key initiatives for the following year.
• A detailed income statement.
• Requests (and justifications) for resources, which may include things like new hires, marketing spend, equipment, and other fixed assets.

S-Team goals (SVPs and Jeff DRs)

• The S-Team selects what it considers the key goals, from the teams initiatives and goals- S-Team goals. These denote priority. Mostly input metrics.
• They make them SMART.
• Sufficiently aggressive that it’s only expected to attain 3/4 of them during the year.
• Each undergoes quarterly review. Leaders go through the detail!

Compensation

• Highly equity based in order to drive long term thinking and avoid short term goals and departmental achievements at the expense of the company.

Hiring

• Watch for urgency bias, group think, confirmation bias, personal bias.
• According to Sequoia capital, the average start-up in Silicon Valley spends 990 hours to hire 12 software engineers.
• Brent Gleeson, a leadership coach and Navy Seal combat veteran, writes, “organisational culture comes about in one of two ways. It’s either decisively defined, nurtured and protected from the inception of the organisation: or – more typically – it comes about haphazardly as a collective sum of the beliefs, experiences and behaviours of those on the team. Either way, you will have a culture. For better or worse.“

The bar raiser

• Job description.
• Resume review.
• Phone screen.
• In-house interview.
• Written feedback.
• Debrief/hiring meeting.
• Reference check.
• Offer through onboarding.
• The bar raiser is a role. Someone specifically trained to lift the standard, train other interviewers and with veto rights.

Single-threaded leadership

• System designed to support rapid innovation. A single person and encumbered by competing responsibilities, owns a single major initiative and heads up a separable, largely autonomous team to deliver its goals.
• The book describes a dependency as something one team needs but can’t supply for itself.
• New Project Initiatives NPI was a review, approval and ranking process for Amazons Global projects.
• “The best way to fail at inventing something is by making it somebody’s part time job.“ Amazons SVP of devices, Dave Limp.
• Amazons approach to morale was to attract world-class talent and create an environment in which they had maximum latitude to invent and build things to delight customers – and you can’t do that if every quarter some faceless process like MPI smites your best ideas.

Two pizza teams

• Be small. No more than 10 people. They later came to the realisation that the major predictor of team success wasn’t whether it was small but it was whether it had a leader that had the appropriate skills authority and experience to staff and manager team whose sole focus was to get the job done. This is what they coined into single threaded leaders.
• Be autonomous no need to coordinate with other teams to get work done; the switch to micro services removed the shackles that had prevented the Amazon software teams for moving fast, and enabled them to transition to smaller autonomous teams.
• Be evaluated by well defined “fitness function“.
• Be monitored in real time.  A team’s real-time score on its fitness function would be displayed on the dashboard next to all other two pizza teams scores. This was later scrapped, it just didn’t work; instead the underlying input metrics were used.
• Be the business owner. Own and be responsible for all aspects of its area focus including design, technology, and business results.
• Be led by a multi disciplined top-flight leader. They couldn’t find enough top-flight leaders so went with a matrix organisation model where each team member has a solid line reporting relationship to functional manager and a dotted line reporting relationship to there to pizza manager.
• Be self funding.
• Be approved in advance by the S team.
• Each needs a purpose, boundaries of ownership, and metrics. Had a charter.
• Two pizza teams works best in product development. It did not work as well in retail, legal, HR, and other areas because those areas did not suffer from the tangled dependencies that had hampered Amazon product development.
• Separable, single threaded teams have fewer organisational dependencies than conventional teams. As a former Amazon VP aptly observed, a good rule of thumb to see if a team has sufficient autonomy is deployment-can the team build and rollout the changes without coupling, coordination, and approvals from other teams? If the answer is no, then one solution is to carve out a small piece of functionality that can be autonomous and repeat.

Communicating

• The six pager
  • Used to describe, review or propose just about any type of idea, process or business.
  • Distributed at the start of the meeting and read for the first 20 minutes. Once everyone is ready, conversation begins.
  • Example for a quarterly report: Intro, tenets, accomplishments, misses, proposals for next period, headcount, P&L, FAQ, appendices.
• The PR/FAQ
  • Linked to the working backwards process.
  • Resist the temptation to start by saying orally “let me walk you through the document”. It’s a waste of time.
  • Go around the room for feedback. Someone needs to take notes of the insuring discussion, as those comments will be part the output of the narrative process. Jeff Bezos consistently provides unique insights to narratives. He assumes each sentence he reads is wrong until he can prove otherwise. He is challenging the content of the sentence, not the motive of the writer.
  • A key part of working backwards. The press release portion is a few paragraphs always less than one page. The frequently asked questions should be five pages or less. There are no wards fixed pages or more words. The goal isn’t to explain all the excellent work you’ve done but rather to share the distilled thinking that has come from the work.
  • PR
    • Heading
    • Subheading describing the customer of the product and what they will gain from it.
    • Summary paragraph
    • Problem paragraph
    • Solution paragraph
    • Quotes and getting started
• Working backwards
  • Start with the desired customer experience.

Metrics

• Manage your inputs, not your outputs
  • leading and lagging indicators.
• The flywheel: input metrics lead to output metrics and back again.
  • Better customer experience leads to more traffic.
  • More traffic leads to more sellers seeking those buyers.
  • More sellers lead to wider selection.
  • Wider selection enhances customer experience, completing the circle.
  • The cycle drives growth, which intern lowest cost structure.
  • Lower costs lead to low prices, improving customer experience and the flywheel spins faster.
• Identify the correct, controllable input metrics.
• Example given of Amazon identifying new detail pages as input metrics, but leads to the wrong output- increased inventory costs rather than additional sales.

Failures

• Fire phone.
• Amazon Unbox- evolved into Prime Video.
• Amazon Auctions and zShops developed into Amazon Marketplace.
• Amazon are patient. They think long term. If they believe in the customer need and they will stick at it for 5-7 years whilst most companies give up after only a couple.
• The Working Backwards process demands that Amazon exercise new muscles, never mind how uncomfortable and awkward feeling those first steps might be.
• “Over a long march to building Amazon Studios to business, we proved a powerful lesson: it takes exceptionally patient and I’m wavering leadership to persevere through the prolonged process of building a new business and navigating through transformative times in an established industry within entrenched  interests.”
• In digital Amazon had to venture out to different areas of the value chain in order to compete as opposed to its focus in physical retail. The three areas mapped out are content creation, aggregation, content consumption. Kindle for books. Fire devices and Amazon Studios for movies.

Actions to take:

• Ban PowerPoint, use 6 pagers with PR/FAQs.
• Establish the bar-raiser hiring process.
• Focus on controllable input metrics.
• Move to an organisational structure that accommodates autonomous teams with single threaded leaders.
• Revise the compensation structure for leaders.
• Articulate the core elements of the company culture.
• Define a set of leadership principles.
• Depict your flywheel.