The 20th Amazon shareholders letter written by Jeff Bezos is an annual business must-read. Also worth your time is a good article on Bezos’ letter by Suneel Gupta, Entrepreneur-in-Residence at Kleiner Perkins Caufield & Byers.
One of the themes that Bezos has continued to hit on year after year is the difference between a Day 1 and a Day 2 operating philosophy. This is really the distinction between a form of humility and a form of egocentrism. Day 2 is what happens as the freshness and clarity and passion begins to wear off. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
According to Bezos, maintaining Day 1 focus on customer obsession requires following five principles:
- Experiment patiently Continuously look for new ways to delight the customer.
- Accept failure Experiments must allow the possibility of failure or else they’re not real experiments.
- Plant seeds To stay relevant and capable of delighting customers, embrace new initiatives as if every day is Day 1.
- Protect saplings Don’t lose sight of those new initiatives in favor of the bigger part of the business.
- Double down when you see customer delight Because this should always be our focus.
Bezos cautions us that Day 2 happens in extreme slow motion, like grass growing or paint drying, and it can occur over decades. Bezos’ biggest fear is that Amazon will, in its hugeness, descend into an egocentric and excruciating irrelevance to its customers.
Here are his four antidotes to Day 2 thinking:
- Obsess on customers (Last year I wrote about this in “Bezos’ Winning Formula: Failure and Obsession”.)
- Embrace external trends early (More on this in a few weeks.)
- Use high velocity decision making (More on this next week.)
- Resist proxies (I’ll go into more detail on this below.)
So what does he mean by “proxies”? Basically anything that masquerades as customer delight. Companies often focus on customer surveys or ratings or rankings as a measurement of customer satisfaction. For example, DMVs are not notorious for great customer delight, and the Douglas County DMV is no exception. Recently, they won an award for being one of the best DMVs in the United States. Certainly that’s great news. I’m very glad that the Douglas County DMV won this award, but it is not the same thing as customer delight. In the movie Two Jakes, the sequel to Chinatown, Jack Nicholson’s character says, “In this town, I’m the leper with the most fingers.”
Winning an award for being the best DMV simply means you’re doing better than all the other DMVs; it doesn’t mean people are delighted with you. This is what a proxy is and this is what we have to be very careful of. There’s a lot of industry data and there are a lot of industry awards—winning may lull us into the misapprehension that we’re delighting customers when all we’re doing is winning awards.
This is especially true in advertising. When I was in that business, we won lots of creative awards. Very few of them had to do with delighting our customer, which in this case was the advertiser. Winning awards is a nice ego boost, but it isn’t usually a goal on Day 1. So it should probably stay off the priority list.
Not everybody loves Jeff Bezos, especially his competitors, but there’s no denying his mastery of and focus on very specific business principles. Next week, I’m going to dive deep into his decision-making philosophy, which is very much in line with what we teach at Doubledare Academy. If you can’t wait till then, send me an email at Scott@doubledareyou.us and I’ll get you a sneak preview.