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How does Amazon create a culture of innovation?

July 6, 2017 By: Jon E Worren

Earlier this year, Fast Company put Amazon on the top of its “Most Innovative Companies” list. The company, representing the “A” in the acronym tech investors love — “FANG” (Facebook, Amazon, Netflix and Google) — has seen a 300% increase in its stock price over the last five years.

Having started as an online bookstore more than 20 years ago, Amazon has been reshaping an ever-increasing number of retail sectors. But its innovative nature has seen it go outside retail to create utilities like Amazon Web Services (which is powered by its own solar farms), media products and consumer technologies.

In a recent talk for corporate innovators at MaRS, Shawn Gandhi, head of solutions architecture at Amazon Web Services, allowed a brief glimpse into the culture that powers Amazon in its effort to continuously disrupt and reinvent sectors of their choice. From that talk, I identified at least three take-aways other innovators can learn from Amazon — independent of them being in a startup or a large company:

1. Start with the customer

Amazon’s mission is “to be the Earth’s most customer-centric company.” This mission pervades everything Amazon does.

For every new idea, they start with the customer and works backwards: they write the press release, the FAQs, define the user interaction and write the manual BEFORE writing a single line of code. The benefit of this relentless customer orientation is that it forces the whole organization to think through how every new idea will play out in the hands of the customer and the market place.

Beyond that, the customer is ultimately the one who clicks on the “Buy” button — and if you haven’t linked what you are creating to the moment the customer decides to push that button, you are already at risk.

For both intrapreneurs and entrepreneurs, the interesting thing is that Amazon’s choice of staying close to the customer and how they are operationalizing it, that is a choice that is available to everyone.

2. Make bold bets

Some of these bets will fail. Amazon knows and accepts that fact. In his 2016 annual letters to Amazon shareholders, Jeff Bezos claimed that Amazon was probably the best company to embrace failure.

The way Amazon talks about failure makes it clear just how embedded this acceptance is. Instead of trying to eliminate failures, they work hard to lower the cost of each failure so that they can afford an increase in the overall number of failed experiments — reflecting their assuredness that the right types of failure eventually spawn successful ideas.

For many of the corporate innovators in attendance, acceptance of failure is probably the most challenging element — they work in cultures built around stability in execution and outcomes. While failure may sound like a negative word — and therefore difficult for many traditional organizations to deal with — it simply describes the process of learning from and adapting to complex changes in the world around us. Going forward, only those who shift how they deal with failures at an organizational level (for instance, by becoming an ambidextrous organization) will actually be the only ones that have a chance at sustaining their position.

3. Two-pizza teams

It may sound cheesy (pun intended), but Amazon’s insistence on driving projects forward in teams that two pizzas will feed is a key element of their agile culture. Each team has a lot of autonomy (Amazon is “stubborn on vision but flexible on details”) and each hire, whether builder or innovator, is expected to bring leadership skills. This ownership culture leaves space for experimentation and personal growth. This two-pizza approach is ultimately what gives Amazon its high rate of innovation.

Many corporate innovators — especially those that are driving digital initiatives — are trying to move in this direction: be more agile, provide space for experimentation, etc. Amazon shows the rest of us where the bar is: an organization with less bureaucracy and red tape, no micro-management and an emphasis on learning.

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