Posts Tagged: Amazon
Last week, I attended a fascinating talk about Customer Obsession given by Kim Rachmeler at version one’s portfolio company, Frontdesk. Kim spent 10 years at Amazon.com, where she served as VP of Worldwide Customer Service, CIO International, among several other critical roles.
While it’s no secret that Amazon.com is a customer-centric company, Kim shared a few interesting insights into the role of customer service at Amazon. In particular, I took away three key points:
1. Empower customer service to do whatever is best for the customer:
Customer service is a company’s direct link to the customer, yet in many organizations, customer service is positioned as a “reactive” department – just there to field queries and complaints. At Amazon.com, customer service has the ability to take a product out of catalogue if they see it doesn’t meet customer expectations. The merchandising manager then needs to fix the product before it can be returned to the catalogue.
2. Focus on a simple measure of customer service quality:
Amazon.com includes the question “Was this answer helpful?” at the end of every email that gets sent out. This question focuses the entire team on a single, one-dimensional metric. And the simplicity of the question means that more customers are likely to answer, providing feedback from more customers than trying to get responses from a lengthy survey.
3. Drive customer service into the whole company:
At AbeBooks, we had everybody work in customer service from time to time and Amazon.com has a similar policy (although given the sheer size of Amazon, they need to limit the program to just managers). Having everyone wear the customer service hat accomplishes two things: 1) Participants get reconnected to customers and actual customer needs and 2) Managers view customer service as an important source of knowledge about customers.
In a customer obsessed organization, customer service isn’t viewed as a cost center or simply measured on a P&L report. Customers are valuable assets, and each interaction is an opportunity to improve not only that relationship, but improve your product, processes, and company mission.
I recently spoke with a founder and CEO of a start-up that had just crossed the 200-employee milestone. Like so many others lucky enough to reach that level, he was complaining about how progress was coming to a halt as the organization grew and became more complex. I myself experienced this as COO at AbeBooks. It’s a cruel irony in business: the more people you add, the slower you get.
To help overcome this scale stagnation, I have three pieces of advice:
1. Overinvest in your management team
An ineffective employee is bad for the company, but the impact of an ineffective manager reaches across the organization, multiplied by the number of people he/she manages. For this reason, you need to hire the absolute best people you can get for managerial positions. Invest both money and time in developing their managerial skills, and have a strong employee feedback system in place to make sure you can identify and correct the “bad apples” right away.
2. Listen to Amazon: two-pizza teams and internal APIs
Few would argue that Amazon is one of the most entrepreneurial companies around and CEO Jeff Bezos has an uncanny ability to see patterns long before others. Two of the reasons Amazon is able to keep its momentum even as a 97,000-employee giant are pizza teams and APIs…
- “Two-pizza teams”: Bezos structured Amazon as a decentralized company where small groups can innovate on their own and be free from the inherent problems of groupthink. Company-wide, he introduced the principle of the two-pizza team. If a team can’t be fed by two pizzas, then the team is too large.
- Internal APIs: Every internal product should have an API, just as if it were developed for an external client. This decouples the speed of development between different product teams, as you can have a clean hand-off between the two.
The added bonus is that APIs lay the groundwork for the productization of internal tools. Bezos mandated that all IT assets be exposed as APIs. To quote a Forbes article, “That single, simple declaration created an IT (and cultural) architecture that catalyzed and stoked the stunning growth of Amazon Web Services, which is thought to be a billion-dollar business unit after only a few short years of growth.”
In short, small teams can run fast and innovate because of their size and the fact that they’re not reliant on the technology from other teams.
3. Focus your culture on speed over perfectionism
“Hackers try to build the best services over the long term by quickly releasing and learning from smaller iterations rather than trying to get everything right all at once…We have the words ‘Done is better than perfect’ painted on our walls to remind ourselves to always keep shipping.”
Prioritizing speed over perfection can be a very powerful way to keep momentum up as you scale, particularly as you add layer upon layer to the organizations and require multiple signatures to get things done.
One key message that can apply to any start-up is to never end a meeting without a decision (unless everyone determines that more data is needed to make that decision). If a meeting begins to succumb to groupthink and indecision, you need to ask why we can’t make a decision today instead of another day. After all, you just need to move forward.
- The 3 Books Amazon’s Jeff Bezos Asks His Senior Managers To Read (embargozone.com)
Looking to sell into an industry that’s currently undergoing disruption? At first glance, it sounds like a great idea. After all, companies getting disrupted are experiencing some very real challenges and pain points; they need to adapt quickly and could be looking for that silver bullet to save them.
During my time at AbeBooks, I was working in the book industry when it was undergoing a major disruption from Amazon. And many entrepreneurs thought at that time that they could offer products and services to offline bookstores to compete against Amazon’s growing power.
Likewise, over the past 5 years, I’ve seen dozens of start-ups trying to sell different tools and technologies to help newspaper companies keep up in an online world.
However, selling into a disrupted industry rarely works for three key reasons:
1. Whenever there’s a complete disruption of the business model, it means that the underlying rules for that vertical have dramatically changed. Just adding a website to now offer books for sale will not suddenly make an offline bookstore a serious competitor to Amazon. Likewise, a recommendation engine that tries to keep readers on a specific online media site does not change the fact that most users today now use aggregators like Twitter or Google News to find stories from a wide range of sources.
2. A company that’s being disrupted certainly feels the pain that their business model is under attack. Yet, at the same time, they most likely also have declining revenue and profits. In other words, they don’t always have the money to invest in a new solution, no matter how promising it may be.
3. Companies that get disrupted are often disrupted for a reason: they failed to be proactive enough to changing conditions. In many cases, this means they didn’t invest enough in technology or other solutions in the first place. It’s hard for slow adopters to change their culture, so you’ll need to be prepared for long sales cycles and indecision with these customers.
In short, while selling into a disrupted industry seems like a great opportunity, the reality is much harder to pull off.
Start-up success typically boils down to three elements: hard work, talent, and luck. Yet when we dissect the successes and failures of other start-ups, we tend to focus on the hard work and talent of the team, completely disregarding the important role that luck (or the lack thereof) may have played.
Luck definitely played a huge role in my career, both on a company-level as well as a personal level. In the early days of AbeBooks, our company got lucky twice. Luck struck first when Barnes & Noble approached us to become a reseller of the books of our sellers. This immediately doubled revenues of our sellers and attracted more inventory to our site. And then luck came again, when Amazon bought our competitor Bibliofind and folded it into the main site. This led most sellers to leave Bibliofind and join AbeBooks.
I’m certain that without both of those events, AbeBooks would most likely never have become the uncontested market leader in the used books space. And while one could argue that our hard work and talent created the right environment for Barnes & Noble to approach us, I have no doubt that both scenarios could just as easily played out another way…completely altering the course of events.
And I also got lucky a few times on a personal level. Back in 2003, I felt like leaving AbeBooks and starting something new, but my parents convinced me to stay at the company. That proved to be the right decision, as most of the success of AbeBooks (including the ultimate exit to Amazon) came in the subsequent years and defined my career.
What’s the moral of these stories? Don’t underestimate the power of luck in shaping the future of your start-up. For some this may be unnerving…after all, luck may play such an important role, yet we cannot do anything about it. However, instead of worrying about luck or fate, focus on what you can control. Aim to create the right environment for luck and its opportunities to take hold.
Few decisions can be as life-changing for founders as deciding when to sell a business. Companies get sold for a whole host of reasons: founders break up; money runs out; shareholders force a sale. And in many cases, the financial upside of a sale is just too seducing for the entrepreneurs, particularly for first-time founders.
When making such a major decision, you’ll undoubtedly need to weigh many factors and most likely, some competing interests. However, I think the most compelling reason to sell is when the founders run out of ideas for how to grow the company further.
At the time, AbeBooks was still a nicely growing and highly profitable business, but we didn’t know how we could turn it into a billion dollar company. At the same time, the business could provide a lot of strategic value for many players in the book business, namely Amazon. So we decided to sell.
Looking back, there were several factors limiting our ability to grow, including:
- Geographical markets: We had internationalized to five non-English speaking countries in Europe, but felt that conquering Asia was too risky an endeavor for a relatively small company (our platform revenues were in the hundreds of millions of dollars).
- Vertical markets: Expanding from books to other media verticals seemed unrealistic, considering both the music and movie verticals had a rapidly shrinking share of physical goods.
- Market expansion: AbeBooks specialized in the long tail (used, rare, hard-to-find books). We saw only modest success when we tried to complete our offering by expanding into new books. Amazon’s brand recognition is just too strong among book buyers to allow competition.
- Acquisitions: We had acquired companies both upstream (Bookfinder, a major price comparison engine that sent up a large amount of traffic to us) and downstream (Fillz, a channel manager software that helped our sellers sell on other marketplaces).
Most importantly, we felt that we had optimized our business model to extract as much value out of the marketplace as we could. In short, we were struggling to think of ways to grow the company beyond modest increments.
For some founders, external factors and financial pressures may be too strong to avoid selling. But if you have a choice, don’t think about selling your company until you run out of ideas for how to grow it. Hopefully, that time will be far down the road.