Amazon has figured out how to combine the entrepreneurial culture of a small company with the financial resources of a large one. And that allows it tackle problems most other companies can’t.
Google’s approach — solve the hard technical problems first, worry about the business model later — is rooted in the engineering background of Google Founders Larry Page and Sergey Brin. In contrast, Amazon CEO Jeff Bezos spent almost a decade working for several Wall Street firms before starting Amazon — a background that gives him a more pragmatic outlook that’s more focused on developing products customers will actually want to pay for.
Bezos has worked to create a culture at Amazon that’s hospitable to experimentation.
“I know examples where a random Amazon engineer mentions ‘Hey I read about an idea in a blog post, we should do that,’” Eric Ries says. “The next thing he knows, the engineer is being asked to pitch it to the executive committee. Jeff Bezos decides on the spot.”
A key factor in making this work, Ries says, is that experiments start small and grow over time. At a normal company, when the CEO endorses an idea, it becomes a focus for the whole company, which is a recipe for wasting a lot of resources on ideas that don’t pan out. In contrast, Amazon creates a small team to experiment with the idea and find out if it’s viable. Bezos famously instituted the “two-pizza team” rule, which says that teams should be small enough to be fed with two pizzas.
Ries says that new teams get limited funding and clear milestones; if a team succeeds in smaller challenges, it’s given more resources and a larger challenge to tackle.
But Amazon doesn’t spend too much time on internal testing. “They prioritize launching early over everything else,” one engineer wrote in an epic 2011 rant comparing Amazon’s culture to other technology companies. Launching early with what Ries has dubbed a “minimum viable product” allows Amazon to learn as quickly as possible whether an idea that sounds good on paper is actually a good idea in the real world.
Of course, this method isn’t foolproof; Amazon has had plenty of failures, like its disastrous foray into the smartphone market. But by getting a product into the hands of paying customers as quickly as possible and taking their feedback seriously, Amazon avoids wasting years working on products that don’t serve the needs of real customers.
This seems to be the approach Amazon is taking with Amazon Go, its new convenience store concept. It’s a technology that could work in many different types of retail stores, but Amazon’s initial approach is modest: a single, relatively small convenience store. Media reports suggest that Amazon plans to open 2,000 retail stores, but the company disputes this. The Amazon way, after all, isn’t to open one store because there’s a plan for 2,000. It’s to open one store and then open thousands more if the first one is a big success.
In the abstract this approach — minimize bureaucracy, start out with small experiments, expand them if they’re successful — sounds so good that it’s almost banal. But it’s surprisingly difficult for big companies to do this, especially when they’re entering new markets.
Over time, big companies develop cultures and processes optimized for the market where they had their original success. Companies have a natural tendency to establish uniform standards across the enterprise.
“It doesn’t matter what technology” teams use at Amazon, one of the company’s former engineers wrote in 2011. Bezos has explicitly discouraged the kind of standardization you see at companies like Google and Apple, encouraging teams to operate independently using whatever technology makes the most sense.
Bezos has worked hard to make Amazon a modular, flexible organization with a minimum of company-wide policies.