How did Jeff Bezos scale Amazon without destroying its entrepreneurial culture?

By boris, May 17, 2016

Running a start-up is profoundly different than running a big company. When you’re small, founders are close to the action and can make sure all the important things happen. But as a start-up scales, founders can’t have their hands in everything: many companies lose focus on the customer; decisions get bogged down; and there are hiring mistakes. We’ve all seen these things happen to good start-ups.

Amazon’s magic is that it’s a behemoth of a company that still operates like a founder-driven start-up in several key areas. This is partly because Bezos has a strong cultural influence throughout the company. But, he also developed some unique tools to institutionalize his core values in the company. For example…

1. Customer Focus

Amazon has a unique product development process: before starting any new project, the product manager writes an internal press release ‘announcing’ the product. This working backwards approach helps the team fully understand the product’s value proposition to its customers (e.g. what problem is it solving). A former director at Amazon described the approach this way: “We try to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.

If the team can’t come up with a compelling press release, they either need to refine their thinking or maybe the product just isn’t worth making in the first place.

While distilling the customer needs and benefits in a concise press release is a great exercise, there’s still the question of how the product team come to truly understand these customer needs and challenges. Amazon keeps managers close to the customer by having them regularly work customer service. We had a similar policy at AbeBooks.

2. Organization

Amazon’s Two-Pizza rule is pretty widely known: if a project team can eat more than two pizzas, then it’s too large. This means they break up a big project into smaller projects, where the smaller project teams can stay nimble and be less subject to complex governance.

The supporting piece is that every product at Amazon should have an API, just as if it were developed for an external client. This decouples the speed of development between different product teams, and offers a clean hand-off between the two. Its Bezos’ vision of a decentralized company where small groups can innovate and move quickly independently of everyone else.

3. Hiring

When a company reaches the scale when it’s no longer possible for the founder to be hands-on in each decision, it better have good people in place.

Early on, Bezos implemented “bar raisers” at Amazon. These are Amazon employees who are skilled evaluators and interview job candidates. Bar raisers can veto any candidate, even for positions that are completely out of their area of expertise. Bezos has said this program helps weed out the “cultural misfits” at Amazon and makes sure the company makes good hiring choices by forcing several diverse employees to sign off on a candidate.

Another important hiring tactic is Amazon’s ability to keep acquired founders on board. For example, Mike George joined Amazon in 1998 through Junglee’s acquisition. He has since become Bezos’ go-to person for many new initiatives: he launched the marketplace, ran payments, and is now heading up the Alexa unit.  

Keeping acquired founders on board is particularly tough: someone founds a company because they want to be a leader, not a follower. Entrepreneurs have a difficult time when the acquiring company tries telling them how to run the business they have created and grown. Amazon has been successful at keeping founders around by giving them lots of latitude.

For founders of early-stage start-ups: you may be thinking more about getting your product out the door or acquiring your first 1,000 or 100,000 customers rather than any challenges associated with scaling. But some of these tools can be really important early on (20-30 employees). It’s never too early to start thinking about implementing the right processes and tools that will help your company grow without losing its focus.

  • Very interesting Boris. Thanks for sharing. I think the red thread here
    is Jeff Bezos himself. My sense is that Amazon’s culture of entrepreneurship is rooted in his
    WAY OF BEING. He probably embodies the principles that ultimately guide
    Amazon and that’s how they have spread. Jeff Bezos can’t be copied or scaled so
    other Founders and CEOs need to self-discover and self-actualize if they want
    to stay on the leading edge. This means shedding mental-emotional habits and
    beliefs that hold them back from genuine learning and growing (which is
    emotionally uncomfortable), taking risks, perceiving reality more objectively (a
    result of a sensitive, open and unblocked organism) and so forth.
    Organizational processes, techniques, best practices, methods etc are all fine
    but in the end you can’t copy your way to an innovative culture. You have to BE
    innovative. Creativity is an inner process that happens spontaneously when
    blockages are removed and space for it to happen exist. Many of the CEOs and
    Founders that I know or have worked with have a few unique and creative ideas
    that set them off on the path of entrepreneurship, but as they become more successful inner foibles (present all along but often well hidden) are accentuated. They get scared, can’t work that well with a diversity of people, micro-manage, become controlling, sacrifice their personal health
    and happiness for “success” etc. This leads to burn out, loss of focus, lack of
    engagement and an organization far from realizing its fullest potential. Simply
    put, fear creates tunnel vision and blocks free thinking (i.e. innovation). To the degree that a person or an organization is running on fear there is negative
    residue created in all interactions and relationships. A person or CEO running on fear has a body language, energy and lack of presence that others are
    constantly impacted by (this can only be masked but the impacts are there regardless). We might even
    say that the proverbial “box” consist of fear. Meaning that to the degree that
    a person is fearless they are free, out of the box and can actually serve others. To the
    degree that a person run on fear they are trapped, in the box and self-serving (for example
    appearing self-sacrificing in other to get for self i.e. “giving to get”).

  • bwertz

    Yes, Jeff is certainly unique and cannot be copied – but my take-away from that post was rather that you need to think about tools that make sure that the founder mindset is being replicated into the organization as you scale (and the tools listed in this blog post might or might not be the right ones for your own organization)

  • I understand and I agree with you. My
    point wasn’t that “tools” are unimportant. But a tool is just a tool.
    A hammer can be used to build a home….or whack somebody on the head. In my
    experience people tend to focus too much on technique/tool/method and too
    little on WAY of being and working. I’m always interested in understanding
    whom/what does the tool originate within and to what purpose. For example, you
    can have a CEO use tools and processes in order to create “team
    effectiveness” and “team happiness” but unless the CEO IS
    effective and happy the tools themselves will not be worth much. On the other
    hand if you have a CEO who genuinely is effective and happy this person doesn’t
    need to rely on many tools to generate effectiveness and happiness within the
    team (the “tools” are embodied in the way they work). Also sometimes the
    intention behind the use of a tool is unconscious even to the user of it. Say
    Jeff Bezos was using “decentralization tools” with the intention of controlling
    people. In that case I think that despite having the right tools the end result
    will be less creative empowerment in the organization.

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  • bwertz

    Great video on how to keep founder mentality in a rapidly scaling business (h/t Bram Sugarman) https://www.youtube.com/watch?time_continue=537&v=Rp4RCIfX66I

  • Interesting watch Boris.

    But I think that he may be complicating making sense of complexity in this presentation. He’s very convincing with his story, research, graphs and stats. I almost got seduced into thinking that he had it all figured out. But what’s the root of the problem? Where is the meat? If you haven’t understood the root of the problem then all so-called “solutions” only tend to complicate things even further. For example, a “lack of founders mentality” is a symptom and not a root cause.

    Speaking in the language of Fredric Laloux I think that the “complexity problem” is largely a result of the dominating amber-orange management paradigm (view the below video for clarification or read his book “Reinventing Organizations”). “Levels of thinking” which management consultant firms like Bains tend to operate from. It has to do with the focus on “distribution of” power and control, order, process, budgets, predictability, top down management etc. Organizations operating more like armies and machines. Masculine, “rational” (read non-emotional and non-intuitive) and individualistic.

    If the “Teal breakthroughs” of Evolutionary Purpose, Self-Management and Wholeness were the embodied guiding principles of the organization then I think you’ll find a lot more people “acting like owners”, “being accountable”, “having a founder mindset” etc. In fact, both life and work becomes a lot simpler with the embodiment of these operating principles.

    Patagonia is a good example of a Teal company (stable, growing, successful yet attracting passionate and great talent). In tech, Tony Hsei at Zappos is trying to “become Teal”. Partially by working with Holacracy (a company actually studied in Laloux’s research as an example of a Teal organization itself). To be continued!

    https://youtu.be/gcS04BI2sbk

  • Thanks for this. I often wonder about how to instil founder mentality in employees.

    I’ve come to see that the only difference between a founder and a founder-like-employee is the amount of perseverance. Both need to be self-starters and scrappy but the founder-like-employee doesn’t need as much perseverance as the founder; cuz she can usually lean on the founder for that.

    But I still have no idea how to cultivate someone to be founder-like. I try to look for people that already are or are motivated to be.

  • bwertz

    Agreed – most successful strategy for my portfolio companies in that respect has been to hire former founders.

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