Working Backwards: Insights, Stories, and Secrets from Inside Amazon
| A | A fascinating read; first half filled with the some of the nuts and bolts of Amazon's product development process (single threaded separable teams, 6-pagers, working backwards from press release, etc) and second half 4 different stories from Amazon showing them in action. |
There’s a saying often heard at Amazon: “Good intentions don’t work. Mechanisms do.” (Bryan and Carr 2021, chap. 1)
Our emphasis is on what we call controllable input metrics, rather than output metrics. Controllable input metrics (e.g., reducing internal costs so you can affordably lower product prices, adding new items for sale on the website, or reducing standard delivery time) measure the set of activities that, if done well, will yield the desired results, or output metrics (such as monthly revenue and stock price). (Bryan and Carr 2021, chap. 1)
A well-known Six Sigma process improvement method called DMAIC, an acronym for Define-Measure-Analyze-Improve-Control. (Bryan and Carr 2021, chap. 6)
Amazon takes this philosophy to heart, focusing most of its effort on leading indicators (we call these “controllable input metrics”) rather than lagging indicators (“output metrics”). Input metrics track things like selection, price, or convenience–factors that Amazon can control through actions such as adding items to the catalog, lowering cost so prices can be lowered, or positioning inventory to facilitate faster delivery to customers. Output metrics–things like orders, revenue, and profit–are important, but they generally can’t be directly manipulated in a sustainable manner over the long term. Input metrics measure things that, done right, bring about the desired results in your output metrics. (Bryan and Carr 2021, chap. 6)
Over multiple [Weekly Business Review] meetings, we asked ourselves, “If we work to change this selection metric, as currently defined, will it result in the desired output” (Bryan and Carr 2021, chap. 6)
You’ll notice a pattern of trial and error with metrics in the points above, and this is an essential part of the process. (Bryan and Carr 2021, chap. 6)
[align] your metrics with the customer experience. (Bryan and Carr 2021, chap. 6)
at Amazon we routinely place our trailing 6 weeks and trailing 12 months side by side on the same x-axis. The effect is like adding a “zoom” function to a static graph that gives you a snapshot of a shorter time period, with the added bonus that you’re seeing both the monthly graph and the “zoomed-in” version of it simultaneously. (Bryan and Carr 2021, chap. 6)
Adding YOY growth rates in addition to the underlying metric you are measuring is a great way to spot trends. In this example, YOY growth has actually decelerated 67 percent since January with no signs of plateauing. (Bryan and Carr 2021, chap. 6)
The institutional no refers to the tendency for well-meaning people within large organizations to say no to new ideas. The errors caused by the institutional no are typically errors of omission, that is, something a company doesn’t do versus something it does. Staying the current course offers managers comfort and certainty–even if the price of that short-term certainty is instability and value destruction later on.
Moreover, the errors of omission caused by the institutional no can be notoriously tricky to spot. Most businesses don’t have the tools to evaluate the cost of not doing something. And when the cost is high, they only realize when it’s too late to change. The institutional no can infiltrate all levels of the organization. (Bryan and Carr 2021, chap. 8)
- What were the biggest mistakes we have made last period, and what have we learned from them?
- What are the key inputs for this business?
- What is the single biggest thing we can do to move the needle in this business, and how will we organize to do just that?
- What are the top reasons we should not do what we’re proposing today?
- When push comes to shove, what are the things we won’t compromise on?
- What’s hard about the problem we are trying to solve?
- If our team had X more people or Y more dollars, how would we deploy those resources?
- What are the top three new initiatives, products, or experiments our team has launched in the past X months, and what did we learn from them?
- What dependencies do we have in our area today over which we wish we had control? (Bryan and Carr 2021, Appendix B)