Decentralize decision-making to generate innovation
Jeff Bezos letter to shareholders 2013
KEY MESSAGE 16/22
Jeff Bezos has been writing a letter to shareholders since 1997 and looking at all if them gives an insight to the organisation and a masterclass in leadership. This is a series of short blogs that gives you a snap shot / key takes outs of each letter, along with links to them all.
“We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture — great innovations, large and small, are happening everyday on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company — not limited to the company’s senior leaders — is the only way to get robust, high-throughput innovation.”
Innovation comes from distributed decision-making. Top-down teams are effective at optimizing existing processes and enforcing the completion of work, but only decentralized, bottom-up teams can consistently generate new ideas.
In most big companies, command-and-control is the way that work gets done. Ensuring that important decisions only get made by those at the top maintains a certain level of quality and keeps everything stable.
Building a business that is continuously throwing off new ideas and innovating, on the other hand, requires that your people have leeway. You need autonomous teams that can exercise their own judgment rather than having to submit every idea they have to a committee. It requires your company to recalibrate how it hires, how it takes risks, and the opportunity it offers to even junior employees.
Its culture of creativity is a large part of why Amazon has been so successful on so many fronts, and why it has risen to the second-largest company by market cap in the world.
That creativity is often actually a function of the proactive way Amazon thinks about customers. Rather than wait for their customers to tell them about something they want, Bezos says, Amazon would always rather create the thing they don’t even know they want yet.
To encourage this kind of innovation inside your company, however, you need to have distributed decision-making and autonomy for more than just your senior staff.
At Amazon, employees who have an idea are encouraged to pursue it, even if they have to upset traditional corporate rules to do it.
Great innovations come from a “large, inventive team” with a “patient, pioneering, customer-obsessed culture” rather than from a small braintrust.
If you’re a junior employee at Amazon and you have an idea for some new way to delight customers, Bezos writes, you’re just as encouraged to give it a try as a senior leader. Experiments can start small. The downside of a small failed experiment is low, but the potential upside can be very high.
link to all letters to shareholders
- 1997: Bring on shareholders who align with your values
- 1998: Stay terrified of your customers
- 1999: Build on top of infrastructure that’s improving on its own
- 2000: In lean times, build a cash moat
- 2001: Measure your company by your free cash flow
- 2002: Build your business on your fixed costs
- 2003: Long-term thinking is rooted in ownership
- 2004: Free cash flow enables more innovation
- 2005: Don’t get fixated on short-term numbers
- 2006: Nurture your seedlings to build big lines of business
- 2007: Missionaries build better products
- 2008: Work backwards from customer needs to know what to build next
- 2009: Focus on inputs — the outputs will take care of themselves
- 2010: R&D should pervade every department
- 2011: Self-service platforms unlock innovation
- 2012: Surprise and delight your customers to build long-term trust
- 2013: Decentralize decision-making to generate innovation
- 2014: Bet on ideas that have unlimited upside
- 2015: Don’t deliberate over easily reversible decisions
- 2016: Move fast and focus on outcomes
- 2017: Build high standards into company culture
- 2018: Wandering is an essential counterbalance to efficiency