Decentralise decision making to generate innovation

amazon bezos innovationDecentralize 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.”

Takeaway

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.

Challenge

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.

Solution

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

Jeff Bezos Letter to Shareholders 1997

  • 1998: Stay terrified of your customers

Jeff Bezos Letter to Shareholders 1998

  • 1999: Build on top of infrastructure that’s improving on its own

Jeff Bezos Letter to Shareholders 1999

  • 2000: In lean times, build a cash moat

Jeff Bezos Letter to Shareholders 2000

  • 2001: Measure your company by your free cash flow

Jeff Bezos Letter to Shareholders 2001

  • 2002: Build your business on your fixed costs

Jeff Bezos Letter to Shareholders 2002

  • 2003: Long-term thinking is rooted in ownership

Jeff Bezos Letter to Shareholders 2003

  • 2004: Free cash flow enables more innovation

Jeff Bezos Letter to Shareholders 2004

  • 2005: Don’t get fixated on short-term numbers

Jeff Bezos Letter to Shareholders 2005

  • 2006: Nurture your seedlings to build big lines of business

Jeff Bezos Letter to Shareholders 2006

  • 2007: Missionaries build better products

Jeff Bezos Letter to Shareholders 2007

  • 2008: Work backwards from customer needs to know what to build next

Jeff Bezos Letter to Shareholders 2008

  • 2009: Focus on inputs — the outputs will take care of themselves

Jeff Bezos Letter to Shareholders 2009

  • 2010: R&D should pervade every department

Jeff Bezos Letter to Shareholders 2010

  • 2011: Self-service platforms unlock innovation

Jeff Bezos Letter to Shareholders 2011

  • 2012: Surprise and delight your customers to build long-term trust

Jeff Bezos Letter to Shareholders 2012

  • 2013: Decentralize decision-making to generate innovation

Jeff Bezos Letter to Shareholders 2013

  • 2014: Bet on ideas that have unlimited upside

Jeff Bezos Letter to Shareholders 2014

  • 2015: Don’t deliberate over easily reversible decisions

Jeff Bezos Letter to Shareholders 2015

  • 2016: Move fast and focus on outcomes

Jeff Bezos Letter to Shareholders 2016

  • 2017: Build high standards into company culture

Jeff Bezos Letter to Shareholders 2017

  • 2018: Wandering is an essential counterbalance to efficiency

Jeff Bezos Letter to Shareholders 2018

Author: Andrew Mann

Managing Partner at NorthBailey. Having had senior marketing & insight roles at Tesco, Sainsbury's, Asda, Coop and M&S, I'm now using my experience & network to solve strategic marketing problems for NorthBailey clients

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