“Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs. To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. . . . Our goal-setting sessions are lengthy, spirited, and detail-oriented. We have a high bar for the experience our customers deserve and a sense of urgency to improve that experience.”
When you’re setting goals for a business or a product, focus on controllable inputs, not on financial outputs.
Over the long term, investing your effort in the parts of the customer experience that you can control is what generates success for your company financially.
The majority of large, public companies benchmark success by quarterly and annual financial results. They know their boards will assess them using these numbers, so they focus their teams on hitting financial goals. The problem is that incentivizing a team to hit certain numbers doesn’t always incentivize them to do the right things for their customers.
Instead of setting goals and judging your company’s efforts using financial outputs, work on perfecting your inputs, and trust that the outputs will handle themselves.
In this letter, Bezos mentions several key inputs he and his team assessed throughout 2009, including:
- The # of reviews added to Amazon products
- The # of new product categories available
- The # of different items available for immediate shipment on Amazon PrimE
1. The more reviews added to Amazon products, the better a new customer’s understanding of whether that product is worth buying or not, and the more trust they can place in the platform.
2. The more product categories and products available the more likely customers are to use amazon as go-to retailer.
3. The more items available for immediate shipment on Prime, the more choice a customer has, and the less likely they are to go somewhere else to find an item the next time.
If you can choose inputs that correlate with a great experience for your customers, then working on those will likely bring financial outputs up over the long-term.
Jeff Bezos letter to shareholders
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.
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