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Amazon Leadership Principles

· 8 min read

1. Customer Obsession​

  • Amazon's goal is to leave a legacy: Becoming Earth's most customer-centric company (listen, invent, personalize).
    • "What we have always wanted to do is raise the standard for what it means to be customer-centric to such a degree that other organizations should look at Amazon as a role model and ask, 'How can we be as customer-centric as Amazon?'"
    • Sony early mission was not to make Sony known for quality, but to make "Japan" known for quality.
  • What we focus on: Thinking long-term, putting the customer at the center, and inventing for customer - all together.
    • "If you're going to invent, you need to experiment, and if you're going to experiment, you need to accept failure. If you are going to fail, you need to think long-term."
    • "You can't invent on the behalf of the customer if you're not thinking long-term. Because a lot of inventions does not work."
  • How we do it:
    • Start with the customer and work backwards. Instead of starting with the technology/product and work forwards
    • Prioritize customer satisfaction over profit! If you delight your customers you will make a profit eventually.
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  • Ask, “Is what I’m working on helping my customer?” Remove non-value steps?
  • Honestly pursue customer feedback, not just solicit for compliments?
  • Anticipate and know your customer's needs (needed immediately) and wants (needed eventually)?
  • Leaders are owners. They think long term and don't sacrifice long-term value for short-term results. They act on behalf of the entire company.
  • They never say "that's not my job". Leaders champion ideas they believe will benefit the business.
    • "Be an owner, not investor. Investor only care about short term success, while owner want long term sustainable business."
  • Leaders expect and require innovation from their teams and always find ways to simplify.
    • Think about killing bad products and simplifying products, not just "inventing".
  • Be externally aware and look for new ideas from everywhere. Don't be limited by "not invented here".

4. Leaders Are Right a Lot​

  • Good leaders have strong judgment and good instincts.
    • "It sounds simple, but there is a way to practice being right a lot. You won't always be right, but you can improve."
  • People who are right a lot -
    • They listen a lot, seek diverse perspectives.
    • They change their minds a lot, often based on new data or reanalyzing a situation.
      • Think about how you disagreed with someone, consulted the data or reanalyzed the situation, and came up with the right answer.
      • or when you used your judgement to make a call when you have limited data to support or you re-evaluated the situation.
    • They try to disconfirm their own beliefs.
  • "Politicians struggle with this because the moment they change their mind, they are accused of flip-flopping. But in reality, anyone who never changes their mind is underestimating the complexity of the world."

5. Frugality​

  • Accomplish more with less.
  • Constraints breed resourcefulness, self-sufficiency, and invention.
  • The two-pizza teams principle: No team should be too large that it cannot be fed with two pizzas.
    • "We humans evolved around campfires, telling each other stories. A team of 10-12 people is the perfect size for natural coordination without too much structure."
  • Using six-page memos instead of PowerPoint for better communication.

6. Hire and Develop the Best​

  • Raise the performance bar with every hire and promotion.
  • Recognize exceptional talent and move them throughout the organization.
  • Develop leaders and take seriously the role of coaching others.

7. Earn Trust​

  • Listen attentively, speak candidly, and treat others respectfully.
  • Be vocally self-critical, even when awkward or embarrassing.
  • Benchmark yourself and your team against the best.
  • "What do you do as a leader to stay in touch with a 19-year-old in his bedroom, revolutionizing an industry? You hire smart people."

8. Insist on the Highest Standards​

  • Maintain relentlessly high standards, even if they seem unreasonably high.
    • "People might think our standards are too high, but they help us build great products and services. It's fun to work in future."
  • Defects do not get sent down the line; problems are fixed so they stay fixed.
  • When you are giving a great customer experience, the only way to do it is with happy people. You can't do it with unhappy people.
    • "Work-life balance? I prefer to call it work-life harmony. When I'm happy at work, I come home a better dad. When I'm happy at home, I come to work a better leader."
    • "Amazon is constantly changing and if you hate change, job in high-tech would be challenging."

9. Bias for Action: Be Bold, Take Risks, and Be Scrappy​

  • A few big successes can compensate for dozens of failures.
    • "I have made billions of dollars of failures at Amazon — literally billions. But bold bets like AWS, Kindle, and Prime have more than made up for them."
  • Speed matters in business.
  • Many decisions and actions are reversible and do not need extensive study.
  • Amazon values calculated risk-taking.
    • "One of my jobs as Amazon's leader is to encourage bold bets. The problem is people love to focus on things that aren't working, which can be helpful, but you must also celebrate experimentation."

11. Have Backbone – Disagree and Commit​

  • Respectfully challenge decisions when you disagree, even when uncomfortable or exhausting.
  • Have conviction and be tenacious.
  • Do not compromise for the sake of social cohesion.
    • "You must be willing to challenge decisions. But once the decision is made, commit to it."

13. Think Big​

  • Thinking small is a self-fulfilling prophecy.
  • Create and communicate a bold direction that inspires results.
  • Think differently and look around corners for ways to serve customers.

14. Deliver Results​

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  • Achieve the right result instead of driving goal for the sake of goal achievement. Take a hit on goal attainment to achieve the right result.
    • Right result is what's good for customer in the long run?
    • It is a trade-off between schedule and providing better customer experience. Always focus on later.
  • Set smart team goals, expectations and priorities for the team.
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  • Trying to get everything done, without regard for importance.
  • Working at an unsustainable pace and expecting others to do the same.
  • Build for the sake of building, without regard for customer needs.
  • Creating a false sense of success or false confidence.
  • Focus on the controllable inputs of your businss and deliver them with the right quality and in a timely manner.
    • "You might think I spend my time managing Amazon's stock price, but that would be a mistake. The best approach is to focus on inputs that create long-term value."
    • Output of the company: stock price.
    • Controllable Inputs to higher stock price: Number of customers served, features available to them.
      • You change that by customer obsession, invention, and operational excellence (reduce defects).
        • Reduce defects → Better customer experience → More customers → Higher stock price
        • Innovation → More margin → Lower prices → More customers → Higher stock price
        • Customer obsession → Higher engagement → Higher lifetime value → Higher stock price
  • Get the important things done and have the team focused and motivated in order to deliver the right results.
    • Important things: Required for customer right now.
    • Team focus: Set smart team goals and expectations.
    • Motivate team: Share successes.
  • Help remove obstacles and enabling team to achieve more than they thought possible.

Assorted: A. Why Lower Prices Make Sense?​

  • When you lower prices, you increase the number of customers, the revenue, and the profit.
    • "People assume you should always optimize for percentage margins, but actually, you should optimize for dollar margins. That's why lowering prices makes sense."
  • You can't have both best experience and lowest prices in physical retail as the fixed costs increases with more stores.
    • "In online business, you can have best experience and lowest prices."
Percentage Margins vs Dollar Margins

Imagine you own a fruit shop.

  • Premium apples sell for ₹100 with a 50% profit margin (₹50 profit per apple).
  • Regular apples sell for ₹20 with a 25% profit margin (₹5 profit per apple).

If you only focus on percentage margin, premium apples seem better.

But if you drop the price of premium apples to ₹80, more people buy them. Now:

  • Your profit margin drops to 40% (₹32 per apple).
  • However, you sell 5 times more apples, increasing your total profit.

Even though the percentage margin is lower, your total earnings (dollar margin) are much higher because of increased sales volume.

This is why businesses often lower prices strategically—to maximize total profit.