10 Lessons MBA Grads Can Learn from Jeff Bezos
Amazon founder and CEO Jeff Bezos worked for a hedge fund before starting his online bookstore in 1994. Over the next 25 years, Amazon grew from a place to buy the latest novels to a one-stop destination for goods from around the world along with its media and technology assets.
During that time, Bezos has learned important lessons that he’s imparted to the business community through speeches and articles. The following list summarizes the most important lessons Bezos offers to entrepreneurs.
Balancing work with life
Bezos does not live up to the stereotype of a corporate CEO who works long hours, gets little sleep, and demands the same from his employees. He has spoken about how gets at least 8 hours of sleep each night. Bezos also says that he spends time with his children in the morning before taking on challenging tasks prior to lunch. Amazon’s CEO also makes an effort to make difficult or complicated decisions before the end of the workday.
This approach to work-life balance allows Bezos to make smarter decisions each day. He has touted his “three good decisions” philosophy for upper management. By ensuring balance, he is able to make at least three good decisions each day without sacrificing performance or his personal life. Entrepreneurs and executives at all points in their careers should heed this advice to make the most out of their potential.
Innovate for customers, not against competitors
Bezos has been critical of companies that obsess over their competition rather than their customers. According to Bezos, this model creates a pattern of corporate development where products and services are designed to outdo other companies. This approach can create products that “out-feature” others but are unresponsive to the requirements of current and future consumers. Bezos has also pointed out that all companies cite their obsession with customers without living up to this language.
Bezos credits Amazon’s customer-first approach with the development of Amazon Web Services (AWS). Amazon saw a gap in the marketplace for application hosting as applications expanded exponentially. Prospective clients for AWS products could not afford to develop their own hosting services. These clients also struggled with open-source productivity tools that were limited by speed and storage, restraining company growth until new tools were found or developed.
AWS stepped into this void with cloud-based services in 2006. This subsidiary created $17.4 billion in revenues in 2017. By observing the market, Bezos realized that Amazon’s competitors were incapable or unwilling to serve an untapped group of clients. The best businesses truly listen to their customers and innovate based on feedback rather glancing at other companies.
Be stubborn on vision and flexible on details
Every entrepreneur or executive faces the challenge of whether to remain steadfast or flexible in their work. Bezos has expanded Amazon from an online bookstore to a global behemoth by striking the balance between long-term and short-term thinking. According to the Amazon founder, it is important for executives to remain stubborn in long-term thinking so that innovations can emerge even after repeated failures. Bezos tempers this view with a dynamic approach to short-term details.
Bezos uses the example of the now-ubiquitous Amazon Kindle to illustrate his view on vision and details. Amazon committed to creating a portable reading device and eventually reached that goal in 2007. The company, however, did not continue with the same methods for development used at the beginning of the Kindle’s development. Amazon quickly developed successive generations of the Kindle as well as a Kindle app by remaining committed to the original vision but showing willingness to follow new leads.
This balance can be difficult to achieve with the demands of the modern marketplace. Entrepreneurs can be pushed toward rigidity or total flexibility without using their visions as ballast. Amazon provides a great proof-of-concept for keeping long-term vision in mind even as new methods or approaches are used to achieve that vision.
Create a decision-rights hierarchy and trust others
As a company grows, bureaucracy can set in place in response to new challenges and growing payrolls. This bureaucracy can slow down decision-making processes or place all decisions in the hands of high-level executives. Amazon has grown into one of the world’s most prominent brands in part because Bezos has trusted some decisions to trustworthy individuals outside of the boardroom.
Bezos divides decisions into Type 1 and Type 2 decisions when discussing trust in his employees. Type 1 decisions are complicated or company-defining decisions that should be placed in the hands of executives. Type 2 decisions are day-to-day choices that should be handled by managers and supervisors closer to the consequences of those decisions. Bezos has argued that companies often place most decisions into the Type 1 category, thereby ignoring strong leaders throughout the company.
Amazon flips this trend by placing most decisions into the Type 2 category while keeping the most significant decisions in the hands of Type 1 decision makers. Bezos credits this decision-rights hierarchy for the development of Amazon Prime Video, a cornerstone of Amazon’s business. By placing more decisions in the hands of others, Bezos is generating a wave of future business leaders who aren’t frozen by pressure.
Keep teams small
A byproduct of a company’s growth is the proliferation of teams, groups, and committees. These groupings can be beneficial in the short term but can slow down communications or delay important decisions. It is important for any business to be mindful of when teams have grown too large or outlived their usefulness. Bezos has challenged Amazon’s teams to remain small by observing the “two-pizza rule.”
Bezos argues that a team has grown too large if the team’s members can’t be fed with two pizzas. His experiences with Amazon’s early growth informed this belief. Bezos believes that teams can become inefficient and foster unified thought that prevents original ideas. He argues that large teams often lack the self-awareness to challenge their own beliefs. Bezos suggests that small teams prevent employees from falling into established roles and relying on existing thought. Business owners and executives should keep the “two-pizza rule” in mind as they look at their growing organizations.
Allow fear of failure to fuel innovation
A company’s success or failure places a lot of pressure on executives and managers. This pressure leads to loss aversion or minimizing failure rather than persevering toward success. Loss aversion leads a company to consider a low percentage of failures as success. Jeff Bezos has taken a different approach by leveraging the fear of failure as a renewable energy for innovation.
In 2006, Bezos said that Amazon was willing to take paths less traveled even if some of those paths are dead ends. The company has invested resources in ventures like Auctions for online merchants and the A9 search engine that did not take off like other Amazon products. Bezos has embraced the company’s outlier status among competitors and media thanks to the continued success of new products. Instead of fearing failure, Amazon frames its investments as means of survival in a competitive marketplace.
Treat each day as your first day on the job
In the business world, the first day with a company or on a project is filled with excitement and energy. This enthusiasm can fade, however, as the realities and challenges of work pile up. Longtime executives, managers, and entrepreneurs can fall back on past experiences and established knowledge without rejuvenating their excitement for work.
Jeff Bezos and Amazon are obsessed with maintaining that Day 1 energy. The company has a building called Day 1 and Bezos frequently reminds staff that they are in Day 1 for Amazon. In a 2016 letter to shareholders, Bezos said, “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline.” He argued that Amazon avoids allowing processes to become products, quickly makes high-quality decisions, and keeps current customer needs in mind to stay in Day 1. These methods are replicable by individuals and businesses if they are willing to remain self-aware and committed to a long-term vision.
Constraint breeds resourcefulness
Amazon’s origins as an online book retailer during the era of traditional book stores taught Bezos how to do more with less. It is difficult to imagine Amazon embracing constraint given the enormity of its operations. One of the company’s principles is frugality, defined in the leadership principles document as, “Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention.” This principle also notes that neither the company nor the market reward employees for “growing headcount, budget size or fixed expense.”
Amazon has embraced constraint throughout its corporate operations. The company purchases economy flights for executives rather than business class. Staff members at the main office in Seattle are not given parking, snacks, or other fringe benefits common among tech companies. Amazon also handles design and construction of network hardware to avoid paying for features that aren’t required by their customers. Bezos’ frugality is a good example for entrepreneurs with growing businesses that may be tempted to give into excesses that don’t serve their customers.
Minimize regret about major decisions
Jeff Bezos has become so synonymous with Amazon that it is difficult to imagine his early career. Bezos earned his bachelor’s degree from Princeton University before serving as the head of development at Fitel and a senior vice president at D.E. Shaw & Co. In these positions, Bezos could have enjoyed a successful professional life without the stresses of entrepreneurship. He ultimately left D.E. Shaw & Co. in 1994 to start Amazon because he did not want to regret not pursuing his idea for an online book store.
Bezos has touted his Regret Minimization Framework as the tool that allowed him to make this life-changing decision. This framework asks the user if they would regret not pursuing a new path in a certain number of years. Bezos asked himself if he would regret not following his own path when he was 80 years old.
This model fits well with Bezos’ approach to everything in Amazon’s development. The Regret Minimization Framework can be used by anyone who wants to project their decisions into the future. An entrepreneur deciding whether to start a new venture or pursue a new product line can look months, years, or decades into the future to avoid regret. This tool also allows users to make quick decisions based on their passions and visions.
Make choices that leverage your skills
In his 2010 commencement address at Princeton University, Bezos offered an explanation for his work ethic. He told graduates about summers spent on his grandparents’ ranch in Texas. Bezos helped his grandparents take care of cattle and participated in a trailer caravan. During one caravan, his grandfather told him that it is harder to be kind than clever. Bezos used this framework in the speech to describe the differences between gifts and choices.
His commencement address warned talented graduates not to rely solely on the gifts they accrued throughout life. Bezos challenged the audience to choose kindness and use their gifts to improve the world. He also said that he started Amazon after learning about the startling growth of internet usage and the absence of online shopping outlets. The prospect of stocking a site with millions of books unavailable in one location excited Bezos. He left his job with his support of his wife, used his gifts, and continued to embrace kindness even as Amazon expanded.
A series of questions concluded his speech including whether graduates would be guided by inertia or passions and whether they would be clever at the expense of others or be kind. Bezos also highlighted his Regret Minimization Framework by saying, “In the end, we are our choices.”
Turning these lessons into action
Aston University’s online MBA program allows prospective entrepreneurs to turn these lessons into business successes. After his graduation, Jeff Bezos made a few key moves that turned him into one of the world’s wealthiest entrepreneurs. The online MBA program equips motivated future executives, innovators, and business owners with the tools to succeed in the marketplace.
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