We read Jeff Bezos’ annual shareholder letter so you don’t have to...here’s what to know:
The letter began with a reminder of just how successful Amazon has been:
“This year, Amazon became the fastest company ever to reach $100 billion in annual sales. Also this year, Amazon Web Services is reaching $10 billion in annual sales … doing so at a pace even faster than Amazon achieved that milestone.”
Then Bezos talked about Amazon’s corporate culture, clearly addressing (though not directly) the unflattering New York Times article published last summer. He acknowledged Amazon isn’t for everyone, but it can “fit certain people like a custom-made glove.”
“We never claim that our approach is the right one - just that it’s ours - and over the last two decades, we’ve collected a large group of like-minded people: folks who find our approach energizing and meaningful.”
Speaking of Amazon’s approach…
Bezos highlighted the role that failure plays in Amazon’s overall success.
“I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”
He cited three experiments, or “bold bets,” that have worked: Amazon Web Services (the company’s cloud computing business), Marketplace (it’s business for third-party sellers), and Prime. In the beginning, people questioned all three. Now they’re main pillars of the company.
Speaking of Prime…
“We want Prime to be such a good value, you’d be irresponsible not to be a member,” Bezos said. And at $99, it’s hard to argue with him.
There are now 30 million Prime-eligible items on Amazon, one-hour delivery (Prime Now) is available in 30 cities, and Prime Video, the company’s Netflix competitor, has both Emmy and Golden Globe wins under its belt.
“Prime has become an all-you-can-eat, physical-digital hybrid that members love. Membership grew 51% last year and there are now tens of millions of members worldwide.”
Amazon’s biggest challenge moving forward
Bezos wants Amazon to remain an “invention machine” but understands how difficult it is for large companies to do that. As he puts it, “one common pitfall for large organizations - one that hurts speed and inventiveness - is ‘one-size-fits-all’ decision making.”
“[Type 1 decisions] are consequential and irreversible or nearly irreversible… But most decisions aren’t like that, they’re two-way doors. If you made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long, You can reopen the door and go back through.”
According to Bezos, the problem with big companies is that they apply the methodical process (Type 1) far too often. “The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.”
And there you have it.