By Nelson DeMestre | Associate Analyst at NAOS Asset Management
“We don’t have a single big advantage, so we have to weave a rope of many small advantages”.
‘The Everything Store: Jeff Bezos and the Age of Amazon’ by Brad Stone, charts the rise of the retailing behemoth Amazon.com. Stone emphasises that the success of Bezos’s business is based on a set of rigid principles and cultural ‘DNA’ that were applied at an extreme level by employee’s and management alike. One such principle is frugality, where even conference-room tables were a “collection of blond-wound door desks shoved together side by side”, as part of a constant search to reduce costs and pass on savings to customers in the form of lower prices.
There was also a constant review of performances through a weekly meeting of sixty retail business managers, each armed with data on defects and inventory turns, forecasting and addressing specific issues. As a former Amazon General Manager Dave Cotter reflected: “The data doesn’t lie”. In its most difficult teething years of the late 1990’s, Bezos insisted on knowing the individual order results from every distribution centre.
Stone portrays Bezos as a lifelong competitor, mercilessly ambitious, creative and with a willingness to go to any length to grow the Amazon empire. In the face of years of Wall Street doubt and derision, Bezos and Amazon’s hierarchy won inches in the battle for the American retail market. In June of 2000 for example, an analyst named Ravi Suria made international news by predicting Amazon would “run out of cash within the next four quarters, unless it managed to pull another financing rabbit out of its rather magical hat”. In turn, Bezos “frequently invoked Suria’s analyses in meetings” as motivation to shed costs, make Amazon leaner and hit profitability. A few months later Amazons stock shed half its value, to hit $33, only for Bezos to declare that “if Amazon stayed focused on the customer, the company would be fine”. The stock now trades for over $3,000.
In this way, Stone underscores how Amazon embraced a flipped traditional top-down management technique, by “starting with the customer and working backward”. Writing now in a 2021 context where the rise of online retailing on a large scale is now taken for granted, the Amazon model has been applied internationally and at home in Australia with great success.
The Appendix also gives readers Bezos’s reading list, which is as follows:
- The Remains of the Day by Kazuo Ishiguro (1989) - his favourite novel
- Sam Walton: Made in America by Sam Walton with John Huey (1992) - This autobiography expands on the principles of discount retailing and frugality. Both of which are included in Amazons corporate values.
- Memos from the Chairman by Alan Greenberg (1996)
- The Mythical Man-Month by Fredrick Brooks Jr (1975)
- Built to last: Successful habits of Visionary Companies by James Collins and Jerry Porras (1994)
- Good to Great: Why Some Companies Make the Leap ... and Others Don’t, by Jim Collins (2001)
- Creation: Life and How to Make It, by Steve Grand (2001)
- The Goal: A Process of Ongoing Improvement, By Eliyahu Goldratt and Jeff Cox (1984)
- The Black Swan: The Impact of the Highly Improbable, by Nassim Taleb (2007)
Link to book
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