Listening to Jeff Bezos, founder and chief executive officer of Amazon, is like going to startup school where you learn that failure is part of entrepreneurial growth. Whenever I have talked to Bezos in the past, the things that have stuck in my head have been his willingness to be wrong and his unflinching abhorrence of the status quo. At the Wired Business Conference in New York City, Bezos reiterated some of those points in a conversation with writer Steven Levy.
Unfortunately, my month-old MacBook died in the middle of writing that post and I lost much of it; it wasn’t until later tonight that I managed to borrow a ThinkPad from a friend. Of course, by now many have already written about Bezos’s comments on the Kindle, Google’s book efforts, and e-readers, so I’m going to skip those and instead focus on some of the comments about innovation and entrepreneurship. Many of his tips have helped me think clearly about our little startup as we grow older. Hopefully you enjoy these nuggets of wisdom from a man I like to call a constant gardener of innovation.
Innovation and large companies
In describing change, Bezos said that rapid change is always scary for incumbents, but if you’re not an incumbent, you have nothing to lose. Large incumbents have to worry about legacy revenues. Innovation is hard for large companies because you need to be long-term oriented. And since the innovative projects are such a tiny part of a large company, there is tendency to be dismissive of the innovation.
“You need a culture that high-fives small and innovative ideas and senior executives [that] encourage ideas,” he said. In order for innovative ideas to bear fruit, companies need to be willing to “wait for 5-7 years, and most companies don’t take that time horizon.”
In tough times, focus on the customer
In the aftermath of the dot-com bust, Amazon was one of the many Internet companies that saw its stock price dive faster than a flying seagull in search of food. “The stock price deflated but the business continued to grow,” he recalled. As a result, Amazon refocused its energies on the customer.
“Focusing on the customer makes a company more resilient,” he added. “We had to tell employees that they shouldn’t feel smarter because the stock went up 35 percent, because then they would feel 35 percent dumber if the stock price went down.” His tip on managing during tough times such as those faced by Amazon during the bust was to communicate more with its employees. With too many external inputs, Bezos thinks it’s important for companies to be talking with its people more often, easing their concerns.
The difference between founders and professional managers is that founders are stubborn about the vision of the business, and keep working the details. Professional managers, when things don’t work, want to change the vision. The trick to being an entrepreneur is to know when to be stubborn and when to be flexible: Be stubborn about the vision, but flexible about tactics, Bezos said. For instance, you can be flexible about reducing costs, but you don’t change your vision to reduce costs. Great point, because more often than not, founders get caught up in the tactics and change their direction as a result.
Prerequisites of innovation
Bezos listed a few prerequisites for innovation and inventing, but the biggest one is willingness to fail. You need to think for the long term and be misunderstood for a long period of time. “If you can’t do those things, then you need to limit yourself to sustainable innovation.” In other words, seek incremental change to grow your business.
In talking about the need for thinking long term, Bezos said you need conviction. I totally agree — if you take a short-term approach, then you are constantly stuck with trying to deal with minutiae. He noted how much hated the idea of “sticking to one’s knitting” and not taking chances. That said, Bezos was clear in pointing out that his company looks at everything from a customer’s standpoint. “We do make business decisions in a very deliberate way,” he said. “We work backwards from customer needs.”
Errors of omission vs. errors of commission
Many people make too much about the errors of commission. People overemphasize their failures when trying something new. Actually failure is not that expensive and it’s part of work. If something fails, then you’re going to shut it down and cut your losses, Bezos said. The focus, he said, should be on errors of omission. These are the chances not taken. He is not ashamed of his failures — A9 search and Auctions are two examples he cites often. Both markets were big enough for Amazon to take a flyer.
(I am paraphrasing from my notes and as a result there might be some mangled quotes in there somewhere. Once I revive my computer, I will recheck against the audio files I have sitting on my laptop.)