amazon-organizational-culture

Amazon Organizational Culture

Amazon’s organizational culture is characterized by four key ingredients: pride in operational excellence, an obsession with customers, long-term thinking, and an eagerness to invent.

Understanding Amazon’s organizational culture

Amazon’s success as a company has made its organizational culture the subject of much discussion.

In a 2009 interview with Slate.com, former CEO and founder Jeff Bezos was asked how he defined Amazon now that the company had transitioned from a book retailer to one that sold consumer electronics and cloud computing services. 

We start with the customer and we work backward”, Bezos replied. “We learn whatever skills we need to service the customer. We build whatever technology we need to service the customer. The second thing is, we are inventors, so you won’t see us focusing on “me too” areas. We like to go down unexplored alleys and see what’s at the end.. And then the third thing is, we’re willing to be long-term-oriented, which I think is one of the rarest characteristics.

How is Amazon’s organizational culture supported?

Here are a few of the ways Amazon supports its organizational culture and the four key ingredients on which it is based.

Writing and record-keeping 

During meetings, Amazon records opinions and ideas involved in making business decisions.

Employees discuss the contents page by page and evaluate the information before moving forward.

This ensures that individuals can have their queries addressed right away before they forget to mention them at the conclusion of the meeting.

Agility

Jeff Bezos’s famous two-pizza rule stipulates that each team must be small enough to be fed by two pizzas.

The rule was initially devised for technical teams to avoid information loss and foster smoother communication.

However, it has now permeated teams across the entire organization.

Innovation

Every Amazon employee is empowered to be an innovator.

While many companies claim they do the same, few would be able to match Amazon’s level of commitment. 

To that end, any employee with an innovative idea can outline their vision in a “PRFAQ” document.

As the name suggests, the document must also include a mock press release and hypothetical FAQ that explains customer benefits.

Once submitted, a team of innovators assesses the idea and decides whether it will receive funding to go to market.

Several of Amazon’s most successful products have been found this way. Examples include Prime Now, Alexa, and Amazon Go.

Startup culture

Despite its title as the largest online marketplace in the world, Amazon maintains the sort of youthful exuberance more commonly seen in start-ups.

While similarly mature companies slow down or rest on their laurels, Amazon maintains a culture that supports the constant pursuit of excellence.

With employees working as if they’re trying to get a new company off the ground, Amazon has been able to silence critics who repeatedly suggest that its energy and innovation potential is not scalable.

Downsides of Amazon’s organizational culture

Despite its customer-centrism, innovation ability, and long-term focus, some former Amazon employees described its culture as one that promoted burnout and stress.

After speaking to over 100 former staff, The New York Times found that Amazon’s culture was characterized by:

  • Anonymous evaluations and annual culling of low performers – where employees made informal pacts to intentionally leave negative feedback for certain employees and have them fired.
  • Hostile work environments – with individuals encouraged to debate and criticize their co-workers to the point of mortification.
  • Poor or non-existent boundaries – some were also required to attend conference calls whilst on vacation or work weekends and nights at home. This also manifested in instances where the company was inconsiderate and demanding toward individuals who had recently experienced personal hardships. 

Key takeaways:

  • Amazon’s organizational culture is characterized by four key ingredients: pride in operational excellence, an obsession with customers, long-term thinking, and an eagerness to invent.
  • Amazon supports its culture with various strategies. These include extensive writing and record keeping, agility, innovation, and the maintenance of a culture more commonly seen in start-ups.
  • Amazon’s constant pursuit of excellence can negatively impact some employees and create a toxic culture with poor or non-existent boundaries.

Read Also: Organizational Structure

Connected to Amazon Business Model

amazon-business-model
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services,  Amazon AWS, Subscription Services, Advertising revenues, and Physical Stores.
amazon-vision-statement-mission-statement (1)
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” 
customer-obsession
In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years. These lessons are fundamental for any entrepreneur, of small or large organization to understand the pitfalls to avoid to run a successful company!
amazon-revenue-model
Amazon has a business model with many moving parts. With the e-commerce platform which generated over $222 billion in 2021, followed by third-party stores services which generated over $103 billion, Amazon AWS, which generated over $62 billion, Amazon advertising which generated over $31 billion and Amazon Prime which also generated over $31 billion, and physical stores which generated over $17 billion.
cash-conversion-cycle-amazon
working-backwards
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
amazon-flywheel
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.

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