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.”
Understanding the Amazon Working Backwards Method
Customer obsession goes beyond quantitative and qualitative data about customers, and it moves around customers’ feedback to gather valuable insights. Those insights start with the entrepreneur’s wandering process, driven by hunch, gut, intuition, curiosity, and a builder mindset. The product discovery moves around a building, reworking, experimenting, and iterating loop.
Amazon CEO Jeff Bezos later admitted that while the method was resource intensive, it saved a lot of work later in the product development process.
“The Working Backwards Process is not designed to be easy; it is designed to save a huge amount of work on the backend and to make sure we are building the right thing,” said Bezos.
A fundamental principle of Amazon’s method is that the product team must imagine the product is ready to ship.
This entails drafting an imaginary press release. In the next section, we will discuss this core component of Amazon’s method in more detail.
The Amazon Working Backwards Method press release
Amazon allows the product team to draft the press release in any way they see fit.
However, McAllister noted that it should occupy a page and a half or less and be broken down into short paragraphs of three to four sentences.
It must also contain certain elements, including:
Heading
Containing the product name in a form that will resonate with the customer.
Sub-heading
Concisely describing the intended customer or target audience in no more than a sentence.
Summary
Or a brief product summary focusing on the benefits the product will deliver to the customer.
Product teams should assume that the reader will focus most of their attention here, so the summary must be high quality.
Problem
Identifying a problem and then describing how the product in question offers a solution.
Solution
How does the product solve the problem in practice? The language must be relatable and not use technical jargon.
Quote
Include an inspirational quote from a company representative explaining the reasons for developing the product.
The company should also detail what they hope the customer will gain by using the product.
Is it extra time or money? Perhaps it is related to confidence or an increased feeling of autonomy?
Call to action
It is important to direct the customer to take advantage of the new product.
Testimonial
Since the product has not been created yet, the team must create a hypothetical testimonial.
Focusing on the benefits of the product is recommended first and foremost.
FAQ
Or a similar addendum answering common questions or concerns. This feature is optional.
The benefits of the Amazon Working Backwards Method
Amazon’s method helps decision makers become more emotionally intelligent.
Product teams often become emotionally attached to unviable ideas. Without proper due diligence, these teams find it difficult to let go of ideas and spend vast amounts of time and money trying to make them work.
By drafting a mock press release, the team is forced to flesh out and then refine an idea in detail.
This makes idea legitimacy more apparent because teams are forced to clarify whether their intentions are aligned with customer needs.
With a more objective approach, decisions are based on thoughtful and considered research and analysis.
If a productdoes progress to development, a well-crafted press release helps the product team stay on track and avoid scope creep.
Amazon working backwards example
How can other businesses replicate Amazon’s success and work backward from the customer during product development?
This is illustrated in the fictional example below.
Let’s start with a description based on five customer questions.
1 – Who is the customer?
The customer in this example is a deer farmer who finds it difficult to locate individuals in the herd and cannot determine their health at any given time.
2 – What is their problem?
The deer farmer owns a vast property which means they have to track deer in remote and mountainous areas where communication is a problem.
3 – What is the most important customer benefit?
The most important customer benefit is a solution that enables the farmer to track deer over the entirety of their acreage at a reasonable price.
To realize this benefit, a low-power wide-area network (LPWAN) product is envisioned to enable the farmer to track their deer across vast distances.
Combined with readily available sensors incorporated into a deer’s collar, the farmer can access a cost-effective app that provides real-time location and body temperature data.
4 – How does the company know what the customer wants or needs?
The company can analyze various forms of customer data to either verify its assumptions or identify other needs or wants of the deer farmer. This can be sourced from:
Behavioral metrics
Which measure current interactions between customers and a product or service via direct observation.
Qualitative feedback
Qualitative data that is collected from direct customer feedback or observations of what they are doing and how they are doing it.
Qualitative research is performed by businesses that acknowledge the human condition and want to learn more about it. Some of the key characteristics of qualitative research that enable practitioners to perform qualitative inquiry comprise small data, absence of definitive truth, the importance of context, researcher’s skills and are of interests.
Subjective metrics
Quantitative data of the customer experience which can be measured with calibrated instruments or close-ended rating systems.
5 – Describe the customer experience. What does it look like?
At this point, the company quickly and economically illustrates the customer experience by sketching it out.
The team calls the deer farmer Michael whose customer experience is briefly detailed below:
Deer farmer Michael finds it difficult to monitor or track his animals. He experiences a financial loss when deer wander off his property or perish due to ill health.
Michael downloads the Deer Tracker app and then installs numerous antennae in different areas of his property. He also places tracking collars on each deer.
When a deer is in poor health or has wandered off the property, Michael receives an alert and knows exactly where the animal is located.
After six months of using Deer Finder, Michael’s herd management system is much more effective. No longer a manual task, he has also saved invaluable time and money.
Sample press release
Let’s now craft a mini press release to complete the working backwards process.
Heading
Introducing Deer Tracker, a more efficient, app-based way to track deer
Sub-heading
Agricultural services company works with university students to develop an efficient, cost-effective deer monitoring and tracking system for farmers in California.
First paragraph (problem, solution, quote)
Los Angeles Times, August 19, 2022
Students at the University of California-Davis and agricultural services company Rural Co. have today released the Deer Tracker app. The app, which relays information sent from animal collars to a low-cost wireless network, enables deer farmers to better track the location and health of individuals in their herd.
While Deer Tracker will reduce the number of deer that are lost on vast properties, the app will be especially useful during the critical birthing season when the health of expectant mothers needs to be monitored constantly. Californian deer farmer Michael said the app would allow him to streamline herd management and maximize its economic benefits.
“This new system now means I can keep track of my deer regardless of where they are on my property”, he explained. “I’m a fourth-generation farmer here and in the past, a deer that wandered into an inaccessible area was almost impossible to recover. With Deer Tracker, we no longer lose deer in this way and suffer the financial losses that result. We’re also able to monitor the health of pregnant does and intervene with veterinary care if required. Both the locational and health monitoring features of the app save me a significant sum of money.”
What products did Amazon launch with the Working Backwards Method?
Some of the most incredible products/services that Amazon managed to launch over the years were the result of this approach.
Of course, for one thing, this approach has been used to test many ideas, and it also generated major failures.
However, Amazon, thanks to this process, also generated great hits.
Some of these hits comprised:
Amazon Kindle: This would become the core physical product sold by the company, enabling it to create a publishing ecosystem on top of the Kindle.
Amazon Prime: This became an essential element of Amazon’s businessmodel, as it enabled the company to make the buying experience sustainable over Amazon by making shipping free, while enabling Amazon to launch its streaming service. This has been one of the most interesting strategies Amazon employed. Amazon leveraged content and a streaming library to make its subscription appealing while also making shipping faster and free for prime members!
AWS: This turned into the most interesting business unit for the company, which as of now, is a company for its own sake. AWS, born as a way to order the jumbled mess that had become Amazon’s infrastructure turned into the most successful business unit within Amazon, and potentially a stand-alone company.
Key takeaways
The Amazon Working Backwards Method is a product development framework where teams create hypothetical products based on real customer needs.
Central to The Amazon Working Backwards Method is the creation of a press release announcing the release of the product. The press release must demonstrate that the company has a sound grasp of its target audience and their particular needs, among other things.
The Amazon Working Backwards Method enhances the emotional intelligence of product teams. Crafting a press release removes emotional attachment from product design and avoids low viability ideas being pursued indefinitely.
In 2022, Amazon closed its divide in terms of total revenue, as it generated over $513 billion in revenue, compared to over $572 billion in revenue from Walmart.
In 2021, Amazon generated almost $470 billion in revenue, vs. eBay’s over $10.4 billion. In comparison, looking at revenues, Amazon was 45x times larger than eBay.
Amazon was not profitable once AWS was removed in 2022. In fact, Amazon, without AWS generated $10.6 billion in operating losses. While Amazon, without AWS, generated $12.2. billion operating income.
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’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.”
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 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.
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.”
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.
In the letter to shareholders in 2016, Jeff Bezos addressed a topic he had been thinking quite profoundly in the last decades as he led Amazon: Day 1. As Jeff Bezos put it “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
