Amazon Working Backwards Method

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.”

Aspect	Explanation
Definition	The Working Backwards Method is a problem-solving and product development approach used by companies like Amazon to create new products, services, or features. It starts by defining the desired outcome or customer experience and works backward to identify the necessary steps and components to achieve that outcome. Rather than beginning with a solution or product idea, this method begins with the customer’s needs and builds from there. It emphasizes customer-centricity and innovation.
Key Steps	– Start with the Customer: Begin by understanding the customer’s needs, pain points, and the experience you want to deliver. Define the “customer backward” vision of success. – Identify the Final Outcome: Determine what the ideal end state or outcome should be, both for the customer and the business. This serves as the guiding vision. – Work Backward: Break down the final outcome into smaller, actionable steps or components. Each step should move you closer to the desired outcome. – Prioritize and Iterate: Prioritize the steps and iterate on the plan, seeking feedback and refining the approach as needed. – Build and Execute: Start building and executing the plan, with a focus on delivering the customer-centric outcome. – Continuous Improvement: Continuously measure, learn, and adapt based on customer feedback and data to refine the solution further.
Benefits	– Customer-Centric: The method ensures that the end product or solution is directly aligned with the customer’s needs and expectations. – Innovation: It fosters innovation by encouraging teams to think creatively about how to achieve the desired outcome. – Clarity: Starting with the end goal provides clarity and a clear sense of purpose for all team members. – Flexibility: Teams can adapt and pivot as they learn more about what works best to achieve the desired outcome.
Challenges	– Complexity: Some problems may be complex, and it can be challenging to break them down into actionable steps. – Customer Understanding: Obtaining a deep understanding of the customer’s needs and defining the “customer backward” vision can be time-consuming and require thorough research. – Resource Allocation: Determining resource allocation and timelines for each step can be tricky.
Applications	The Working Backwards Method is commonly used in product development, especially in technology companies. Amazon, in particular, is known for its use of this approach when creating new products and services. – It is also valuable in problem-solving scenarios where the desired outcome is clear but the path to achieving it is not.

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 product does 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 business model, 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.

Key Highlights

Understanding the Method: The Amazon Working Backwards Method emphasizes building products based on customer needs rather than starting with a product idea and trying to fit customers into it. This approach gained prominence after Amazon employee Ian McAllister shared it on Quora, highlighting its customer-centric nature.
Customer Obsession and Product Discovery: Amazon’s approach goes beyond data and involves understanding customer needs through intuition, curiosity, and a builder mindset. It involves an iterative process of building, reworking, experimenting, and iterating to develop valuable insights.
Resource-Intensive but Effective: Despite being resource-intensive, Amazon CEO Jeff Bezos highlighted that the Working Backwards Process is designed to save work in the long run by ensuring the right product is built.
Core Component: Press Release: A crucial principle is to imagine the product is ready to ship and create an imaginary press release. This press release envisions the product’s benefits, problem-solving capability, and customer experience. It serves as a guiding document throughout development.
Press Release Elements:
- Heading: Catchy product name resonating with customers.
- Sub-heading: Concise target audience description.
- Summary: Key benefits the product offers.
- Problem: Identification of a problem and its solution.
- Solution: Practical explanation of how the product solves the problem.
- Quote: Inspirational quote explaining reasons for product development.
- Call to Action: Directing customers to utilize the new product.
- Testimonial: Hypothetical customer testimonial.
- FAQ (optional): Addressing common questions or concerns.
Benefits of the Method:
- Enhances emotional intelligence: Reduces emotional attachment to unviable ideas, allowing teams to objectively evaluate ideas.
- Idea legitimacy: Forces teams to flesh out and refine ideas, aligning them with customer needs.
- Avoids scope creep: A well-defined press release keeps the product team on track and prevents scope expansion.
Example: Tracking Deer on a Farm:
- Illustration of the method’s application using a fictional example of developing a deer tracking solution for a deer farmer.
- Addressing questions like customer identity, problem, key benefits, customer needs identification, and customer experience.
Sample Press Release:
- Creating a mini press release for the deer tracking product, illustrating how the product solves the problem and benefits the customer.
Successful Amazon Launches Using the Method:
- Amazon Kindle: Building an ecosystem around the Kindle.
- Amazon Prime: Transforming the buying experience and launching a streaming service.
- Amazon Web Services (AWS): Creating a successful business unit focused on cloud services.

Case Studies

Company/Project	Description	Application of “Working Backwards”	Purpose of “Working Backwards”
Amazon Kindle	Development of the Kindle e-reader.	Starting with the ideal reading experience for users.	Create a user-centric e-reader and transform the e-book industry.
Amazon Prime	Creation of Amazon Prime, the subscription service.	Defining the ultimate shopping experience, including fast delivery.	Improve customer loyalty, engagement, and shopping experience.
Amazon Web Services (AWS)	Development of a comprehensive cloud platform.	Working backward from the needs of developers and businesses.	Offer scalable and reliable cloud services to a wide range of customers.
Tesla Model 3	Design and production of the Model 3 electric car.	Imagining an affordable electric vehicle with broad appeal.	Make electric cars more accessible and drive sustainability.
Netflix Original Content	Creation of original content like “House of Cards.”	Focusing on content that keeps subscribers engaged and attracts new users.	Become a major player in the entertainment industry.
Apple iPhone	Development of the groundbreaking iPhone.	Envisioning a revolutionary device combining phone, iPod, and internet.	Transform the smartphone industry and redefine communication.
Airbnb Experiences	Launch of Airbnb Experiences offering local activities.	Starting with travelers’ desire for immersive and authentic experiences.	Expand platform offerings and provide hosts with income opportunities.

Connected to Amazon Business Model

Walmart vs. Amazon

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.

eBay vs. Amazon

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.

Is Amazon Profitable without AWS?

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.

Is Amazon Profitable?

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 Mission Statement

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 Revenues

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.

Amazon Cash Conversion

Working Backwards

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.

Jeff Bezos Day One

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.”