The Chris Voss Show - The Chris Voss Show Podcast – The Amazon Way: Amazon’s 14 Leadership Principles by John Rossman

Episode Date: March 3, 2022

The Amazon Way: Amazon's 14 Leadership Principles by John Rossman The 3rd edition of The Amazon Way is one of the rare business leadership books giving actionable insights for innovation and business growth to be the basis for your digital transformation gameplan. The Amazon Way translates Amazon's unique culture and management practices into insights and opportunities, as only an Amazon executive and expert advisor could do for the Amazon Leadership Principles giving readers one of the essential business leadership books for the digital era. Peppered with humorous and enlightening firsthand anecdotes with Jeff Bezos from the author’s career at Amazon, this revealing business guide is also filled with the valuable lessons that have served Jeff Bezos’ “everything store” so well—providing expert advice for aspiring entrepreneurs, CEOs, and investors. The author was responsible for launching the Amazon Marketplace business and had accountability for the enterprise services business. Since leaving Amazon, Rossman has worked across every industry sector and with companies of all sizes to create business and product strategies, approaches to scale leadership, culture and innovation. It’s this combination of Amazon insider experience coupled with a vast portfolio of helping other businesses compete which make The Amazon Way a guide for anyone looking to compete in the digital era. The 3rd edition has many new and updated sections. This includes a new foreword from Tom Alberg, managing partner at Madrona Venture Group. Tom was on the board of directors at Amazon for 23 years. A new preface is included suggesting a vital strategy for Amazon and the leadership teams for all companies. The Amazon Way is on a short list of essential business leadership books and should be a key addition to business leadership programs to develop a culture of growth and innovation. If you are interviewing at Amazon or for current Amazon employees, The Amazon Way will be an invaluable asset for your success. The Amazon Way doesn't just explain the Amazon Leadership Principles, but gives tools, mechanisms and atomic habits to create change in a team or business. The leadership principles and examples include customer obsession, long-term thinking, think big, working backwards and the future press release, bias for action, earn trust and free cash flow. Praise for The Amazon Way "In this new edition, John Rossman provides an updated, in-depth and invaluable view of the principles that are fueling Amazon's extraordinary business success. John's suggestion to add a new principle focused on the Golden Rule is a great one for every company, as, more than ever, we need business to serve the common good!" - Hubert Joly, former chairman and CEO of Best Buy, author The Heart of Business - Leadership Principles for the Next Era of Capitalism "In The Amazon Way, John Rossman brilliantly illuminates Amazon's secretive corporate culture, using HIS rare insider's perspective to show how Jeff Bezos has created unique systems that facilitate good decision making at all levels of his company" -- Brad Stone, author of The Everything Store and Amazon Unbound

You wanted the best. You've got the best podcast, the hottest podcast in the world. The Chris Voss Show, the preeminent podcast with guests so smart you may experience serious brain bleed. Get ready, get ready, strap yourself in. Keep your hands, arms and legs inside the vehicle at all times. Because you're about to go on a monster education roller coaster with your brain now here's your host chris voss hi folks this is voss here from the chris voss show.com the chris voss show.com hey we're coming here with another great podcast we certainly oh my gosh appreciate you coming by the show and spending time with us today remember refer the show to spending time with us today.

Remember, refer to the show to your family, friends, relatives. Everybody should be involved in the show because remember, the Chris Foss Show is a family that loves you, but unlike most of the other ones, we don't judge you. We're the best kind of family, really, when it comes down to it. Go to Goodreads.com for us as Chris Foss. See everything we're reading and reviewing. All of our groups on YouTube and LinkedIn and Facebook and Twitter and Instagram and everywhere those crazy kids play with those phones, except for Snapchat for the most obvious of reasons. I don't know about that joke.

So we're excited to announce my new book is coming out. It's called Beacons of Leadership, Inspiring Lessons of Success in Business and Innovation. It's going to be coming out on October 5th, 2021. And I'm really excited for you to get a chance to read this book. It's filled with a multitude of my insightful stories, lessons, my life, and experiences in leadership and character. I give you some of the secrets from my CEO Entrepreneur Toolbox that I use to scale my business success, innovate, and build a multitude of companies. I've been a CEO for, what is it, like 33, 35 years now. We talk about leadership, the importance of leadership, how to become a great leader, and how anyone can become a great leader as well.

Or order the book wherever fine books are sold. Anyway, guys, thanks for tuning in. We have an amazing author on the show. Who knew we saw that coming? 12 years of doing this. Another amazing author? No way. Say it isn't so, this. Another amazing author? No way. Say it isn't so, Chris. The amazing, I was going to say the amazing, The Amazon Way. Amazon's 14

leadership principles came out June 9th, 2021. John Rossman is going to be on the show with us here. He's going to be talking about his amazing book and everything he learned about Amazon. You may have heard of it. They've got these, they've got a warehouse or two or something. John Rossman is the author of the Amazon Waybook series, a former Amazon leader and managing partner at Rossman Partners, an advisory firm that helps clients compete in the digital era. Mr. Rossman, Rossman, my apologies, is an expert at crafting and implementing innovative and digital business models and capabilities. He sought after a speaker on leadership, innovation, and company culture, and he was an executive at Amazon.com, where he played a key role in launching the Amazon Marketplace business as the Director of Merchant Integration.

Welcome to the show, John. How are you? Chris, great to be here. Thanks for the invitation. Appreciate your energy. Thanks for coming. We certainly appreciate you coming by. So give us your plugs, your dot coms, where you want people to find you on those interwebs.

Perfect. Rossman.com is a great place to find me, and I have a newsletter at Substack. It's called the Digital Leader Newsletter, and LinkedIn, John Rossman is an easy way to track me down. There you go. There you go. Give us a rundown on what motivated you to write this book. Yeah. So I was at Amazon from early 2002 through late 2005. Launched the marketplace business, talked about it, ran enterprise services. When I left Amazon in late 2005, started working with clients to help their digital strategy, digital transformation. And it was about six years after I left Amazon, a client of mine at the Gates Foundation said,

hey, John, you do a really clever job of putting the little strategies and tricks and approaches from Amazon to work in our business, you ought to write a book. So the smartest thing I did was I talked him into being my partner on the book. So we wrote the first edition of the Amazon Way in 2014, as you mentioned, just released the third edition of that, some updates in that new forward by a gentleman by the name of Tom Allberg, who was on the board at Amazon for 23 years. And what I've found is none of this is about Amazon, right? Like my books, my work, it's all about what can other businesses, what can other leaders take from a company like Amazon to help innovate, to help grow their company, how to keep a culture that is about customers

and about accountability. They certainly did something amazing with what they built. Somehow on my YouTube feed, I saw videos of him in the old days where they were in Seattle in a rickety office and he had a wood, he had I think a T, I think a door desk. Yeah. Yeah. And the guy's like worth a billion dollars driving a Honda. So the door desk is a good example of a principle versus a mechanism, right? So a principle is about frugality and it's all about encouraging

people at Amazon to use resources smartly and to use constraints as a vehicle, as a forcing function to innovate. So for every principle, you want to have mechanisms. A mechanism is a technique or a symbol or a reminder of how to keep that principle alive in your organization. So the door desk is purely a symbolic message to the organization about frugality and that we want to spend our resources on things that matter to customers and the things that matter to scaling. A desk doesn't impact those things. So let's try not to spend our money on that. That's pretty brilliant. Maybe Amazon or Walmart copied that because they have, I guess they have a low down basic corporate headquarters somewhere.

A lot of retailers come from that ethos because retail is such a margin driven business and tends to be smaller margins and everything. So that doesn't surprise me. A lot of these principles come from other places. Some of these principles are about operational excellence and things like that. Amazon built on the shoulders of others relative to those. It's just that these are the principles

that have made Amazon real. One of the things I encourage teams to do and leaders to do is take your time and not that these are the right principles for you, but what are your principles? How do you make common decisions? How do you hold others accountable? How are you investing in the business? And if you can outline a set of tenets or principles, guess what you're going to do? You're all going to operate better because you're going to have similar frameworks for how you make decisions and how you work together. Now, you've outlined in the book, there's basically 14 leadership principles. Tease us out on a few of maybe your favorites.

Yeah, absolutely. The first leadership principle is called customer obsession. And it's about that leaders at Amazon start with the customer and work backwards. They work vigorously to earn and keep customer trust. And while they pay attention to competitors, they obsess about customers. And it is just the first of many. And sometimes people forget, like it's just one of several and you really have to understand the balance of levers and principles you use for any particular circumstance. But I think really this is the principle that sets the basis for everything else. And Amazon really means it in both a tactical sense and a strategic sense. From a tactical sense, what I mean is, hey, we have to get every transaction right for a customer. That's what trust is all about. From a strategic sense,

this leadership principle says, we're willing to explore anything as long as it serves a customer. And we're going to be curious about a customer much bigger and broader than just the product or service that we work with them today. Another great leadership principle is the third one, which is called invent and simplify. And what I think is really interesting about that leadership principle is that simplifying is seen as to be both as important and as hard as inventing. So many companies become complex, right? Complex processes, complex jobs, complex policies, complex data flows, complex rules, everything. And so much value, complex products and SKUs, a lot of complexity

in that. So much value can be created by going through a rationalization process of simplifying, integrating, and then automating how work gets done in organizations. And people really don't appreciate the value of doing that relative to scale. Maybe the last one I'll talk about is one that's called bias fraction. Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk-taking. So that's the principle. The mechanism for that is this concept around how we make decisions. And they have a concept called one way doors versus two way doors. One way door decisions are ones that you can't come back from. So like a merger is a good example of a one way door decision. A two way door decision is one that

you can actually make. You can test it, you can evaluate and you can easily reverse it. And what so many people do is they don't think through, how could I take what appears to be a big moment, a big decision, and actually break it down into smaller ones so that we can test and learn and create speed in our organization versus bringing everything to center and forcing ourselves to slow down so that we can have all of these big committee meetings and make big decisions and shielding ourselves from accountability. And so those are a couple of good ones that really show the breadth and the depth of these types of leadership principles. I really, the most recent one, I really like that because there's so many companies that will pour so much effort into making a decision.

Facebook had the failing fast, but they'll research it to death, detail it by death. And then a lot of times they'll miss the moment. The moment will pass of some sort of innovation or some sort of new vehicle they could jump on that could increase revenues or product stream. If you sit around waiting to build a new iPad, Steve Jobs may be the punch, that sort of thing. There's probably some other examples of that. So much of it is really an operational and real-time moment where you know the right thing to do, but instead you go and ask for permission relative to doing it right. And that's where speed is just critical to a business. And you want to, everybody talks about wanting to empower their people. Well, empower them to make and train them on these are the right decisions to make at the right speed. And these are the types of decisions

where we want to bring them to the middle and we want to talk about them a little bit, but people don't have a framework for thinking through there's actually different types of decisions. And here's how we want to think about it. So that's where a simple mechanism like one-way doors versus two-way doors helps people operate to that principle appropriately. Yeah. That really makes sense. I never thought of it from the simplicity of that, but that's on your second point, you talked about how by making things over detailed and over complex, things just grind to a halt and nothing can get done because it's just bogged down in bureaucracy and everything else. I remember I've had two times where I had friends build some really innovative apps that really would have been mind-blowing. One case may be giving WordPress a run for their money.

But when I sat down with it, I said, let me play with it. And I'm very good at intuitive stuff because we review a lot of products in the crisp box i get stuff and i'm like i i test for the review for the intuitiveness like can i figure out what this product is without having to go read the manual how simple and easy it is for a consumer especially a layman to just be able to grab it and go and i remember one of my friends he spent 45 minutes he goes no i can't just give it to you i've got to show it to you and we're and he spent 45 minutes. He goes, no, I can't just give it to you. I've got to show it to you. And he spent 45 minutes explaining his product to me. And I'm like, dude, you can't go around to every consumer who buys your product and spend 45 minutes trying to fucking teach them your product. So one of the real important concepts from Amazon is this concept of self-service.

And self-service means that other people should be able to use your stuff, your product, your service, your capability, your tool, your function. They should be able to use it without having to talk to you. And that means both external customers and internal customers too. So the business I launched at Amazon, the marketplace business, our goal was to be able to launch tens of thousands of third-party sellers without ever having to talk to us. But we had a very complex set of choreography that was needed. So we really had to think through how do we build all of the capabilities to meet sellers where they were at, give them the right tools, the right examples, the right documentation, the right testing

environments, all of the right data models so that they could integrate in a very complex choreography, but being able to do it fast and without needing our support. That was a hard design and engineering problem, but that forcing that self-service mindset was the complete unlock of the winning strategy for that marketplace business. The marketplace business today is over 58% of all units shipped and sold at Amazon, over 3 million sellers on the marketplace business. And I really do believe it's because we were told you have to make it self-service from the start. And it really worked. I am one of the Amazon seller marketplace. Normally we get a lot of goods that were sent to us to review. So we'll just sell those off as review units. I am one of the Amazon seller marketplace. Normally we get a lot of goods that were sent us

to review. So we'll just sell those off as review units. I buy a lot of stuff. I'll sell them off as new used review stuff at a discounted rate. If I buy something like an Xbox or something and I don't want the Xbox anymore, I'll sell it that way. It's way better than eBay. eBay, everybody wants to buy it. It's such a better customer experience too. It's all about trust and you understand what you're buying. Amazon takes the same level of accountability for a marketplace item as they do for whether they're the retail seller of it. Yeah. The fact that I never have been able to figure out when I first started my account, but I swear to God, I've been doing it since 2013, 2014. It's been a long time and I've made really good money on it.

And it always holds well. It's a great service. There's been a couple of times where I've come across these scammers that they try and hustle the system, but I haven't run into one for a while. There was a while there was running a whole bunch of them, but yeah, it's just run. And yeah, I never really talked to Amazon, anybody Amazon for the first 10 years or something. However long it's been, I don't know, five, six years before I really talked to anybody or need anything. It was just, it just worked like a machine. You get paid, boom, boom. To give you an example,

about a year or two ago, there's certain products we can't put on Amazon because of these people have a block now. It's a new thing. They're like, it's not, unless you're selling new, you can't compete with us or something. And so we start up a Walmart reseller account. You want to talk about a freaking non-intuitive nightmare process. Insane. And then they made it more insane because it's so non-intuitive. People hate it. They've made it more insane where they try and handle you through it,

but they don't handle you through it. They just try. How come you have a list listed your first product yet? Because your system's a pain in the ass. You want to talk about night and day. Like I'm literally telling the Walmart agents, one of you needs to go over and use an Amazon seller account and see what the hell is going on.

Cause you're like, you're like, I don't know. It was, you're like the Palm pilot CEO back in the day who had never used an iPhone or seen an iPhone. And yet you were criticizing it and you had no idea what you're talking about. Making things simple is not simple

work. In fact, it's some of the hardest work of making it both full capability and as obvious and intuitive, as simple as possible. And that's the really hard engineering work that goes into a good organization. And the key benefit you get do is go through and re-rationalizing and simplify so many things, products, SKUs, processes, organizations, data flows, data capabilities, instructions, policies, like all of those things. And you have to do it in a holistic manner. You can't do just one of those topics together. And what you get out of that is true scale. And that was the number one thing we were thinking about as an operational leader at Amazon was how do we scale?

That meant we need to be able to do more on an improving unit economic basis. That's hard to do. And what are some other aspects? We don't have to do all the 14 principles, but what are some other things you think people are going to find in the book? I think one of the core concepts about Amazon is thinking big, right? And so the leadership principle says, thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers. So a couple of things I would talk about that is, first of all, making it a priority results. They think differently and look around corners for ways to serve customers.

So a couple of things I would talk about that is, first of all, making it a priority to actually think about the future and think big and then work backwards relative to, okay, so what should we be doing now relative to creating that path towards thinking big. Everybody runs with such a short-termism, a short runway in front of them. They actually don't have a discipline for doing this. And then it's really about how do we do that? So Amazon has this whole technique that I talk about in the book, The Amazon Way, about future press releases, writing narratives, frequently asked questions, and how you debate those things as a team. That is about thinking big, starting with the end in mind, and then working backwards to, well, is that the right idea for us to do? Exactly how would we articulate it? What's the killer feature

relative to it? And then making careful decisions about our resources and which of these ideas do we go forward to? Every company has, let's call it a hundred things they could go do. The key is picking the one or two innovative ideas that you should go do. You can't do them all. And so the better you can play this thought experiment game of thinking like, what's the big idea? And then working backwards and debating those before you decide to go forward, then you can pick one or two and really go for it. So I think that's the other really important idea. The big idea from Amazon is thinking big. Yeah, it's a big vision. And it's interesting how you guys really got honed in on so many

different levels. His focus on customer service and the customer is everything. And you just feel so comfortable buying from them. You're like, my mom, she bought something from Walmart and I had to go over and help her. She bought the standing desk and it came in and after she got it, she was reading the reviews and they were really awful and it was still in the box. And so we had to take it back to Walmart. We literally had to go to Walmart and give them the desk. I had to load it up in her van. And had to go to Walmart and give them the desk. I had to load it up in our van. And I was like, Mom, next time I order from Amazon, they just send you a label.

You call a guy, pick it up. It's done. Or there's 10 other ways that you can drop off a return. You don't even have to put it in a box anymore for Amazon. You just show them your QR code, you hand them the item and they're off. Think about how many companies think about making returns easy, right? Only Amazon really does that. And they forced other companies to do it. They've made it a competitive issue. But only Amazon was like, because it benefits the customer, because we think long-term and if the customer trusts buying from us and that returns will be

easy, they're going to buy more from us over a long period of time. That's true customer obsession. That's understanding customer lifetime value versus order value. And so again, mechanism versus leadership principle, the leadership principle, customer obsession, thinking long-term, the mechanism, understanding customer lifetime value versus just order or item economics. Those are really important concepts. And that allows you to invest in non-intuitive aspects of your business and in the customer experience, like making returns super easy. And that really speaks to a thing in building that trust factor, if you will, with customers.

Years ago with my mortgage company, sometimes something we had screwed up or something was wrong or sometimes whatever the communication was between our loan officer and the client and they'd be unhappy at closing. And so I'd have to make decisions many times to refund whatever sort of discrepancy it was. Or sometimes it was just a matter of, look, what do I need to do to make you happy? And I do it. And there were some times where sometimes our refunds were like five grand, several thousand dollars. It was very painful at the time. And the client would be surprised and they would be happy. Usually, it was funny.

They would call me up. And whenever I got the message from my executive secretary, there's a customer online. He's very angry. He wants to talk to the president and CEO. And I'd be like, okay, so that's one of my calls. And you pick up and they'd usually start hammering down. I'd just be like, look, what do I need to do to make you happy? How do we fix this for you? Because you're very upset about it. How do I fix it? And they'd just be stunned. Yeah, yeah. And the underlying point is these lessons, these concepts are applicable in any industry for any company, regardless of size. And if you can build a culture that is all aligned

around whatever your version of these concepts are, you're going to operate better. You're going to have more fun. People are going to be more empowered. They're going to grow as leaders. It has so many benefits to it. That's what I do with my clients in my keynotes is help them think through what's your future? How do you create the right digital version of that capability? But more importantly, how do you build a team and a culture that operates with similar notions for who we are and what we believe in? Yeah, it's really easy. The other thing we used to have, we used to have a giant telemarketing department and I would, you'd have one of the telemarketers go up, somebody's angry with us, they're on the phone, they want to talk to the manager. And I just pick up the phone and I go,

I understand you want your number taken off your list. We've taken it off right now. So you're taken care of. And they would just be like, they would go from starting DL to, Oh, okay. All right. Well, thank you. Thank you. And part of it was my voice and how I delivered that customer service where they would go, Oh, this guy gets it. Yeah. Okay. All right. He's got it. So we're going to get it done and we'll be, and we'll be, and we'll be fine. Yeah. It's, it really comes down to that and it makes all the difference in the world. People just need to get it. Now, anything else you want to touch on the book before we go out? It's a quick read, right? It's available in Kindle, Audible, and paperback.

I had a design principle for it, which was somebody should be able to read it on one plane ride with a glass of wine. And so I think I hit my design principle. And so it's meant to be a very readable, approachable story of kind of my time at Amazon and the leadership principles that came out of that. Yeah. A lot of great principles. I mean, there's a reason you guys are the number one company on everything and just eating up the world, if you will. So there you go.

It's been wonderful to have you on. Thank you for coming by the show, John. We certainly appreciate it. Awesome. Thanks, Chris. There you go. And give us your plugs one more time so we can find you on the interwebs. Sure. So the book is The Amazon Way.

You can find it at Amazon. My website is RossmanPartners.com, and I have a weekly free newsletter, The Digital Leader Newsletter. You can find it on Substack or just Google for it. Awesome. Thanks, my friends, for tuning in. Go to Goodreads.com, force us, Chris Voss. Hit the bell notification button. Go to all of our groups on Facebook, LinkedIn, and Twitter.

Pick up the new book that just came out last year, The Amazon Way, or the updated one, I should say. Amazon's 14 Leadership Principles. I love leadership stuff. That's my thing. Anyway, guys, thanks for tuning in. Be good to each other. Stay safe, and we'll see you next time.