PRINCIPLES ARE NOT A POSTER

The Pursuit of Speed, Agility, and Digital Leadership

I think it’s important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. [With analogy] we are doing this because it’s like something else that was done, or it is like what other people are doing. [With first principles] you boil things down to the most fundamental truths . . . and then reason up from there.

—Elon Musk

Like any industry, the management consulting industry has a marketing machine devoted to constantly generating interest and demand. The term “digital transformation” is one of those concepts conceived and perpetuated by this machine. Conceptually, it is meant to insinuate that any company should be able to become the digital version of itself with the proper assessment and implementation.

Yet, as I’ve worked with executives to create digital strategies and cultures over the past 10 years, I’ve become convinced that competing and winning in the digital era is as much about creating personal change in executives and their beliefs, habits, and priorities as it is about the overall strategy. But guess what? Most don’t really want to challenge their assumptions of the business, change their operating model, or make personal changes. They are “all hat and no cattle.”

THE 10-YEAR AMAZON FORECAST

You can be certain Amazon is running financial, logistics, headcount, and infrastructure scenarios to 2029. Of course, we don’t have access to those. At the likely risk of being highly inaccurate or even flat-out wrong, let’s look forward 10 years at what Amazon might be.

Amazon’s 2018 financial result was roughly $240 billion in revenue, and has been growing between 20 percent and 40 percent for years. If, for the next 10 years, Amazon grows at a rate of 20 percent, Amazon’s revenue will be roughly $1.5 trillion in 2029 Given the breadth of Amazon’s businesses, its penchant for expanding into new ones, and its ability to ride global market trends such as e-commerce, I would argue this estimate might even be low. Wow!

What projections do I have beyond astronomical financial growth? Here are a few more peeks into the future.

In some ways, Amazon is becoming an infrastructure company. Much of what you will see in the next 10 years concerns building and optimizing infrastructure to make retail delivery easier or to make computing power more local through AWS. By 2029, Amazon will operate a large, last-mile carrier fleet, which will deliver a sizable chunk (although not a majority) of its packages to customers. Many of these trucks will be autonomous driving trucks manned by a sole runner. Sustainable power generation and use will be an increased area of innovation for Amazon. By 2029, Amazon will generate all the power needed for AWS and for their completely electric-power truck fleet, which will also be primarily autonomous. In addition, Amazon will have greatly expanded its blimp and drone operations. As a result, I expect 50 percent of all Amazon fleet deliveries to be done by either an autonomous truck or by a drone.

On-demand and adaptable manufacturing will be a capability and a business (manufacturing-as-a-business) at Amazon. What’s the best way to give the customers exactly what they want? Let them configure and choose exactly what they want. What’s the best way to minimize inventory, returned inventory, and transportation costs? Manufacture a custom item close to the customers. Like many of Amazon’s most profitable businesses, this is a platform engaging in on-demand manufacturing both for Amazon and for others, taking the momentum of the “maker movement” and unleashing the creativity of hundreds of thousands of designers and makers for unique products such as eyeglasses, apparel, and devices. Perhaps it will be called “Manufacturing By Amazon” (MBA). I’m predicting that Amazon will be the largest apparel manufacturer and retailer in the world.

Alexa will be a major operating system in 2029, running a Windows-like 75 percent of all voice interfaces in all industries. Alexa will not only be a force in the home but also in business settings as voice becomes a powerful interface.

Food and grocery will be a big business as well for Amazon. By 2029, the company will have revolutionized agriculture by developing high-tech growing farms in major urban areas, and those farms will achieve 100 times more effective food production than the current model.

Amazon will own or brand a 5G cellular network, and part of the Prime proposition will be a peerless, always-on 5G data plan for Prime members. This will largely reshape the current wireless carrier picture given that 70 percent of all U.S. households will be Prime members, and a majority will utilize Amazon 5G cellular service. And the most profitable Amazon business in 2029? Advertising. Amazon Advertising is a powerful competitor to Google, and it runs digital and next-generation in-store advertising at all Amazon properties and beyond Amazon properties.

Amazon will be a major player in healthcare reform, but it will still be early in the industry transformation. Amazon will have “just-walk-in clinics” leveraging the next-generation capabilities that will allow their employees to receive on-demand and primarily remote doctors’ appointments. Amazon will be selling generic pharmaceuticals, and it will have launched a Prime Health healthcare insurance plan for Prime members.

In 2029, Bezos will be just Amazon’s chairman. He will have stepped away from the CEO position to focus his time and fortune on Blue Origin, which will be setting up its first permanent space colonies. Amazon will be fighting a European-led effort to force the breakup of Amazon into three separate companies—Consumer (retail), AWS, and Logistics. Amazon will have come up with a novel approach—actually splitting the company into over 15 companies, independent but managed under one stock and transparent operating agreement. This fragmentation will help avoid the dreaded ABCs.

In 2029, HQ4 will be in the process of being set up in Brazil, and Amazon will have 700,000 worldwide employees, which is not so different from today’s 500,000. Why is that? Since fulfillment center automation will have become so widespread, Amazon’s employee growth rate will have slowed. In addition, Amazon will have reinvented many management techniques, including an Echo-based management assistant that participates in all management meetings for immediate recall and validation of facts and trends and for capturing decisions and commitments made by team members.

Amazon will change a lot in the next 10 years. Growth, new businesses that they are not in today. The largest company in the world. So, what will not change about Amazon? The principles of leadership will continue to define their expectations for all Amazon employees. The 50 ideas in this book will be constant, and they will remain at the center of Amazon’s core culture: metrics, operational excellence, thinking big but betting small, and of course, customer obsession. In 2029, they will still believe it is Day 1, and they will prioritize long-term optimization over short-term results, invent and simplify, create accountability and avoid bureaucracy. They will also still have ridiculously high standards for employees and will be viewed as a demanding, but great place to work.

PERSONAL HABITS

It’s not just that new habits are hard to create. It’s that old habits are hard to break. I’ve tried to give up desserts this year. So far, I’ve been reasonably successful, but at the end of the year, will this new habit be ingrained, or will I degenerate into the same old dessert-addicted adult who eats like a teenager?

Many of Amazon’s ideas in this book require personal commitment. You need to become the chief product officer. You need to spend time designing the right metrics. You need to spend time writing and editing narratives. Will you commit to doing these things? The best way to catalyze this type of change is to focus on the group habits of you and your direct leadership team. Commit to them for at least a year. See what works for you.

Creating change in organizations takes tremendous effort and is often high risk. Even calling the process an “initiative” sends the message that it’s a temporary state. People with entrenched attitudes know they can outlast the commitment to change, and they will simply bide their time until everyone loses focus and submits to organizational entropy. Part of the leadership challenge is being sincere—actually believing and practicing the behaviors you are espousing. Nothing is as toxic as a poser. If you say it, you must also live it.

Amazon’s leadership principles work because they are authentically Amazon. Although they borrowed many ideas from others, they spent years hammering out and practicing the leadership principles before they were codified. When I was at Amazon, the principles were not even written down. However, we practiced them every day, at all levels in the organization. At some point along the way, the leadership team did commit pen to paper. I can imagine the intensity of the debates that spawned those sentences. Today, Amazon continues to internally question and refine those principles. It is a given that they will need to evolve. After all, it’s still Day 1.

Even smart leaders naturally want to snap their fingers and announce, “From now on, this is how we will operate.” It is a completely understandable pitfall. While dramatic, the classic “change by declaration” approach doesn’t work. Organizational transformation is not magic. It is not spontaneous. It is not easy.

The 50 ideas in this book are authentic beliefs, strategies, and techniques used at Amazon to build and manage the dynamic business we all admire, if not fear, today. But that does not mean they are all the right ideas for you. Be thoughtful, be deliberate, be authentic, and be patient in creating the changes in your business, and in yourself, to compete in the digital era.

GIVE ME THE ½ IDEA!

You’ve patiently read the book (maybe you skipped ahead!), wondering, What is the “half idea”? Amazon’s leadership principles and how the company’s leaders operationalize them, how they drive accountability, build world-class operations, and systematically solve problems to drive innovation and come up with big ideas for new businesses—these are the 50 ideas you are now equipped with.

The “half idea” is the following question, which only you can answer: How will you build the traits of the truly digital business and culture to ensure Amazon-like results, to become the best digitally enabled business you can be and not become roadkill on the side of the digital disruption highway?

What’s the second half to this idea? Your answer to this question. Take it from here!