Brian Dumaine is an award-winning journalist and a contributing editor at Fortune magazine. His
book, “Bezonomics: How Amazon Is Changing Our Lives and What the World’s Best Companies Are Learning From It”, takes an unbiased look at Amazon’s increasingly dominant business model, the competitors either imitating or trying to outfox the company, and the ways “Bezonomics” is shaping the life of every American consumer.
Why you have to check out today’s episode
- Learn about the corporate culture within Amazon, and why is a “tough place” to work in
- Understand Jeff Bezos’ “Flywheel” concept of business
- Find out how Amazon threatens to disrupt the grocery business, medical business, and finance business through constant and continuous innovations
“If there’s one thing that keeps coming back to me, it’s authenticity. I think the leaders who are most successful are honest people who have a passion and believe in that passion and can listen.” – Brian Dumaine
01:26 – Introducing today’s guest, award-winning journalist Brian Dumaine
02:25 – What inspired Brian to write his book “Bezonomics”
03:31 – The corporate culture inside Amazon and what it transpires
05:32 – Why Amazon is a tough place to work in
08:20 – What Jeff Bezos does to make sure that he has a good team around him
11:35 – The Flywheel concept: What Jeff Bezos does that others don’t that led to Amazon’s exponential growth
17:28 – Amazon is an innovative company that focused on customers’ convenience
18:49 – How Jeff Bezos started Amazon, and how he developed it to what it is right now
23:15 – Through their innovations, Amazon is going to disrupt the grocery business, the health care business, and the finance business[Text Wrapping Break]27:49 – The challenges that Amazon had in expanding internationally
29:52 – Brian’s takeaway about leadership
“Propensity for forthrightness and clarity and the facts really help Amazon become an incredibly innovative company. But again, it’s a tough culture. It’s not one for everyone.” – Brian Dumaine
“If you do everything to please the customer… you’re going to attract more customers. And if you attract more customers… you’ll attract more third-party sellers who will offer more products on the site for customers. And if you do that, you get to grow your revenue. And if you grow your revenue, you’re going to have economies of scale that allow you to do more for your customers.” – Brian Dumaine
“Their [Amazon’s] tentacles reach far and wide. And, you know, you put cloud on top of that and you start wondering: Sections of the economy, are they not playing it? – Brian Dumaine
People / Resources Mentioned:
- Amazon: https://www.amazon.com/
- Amazon Go: https://www.amazon.com/b?ie=UTF8&node=16008589011
- Pillpack: https://www.pillpack.com/
- AWS: https://aws.amazon.com/
- Bezonomics: How Amazon Is Changing Our Lives and What the World’s Best Companies Are Learning from It: https://www.amazon.com/Bezonomics-Amazon-Changing-Companies-Learning/dp/1982113634
- The Everything Store: Jeff Bezos and the Age of Amazon: https://www.amazon.com/Everything-Store-Jeff-Bezos-Amazon/dp/0316219266
- Good to Great: Why Some Companies Make the Leap and Others Don’t: https://www.amazon.com/Good-Great-Some-Companies-Others/dp/0066620996
Connect with Brian Dumaine:
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
You go to any business school and the professors will teach you that communications is key and you really have to communicate what’s going on to everyone. Bezos thinks that’s a total waste of time. He thinks that if you spend all this time trying to communicate everything to everyone, it’s going to slow things down. You can’t be a fast moving, entrepreneurial company. So, the two-pizza teams, he can drive ownership down to the lowest levels of the organization. And those pizza teams really own the problem they’re responsible for. If it didn’t work, they were on the line for it. They had to make it happen and they didn’t have to waste a lot of time – that’s the positive side of it – explaining to all the different departments and all the different constituencies what they were doing.
Welcome to the Excellent International Leadership Podcast. Your host today works with the world’s leading experts on international leadership, helping them find purpose and implement their vision. She’s a master certified coach and facilitates a mastermind for CEOs of international companies. She’s the author of three books and works with Nestlé, Novartis and even the United Nations. She’s especially good at helping executives fast track to the C-suite. Welcome, Dr. Katrina Burrus.
Dr. Katrina Burrus
Today’s guest is Brian Dumaine, the founder and editor in chief of the New York media company High Water Press. He’s been a contributor to the Fortune Magazines for three decades. He’s an award-winning journalist after writing several books. Today, we’re going to listen to Brian’s current bestseller, “Bezonomics”. The book is described as an in-depth and unbiased look at Amazon’s world dominating business model. So, let’s find out more.
Welcome to the excellent international leadership. I’m your host, Dr. Katrina Burrus. And today we have the pleasure of interviewing Brian Domain. Did I pronounce that correctly?
You did, Katrina. Thanks for having me here today.
Dr. Katrina Burrus
You’ve written the book “Bezonomics”, right?
Right. Based in omics after Jeff Bezos, the founder of Amazon.
Dr. Katrina Burrus
Right. There’s quite a few books on Amazon, as I saw. What motivated you to write this book?
Well, at the time I wrote the book, there weren’t a lot of books about Amazon. There was The Everything Store, which had come out about ten years ago. But Amazon obviously grown tremendously since then and started a host of new businesses. I mean, AWS, their server business didn’t even exist at the time when that previous book was written.
So, I wanted to get inside Amazon and figure out how Bezos took this from a company which in 2001 almost went bankrupt during the .com boom to one that at the time I wrote the book had a market cap of over $1,000,000,000,000. And I was fortunate enough to be invited inside of the Amazon headquarters in Seattle. I spent time with their top executives trying to figure out their secret sauce. I mean, really, what makes Amazon different from other companies and what lessons could we learn that would be useful for other businesses?
Dr. Katrina Burrus
So, let’s start about the corporate culture. What would you say Amazon’s corporate culture is? What does it transpire?
Well, it has a few elements, but one of the most important is the “day one” mentality that Bezos instills at Amazon. “Day one” is a concept that Jeff originated, which basically says that every day you come into work, it should be like the first day of a startup. That kind of energy, that kind of drive, that kind of enthusiasm. But as an organization gets bigger, as a business gets bigger, it’s harder to keep that up. As a matter of fact, there was an instance which I wrote about in the book where Bezos was – this is a couple of years ago – addressing his he calls them his “All Hands” meeting, and he had a stadium with 17,000 employees in it. And one of the questions to him was, “Jeff, what happens on day two?” And everyone laughed because they all knew what the day one concept was. And Jeff said, “Well, I know exactly what happens on day two.” He says, “Day two looks like status, followed by irrelevance, followed by excruciating, painful decline and followed by death.” Everyone laughed in the audience, but there was a truth in that method. Bezos has pointed out in the past that most companies live only about 30 years these days. At the time, Bezos made that speeches employees. Amazon was already 25 years old. So, he believes this “day one” concept is crucial and even named his headquarters building in Seattle the Day One building. And he powers that home to his employees day in and day out. “We have this day one mentality. If you’re not enthusiastic, if you’re if you’re not entrepreneurial, Amazon is not the place for you.” And it makes it a tough place to work. And Amazon does have that reputation.
Dr. Katrina Burrus
The “tough place to work”. What you mean by that?
One of the traits of the Amazon culture is a propensity for truth telling. I mean, we all know and so many businesses, people don’t want to tell the boss the truth. People are afraid to tell the truth of what’s happening or if something goes wrong, they don’t really want to talk about it.
Well, that has no place at Amazon. And Bezos drives this home with a tool he uses, which a lot of other businesses could use, called the six-pager. And what it is, it’s a six-page memo that anyone in the company has to write who wants to do something new or create a new product or a new service or change the way things are done at the company. And well, how does that trigger truth telling? You can’t fake it with a six-page memo. What happens is that let’s say you have an idea for a talking computer called Alexis, and you want to sell that to Jeff. You have to write this six-page memo as if it were a press release, as if that project – as if Alexis already exists. And a detailed press release in the sense that it says, “What is this product for? How will people use it? How much will it cost? How are we going to make it? What features will it have?” And then at the beginning of each meeting, Bezos makes everyone in the meeting spend the first 20 minutes reading the six-page memo so that you can come in, having glanced at it and tried to fake it through the duration of the meeting. “Yeah, sure. I know.” “No, you got to read the memo. You got to know what’s in there. You got to know the facts.” And then that’s followed by an incredibly lively and sometimes heated discussion about what’s in the memo. And if you try to fake it or if you don’t know the answer and try to fake it, Bezos would go ballistic. He had these famous things called mutters, and he’d say things like, “What do you think? I took my stupid pills today?” He just did not want anyone to try to obfuscate what was going on. And that propensity for forthrightness and clarity and the facts really help Amazon become an incredibly innovative company. But again, it’s a tough culture. It’s not one for everyone.
Dr. Katrina Burrus
I understand. I used to be a coach for the Swiss government for startups, and one of the biggest challenges for these leaders was to delegate, to really go from where they’re doing it, it’s their ideas. So, you’ve shown us a way that he delegates the idea, and then you have to argue it. But what does he do to really make sure that he has a good team around him?
Well, there are a couple of things. First, a Katrina, on the delegation point, he created something he called the two-pizza teams. What that means is that on most projects, he didn’t want a team bigger than ten people because that’s the size he figured two-pizzas could feed. So that’s why as the two-pizza team, you know, you go to any business school and the professors will teach you that communications is key, and you really have to communicate what’s going on to everyone. Bezos thinks that’s a total waste of time. He thinks that if you spend all this time trying to communicate everything to everyone, it’s going to slow things down. You can’t be a fast moving, entrepreneurial company. So, the two-pizza teams, he can drive ownership down to the lowest levels of the organization. And those pizza teams really own the problem. They’re responsible for it. If it didn’t work, they were on the line for it. They had to make it happen and they didn’t have to waste a lot of time – this is the positive side of it – explaining to all the different departments and all the different constituencies what they were doing. It’s like “Alright, you create an electronic book. You’re the two-pizza team that does that. And it’s on your plate. You do it.” And that really drove responsibility down.
Now, how do you get the people in your organization – that was the other part of your question – who can handle that kind of responsibility and that kind of pressure? Bezos invented a unique type of mentoring system. And we all know about mentoring, as you take someone under your wing and you try to help them with their careers, and try to help them do their jobs better in the company. But Bezos took this to an incredible extreme. And in his mentoring program, he would put very promising managers, and he would have them shadow him for an entire year. They would go to every meeting he was in. They would travel with him, they would meet outside customers with him, etc. And that ended up creating a really strong team of top managers at the company. And they in turn would also mentor in the same way and they would build, you know, the next level of teams in the organization. Andy Jassy, who is now CEO now that Bezos stepped up to chairman of Amazon, he was the first person in the shadowing mentoring program that Bezos launched. So, in his case, it certainly worked.
Dr. Katrina Burrus
Wonderful. What a wonderful system. And yet, how do you explain this incredible growth that he’s had? It’s exponential. What does Bezos do that others don’t?
Well, one key is something I write about in the book at great length. It’s called “The Flywheel Concept”. The flywheel is it’s not a system or a piece of software. It’s a mental model that is the key to Amazon’s growth. And what it is, It started back in 2001. I mentioned earlier that Amazon was in financial trouble. As your listeners and viewers might remember, the .com boom in 2000 and 2001 just devastated the whole online market. And Amazon stock at the time, which was a high-flying stock, which is around $107 a share, dropped to around $6 a share. And Barron’s magazine had a headline that was titled “Amazon.bomb”. And everybody thought Amazon was going to go out of business and they were hemorrhaging money. Many names back then, like Pets.com literally went out of business and everybody thought Amazon was going to be one of those.
Well, there’s this management thought leader Jim Collins, who’s the author of Good to Great. And Jim is one of the top business thinkers in the world. He’s just tremendous. And Jeff knew that back in 2000 when he reached out to Jim and asked him to come up and address him and the board about what to do, because it was a life and death struggle as the typical burning platform situation. You know, you’ve got to do something. And what Collins told them was “In a time of great stress or crisis, don’t just react to all the bad news. If you do that, you’re just going to be digging yourself into a deeper hole.” And instead, he said, “You’ve got to create a flywheel for growth”. And what did he mean by that? Well, a flywheel is a virtuous cycle. It’s a way of thinking about your business. It’s a way of thinking about how to grow your business that you want to be integral to your business model. You want everyone in your organization to understand this and to help push the flywheel. And it’s a long-term process, it’s not an overnight miracle cure something. You start pushing the flywheel and you start pushing it more, and more people start pushing, and it goes a little faster and it goes a little faster.
Now, what’s in the flywheel, and how does it work? When Bezos heard this, he immediately drew a sketch on the back of an envelope, and it started with the customer – and everything starts with the customer in Amazon. And that’s the key to the flywheel. The flywheel focuses on the customer. So, if you do everything to please the customer, let’s say, lower prices, you keep lowering prices. If you do that, you’re going to attract more customers. And if you attract more customers, in Amazon’s case, you’re attract more third-party sellers who will offer more products on the site for customers. And if you do that, you get to grow your revenue. And if you grow your revenue, you’re going to have economies of scale that allow you to do more for your customers. Cut prices more, offer them more services like Prime, or like Alexa, or Kindle or whatever. And it goes back to the customer. And then what do you do? You lower prices more. You attract more sellers who are going to offer more goods and delight the customer more. And that’s going to attract more customers. In the end, the flywheel starts spinning and spinning and spinning and spinning. And at Amazon, everybody knows about this flywheel concept. If you interview for a job at Amazon, you’ve got to understand what the flywheel is and how you as an individual can help push that flywheel faster and faster.
And so, Jeff implemented that back in 2001 when the company was on the brink of death. And he started pushing that flywheel and he got everyone else to understand it and start pushing that flywheel. And that’s why, you know, Amazon is known for delighting the customer, right? They go beyond the call of duty to do what the customer wants. I mean, I had this personal experience with Amazon once where I ordered a Cedar Garden gate and it arrived and it was too small for what I needed. And I noticed when I went back to return it that it was sold by a third-party seller and there were no returns on this game. So, I called up Amazon Customer Service and I said, “Look, you know, I didn’t realize I couldn’t return this because with Amazon, you just think you can return everything, right?” And they said, “Yeah, that third party seller doesn’t want to take returns”. But I didn’t have to argue. They said, “Just keep the gate and we’ll refund you the amount of money.” That was it. And you know, what company does that, right? I mean, that’s the flywheel at work, right? That person that I called in customer service knew about the flywheel and knew they were supposed to do everything in their power to delight the customer. And that will help push the flywheel a little faster.
Dr. Katrina Burrus
Yes, that, and also his strong creativity of new products that are incredible.
Yeah, absolutely. Amazon is one of the most innovative companies in the world if you look at the list of things they developed. First, their online commerce, the e-commerce. They practically invented it. I mean, a lot of other people were doing it, but they did it in a way that really works. And Bezos invented the buy button. Instead of having to put in all your information every time in order to buy something online, you figured out with one click you could automatically buy something. And that became like crack for consumers, right? I mean, it was just “Yeah, it’s easy to buy, I’m just going to push this button.” You don’t have to think about it halfway through when you’re putting your credit card information in, you might think “Oh, maybe I don’t really need this garden gate”. I could get something else. But no, if it’s a one click button, Amazon has you.
[Text Wrapping Break]Dr. Katrina Burrus
No resistance, exactly taking all the friction out of the customer experience. That’s what they’re great at.
Dr. Katrina Burrus
Tell us a little bit how it started for our listeners that might not know as much as you. How did Bezos start?
Absolutely. This was the mid-1990s and Bezos was a young man. He had a computer science degree from Princeton. He was working at a hedge fund in New York City and was sitting at his desk. One day he saw that this thing called the Internet was growing at 1300% a year, and he’d never seen anything in his life that had grown 1300 percent a year. So, he knew he had to do something with the Internet, but he didn’t know what. So, he went to his bosses and he said he wanted to go start an Internet company. And they said, “You’re crazy. You’re one of the most successful young people we have here. You’ve got a great career ahead of you.” And he said, “I know I’ve just got to do this.” He has a no regret philosophy of life. He doesn’t want to wake up when he’s 80 and then regret not having taken the chance, like going off to start an Internet company, which back then was a brave thing to do when you had a really lucrative job on Wall Street. And if he just stuck with it, you know, you’re guaranteed to be rich and successful. But he wanted to take that chance. And what a side it was that he offered his boss the opportunity to invest $1,000,000 in his company and his boss turned him down. Imagine what that million dollars would be worth today.
He took off to Seattle to start an online book company. Now, people say, “Well, why books?” Bezos didn’t really care about selling. He didn’t start out to be a bookseller, right? He wanted to create a technology platform, and it just happened that books were the first products he chose. Well, they were easy to store, they didn’t spoil on the shelves like groceries. They’re pretty uniform in size, so they’re easy to ship. And, you know, people pretty much knew what they were getting. I mean, they could read book reviews and know they could get the latest Tom Clancy or they didn’t have to do a lot of explaining. So, he set up this bookselling company and it took off. One of the reasons he chose Seattle, well, a couple of reasons: One, it was near a big book wholesaler, so it was easier to get a hold of the books he had to ship out. And two, he didn’t want to pay sales tax. And so, he knew the big markets like California and New York, if he’s operating inside those state boundaries, he’d have to pay sales tax and those would be his biggest markets.
So, he set up shop in Seattle and then from there the company just took off. He applied his “day one” mentality, he applied the flywheel, kept innovating the long list of innovations from the online buying in the first place, to Kindle Fire phone, which was a flop. But he used the learning from that to create the Fire TV and Alexa and all the Echo products that they have out now.
And now they’ve got home security products. And the biggest invention of all was AWS, which is their cloud computing business, which now creates more profits than any other segment of Amazon. How that arose was that Bezos was always about speeding things up and innovating faster and faster and he founded a software where programmers had to reinvent the wheel basically every time they wanted to do a project because they all had their own computer systems or a bunch of silos around the company. And he said, “Why don’t we just centralize our computing knowhow so that all our programmers can basically operate off the same system and we wouldn’t have to duplicate a lot of effort?” And that was a huge success. So successful that one day he said, “Well, why don’t we just start selling this service to outsiders?” And they started doing that. And now AWS is the largest cloud computing company in the world. I mean, tremendous success, as I’ve said earlier, you know, it’s the most profitable segment of Amazon.
Dr. Katrina Burrus
I’m going to ask you another question, because Amazon has gotten so big that a lot of stores are going out of business because they have the old model. Sociologically, how do you think that Amazon and all the service it provides will change the way we do things?
Amazon has already changed the way we shop. I mean, especially during the pandemic. Amazon was a lifesaver for a lot of people because they were confined to their homes or quarantined or whatever, and they couldn’t go into stores. They didn’t want to go into stores for a reason. But Amazon was there to provide goods for them. And their growth during the pandemic was just rocket like. They were big to start with and they got even bigger and more powerful in the marketplace. That’s in the retail segment. I think what people don’t realize is that Amazon’s taking its model and it’s spreading it to different industries in the economy.
Health care, for example, Amazon has an online pharmacy business called Pillpack, and it’s working with telemedicine. So, they’re creating this system where, you know, you can have an appointment with your doctor online. You’ll have a video checkup. Alexa can schedule it for you can remind you that you got the checkup. The doctor can say, “Well, you know, I think you need some antibiotics, Katrina.” And you say, “Great”, at which point Amazon will deliver the antibiotics through Pillpack directly to your door because they have the delivery capabilities as well, so it’s like one stop shopping for health care. They’re doing this with their employees so far, they’re setting up the system, it has been working quite well. And it’s only a matter of time, I think, before they launch it to the general public and that that could start disrupting the health care business.
They’re doing it with finance. Think about the number of Amazon Prime members they have. I think it’s the last I looked at it coming on to 200 million. They’ve got all their financial information. How long before they can start offering checking accounts for their prime members? You know, they already offer credit cards. They already have Amazon Pay where you can use Amazon to pay your bills. I subscribe to The Washington Post, which, Jeff Bezos also happens to own. My subscription gets billed every month, but my Amazon account pays for that. And you can go to certain stores now and use your Amazon account on your phone to buy whatever it is you’re looking for.
And groceries are also moving into obviously, they bought Whole Foods. They’re trying to use technology to disrupt that industry. They have Amazon Go, which is a technology which I experienced in Seattle. It’s quite amazing. It feels like shoplifting. You take your phone and it’s got an Amazon go app on it. You scan it through a turnstile when you walk into the store and then you just pick up whatever you want on the shelves, whatever groceries you want or sandwiches or sodas or whatever, you put it in a bag and you walk out of the store and then your Amazon account is automatically charged and there are no cashier’s, you don’t check out. And they have cameras in the ceilings and scales and weight scales on the shelves that know exactly what item you’re picking up and which ones you’re walking out of the store with. And they’re starting to roll that out in a lot of their Amazon stores, and they’re testing it at Whole Foods as well.
So, they’re going to disrupt the grocery business, the health care business, the finance business.
They’re heavily invested in electric vehicles because they want to electrify their delivery fleet. And they’ve made big investments in a number of EV startup and including RIVIAN, which now has this incredible electric pickup truck. And they’re going to be building delivery vans for Amazon. So, their tentacles reach far and wide. And, you know, you put cloud on top of that and you start wondering: Sections of the economy, are they not playing it?
Dr. Katrina Burrus
Well, I’ll tell you. And it’s going so fast. Look, we’re coming almost to the end of our podcast. So, I wanted to ask you one question. Since this is excellent international leadership, what kind of challenges did he have to expand internationally for Amazon?
Yeah, he has a lot of challenges internationally. I mean, the last time I looked, the international businesses on e-commerce businesses were still not making money because he has to spend money to expand in Europe and in Asia. China basically was a no go for Amazon because the Chinese government was favoring their homegrown e-commerce businesses. India has been an incredibly tough challenge for them for the same reason as in China. Amazon has made a foothold in Europe, but there are challenges there as well with regulations and privacy issues etc.
So, international has been tough for them. I mean, they’re incredibly successful in their cloud business internationally because it’s easier to cross borders in a cloud computing business than it is in a retail business. But, you know, they’re going to keep pushing the flywheel all around the world and they are growing at some point. I think they will be profitable in their international ventures. But it is a tough call for them.
Dr. Katrina Burrus
For having shopped in Europe and U.S, it is seamless in the U.S. The easiest thing. In Europe is a little more challenging and more expensive because maybe if I’m in Switzerland and I purchase from London, of course the transport expenses are a lot, things like that. So, it’s not as beneficial, but still it’s coming.
It’s coming. That’s right.
Dr. Katrina Burrus
You’ve done several books. You’ve written several books and you’ve studied leadership. What has all your research work? What do you take away about leadership?
Wow, That’s a broad question. I think if there’s one thing that keeps coming back to me, it’s authenticity. I think the leaders who are most successful are honest people who have a passion and believe in that passion and can listen. I think part of authenticity is being able to listen because if you’re listening to other people and you’re not being authentic, you’re just saying what you want to say and you don’t really care what anyone else wants to say. So, it’s that personal element. I mean, you can be super smart in finance or in marketing or in technology, but if you don’t have the right kind of authentic personality, I don’t think you’re going to go far as a leader these days, especially when the job is shifting from pure profit generation to more of an ESG role, where you have to address and communicate with more constituencies out there, your employees, and your customers, and communities and etc. And that’s a tough job because you have to really be empathetic and you have to be passionate and you have to be bold. Most importantly, I have to be a good listener. And I think, looking back in all the leadership coverage I’ve done, that’s what sticks out the most in terms of who’s going to be a successful leader who’s not.
Dr. Katrina Burrus
I want to thank you very, very much, Mr. Brian Dumaine and Bezonomics. I encourage my listeners to purchase the book. It’s fascinating. Thank you so very much for your time.
It was a pleasure being here today.
Dr. Katrina Burrus
Thank you for listening to the Excellent International Leadership Podcast. You can subscribe to all future podcasts at excellentexecutivecoaching.com and select podcasts. Join us each Thursday to learn more about the latest trends and leadership techniques and bring your leadership to the next level. To learn more about Dr. Burrus’s coaching programs and the International Leadership Mastermind, use the contact form at excellentexecutivecoaching.com.