Benham Tabrizi
Amazon’s continuing success shows that leaders can be effective even if they lack the brilliance and drive of an entrepreneurial founder.
For once, Amazon has stolen Apple’s thunder. In a recent earnings call, the e-commerce giant beat analysts’ expectations handily, while the iPhone maker had a mixed report, some good (rising revenue), some bad (declining phone sales). And it’s worth noting what an interesting comparison that is.
A decade ago, Marc Andreesen famously said that software would eat the world. It certainly ate Wall Street. For years, financiers have been pouring money into startups with little more than some coding talent and an intriguing idea. “Pure” companies such as Google/Alphabet and Facebook/Meta, and even employee-light ones such as Uber, seemed to maximize the reward while minimizing the asset investment.
By that criterion, Amazon is in trouble. It employs over a million people and owns hundreds of warehouses. In recent years it has invested in its own fleet of trucks and other delivery assets, not to mention massive data centers. Surely such an old-fashioned emphasis on physical assets would eventually overwhelm its software chops.
But the opposite happened, mostly because founder Jeff Bezos wasn’t content with conquering the e-commerce world. He worried about complacency, and pushed his teams to go into other areas, even where they lacked expertise, with remarkable success: e-readers (Kindle), AI-driven speakers (Alexa/Echo), and cloud services (AWS). Even the failed Fire phone gave them valuable insights that went into developing Alexa.
Ok, said the critics, but Bezos was a remarkable entrepreneur and leader, with the authority and charisma to pull off those successes. His successors can’t help but slack off and become fat and happy bureaucrats, similar to what happened at Google after its founders retired. And when Bezos left in 2021, the stock dropped by half. It all seemed predictable that new CEO Andy Jassy would move to cut costs and drop several of Bezos’ innovation projects.
The recent announcement runs counter to that narrative. The stock has yet to regain its heights from before Bezos retired, but it has recovered more than half of the drop. Jassy indeed has cut costs and killed some projects, but he’s managed to keep revenues strong in all areas.
Something that gets less attention is that Amazon is working to keep up in adapting generative artificial intelligence to its products. On the earnings call, Jassy said that “every single one of our businesses has multiple generative AI initiatives going on.” Much of the buzz surrounding AI right now centers on Microsoft and Google, but it’s still early in the game. Maybe the seemingly conservative Jassy isn’t so different from Bezos after all.
Bezos’ Pygmalion EffectI recently worked with a team of researchers at Stanford University to assess dozens of companies on their ability to carry out agile innovation—to keep coming up with successful new products despite ongoing disruptions. I was especially interested in how well they pivoted according to market shifts after their initial breakthrough. After we isolated firms that succeeded and those that didn’t, we identified eight drivers of agile innovation that seemed to make a big difference.
Some of those drivers didn’t surprise us, such as an existential purpose and an obsession with customers. But others did, especially one that we called the Pygmalion Effect. Similar to the Greek myth, this happened when founders and other leaders influenced how their colleagues ran the business. The clearest example was at Tesla, where the charismatic Elon Musk enabled his colleagues to put out cars so astoundingly good that the company’s market cap soared past its far larger rivals.
It seems Bezos did something similar with Jassy. Rather than conform to the usual successor model of rationally cutting costs and maximizing profitable growth (think John Scully after Steve Jobs first led Apple), Jassy has kept pushing the e-commerce giant into new areas. On paper, Amazon has no business competing with software giants like Google. How could its leaders possibly have the focus to succeed there when they’re busy running a business with billions in hard assets and resisting unionization? Yet they’ve already demonstrated their AI chops with Alexa, and the market has decided not to bet against the company again.
It seems that the discipline to succeed in an area actually matters more than what you have on paper. The Googles of the world may have more experience and software talent, but Amazon has a proven record of commercializing areas pretty far from its core. Agile innovation depends more on a deep-seated corporate passion for change than on the talents you already have.
Moving Gradually with AIHow do we know that Jassy’s bold talk on the earnings call has substance? While maybe not as flashy as ChatGPT, Amazon is about to launch upgrades to the company’s Alexa speakers to respond to queries with generative AI. The goal is to move Alexa from a transactional assistant to a conversational partner, which could be a breakthrough in delivering services and goods.
A narrower area is in quality control. Amazon ships millions of items, and sometimes those products are defective even before they go out. Pickers can screen out some of these, but the company wants to improve on these human checks. So it is employing AI with “computer vision” to assess products as they pass out of the warehouse. The machine learning model analyzes the scans to discover hidden patterns and compare these to normal products.
We won’t know for months whether these improvements actually work well in the scaled-up real world. But they’re evidence of the company’s ambitions and its attention to detail—even under supposed caretaker Jassy. Bezos was famous for “moving ferociously, gradually,” and it looks like Jassy is continuing that relentless push.
Takeaways for CEOsAmazon’s continuing success shows that leaders can be effective even if they lack the brilliance and drive of an entrepreneurial founder. Here’s what CEOs can learn from its example:
• Take time to coach and mentor your colleagues: Even extraordinary leaders such as Bezos know they can achieve only a little on their own. They work closely with colleagues and gradually spread their points of view. It’s time well spent.
• Don’t believe the myth of decline. It’s conventional wisdom that companies can’t sustain an innovative culture over time. Success often makes people complacent and concerned about their own position and perquisites, as Google has found. But that doesn’t have to happen to your company.
• If you define yourself not by what you have, but by your deep-seated existential purpose and follow up with bold actions you can overtake seemingly better-equipped companies and start-ups and triumph in the marketplace.
Source: Chief Executive Group
Original Content: https://shorturl.at/jwBN5
