Jeff bezos gets it


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Jeff bezos gets it

  1. 1. ^^Afew months ago Amazon reached what its founder and CEO Jeff Bezos demurelytells me was "an interesting milestone." The retailing giant, so ubiquitously asso-ciated with books, then music and video, now has more than 20 million productsin stock—and a majority of them are nonmedia goods: drills, dress shoes, tennisrackets and almost anything else that a human can ship. Adults may srill mentallylink Amazon widi Barnes & Noble, but to teenagers Amazon is now synonymous with .store.That remarkable turning point might be Bezos greatest accomplishment. In officially trans-forming Amazon fi-om an online bookstore that sells other stLiff to a retailer—and husiness ser-vices provider—that once sold niosriy books, he has taken one of the original Internet bonanzasand created a success story all over again. Its stock is up 397% in the last five years.BEST CEOSBezos 10 Rules 79Could You Workfor Amazon? 84Update on the WebHeroes of 1998 86MEL KARMAZIN 88CEO PAY DATA 94BEST BOSSES EORTHE BUCK 9676 I FORBES APRIL 23.2012
  2. 2. PHOTOGRAPHS BY MICHAEL PRINCE FOR FORBESJEFF BEZOS GETS ITIn an era when high-flying tech companies outdo each other with workerperl<s, the no-frills billionaire is proving the potency of another model:coddling his 164 million customers, not his 56,000 employees.BY GEORGE ANDERSAPRIL 23.2012 FORBES I 77
  3. 3. FORBESTHE BEST CEOS —AMAZONSJEFF BEZOSwith a net worth of some $19 billion, the 48-year-old isone ofthe 30 richest men in the world. Yet he still dashesaround Amazon with the intensity of a startup boss trying tomake his first payroll, as well as the glee of a teenager dis-covering all the fun you can have at overnight camp. "Im alegitimately happy person," Bezos explains on a recent, rainyFriday morning at Amazons Seattle headquarters. "My wifesays: If Jeff is unhappy, just wait five minutes. "Whats not to he happy about? Hes the numher one CEOin America. The passing of Steve Johs has left him, withoutquestion, as the corporate chief that others most want tomeet, emulate and deify. And his primacy can be provenwith numbers: FORBES ranking of top CEOS—using abang-for-the-huck methodology that factors in sustainedperformance, modest compensadon and the ability to pullahead of ones peers—has Bezos comfortably in the top spotIndeed, hes in the highest 5% in every single metric.Across numerous e-mail back-and-forths and face-to-face questions with Bezos, Ive come to understand why.More than a century ago another legendai-y retailer,Chicagos Marshall Field, championed the fatalists slogan:"The customer is always right" Bezos, perhaps more thananyone, has taken that mantra into the digital era, incre-mentally cracking one of the businesss gi-eat mysteries: fig-uring what customers want before the cash register ringsand then making those insights pay off In an era whenhigh-flying tech companies outdo each other with workerperks, no-frills Bezos is proving the potency of anotherAmazons new digs are in Seattles elegantly rehabbed South Lai<e Union district. One building is named Rufus in honor of a beloved dog.78 I FORBES APRIL 23.2012
  4. 4. model: coddling his 164 million customers, not his 56,000employees.JEFF BEZOS MANAGERS AT AMAZON find him formi-dable enough. But the figure that overwhelms their lives goesby the internal nickname "the empty chair." Bezos periodi-cally leaves one seat open at a conference table and informsall attendees that they should consider that seat occupied bytheir customer, "the most important person in the room."If the empty chair is the ultimate boss at Amazon, thenBezos is its billionaire enforcer, the guardian of what he callsthe "culture of metrics" that tries to give that inanimate ob-ject a loud, clear voice. Amazon tracks its performanceagainst about 500 measurable goals. Nearly 80% relate tocustomer objectives. Some Amazonians try to reduce out-of-stock merchandise. Others race to huild a bigger library ofdownloadable movies. Intricate algorithms turn one i^roup ofshoppers past habits into custom recommendations tor newcustomers. Hourly bestseller lists identify whats hot. Weeklyreviews keep track of who is on course—and where correc-tive attention is needed.Amazon is so confident of its ahility to personalize thesite for each user that the company hardly ever creates clas-sic customer-segment personas, such as "soccer moms" or"gearheads." Such marketing standhys are too imprecise forTeam Bezos.Feisty dehates over what metrics to watch are Amazonsway of life. "Theres an incredible amount of challenging theJEFF BEZOS TOP TEN MAXIMS, DECODEDWith the passing of Steve Jobs, Jeff Bezos is now techs leading philosopher-CEO. His adviceranges from what to read (give the Declaration of Independence a shot) to how to deal with stress("Laugh a lot"). Mostly, though, Bezos sticks to business."BASE YOUR STRATEGY ON THINGSTHAT WONT CHANGE."Selling lipstick, tractor seats, e-book readersand data storage are all part of one big planwith three big constants: offer wider selec-tion, lower prices and fast, reliable delivery."OBSESS OVERCUSTOMERS."Early on Bezos brought an empty chair intomeetings so lieutenants would be forced tothink about the crucial participant whowasnt in the room: the customer Now thatsurrogates role is played by specially trainedemployees, dubbed "Customer ExperienceBar Raisers." When they frown, vicepresidents tremble."WE ARE WILLING TO BEMISUNDERSTOOD FOR LONGPERIODS OF TIME."Many of Amazons expansions look like money-losing distractions at first. That sometimessends the companys stock price skidding andevokes analysts scorn. Bezos shrugs. If the newinitiatives make strategic sense to him, a five-to-seven-year financial payoff is okay"THERE ARE TWO KINDS OFCOMPANIES: THOSE THAT TRYTO CHARGE MORE AND THOSETHAT WORK TO CHARGE LESS.WE WILL BE THE SECOND."Lots of retailers talk about holding down costsand passing the savings to the consumer. Fewdo so as intently as Amazon, where "frugality"is one of eight official company values. Thereward for putting up with cheap officefurniture: a $90 billion stock market valuationand 35% revenue growth."DETERMINE WHATYOUR CUSTOMERS NEED,AND WORK BACKWARDS."Specs for Amazons big new projects such asits Kindle tablets and e-book readers havebeen defined by customers desires ratherthan engineers tastes. If customers dontwant something its gone, even if that meansbreaking apart a once powerful department."OUR CULTURE IS FRIENDLY ANDINTENSE, BUT IF PUSH COMES TOSHOVE WELL SETTLE FOR INTENSE."Data reigns supreme at Amazon, particularlyhead-to-head tests of customers reactions todifferent features or site designs. Bezos callsit "a culture of metrics." With dozens of thesegladiator-style showdowns under way eachweek, there isnt much time for soothingwords or elaborate rituals of social cohesion."IF YOU WANT TO BE INVENTIVE,YOU HAVE TO BE WILLING TO FAIL."Early on the company hired a lot of editorsto write book and music reviews—and thendecided to use customers critiques instead.A foray into auctions flopped. Bezos regardssuch stumbles as a part of life, as long asAmazon can learn something useful."IN THE OLD WORLD, YOU DEVOTED30% OF YOUR TIME TO BUILDINGA GREAT SERVICE AND 70% OF YOURTIME TO SHOUTING ABOUT IT. IN THENEW WORLD, THAT INVERTS."Amazons ad budgets are surprisingly smallfor a retailer of its size. Bezos believes old-fashioned word-of-mouth has become evenmore important in the digital age—so heprefers low-key process improvements thatare meant to get happy customers buzzing.One favorite: Amazons war on clamshellpackaging, so toys and other shipments willbe easier to open."EVERYONE HAS TO BE ABLETO WORK IN A CALL CENTER."Complaints can be devastating in the age ofviral tweets and blogs. Bezos asks thou.sandsof Amazon managers, including himself, toattend two days of call-center training eachyear. The payoff: humility and empathy forthe customer"THIS IS DAY 1 FOR THEINTERNET. WE STILL HAVESO MUCH TO LEARN."Bezos first made that observation in 1997, inhis initial letter to Amazons shareholders. Hehasnt budged from it. At Amazons newheadquarters two of the largest buildings areDay 1 North and Day 1 South. In interviewsBezos still talks about the internet as anuncharted world, imperfectly understood andyielding new surprises all the time. —G.A.APRIL 23,2012 FORBES I 79
  5. 5. FORBESTHE BEST CEOS —AMAZONSJEFF BEZOSother person," says Manfred Bluemel, a former senior mar-ket reseaicher at Amazon. "You want to have absolute cer-tainty about what you are saying. If you can stand a harrageof questions, then you have picked the right metric. But youhad better have your stuff together. The best number wins."Bezos is even stricter about what customers dont want.They hate delays, defects and out-of-stock products, so themetrics patrol at Amazon constantly tracks such numbers,looking to make them as rare as possible. Even the tiniestdelay in loading a Web page isnt tiivial. Amazon has metricsshowing that a 0.1 second delay in page rendering can trans-late into a 1% drop in customer activity.Former executives all have stories about Bezos obsessivefocus on the customer. Simon Murdoch, the former head ofAmazons British operations, remembers offering customersin the U.K. next-day delivery if their order was in by 4 p.m.;Bezos personally hammered him to extend that deliveryv indow to 6 p.m., 7 p.m. and later, even if it meant radicalchanges in wareliouse hours. (Today Amazon offers same-day delivery for much of Britain and ten U.S. cities if theorder gets in that morning.) Another one-time insider re-members a relentless push for sturdier-than-usual cardboardso customers could reuse its boxes for other shipments orpresents, creating goodwill and putting Amazons name infront of a second set of potential customers.Tina Patterson, a senior Amazon brand manager fi-om2007 to 2011, recalls tense moments previewing televisionads for the soon-to-launch Kindle. Early versions included awhimsical snippet where a Kindle-carrying reader trans-formed into a brave matador, tossed into the air by a charg-ing bull. Everyone giggled—except Bezos. He hit the rewindbutton and silently replayed the matador scene. Then hettnuieil to the gi^oup and adopted a gi^ade-school teacherssomber voice: "I know its cute, and lots of people will thinkthe hull is funny. But the customer right there is getting hisass kicked. We cant let him get hurt."Bezos zealous protection has paid off Each yeai- the Uni-versity of Michigan calculates a customer-satisfaction indexfor 225 of Americas largest companies. Amazon has led theonline retailing category for years and has repeatedly placedin the top 10 among all companies. Currently only Heinz,Clorox, Apple and three car brands topped Amazon.But great customer service doesnt fully explain Amazonsextiaordinaiy success. Other high-touch online retailerscant match the $48 billion in sales Amazon did last year.Meanwhile, traditional retailers like Target and Costco play
  6. 6. up customer service too—yet their combined market capital-ization trails Amazons $98 billion.For Bezos a data-driven customer focus lets him take risksto innovate, secure in the belief that hes doing the right thing."We are comfortable planring seeds and wairing for them togrow into tiees," says Bezos. "We dont focus on the oprics ofthe next quarter; we focus on what is going to be good forcustomers. I think this aspect of our culture is rare."Amazons Kindle, for example, came into being becauseBezos, internalizing hundreds of data points, helieved mil-lions of people would want a crisp e-book reader that coulddownload any book in 60 seconds or less. He set that deliverytarget without getring pinned down by technical is.sues aboutthe right compression rarios or transmission speeds for hookfiles. Engineers were free to solve technical challenges as theysaw fit. They just needed to make it right for consumers. Ittook years for Ainazon to master the hardware necessary tobuild such devices, hut Bezos didnt blink. When one financeexecurive asked how much he was prepared to spend on theproject, the CEO shot back: "How much do we have?"That kind of tliinking has ti"ansformed Amazon. After wildswings associated with the dot-com boom and crash, Ama-zons performance was essenrially flat between mid-2003 andearly 2007, in lockstep with the industries it was associatedwith: books, music and the like. Then Amazon t(K)k off afresh,as investors realized that Bezos had been quietly building amulritude of new growth engines inside his company. Allwere rooted in the same theoiy: If Amazon lets customers setthe specs, it could conquer any number of consumer productsand services. Bezos also decided to court business customers(and freak out his own engineers) by turning Amazons inter-nal software architecture inside out and selling access to it.The boss new diktat upended Amazons approach to tasksranging from quality a.ssurance to interteam communicarion.In 2006 he launched Amazon Web Services a.s a stand-alone business. It rang up an esrimated $1 billion in revenuelast year, with $2 billion in its sights, thanks to an even fastergrowth rate than Amazons main storefront. It serves cus-tomers ranging from NASA to Netflix with dozens of c-heap,on-demand computer services via the "cloud." During theCassini space prohes explorarion of Saturn, raw data for180,000 photos were processed on Amazons computerswithin flve hours, at a cost of less than $200, says TomasSoderstrom of NASAs Jet Propulsion Lab. Doing the job in-house would have taken 15 days, he says.Last Octobers launch of the Kindle Fire, a computingIntroducing the entirely new Acura RDX. Intelligently built for the size ofyour life.its big without being too big. Its small without being not big enough. Powerful but not gluttonous. Stylish butnot ostentatious. It has the best highway fuel mileage for a V-6 in its classyet it boasts a surprising 273 horsepowIts everything youre looking for in a luxury crossover And more. And less. The entirely new Acura RDXifkatimreg!sleridlrs:l^
  7. 7. THE BEST CEOS —AMAZONSJEFF BEZOSKiva bystems robots make warehouses more efficient. Amazon bought the firm last month.tablet that can play music and videos, has again hurt short-term profitability. Amazons selling price of $199 doesnt ap-pear to cover costs. Bezos isnt perturbed. He calls the Fire"the most successful product weve ever launched." To himthe bullish case for the Fire is obvious. If it induces ownersto buy more from Amazon, the costs of spreading thesetablets globally will be well worth it.THIS RENEWED AMAZON is basically a personal mani-festation of Bezos, who is equal parts quant and dreamer.Growing up in Houston and Miami, Bezos never paused fora traditional retailers apprenticeship—i.e., selling things.Rather, he crunched numbers, once proudly telling hisgi-andmother that he had calculated how much her cigarettehabit was shortening her life. He went to Princeton to studyphysics and ended up in computer science, which led to abrief, lucrative career on Wall Street.The dreamer side of Bezos wants to be at the frontier. Histeenage hope was to become an astronaut, and he pushedhimself to be high-school valedictorian to improve hischances. He spent .summers as a teenager on his grandfa-thers 25,000-acre ranch in Texas, fixing machines, workingwith cattle and learning about self-reliance.The respect for that ethic explains why Amazon screensits job candidates for a strong bias to action and an ability towork through ambiguity. Both help identify people who caninnovate fast and do right by the customer. One popular in-terviewing tack: asking candidates to create an action plan asbrand managers in an area where they lack any directknowledge—and then being told they have no budget.Stumped candidates will find their path into Amazon slip-ping away. Those who cobble together guemlla answers—in-formal polls throu^ free online toolssuch as SurveyMonkey—tend to thriveat Amazon. They are the same peoplewho might have challenged Bezos inmath class and also succeeded onGrandpas ranch.Efficiency—cheapness, in the eyesof Amazons detractors—is as much apart of the Amazon culture as theempty chair. In fact, Bezos links thetwo. In his 2009 letter to sharehold-ers, Bezos declared that Amazon hadbegun waging wai on niuda, theJapanese word for waste. The morehe could get rid of needless costs, theeasier it would be to deliver rock-bot-tom prices to customers. This crusade,he wrote, was "incredibly energizing."During interviews for this storyBezos cited Amazons recent successin improving its warehouse usage 23%, "recapturing 6 millionsquaie feet of undemtilized space." He also takes pride inAmazons work to presort packages for carriers such asFedEx, so shipments arent delayed by the carriers need tocarry out further "sortation."Soitation? "We use that word so frequently that it rolls offour tongues," Bezos says with a smile. "But its not a com-mon word, is it?"The companys executives feel the pinch. Bezos keeps aneerily tight rein on expenses, eschewing color printers infavor of trusty old black-and-white models. No one fiies firstclass (though Bezos sometimes rents private jets at his ownexpense). Experiments are hatched and managed by thesmallest teams possible; if it takes more than two pizzas tofeed a work group, Bezos once observed, then the team istoo big. Offices still get cheap desks made of particleboarddoor blanks, a 1990s holdover that Bezos refuses to change.Managers may grumble, but they learn to bring sandpa-per to work so their merino sweaters dont get shredded bysplinters. None of the companys five top officers earns morethan $175,000 in cash a year. Bezos last year took $81,840 insalary and hasnt had a raise since 1998. He has rai.sed at least$750 million since 2010 by selling Amazon shares, but thatshow you make your money at his company. Stock and op-tions are the big honeypots; many on the leadership teamhave $20 million or more in unvested shares.This mind-set is an outlier in an industry that views tal-ent as a delicate asset in need of constant pampering; in Sil-icon Valley perks like free on-site massages are as rote as apot of coffee in the kitchen area. At, wherecurrent and former employees rate their companies as aplace to work, Amazon generates a middling 3.1 out of 5,82 I FORBES APRIL 23.2012
  8. 8. FORBFSTHE BEST CEOS —AMAZONSJEFF BEZOSCOULD YOU WORKFOR JEFF BEZOS? is on a hiring spree. Its global workforce nowexceeds 56,000 employees—and jobs are open in 53 depart-ments, including account management and website produc-tion. Before you start imagining yourself on Team Bezos, how-ever, take this diagnostic quiz. Then youll know better if thehighly idiosyncratic culture is right for you.Dn ynii ¡¡ke making multicolor pie charts?Try McKinseyAt Amazon theoffice printersare strictlyblack-and-white. The bosssays color coststoo much.Do you like talking trash about the competition?Try OracleAt Amazon referencingrivals in public or privatewont help your career.Focus on the customer.Do you like flymyfirst class or business?At Amazonexecutivestravel in coach.Do you want yourclothes dry-cleaned,free of charge?Try FacebookAt Amazonfrugality is acompanyvalue. SiliconValley-styleperks dontexist.Do you expect the company tothrow an all-hands t>ash whena big project is done?At Amazon stock optionsare the main reward.Work hard, do well andyou might get rich.putting it somewhere between Delta Airlines (3.2) andBurger King (3.0).Steve Yegge, a Google employee and former Amazon en-gineer, chronicled his frustradons last Octoher in a 4,500-word Internet posdng that has atti-acted more than 100,000readers. He complained about the decor at Amazon, thefood, the pay and the need to do grungy tasks at dmes. Hepoiti-ayed his former boss as Dread Pirate Bezos, who issuesmandates that cause people to "scramble like ants beingpounded with a rubber mallet."Yet Yegge also saluted Bezos ability to push massivechanges through the organizadon, in pai-dcular the inidadvesthat led to Amazon Web Services. Those small two-pizza-or-less innovadon teams are nimble, and because theyre cost-ef-fecdve, Bezos can deploy dozens. Even Google hasnt beenable to react so quickly with its own Web sei-vices, Yeggeadded. That comparison alamied him—when Yegge quit lean-and-mean Amazon, it was in favor of opulent Google, wherefree shuttle buses with Wi-Fi whisk employees to their jobs.AMAZON, STARTED IN A GARAGE and numircd in arundown stretch of Seattle waterfi-ont, is now settling intoits fifth headquarters, in Seattles elegantly rehahhed SouthLake Union district. The companys new campus consists ofnearly a dozen shiny glass and steel huildings, completewith couityards, cafes, restaurants and a little bit of publicai-twork on display.Jefï Bezos should be there a long time. He just turned 48in Januai-y and could easily run Amazon another twodecades. Thats good for stahility. It could he a challenge interms of retaining other executives with aspirations of be-coming a CEO. Bezos says he knows when to avoid meddlingso that his project leaders can find their own paths. Yet itscongenitally hai-d for founders to he hands-off for long—aneffort to bring in a chief operadng officer to work directlyunder Bezos didnt work out a decade ago.How much power can Bezos share when the customer, aschanneled by Amazons founder, calls all the shots? Ratherthan kibhitz with a number two, Bezos acttially reads over-the-transom e-mail, which most CEOs regard as unhearableclutter. He scanned customer notes avidly when Amazonwas tiny, and he hasnt shaken the habit Dozens of times ayear, unsolicited suggestions turn into feature improvements.Even angry e-mails are "fantasdc if you want customers tobe honest," Bezos says.Then theres the fan mail. Asked about customer e-mailsthat have become his favorites, Bezos forwarded to FORBESa note from a woman recounting how Amazon has touchedher life over the past 12 years. First she hought hooks andcompact discs when she was in her late 20s. Then she spent$79 a year to qualify forfi-eeshipping as part of the AmazonPrime program for heavy users.84 I FORBES APRIL 23.2012
  9. 9. FORBESTHE BEST CEOS —AMAZONS JEFF BEZOSNow, she writes, Amazon is "helping me choose a mat-tress and a crih for my son." Instead of heing over-whelmed by all the shopping associated with preg^iancyand the arrival of a child, she feels in control. She con-cludes hy writing: "Thank you so much for making my lifesimpler and easier.... They say it takes a village, but,in this case, all a mom needs is Amazon, her Amex andan iPhone."That last need, ironically, seems to he Amazons next tar-get: smartphones. Lab 126, Amazons Silicon Valley unitwhere the Kindle was developed, has been hiring fiurries ofmobile-technology engineers the past two years. Amazonhasnt confirmed anything, but it hasnt made much of aneffort to swat down speculation. If Amazon does storm thelush smartphone market, it will do so with valuablestrengths such as customers physical addresses, purchasinghistories across a broad array of categories and credit carddata. Even Apple cant claim all of those.In the short term Bezos will continue to attack muda.Last month Amazon bought Kiva Systems, a maker of smallrobots that whiz goods to the right spots within a ware-house, for $775 million. Kiva "could speed the cycle time in-side our fulfillment centers," Bezos says. Owning Kiva givesAmazon first crack at its technology, which means "gettingproducts to customers even more quickly."In some ways this is the area Bezos least needs to worryahout: Last December he was "very proud" that Amazonwas able to make good 99.99% ofthe time on its promises toget packages to customers before Christmas. No small feat(just ask Best Buy). To Bezos, though, this also means theycame up short one time in 10,000. "Were not satisfied untilits 100%."WHERE ARE THEY NOW?Internet hype was at full throttle when our July 1998 cover united 13 CEO/founders to watch. Only one regainedpre-bubble heights. Jeff Bezos (left page, center) is worth more than the others combined.—/?yaA7 MacLarry RosenN2KHis early ancestor toiTunes merged withCDNow. Sold toAmazon in 2001.Rosen now runs hisown jazz productionand events company.Halsey Minor -|CNETProfligacy has broughthim low. He and his wifesit atop Californias list oftop 250 tax dodgerswith a $14 million debt.a 1Henry NicholasBroadcomLeft as CEO in 2003Indicted on, clearecof backdating anddrug charges. Worthmore than $1 billionEarthLinkWent on to start fourother firms, includingHelio, Business.comand Boingo Wireless,a hot-spot providerthat went public inMay. Surfs a lot.RealNetworlcsStreaming-audiopioneer cededCEO title in 2010.Still chairman with$100 million stake.Also a VC at Accel., - Kevin OConnor DoubleClickHis banner-ad network lost 75%of its customers after dot-comcrash. Soid it in 2005 to Heil-man & Friedman, which flippedit to Google in 2007 for $3.1 bil-lion. Now backs startups.Jerry Yang YahooMarket cap then; $213billion. Now: $18 bil-lion. Yang finally gaveup trying to run thecompany in January.Shikhar Ghosh Open MarketTeaches at Harvard. He forgot to tellhis wife he was on the cover. Whenhe asked her to pass the rice at din-ner she said, "Youre a Master ofthe Universe. Make it come to you."J L GilShwedCheck Point SoftwareIT security firms shareshave tripled since 2008.Shwed is worth$2 billion.Mike LevySportsLineTook news/scores sitethrough the worst oftimes before sellingto Viacom in 2004.His fantasy-gameservice Open Sportsclosed in 2011 afterthree years of effort.USWebLeft his Net consul-tancy to pursue thetheory that ail tech-nology comes fromaliens. Now runswebsites aimed atmerely understand-ing the cosmos.Jerry KaplanOnsaleMerged the onlineauctioneer withEgghead, which gotfolded into Amazon.Now runs socialgaming site Winster.86 I FORBES APRIL 23.2012
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