Customer Obsession Lessons From Amazon.com’s Bezos

Amazon.com CEO Jeff Bezos recently sent a letter to shareholders sharing his view on how Amazon would avoid what he calls “Day 2,” because…

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.  

I’ve shared the full letter below, but want to share my thoughts on Bezos’ four themes he shares for avoiding Day 2:

  1. True Customer Obsession: Obviously this theme completely resonates with me. I love the line… “Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.” My take: Companies need to look for the unchartered white space, and innovate at the intersection between customers’ latent needs and emerging capabilities.
  2. Resist Proxies: Bezos calls out “process” and “surveys” as proxies to watch out for. Process is an issue because it can reinforce compliance and complacency, instead of empowering individuals to drive innovation.  Surveys are an issue, because they can provide employees with a superficial understanding of customers. Deep insights into what people like, love, and dream about aren’t fully answered with percentage points. My take: You need to create deep customer empathy, not just statistically significant charts and metrics. Find ways to include more qualitative research.
  3. Embrace External Trends: Amazon will likely be more adept at grabbing the “tailwinds” of trends than most companies, but it’s critical for all leadership teams to keep an eye on how the world is changing. That’s why we issue our annual listing of CX trends. I was also very intrigued by Bezos’ discussion about easy access to Amazon’s “deep learning frameworks.” An API that taps into Amazon’s rich analytics backbone could be much more exciting than even IBM’s Watson. My take: Every organization should identify a set of key trends and ask the question: “How will these put us out of business or help us to create even more value to customers?”
  4. High-Velocity Decision Making. Bezos discusses three elements of his leadership philosophy. First of all, treat many decisions as reversible, so that you are creating an option — not just putting all your chips on a single approach. Second, is to get comfortable with making decisions without full information. Thirdly, he talks about “disagree and commit” which means that everyone needs to get in line when a decision has been made. Finally, he wants true misalignment to be identified and dealt with immediately. Nothing kills a culture more than lingering, unaddressed issues. My take: It’s smarter to get moving and learn along the way (see my post Modernize Leadership: Learn and Adjust).

The bottom line: Every leadership team should proactively avoid Day 2.

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Amazon-ing the Newspaper Experience

As you’ve likely heard, Jeff Bezos purchased the Washington Post and related media properties for $250 million. You can see some of what Bezos has in mind from his letter to the Washington Post employees. Here’s an excerpt:

“The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about – government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports – and working backwards from there.”

My take: I applaud Bezos for making this move. Yes, the newspaper business is going through very tough times, but let’s look at the numbers. Here’s the average amount of time that U.S. consumers spend on different media activities from Temkin Group’s Media Benchmark Study:

MediaUsageU.S. consumers, on average, spent 1.13 hours per day reading newspapers (on paper) in 2012, a number that dropped to .95 hours in 2012. During the same period, reading of news online increased from 1.18 to 1.37 hours. Collectively, U.S. consumers increased the time they spent reading news from 2.31 to 2.32 hours. While  newspaper circulations (on paper) may be declining, news consumption is on the rise. It’s fun to think about what Bezos can do with over two hours of a consumer’s day.

So how can Bezos take advantage of this growing appetite for news? By applying Amazon’s online experience design and predictive analytics skills to build around the Washington Post’s core asset, its strong brand and its national/international journalism. Here are some ways that Bezos might Amazon-ize the newspaper experience:

  • Dynamically personalized newspaper (My News): You can get news feeds from lots of sources today, but they are typically based on static preferences and pre-set search criteria. What about a daily “newspaper” that adapts over time to my needs. An Amazon-ized newsfeed would identify what I’m likely to want to read based on my profile, previous content that I’ve consumed and liked, purchases that I’ve made (including books and other products), my current location, and the content that people like me enjoy reading. If I’m someone who likes to read a daily newspaper, then it can be formatted for on-demand printing from my home.
  • Suggested reading. If I’m reading a news story and want to read more on the topic, Amazone-ized news can serve up related information from relevant articles, blog posts, and other sources beyond just the Washington Post content. There may even be some books that Amazon might suggest based on the news that I’m interested in reading.
  • “Give-it-A-Try” content. Online news eliminates some of the random discovery that happens when reading a newspaper, but Amazon-ized news could incorporate that into the online experience by creating a “Give it a Try” type of content that includes articles that aren’t typical for the reader’s preferences.
  • Democratization of journalists. Good Washington Post journalists will shine, but marginal ones will be set aside as Amazon-ized news will reward the authors who people like to read, whether or not they are Washington Post journalists. Amazon can continue its push to enable self-publishing (as it does in Kindle Direct Publishing and CreateSpace) in the news space, enabling some independent writers to become featured writers in the content if their work seems to be liked by a large number of people or they become very popular with a niche of consumers. (Note: Who knows, maybe Customer Experience Matters will become a popular source for the Washington Post).
  • Prime bundling: Prime membership includes free two-day shipping and some free streaming movies, so why not include free subscription to some form of the Washington Post content.
  • Really, really smart marketing. Understanding the content that we consume an the products that we’ve purchased will allow Amazon-ized news to provide very relevant ads, even more tailored than what Google can provide. And Amazon can find ways to embed opportunities to purchase within the content. And, anything that people want to buy is one click away from a final purchase on Amazon.
  • Kindle News. Amazon can also make the Kindle a prime-time news platform. As more people get comfortable reading their books on Kindles and other mobile/tablet applications, Amazon can dominate the news delivery service. Look for Kindle News Apps on every mobile device you can think about.

What’s next? These changes won’t happen overnight. But what might be on Bezos’ roadmap if he successfully Amazon-izes the newspaper business? Yahoo! If Bezos and company can generate new value from the Washington Post’s reach and brand, think about what can be done by Amazon-ing Yahoo! This $250 million acquisition may just be a small incubator for a much larger strategy to acquire Yahoo! and take on Google. That clash of online titans would be fun to watch and good for consumers who would benefit from an accelerated pace of innovation.

The bottom line: I’m looking forward to seeing Bezos Amazon-ize the newspaper industry

Bezos Letter Describes Amazon’s Customer-Centric Blueprint

In his recent letter to shareholders, Amazon.com CEO Jeff Bezos provides insight into a truly customer-centric organization. The letter demonstrates how Amazon operates with a long-term view of customer value. Here are some of the most powerful components of the letter:

Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.

I frequently quote famed investor Benjamin Graham in our employee all-hands meetings – “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” We don’t celebrate a 10% increase in the stock price like we celebrate excellent customer experience. We aren’t 10% smarter when that happens and conversely aren’t 10% dumber when the stock goes the other way. We want to be weighed, and we’re always working to build a heavier company.”

Bezos understands the value of Amazon’s most critical asset, customer loyalty, which I’ve defined as the willingness to consider, trust, and forgive. That focus is what put Amazon.com on the top of the retail sector in the 2013 Temkin Experience Ratings. Great leaders focus on building that customer loyalty asset with the knowledge that it will generate the best returns for all stakeholders in the long run.

Here are some other components of Bezos’ letter that I want to comment on…

As regular readers of this letter will know, our energy at Amazon comes from the desire to impress customers rather than the zeal to best competitors… One advantage – perhaps a somewhat subtle one – of a customer-driven focus is that it aids a certain type of proactivity. When we’re at our best, we don’t wait for external pressures. We are internally driven to improve our services, adding benefits and features, before we have to.”

My take: Too many companies overly focus on their competition, a process that leads to collective mediocrity. Great companies focus their energies, from learning to innovating, on three questions: who are our customers? what do they want and need? how can we provide them even more value?

We build automated systems that look for occasions when we’ve provided a customer experience that isn’t up to our standards, and those systems then proactively refund customers.

My take: This type of proactive approach is not only great for building trust with customers, but it also establishes pressure within Amazon to do the right thing all the time. It creates an environment where mistakes are proactively found, fixed, and prevented in the future.

Our business approach is to sell premium hardware at roughly breakeven prices. We want to make money when people use our devices – not when people buy our devices. We think this aligns us better with customers. For example, we don’t need our customers to be on the upgrade treadmill. We can be very happy to see people still using four-year-old Kindles!

My take: If you want to align your interests with your customers, then create pricing models where you only make money when customers gain value. This is an increasingly important concept as more products and services are connected online where usage and value can be more closely monitored.

As proud as I am of our progress and our inventions, I know that we will make mistakes along the way – some will be self-inflicted, some will be served up by smart and hard-working competitors. Our passion for pioneering will drive us to explore narrow passages, and, unavoidably, many will turn out to be blind alleys. But – with a bit of good fortune – there will also be a few that open up into broad avenues.”

My take: Every company makes mistakes, but companies that build loyalty with customers also earn their forgiveness. That’s why Amazon scores so high in the Temkin Forgiveness Ratings. It also allows employees to have the confidence to try new things.

The bottom line: Customer-centric organizations are purposefully built

Don’t Confuse Customer Service With Customer Experience

I often get asked to describe the difference between customer service and customer experience. To me, it comes down to this picture:

customerexperience2_vsmall

Customer service is an organizational function, like marketing and sales, that manages a subset of interactions with customers. Customer experience, on the other hand, is the connection that companies make with their customers across all functions and touchpoints. Here’s a definition for customer experience:

The perception that customers have of their interactions with an organization

I also like what Amazon.com’s CEO Jeff Bezos had to say on this topic:

Internally, customer service is a component of customer experience. Customer experience includes having the lowest price, having the fastest delivery, having it reliable enough so that you don’t need to contact [anyone]. Then you save customer service for those truly unusual situations. You know, I got my book and it’s missing pages 47 through 58

For most companies, customer service deals with some key “moments of truth” for customers. So that function is an important participant in most efforts to improve customer experience. But firms can’t just  focus on customer service interactions or offload responsibility for customer experience to the customer service organization.

The bottom line: Customer service is an important component of customer experience