Seattle, WA—Every year since 1997, Jeff Bezos has written an open letter to Amazon’s shareholders. Reading those letters shows how the world’s richest man thinks about customers, innovation, building a company, and more. CBInsights.com has distilled their essence down to 21 valuable lessons that any retailer of any size can adapt to their own business, but all of Bezos’s letters and philosophies have one theme in common: a focus on the long term.
Everything Bezos does is customer-centric. Doing whatever it takes to make the customer as happy as they can be will pay off, he says; spending more money now to make your customers happy will make you more money later. For instance, when Amazon first considered Prime, all the quantitative models pointed to raising prices on shipping, not to making shipping free. The models said that by raising prices the company probably wouldn’t lose that many customers and it would make a lot more money. But Bezos bet on free, believing it would grow the volume of business and customer loyalty which in turn would make even more money. Prime memberships (now $119/year) have nearly quadrupled since the program was launched, bringing in over $10 billion in revenue just from memberships alone—before a single item is sold.
Here are the themes of all of Bezos’s shareholder letters: Click on each to read CBInsight’s summaries of the challenges and key takeaways; click on the bottom link to access a list of the actual letters.
2017: Build high standards into company culture. And those standards need to evolve with the marketplace.
2016: Move fast and focus on outcomes. Always focus on the customer, who always wants more.
2015: Don’t deliberate over easily reversible decisions. Irreversible decisions should be made slowly and with caution; but just jump in and make reversible decisions swiftly.
2014: Bet on ideas that have unlimited upside. Bezos calls those “dreamy business ideas.” You’ll fail sometimes, but the rewards should more than make up for the flops.
2013: Decentralize decision-making to generate innovation. Top-down teams are effective at optimizing processes and getting work done, but consistent innovation comes from decentralized, bottom-up decision-making and autonomy.
2012: Surprise and delight your customers to build long-term trust. In the short term, this costs you money but in the long term you win more of your customers’ money.
2011: Self-service platforms unlock innovation. Companies that don’t invest in technology are going to fall behind.
2010: R&D should pervade every department. Don’t silo it in one place.
2009: Focus on inputs — the outputs will take care of themselves. Long-term, investing in the customer brings better returns than focusing on quarterly or annual financial targets to please analysts.
2008: Work backwards from customer needs to know what to build next. Think about what your customer needs and then provide it.
2007: Missionaries build better products. These are people who see beyond the existing products that get the job done “good enough.”
2006: Nurture your seedlings to build big lines of business. New business lines may not contribute much to revenue for years but long-term they can be tremendous.
2005: Don’t get fixated on short-term numbers. If the numbers say one thing but your gut says another, evaluate by customer experience.
2004: Free cash flow enables more innovation. Don’t tie up your cash! Turn inventory over quickly and collect payments from customers before your payments to suppliers are due.
2003: Long-term thinking is rooted in ownership. Customer focus first—and while Bezos’ advice here was focused on Wall Street, small business owners could consider profit-sharing so employees are more invested in the success of the business.
2002: Build your business on your fixed costs. Amazon did this through technology; retailers can adapt that to their needs.
2001: Measure your company by your free cash flow. See 2004 and 2000 as well as this letter.
2000: In lean times, build a cash moat. The dot-com bubble almost took Amazon down. Almost. Its cash-flow policies (see 2004) kept it afloat where lots of other companies failed.
1998: Stay terrified of your customers. They’re loyal to you only until someone else does it better.
1997: Bring on shareholders who align with your values. Don’t let short-term success distract from long-term focus.
For additional reading, Women’s Wear Daily has an article explaining why retailers should zig when Amazon zags. Read it here.