An inside look at the system that will outlast Bezos - Bill Carr & Colin Bryar on lessons from Amazon

[00:00:00] The challenge at any established company. When you go back to this question of how do other established companies build that other business to rival or exceed? The core business that they've got is that the demands of your core business will always soak up all of the bandwidth of your leaders. And even if one of them is assigned as a part-time job, in addition to managing some large business in the company, they'll also be responsible for some innovation.

It tends not to work to quote Dave limp, who is the senior vice president of the Amazon device business. The best way to ensure that you fail to invent something is by making it somebody's part-time job.

[00:00:45] Welcome to in-depth a new show that surfaces tactical advice, founders and startup leaders need to grow their teams, their companies, and themselves. I'm Brett Berson, a partner at first round. And we're a venture capital firm that helps startups, like notion, roadblocks, Uber, and square tackle company building firsts through over 400 interviews on the review.

We've shared standout company, building advice. The kind that comes from those willing to skip the talking points and go deeper into not just what to do, but how to do it with our new podcast in depth, you can listen into these deeper conversations every single week. Learn more and subscribe today@firstround.com

today's episode of in-depth. I am really excited to be joined by two guests, bill Carr and Collin Brier. They are former Amazon execs who have written a new book that's out this week and on the heels of last week's big news that Jeff Bezos will be stepping down as CEO of Amazon. Their book working backwards could not be more well timed.

It's a great read for those who are curious about incoming CEO, Andy Jassy and the business practices and cultural foundation that will enable the company to continue succeeding without its founder at the helm. So just to ground our conversation, I wanted to share more details about why bill and Collin are the perfect people to explain the underpinnings of why Amazon works.

Bill started at Amazon in 1999 as a senior product manager for DVD video and went on to launch and run the prime video, Amazon studios and Amazon music businesses. Before he left the company in 2014, he then served as the COO of offer up before teaming up with Colin to write this book and start a consulting business to coach executives on how to implement the management practices developed at Amazon.

Colin joined Amazon in 1998 as the director for Amazon associates and Amazon web services programs, then he spent two years in an incredible role as Jeff Bezos's technical advisor or shadow working with the Amazon CEO on a daily basis to help him with business strategy, technology and operations in his last role at Amazon before he left in 2010, Colin was the COO for IMDV afterwards.

He spent a couple years in Singapore as the COO of an e-commerce company called RedMart, which was sold to Alibaba. What stands out for my conversation with the two of them is how Bezos and the leadership team invented not just slew of products, but an invention machine or a remarkably different way to run a company.

We start off by digging into why Amazon has uniquely been able to launch so many different seemingly unrelated businesses and how they've cultivated a culture of longterm thinking and true customer obsession, bill and Collin tell the creation stories of the Kindle, AWS and prime sharing granular details about the working backwards process, which centers around the now famous press release frequently asked questions document that helps clearly define the customer problem before anything gets built from an inside.

Look at how players like Jeff Bezos and incoming CEO. Andy Jassy operated up close to the projects that didn't work out and the inspiration Amazon's leadership team has taken from Toyota's manufacturing line. There's tons of fantastic details here to learn from. We get into what it means to be a great operator and the art of how leaders can learn to dive deep, but not micromanage, which given the name of this podcast was a topic we had to explore.

Finally, we end on what it's like to be a fly on the wall during Amazon's interview process and the mistakes bill learned from after nearly a thousand interviews as a bar raiser. I think bill and Colin do a particularly good job and not just sharing Amazon's practices, but highlighting what other companies can learn from them.

Whether it's their lessons on why innovation can't be a part-time job or the perils of taking a skills forward approach to exploring adjacent business opportunities or why mechanisms are more important than good intentions. There's a lot of food for thought in here for founders and startup leaders. I really hope you enjoy this episode.

And now Mike conversation with bill and Collin.

Well, thank you. You both for coming on the podcast. Yeah. 

[00:05:22] So I'm super excited about this conversation and the place that I thought we could start is at the 10,000 foot level and explore why Amazon has been uniquely great at launching a multitude of businesses that then ended up getting to meaningful scale.

And I think it's a great place to start because for so many large technology companies, this is an area that is exceptionally hard and I'd argue for most technology companies. They are thing. The thing that got them their first three, five or 10 years continues to be their one thing. And if they do launch an ancillary products or services, or what have you, they tend to.

Oftentimes not be material. And that one thing from day one continues to be that one thing. Right? So even if you look at a special company like Google, still there, one thing in terms of the core advertising that runs through search in YouTube, et cetera, it tends to be their one thing, but Amazon has done a uniquely great job of launching this horizontal set of products and services and businesses, and would love to talk about how that works.

What are the underpinnings that enables Amazon to launch such a diverse set of businesses that in many ways seem unrelated, require in some ways different cultures, right? Pick, pack, and ship is different than building infrastructure for technology companies to build on top of, for example, what's special about what Amazon does.

And what can others potentially learn from that? Colin, why don't you 

[00:06:53] start as Amazon is in they're very different and have different characteristics, skillsets, AWS, primarily B to B, you have the e-commerce business, you've got pure digital delivery, huge logistics, business, and so on. But what a lot of people don't really focus on is what do they have in common?

And there's one thing in particular that all of those businesses have in common is they were built the same and operated using the same process. And in our book, we do call it the invention machine, but really at its heart, it's Amazon's 14 leadership principles surrounded by five very specific processes.

And those five processes are how Amazon hires, how they organize into single-threaded small separable teams, how they communicate using narratives, the working backwards product development process, how you take new ideas and make them a reality. And then finally, how does Amazon continually measure and operate the business by focusing on input metrics?

So all of the businesses, prime, AWS, they started from that invention machine, really from ideas on a whiteboard. And they've grown very large, but they've stuck to those set of principles and processes. And other part about what makes Amazon different and unique is that if you had to describe what is the.

Culture. It's really, long-term thinking longer than most companies, a longer time horizon than most companies. It's customer obsession, not just customer focused, you know, that's woven into everything. Amazon does the spirit of invention, and that also means that you need to be able to handle failure and how you handle failure in the company is very important too.

And then there's pride in operational excellence. Most of the stuff that people do on build that's under the tip of the iceberg that customers never get to see, but that's where a lot of the magic happens when, uh, you know, you see these crisp things. How does this package come in? 12 hours after I click reliably day after day.

And the long-term thinking especially is different than we've seen in most companies, along with customer obsession, because a lot of people think in order to move fast, you need to always iterate very, very quickly. And not stop to think about what is the value that I'm creating for the customer. What is the problem I'm trying to solve?

And especially when you move into a brand new area, those questions are hard to answer. And it usually takes several iterations by focusing on the customer experience, rather than just throwing stuff over the fence, launching it, or throwing it in an app and seeing how it sticks. And so Amazon goes through, they have a deliberate process to go through and all of these businesses went through there to make sure that it's a well-defined customer problem they're trying to solve.

And then the solutions everyone is on the same page about what they're trying to do. AWS went through this in 2004, 2005 timeframe where. We had an inkling that more than an inkling, that web services really were going to, it was a new paradigm on how software engineers would build and deploy software.

We didn't quite know how to expose it to the outside world to developers. We were working internally across several different groups, experimenting on what worked well for using web services internally at Amazon to deploy and build software. And, uh, so Andy Jassy started a small team to go start investigating that.

And for 18 months it was pretty much writing. Documents doing some prototypes. And we're meeting with Jeff Bezos to say, what are the problems that we're going to try to solve? 

[00:10:36] How do you even figure out that that is an area worth spending 18 months exploring, learning about writing about and refining, right?

There's a near limitless number of things. And it also feels so, so adjacent. If you think about something like prime and prime video and the stuff that sits around the core Amazon consumer experience, I could see waking up every day and saying, okay, what do our customers care about? Okay, this is adjacent.

This is in Jason. This can be self-reinforcing. Whereas a project like this seems so far a field. 

[00:11:08] So a couple of things. One is we were getting some validation from a couple of different areas from developers. That web services were just a better way to build into play services. We had exposed Amazon's catalog for instance, through a set of XML services and what we found relatively quickly, as some of our internal developers were using this external.

Service, which is meant for third-party developers to build the Amazon website. And they just did that because it was better than the internal tools that we had built. And then we had a lot of small separable teams at that point coming to Rick Dalzell, the CIO Jeff Bezos saying can build our service, but it takes too long to integrate it into this infrastructure and then go deploy it.

We're spending more time doing the same thing over and over again. We were also working with a set of partners, building websites for third parties at that time. And we found that web services was the best way to, and the fastest way actually to go build another stack other than amazon.com, where there were some data points.

And this is where that spirit of invention comes in. We weren't certain with a lot of things like how big this could be. Who else may be doing that because if you wind the clock back to that time, there probably a list of other companies who are in their own right, should have been racing fast to get there and have had the capability and the customer knowledge.

We were not a B2B company at that time. And our customers at Amazon were either sellers, third party sellers, or, uh, consumers. And so, um, it was a relatively small team to start off. And this is just where the spirit of invention comes in. Hey, it's worth trying, it's worth pursuing and let let's dig deeper.

And it was an iterative approach. And as we settled in on the two, first things we wanted to roll out were compute and storage. We refined that over the period of 18 months and then launched it and constantly got feedback from customers. 

[00:13:07] When the team is thinking about what projects to kick off or areas of exploration is.

A part of it. What is Amazon's unique ability to do something in this space or does that really not matter? And it's where is there an opening where's there an unmet need and our existing footprint capabilities, whatever. We don't really care. Maybe bill, you could jump in here. 

[00:13:32] Yeah. That's actually one of the other remarkable things that other companies can learn.

So most companies take what you're describing, which is called a skills forward approach saying, Hey, we're good at e-commerce or we're good at retail or whatever it is that company is good at. So they look for new businesses, adjacent businesses to build a leverage, the strengths that they already have when I was in business school.

This is frankly, one of the things that I was taught, but successful companies do. And it's one of the many ways in which Amazon succeeded by taking a peculiar or contrarion. Approach to how it thought about managing and building new businesses. So AWS and digital media are two good examples. So I was one of the founding leaders of the digital media group and the reason.

We started to work on digital media was because this was 2004, beginning of 2004, and we just finished calendar year, 2003. And at that time, Amazon had about 5.7 billion in revenue, which was certainly a big number, but the bad news was that 77% of all of Amazon's global revenue back in 2003 were for physical media products.

You know, hardcover books, paperback books, CDs, DVDs, VHS tapes, and the writing was on the wall. By this time that the world was going to move to digital media. There were already more than a million iPods sold Napster had millions of people, sharing songs. People were ripping their CDs and creating playlists.

It was clear that the days for physical media were numbered. So what Jeff did is my boss, Steve castle, and I, he literally pulled us off of what was then the largest business in the company, the physical media business, and said, you two now need to go figure out. How we going to build a digital media business.

And the first notable thing is that neither Steve and I knew anything about digital media and ironically, Steve was in some ways, so non-techie that he didn't even have a stereo in his car. And so we seemed like two unlikely people to go figure this out. The next notable thing is that like the AWS process, we really literally spent more than 18 months then coming up with different product ideas, refining those ideas, and eventually using a new process that we developed through that time called the working backwards.

PR FAQ process. We would write press releases that described new products. We wouldn't worry about whether we had any idea how to build that product at the time, but we just said, does this product sound like something that people would really want? And we wrote many, many of these tens more, probably more than 50 different ideas and eventually focused on the best ones.

The standard approach would have been for us to then go build our own knockoff, iPod and iTunes competitor. But we intentionally did not focus on that because we wanted to. Invent something new on behalf of customers to create real value. So instead we were drawn to this other idea of how could we create eBooks was, uh, was sort of a nothing business at that time.

You could only read an ebook on your PC or Mac and the prices were high and oh, by the way, they were a pitiful selection of eBooks, maybe 15 or 20,000 eBooks available as opposed to the hundreds of thousands of books in print. So there was no real good reason for people to actually buy and use eBooks back in 2004.

But we try to envision what, what would change that? And through an iterative process, we came up with the idea for the Kindle and when we came up with that idea, several things were true. Number one, we had never built a hardware device as a company. We sold hardware devices. We sold TVs. We sold a lot of electronics as an e-commerce retailer.

But we certainly had no capability to build one. And I remember questioning our wisdom at one point, when we decided to go do this and say like, why on earth would we go build our own device? We don't know anything about that, but instead of taking a skills forward approach and say, we're only going to do what we could do, we took that.

Customer obsessed approach to say what would be the product that if we could create it, customers would love it. And the other thing that would have been easy to do is to outsource it to an OEM or ODM, to design and build this for us. And instead we said, no, no, no, no. We need to actually hire up a team of people who are experienced hardware, engineers, software engineers on devices who have designed built many successful devices over time and hired a leader named Greg Zare from Palm to do that and build up that team.

And this was also unconventional many senior leaders in the company questioned the wisdom of such a move. And this approach by the end, it took a lot longer Kendall didn't launch until 2007. So more than three years after we got started working on digital media. But by really thinking through the detailed customer experience, by making sure that those details would really delight customers, some things simple that were hard to do, like when you opened up your Kindle, it was delivered to you.

It already knew. It already had been associated with your account. So any eBooks that you had bought in the past were already downloaded to your device or the fact that the device was always connected to the internet. And there was one way to shop, download, and start reading on one device. These were all things that were breakthroughs at that time.

And we only accomplish them because we took that customer obsessed approach and then sought out, develop and built the skills we needed to get there. When 

[00:18:58] you think about that starting point. So bayzos says we need to work in this area, potentially drop what you're doing and go explore how much when you think in reverse.

So you think of all the seven, 10 major successes started with the senior leader saying, Hey, somebody go explore versus something even more bottoms up or organic. 

[00:19:23] So as we already described two or three, depending, if you want to count digital mean devices, one or two businesses, and as well as AWS, they were started by, yes.

Let's create this group to go. Explore develop and figure out what to go build there. Prime was a more organic process through trial and error. And so one of the other hallmarks of Amazon is the fact that it has this attitude of being stubborn on the vision, but flexible on the details and the way you can see that as through how did prime come to be?

So prime was developed to solve a very specific customer problem. And the customer problem was the customers don't like paying for shipping. And it was not hard to figure that out. All you had to do was field, any customer survey, all the way back to the beginning of Amazon to ask them, what do you like least about shopping with Amazon or what would make you want to buy more?

And number one or number two would always be, I don't like paying for shipping. The hard part was figuring out well, how, since shipping costs real money, how do we actually afford. To do that. How do we construct a program that would enable that? And there were various efforts, various free shipping promotions, and then one that stuck the longest was one called super saver shipping that some of you may be old enough to remember where for many years, the way that you got free shipping on Amazon was to place an order for $25 or more.

And then in that case, part of your trade-off was that the items would be delivered to you a little more slowly than the standard speed. So it would take two or three days longer than if you were to standard shipping. But fundamentally the company in 2003 was hitting a wall on its growth. We recognized that media business a its future was not looking bright, but more importantly, in fact, the year of your growth was decelerating.

And a lot of it was because while a lot of people use this super saver shipping. Yeah, you had to get over this hurdle. So lower ESPN is under $25, you know, just want to one of those things, it wouldn't qualify. And two people don't like having to wait for stuff. So we try to figure out, well, how can we solve this?

How do we get to where people can get stuff fast and free? Colin can jump here and tell more about sort of that iterative process. It was a process of working through a lot of different business models, a lot of different ideas before landing on one that became prime that in this case, actually, ultimately there were a number of people that contributed, but Jeff was really the person that finally came up with that idea and pushed for us to go do it.

[00:21:46] I'll just add that most of these ideas, it was not, Jeff said, let's go create cloud computed, or we're going to go create a Kindle. Everyone knew that the physical business media business was moving over to digital. The trick is when do you do it? And how do you do it? And those things for collaborative efforts, same thing with the cloud computing, there were multiple data points.

And with prime also, there was some, we knew. Yeah, customers want cheaper products. They want them faster and they want more selection. There wasn't any surprise there or deep insight that only one person at the company had. The trick is figuring out how to do this, how to organize. And as bill said, how to afford it, 

And then the other example is fulfillment by Amazon, you know, which is a huge business for the company, enabling merchants to outsource, warehousing and fulfillment of their items that they sell on Amazon and other retail sites. And that idea, again, it wasn't the Jeffer, any one person. It was through talking to our merchants and observing what were their challenges and thinking about our capabilities.

I think it was apparent to a number of people, what this could be. And for a number of years, this project bounced around the company has something called self-service or fulfillment and. What's also notable to learn is this is true at a lot of companies where people can see, oh, I think there's this opportunity and there's this project and let's go do this, but the project wasn't happening, it just wouldn't launch it.

Wasn't launching an Amazon. It kept being on long lists of initiatives to do it. Wasn't getting worked on it. Wasn't being resourced appropriately. And it wasn't until Jeff Wilkie. Now the outgoing CEO of Amazon's consumer business assigned one of his strongest VP lieutenants. To go stop, drop what was a very large role in the operations organization and go focus fully and completely on what was then known as SSOs self-service order fulfillment and you know, in doing so then this VP leader was able to actually identify, well, what resources do we really need?

How do I make this project actually go and then hired and developed the right team and finalize the products back within a matter of months actually was able to launch that program, which we now know is fulfillment by Amazon. So the other important lesson is that a lot of good ideas can get trapped inside big companies, even medium-sized companies, because they're not staffed to succeed.

And Amazon came up with a unique solution that it calls single-threaded by organizing by what's called single-threaded leadership for. Each important initiative, having one leader who works on that initiative and nothing else as well as their team and in doing so that gives them the appropriate focus to make sure that they can devote time and attention to make that a success.

Because the challenge at any established company, when you go back to this question of how do other established companies build that other business to rival or exceed the core business that they've got is that the demands of your core business will always soak up all of the bandwidth of your leaders.

And even if one of them is assigned as a part-time job, in addition to managing some large business in the company, They'll also be responsible for some innovation. It tends not to work to quote Dave limp, who is the senior vice president of the Amazon device business. The best way to ensure that you failed to invent something is by making it somebody's part-time job.

[00:25:21] explain the process to ultimately launch Kindle on them, what would become the digital media business? You talked about this 18 month voyage of discovery that was anchored in the, the concept that I think was pioneered at the time, working backwards, press release FAQ. I think it'd be interesting to talk about that in more granular detail.

Like if you were to look at any given week long before you landed on the Kindle, what was going on? Maybe some more detail about what that documentation looked like. And then if you had 50 of these press releases, what is the process that you called and prioritize and decided, okay, Kendall's it. And we're going to make a huge bet here.

[00:26:06] It's a funny story. That's really 2004. I'm starting down the path of being one of the leaders here of this new digital business. And so Steve and I go off and we start to develop our plans for what are we going to go do? And what are we going to go do? Not only in eBooks, but digital music and digital video, which didn't exist at all as a business, then we both had MBAs.

And so we pulled out our MBA toolkit and we did what you're supposed to do, which is you go look at industry analysis that say, what are the projected sizes of each one of these market segments in the future years? How big will the ebook market segment be? And you come up with some projection for what our market share will be.

You have each one of them by year, you build a pro forma PNL factoring in like what's going to be our cost of goods sold. What would be our other sort of, you know, Fixed and variable costs. And we took that into Jeff and said, okay, great. So here's kind of what the business will look like. And so we're ready to, you know, go ahead and get started and hire out the team and go start negotiating rights agreements with our partners at the publishing houses and motion, picture studio, some record companies.

And Jeff just looked up from these documents and spreadsheets and looked at us and said, where are the mock-ups. And, you know, by that he meant, you know, where are you your mock-ups of the website experience or how the customers will actually buy, interact with use, listen, to read these digital media products.

And we had not done any of that work at all yet. It's actually a lot of work to figure that out. So we kind of went back to the drawing board and tried to figure some of that out and develop some mock-ups and we came back and that didn't go very well either because frankly, we hadn't really thought through all the details.

And by the way, we were really thinking very big. About what we were going to do. We were thinking about a kind of just an extension of our physical retail business is just sort of more items to add to our catalog if you will shop for, and we hadn't really factored in the way in which digital media was so different and that our role as an aggregator in digital media, wouldn't really confer much value to consumers.

That was great for physical goods, by being able to aggregate, you know, millions of items in one store and ship them to your home, like that was hugely valuable, but it had no real value in digital media. And we hadn't really unlocked any of the problems to make that digital media useful and valuable because in those days there's no good bandwidth streaming didn't exist.

Didn't have devices, all, all these other problems. And so Jeff basically by asking us about the mock-ups and challenging, our assumptions forced us to push ourselves and our thinking out to the ends of the value chain and think much bigger. About how to do that. And so it was a halting process though, to figure out like, how should we as a work process, like how do we have productive meetings and ideation to go do that?

And so mock-ups, didn't really work because it's a lot, it takes a lot of time and effort. To work with a designer to come up with a good mock-up and you spend much more time building the mock up than actually thinking through all the issues and details of the customer experience. So in the end, what we figured out was a much more effective mode was frankly, just to write down in a word document, describe the customer experience you were going to go build and in that document to clearly articulate and explain, okay, what's the problem.

I'm trying to actually solve for the customer, because I know by the way, for each one of these businesses, there are many different problems you could choose to focus on which problem or problems are you going to address. And then what is the product you're going to build to solve it? And it wasn't until Jeff said, everyone, just go write a document, you describe your product.

And then we came back to the room and probably spent four hours going through, I dunno, 12 different product ideas, a huge range of ideas, but now we were actually getting somewhere. Now we could actually compare and contrast different ideas. And it was after doing a few of these meetings at some point, Jeff landed on the point of like, I know to really make this process better.

Let's just write the press release. And he said, the reason to do that is that normally happens at the end of the process. And typically in fact, the product engineering teams long ago, years, earlier months earlier made decisions that will affect how the product is sold and marketed. And then just. Just tossed over the wall to marketing, to then figure out how to sell it.

And he said, let's instead start at that end because of the press release doesn't if in one page press release, you can't describe something that sounds super compelling that people really want and need. Then there's no point in building it and it doesn't take that much effort or time, like unlike building prototypes or unlike building mock-ups.

Or in like launching an MVP, anyone can write a press release and you can write many of them very, very quickly. And then you can form a meeting to review lots and lots of them. And if you spend the time, then when you find a good one, you can refine that idea. So that ability to, uh, that doesn't require them that many resources to write one, and you can actually compare them that allows you to over time, look and see which ideas are the best.

And they float to the top. Once you've actually landed on the good press release, then you do the second part, which is called the frequently asked questions. And the short answer on that is those are really designed to help then address. Okay. This thing that I just described as a product doesn't exist today and there undoubtedly will be some challenges and problems to build it.

Well, what are they and what solutions have I come up with or do I need to come up with to actually build 

[00:31:27] it on the point? And you follow your curiosity, think about the customer and you start writing these press releases, and let's say you have 10 or 20 or 30 and you have a meeting. Is it just judgment and gut, oh, this seems really interesting.

Today's episode is with Bill Carr and Colin Bryar, former Amazon execs and authors of, "Working Backwards," a new book on the company's leadership principles and business processes. They tell the creation stories of the Kindle, AWS, and Prime in granular detail, and share insider anecdotes, from how leaders like Jeff Bezos and incoming CEO Andy Jassy operated, to Amazon's hiring process and key metrics.

An inside look at the system that will outlast Bezos - Bill Carr & Colin Bryar on lessons from Amazon

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