Over the course of Amazon.com's (NASDAQ:AMZN) epic rise into a trillion-dollar company that dominates fields like e-commerce, cloud computing, and voice-activated technology, a few key themes have emerged in the company's philosophy and that of its founder and CEO Jeff Bezos. They include:
- Satisfy the customer. Amazon believes its foremost duty and the key to success is to delight its customers, and sees its primary goal as inventing on behalf of customers.
- Embrace failure. Bezos encourages risk-taking and experimenting, and believes that the company's successes will make up many times over for its failures.
- It's always Day One. Bezos wants Amazon to forever have the spirit of a start-up, inventing and making quick decisions. Day One is even something of a mantra at the company; the building Bezos works in and the company's blog are both called "Day One."
- Think long term. Ever since Bezos started Amazon, he has emphasized long-term thinking, and the company continues to invest for the future with little regard for short-term profits.
In his just-released 2018 shareholder letter, Bezos banged the drum on those themes again, but also introduced some new concepts for the company's "shareowners" to consider. Foremost among them was his belief in "wandering."
What wandering means to Amazon
Bezos attributed Amazon's success to a combination of building and wandering. His outline of building is fairly straightforward: invent, guide, deal with setbacks, and reinvent. But he also says that wandering is a key counterweight to the efficiency of building. Here's how Bezos explains wandering:
Sometimes (often actually) in business, you do know where you're going, and when you do, you can be efficient. Put in place a plan and execute. In contrast, wandering in business is not efficient ... but it's also not random. It's guided -- by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it's worth being a little messy and tangential to find our way there. Wandering is an essential counterbalance to efficiency. You need to employ both. The outsized discoveries -- the "non-linear" ones -- are highly likely to require wandering.
Indeed, the company's success to this point has been anything but linear or focused. In the letter, Bezos highlights inventions that have come out of wandering, like Fulfillment by Amazon and Prime, which have driven the rapid growth of its third-party marketplace. Third-party sellers made up 58% of the company's e-commerce sales last year, or $160 billion in gross merchandise sales.
He also pointed to the Echo smart speaker and Alexa voice-activated technology, which the company worked on at the same time as the Fire phone. Though the Fire phone failed, the success of Alexa and the Echo has made the Fire failure irrelevant, since the company has now sold more than 100 million Alexa-enabled devices.
In his letter, Bezos did more wandering by shining light on Amazon Go, the company's experiment with cashierless convenience stores. Those stores are powered by a proprietary network of cameras and AI tools that store their data using Amazon Web Services, the company's cloud computing juggernaut. He explained that AWS products like the DynamoDB database are now used by thousands of customers, which led to the creation of its own database engine, Amazon Aurora.
Wandering was also key in its development of SageMaker, a machine learning tool. Thanks to such products, AWS has reached a $30 billion run rate and is growing fast, as sales jumped 47% last year.
Great minds think alike
At times in his letter, Bezos echoed talking points of some other top CEOs. The late Steve Jobs, Apple's co-founder and longtime chief, liked to say that consumers "don't know what they want until you show it to them." He was paraphrasing Henry Ford, who is believed to have said, "If I had asked what people wanted, they would have said faster horses." Bezos repeatedly noted that Amazon's customers hadn't asked for things like AWS or Alexa, stressing the importance of invention and wandering. In the letter, he sounds especially Jobs-like, saying, "The biggest needle movers will be things that customers don't know to ask for."
Bezos was also reminiscent of Netflix CEO Reed Hastings, who has said that he wants more failures, and more of his company's original shows to flop, as that would show that they were taking bigger risks. In the letter, Bezos said:
As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn't growing, you're not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures.
Finally, Bezos made clear that Amazon is far from done inventing and growing; he even called his company small at one point. "Amazon today remains a small player in global retail," he wrote. "We represent a low single-digit percentage of the retail market, and there are much larger retailers in every country where we operate."
In other words, Amazon's ambitiousness and voraciousness aren't about to slow down. Wandering will continue to be the company's guiding light, as Bezos concluded the letter with something of a call to arms, saying, "Teams all across Amazon are listening to customers and wandering on their behalf!"