Understanding Amazon’s Management Principles – Ownership
This article by Marek Ròżycki and Thorsten Runge is part of a series dedicated to the e-commerce behemoth and its peculiar ways. While readers won’t be guaranteed that they will beat Amazon after reading them, they will at least be competing with an entity that is less enigmatic and therefore will be better placed to develop strategies and concrete tactical steps for their organisation.
In this article we will deal with one of Amazon’s Management Principles: Ownership.
Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say, “That’s not my job”.
Hardly a day goes by without new articles or blog posts about how retailers are trying to keep up with Amazon and how Amazon has, yet again, come up with something new to strengthen its leadership even further.
So what’s the challenge when competing with Amazon? A common albeit very superficial answer is that Amazon just has more money.
Amazon is like no other organisation we have worked for; it is almost like a religious order with its rules and traditions. Just as Christians look to the Ten Commandments for guidance in their daily lives, Amazonians look to the 14 Management Principles. Arguably the latter are more like rules and, if you wish to succeed at Amazon you had better learn to live them… and fast.
While there is not just one simple “recipe” (or “secret sauce” to stay with Amazon terminology), there is a key “ingredient” that many companies often underestimate, and that is OWNERSHIP. Real ownership is a hugely powerful asset for any organisation and without it, whatever tech developers produce and whatever hardware or software is procured, they are just items on one’s balance sheet but don’t necessarily result in real innovation or success without ownership.
We have worked with many companies, large and small, across Europe and North American. Most translate “ownership” into “responsibility”, which is not far off the mark. Indeed, most employees of those companies took responsibility seriously but rarely did they take ownership – not because they didn’t want to, but because they weren’t taught to understand the difference between the two.
“So what’s the difference?” we hear you say. Ownership cannot be shared, it cannot be broken up into pieces of “sub” ownership; it is irrevocable and cannot be delegated. By contrast, responsibility can and often is.
Let’s take some real life Amazonian (last mile) examples:
Back in 2008, just a few days before Christmas, in the peak period where parcel delivery volume is super high, the IT integration with a parcel carrier for one part of the UK broke. The carrier had the parcels but no data to effect deliveries. The Amazon VP in charge of the fulfilment centre close to the affected area followed the ownership principle and didn’t bat an eyelid and simply rented a van, drove to the carrier, picked up the parcels… and delivered them himself. He was not responsible for the IT issue or even carrier management, but he owned the delivery performance for that fulfilment centre.
Thorsten has his own example of ownership too. The afternoon before the first delivery depot for ‘’last mile by Amazon” (now known as Amazon Logistics) was launched we learned that the developers wouldn’t have the vehicle routing software ready on time for launch the next day. His entire team sat through the night and, together with one of the analysts, they created some “software”, based on Excel. Was Thorsten’s team responsible for the delay in the development? No. Did they own the delivery performance and the launch? Yes.
At the other end of the scale are more typical companies we have worked with, that operate on a “responsibility level”; if product developers don’t deliver on time, the operations functions are absolved of responsibility for a delayed, or even failed, launch. Taking one relevant example close to Marek’s heart: eBay has worked for many years to offer effective fulfilment capability for their sellers. Partly, we believe, due to the lack of ownership, the once great player has not come close to Amazon in this field. Ownership accelerates and it delivers better results.
So the learning here, like it or hate it, is that Amazon has developed a “secret sauce” that seems to work… and to work very well, at that. Perhaps other leaders should take a page out of Bezos’s book and take a look at how to implement ownership in their organisation. The benefits are more than clear.
About the authors
Marek Różycki is managing partner at Last Mile Experts, specialising in CEP and last mile advisory. He was previously VP Amazon Logistics EU.