Data Driven: What Amazon's Jeff Bezos Taught Me About Running a Company
My experience with Jeff Bezos changed me forever.
In 2003, Amazon hired me directly out of Stanford. I initially turned down six separate offers until management coaxed me into running the company's Customer Behavior Research group focused on data-mining research and development. Upon arrival in Seattle, I was bounced around from one manager to another, including working directly with Bezos himself.
Bezos tasked me with digging into Amazon's data to unearth new ways to grow the business. My team responded with three new data-driven systems that delivered a nice portfolio of patents and drove Amazon’s annual profit by over $50 million.
I moved on to co-found Redfin in 2004, and ultimately founded my current firm, RichRelevance, in 2006. More than I could ever anticipate, the lessons I learned at Amazon have shaped me as a leader.
While conventional wisdom has held that customer service is Amazon’s secret sauce, Bezos’s core innovation was to place data at the center of his corporate culture. Despite big data’s hype, Bezos is unique in his data focus. The rest of us are using buzzwords to try to keep up.
Here’s what it takes to do it right, according to the Amazon boss:
1. Metrics define your corporate culture. More than anyone I’ve ever met, Bezos knew that things don’t improve unless they’re measured. At Amazon, everything that can be measured is. Every piece of data is tested and analyzed -- not just web design or product features, but finance, HR and operations processes.
While I was at Amazon, my team proved (65 pages of proof, in fact!) the impact of website load times on sales, and identified the metrics that mattered. Without hesitation, Bezos and Amazon reorganized around a new, even more aggressive method of measuring website performance, changing hundreds of jobs to obsess about these very metrics.
Metrics become objectives, objectives become mantra, and mantra composes the verbiage of everyone’s job.
2. Listening to data starts at the top. A data-driven culture is meaningless without the support of the CEO and executive team -- and their own willingness to challenge assumptions that they hold dear. A top-down approach is the only way to break the tyranny of the “HiPPOs” (Highest Paid Person’s Opinions).
Bezos had a rare ability to set opinions aside in favor of data. At Amazon, one of my proposals was to sell advertising on the homepage, and Bezos’s initial response wasn’t positive: “It is one of the stupidest ideas I’ve ever heard.” Yikes.
Nonetheless, when I showed data to prove the opportunity, I had approval. Bezos told me to run a live test, and from that simple decision we found a billion dollars. Amazon Advertising now accounts for about $1 billion annually, one of Amazon’s most profitable services and a battlefield on which they’re rumored to be taking on Google.
3. Democratize data. If you wonder how Amazon (and companies such as Google and Facebook) innovates so quickly, the answer is what I call “hill climbing.” It is an approach to business that institutionalizes the finding, questioning and testing of data.
Hill climbing requires that everyone, regardless of seniority, have access to data and tools to test their ideas and intuitions. With the established primacy of data, and broad empowerment to test early and often, rapid innovation and huge gains become possible at scale. Rising stars do just that -- without the cumbersome overlay of bureaucracy and politics.
At RichRelevance, everyone optimizes. In a typical engineering interview, we often ask candidates to write code to solve a problem. But the focus is on how the engineer knows it is right. How do they test and verify their answers? Our goal is to analyze how they choose data points, validate their own ideas and ultimately measure success. We hire on hill-climbing potential.
It’s that simple. Metrics, leadership and democracy are the data principles that will drive your business forward.
As I lead RichRelevance through its rapid growth, I strive every day to follow the very principles I learned from Bezos. I believe that the best ideas won’t come from me but from my team, and that these simple rules create a business culture where rising stars do rise and great ideas become reality.