3 Management Techniques Used by Amazon to Cultivate a Culture of Innovation

Amazon is the 5th largest company in the world ($1 trillion market cap),

and became that by cultivating a culture of innovation.

Here are 3 management techniques they use to create that culture (that you can too): pic.twitter.com/QNpacGxd6U

— Kurtis Hanni (@KurtisHanni) April 18, 2023

1. Two Pizza Team Rule

Agility and speed are crucial for growth and transformation, but traditional organizational structures stifle this.

To address this, Amazon came up with the concept of the Two-Pizza team: no team should take more than two pizzas to feed them. pic.twitter.com/4Oulk7HdLb

— Kurtis Hanni (@KurtisHanni) April 18, 2023

This approach:

- decreases bureaucracy when making decisions

- mitigates the Ringelmann Effect (the tendency for individual productivity to drop in larger groups)

- allows for fast experimentation, which lowers the cost of failure pic.twitter.com/FXjPgtFa68

— Kurtis Hanni (@KurtisHanni) April 18, 2023

2. Meeting Memos > PowerPoints

Instead of presentations, a written memo is prepared for each meeting.

Participants sit in silence reading the memo (15-30 min) before discussing it.

This forces the “presenter” to build a narrative and think more deeply about the content. pic.twitter.com/llyNV4l4Bh

— Kurtis Hanni (@KurtisHanni) April 18, 2023

Jeff found meeting memos:

• Save time
• Clarify goals
• Encourage active participation
• Assured meeting organizers were prepared

Jeff said “Banning Powerpoint slides at Amazon was probably the smartest thing we ever did.”

— Kurtis Hanni (@KurtisHanni) April 18, 2023

3. The Waterline Principle

Amazon’s culture is built on the “Day 1” mentality.

This means:

- Long-term focus
- Customer-centric
- Embracing failure
- Experimentation encouraged
- High-quality & velocity decisions

— Kurtis Hanni (@KurtisHanni) April 18, 2023

Using the visual of a boat, this principle highlights the different types of mistakes.

For holes (mistakes) above the waterline, damage is done, but the risk of significant loss is low… no water gets in the boat.

For holes below it, water enters in, risking the boat sinking. pic.twitter.com/vYqRCTk2s6

— Kurtis Hanni (@KurtisHanni) April 18, 2023

In an organization, move quickly when stakes are low and more deliberately when holes are below it.

Bezos used the example of building a fulfillment center. Screwing up the build is expensive, so move more deliberately and include more parties in the process.

— Kurtis Hanni (@KurtisHanni) April 18, 2023

But for experiments and inventions, the damage is limited, so move quickly and understand failure is part of the process.

Jeff went as far to say he wants Amazon to be one of the best places in the world to fail. pic.twitter.com/3mCmlwLD5K

— Kurtis Hanni (@KurtisHanni) April 18, 2023

I talk more about the waterline principle and its application to your business in last week’s email to 17k+ Frameworks & Finance subscribers:https://t.co/ELJJkdgHU4

— Kurtis Hanni (@KurtisHanni) April 18, 2023