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. Learn about 3 management techniques they use to create that culture (that you can too): the Two Pizza Team Rule, the Fail Fast Rule, and the Launch Process.
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Kurtis Hanni
I decode business finances for SMB owners and leaders. Join 20k learning finance concepts every Thursday: https://t.co/OxWSQCNxfS
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Amazon is the 5th largest company in the world ($1 trillion market cap),
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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 -
1. Two Pizza Team Rule
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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 -
This approach:
— Kurtis Hanni (@KurtisHanni) April 18, 2023
- 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 -
2. Meeting Memos > PowerPoints
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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 -
Jeff found meeting memos:
— Kurtis Hanni (@KurtisHanni) April 18, 2023
• 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.” -
3. The Waterline Principle
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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 -
Using the visual of a boat, this principle highlights the different types of mistakes.
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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 -
In an organization, move quickly when stakes are low and more deliberately when holes are below it.
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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. -
But for experiments and inventions, the damage is limited, so move quickly and understand failure is part of the process.
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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 -
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 -
Thank you for reading!
— Kurtis Hanni (@KurtisHanni) April 18, 2023
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