Vanessa Fuhrmans and Yoree Koh published a WSJ front business page article titled “The 250 Most Effectively Managed U.S. Companies—and How They Got That Way“. Quoting research from the Drucker Institute “Management Top 250” report, Amazon was evaluated as #1, just ahead of Apple, Alphabet (Google), Johnson & Johnson and IBM. This despite having just a “2 star” rating within the social category.
In the WSJ article, the authors note “Amazon’s agility comes from grouping workers in small teams. Chief Executive Jeff Bezos instituted the “two-pizza team” concept, where the ideal team size is one that can be fed on two pizzas. When it was instituted in the early 2000s, it was “really jarring,” says Eric Heller, CEO of Marketplace. But by getting rid of bureaucratic layers, it fueled innovation. Each team owned projects as small as a single button on the website and was responsible for improvements. At Amazon, potential product ideas get written up into dummy news releases that get marked up. Creators must answer questions such as the cost of the project, how much the product or service would sell for and the launch date. It’s always day one for Amazon—”today we’re starting day one of the next five years or the next 10 years and we’re not dwelling in the past”—says Mr. Greenberg. “That’s really how the company thinks and breathes, and…that helps them maintain a competitive advantage.” The company’s early emphasis on frugality led to creative ideas, the most impressive of which were rewarded with a highly coveted “door desk award,” a trophy that looked like a typical worker’s desk. Ideas ranged from how to better affix shipping labels to packages to how to save money on conference-room equipment.”
There are many ideas outlined in the article, and many practices not discussed (it would take a book, like The Amazon Way to do that!)
Small teams — Amazon’s biggest worry is about becoming a bureaucracy, so many of their management concepts come from the goal of avoiding becoming a bureaucracy. Breaking the business up into small teams is one way of doing that. The 2 pizza team is one type of team at Amazon. A 2 pizza team (or 2PT) owns a key capability and service. For example, the “image service” or “promotion service” might be a 2 pizza team. They own the product management, development and driving adoption of service. Not all teams at Amazon are 2PT.
There is no PowerPoint at Amazon. All ideas (projects, proposals, explanations) are written as 2 or 6 page narratives. This discipline takes tremendous time and effort forcing teams to clear and concise on the topic at hand. It is more demanding of the senior staff reviewing the documents as they have to read and digest the (hopefully) well written concept memos. Meetings to discuss the topics start with 10 or 15 minutes of silence to read the document — then discussion ensues.
Future Press Releases (read my blog article here: Innovate Like Amazon With the Future Press Release) articulates a concept is a brief summary, and always starts with “what delighted my customer” with the new service or capability.
Frugality is important for many reasons. It helps keep the team humble, and most importantly is a key design constraint with emphasis on efficiency on not waisting resources in the design of your business.
There are so many additional items the article could emphasize, such as the obsession with metrics and how the 14 Leadership Principles drive consistency in strategy and how teams work together. It’s easy to ask for the “one or two things” I need to do to be innovative and agile, to be “digital”. But it’s a system, and takes many strategies, beliefs and techniques.
Any of the companies listed in the Top 250 are worthy of the top billing, but it is interesting that Amazon is #1 — for now. The breadth of businesses for Amazon is clearly a differentiator compared to most companies. These concepts can be adopted into leadership teams helping to get operating effectiveness and innovation. This is what inspires my work with other great companies and teams.