The recurring theme in the letter has been high-impact thinking, relentless pursuit of innovation and making it your norm to be abnormal.
Photo by Christian Wiediger on Unsplash
Jeff Bezos announced in February 2021 that he would be stepping down as the CEO of Amazon. After 26 years of being at the helm of this corporate behemoth that he started in his garage, he decided to give up the day-to-day operations.
He said that he would be moving into the position of executive chairman of the board at Amazon. According to pundits and media analysts, that doesn’t mean that he has wrested control of the company. Because the chairman of the board is still an influential position at the e-commerce giant.
In Bezos’s place, Andy Jassy, the one who heads Amazon Web Services will take over as the CEO. Jassy has been with Amazon since 1997 and took Amazon’s cloud services section AWS to levels of unprecedented success. Such that AWS accounts for 52% of Amazon’s operating income according to CNBC.
On April 15th, 2021, Jeff published his last letter to shareholders which we will examine and glean meaningful lessons from it.
Consistency and foresight
The first lesson that I identified with was consistency.
I remember one time watching a documentary about Amazon. PBS revealed that Jeff and his leadership team had indicated that they would take low profits for almost 14 years and invest it back into the business.
They followed through with the plan consistently and that is why the company has grown to post the numbers that Jeff was quoting in his letter. The company has been consistent with “obsessing over the customer” by saving their time and money for all these years.
He said that they have been able to cut buying and delivering time by 28%. This boosted customer confidence and exponential growth in sales.
Secondly, Jeff had foresight.
The company started as an online bookstore. Its aim was to leverage the power of the internet to bring services closer to people and more conveniently.
Amazon went public as far back as 1997 as small as the company was back then. He referred to “www” as World Wide Wait meaning the world was waiting to embrace the Web in large numbers. That is why they took minimal profits and invested the money back into the business.
This is a classic example of projecting many years ahead and making decisions that will propel you to that goal. If you have to make sacrifices and adopt orthodox modus operandi to reach where you want to go, by all means pursue it relentlessly.
Even the Chinese started planning their economic dominance in the 1950s which guided them to make decisions that they are benefiting from today.
Plan your growth, make sacrifices and run away from being normal.
Value addition and diversification ensure continuity
As stated earlier, the company started as a simple online library where one could buy books instead of going to a bookshop or book store. But with time, Jeff and his team have been able to add services such as streaming platform Prime, cloud computing branch AWS, virtual assistant Alexa, and e-shop Amazon Marketplace.
Jeff noted that when they were starting out, the above services were not on offer.
“In 1997, we hadn’t invented Prime, Marketplace, Alexa, or AWS. They weren’t even ideas then, and none was preordained.”
The diversification of services and value addition has continued to ensure that Amazon’s dominance in e-commerce doesn’t wane. As a result, they have been able to last long and maintain a continuous growth curve.
Remember that in 2017, Amazon acquired Whole Foods Market for $13.7 billion and this gave them an edge in the grocery shopping market. The strategy of constantly growing and innovating keeps a business solid and its share price grows as a result.
According to Forbes, “In order to maintain its high stock price, Amazon has to grow its revenues.” Value addition and diversification add revenues and this ultimately results in the growth of the stock price.
Nothing replaces sweat equity
In his last letter, Mr. Bezos quoted an excerpt from the book “The Blind Watchmaker” authored by Richard Dawkins. The piece showed how starving off death requires one’s body to always have a higher temperature.
He used the passage as a metaphor to show how you always have to do things differently and be different. Amazon has repeatedly come under fire with media reports indicating that its employees have been working like robots. The media has repeatedly chided Amazon’s treatment of its employees and the poor working conditions they suffer.
However, Bezos acknowledged that to achieve the level of success that they have, they had to work hard. In the 1997 letter he attached, it indicated as follows.
“It’s not easy to work here (when I interview people I tell them, “You can work long, hard, or smart, but at Amazon.com you can’t choose two out of three, but we are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things aren’t meant to be easy. We are incredibly fortunate to have this group of dedicated employees whose sacrifices and passion build Amazon.com.”
He also noted that seeing Prime, AWS, Alexa and others have grown because they worked hard at them.
For growth and dominance to be realized, there has to be extra effort, extra ingenuity, extra innovations and more. These have all been the highlight of the growth of this empire. Being normal and ordinary is easy and doable. However being extraordinary has a very high price and only those who are willing to pay the price win the prize.
Aim for impact
In his letter, Bezos celebrated the fact that they have created wealth for their shareholders. He wrote that they have created more than $1.6 trillion for shareowners and went ahead to give an example of one family.
The family bought shares back in 1997 when Amazon went public. According to the senders of the letter, the shares have spiked in value so much so that they split them among family members. One of the children is even buying a house from the proceeds of the shares.
Amazon.com Inc. held its Initial Public Offering (IPO) on the Nasdaq on May 15th, 1997 according to Investopedia. Jeff said that their split-adjusted stock price back then was $1.50 per share. Right now the value of one share has exploded to $3,386.49. That’s a mind-blowing more than 225,666% increase.
For any business to be successful they must be willing to beat the odds and impact their customers and give them immense value.
They have also been able to grow their workforce from 158 to 1.3 million employees around the world. That goes on to show how creating employment for all these millions of people has cemented the company as a dominant global giant.
Small businesses have also benefited immensely from Amazon because more than 1.9million MSMEs sell on the platform.
Jeff wrote, “Your goal should be to create value for everyone you interact with. Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out.”
There is an African proverb that says “People are wealth”. Investing in the growth of people has shown to be Amazon’s greatest strength.
Conclusion
The recurring theme in the letter has been high-impact thinking, relentless pursuit of innovation and making it your norm to be abnormal. Those values have produced amazing results and they will for you if you adopt them.
