Leading change

Case Study: Evaluate the leadership of Jeff Bezos

Jeffrey Preston “Jeff” Bezos an American technology entrepreneur who has played a key role in the growth of e-commerce as the founder and CEO of Amazon.com, the online merchant of books and later of a wide variety of products. Under his leadership, Amazon.com became the largest retailer on the World Wide Web.

Your task is to prepare an evaluation of the leadership and management style of Jeff Bezos. To get you started a small number of articles about Bezos from leading business magazines is attached. You are then invited to supplement the information in this article by wider reading. You will find extensive information on Jeff Bezos on the web.

Your report should be about 2,500 words excluding references, typewritten – Ariel 11 point, single-sided, 1.5 line spacing. A 10 per cent variation in word count is acceptable. Submission date via Turnitin will be agreed in class.

In writing your report you are expected to utilise leadership and change theory in your critical assessment of Bezos. In so doing you may, among other issues, wish to consider the following issues:

• Is Bezos a manager or a leader or both?

• Bezos’s characteristics that helped him drive the company forward,

• What could be the consequences of taking his style too far?

• Is Bezos the right person for Amazon during the times ahead, or does the company now require more of a ‘manager’ than a ‘leader’?

Stress is placed on referencing and the application of appropriate theory. For example, in looking at Bezos as a manager/leader you are expected to assess Bezos by specific reference to appropriate theory.

Your challenge is complex and you should therefore make reference to a range of literature and introduce other issues that you consider to be relevant to a thorough understanding of leadership at Amazon. You are expected to demonstrate that you have understood the relevant application of theory to this case study. Higher marks will be awarded by demonstrating a critical approach to the application of theory.

There is a guide to referencing on the Library website. If you do not follow these guidelines you will lose marks.

Advice on writing style and presentation

Some students find assignments such as this to be difficult due to the relative lack of structure – this is no different to management problems you will eventually face in industry and commerce. No correctly answered list of questions or mechanical process will lead to the “right” answer. Indeed, there is no “right” solution to many managerial problems.

When analysing the information provided and that which you come across in your research, remember that there are many possible approaches, answers and solutions. The goal is not to figure out a definitive answer but to sharpen your analytical skills. Use theory to analyse the data which you collect. The following steps outline the basic approach that I suggest you adopt in preparation for a written analysis.
Read the material in the attached articles. Take notes about the important issues that the material raises. Analyse what is occurring and why. You should be able to identify outcomes and/or issues that the material raises. Read other materials about Jeff Bezos. Does this confirm or contradict the information in the attached articles? But be alert for the danger that some information may be coming from biased observers and participants.

In your written analysis there is no need to summarise the information in the articles about Bezos. This is merely a waste of space, as I have read the material. Rather, you should use this material and from your wider reading to support your analysis or to provide examples to back up your arguments. Remember, your objective is to explain not describe!
Make sure that your analysis is well-written, clearly organised and has a logical flow. The following is a safe format (in other words, you can do it other ways, but this one is likely to work). First, start out with an executive summary, highlighting your main findings and conclusions. Second, write a short introduction telling the reader what is to follow. Third, analyse the evidence by applying relevant theory, making sure you address the key questions set out above. Fourth, summarise and draw conclusions.
Finally in terms of writing style, I suggest you effectively write a management report with references. Therefore, please feel free to use headings and bullet points.
Good luck

Dr Christian Harrison

Inside Amazon’s Idea Machine: How Bezos Decodes Customers by George Anders
This story appears in the April 23rd, 2012 issue of FORBES magazine.

A few months ago Amazon reached what its founder and CEO Jeff Bezos demurely tells me was “an interesting milestone.” The retailing giant, so ubiquitously associated with books, then music and video, now has tens of millions of products in stock—and a majority are non-media goods: drills, dress shoes, tennis rackets and almost anything else that a human can ship. Adults may still mentally link Amazon with Barnes & but to teenage customers, Amazon is now synonymous with store.
That turning point might be Bezos’ greatest accomplishment. In officially transforming Amazon from an online bookstore that sells other stuff to a retailer—and business ser-vices provider—that once sold mostly books, he has taken one of the original Internet bonanzas and created a success story all over again. Its stock is up 397% in the last five years.

With a net worth of some $19 billion, the 48-year-old is one of the 30 richest men in the world. Yet he still dashes around Amazon with the intensity of a startup boss trying to make his first payroll, as well as the glee of a teenager discovering all the fun you can have at overnight camp. “I’m a legitimately happy person,” Bezos explains on a recent, rainy Friday morning at Amazon’s Seattle headquarters. “My wife says: ‘If Jeff is unhappy, just wait five minutes.’”
What’s not to be happy about? He’s the number one CEO in America. The passing of Steve Jobs has left him, without question, as the corporate chief that others most want to meet, emulate and deify. And his primacy can be proven with numbers: FORBES’ ranking of top CEOs—using a bang-for-the-buck methodology that factors in sustained performance, modest compensation and the ability to pull ahead of one’s peers—has Bezos comfortably in the top spot. Indeed, he’s in the highest 5% in every single metric.
Across numerous e-mail back-and-forths and face-to-face questions with Bezos, I’ve come to understand why. More than a century ago another legendary retailer, Chicago’s Marshall Field, championed the fatalist’s slogan: “The customer is always right.” Bezos, perhaps more than anyone, has taken that mantra into the digital era, incrementally cracking one of the business’s great mysteries: figuring what customers want before the cash register rings and then making those insights pay off. In an era when high-flying tech companies outdo each other with worker perks, no-frills Bezos is proving the potency of another model: coddling his 164 million customers, not his 56,000 employees.
Jeff Bezos’ managers at Amazon find him formidable enough. But the figure that overwhelms their lives goes by the internal nickname “the empty chair.” Bezos periodically leaves one seat open at a conference table and informs all attendees that they should consider that seat occupied by their customer, “the most important person in the room.”
If the empty chair is the ultimate boss at Amazon, then Bezos is its billionaire enforcer, the guardian of what he calls the “culture of metrics” that tries to give that inanimate object a loud, clear voice. Amazon tracks its performance against about 500 measurable goals. Nearly 80% relate to customer objectives. Some Amazonians try to reduce out-of-stock merchandise. Others race to build a bigger library of downloadable movies. Intricate algorithms turn one group of shoppers’ past habits into custom recommendations for new customers. Hourly bestseller lists identify what’s hot. Weekly reviews keep track of who is on course—and where corrective attention is needed.
Amazon is so confident of its ability to personalize the site for each user that the company hardly ever creates classic customer-segment personas, such as “soccer moms” or “gearheads.” Such marketing standbys are too imprecise for Team Bezos.
Feisty debates over what metrics to watch are Amazon’s way of life. “There’s an incredible amount of challenging the other person,” says Manfred Bluemel, a former senior market researcher at Amazon. “You want to have absolute certainty about what you are saying. If you can stand a barrage of questions, then you have picked the right metric. But you had better have your stuff together. The best number wins.”
Bezos is even stricter about what customers don’t want. They hate delays, defects and out-of-stock products, so the metrics patrol at Amazon constantly tracks such numbers, looking to make them as rare as possible. Even the tiniest delay in loading a Web page isn’t trivial. Amazon has metrics showing that a 0.1 second delay in page rendering can translate into a 1% drop in customer activity.
Former executives all have stories about Bezos’ obsessive focus on the customer. Simon Murdoch, the former head of Amazon’s British operations, remembers offering customers in the U.K. next-day delivery if their order was in by 4 p.m.; Bezos personally hammered him to extend that delivery window to 6 p.m., 7 p.m. and later, even if it meant radical changes in warehouse hours. (Today Amazon offers same-day delivery for much of Britain and ten U.S. cities if the order gets in that morning.) Another one-time insider remembers a relentless push for sturdier-than-usual cardboard so customers could reuse its boxes for other shipments or presents, creating goodwill and putting Amazon’s name in front of a second set of potential customers.
Tina Patterson, a senior Amazon brand manager from 2007 to 2011, recalls tense moments previewing television ads for the soon-to-launch Kindle. Early versions included a whimsical snippet where a Kindle-carrying reader transformed into a brave matador, tossed into the air by a charging bull. Everyone giggled—except Bezos. He hit the rewind button and silently replayed the matador scene. Then he turned to the group and adopted a grade-school teacher’s somber voice: “I know it’s cute, and lots of people will think the bull is funny. But the customer right there is getting his ass kicked. We can’t let him get hurt.”
Bezos’ zealous protection has paid off. Each year the University of Michigan calculates a customer-satisfaction index for 225 of America’s largest companies. Amazon has led the online retailing category for years and has repeatedly placed in the top 10 among all companies. Currently only Heinz, Clorox, Apple and three car brands topped Amazon.
But great customer service doesn’t fully explain Amazon’s extraordinary success. Other high-touch online retailers can’t match the $48 billion in sales Amazon did last year. Meanwhile, traditional retailers like Target and Costco play up customer service too—yet their combined market capitalization trails Amazon’s $98 billion.
For Bezos a data-driven customer focus lets him take risks to innovate, secure in the belief that he’s doing the right thing. “We are comfortable planting seeds and waiting for them to grow into trees,” says Bezos. “We don’t focus on the optics of the next quarter; we focus on what is going to be good for customers. I think this aspect of our culture is rare.”
Amazon’s Kindle, for example, came into being because Bezos, internalizing hundreds of data points, believed millions of people would want a crisp e-book reader that could download any book in 60 seconds or less. He set that delivery target without getting pinned down by technical issues about the right compression ratios or transmission speeds for book files. Engineers were free to solve technical challenges as they saw fit. They just needed to make it right for consumers. It took years for Amazon to master the hardware necessary to build such devices, but Bezos didn’t blink. When one finance executive asked how much he was prepared to spend on the project, the CEO shot back: “How much do we have?”

Amazon CEO Jeff Bezos introduces the Kindle Fire tablet in New York, September 28, 2011.
That kind of thinking has transformed Amazon. After wild swings associated with the dot-com boom and crash, Amazon’s performance was essentially flat between mid-2003 and early 2007, in lockstep with the industries it was associated with: books, music and the like. Then Amazon took off afresh, as investors realized that Bezos had been quietly building a multitude of new growth engines inside his company. All were rooted in the same theory: If Amazon lets customers set the specs, it could conquer any number of consumer products and services. Bezos also decided to court business customers (and freak out his own engineers) by turning Amazon’s internal software architecture inside out and selling access to it. The boss’ new diktat upended Amazon’s approach to tasks ranging from quality assurance to interteam communication.
In 2006 he launched Amazon Web Services as a standalone business. It rang up an estimated $1 billion in revenue last year, with $2 billion in its sights, thanks to an even faster growth rate than Amazon’s main storefront. It serves customers ranging from NASA to Netflix with dozens of cheap, on-demand computer services via the “cloud.” During the Cassini space probe’s exploration of Saturn, raw data for 180,000 photos were processed on Amazon’s computers within five hours, at a cost of less than $200, says Tomas Soderstrom of NASA’s Jet Propulsion Lab. Doing the job in-house could have taken 15 days, he says.
Last October’s launch of the Kindle Fire, a computing tablet that can play music and videos, has again hurt short-term profitability. Amazon’s selling price of $199 doesn’t appear to cover costs. Bezos isn’t perturbed. He calls the Fire “the most successful product we’ve ever launched.” To him the bullish case for the Fire is obvious. If it induces owners to buy more from Amazon, the costs of spreading these tablets globally will be well worth it.
This renewed Amazon is basically a personal manifestation of Bezos, who is equal parts quant and dreamer. Growing up in Houston and Miami, Bezos never paused for a traditional retailer’s apprenticeship—i.e., selling things. Rather, he crunched numbers, once proudly telling his grandmother that he had calculated how much her cigarette habit was shortening her life. He went to Princeton to study physics and ended up in computer science, which led to a brief, lucrative career on Wall Street.
The dreamer side of Bezos wants to be at the frontier. His teenage hope was to become an astronaut, and he pushed himself to be high-school valedictorian to improve his chances. He spent summers as a teenager on his grandfather’s 25,000-acre ranch in Texas, fixing machines, working with cattle and learning about self-reliance.
The respect for that ethic explains why Amazon screens its job candidates for a strong bias to action and an ability to work through ambiguity. Both help identify people who can innovate fast and do right by the customer. One popular interviewing tack: asking candidates to create an action plan as brand managers in an area where they lack any direct knowledge—and then being told they have no budget.
Stumped candidates will find their path into Amazon slipping away. Those who cobble together guerrilla answers—informal polls through free online tools such as SurveyMonkey—tend to thrive at Amazon. They are the same people who might have challenged Bezos in math class and also succeeded on Grandpa’s ranch.
Efficiency—cheapness, in the eyes of Amazon’s detractors—is as much a part of the Amazon culture as the empty chair. In fact, Bezos links the two. In his 2009 letter to shareholders, Bezos declared that Amazon had begun waging war on muda, the Japanese word for waste. The more he could get rid of needless costs, the easier it would be to deliver rock-bottom prices to customers. This crusade, he wrote, was “incredibly energizing.”
During interviews for this story Bezos cited Amazon’s recent success in improving its warehouse usage 23%, “recapturing 6 million square feet of underutilized space.” He also takes pride in Amazon’s work to presort packages for carriers such as FedEx, so shipments aren’t delayed by the carriers’ need to carry out further “sortation.”
Sortation? “We use that word so frequently that it rolls off our tongues,” Bezos says with a smile. “But it’s not a common word, is it?”
The company’s executives feel the pinch. Bezos keeps an eerily tight rein on expenses, eschewing color printers in favor of trusty old black-and-white models. No one flies first class (though Bezos sometimes rents private jets at his own expense). Experiments are hatched and managed by the smallest teams possible; if it takes more than two pizzas to feed a work group, Bezos once observed, then the team is too big. Offices still get cheap desks made of particleboard door blanks, a 1990s holdover that Bezos refuses to change.
Managers may grumble, but they learn to bring sandpaper to work so their merino sweaters don’t get shredded by splinters. None of the company’s five top officers earns more than $175,000 in cash a year. Bezos last year took $81,840 in salary and hasn’t had a raise since 1998. He has raised at least $750 million since 2010 by selling Amazon shares, but that’s how you make your money at his company. Stock and options are the big honeypots; many on the leadership team have $20 million or more in unvested shares.
This mind-set is an outlier in an industry that views talent as a delicate asset in need of constant pampering; in Silicon Valley perks like free on-site massages are as rote as a pot of coffee in the kitchen area. At Glassdoor.com, where current and former employees rate their companies as a place to work, Amazon generates a middling 3.1 out of 5, putting it somewhere between Delta Airlines (3.2) and Burger King (3.0).
Steve Yegge, a Google employee and former Amazon engineer, chronicled his frustrations last October in a 4,500-word Internet posting that has attracted more than 100,000 readers. He complained about the decor at Amazon, the hiring policies, the pay and the need to do grungy tasks at times. He portrayed his former boss as Dread Pirate Bezos, who issues mandates that cause people to “scramble like ants being pounded with a rubber mallet.”
Yet Yegge also saluted Bezos’ ability to push massive changes through the organization, in particular the initiatives that led to Amazon Web Services. Those small two-pizza-or-less innovation teams are nimble, and because they’re cost-effective, Bezos can deploy dozens. Even Google hasn’t been able to react so quickly with its own Web services, Yegge added. That comparison alarmed him, because Yegge had quit lean-and-mean Amazon years earlier in favor of opulent Google, where free shuttle buses with Wi-Fi whisk employees to their jobs.
Amazon, started in a garage and nurtured in a rundown stretch of Seattle waterfront, is now settling into its fifth headquarters, in Seattle’s elegantly rehabbed South Lake Union district. The company’s new campus consists of nearly a dozen shiny glass and steel buildings, complete with courtyards, cafes, restaurants and a little bit of public artwork on display.
Jeff Bezos should be there a long time. He just turned 48 in January and could easily run Amazon another two decades. That’s good for stability. It could be a challenge in terms of retaining other executives with aspirations of becoming a CEO. Bezos says he knows when to avoid meddling so that his project leaders can find their own paths. Yet it’s congenitally hard for founders to be hands-off for long—an effort to bring in a chief operating officer to work directly under Bezos didn’t work out a decade ago.
How much power can Bezos share when the customer, as channeled by Amazon’s founder, calls all the shots? Rather than kibbitz with a number two, Bezos actually reads over-the-transom e-mail, which most CEOs regard as unbearable clutter. He scanned customer notes avidly when Amazon was tiny, and he hasn’t shaken the habit. Dozens of times a year, unsolicited suggestions turn into feature improvements. Even angry e-mails are “fantastic if you want customers to be honest,” Bezos says.
Then there’s the fan mail. Asked about customer e-mails that have become his favorites, Bezos forwarded to FORBES a note from a woman recounting how Amazon has touched her life over the past 12 years. First she bought books and compact discs when she was in her late 20s. Then she spent $79 a year to qualify for free shipping as part of the Amazon Prime program for heavy users.
Now, she writes, Amazon is “helping me choose a mattress and a crib for my son.” Instead of being overwhelmed by all the shopping associated with pregnancy and the arrival of a child, she feels in control. She concludes by writing: “Thank you so much for making my life simpler and easier. … They say it takes a village, but, in this case, all a mom needs is Amazon, her Amex and an iPhone.”
That last need, ironically, seems to be Amazon’s next target: smartphones. Lab 126, Amazon’s Silicon Valley unit where the Kindle was developed, has been hiring flurries of mobile-technology engineers the past two years. Amazon hasn’t confirmed anything, but it hasn’t made much of an ¬effort to swat down speculation. If Amazon does storm the lush smartphone market, it will do so with valuable strengths such as customers’ physical addresses, purchasing histories across a broad array of categories and credit card data. Even Apple can’t claim all of those.
In the short term Bezos will continue to attack muda. Last month Amazon bought Kiva Systems, a maker of small robots that whiz goods to the right spots within a warehouse, for $775 million. Kiva “could speed the cycle time inside our fulfillment centers,” Bezos says. Owning Kiva gives Amazon first crack at its technology, which means “getting products to customers even more quickly.”
In some ways this is the area Bezos least needs to worry about: Last December he was “very proud” that Amazon was able to make good 99.99% of the time on its promises to get packages to customers before Christmas. No small feat (just ask Best Buy). To Bezos, though, this also means they came up short one time in 10,000. “We’re not satisfied until it’s 100%.”

Jeff Bezos’s Top 10 Leadership Lessons
This story appears in the April 23, 2012 issue of FORBES magazine, accompanying the cover story, Inside Amazon’s Idea Machine.
With the passing of Steve Jobs, Jeff Bezos is now tech’s leading philosopher-CEO. His advice ranges from what to read (give the Declaration of Independence a shot) to how to deal with stress (“Laugh a lot”). Mostly, though, Bezos sticks to business.

1. “Base your strategy on things that won’t change.”
Selling lipstick, tractor seats, e-book readers and data storage is all part of one big plan with three big constants: offer wider selection, lower prices and fast, reliable delivery.

2.“Obsess over customers.”
Early on Bezos brought an empty chair into meetings so lieutenants would be forced to think about the crucial participant who wasn’t in the room: the customer. Now that -surrogate’s role is played by specially trained employees, dubbed “Customer Experience Bar Raisers.” When they frown, vice ¬presidents tremble.

3. “We are willing to be misunderstood for long periods of time.”
Many of Amazon’s expansions look like money-losing distractions at first. That sometimes sends the company’s stock price skidding and evokes analysts’ scorn. Bezos shrugs. If the new initiatives make strategic sense to him, a five-to-seven-year financial payoff is okay.
4. “There are two kinds of companies: those that try to charge more and those that work to charge less. We will be the second.”
Lots of retailers talk about holding down costs and passing the savings to the consumer. Few do so as intently as Amazon, where “frugality” is one of eight official company values. The ¬reward for putting up with cheap office ¬furniture: a $90 billion stock market valuation and 35% revenue growth.
5. “Determine what your customers need, and work backwards.”
Specs for Amazon’s big new projects such as its Kindle tablets and e-book readers have been defined by customers’ desires rather than engineers’ tastes. If customers don’t want something it’s gone, even if that means breaking apart a once powerful department.
6. “Our culture is friendly and intense, but if push comes to shove we’ll settle for intense.”
Data reigns supreme at Amazon, particularly head-to-head tests of customers’ reactions to different features or site designs. Bezos calls it “a culture of metrics.” With dozens of these gladiator-style showdowns under way each week, there isn’t much time for soothing words or elaborate rituals of social cohesion.
7. “If you want to be inventive, you have to be willing to fail.”
Early on the company hired a lot of editors to write book and music reviews—and then -decided to use customers’ critiques instead. A foray into auctions flopped. Bezos regards such stumbles as a part of life, as long as Amazon can learn something useful.

8. “In the old world, you devoted 30% of your time to building a great service and 70% of your time to shouting about it. In the new world, that inverts.”
Amazon’s ad budgets are surprisingly small for a retailer of its size. Bezos believes old-fashioned word-of-mouth has become even more important in the digital age—so he prefers low-key process improvements that are meant to get happy customers buzzing. One favorite: Amazon’s war on clamshell packaging, so toys and other shipments will be easier to open.
9. “Everyone has to be able to work in a call center.”
Complaints can be devastating in the age of viral tweets and blogs. Bezos asks thousands of Amazon managers, including ¬himself, to ¬attend two days of call-center training each year. The payoff: humility and empathy for the customer.
10. “This is Day 1 for the Internet. We still have so much to learn.”
Bezos first made that observation in 1997, in his initial letter to Amazon’s shareholders. He hasn’t budged from it. At Amazon’s new headquarters two of the largest buildings are Day 1 North and Day 1 South. In interviews Bezos still talks about the Internet as an -uncharted world, imperfectly understood and yielding new surprises all the time.

The story below is from the December 3, 2012 issue of Fortune
Amazon’s Jeff Bezos: The ultimate disrupter

He’s a pro-customer, tightfisted risk-taker who is conditioning Wall Street to embrace his erratic earnings. If you’re running a business with high margins — watch out.
By Adam Lashinsky, senior editor-at-large
FORTUNE — Jeff Bezos likes to read. That’s a dog-bites-man revelation if ever there was one, considering that Bezos is the cerebral founder and chief executive of a $100 billion empire built on books. More revealing is that the Amazon CEO’s fondness for the written word drives one of his primary, and peculiar, tools for managing his company: Meetings of his “S-team” of senior executives begin with participants quietly absorbing the written word. Specifically, before any discussion begins, members of the team — including Bezos — consume six-page printed memos in total silence for as long as 30 minutes. (Yes, the e-ink purveyor prefers paper. Ironic, no?) They scribble notes in the margins while the authors of the memos wait for Bezos and his minions to finish reading.
Amazon executives call these documents “narratives,” and even Bezos realizes that for the uninitiated — and fans of the PowerPoint presentation — the process is a bit odd. “For new employees, it’s a strange initial experience,” he tells Fortune. “They’re just not accustomed to sitting silently in a room and doing study hall with a bunch of executives.” Bezos says the act of communal reading guarantees the group’s undivided attention. Writing a memo is an even more important skill to master. “Full sentences are harder to write,” he says. “They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking.”
Businessperson of the year – the full list
Jeff Bezos has always done things his own way, whether he’s ignoring Wall Street’s pleas for consistent earnings growth or requiring his top people to construct artfully written missives or launching seemingly disparate businesses — all at razor-thin margins. Only there’s nothing random about Bezos’s strategy. Indeed, like the memos he makes his managers write, his moves are driven by clear thinking and a cohesive vision, even if it takes a while for rivals to figure out Amazon’s motives — at which point it may be too late.
Bezos is the ultimate disrupter: He has upended the book industry and displaced electronics merchants. Now Amazon is pushing into everything from couture retailing and feature-film production to iPad-worthy tablet manufacturing. Amazon even sells ultracheap database software for businesses. (Oracle (ORCL), take note.) He’s willing to take risks and lose money, yet investors have embraced him, pushing Amazon’s stock up 30% so far this year. And even as Amazon expands and experiments, Bezos remains zealous about delivering a good customer experience. For all these reasons and more, Fortune has named Bezos its 2012 Businessperson of the Year.
It’s not just Fortune that deems Bezos praiseworthy. He counts among his fans Amazon’s sharpest competitors and a legion of entrepreneurial imitators. “Jeff is a manic competitor, a delightful human being, and a trusted supplier,” says Netflix (NFLX) CEO Reed Hastings, whose company is enduring a full-frontal assault from Amazon’s instant-view movie-streaming service. Marc Andreessen, the Netscape co-founder and venture capitalist, marvels at Bezos’s “staying power and willingness to withstand beatings.” And in the absence of Apple’s Steve Jobs, Bezos is the new undisputed role model for founders who want to keep control of their companies. “With Steve’s passing, Bezos is the epitome of the venture-backed CEO,” says Bill Gurley, another VC and longtime Amazon watcher, as well as the lead investment-banking research analyst for the company’s 1997 IPO. “If you were to ask 100 startup entrepreneurs who the CEO is they admire most, he would show up on 95 of the ballots.”

Amazon recently released a new e-book product called Kindle Serials. For $1.99, customers get a book delivered to their Kindle e-reader device serially — say, once a week — with no additional charge for each new episode. It’s an homage to the bygone era when writers like Charles Dickens published their novels in newspapers one chapter at a time before collecting the work in book form. Kindle Serials is not likely to amount to a giant revenue stream for Amazon, which will ring up more than $60 billion in sales this year. But listening to the way Bezos talks about the history of serialization, you get a glimpse of his concept of customer feedback — and how Amazon acts on it. “Even in Dickens’s day, he would take notice of the criticism of the prior installments and use it to his advantage,” he says.
How does Bezos use Dickensian continual improvement at Amazon? “We innovate by starting with the customer and working backwards,” he says. “That becomes the touchstone for how we invent.” Pushing the publishing industry to make books available electronically was a customer-friendly proposition: Readers got instant gratification at lower prices. Amazon Prime, the company’s addictively popular all-you-can-eat delivery offering, eliminates friction; if you’ve already paid for unlimited shipping, then you order what you want, when you want, in the quantities you want. Amazon Web Services, the company’s newest big division, offers business customers the same sophisticated online infrastructure technology that Amazon has developed for itself.
Amazon goes Hollywood
Customer focus is a cultural issue, Bezos says, that distinguishes Amazon from other companies, whose chiefs craft strategy in competitive terms. “When they’re in the shower in the morning, they’re thinking about how they’re going to get ahead of one of their top competitors,” Bezos says. “Here in the shower, we’re thinking about how we are going to invent something on behalf of a customer.”
At 48, Bezos is relatively unchanged from the days when he was the boy wonder of the Internet industry. It is Election Day, and the weather in Seattle is splendid — meaning it is not raining. Bezos holds court in a conference room in the Day One North building of Amazon’s urban headquarters, where no corporate logos adorn the outside of the company’s multibuilding campus. (“Day One” refers to his persistent assertion that the Internet is still in its infancy.) Bezos has wisps of gray stubble at the sidewalls of his otherwise bald pate, and his large brown eyes dominate his face. In a wide-ranging discussion about Amazon’s culture and management techniques, he is by turns inquisitive and challenging, but also charming and relaxed. By multiple accounts he is the same way internally, though unforgiving of anyone who is ill-prepared. “He is very demanding,” says a former insider. “He gets angry when he feels like people aren’t being competent.”

Nadia Shouraboura, until recently an Amazon vice president in charge of technology for Amazon’s global supply chain and fulfillment operation, says she sometimes saw Bezos ignoring the discussion at his own meetings because, she realized later, he was reading e-mails from customers, usually complaints. Those e-mails trigger what Amazon people call a “Jeff B. escalation.” By forwarding customer gripes, Bezos is able to have a direct dialogue deep into the company. Ordinary employees see evidence of his insistence on responsiveness. “My initial reaction was, ‘You want me to be working on a Friday night on an order that was messed up by half a day?’ ” says Shouraboura, who recently opened a men’s apparel store in Seattle. “Then it sank in. If one customer wrote to Jeff, there are others who didn’t. And Jeff wants to understand the screwup to make sure it gets fixed.”
One way to serve customers is to give them the lowest possible prices, and in that way Amazon is more like the granddaddy of American retail, Wal-Mart (WMT), than its Silicon Valley counterparts. To offer the lowest prices, Amazon is famously frugal. Unlike in much of Silicon Valley, Amazon employees pay for their meals. Desks are slabs of wood that could be used for doors. For years Bezos chose ultracheap shipping rates for customers over expensive TV advertising. The penny-pinching applies to salaries, which are low throughout the 80,000-person-plus organization. “We pay very low cash compensation relative to most companies,” says Bezos. “We also have no incentive compensation of any kind. And the reason we don’t is because it is detrimental to teamwork.”
Jeff Bezos’ fashion foray
Make no mistake, Amazon rewards its teams. It’s just that restricted stock that becomes valuable only over time — and more valuable only if the company succeeds — is the primary reward. For example, Jeff Wilke, who runs Amazon’s North American consumer business, one of its largest, earned a salary last year of $165,000. That reflected a $5,000 raise from the previous year. Save one peer with an ancient employment agreement, no one at Amazon makes more than Wilke. (That includes Bezos, whose annual salary is just under $82,000. Bezos receives no restricted stock awards either. Then again, his founder shares are worth about $19 billion.) For his part, Wilke held restricted stock worth more than $20 million earlier in the year. The stock performance clearly helps retention, but it isn’t the primary motivator for Amazon’s recruiting. “You go to Amazon because there’s something big going on,” says Dave Cotter, another recently departed executive who also is working on a startup of his own. “Other companies pay more.”
In the world of consumer electronics, new-device launches are as hyped and choreographed as a Justin Bieber concert, and Amazon’s most recent Kindle announcement is no exception. It is pitch black inside a converted airplane hangar in Santa Monica until a faint flicker appears at the front of the room. As the lights come up, the source of the light is revealed: The tiny beacon is Jeff Bezos holding above his head a new Kindle Paperwhite, Amazon’s latest e-ink device that for the first time includes illumination. The Paperwhite is as nerdily wonderful as Bezos sells it: A lightweight, moderately priced ($119) e-reader for those who like to read in bed in the dark without disturbing the person next to them. Amazon’s newest Kindle Fire tablets are cool too — all priced lower than comparable iPads and pretty darn close in terms of features.
Everything about the Amazon event, from the new products to Bezos’s lights-out stunt to his assertion that Amazon is offering the “best tablet at any price,” invites inevitable comparison to Apple. It is equally impossible to avoid comparing Bezos to Steve Jobs, given that the list of their similarities is long. Bezos insists on a long-term orientation for Amazon, just as Jobs did at Apple (AAPL). He treats Wall Street with mild disdain, just as Jobs did. Amazon employees, like their counterparts in Cupertino, Calif., are known for being tightlipped on the subject of their respective companies. As Jobs did, Bezos has an extraordinarily loyal, long-serving, and close-knit brain trust of top executives who can channel his authority inside and outside the company. Wilke, the North American consumer chief, is a 13-year veteran. Jeff Blackburn, a former investment banker who worked on Amazon’s IPO before joining the company in 1998, is Bezos’s top dealmaker. And Web Services chief Andy Jassy — there’s no requirement that top brass be named Jeff — is a Bezos protégé who joined the company in 1997.
Bezos, like that other guy, has a shrewd and even ruthless side. Executives with Drugstore.com, now owned by drug retailer Walgreen (WAG), still recall that a decade ago Amazon started a health-and-beauty category aimed squarely at the smaller company. Never mind that Amazon owned a significant stake in Drugstore.com at the time and that Bezos sat on its board. Years later, in 2010, Amazon launched a full-throttle push to market baby products to moms at the precise moment it was negotiating to purchase the parent of Diapers.com, an act that could only drive down an acquisition price by striking terror in the hearts of other buyers.
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Bezos is also willing to cannibalize his own companies: Amazon spent nearly $1 billion to acquire shoe retailer Zappos in 2009, but its Amazon shoe site competes directly with Zappos. As well, Bezos is adept both at changing the subject to one of his choosing and at crafting a reality that suits his purposes. Asked if Amazon’s price-comparison app, launched during last Christmas’s shopping season to the intense irritation of physical retailers, was a gentlemanly thing to do, Bezos responds, “I would broaden that to say we live in a world that is becoming more and more transparent.” Similarly, the Amazon CEO is unapologetic about a strategy that for years avoided collecting state sales taxes in locations where Amazon didn’t have retail-oriented operations. “We have been very clear for more than 10 years that we are in favor of having federal legislation that simplifies and allows online retailers to collect sales tax,” he says. When challenged that advocating a different position isn’t the same as complying with the law as it stands, he replies, “Which is what we did.” It’s a legalistic interpretation, yet it has served Amazon extremely well in establishing strong positions nationwide. In Texas and California, for example, Amazon agreed to begin collecting sales taxes after negotiating for favorable conditions for new warehouses.

Bezos and wife Mackenzie in New York at a Metropolitan Museum of Art Costume Institute Gala in 2012
The comparisons to Apple and Jobs go only so far, of course, and in some ways the two companies and their celebrated founders are polar opposites. Amazon, unlike Apple, has a low-price, low-margin strategy almost across the board. A favorite Bezos aphorism is “Your margin is my opportunity.” In fact, whereas Apple has long prided itself for premium prices — with the operating margins to show for it: 31% in 2011, vs. 2% for Amazon — Amazon sells at the bare minimum needed to break even, on the assumption it will make money elsewhere. It’s a completely different approach. Apple uses its platform to sell high-profit devices; Amazon sells low- or no-profit devices to pump ever more volume onto its platform.
Amazon also tolerates businesses under its roof that are unconnected to one another. Amazon Web Services, for example, has nothing in common with Kindles, and that’s just fine with Bezos. He allows each to operate independently as long as they adhere to Amazon’s overall values. He calls this “distributed innovation,” and it contributes to a nimble corporate mindset that allows Amazon to branch out into new areas.
A strong strain of pragmatism, or practicality, runs through Bezos’s decision-making. Sure, he has his credos, and he cites them frequently. “The three big ideas at Amazon are long-term thinking, customer obsession, and a willingness to invent,” he says. But he doesn’t let other tried-and-true practices hem him in. That aversion to TV advertising, for example? Going up against Apple and others in the device business has changed his mind, and Amazon is advertising its Kindles aggressively for Christmas. Amazon is also an overwhelmingly headquarters-centric company. Yet to get closer to the hardware designers he needed for the Kindle, Bezos opened the now 1,500-strong Lab126 operation in Cupertino that is so close to Apple that some Amazon employees can see Apple buildings from their windows. Pragmatism may be preventing Bezos from pulling the trigger on long-rumored initiatives such as same-day delivery and a move into brick-and-mortar retail — two projects that remain tremendous financial challenges, even for a company of Amazon’s scale and execution prowess. Another long-rumored project, an Amazon phone, seems perhaps more manageable.
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Bezos reveres invention. Other companies have more of “a conqueror mentality,” he says. “We think of ourselves as explorers.” Yet he’s not too proud to copy others. As such, the success of flash-sales sites like Gilt begat Amazon’s MyHabit site. Groupon’s (GRPN) momentum in daily deals led to AmazonLocal — and a so far losing investment in LivingSocial. Diapers.com clearly encouraged Amazon Mom. And so on. “You want to look at what other companies are doing,” says Bezos. “It’s very important not to be hermetically sealed. But you don’t want to look at it as if, ‘Okay, we’re going to copy that.’ You want to look at it and say, ‘That’s very interesting. What can we be inspired to do as a result of that?’ And then put your own unique twist on it.”
Bezos even takes a practical approach to his love-hate relationship with Wall Street. Having worked at a hedge fund in his twenties, he understands the investor mentality probably better than most CEOs. Perhaps as a result, for the first many years of Amazon’s existence, Bezos frustrated investors by refusing to realize Amazon’s profit potential. Then, around 2007, Amazon’s investments began to bear fruit, and investors were delighted. The stock is up 10-fold in the past six years. “We believe in the long term, but the long term also has to come,” says Bezos, explaining that periodically Amazon wants to “check in” with its ability to make money. Thus, in 2007, Amazon more than doubled its profit, to $476 million, on a 38% increase in sales to almost $15 billion.

Bezos, photographed near Amazon’s headquarters in early November
The “check-in” made a dramatic impact on investors, including short-sellers who had wagered against Amazon’s shares. “There were so many investors that were short Amazon’s stock in 2006 and 2007 that when the shares moved from $35 to $100 they lost their jobs,” says Brian Pitz, a bullish-on-Amazon analyst at investment bank Jefferies. Amazon currently happens to be in another of those investment phases. It is spending heavily on Kindle development, additional data centers, and new warehouses. These investments produced an unexpected loss of $274 million in the third quarter, and Pitz expects full-year earnings of just $107 million — well below the profitability of five years ago. (Bezos says he can’t predict how long the investment phase will last, “and even if I could, I wouldn’t tell you.”) Still, bearish investors have been cowed. Despite the disappointing earnings report, Amazon’s shares are worth more than 100 times Wall Street’s estimates for next year’s earnings. Says analyst Pitz: “Now you are either long term on Amazon or on the sidelines.”
Jeff Bezos reads for fun too. A science-fiction buff who is funding space exploration as a side project, he just finished The Hydrogen Sonata by Iain Banks. “Read it on both Paperwhite and Fire HD, with Whispersync keeping my place between the two,” he writes in an e-mail, referring to the Kindle feature that synchronizes a reader’s progress across devices.
Given what he’s built in the 17 years since turning on the Amazon store, Bezos might be forgiven for thinking of his legacy. He isn’t. “I have joked that I want my legacy to be ‘World’s Oldest Man,'” he deadpans. The father of four has, however, gained insight over the years into what makes him tick. “I have realized about myself that I’m very motivated by people counting on me,” he says. “I like to be counted on. I like to have a bunch of customers who count on us. I like being part of a team. We’re all counting on each other. I like the fact that shareholders are counting on us. And so I find that very motivating.” As he speaks, Bezos is so focused on not letting down customers, he clearly doesn’t need a six-page memo to get there.