- In 25 years, Amazon from went from a small-scale online bookseller to a retail behemoth.
- Earlier this November it launched its pharmacy delivery service, marking the company's expansion into healthcare.
- Marketing experts and past Amazon employees attribute the company's successful diversification to Jeff Bezos' customer-obsessed approach to strategy.
- By working backwards from an end product meeting a specific need, Amazon successfully anticipates customer needs and tailors its services to meet them.
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In 2011, Ian McAllister, Amazon's former director of Alexa and Smile, went to CEO Jeff Bezos with a series of new program ideas.
At Amazon, that means presenting Bezos with an internal press release, or a document presenting a clear problem that consumers are facing and an explanation of how the idea in question will solve that problem.
Not every idea made the cut. McAllister said that Bezos would point out when a press release didn't clearly explain the problem for consumers. If he wasn't able to come up with a compelling problem paragraph, there might not be a problem worth solving. But the ideas that were able to present a solution to a clear problem made it through.
This process, known as "working backwards," allowed McAllister's team to eventually develop Amazon Smile. While charitable giving directly to organizations can involve many steps, Smile allows Amazon shoppers to give back to causes they care about by donating a portion of their eligible purchase to charity at no cost to themselves, all while feeling good about the purchase they've made.
"To me, this was a clear example of how Jeff is truly customer-obsessed," McAllister wrote in an email to Business Insider. "It's not just lip service. From that point forward, every press release that I wrote, or someone on my teams wrote, was required to have a problem paragraph, and the customer problem was invariably the first topic of discussion in each meeting."
Amazon confirmed that a 2011 meeting between McAllister and Bezos took place, but could not confirm specific details of the conversation.
The principle of customer obsession, which Bezos explains in his new book, "Invent and Wander," has allowed Amazon to anticipate and provide nearly every purchase a consumer would need to make on a daily basis. And November's launch of Amazon pharmacy, a two-day prescription delivery service free of cost for Prime members, is the latest example of that strategy.
Today, the $1.4 trillion retail giant serves over 150 million paying Prime customers across the globe and employs 1.2 million people worldwide. Here's how Bezos made it happen.
Work backwards, scale forward
To understand why Amazon's ambitious ventures have been so successful, it's worth taking a deeper look into CEO Jeff Bezos' customer-obsessed approach, which centers the company's strategy around addressing the customer's needs and problems.
"Because you're customer-obsessed, you find ways to satisfy customers," Sunil Gupta, a professor of business administration at Harvard Business School, said recently on the podcast IdeaCast. "If that means developing new skills that we don't have because we are working backwards from what the customer needs are, then we'll build those skills."
According to Gupta, most companies tout having a customer-centric model, but they're actually primarily focused on enhancing offerings rather than thinking about how the customer will experience them.
For example, Gupta said a gas company might add additional services to their gas stations without considering that customers want to avoid gas station altogether. By contrast, Amazon takes customer focus to another level. At meetings, Bezos often leaves one seat open and tells his team that they should imagine it's occupied by the customer, who is the most important person in the room.
That's one reason it's standard practice for Amazon employees to start developing a product by writing an internal press release.
"Even when they don't yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf," Bezos wrote in a 2016 letter to shareholders.
"It requires that the author of the idea crisply identify one or more very real customer problems, and be thoughtful about how those problems are described and ranked," McAllister wrote.