Marko Ilincic, group chairman of Vistage UK, evaluates the final message from Jeff Bezos who recently stepped down as chief executive of Amazon, the company he founded 27 years ago.
As this is my first feature for Elite Business magazine, I thought I would begin by giving readers a little bit of background information about myself. I’ve always loved building things, which is why I spent nearly 25 years with LEGO® ‘ one of the world’s most respected brand names.
Joining from university as a marketing assistant, I went on to undertake a number of commercial roles in various countries, and served on the company’s Global Executive Board. Since leaving LEGO a couple of years ago, I have had the privilege of coaching numerous chief executives and managing directors across a wide range of business sectors.
I have also served as a non-executive director on various company boards and in this maiden feature I will discuss the remarkably successful online retail giant Amazon, and in particular its former CEO Jeff Bezos. Just a few weeks ago, Bezos stepped down from this position at the company he created from his own garage in 1994. He is surely an inspiration to every entrepreneur out there.
With great interest, I read his final message to shareholders and employees, and wanted to discover if its contents held any secrets? I have delivered hundreds, possibly thousands, of communications over the years. These have covered quarterly business performance updates, as well as end of year speeches, and town hall presentations.
In his final communication, Mr Bezos did not beat the drum with regards to market share or sales increases. Neither did he talk about ‘achievements’ which are often the bedrock of many such departure occasions.
Instead, he cleverly reaffirmed the purpose of the company and where it was going. He combined factual information with emotive words that subtly reinforced the company’s purpose for its existence. His speech was aimed at both employees and shareholders alike.
Here are, what I believe to be, the main talking points from his final communication.
Value creation: He focussed on the value Amazon creates, and not just its top and bottom lines. By adding up all the metrics from the previous year, Bezos says Amazon created over $300 billion of value last year. The company’s fourth quarter spending during 2020 revealed an outlay of $42bn on ‘technology and content.’ This supported his mantra that invention is the root of all real value creation.
What does this mean to you? Consider how you measure value creation. Look at your value proposition and ensure this can be explained on one page. By doing this it will help your employees to understand why the business exists. Clearly demonstrate how the product or service your company is providing, meets the needs of your customers or clients. Try to attribute values/metrics against these elements.
Prime expansion: Amazon grew its fulfilment centre footprint by over 50% in 2020. It reached a milestone of 200 million Prime members, and spent $21.4bn on shipping during the final quarter. Bezos estimated that Amazon saved each Prime customer an average of 75 hours a year. By this, I mean, they didn’t have to travel to retail parks, distribution centres or high streets to fetch their goods. Therefore, at $10 an hour for 200m Prime members, Amazon had created $126bn in value for its customers ‘ and this does not take into account cost of product.
What does this mean to you? Using your value proposition, look at each component and try to attribute the value and benefits that your company is having on your clients or customers. Employees need to be reminded, so that they feel they are contributing to something other than just sales and profit. This cannot be under estimated.
Global employee count: Amazon has 1.3m employees across the globe, earning approximately $80bn in combined income. It is estimated that there is a further $11bn in payroll taxes and benefits, along with a $300m spend in employee safety projects. These huge figures illustrate the immense socio-economic impact that Amazon currently has around the world, and far beyond the service it provides to its customers.
What does this mean to you? If you have been hiring recently, don’t just think about employee headcount. Consider its incremental salary values and the positive economic impact that it has. Alternatively, if you have had to reduce or furlough some of your team because of the pandemic, acknowledge the loss, along with the difficult decisions you have had to make. But also consider communicating the measures you have put in place to secure the jobs that remain.
Third-party sellers: Amazon is often cited as negatively impacting on small businesses who struggle to compete. However, 1.9m SMEs accounted for 60% of retail sales on Amazon‘s marketplace. Bezos says third-party retailers profited by approximately $25bn last year though the Amazon platform.
What does this mean to you? It’s easy to be drawn into defending your position when under fire from third parties. Bezos acknowledges this particular challenge but prefers to focus on the value creation his company manufactures. This motivates employees and is more likely to appease Amazon‘s critics.
Future focus: Amazon has invested around $1bn in Rivian and plans to have more than 10,000 electric delivery vans on the road globally by the end of 2022. This figure is estimated to become 100,000 by 2030. The company also spent $11bn on video and music content during 2020, and has just announced a $250m venture fund to support the digitizing of start-up businesses in India. Amazon view India as a growth market, following their disastrous attempts to woo China.
What does this mean to you? Make sure you regularly remind your organisation about future plans and potential investments. Owners, bosses and employees are on a journey together, something which the majority shareholders at Europe’s leading football clubs failed to understand recently! It is important employees can visualise how the business may evolve over the coming months and years.
And finally, these sorts of messages usually possess a standout phrase, slogan or strapline, similar to a chorus in a pop song. With Bezos, his was: ‘Differentiation is survival and the universe wants you to be typical.’ So next time you circulate an important message, decide on your tagline. Like any top performer, preparation is the key to excellence in execution and Bezos had this in bucket loads.