David Maister: Trust and Professionalism

16 December, 2014

David Maister was described to me by a friend and colleague* as ‘the first good consultant’s consultant’. A former Harvard Business School professor, who hails from the United Kingdom, Maister carved out a niche as perhaps the most influential thinker about professional services and and the role of trust in business.

David MaisterBrief Biography

David Maister was born in London, in 1947,and studied Maths, Economics, and Statistics at the University of Birmingham. He went on to achieve a Masters in operational research from the London School of Economics and a DBA from Harvard Business School, in 1976. He then taught, first at the University of British Columbia, and then, from 1979 to 1985, at Harvard Business School.

During this time, he specialised in transportation and logistics. His books on the topic are now all out of print. He left academia to establish his own consultancy and started to focus on advising professional firms, like accountants, lawyers, marketers and consultants. This led to his keystone work, in 1993, ‘Managing the Professional Services Firm‘. This remains in print and a strong seller. Maister had found his niche. I came under his spell when given a copy of his 1993 book, ‘True Professionalism‘, while a manager at Deloitte. It was written for people like I was then: professional services managers, looking to build a career, a reputation, and a client portfolio.

Perhaps Maister’s most influential book, however, was his 2000 book (co-written with Charles Green and Robert Galford), ‘The Trusted Advisor‘, which introduced us to ‘The Trust Equation’. His last book (to date) is ‘Strategy and the Fat Smoker: Doing What’s Obvious But Not Easy‘. The subtitle summarises the book’s thesis succinctly. At the start of 2010, Maister announced his retirement, shortly after being awarded the Carl S Sloane Award for Excellence in Management Consulting. He now spends his time in his home town of Boston, having forsworn air travel, enjoying the arts with his wife. How unusual and refreshing to see a top business person enjoying a fulfilling retirement.

Five Inter-connected Ideas

I’d like to summarise and interpret some of Maister’s ideas and how they link together by isolating five inter-connected themes, and showing how Maister joins them up.

1. The Trust Equation

At the heart of ‘The Trusted Advisor’ is The Trust Equation, which Maister and his co-authors use to illustrate how the ‘four realms’ of trust interact, to answer questions like: ‘My client knows I am credible and reliable, so why doesn’t my client trust me?’. Trust (T), they argue is the result of four factors: Credibility (C), Reliability (R), Intimacy (I), and Self-orientation (S).

T = (C + R + I ) / S

But trust, they say, is not about knowing and it is not about tactics: it is all about attitudes and character. People will trust you if you show an interest  in them, demonstrate a genuine desire to help them, and have a low self-orientation – that is, you are less interested in yourself than in them. Excellence, Maister says, arises from acting according to agreed principles and values, which also build trust (through reliability – or being predictable in your ethical choices).

Here is the first link: A high trust business will experience high growth. Trust is the best business strategy.

2. Business Strategy

Maister observes that many professional services firms in the same market will often have near-identical strategies. So what will determine which one wins, competitively. Since they are all smart, it isn’t the choice of customers, products, services or marketing: it is the drive and commitment to implement the strategy effectively. And this comes from people and how the leaders of the business manage and lead them.

Here is the second link: To deliver a business strategy, you need energy, excitement and enthusiasm from your team

3. Management

Management is about people, passion and principle. Maister says that one-on-one management is the only real managerial activity, because this is the only way to properly engage with people. A manager’s agenda must be to create a great place to work, rather than working at building their own career: that will follow.

In an article published in 2002 (Business: The Ultimate Resource), Maister sets out 13 rules on which successful managers model their behaviour. I have selected some of my personal favourites:

  • Act as if not trying is the only sin
  • Act as if you want everyone to succeed
  • Understand what drives individuals
  • Know all your people as individuals

Here is the third link: Management is about doing what’s right over the long term for your clients and people. This is the route to great client service.

4. Client Services

Maister sees the world of client services in a fairly simple way. But his work has been able to justify this with logic and evidence. A manager’s role is to energise their people. These people will then serve their clients excellently. Clients will reward the company with their patronage and loyalty. This will lead to great financial performance.

So stop focusing on the financial results – they are a lagging indicator of what matters: focus on energising your people. Maister notes that formal systems, policies and procedures do little to build a business: what it needs is managers to use their informal influence on employees, and demonstrate honour, character and integrity.

Here is the fourth link: Honour, character and integrity are the foundations of a meaningful career

5. Career – Professionalism

True Professionalism was where I started with Maister, and his subtitle neatly summarises Maister’s point of view: ‘the courage to care about your people, your clients, and your career’. His definition of professionalism takes in four critical commitments:

  1. to provide the best, most effective services to your clients
  2. to self-improvement
  3. to caring about your clients
  4. to not compromising your values

Here is the final link, back to the start: Not compromising your values is the key to ‘values in action’. Without this, there can be no trust.


* Michael Coleman, who sadly died in September 2011.


Estée Lauder: Modern Marketing

9 December, 2014

Christmas is coming and many readers will be considering perfume and beauty products as gifts. One of the biggest players in that market is Estée Lauder – the eponymously named cosmetics business founded by a determined and charismatic entrepreneur: Estée Lauder.

Estee Lauder

Brief Biography

Estée Lauder was born in 1908 and grew up in the Queens suburb of New York, where her father (like mine) ran a hardware store. Her interest in beauty products started when her Hungarian uncle, Dr Schotz, who was a chemist, came to live with her family and created skin creams in the kitchen, and later in a laboratory in a stable out back. He also made paint stripper, embalming fluid, and lice treatment for chickens. We can only hope that there were no serious mix ups in packaging!

Lauder helped Schotz by selling beauty products and so began her career as a consummate salesperson and marketer, selling skin care and makeup in beauty salons, demonstrating her products on women while they were sitting under hair dryers. This cemented her belief that women must try if they are to buy.

The Estée Lauder name borrows from her given name, Josephine Esther Mentzer, which the family shortened to Esty, and her married name, following her marriage to Joseph Lauder in 1930 or, more strictly, I’d guess, following their remarriage in 1942, following separation and reconciliation. In 1946 she and Joseph Lauder  launched the Company, soon winning a concession at their first department store.

Lauder targeted the most prestigious store, Saks, and a year later was able to finally persuade the buyer after giving a talk at the Waldorf Astoria hotel, and then giving away samples at the end. This created a demand that Saks could not ignore, and marked her second key lesson in marketing.

Lauder’s first fragrance was Youth Dew, a bath oil, created in 1953. It was a rapid success, and Lauder continued to demonstrate her olfactory acumen (as a ‘nose’ is how the industry terms it) by overseeing the creation of five more brands of fragrance before she retired in 1995.

Lauder’s Approach to Marketing

Many of Lauder’s marketing strategies and tactics will strike a modern reader as very… modern. They remain very much what is still recommended; because it still works. So, as a primer on marketing, we can do little better than take inventory of seven of her best approaches.

Give away samples

The try before you buy approach is so successful, it is used on a multi-million dollar scale. Just look at how many millions of versions of U2’s latest record were given away by Apple (500 million actually) at the launch of their new iOS8 and iPhone 6. Was this successful? You bet. Most of U2’s earlier albums re-entered the iTunes charts within a week, generating millions of dollars (undisclosed) of sales for both U2 and Apple.

Direct Mailing

Early on, Lauder used Sak’s mailing list to send samples and gifts to their customers, encouraging them to visit the Estée Lauder concession in store. Direct mailing may have fallen out of fashion to a degree, but many marketers still argue that, in the days of so much direct email, a well thought-out direct mail campaign can be successful. Whether you agree or not, the use of direct email is a powerful and omnipresent force in our lives – the same strategy; just new technology.

Clever Naming

When the US Food and Drug Administration came down hard on the scientific claims of Lauder’s rivals’ products, Lauder took an altogether more savvy route. Her advertising refrained from making scientific claims, but her naming implied the attributes she was unable to claim: Re-Nutriv is meaningless as a word, but caries a vast weight of associations.

Clever Pricing

‘You get what you pay for’ my dad used o say. If lots of her customers believed that, then her premium pricing strategy was clever. Without doubt, two things are true: she did insist on top-quality ingredients, but her pricing included a substantial mark-up, creating exclusivity and emphasising the quality through the most important real-estate in the store: the price label.

Gift with a purchase

That idea may well been hers – she certainly exploited it well, long before BOGOF and three-for-two offers made shopping bags twice as heavy.

Hands on Consultative Selling

Going one step beyond her ‘try-before-you-buy’ strategy, Lauder did pioneer in-store beauty consultations as a way of selling. She believed that in order to make a sale, you must touch the customer, and spent a great deal of her time advising customers and teaching Beauty Advisors.

Brand Clarity

Lauder believed that every woman had a right to feel beautiful and therefore ensure that her advertising portrayed beauty that was both aspirational and approachable. From 1962, Estée Lauder selected one model to be the “face” of the brand. These have included supermodels and actresses. Whether they are really ‘approachable’ is debatable, but at any one time, the face of the brand become a distinctive image for the company.

To learn more about marketing and sales…


This blog is for my mother, Jeanne Clayton, whose favourite perfume was Estée by Estée Lauder.


Eiji Toyoda: Yes we can

2 December, 2014

Eiji was not a management theorist and neither did he found a business. His genius lies in his absolute determination to take on a huge challenge and do difficult things… and he did it twice.

Eiji Toyoda

Brief Biography

Eiji Toyoda was born in 1913 and grew up near Japan’s third city, Nagoya. There, his father had a textile mill, so Toyoda grew up surrounded by the potent combination of engineering and business that was to define his life. He studied engineering at Tokyo Imperial University and, upon graduating in 1936, he joined his cousin’s Toyoda Automatic Loom Works business, where they set up an automobile works and soon changed the name to Toyota.

Toyoda took on a number of roles in setting up research and production planning, but the steady growth of the business was interrupted in 1941, when Japan entered the war. The General Motors car parts they needed were no longer available, and besides; the country now needed trucks. So Toyota became a truck manufacturer. In the early years after the war, trading was tough and Toyoda was heavily involved in the inevitable lay-offs. But he also decided to diversify the company’s future by establishing Toyota Motor Sales.

But there was still precious little to sell. In 1950, Toyoda visited a Ford plant in Dearborn, Michigan. In the time since Toyota had produced their first car in 1936, they had built around 2,500. What Toyoda saw was a plant producing 8,000 every day. He saw immediately that this was the future and determined to revolutionise Toyota’s manufacturing.

Toyoda – like many of his Japanese contemporaries – was often described as under-stated, or taciturn. This was characterised by his outward response to his experience in Michigan. He wrote back to Toyota headquarters that he ‘thought there were some possibilities to improve the production system.’ He brought a manual of Ford’s quality-control methods, which he had translated into Japanese, changing all references to Ford to ‘Toyota’.

This was the start of his first big challenge.

In 1955, Toyoda led the introduction of Toyota’s first mass production car, the Crown. It was a huge success in Japan, but in serving the Japanese market, it was poorly suited to the US Market, where it failed to gain a foothold. That came in 1960, when Toyota launched two new models, the Corona and the Corolla. Both sold massively in the US and, by  1975, Toyota overtook Volkswagen as the largest car importer into the US.

By then, Toyoda had been appointed president of Toyota, serving for longer than anyone to date, from 1967 to 1981, when he stepped into the newly created role of Chairman. It was as Chairman that he really took on and equalled the US, forming a joint venture with General Motors in 1984 to manufacture Toyota cars in the US.

But it was a year earlier, in 1983, that he kicked off his second big challenge: to create a luxury car to challenge the best.

This was to become the Lexus, which later grew into a new brand, to create a clear marketing distinction between the mass-market Toyota cars and the elite Lexus vehicles. His success was complete. Lexus regularly competes with prestige German Marques Audi, BMW and Mercedes.

In 1984, Toyoda resigned from the Chairmanship although he continued to go into the office (where all three of his sons are executives) into his nineties. He died, shortly after his 100th birthday, in 2013.

Challenge 1: Become a World Class Manufacturer, to rival the US ‘Big Three’ auto manufacturers

Toyoda set out to take US mass-production ideas and fine tune them to the point where he could out-compete the US auto giants. He worked with a veteran loom engineer, Taichi Ohno (who deserves, and will doubtless get, his own Pocketblog one day). They created together the ‘Toyota Production System (TPS)’ which is now more generically known as ‘Lean Production’. It rested on three core tenets:

  1. Just in time (JIT) production
    Ohno extended the concept of quality to reduction of waste and asked ‘why stockpile components?’. The result was a revolution
  2. Value Stream – also known as Value Chain
    To make JIT work, you need to see the production process as a part of a longer stream of activities from procurement to production to delivery. Customer demand drives ordering.
  3. Kaizen and Responsibility
    TPS makes everyone responsible for quality. While Toyota did not invent continuous improvement, or Kaizen, it is only when everyone takes responsibility for quality that it can really work.

Challenge 2: Create a World Class Luxury Brand, to rival established German auto manufacturers

From a top secret meeting to a world class luxury marque, Toyoda created a new brand from nothing but determination and around $2 billion of investment. Well, you can do a lot with $2 billion (I think – I’d love to try). But who, in 1983, would have thought that a Japanese car maker would out-engineer the German luxury brands? To do this, Toyoda’s engineers had an eye for detail that today reminds me of Apple. They tested the Lexus on Japanese roads, but knew that Japan would not be their primary market if they were to succeed. So they built new roads in Japan, mimicking roads in the US, UK, and Germany, and tested the Lexus on these. In the process of building the first Lexus, Toyota innovated and experimented like never before.

And what did Toyota get for their 200 patents and 450 prototypes? The Lexus LS400 and the start of a whole new world class business.


Mastering Difficult Conversations: What sort of monkey are you facing?

27 November, 2014

Today we have a guest blog from author Pete English, who has just given a successful presentation at CIPD’s Annual Conference and Exhibition on the topic of ‘Mastering Difficult Conversations: What sort of monkey are you facing?’. Pete’s website is www.peterenglish.co.uk and he can be contacted at pete@peterenglish.co.uk   He has written three Pocketbooks: Tackling Difficult Conversations, Confidence and Succeeding at Interviews.

We’re all primates.

Many of our day-to-day behaviours have been hard-wired into us over thousands of years of evolution. Our ancestors survived by being excellent threat-detectors (it was important to decide quickly whether an animal or situation was safe) and by being good at sucking up to the leader of the pack, to put it bluntly – according to the evolutionary psychologists, being friendly with the alpha male or female enhanced your survival prospects.

So, we’ve evolved to be vigilant and status conscious. Apparently when we meet someone, the first thing we unconsciously assess is their level of status – do I need to be wary of this person? Do I need to keep on the right side of them?

And other primates are sniffing you, picking up cues as to how powerful you are, how much respect they need to give you.

If you want to master this game, it helps to know what kind of monkey you are dealing with. Let’s consider the Chimpanzee and the Bonobo.

Chimpanzees

In the wild, chimpanzees are very territorial, competitive and (particularly when threatened), ferociously aggressive. There is a strict hierarchy with a male chimp at the top.

Chimpanzees

 

In your organisation, you know you’re dealing with a chimp when:

  • you feel like they’re trying to dominate (often using their tone of voice and body language), and they are inclined to displays of power and status;
  • the conversations often have an argumentative tone – there’s a Win/Lose feel to the interaction;
  • their focus is on the task in hand, with little or no attention paid to pleasantries.

Bonobos

Bonobos are very different. They are much more relaxed about their territory. Rather than seeking to dominate, they engage in ‘affable social networking’. Bonobos are much less hierarchical than chimps, and tend to form matriarchal groups.

Bonobos

You know you’re dealing with a bonobo because:

  • their body language is responsive and affirming – lots of smiling and nodding;
  • the conversation is friendly, and relaxed;
  • you get the impression that their primary focus is ‘mutual stroking’, with the task being secondary.

Next time: how to handle each type of monkey (and what they think of you).

 


Joseph Juran: Quality Management

25 November, 2014

Joseph Juran is one of the leading thinkers on the route establishing a culture of quality throughout much of Japanese and then western business. He asserted that quality was nothing new or clever. Rather, it is elemental and elementary. That said, he watched as, for 25 years, his adopted homeland of the United States ignored the quality imperative. Then, in his late seventies, he lived to see American businesses wake up to quality. In his eighties and nineties, he was active and, indeed, energetic in consulting and advocating for quality.

Joseph Juran

Brief Biography

Joseph Juran began his long life in 1904, in Romania. His family emigrated to the United States, and from 1912, he grew up in Minnesota.  He gained his first degree in Electrical Engineering at the University of Minnesota (he later gained a Doctorate in Law at Loyola University) and went straight to working for Western Electric at its Chicago Hawthorn Plant (where Elton Mayo later conducted his famous studies).

In 1928, he wrote his first pamphlet on statistical approaches to manufacturing quality and rose up through the business. Along the way, he ‘invented’ the Pareto Principle (of which more later), but by 1945, he was ready for something else.

In 1945, he joined the faculty of New York University, to allow him time for lecturing, consulting and writing. In 1951, he published his first substantial book, the Quality Control Handbook. This is still in print, much updated, enlarged and revised, in its sixth edition, under the title Juran’s Quality Handbook: The Complete Guide to Performance Excellence. He was becoming well known, although initially, not so much in the US as in Japan. In 1954, he was invited to Japan for a series of lectures, and Japanese companies eagerly took up his ideas on how to increase their manufacturing quality.

In the US, the concept of quality was largely ignored. But in 1979, he founded the Juran Institute in the hope of increasing awareness of and engagement with his ideas. It was in the 1980s that quality started to rise up the agenda of US companies, and he became, in his 80s, a much in demand speaker and consultant. In 1988, he wrote the book that most marks his contribution, Planning for Quality – now out of print. The ideas, however, are all incorporated into later editions of other books.

Juran remained active, undertaking consultancy until the final years of his life. He died in 2008, survived, until the end of the year, by his wife of 81 years, Sadie, who was also born in 1904.

Juran and the Pareto Principle

Juran noticed early on that not all defects were equal. He found that some causes resulted in many defects and others in a few. A small number of causes accounted for a vast number of the defects. This, he recognised, was the same pattern as that which Italian economist Vilfredo Pareto found when looking at the distribution of wealth among Italian citizens. Juran recognised this as a general principle in the way some effects were distributed, and named it the Pareto Principle. It also became known as the 80/20 rule, because Juran found that around 80 per cent of defects were cause by 20 per cent of the underlying problems.

Juran and Deming

The other huge name in quality management was a contemporary of Juran’s, W Edwards Deming. However, where Deming put huge faith in the value of statistics, Juran saw another equally important effect, which his writings are at pains to stress. Possibly influenced by the work of Elton May at the Hawthorn plant, Juran placed huge emphasis on the human aspects of quality management. In so doing, he was an early exponent of employee empowerment.

Juran identified what has become known as his Quality Trilogy:

  1. Quality Planning
  2. Quality Management (or Control)
  3. Quality Implementation (or Improvement)

From these, he identified a nine-step roadmap to achieve the ideal of quality.

Quality Planning

1 Identify your customers
2 Determine their needs
3 Translate their needs into your own language

Quality Management

4 Develop a product that meets their needs
5 Optimise the product to your own needs too
6 Develop a process that can create the product

Quality Implementation

7 Optimise the process
8  Prove the process works under operational conditions
9 Operationalise the process

Company-Wide Quality Management

Perhaps Juran’s biggest contribution was to see quality as a cultural, rather than operational imperative. He argued that senior managers must not just be involved in, but must actively lead the quality processes. They must not delegate them: the impetus must come from the top and accountability and responsibility must remain there. However, he also saw empowerment of workers at all levels as a key to making quality work successfully.

You Might Also Like…

our articles on the leading modern quality methodology, Six Sigma:

  1. Belt up and Reduce Errors
  2. The DMAIC Solution Process
  3. Six Tools from Six Sigma

and also The Efficiency of Order: The 5S Methodology.


Susan Cain: Introvert

18 November, 2014

Susan Cain took the world by [quiet] storm at the start of 2012, with the publication of her her book, Quiet: The power of introverts in a world that can’t stop talking. It won many plaudits and quickly became (and remains in autumn 2014) an international best-seller. In it are some gems that can transform the world of managerial and professional work radically.

Susan Cain

Brief Biography

Susan Cain (formerly Devenyi) was born in New York, in 1968 and grew up loving reading.  So it seems little surprise that she took a degree in English at Princeton. She followed this with Harvard Law School, where she graduated with a doctoral degree in 1993. This led her to practise corporate law on Wall Street in the firm of Cleary, Gottlieb, Steen & Hamilton, representing blue chip corporations.

She put her commercial experience to use in co-founding the Downing Street Group, a strategic research and consulting firm, and founding The Negotiation Company. In the latter, she was making good use not only of her experience as a practising attorney, but also of having studied negotiation intensively while at Harvard Law School, with Roger Fisher, author of the seminal book on the subject, Getting to Yes.

But she wanted (needed?) a quieter life, so took seven years to write and research her best-selling book. Now, ironically, she has become a major public figure, much in demand as a speaker (her TED talk, which you can watch below, is one of their most watched ever with approaching 10 million views).

More recently, she has also established ‘The Quiet Revolution’. In her 2014 TED talk (not yet available online) she announced three objectives:

  1. Transforming office architecture to make offices once again a place where extroverts can flourish and where everyone can gain some solitude and quiet thinking time (‘hurrah!’ he says from his quiet office).
  2. Helping companies train the next generation of quiet leaders. A lot of her book is about the strengths of introverts and the power of quiet reflection to deliver better leadership.
  3. Empowering quiet children. Creating the tools that will allow schools to give introverted children the same opportunities to thrive as extroverts.

What is Introversion?

Introverts are not necessarily shy. Cain describes shyness as: ‘the fear of social disapproval or humiliation’. Introversion, on the other hand, is a preference for quiet, low stimulation environments. Introverts like to have time to themselves, to be with their thoughts.

Compare introverts with the opposite end of the scale: extroverts. Extroverts crave stimulation; especially from social situations. Note, however, that neither you nor I are either an introvert or an extrovert. We all lie somewhere on the scale from a arbitrary archetype of introversion to an equivalent extreme of extroversion. And, in the middle, lie ambiverts. These are people who are equally comfortable in stimulating social environments and in quiet private spaces.

Here is Cain’s description of the two types:

‘Introverts are drawn to the inner world of thought and feeling, said Jung, extroverts to the external life of people and activities. Introverts focus on the meaning they make of the events swirling around them; extroverts plunge into the events themselves. Introverts recharge their batteries by being alone; extroverts need to recharge when they don’t socialize enough.’

Cain describes introverts living in a world that puts a premium on extroversion as being like ‘second class citizens with gigantic amounts of untapped talent’.

Introverts are compelled to spend a lot of their time in ways that they would prefer to avoid, and therefore find it hard to be at their most creative and productive.

Creativity and Solitude

Cain’s research has led her to conclude that most creative people are introverts. The short video, below Cain’s TED talk at the foot of this blog, shows just how true this is of author, John Irving. His description of himself in the first half is clearly one of an introvert and has great similarities with Cain’s description of herself at a young age.

She goes further. Solitude, she asserts, is vital for the creative process. At the end of her TED talk, whilst acknowledging the value of collaboration, she says: ‘Let’s stop the madness of constant group work.’

In the book, she cites studies that show that performance diminishes as group size increases: bigger groups generate fewer and poorer ideas compared to smaller groups. She quotes organizational psychologist Adrian Furnham as saying that  ‘evidence from science suggests that business people must be insane to use brainstorming groups.’  Her conclusion is stark:

‘If you have talented and motivated people, they should be encouraged to work alone when creativity or efficiency is the highest priority.’

Transforming Office Architecture

This extends to the way we organise offices. I recall hating open plan offices, and it seems I am far from alone. Research in many industries all points in the same direction. Open-plan offices reduce productivity,  impair memory, and increase staff turnover. Ironically, they diminish the quality of communication, decreasing motivation, increasing hostility and stress, and leading to more sickness and absence.

What is the solution if you are stuck in an open plan office? Mine has always been to seek refuge when I need to think: in meeting rooms, in foyers (ironically – in fact they tend to be fairly isolating) and in coffee shops.


Susan Cain setting out a summary of quiet in an astonishing TED talk in 2012.

And here is author John Irving speaking of himself in very similar terms.


Jeff Bezos: Deliberate Billionaire

11 November, 2014

Is it possible to think yourself rich?

Is it possible to define a hugely successful business through careful consideration?

I think the answer is yes, and the evidence is Jeff Bezos.

Jeff Bezos

Brief Biography

Jeff Bezos was born in 1964 and grew up in New Mexico and on his grandparents’ ranch in Texas. From an early age, he enjoyed tinkering and building engineering and science projects in his parents’ and grand-parents’ garages. After graduating in electrical engineering and computer science from Princeton University, he started a rapid rise through the corporate world, moving from a New York start-up, Fitel, to Bankers Trust, where he became its youngest vice president. He then went to a Wall Street firm called DE Shaw & Co, where someone said of him: ‘he is going to make someone a lot of money one day’.

I don’t know how much he made them, but it was whilst he was there that he had the inspiration that would lead him to found Amazon.com. Amazon led the internet revolution in the late 1990s, rapidly overtaking its major competitors, the big US retailers, in turnover. It rode out the storm of the 2000 dot com bubble bursting, and went on to where it is now, taking on just about any big interests – most notably at the moment, the big publishers (about which both I and my publishers have a vested interest and I, for one, as an author and a reader, have complex and mixed views).

But Amazon is no longer just a book seller: it sells anything anyone wants to sell. It also manufactures handheld devices as part of its revolution in eBook selling, and has recently launched its first mobile phone. Bezos himself is now worth over $30 billion and uses his money to pursue his passion for space exploration, his belief in the long term future of the planet and, recently, in acquiring the Washington Post newspaper (2013).

Bezos and Business Strategy

All of the above is well-documented (indeed more fully documented) elsewhere. So why put Bezos into the Management Pocketblog? I think there is one really important lesson I want to draw from the often told foundation story of Amazon, which can be a vital lesson for managers everywhere. It comes in three parts:

1. Openness and Perception

We all come across interesting facts and curious statistics every day. It sometimes seems that this is what the internet is for (if it is not for cat photos or shopping at Amazon, that is). The difference with Bezos is that he took a statistic that millions were aware of and thought about it: In 1992, the internet was growing at 2,300 per cent per year. No matter how small the base was, this meant a huge potential and he saw it. And he also saw that this meant a potential for successful online commerce.

2. Deliberate Analysis

Bezos didn’t just go for what he knew, for what he liked, or for what seemed easy. He made a long list of every category he could sell and whittled it down to find the category with the greatest potential to make a breakthrough in online retail. Books had a lot going for them, he reasoned:

  • A huge inventory of titles – that traditional retailers could not offer but he could
  • No single (or few in number) dominant retailer
  • Easy to transport by post

He then selected his base of operations a long way from where he was living (New York) or his family (Texas and New Mexico) because it was right for the business. Seattle offered:

  • The right workforce of skilled software engineers
  • The right taxation regime
  • The proximity of a major book wholesaler

3. Constant Innovation, Development and Striving

Amazon has never rested and the driving force for that has been Bezos. It has innovated in:

  • Customer engagement
  • Retail software
  • Synergistic hardware development

Bezos Quote

What could you achieve with a fraction of Bezos':

  1. Openness and perception?
  2. Deliberate analysis?
  3. Innovation, development and striving?

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