Obsess over customers, align decision making with long term goals

One of Amazon’s famous traditions is the silent reading of a 6-page narrative memo by participants of a senior executive meeting. Jeff Bezo’s letters to the shareholders are probably the best publically available documents to help us gain some insights on how such a document is structured. (Powerpoints are banned at Amazon)

In his first letter to shareholders, Bezos clearly articulates the long term and short goals for Amazon, the approach they will take to get there, the metrics that they will use to measure progress, and the trade-offs that they will make as a company while taking decisions on a day-to-day basis.

Bezos is onboarding new shareholders and setting clear expectations on their investment philosophy and financial metrics for measuring progress.

He shares the long term goals for Amazon – achieving market leadership and creating shareholder value. He shares how Amazon will approach these goals and metrics that they will use measure progress.

He highlights the trade-offs that Amazon will make while taking decisions:

  • Choosing long-term market leadership over short term profitability while making investment decisions
  • Choosing the present value of future cash flows over optimizing the appearance of GAAP

Bezos details how Amazon will “obsess over customers” to achieve market leadership.

Bezos highlights the crucial role that employees play in the success of Amazon.com.  He states the bar for hiring is high and that “it’s not easy to work here”. He also shares what he tells candidates while interviewing

“You can work long, hard, or smart, but at Amazon.com you can’t choose two out of three”

Bezo’s also highlighting the goals for 1998 and the challenges and hurdles that will prevent Amazon from reaching it’s stated goals.

The key challenges and risks that are highlighted are:

  • Aggressive, capable, well-funded competition
  • Risks of product and geographic expansion
  • Need for continuing investments to meet an expanding market opportunity

All in all, Bezos provides enough information to shareholders to help them decide if Amazon can provide them with the returns that they expect.

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You can read Bezo’s letter here