Amazon: Deflecting Distractions

Being the subject of scorn from politicians on a daily basis could be a distraction to some organizations. So can complaints about mistreating some workers; or having to hire 30,000 employees in less than 12 months; or grousing from investors about spending too much money on capital spending; or even the boss spending time figuring out how to build a spaceship for moon landings.

As Amazon reports its quarterly profits this week, it can label all of those as potential distractions. Yet experts say the firm has the ability to fly above the fray. It stems from a culture and leadership principles that eschew short-term thinking and empowers employees to think like owners, says Sidney Cooke, a Korn Ferry senior client partner. “They live and breathe it,” Cooke says.

Amazon reported revenues of $70 billion during its third quarter, nearly 25% higher than a year earlier. Its net profits were $2.8 billion, lower than last year, but the company had told investors for months that would be the case as it reconfigures its supply chain for faster deliveries and invests in the firm’s web-services and content businesses.

Of course, everything from a government action to a major product mishap could rattle Amazon’s stability. But experts say it stuck well to its leadership principles, developed by founder. They include not focusing too much on quarterly results. “When they weren’t making much money, Bezos continued to plow investments into being able to scale, which is paid off handsomely in subsequent years,” Cooke says.

Indeed, the last time the company faced a major distraction may be in the mid-2000s. From 2004 through early 2006, the firm’s stock was nearly cut in half as investors were upset with Amazon’s considerable ramp up in capital spending without any corresponding jump in sales or profits.  At the time, Amazon was building the technical backbone for its Kindle services and said the spending would level off in mid-2006. The spending did level off, sales and profits rose when Kindle was launched, and the stock’s risen more than 3,000% since.

Another principle that Amazon espouses is that it’s always “Day 1.” In his 2016 letter to shareholders, Bezos wrote that by thinking that the company is just starting out (i.e., Day 1), it will always be customer-centric, or, as Amazon states, “start with the customer and work backwards.”

That’s a mantra that many companies say they want to live by, but few do. “Customer centricity is the top priority for chief marketing officers, but it is a significantly lower priority for the C-suite,” says Caren Fleit, managing director of Korn Ferry’s Global Marketing Officers practice.

Amazon also believes it needs embrace big trends early, make big decisions quickly, and resolve internal disagreements as fast as possible, even if it means escalating them. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1,” Bezos wrote.