Greater than the Sum of its Parts
There's a tendency to manage to proxies. … and it's dangerous. - Jeff Bezos
If you were to build a company like Amazon, where would you start? What principles would you use to grow your company? Would you dictate from the top down how everything should work, or would you foster a culture of competition where people compete against each other in the marketplace of ideas?
Seemingly the very embodiment of complexity, Amazon has so many moving parts that nobody could possibly keep track of it all. Their ability to scale leaves all of their competitors scratching their heads at how they managed to achieve it all.
However, simplicity, not complexity is at the core of their success.
A Murmuration of Starlings
We're all familiar with the way a school of fish can seem to react as one in response to an external threat. The way a murmuration of starlings can create vast and beautiful shapes in the sky. The way the galaxy is infinitely complex and beautiful.
All of these phenomena are governed by the principle of "emergence."
Emergence can be defined as "a system whose behavior cannot be predicted by examining the individual parts" and Amazon exploits this phenomenon - indeed it's at the root of their ability to scale massively.
The 4 Pillars of Amazon
At its core, Amazon is 4 different businesses.
Amazon.com - the retail website that we're all familiar with, plus all of the software that makes it work, with tens of thousands of sellers offering their goods up for sale on the platform.
Amazon Web Services - the web hosting company that hosts not just Amazon but also Netflix and much of the web as we know it today.
Fulfillment by Amazon - the network of warehouses, trucks, ships, robots, airplanes… that stores those goods and manages to get the vast majority of them to you in a day.
Amazon Advertising - the third biggest ad platform (after Google and Facebook), and the second biggest search platform (after Google).
It was this insight - that emergent behavior could lead to outsized and unexpected outcomes - that led Jeff Bezos to, essentially, split the business along those lines. Now rather than trying to scale one complex company, they had 4 different companies that could scale independent of each other. Each division has a singular focus and mission.
The Relentless Pursuit of Simplicity
This pursuit of simplicity is baked into Amazon's leadership principles.
Leaders expect and require innovation and invention from their teams and always find ways to simplify. - Amazon's Leadership Principles
While some may mistake this for laziness - refusing to acknowledge complexity in a system is a problem, Amazon has an "every day is day one" philosophy from inception. This philosophy says that you should always go back to first-principles when managing your business. Reread the quote that started this piece - it's simpler to manage by proxies. To take a system and then manage that system rather than manage the components that make up that system.
Once you have a process in place, it's tempting to manage the process than the inputs and outputs. Don't let a process become a proxy for your business.
Here is that quote in full.
"As companies get larger and more complex, there's a tendency to manage to proxies. This comes in many shapes and sizes, and it's dangerous, subtle, and very day two. A common example is process as proxy... if you're not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you're doing the process right. Gulp."
- Jeff Bezos
Decoupling & Emergent Behavior
In his 1984 book Normal Accidents: Living with High-Risk Technologies, Yale sociologist Charles Perrow explores how accidents happen - specifically airplane crashes and nuclear power plant meltdowns.
A typical scenario is that there are multiple failsafes to ensure failure doesn't happen.
One day, when something goes wrong, Failsafe A - for some reason - doesn't operate properly, it fails to detect the problem. Failsafe B operates perfectly… But since it was designed to take input from Failsafe A, it's never triggered.
"Tight coupling" is when two processes depend on each other - if one fails, they both fail - and this isn't good. Too much dependence can lead to catastrophic failure.
"Loose coupling" is when two processes do not depend on each other, and in general, this is good. In splitting up Amazon into 4 separate divisions, each operating more-or-less independently from the other, Jeff was ensuring that the growth of each division was not stifled by the growth of any other division.
If the divisions had been tightly coupled, innovation would be stifled across the company as division A would need upgrades from division B in order to progress, but division B would have no incentive to implement those upgrades.
Decoupling the two meant that each could scale as needed, regardless of the activities of the other divisions. As long as the fundamentals of how they interacted were unchanged, each could grow on its own. And any division could force every other division to change how they interacted with it by upgrading its communications protocols. The reverse of what would have happened if they had been tightly coupled.
The Innovator's Dilemma
Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.
- Steve Jobs
In the 1997 business classic The Innovator's Dilemma, Harvard professor Clayton Christensen says that the reason the airlines displaced the railroads as the main form of high speed transit is that the railroad companies said "We're in the railroad business" - when they were really in the "Transportation business."
While that may be a bit pithy - going from train to plane is a massive shift in company expertise, Amazon's decoupling of divisions has the added benefit of allowing them to re-define themselves as they move forward.
From day one Amazon has told the world that they're not a book seller, they're not even an online store, they're a technology company. And from day one the world laughed - until they didn't.
I mentioned earlier that Amazon hosts Netflix. That may have come as a surprise to some of you. Would it surprise you to know that Airbnb, Docker, Disney, Unilever, Philips, NASA, BMW, Adobe, GE, Hearst, Hitachi, Johnson & Johnson, Kellogg, Nike, Reddit, Pinterest, The Weather Channel, the Down Jones, Yelp, Unilever, Expedia and others also host with Amazon?
By unbundling their services from each other, Amazon was able to open up each division to 3rd parties and gain exponential growth from that. There are hundreds of thousands of people selling on the Amazon Marketplace. They utilize Fulfillment by Amazon to leverage Amazon's existing - and amazing - warehouse and delivery infrastructure. Because these systems were loosely coupled, it was relatively easy to open them up to the outside world.
None of these things would have been made possible if all of those systems were tightly coupled with each other.
Amazon has never said "We're in the book business" or "We're in the e-commerce business" or even now "We're in the advertising business" - they've always been in one business and one business only. The scale business. What Amazon does - better than anyone else - is scale.
So, if you're looking to scale your business, you may want to take a page from Amazon's playbook and focus on simplicity.