Jeff Bezos' 1997 Letter to Amazon's Shareholders contained excellent advices on how to scale a company into long term success. Most CEOs talk big strategies without the details for execution and could not be held accountable. Jeff provided the details. You can use it as a reference to build your company.Some friends shared on Facebook the Letter to Shareholders by Jeff Bezos of Amazon in 1997. It contained the strategies of Amazon for rapid growth to success. There are many insights in the letter that I think are still very useful for any start-up that wants to embark on fast growth to success.
The first thing that stands out was his long-term focus. Amazon had just gone IPO in May 1997 then. Any CEO of listed companies will tell the pressure to produce short-term results to please the market analysts and investors. However, Jeff instead explicitly stated he wanted to go for long-term shareholder value and not for short-term and will not react to the Wall-streets pressure! Amazon actually continued to make losses until Q4 of 2001 where the profit was $5M on revenue of $1B. Nevertheless, the share price of Amazon continued to rise despite the annual losses. How can it be so? It could be the sentiment than of the dot-com company before the 2000 crash but I think it is more due to the clear growth strategies that were explained and executed well supported by real evidence of customer and revenue growth.
So, I took the extra time to read the letter carefully and to remapped it into a mind-map format for better clarity and to serve as a good lesson for entrepreneurs. It is also a good exercise and an illustration for those wanting to learn about mind-mapping.
Strategies that say they go for long-term shareholder value and customer obsession are impressive but cannot be executed. Jeff shows us the details. You must read the map from top to bottom. They are causally related.
- Long-term shareholder value can only be achieved by wise and prioritized investments to extend the market leadership of Amazon.
- Market leadership must be measured with a set of metrics on customers, revenues, infrastructure, and brand strength. Not just big talk.
- Customers Obsessions must be delivered with a set of features and services that customers appreciate as increased value and can enjoy a wow-shopping experience that they come back for more. The list of value features and services is clearly identified and delivered as shown on the map.
- To serve customers better, investments must be made to improve and expand the infrastructure.
- Then you need talented staff to deliver the promises. The talented staff must be motivated to work hard, smart and long! The compensation scheme was listed. They were to think and act like owners and were better to be made owners. Stock options are offered more than salary.
- Relationships with key partners must be built. It is interesting to note many of the key partners in the list are no longer in existence! They did not learn from Amazon?
- Risks and Challenges are identified and it was a pity not to have the details of how Jeff managed those risks. We could roughly guess from his investment strategies of balancing growth with returns to capital, going lean, and forever experimenting and learning.
So, here is my mind-map and I hope you learn from it.
You could also learn much by going to the Amazon website to find their vision and principles for success.
All the very best to your success.
Lim Liat (C) 15 Aug 2012
Lim Liat (C) 15 Aug 2012