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How Amazon innovates

Amazon Go interiorWhen Amazon comes up with an innovative idea, it doesn’t first consider whether it’s financially viable or even makes business sense – the teams work backwards by pretending it has already launched a new service and released it to the world.

The e-commerce giant revealed some of the secrets to its ideation process yesterday during Amazon’s Innovation Day, as part of its annual AWS Summit in Sydney. Known as ‘working backwards’, when teams come up with a new idea, they first write a press release, revealing to customers how the new service or product will benefit them and change their lives.

“A part of our core and DNA is to think about the customer first and work backwards so it’s ingrained in the way we work, which allows us to be focused on the prize, which is delighting our customers,” said Dipen Mehta, Amazon’s head of digital innovation in the APAC region.

“We truly believe that if you want to create great products and services, you need to understand their needs, by observing your customers, putting ourselves in their shoes, rather than just asking them what they want.”

This ‘working backwards’ process has been used in the creation of all products and services that have come out of Amazon in the past 25 years and is also taken on by all divisions of the business, despite its many different customer bases, markets and models.

Amazon Go is one successful example of the ‘work backwards’ process, Mehta pointed out. The team considered the most painful part of grocery shopping – queuing up to pay for your items – then discussed how enjoyable it would be for customers to be able to simply enter stores, pick things off a shelf and take them home without stopping to pay for them.

As Amazon chief Jeff Bezos himself said: “Done correctly, the working backwards process is a huge amount of work. But it saves you even more work later. The working backwards process is not designed to be easy, it’s designed to save huge amounts of work on the backend, and to make sure we’re actually building the right thing.”

Starting from the end

The first step in the working backwards process is creating a press release with accompanying FAQ for customers and shareholders, said Mehta. Traditionally, most companies would write a business plan, figure out their ROI, go to an investor, get money, build a team, create a product and then write a press release.

“Most people write it after the product is built. But at Amazon, we write it first, before we spend a single dollar or invest any capital or time and building out an idea and we used it as a way of validating that there is a customer benefit to what we’re creating.”

According to Mehta, the press release and FAQ help teams to gain clarity around the following:

  • Who is the customer?
  • What is the customer problem or opportunity?
  • Is the most important customer benefit clear?
  • How do you know what customers need or want?
  • What does the customer experience look like?

All the different elements of the press release encourage the teams at Amazon to put themselves in their customers’ shoes.

For example, a press release is usually written in plain English for customers to easily understand, focusing on the benefits of the product or service, rather than being filled with technical jargon. A release is also usually limited to one page, encouraging the team to be laser focused on their idea. It also usually features a summary, which would then force the team to write a pithy two or three elevator pitch so they know exactly what problem they’re aiming to solve.

After the press release is created, the document is shared very early on internally so teams can get feedback from others and continue to refine and iterate. In fact, the document often goes through at least 20-30 different versions, Mehta said.

“When you have an idea, you usually wait until it’s baked before sharing it with people. You’re afraid that you’ll be embarrassed, someone might steal it or there might be politics. But as soon as we get the first version [of the press release], we share it internally to get feedback and make the idea better.”

Big business, start-up mindset

To ensure customers and innovation are at the forefront of the business, Amazon employees are encouraged to think of it as a “day one” company, added Mehta.

“At Amazon, we literally like to think that every day is day one when we design for customers. We don’t think about what already exists, we think as a startup, what’s brand new and that we’re going to create something for the first time for customers,” he said.

He added that it’s important to not always assume to know what customers want and to experiment to validate your own ideas and hypotheses.

“Everything we do at Amazon is an experiment, we’re always trying new features, moving things around, changing the usability. We’re constantly trying more and more experiments to get closer and closer to what customers want.”

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