How did Jeff Bezos Scale Amazon Without Destroying Its Entrepreneurial Culture

How did Jeff Bezos Scale Amazon Without Destroying Its Entrepreneurial Culture

By Boris Wertz, May 17, 2016.

Running a start-up is profoundly different than running a big company. When you’re small, founders are close to the action and can make sure all the important things happen. But as a start-up scales, founders can’t have their hands in everything: many companies lose focus on the customer; decisions get bogged down; and there are hiring mistakes. We’ve all seen these things happen to good start-ups.

Amazon’s magic is that it’s a behemoth of a company that still operates like a founder-driven start-up in several key areas. This is partly because Bezos has a strong cultural influence throughout the company. But, he also developed some unique tools to institutionalize his core values in the company. For example…

1. Customer Focus

Amazon has a unique product development process: before starting any new project, the product manager writes an internal press release ‘announcing’ the product. This working backwards approach helps the team fully understand the product’s value proposition to its customers (e.g. what problem is it solving). A former director at Amazon described the approach this way: “We try to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”

If the team can’t come up with a compelling press release, they either need to refine their thinking or maybe the product just isn’t worth making in the first place.

While distilling the customer needs and benefits in a concise press release is a great exercise, there’s still the question of how the product team come to truly understand these customer needs and challenges. Amazon keeps managers close to the customer by having them regularly work customer service. We had a similar policy at AbeBooks.

2. Organization

Amazon’s Two-Pizza rule is pretty widely known: if a project team can eat more than two pizzas, then it’s too large. This means they break up a big project into smaller projects, where the smaller project teams can stay nimble and be less subject to complex governance.

The supporting piece is that every product at Amazon should have an API, just as if it were developed for an external client. This decouples the speed of development between different product teams, and offers a clean hand-off between the two. Its Bezos’ vision of a decentralized company where small groups can innovate and move quickly independently of everyone else.

3. Hiring

When a company reaches the scale when it’s no longer possible for the founder to be hands-on in each decision, it better have good people in place.

Early on, Bezos implemented “bar raisers” at Amazon. These are Amazon employees who are skilled evaluators and interview job candidates. Bar raisers can veto any candidate, even for positions that are completely out of their area of expertise. Bezos has said this program helps weed out the “cultural misfits”at Amazon and makes sure the company makes good hiring choices by forcing several diverse employees to sign off on a candidate.

Another important hiring tactic is Amazon’s ability to keep acquired founders on board. For example, Mike George joined Amazon in 1998 through Junglee’s acquisition. He has since become Bezos’ go-to person for many new initiatives: he launched the marketplace, ran payments, and is now heading up the Alexa unit.

Keeping acquired founders on board is particularly tough: someone founds a company because they want to be a leader, not a follower. Entrepreneurs have a difficult time when the acquiring company tries telling them how to run the business they have created and grown. Amazon has been successful at keeping founders around by giving them lots of latitude.

For founders of early-stage start-ups: you may be thinking more about getting your product out the door or acquiring your first 1,000 or 100,000 customers rather than any challenges associated with scaling. But some of these tools can be really important early on (20-30 employees). It’s never too early to start thinking about implementing the right processes and tools that will help your company grow without losing its focus.

Read the original article by Boris Wertz here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

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Khailee Ng and 500 Startups Have a Plan to Stop Founders from Committing Suicide

Khailee Ng and 500 Startups Have a Plan to Stop Founders from Committing Suicide

Two founders from 500 Startups’ portfolio of 1,800 companies have committed suicide. 120 out of the 600 firms backed by their first and second fund are now out of business. Of the 150 startups the VC has invested in Southeast Asia, three founders have cancer, revealed Khailee Ng yesterday, talking about the human toll of entrepreneurial life.

“We are worried about it at 500 Startups,” Khailee Ng, managing partner of the investment firm, spoke in sombre tones last afternoon at the Tech in Asia Singapore 2017 conference. That’s why they are pitching a “personal life management accelerator.”

In true Khailee Ng fashion, he minced no words while driving home the high price of stress that entrepreneurs across the globe pay.

“Ask someone in the startup scene: how are you doing? The typical response you get is: I am killing it; my company is growing 800 percent month-on-month; and so on. But deep down inside, the product is broken; customers are leaking out; you got two-months’ runway left; your co-founder hates you; you just made a bad hire; your team hates you; if you go back home, maybe your partner or spouse hates you; your pet hates you; and you don’t even know whether you are supposed to be a founder or not!” Khailee says.

He knows what he is talking about. Khailee has founded two startups, GroupsMore and Says.com, grew them fast, and sold them to Groupon and Catcha Group. He also invested his own money into a bunch of tech startups such as App.io, Privy, CompStak, SupplyHog, Noonswoon, and iMoney before joining 500 Startups.

Despite the enormous stress a founder goes through, none of it is shared with others around, Khailee says. “That’s the kind of thing we don’t talk to our investors, we don’t talk about it to our staff, and we don’t talk about it to other founders.”

He cites a Harvard Business School study done in 2012 which attributed 65 percent of startup failures to personal stress. He’s had different founders in the 500 Startups portfolio in different countries tell him that they have been piling on a kilo every month since they started their company.

“One of them has a 12-month startup. He has put on 12kg of weight!” Khailee says. “As a VC, I feel really responsible.” He adds: “Fear, stress, overwork, co-founder conflicts – these are things which are deeply personal yet they can cause a complete breakdown of a company.”

Some more scary facts

500 Startups didn’t want to brush it under the carpet. “What are we doing wrong? What can we do better?” they thought and found there was only so much they could do by themselves. So they need to get help from experts.

Enter Dr. Daniel Cordaro, director of wellbeing at the Yale Center for Emotional Intelligence, and executive coach Justin Milano. They are the founders of Good Startups, which aims to “improve the performance and wellbeing of entrepreneurs and their teams.”

They created a test, Entrepreneur Awareness Assessment, that can help you discover your weak spots as well as strengths. “Any founder can take this test and immediately discover in terms of nature and quality of the stress they go through, which areas the stress is about, what needs fixing, what is critical, what is unstable, what is stable, and what is borderline,” Khailee says.

500 Startups got their startups in Southeast Asia and outside to take this test. They then compared the results from companies in the region to the global average.

Compared to the global average, founders in Southeast Asia stressed less about the product-market-fit of their core products or long-term viability of their business models. But when it came to self-compassion, SEA founders were shockingly lacking, Khailee says.

“It seems SEA founders are more likely to give themselves a lot of crap for doing things wrong,” Khailee says. “Maybe they messed up a sales meeting or didn’t get funding from a VC, they would go on: Oh man, I could’ve done better, I must be lousy founder, and so on.”

Is our ‘tiger mom’ the culprit?

Khailee asked Cordaro and Milano why self-compassion in founders is so much lower in Southeast Asia and how 500 Startups could help their founders love themselves more. They are working together to dig up insights into this.

Think about the stress you’ve had in the last week. Ask yourself: can I live with that kind of stress for the next six years of my life?
Khailee’s take is that “inside each of us, maybe, we have an Asian parent lurking. It could be our upbringing by a tiger mom or an Asian father.” No matter how much we achieve, there’s always something we could’ve done better, something we did wrong. And the “Asian parent” baggage we carry into our adulthood might be constantly rapping us on our knuckles for that.

He wants founders to take a deep look at the stress they have been under during the last week or so, and ask themselves: can I live with that kind of stress for the next six years of my life?

If you can’t, “you may not be able to build a significant company,” he says, pointing out that it takes an average of six years to build a unicorn.

“How many of us have the lasting power?” he asks. Khailee believes it is possible “if you scale yourself” along with scaling up your company. He counts Anthony Tan, founder of the ride-hailing unicorn Grab, as someone who has done it well. “If you think that entrepreneurship is difficult and you have to sacrifice your personal life, health, and relationships to build a billion-dollar company, just look at Anthony and you’ll know your assumption is absolutely not true,” he says.

Anthony has maintained his physique and health along the years as Grab grew to a multi-billion dollar company, Khailee points out. “He has a newborn son, spends time with his family, and goes to church every Sunday. Anthony has a holistic foundation that he scaled himself equivalent to the way he scaled his company,” Khailee says.

A personal life management accelerator

At 500 Startups – particularly at 500 Durians – they want to tackle the issue of founder stress by creating more human connections between their founders. They want to create peer circles. “We want to be 500 Strong. We want peer circles with multiple chains that tie each other together. We might not be there to help founders all the time but founders can help each other out,” Khailee says.

That’s why 500 Startups advised Good Startups – the company Cordaro and Milano started – and helped it shape an accelerator program called Breakthrough, which Khailee describes as a “personal life management accelerator.”

A few 500 Startups companies have already signed up for this. This is not about trying to accelerate your company “but you are trying to accelerate yourself,” Khailee says.

500 Startups itself runs 500 Kobe, an open accelerator/peer network where members don’t give away equity.

Khailee explains: “We also want to make peer circles available for startups outside the 500 Startups portfolio as well. Globally, our accelerator programs have been only for companies that we take an equity in. But this one is completely for any founders to apply.”

You can apply for this at 500 Kobe.

Khailee left some parting words of wisdom for the audience at TIA Singapore. “A lot of our success in our life is not worth dying for. You don’t want to sacrifice other people in the process either. And if you really want to scale a large company, you really have to think about scaling yourself.”

He swears you have a much better chance to succeed in your venture if you can make an agreement with your staff, teammates, investors, best friends, partner/spouse to let them know when things are bad and seek help. And yes, Khailee wants to help as well.

Read the original article by Khailee Ng here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

San Francisco
814 Mission St., 6th Floor
San Francisco, CA 94103, USA

© 2010-2018 500 Startups