Taking too long? Close loading screen.
Connect with us

Business

Test, build, accelerate and scale: Meet the 4 cycles of Jeff Bezos

Published

on

October 14, 2020 11 min read

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

Opinions expressed by Entrepreneur contributors are their own.

I know I don’t have to explain who Jeff Bezos is . The founder and current CEO of Amazon is the richest man in the world, and his online store has redesigned our present in ways we didn’t even imagine. The concept of his business was not, in itself, original (there were already other online stores), but his vision, his mastery of risk and his creative strategy separated Amazon from its competitors until it became one of the companies that , in many ways, defines our time.

Things don’t happen by accident. Businesses do not grow “naturally” or “wildly”, as if they were a small tree that is enough to water to become an oak. Businesses require leadership, vision and strategy. Jeff Bezos describes this vision and his strategies in his letters to his shareholders each year. The first of them, that of 1997, already clearly shows the path that Bezos was undertaking.

Back then it wasn’t obvious that Amazon would be a hit. It was a young company with a great idea, but still losing money on all four sides, exploring new ways to solve old problems. In his book The Bezos Letters , Steve Anderson makes an analytical summary of the Bezos System, which is summarized in four cycles and fourteen principles of growth.

The four cycles are: Test, Build, Accelerate, and Scale . Take out a pencil and paper, because this gets interesting.

CYCLE ONE: TEST

Nice that you have a great idea! Scented mosquito candles? Very good. Organic and ecological drink? Ok. An app for locating dogs? Okay. It all sounds great. But before you sell your house and leave your job, do what the greats do: test if there is a replicable process and a market that wants to buy it.

Don’t wait to have the perfect product to go out, or waste too much time at the design table. On the contrary: generate prototypes and minimum viable products (MVP) and explore the jungles of your market.

Growth principles:

1. Promote successful defeats

Our culture fears defeat and humiliates those who make mistakes. This generates an innovative paralysis: nobody tries new things for fear of failing. Companies that grow, try hard and fail a lot . For every great Google service, there are dozens that fell by the wayside. Try and celebrate these “wrong” ideas. Exploring is the only way to find new paths.

2. Bet on big ideas

You have launched exploratory expeditions. Out of ten attempts, eight failed. Good: now you have two that do work. It’s time to bet on them. Redirect time and resources to the things you’ve tried, raising your chances of success along the way.

3. Practice dynamic innovation

Your vision has to stand firm, but in the processes, there are no things written in rock. Whether your company is digital or made of concrete and brick, install systems that allow you to receive information in real time about your processes. Then keep designing and improving your processes until you get closer to their optimal status. Never, never stop learning.

SECOND CYCLE: BUILD

When you have a proven idea, it’s time to lay the groundwork. Now you do have real information that tells you that your idea is viable: that it can be a business. It is time to build.

Different companies have different product creation systems. For example, a digital or creative-based business is not the same as a cake factory or a horse farm. Develop systems that allow you to respond to current demand, anticipate the future and, also (this is essential), space to continue your dynamic innovation process.

Growth principles:

4. Become obsessed with your customers

Big ideas, zero sales – that’s the story of thousands of companies that fail along the way. At the end of the day, it doesn’t matter how great your product is. If nobody buys it, then you are dead. Amazon developed a search, rating and feedback algorithm whose sole goal was – still is – to understand and delight each of its millions of customers. Understanding your customer is a task that requires effort and time, but it pays off handsomely and prevents you from wasting too much time on roads that lead nowhere.

5. Think long term

If you are not born to be the best then what are you born for? You may not be the biggest company on the planet, but you can – and should – aspire to be the best in your own niche, no matter how big or small. That is not built in two days. Amazon lost money for many years before starting to win, but from day one they set a goal that was well worth the effort. It is preferable to try the impossible and fail, than to try the achievable and achieve it.

6. Make your customer your center of inertia: the Flywheel model

Many sales systems are based on the funnel model or sales funnel , which is a process of filtering customers. The purchase is at the end of the funnel and with it, the sales process is “finished”. The center system inertia and Flywheel It changes the focus of the process and puts the customer (not for sale) at the center of the entire experience, attracting, falling in love and learning to generate a strong long-term relationship. The funnel is great for one-time sales, but the Flywheel is great for repeat sales. The customer returns again and again to a changing ecosystem around him. In more ways than one, the client is the architect of their experience.

THIRD CYCLE: ACCELERATE

You have a proven model and a customer base that allows you sustained growth. Congratulations – you have a real and successful company! This is where most of the companies that exist stop: with a business model that works, and in which they choose to stay where they are and not grow any more.

To grow is to believe. It is time to move to the next level.

Growth Principles:

7. Generate high-speed decisions

The bureaucracy can hang medium-sized companies. A leadership review is required at this time to sustain growth with swift strategic decisions. Not all founders are good CEOs! Sometimes a change of baton is convenient; some others it is the same leader who continues ahead. Courage and risk control are required to be able to add value where it is needed and eliminate what is left over.

8. Make the complicated, simple

Simplify, reduce, save and clean processes and products that take time, resources or effort. Structures that have not lived up to their potential are likely to be born in the testing and construction stage: not all have to stay there. Stay with the best and make life easier for your clients, attending to your core business , your mission and your vision, which must be clear, current and shared with your entire organization.

9. Speed up time with technology

Technology can be your best ally. Don’t be afraid to try new things. For example, Amazon One Click Purchase , which was patented at the time, was a revolutionary element that reduced friction to a minimum and made life easier for the customer. Automate, lighten and accelerate growth with the technology at your fingertips. Even small and medium businesses can find ways to do it.

10. Promotes a sense of ownership

Through this process in which the company begins explosive growth, maintain a team culture and a common vision. Amazon allows, like many other companies of the modern era, the option of holding shares for its employees, with which they are direct beneficiaries of growth. However, money is not everything. Neither stocks nor bonds exceed the sense of belonging and purpose that gives a clear vision and positive leadership.

FOURTH CYCLE: SCALE

Not all businesses can be Amazon. But they do develop a scale-up strategy that allows them to serve the needs of more people without destroying the core of who they are and have built. This will only be possible if the bases indicated in the previous cycles have been previously established. This is the difference between serving hundreds and serving thousands or millions, and it is the key to a business with an impact beyond its initial niche.

Growth principles:

11. Maintain your culture

The risk of tearing is imminent. Not a few companies have been lost due to uncontrolled growth that makes them lose their center, their style and their mission. Take care of the communication channels so that the feeling of being a team or, better yet, a family, does not succumb to pressure and distance.

12. Focus on high standards

Distance and speed can very easily impact the way things are done. A poor delegation system can result in poor quality, poor service, and dissatisfied customers. With the prestige of the brand and the future of the company at stake, this is not the time to lower our guard.

13. Measure what matters, question what you measure and trust your intuition

The amount of numbers and information that is generated in a wide-range operation can be noisy and confusing. Manage your information flows to measure what matters and have the data you need to make decisions at hand. But decisions are not automated: they require the intuition, experience and risk sensitivity of the leadership in the company. Businesses that go automatic soon reverse.

14. Think it’s always day one

Stay hungry, stay curious , are the words Steve Jobs famously ended his Stanford speech with. Throughout his annual letters, Jeff Bezos has maintained and repeated this phrase as a kind of mantra: we continue on day one.

The companies that can see the future are those that constantly reinvent themselves and that have in their purpose an impossible ideal that never fails to inspire and thrill the curious mind. It is always day one for a company that grows, that makes a mistake, that falls, that starts again, and that is always hungry to eat the world. Source

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

The Trump campaign celebrated a growth record that Democrats downplayed.

Published

on

The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

Source

Continue Reading

Business

Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

Published

on

The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

Source

Continue Reading

Business

Ant Challenged Beijing and Prospered. Now It Toes the Line.

Published

on

As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

Source

Continue Reading

Trending