Jeff Bezos’s 2016 Letter to Shareholders: Eagerly Embrace External Trends
In 2016, Amazon CEO Jeff Bezos published a 4-page letter to shareholders, packed with his insights on business. While the letter focuses on Amazon’s ideal culture (think: “How we do things around here”), its relevance goes beyond business. The letter contains helpful ideas for any team or group that strive towards goals.
Bezos’s letter compares two types of organizational cultures (“Day 1” and “Day 2”), with nature’s biological cycle of growth and decline acting as the business metaphor.
Day 1 companies are healthy and full of life. Day 2 companies are plagued by stasis. They quickly find themselves irrelevant, followed by a slow death.
Thus, it’s always Day 1 at Amazon.
Day 2 is the Default Outcome
History tells the tale of countless companies that have their hour on the stage and are heard from little more. For example, out Fortune 500 companies from 1955, detailing America’s 500 largest businesses, only 50 made the list in 2020.
When businesses constantly face brutal market competition, if they don’t evolve, they won’t survive.
How does an Organization keep Day 1’s culture?
Bezos recommends four approaches organizations could use to maintain Day 1’s vitality:
True Customer Obsession
Eagerly Embrace External Trends
High velocity decision-making
Embrace External Trends
“The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.” - Jeff Bezos
Business and organizational strength can erode in two broad ways: from within or without. Setting aside the ways organizations trip over themselves, powerful consumer and technological trends constantly threaten an organization’s relevance. If organizations don’t adopt favorable trends in technology, advanced data analytics or consumer behaviors, a competitor will.
For example, at the turn of the 21st century, traditional titans of the auto-industry like Ford, General Motors, Toyota, and Fiat Chrysler were positioned to capture large shares of the growing electric vehicle (EV) market. Tesla didn’t exist. However, by 2020, Tesla became synonymous with EVs, not the incumbents.
What did the legacy auto-makers miss? Tesla made EVs fashionable; they identified and rode a trend with consumers who desired environmentally friendly EVs which were also stylish.
Or, consider Netflix’s rise. Its convenient mailed DVDs and later internet TV was too much for Blockbuster’s “You drive to me” business model.
What’s more, Netflix’s watch-anytime TV struck a blow to ABC, NBC, and CBS’s Monday-Thursday evening monopoly, which was built on appointment television. This was very Day 2.
Netflix figured out, earlier than the competition, that consumers desired hand-picked content easily delivered to their homes (Trend #1) and consumers wished not be constrained with a TV network’s schedule (Trend #2).
Summary
Many external trends end up more like fads, and so there is a risk of embracing the wrong trend. In their infancy, long-term trends may be hard to distinguish from short-term fads.
For example, it’s hard to look at bitcoin, in 2020, and definitively say if it’s a new form of payment and so long-term trend…or does it become irrelevant?
At home workouts featuring live streaming groups (Mirror, Peloton) could be brief trends, or they could be the beginnings of a massive industry.
Powerful new trends will continue to emerge; they might come from changing consumer behavior, social trends, improved software or hardware, advanced data analytics, machine-learning, new payment methods, new forms of payment, etc. With software, hardware and the internet rapidly tri-evolving, the global landscape changes quick. It pays to keep an eye on external trends.
Author’s Note
In today’s rapidly changing world, if you can test new trends or products at low costs, do so.