In today’s era, the speed and magnitude of changes are far greater than in the past; this means that higher requirements are placed on corporate decision-making capabilities than in the past, especially the speed of decision-making. In the digital age, decision-making must be both good and fast, with the focus on “fast”. Once the key decision is slow, once the market window is missed, even the leading companies in the leading position will miss it, or even miss it once and again.
However, in many traditional enterprises, the quality of decision-making may be okay, but the speed of decision-making is too slow.
In terms of decision-making mechanism, Amazon’s admiration is that they not only did it quickly and well, but also formed a set of clear, specific, and unified decision-making principles and methods, so that the front-line team can make decisions and grant authorization. Can be implemented. How does Amazon do it?
How to improve decision speed
When it comes to decision-making, Bezos pays particular attention to the speed of decision-making. As Amazon writes in its leadership guidelines, “speed is critical to business.”
Decision classification: according to different nature, divided into two categories
In Bezos’s opinion, the important reason for the slow decision-making speed of many traditional enterprises is that they have no classification of decision-making. Regardless of the priority, they use a time-consuming and complicated process to make decisions. For this reason, he divided the decision into two categories according to the nature of the decision and put forward different requirements.
The first type of decision refers to a major decision that has a huge impact on the outcome, life and death, and is irreversible. It’s like a one-way door. Once you decide to cross this door, there is no turning back. For example, in 2005, Bezos rejected the crowd and launched the Prime membership service at an extremely loss-making price: $79 a year, unlimited free shipping, and two-day delivery.
The second type of decision-making refers to the conventional decision-making with little impact on the result, reversible process, and flexible adjustment. It’s like a two-way door. Once you decide to step through this door, if it doesn’t work, you can withdraw at any time. For example, whether a product should be temporarily removed from the shelves.
When designing a decision-making mechanism, the two types of decisions must be treated differently. If you do not distinguish between the first type of decision-making method, it will cause the company to act slowly, dare not take risks, and dare not try, making it difficult to innovate and make breakthroughs. If the second type of decision-making method is used, then as long as the The company made a fatal mistake, and the company may cease to exist.
Decision-making authorization: the second type of decision-making, bold authorization
As a company leader or executive, facing the second type of decision-making, you have to boldly delegate to a certain person or a small team composed of a few, you do not have to do it yourself.
No matter how hard you work, get up early and greedy the dark, everyone only has 24 hours a day. With the development of business scale and the expansion of organization scale, if all decisions are still made by top leaders or executives, sooner or later, they will become the biggest bottleneck for the rapid development of the organization.
No matter who is authorized, make sure that the person or people can make a good decision. Some companies have indeed authorized them and set up various decision-making committees. However, since there is no corresponding information support, no clear responsibility requirements, and no timely guidance and assistance, such authorization is actually useless.
Who is authorized: whoever is responsible for making decisions
In some companies, power and responsibility are not equal in decision-making and authorization: often those who can make decisions and are not responsible; those who are specifically responsible can’t be the masters. Such authorization will cause unequal risk and return, that is, if the result is good, the credit is often credited to the person in charge; if the result is not good, the fault is often passed on to the person responsible.
At Amazon, every business goal and every measurement indicator has a clear responsible person. Whoever is responsible is responsible to the end. If an indicator changes, the person in charge has both the right and the obligation to conduct an in-depth analysis at the first time, find the problem, and solve it. If the frontline is fully authorized, the reaction speed and decision-making speed will be faster.
The decision-making speed is fast, so how can the quality be guaranteed? Amazon’s powerful data indicator system and intelligent management tools are a strong support for the quality of decision-making. All kinds of data are not only detailed and specific, real-time and comprehensive, but also various intelligent analysis and intelligent tools, and they are completely open to the responsible person for easy access at any time.
Even so, there is no guarantee that all the information needed to analyze the cause of the problem and formulate a solution will be 100% complete. then what should we do? Bezos encourages everyone to make bold decisions when the information reaches 70%. Even if the cause analysis or solution is indeed not 100% certain, he encourages everyone to try boldly, do an experiment, low-cost trial and error, and practice to get real knowledge.
Speed up approval: change from serial approval to parallel approval
In Amazon, the second type of decision can usually be made on its own; if it must be approved, it is also a level one. What about things that need to be checked by multiple functional departments, such as third-party selection and contract approval?
In many companies, such things that require multi-departmental approval often have long processes and numerous barriers. If you want to promote something that requires cross-departmental collaboration, such as outsourcing part of the work in a R&D project, you usually don’t have a good relationship with each department, and you don’t go to each department to “worship the dock” during the approval process. It feels like passing the approval is almost indefinite. .
Moreover, people who do business on the frontline will have a strong feeling: Some approvers often have a mentality of “one more thing is worse than one thing less.” Approval means that something goes wrong and you can bear the blame.
Of course, people rank high and rank naturally high. They usually don’t immediately refuse approval, but they raise various questions, requirements, and regulations, and from the perspective of each functional department performing their duties, they are all very reasonable. The final result is to grind you to death and drag you to death. After going back and forth in this way, those who do business will retreat from difficulties, so everyone is happy.
How did Amazon solve the persistent problem of slow approval?
One is that since there are multiple departments to participate, it will change from serial approval (that is, one department is approved and signed to the next department) to parallel approval. Each department sends a representative to form a special group, and all functional representatives discuss together , Get it in one trip.
Second, Amazon particularly emphasizes that functional departments must change their concepts. The role of functional departments is not to make the business impossible, but to work together to figure out how to make the business and do it well while taking into account costs and risks.
You would say, what’s the matter with this? Our company’s functional departments all express their views like this. But Amazon has done a little bit more extreme. Their famous saying is, there is no “NO”, which means that functional departments cannot say no. If there is a problem, the responsibility lies with the functional department, and the functional department has to find a solution to help the business department get things done.
Routine decision-making: try to digitalize and make intelligent decisions
In the past, decisions depended on people. Although there are IT systems and data analysis, the final decision has to be made. In the daily operation of an enterprise, some decisions are very important and complex, and usually require an “old master” with decades of experience to be the guard.
For retail business, how to manage inventory levels. On the one hand, in order to ensure supply, hot-selling products cannot be out of stock, and the inventory level cannot be too low. On the other hand, in order to increase the speed of capital turnover and reduce inventory-related costs, the inventory level cannot be too high. How to balance this contradiction?
Forecasting sales requires keen insight into customers and the market; setting inventory levels requires accurate grasp of capital, operations, and every link of the entire supply chain. How can such skills be cultivated without decades of experience? In most companies, such top talents are very scarce, and their time and energy are also very limited. So many categories have to rely on them to check, the speed of decision-making will inevitably be affected.
What’s more, what Amazon is going to do is a “all-goods store”, serving hundreds of millions of customers worldwide, with such a huge scale and such a complex category, how does inventory management do?
Being born in the digital age is luck for Amazon. For daily decisions like inventory management, Amazon has accumulated massive amounts of historical data, and can do a full range of research and analysis on factors such as customer preferences, seasonal fluctuations, and replenishment speeds of different suppliers, combined with algorithms and other intelligent management tools , Can achieve automatic analysis, automatic decision-making, and continue to iterate based on the results after decision-making, and continuously improve the accuracy of prediction and decision-making.
In the digital age, routine, repetitive, and similar routine decisions with a large amount of historical data accumulation need to be digitalized as much as possible, so that smart technology can empower business decisions, make decisions good and fast, continue to iterate, and have no time and energy limits. The larger the scale and the faster the development, the greater the advantage.
How to make major decisions good and fast
Compared with the second type of decision, what should be done for the first type of decision, which has a huge impact on the result and irreversible, and who will make it? In order to ensure quality, do we have to sacrifice speed? Bezos has always been known for his high standards and strict requirements. He specifically emphasized this: “The Amazon executive team is committed to making quick decisions.” Yes, even for the first type of decisions that matter. It must be both good and fast.
If you want to do a good job, you must first identify the person responsible. The huge Amazon, who should be responsible for the first type of decision? In this regard, Bezos is very clear that the person responsible is himself. He once said that he is the chief decision officer. In an interview in 2018, Bezos said: “The job responsibility of executives is to make the few major decisions.”
The responsibilities are clear, what should be the decision?
Dig the truth: comprehensive and accurate, no omissions
In traditional enterprises, because the data and information among various departments and levels have not yet been integrated, leaders have to rely on layer-by-layer reporting and aggregation when making decisions. In this way, the information processed at various levels will inevitably be delayed in timeliness, biased in accuracy, and omissions in completeness. If there are huge loopholes in the information input that decision-making relies on, the decision-making result will definitely not be good. In other words, there are significant loopholes in the basic truth, and decisions made based on this could lead to disaster.
Speaking of Bezos’s excellence, Bezos’ right-hand man, former Amazon executive Rick? Dalzel said: “What Bezos pursues is to have a timely, accurate, and comprehensive grasp of the’Best Truth (Best Truth) at all times.” This seems to be nothing great, but when you think about it carefully, this In fact, it is a very high level that is very difficult to reach.
If there is no such a powerful data information system as Amazon, if there is no personality ability like Bezos who is willing to go into details, be good at inquiring, and proficient in digging the truth, what can the top leaders of traditional enterprises rely on to break the century-old management model and break the deep-rooted departments Separation, breaking the human nature to seek advantages and avoid disadvantages, and grasp the best truth timely, accurately and comprehensively?
Imagining changes: looking at the future, what you think will change
In February 2005, Amazon launched the Prime membership service: $79 a year, unlimited free shipping, and two-day delivery. When making this decision, Bezos was completely “willingly go his own way.” Almost all executives are against it, including the executive from Apple, Diego? Piacentini.
The objection is well-founded. At that time, the cost of express delivery per order was US$8. Assuming that each member places 20 orders per year, the cost of express delivery in one year is as high as US$160, far exceeding US$79. Piacentini said: “Every financial analysis shows that our free delivery service within two days is simply dizzy.”
However, the way Bezos thinks about problems is not static. He can look to the future and see the changes that others have not thought of but that may happen in the future.
First, once they spend money to become a member, customers will take full advantage of their membership benefits, so they will spend more money on the Amazon platform. Based on this humanity, members will buy more things from the Amazon platform to promote business growth and strengthen the flywheel effect.
Second, the cost of express delivery of $8 per order is a variable. With the rapid growth of Amazon’s business scale, the bargaining power of carriers will rapidly increase; with the rapid advancement of digital technology, operational efficiency will continue to increase, and unit costs will continue to decline. Over time, looking at the long-term, this must not be a loss-making business .
It turns out that Bezos was right. Since its launch, Prime membership service has become an important engine for Amazon’s business growth. As of the end of 2018, Amazon’s global members have exceeded 100 million. The average cost of Amazon members is 2.7 times that of non-members, and the membership business is already profitable, and the profit margin after deducting various direct expenses has reached 19%.
Against a group of harmony: different views, fierce collision
Bezos is well aware that everyone has their own cognitive biases. If for the sake of superficial harmony, hindering the frank expression of different opinions, it will inevitably affect the quality of the final decision. Therefore, he encourages, and even asks, others to challenge his ideas.
In Bezos’s view: For high-quality discussions, there must be the emergence of new ideas, there must be clashes of different views, and even fierce collisions.
The truth is unclear.
At Amazon, the team spirit is by no means arrogant. It seems like a group of harmony, but in fact it has its own mind. Amazon’s leadership guidelines have clear requirements for this: “Leaders must be able to question their unconvinced decisions without arrogance, even if doing so is upsetting and exhausting. Leaders must be firm in their convictions, unswerving, and not in order to maintain harmony. And if you yield, you compromise.”
Facing Bezos and facing executives, expressing different opinions frankly and directly is not only a responsibility to the company, customers, and shareholders, but also helps to win everyone’s respect and contribute to their career development.
Many companies also encourage employees to express different opinions, but if top leaders and executives cannot lead by example and cannot win the trust of subordinates, it is estimated that no one will really tell the truth.
Don’t have to agree: keep your own opinions and obey the overall situation
It is good to be able to pass the vote unanimously, but if everything has to wait for everyone to agree, not only will the decision-making speed be slow, but also many things will be unable to proceed because of one or two people. In many companies, the solution is consumption, and it depends on who consumes more energy in the end. In this situation, how can Amazon break the deadlock and move forward quickly?
In a letter to shareholders in 2016, Bezos suggested that you might as well try to “reserve your own views and obey the overall situation.” Although this is short, it has a huge effect and can save everyone a lot of time.
Bezos gave an example of his own: “Recently, Amazon Pictures started filming an original drama. I told the team my point of view: No matter if it is interesting enough, the production process is complicated, the business terms are good or not… These details are fine. Discussing again, the key is that we have many other opportunities and may not have to make this drama. Their attitude is completely different and they want to move forward. So I immediately replied, “I reserve my opinion, obey the overall situation, and hope it will become our production The most watchable show ever. Think about it, if the team is not getting a simple promise, but it takes a lot of effort to convince me, how long will this decision-making cycle be?”
Regret Minimal Model: Life is too short, leave less regret
Whenever faced with a major decision that determines fate but is full of uncertainty, and must make a final choice, Bezos will ask himself: If you are at the end of life, such as 80 or 90, looking back at your life, what is today Do, then the regret will be minimal.
In an interview in 2018, Bezos explained: “Whether it is in my personal life or in business operations, the best decisions I have ever made are based on heart. Of course, this does not mean that analysis is not important. Analytical, of course, you must do a good job of analysis and then make a decision. But the most important decision in life is often not resolved by analysis. The moment of final decision, instinct and courage… Every time I think, if At the end of life, you should leave less regrets for yourself. In fact, the biggest regret in life is to miss, miss something that you originally had the opportunity to do but did not do. Such a miss will make people hard to let go of when they are old.”
Perhaps this is why Bezos resolutely quit his promising high-paying job on Wall Street 25 years ago, and began his unknown journey of exploring the Internet without waiting for the year-end award. He must be 80 years old, and he will be very pleased with his decision back then.
In case of mistakes in decision-making: fully learn lessons and continue to learn and improve
As early as 1997, in the first letter to shareholders, Bezos clearly stated: “In the face of those opportunities that can create long-term market advantages and have great grasp, we will continue to insist on bold investment. Even if we grasp The sex is great, but the result is unlikely to be successful every time. However, no matter whether it succeeds or fails, we can get precious learning improvements from it.”
At Amazon, a failure, a mistake, usually does not mean the end of a career, but Bezos will ensure that he really learned from the failure.
Amazon’s review will focus on reasons. For example, when making this decision, what reasons have been considered, and are there any omissions? For another example, are there any biases in the judgment of certain key elements? If so, why is there such a bias? Which of the original good assumptions proved to be too optimistic afterwards, why were they too optimistic?
In addition, the ability accumulated in the process is also an important gain. Although the Amazon Fire mobile phone, which has been built heavily for many years, suffered a fiasco, the ability, experience and team accumulated during the development of the mobile phone have effectively helped Amazon to launch the Echo smart speaker and the Alexa smart voice platform more quickly and successfully.