AWS Smart Business Blog

Three Ways Small and Medium Businesses Can Build a Culture of Innovation to Accelerate Growth

How do you define the term “innovation?” For some, people it could mean making small improvements to what they’ve always done. To others, it could also mean dreaming up something new and completely unprecedented—ultimately reinventing a business.

In speaking with small and medium businesses (SMBs), we find a range of internal barriers which prevent them from putting differentiated customer experiences at the center of their innovation strategy. What is getting in the way? Culture. Many SMBs are wary of being the first to innovate and often associate excessive risk with innovation. After all—they can’t absorb trial and error as easily as larger enterprises. Another factor, is the lack of processes and organization. SMBs often lack a systematic approach to innovation which causes teams to deprioritize long term planning to meet short term customer and market needs. Lastly, businesses without dedicated IT teams struggle with skills and technology. They perceive digitization to be overly expensive, thus avoid investing in the right people and technology to enable their innovation.

While there are innovation management barriers to overcome, Amazon has learned that SMB customers who prioritize innovation—and focus on more meaningful customer interactions—are more likely to be successful. These organizations understand that to create lasting business success, they will have to constantly turn great ideas into solutions that solve their customers most pressing challenges of today and tomorrow.

At Amazon, we help SMBs think of innovation as a continuum and not a seemingly insurmountable task. At one end of the continuum, innovation is characterized by gradual changes that answer questions like, “how can we make an existing process or product faster, better, and smarter?” On the other end of the spectrum, innovation is often associated with questions like, “What can we do that is radically different, leading to new products, revenue streams, customers, and markets?”

“We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.” – Jeff Bezos

As companies grow and scale, understanding your customers’ needs and desires, and rapidly inventing solutions that meet those needs, should be one of their core competencies. To help guide you on your own journey of customer-centric innovation, we have distilled insights from our own experiences at Amazon, as well as patterns of innovation we have observed among our customers. Here are three factors smart businesses such as yours can consider to turn innovative ideas into reality.

1. Build a culture that puts customers first

One way to stay ahead is to empower a culture that relentlessly focuses on customers and strives to earn and keep customer trust—each day and every day. Doing this requires purposefully building an organizational capacity, and a culture of customer-centric innovation, that can proactively invent on your customers’ behalf.

At Amazon, we hold ourselves and each other accountable for demonstrating 16 Leadership Principles in our daily actions, such as “Customer Obsession,” “Invent and Simplify,” “Learn and Be Curious,” and “Think Big.” These Leadership Principles help guide our business decisions and remind us to keep customers and their needs top of mind as the driving force of our innovation. For instance, an example of thinking big is our Prime two-day delivery, which was an incredible feat back in 2005 when Amazon first offered it. Customers didn’t necessarily ask for two-day shipping, but it certainly became apparent that they wanted it. This anecdotal point is just one example of how we obsess over customers and take bold steps to innovate. At Amazon, approximately 90% of what we build is driven by what customers tell us they want. And for the other 10%, we pay close attention to pain points and create new features and services to surprise and delight customers.

How to get started: Seek to understand your customer and their most pressing challenges by establishing ways to gather data with consent. Start small by sending surveys, feedback forms, reviews or testimonials and embedding customer feedback at different interaction points. This will help you better empathize with your customers, establish trust, and visualize an optimal customer experience.

Smart Business Newsletter: Get cloud resources, expert insights, and peer perspectives you need to build a smarter business—delivered each month

2. Use practical mechanisms to support exploration of business ideas

A mechanism is a process that allows you to learn and improve from mistakes or defects and achieve greater scale over time. In fact, your SMB may already be using a mechanism by a different name. Consider creating mechanisms that codify actions so they are consistent and repeatable. For example, apply the same process and mechanism to envision, test, and evaluate each innovative idea. At Amazon, one of our established mechanisms is “Working Backwards,” where we start with a customer need and work backwards to a solution. We address key questions that help illuminate the customer and their problem, as well as the needs and benefits of a potential solution. Amazonians across the company wrestle with these straightforward questions as they think about new ideas.

How to get started: Determine your own mechanism to document and evaluate innovative ideas. What “frequently asked questions” will you explore for each idea? Define the criteria that are most critical for your business considering financials (i.e., profitability, market share, cost-savings), customer value (i.e., time-savings, satisfaction scores, loyalty), and technology (i.e., feasibility, security, operational efficiency). Once you determine which your organization prioritizes, consistently use this framework to decide which ideas are worth exploring further.

Team of three people collaborating in front of an easel with writing and notes

3. Empower your teams to make faster, better decisions

One helpful mental model we have developed at Amazon is the concept of one-way versus two-way doors. This is a way to encourage calculated risk-taking based on the belief that many decisions and actions are reversible and don’t require extensive study.

One-way doors are finite decisions that have significant consequences and need deep analysis and deliberation—examples include opening a new location, investing in new equipment, or buying hardware. These require careful thought, extensive planning, a lot of capital investment, and are difficult to reverse once you’re starting to break ground.

Two-way doors are reversible and have limited consequences—such as experimenting with a new feature on a mobile shopping app—decisions you can rapidly make and iterate quickly based on what you learn or reverse altogether. A simple prototype that fails to perform as expected because of a previously unknown technical issue is a failure worth celebrating if that new knowledge can be applied to future designs.

When we see a two-way door and have enough evidence and reason to believe going through it would be a good idea, we just walk through it—either way, we learn a valuable lesson we can apply to the next iteration or innovation. So, when’s the right time to make a decision? At Amazon, we believe that most decisions only need about 70 percent of the information you wish you had. If you wait for 90 percent or more, you’re probably moving too slow.

How to get started: Determine your organization’s threshold for experimentation. Dedicating as little as five percent of time to experimentation can lead to significant growth. Not all experiments require budget and resources. Encourage your teams to explore and test small changes or improvements as part of their day-to-day roles. Identify how much information, data or customer feedback will you require before making an investment and apply your own innovation mechanism to evaluate ideas and/or review your teams’ experiments.

What do you need to tackle your next innovative project?

To learn more about Amazon’s culture of innovation, explore on-demand learning on our AWS Connected Community. On the Connected Community, you can also register for events, find customer stories discussing how they’ve used the Working Backwards mechanism, and connect with cloud experts. If you’re still new to the cloud, learn about the value it bring to your SMB.