Innovating Through Disruption
More than ever, companies are beset by challenges–and surrounded by opportunities, too. To thrive, companies are going to have to do (even) more with (even) less. Amazon’s approach to innovation is one way of tackling the challenge, and it could have elements helpful to others in the present climate. In our experience, innovating successfully depends on rapidly determining where to innovate, what solution to focus on, and how to build.
Crises draw us back to where we are comfortable. And we are experiencing a global crisis like no other in recent memory. In response, many companies are preserving capital and hurrying to protect what appears to be their ‘core business.’ At best,most are choosing modest adjustments and incremental change. Plans for innovation are cast aside; such endeavors are considered more appropriate for when times are good. But the innovation imperative continues, and those who innovate now will thrive in the recovery.
First, let's take a trip down recent memory lane. During the 2007-2008 global financial crisis, when many were concerned about the future of the travel and hospitality industry, innovations in business models, customer engagement, and technology emerged to create the marketplace we have today. Airbnb launched in August 2008, Uber in March 2009, followed by Square later that year. By 2010, we were able to use our third-generation iPhones to conduct business that was not even possible when the first model was launched three years earlier.
But these companies were startups with little at stake and everything to gain. What is an established company to do? According to a Harvard Business Review article titled ‘Roaring out of Recession,’ only 9% of established companies emerged stronger after the Great Recession while 17% went bankrupt, and the rest performed roughly the same as pre-recession. So what did that 9% do differently? They ‘reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets.’
In this pandemic, companies are beset by challenges–and surrounded by opportunities, too. To thrive, companies are going to have to do (even) more with (even) less. Amazon’s approach to innovation is one way of tackling the challenge, and it could have elements helpful to others in the present climate. In our experience, innovating successfully depends on rapidly determining where to innovate, what solution to focus on, and how to build.
To determine where to innovate–the ‘innovation space’–it is vital to rapidly differentiate between one-way and two-way doors. One way doors are those decisions that are hard to undo–those impacting life and health, major capital investments, or decisions that could damage customer trust. Even in this present climate, those decisions should be carefully thought through. By contrast, two-way doors are easy to undo and offer great potential for learning–more so by doing than by further analysis. The present crisis should encourage leaders to walk through the two-way door and see what may be on the other side. Put more bluntly, if your team is motivated to experiment, the cost is low and there is the chance to learn–why not give it a try?
When you have determined where you’re going to innovate, investing in the right innovations is more important than ever. Moving fast can also mean moving further in the wrong direction if you make an early error. At Amazon, we focus relentlessly on our end customer to guide our innovation. In his 2016 letter to shareholders, Amazon founder and CEO Jeff Bezos said, ”Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.”
So–very practically–ask yourself some searching questions. First, who is the customer? Not a segment of people or a generic persona that could be anyone’s customer, but who is your customer? Next, what is their most pressing problem or opportunity? Again, be specific. Given the already massive challenge of innovating successfully, your chances of solving two or more problems at once is vanishingly small. Choose one, and focus on it. Notice that you have not–yet–even thought about a solution. You are just understanding, empathizing, considering.
Then, given this customer with that problem, or opportunity, how could you delight them? You enter a process of iteration. Sketch out a solution and–again being specific–describe what the main benefit or opportunity would be to this customer you first identified. Have you delighted them? Perhaps not. Does that mean the solution is not yet right? Probably. Or perhaps–just maybe–you have learned something new about your customer by looking at them and their problem in this wayand need to go back to the previous step.
Finally, you have it: a customer, a problem, and a solution. At Amazon, the next step in our process is to produce three documents. First, we write a press release as if the product or service has been launched. This helps frame the issue at hand. We focus on the customer’s need, not competitors or profits. We are careful not to use industry jargon,and everyone should be able to understand it. This one-page document is supported by a ‘Frequently Asked Questions’ (FAQ) document, where we list all of the questions a customer or internal stakeholder may have–and then answer them one by one. It sharpens the idea, and saves time because one document should answer reader questions. This is the PR-FAQ, and it is thedocument that underpins every innovation in Amazon. It guides our experimentation–which is what comes next.
To experiment quickly–especially now–you need to defray the costs of innovation. This means making experimentation fast and easy by using tools, automation, and agile development to rapidly build, validate, test, scale or abandon experiments. It means building and using services where you pay only for what you use rather than capacity that sits idle. And it also means that once you have a winner,you can scale securely and reliably to all your customers at once–without extensive and costly roll-out plans. With these in place, only one’s pride is at stake when an experiment does not work out. But you can embrace the rich lessons obtained at low cost, and move on to the next project.
There is no surefire way to innovate, but you can improve your chances of success. As Jeff Bezos said in his 2015 letter to shareholders, “Given a 10 percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of 10.” However, taking those bets is crucial because, “big winners pay for so many experiments.” Looking at the world right now, there has never been a time when this is more true.
Richard Halkett, Worldwide Lead, Digital Innovation, AWS
The Digital Innovation team uses methodologies inspired by Amazon’s innovation mechanisms (e.g. Working Backwards) to help customers develop and deliver new solutions on AWS. Previously, Richard led Cisco’s Digital Capabilities organization, and before that the company’s first sales teams focused on Business Analytics and Software, and the Americas Public Sector business development group. Prior to joining Cisco, he worked in the U.K. and U.S. on foreign, technology, and innovation policy. He was the founding Policy & Research Director of Nesta (the UK’s National EndowmentforScience, Technology & the Arts) and was the founding Chief Executive of Boxmind, the Oxford-basededucational technology,content, and services company. A native of Lancashire, England, Richard lives in Los Angeles with his wife and three children. He earned his Masters of Public Policy at the University of California, Berkeley, where he was a U.K.-U.S. Fulbright Scholar. He completed his undergraduate degree at Merton College, Oxford. He is a member of the Board of Advisers for the British Council in the U.S.