Jeff Bezos Focus on Controllable Inputs

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In the April 2010 Letter to Shareholders, Jeff Bezos tells Amazon.com shareholders about their focus on inputs, the customer, and their purposeful lack of discussion around financial metrics:

Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs. To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. Our annual goal setting process begins in the fall, and concludes early in the new year after we’ve completed our peak holiday quarter. Our goal setting sessions are lengthy, spirited, and detail oriented. We have a high bar for the experience our customers deserve and a sense of urgency to improve that experience.

We’ve been using this same annual process for many years. For 2010, we have 452 detailed goals with owners, deliverables, and targeted completion dates. These are not the only goals our teams set for themselves, but they are the ones we feel are most important to monitor. None of these goals are easy and many will not be achieved without invention. We review the status of each of these goals several times per year among our senior leadership team and add, remove, and modify goals as we proceed.

A review of our current goals reveals some interesting statistics:

• 360 of the 452 goals will have a direct impact on customer experience.
• The word revenue is used eight times and free cash flow is used only four times.
• In the 452 goals, the terms net income, gross profit or margin, and operating profit are not used once.

Taken as a whole, the set of goals is indicative of our fundamental approach. Start with customers, and work
backwards. Listen to customers, but don’t just listen to customers also invent on their behalf. We can’t assure you that we’ll meet all of this year’s goals. We haven’t in past years. However, we can assure you that we’ll continue to obsess over customers. We have strong conviction that that approach in the long term is every bit as good for owners as it is for customers.

In a world where there is much talk of gross margin, etc., Bezos and Amazon focus on the long-term health of the company and the customer experience.

A key lesson here is this: focus on the controllable inputs – this is a key tenet in Lean Thinking. When we focus on the controllable inputs, then the outcome will follow.

Such a simple and clear lesson, yet so many people and organizations fail to see.

Below is Jeff Bezos speaking about their acquisition of Zappos, where he shares some of the lessons as described in the April 2010 Letter to Shareholders.