Think like Amazon with John Rossman

Welcome to Brainfluence, where author and international keynote speaker Roger Dooley has weekly conversations with thought leaders and world class experts. Every episode shows you how to improve your business with advice based on science or data.

Roger’s new book, Friction, is published by McGraw Hill and is now available at Amazon, Barnes & Noble, and bookstores everywhere. Dr. Robert Cialdini described the book as, “Blinding insight,” and Nobel winner Dr. Richard Claimer said, “Reading Friction will arm any manager with a mental can of WD40.”

To learn more, go to RogerDooley.com/Friction, or just visit the book seller of your choice.

Now, here’s Roger.

Roger Dooley:     Welcome to Brainfluence. I’m Roger Dooley. When I first started working on my new book Friction, the very first company I began studying was Amazon. This was a company that spent a ton of money to defend its patent for one-click ordering. The only purpose of that effort was to ensure that as long as the patent was enforced, their competitors would have to add one tiny click to their checkout process. This obsession with minimizing customer effort makes them the prime… Sorry about that, example of a company that has prospered by making things easy.

Our guest today is a leading interpreter of Amazon’s philosophy. John Rossman is most known for launching and scaling the Amazon marketplace business, which now accounts for more than half of all Amazon units sold. He’s a fellow McGraw Hill author who has written multiple books about Amazon’s methods, including The Amazon Way, The Amazon Way on IoT and his newest book, Think Like Amazon: 50 1/2 Ideas, can just be 50 ideas, 50 1/2 Ideas to Become a Digital Leader. If you want to learn how to compete in the digital era, John is someone you should listen to.

Welcome to the show, John.

John Rossman:   Roger, thanks for having me. We’re really looking forward to the discussion.

Roger Dooley:     John, I’m curious, what was the initial vision for Amazon marketplace?

John Rossman:   Well, the initial vision was to be able to open up… When I was at Amazon from early 2002 through late 2005, when I started there, 90% of the business was books, music, video. And so we knew we needed to expand in different categories, but we also knew the limitations of our merchandising and buying expertise plus the amount of inventory we could carry.

And so the vision of marketplace was to allow third party sellers to be able to help us open up new categories. But I think that the key strategy we came to was that we wanted the customer experience, the buying from an Amazon marketplace seller, needed to be as trusted an experience as buying from Amazon, the retailer. And underneath kind of that goal, we tackled some really hard problems. We had to work very hard to make both a great customer experience as well as a great selling experience, but we never lost sight of our brand of customer trust and that we needed to make sure that marketplace buying and selling was to use, one of your terms was, as frictionless as possible.

Roger Dooley:     Yeah, because really it’s pretty much transparent to the buyer. I mean, you may notice that you’re getting it from a marketplace seller or you may not, but the experience is the same. And I guess I’d contrast that with probably the other company that was comparable at that time, which would be eBay, where they had a lot of sellers on a platform. And then eBay is a platform play. But particularly I think in the earlier years, the customer experience depended quite a bit on the seller that they were buying from as opposed to the eBay platform itself. And I know they’ve moved to address that in a variety of ways as well. But that’s really a key distinction.

John Rossman:   Yeah. I mean, it was really just because of the force from the Amazon that eBay’s addressed that. But yeah, back in 2002 eBay was the market leader in kind of broad category marketplace selling, but it very much was kind of a laissez-faire approach, which was, “Hey, eBay is just connecting buyer and seller. It’s basically between the buyer and seller to work things out.” And we took 180 degree different point of strategy around that and that forced Amazon to do some very hard things. And it forced a very different integration and choreography with sellers and a much different set of obligation with sellers. Because again, we wanted the customer experience to be as frictionless and as trusted buying from third parties as it was in buying from Amazon, the retailer.

One little historical point that people tend to forget is that the marketplace business that I helped launch in 2002 was actually the third iteration of a marketplace model at Amazon. And Amazon kept at it, and it’s one of the things I admire about Amazon. And one of the lessons to take from them is that oftentimes good ideas don’t succeed on their first iteration. Right? And it’s not that the idea is bad, it’s just your manifestation might not be the right way to go about it, or sometimes the market takes time to develop behind it.

Roger Dooley:     Right. Well, third time’s the charm. And I guess you proved that to be the case.

John Rossman:   Right.

Roger Dooley:     So, I think all too often businesses do give up on ideas. I mean, it’s tough to reinvest in something that might’ve failed in the first iteration. It’s a lot easier just to sort of put that in the rear view mirror and say, “Okay. Well, that was an interesting idea, but let’s just move on to something we’re going to do better at or we think we can do better at.”

John Rossman:   And that’s one of the common mistakes that especially large enterprises make is they expect immediate success. Even with this version of the marketplace business that we launched in 2002, it took seven or eight years of development and the customer to get used to coming to Amazon for more than books, music, video, and for the combination of the marketplace business with Prime and with fulfillment by Amazon FBA to really create the fly wheel, the virtuous cycle of growth within the marketplace business.

And so, even the successful attempt, if you evaluated it after a year or two, you wouldn’t be looking at as striking ROI. It took a lot of patients. And one of the, I think, lessons and understated virtues, I always get asked like, “Hey, what’s the secret of Amazon?” It’s like, “Well, there is not one secret,” and that’s why the book has 50 and a half ideas in it. But one of the understated secrets of Amazon is patience. And that really starts from the top, from Bezos, and just his willingness to stay with good ideas much longer than most other companies are able to. And that allows him to invest and innovate like most other companies aren’t allowed to innovate.

Roger Dooley:     Well, I guess that’s what separates visionaries from the rest of us. So where people like Jef or Steve Jobs can look at something and say, “This is the way it should be,” and sort of stick with that vision, even when somebody says, “Oh, that’s impossible, we can’t do that,” or everybody says, “That’s never going to work.” Where most people would be intimidated.

John Rossman:   Yeah. The only twist I would put on that is I don’t think there is one thing that differentiates them. I think that there’s a combination of things and I always resist the temptation of boiling it down to a simple thing or one thing. It depends on the situation and that’s why… If you haven’t read Think Like Amazon, the only problem with 50 ideas is that there’s 50 ideas. It takes wisdom and judgment to apply the right idea in the right circumstance.

And so while patience underneath, kind of the foundation of how do we innovate, how do we invest, on the flip side, there’s this sense of urgency of getting to perfection on today’s customer experience. And so Amazon, the system of innovation of Amazon, is really a combination of operational excellence and putting metrics in place in everything and striving for perfection in today’s operations and customer experience combined with longterm thinking and willingness to work in the future and make that relative to that future. And it’s really that combination that creates a company like Amazon, along with a number of other things that go along with that to make those two things happen.

Roger Dooley:     How do you suggest that people accomplish that? I think that if you have a very high level of focus on what you’re doing now and trying to improve that experience, measure everything, test lots of stuff and keep improving, and at the same time have these longterm goals, I mean, I think it’s challenging. Not impossible obviously, but it’s challenging to maintain that dual focus at the same time, especially over the long haul.

John Rossman:   Well, it’s funny you mentioned that it’s not impossible. One of the chapters is called Mission Impossible. And one of my favorite lines from one of the Mission Impossible movies was, the agent’s handler… Or the agent goes, “Well, this is going to be very difficult.” Then the agent goes, “Well, that’s why this is called Mission Impossible, not mission difficult.” Difficult to walk in the park, right?

And, yes, it is challenging, right? But anything worthy is going to be challenging. But it truly is that combination of obsessing about trying to get to perfection in today’s results and looking for the root causes of why that error, how do we improve the customer experience, how do we reduce that piece of friction and trying to solve for. And that constant dealing in those details and asking those questions not only helps improve today’s results and today’s customer experiences, but that’s the fundamental work you have to do in order to have the insights in, well, what are the big innovations that we could add to extend to it, right?

And I liken it to being an athlete, right? Which is we all want the big moment of championship or the big win, but you win those things by going to the gym every day. Right? By doing the hard work every single day and being conscious of that hard work that you’re doing for improvement. And that’s really the combination of operational excellence and then challenging and working in the future to define that future and knowing how to proceed upon it.

Roger Dooley:     And John, you actually have one chapter, chapter 26 that has friction in the title, and in it you describe your sort of, I would call it a tragic comic experience trying to fill a prescription at a very typical pharmacy. The kind we, at least in the US, have all been to where it had ended up being a rather time-consuming and effortful experience for you when you would think it would be quite simple.

And coincidentally enough, just like in the last two days, I got an email from Amazon offering to take over my prescriptions, if I had any, with their PillPack service that packages prescriptions, the way that they will be taken. So if you happened to be, hopefully you’re not, but if you’re on five different medications with different schedules on different days, it will give you a little packets labeled by day and time of day so that you know exactly when you’ll take it, you’ll know if you missed one because that time will be in the past. You don’t have that staring at that bottle saying, “I think I took it.”

So this is really brilliant and they’ll do that at no charge and they will, say, work with most insurance companies. And in my book I actually have a very short section about compliance with medical instructions and taking medications. And that is kind of a high friction experience that often gets screwed up and people abandon it. And there’s a huge problem where people just don’t follow the instructions or they stop taking them. So I think this is an exciting venture from Amazon. Do you think this is going to fly?

John Rossman:   Well, yes. So the chapter in Think Like Amazon you’re referring to is Idea 26. Why is this so hard? Innovate by reducing friction and in it I wrote a little essay called, “Please Amazon, open a pharmacy, please.” And it was really just a breakdown of an experience I had in my local pharmacy. And all the minutiae, that kind of sloppy customer experience and kind of old methods that go on within a pharmacy and how a company like Amazon would rethink all of that. Right?

And PillPack, the acquisition from Amazon is, as you pointed out, instead of delivering you five different bottles and asking that the patient, the customer to administer those properly, gives them a daily dose packet. Right? And because, especially in complex medications, especially with people who aren’t feeling their best, properly taking your medication is a massive issue in our healthcare.

So, I don’t know… My guess is that that Amazon’s foray into pharmacy is going to be successful. But I think the notion of challenging the status quo and really always asking yourself like, “Why are we asking the customer to figure that out, to put in that information, to confirm this, to check this, to call us to do these things?” I quoted in the book the famous Pink Floyd song, Comfortably Numb. Right? We have just become comfortably numb, both as customers and as the business serving them, to all these minutiae of things that we ask customers to compensate for that are not necessary if you really think about the flow, the data and how technology and new approaches can make it easier and simpler for customers.

And what businesses oftentimes overlook is that those things also benefit the business from improved quality, much better data about the customer experience and about the business, about speed and efficiency and agility. To do all those things, you get back a bunch of great business benefits also. And so again, it’s that combination of leading with the customer but it delivers to you so many operational improvements.

So yeah, it’s going to be a long set of bets. Talk about patients, I think healthcare is going to be one that tests Amazon patients, but they’re a company that has it. But yeah, I think, there’s so much in healthcare in particular where we have just grown numb to asking the customer, and the customer’s family, and the providers that can be done so much better.

Roger Dooley:     Yeah, the thing I like about that solution too, John, is that it is really admirable in its simplicity. I’ve seen devices that are electronic and they’re designed to beep when it’s time to take your medication, there’s like a bunch of little slots in them, and I find that very hard to believe that the average person would be able to properly configure these things and comply with them. Particularly if you’ve got perhaps folks who are older or who are suffering from the effects of some kind of an illness and maybe not as with it as they would be when they’re at their best. Where this is pretty darn simple, whether they’re doing it themselves or whether somebody is helping them with it. So it’s a great solution.

John Rossman:   Well, I think the other part of that story is that I believe Amazon’s greatest innovations are things that, when they were launched, were Amazon was criticized for, they were told they were irresponsible, that it didn’t really matter, but today are just common defacto capabilities for most companies. So examples of that would be putting true customer reviews on product detail pages. Amazon launched that in 1999, primarily the book publishers and the music publishers that Amazon was dealing with, hated it and they tried to pressure Amazon to take those down. Amazon stuck to their guns on it. And what they proved was that if customers trust what they’re going to get, they will actually buy more over time and not less. Right?

Another example of a great Amazon innovation is selling used items on the same detail page as new items. So we really launched that as part of the marketplace capability. Again, completely counterintuitive from a traditional business standpoint, but letting customers choose and have trust in new items and used items and the condition of those used items on the same detail page, was a completely counterintuitive move of which we were criticized heavily for, for a long period of time.

And so this notion of reducing friction and challenging the status quo, you have to be ready for some criticism. In fact, I would say to some degree, if you aren’t getting criticism or jeers from the competitors and the traditionalist, then you probably really aren’t challenging the status quo. And so you really have to be ready for that. And that’s why understanding what you’re truly trying to solve for, what the customer experience is and having conviction around that, that’s what’s necessary. But if you stick with it, over time, if it’s the right concept, traditions will change and you’ll set the next tradition.

Roger Dooley:     Sounds good, John. Go into one quick trivia note. In that chapter 26 you use the phrase ‘grease the skids.’ I’m curious whether that’s something that Jef said himself or whether that’s you’re paraphrasing.

John Rossman:   I don’t recall. I think that’s my paraphrasing, yeah.

Roger Dooley:     Right. Okay, good. Just because I know he has made very specific comments about Friction in the past and then…

John Rossman:   Oh, big time. I mean, these concepts are straight from Jef throughout the book and everything. Right? I was just a good student at Amazon. I just paid attention and everything. Right? But these are authentic mechanisms and concepts and strategies that Amazon again uses in the appropriate way, at the appropriate time to get their types of results. And I’ve just kind of captured the story and packaged them up into these digestible techniques.

Roger Dooley:     Yeah, John, these days, a lot of companies use things like net promoter score and customer effort score a little less frequently to gauge how they’re doing with their customers. I don’t think I’ve ever seen one of these pop-ups on Amazon asking me whether I’d recommend them to a friend. Maybe they exist. But how does Amazon measure how it’s doing with its customers, either from a customer satisfaction standpoint or particularly from a customer effort standpoint since that seems to be such a focus of theirs?

John Rossman:   Yeah. The way they do it is they measure every single order. That’s how they do it. And I think that things like surveys and net promoter scores are important. But if that is your sole measure of understanding customers’ feedback and customer satisfaction and getting to operational excellence, you’re just going to be scaling above the median in everything. Right?

And so Amazon has had the… What’s the American Customer Satisfaction Index or whatever, that’s the University of Michigan Index. They’ve had the highest scores on record every single year, and they’re proud of that and they know that. But the way they get there is by measuring what we call promise. Right? Customer promise is essentially that you get the right item delivered to the right location on the right day with the right products in the right condition. That is what comprises a perfect order. That’s the customer promise.

And they measure every single one of those. And then every year they raise the bar on what that service level agreement, what the SLA is for hitting customer promise. And it’s because they pay attention to the details on every single order that they get the survey and the recognition and the net promoter scores that you’re looking for. But too many companies use those to try to drive on an operational basis. And the data isn’t real time enough and the data’s not granular enough to actually act against in a really decisive way.

Roger Dooley:     Amazon gets a lot of credit for making things easy for customers, but I think probably something that you’re quite familiar with is that they make it easy, relatively easy perhaps for vendors to reach the world market. In my book, I talk about this little startup that had a crazy idea for a home or small office router where they’re going to put a little touchscreen, a color touchscreen on the side of it, where we all know that routers are black boxes with some blinking lights on them. Right? But they said, “Well, we could avoid this horrendous setup process that you have in the existing ones,” which even network people don’t like setting up routers by putting a touchscreen right on it and letting you configure it in a few minutes.

They tried to get this into the channels through those traditional outlets, the Best Buys and Office Depots and such, but they have shelf space issues and they really couldn’t penetrate because they were up against folks like Cisco and Netgear. So they went to Amazon and it ended up being a huge win for them. They ended up, over a period of years, they sold hundreds of thousands of units because of two things. First of all, they were able to get access to the market from Amazon that they were denied from the other sellers. But then also the review system you talked about worked in their favor, because it really was way easier to setup.

And even if you look at the top brands, like Linksys’, which is a Cisco unit and whatnot, even their routers at the time were not highly rated simply because the products may have been fine, but they were hard to use. And people got frustrated and they sent it back and they give it a bad rating. But these routers from Securifi was the company, were so easy that they ended up having higher ratings than anything. And so you have this sort of virtual circle started or a cycle where the ratings got better and it encouraged presumably more displays of their product and they ended up becoming huge sellers. So I think that’s kind of an overlooked aspect of what Amazon has done. It’s helped a lot of small businesses too.

John Rossman:   Well, I mean, that is the marketplace platform right there. That’s a great success story. It’s helped millions of small and medium size sellers compete for the customer simply on the merits of having the best value proposition to those customers. Today, there’s over 3 million sellers on the Amazon marketplace platform. And I think it’s an under-told part of Amazon’s story. For every story that’s written about disruption and retail and everything, it’s not the stories about entrepreneurs being able to reach customers and build new businesses because of the Amazon marketplace, doesn’t get told as much.

And the thing I always come around to is people like to blame others for their demise, but it’s not that Amazon has disrupted or other companies have disrupted. It’s a lack of responding and innovating by others as a response or seeing where business and customer capabilities need to go. So it’s a failure of your ability to change and innovate. That’s the true root cause. It’s not because of what Amazon is doing.

And so, I get lots of business leaders in conversations where effectively people are kind of either complaining or whining or talking about the limitations of what they can’t do. And I always kind of come around to like complaining is not a strategy. Right? What we have to do as business leaders is take account to all the assets you do have and say, “How are we going to compete going forward? And take it upon yourselves as an opportunity and a challenge to change your business practices and effectively compete in this digital era.” And I get more energy and ideas from companies like Amazon than limitations from companies like Amazon.

Roger Dooley:     Most businesses really don’t want to disrupt themselves.

John Rossman:   Oh, no. For sure.

Roger Dooley:     It’s only when someone else comes in and disrupts them that either A, they complain about disruption or realize, “Hey, we better start changing things quickly.”

John Rossman:   I’ve gotten to work with hundreds of companies and teams. I was a partner in a consulting firm, Alvarez and Marsal for 12 years after Amazon. And A&M, the real forte of that business, is working with companies in crisis. And I loved working with teams and companies in crisis going through restructuring, because as you point out, they were willing to rethink everything and do anything because they had to. They let go of the past. And the hardest clients I worked with were those that were successful companies. They say they want to innovate, they say they want to change, they say they want to disrupt, but they’re not really willing to do it yet because they’ve grown a little fat and used to the good times. Right? And so, those are hard leadership challenges and I think when you’re most at risk are when things are at their best.

Roger Dooley:     Yeah. Great point, John. Something I’ve written and spoken about quite a bit is how Amazon doesn’t have the same security-driven, IT-driven bad user experiences that I see at so many different businesses, large and small. And I think that kind of relates to a chapter in your book that talks about how support functions are all supposed to focus on getting to yes. Which that isn’t exactly what the chapter talks about, but somehow the security people at Amazon have gotten past saying, “Okay, we’re going to use all these so-called best practices and have horrendously long passwords that expire after 90 days,” et cetera, et cetera. And they made things relatively easy for their users and there is security there. You encounter it occasionally if you decide to say ship TV to a new address or send a bunch of gift cards out. But the average user never encounters that. That one click button is just there waiting for them.

How does Amazon build that philosophy into these other departments where… In fact, I think, John even referred to the attorneys at the previous companies as being the deal prevention team. And really those folks weren’t out there to prevent deals. They thought they were trying to protect the company. But in doing that, they kind of miss the bigger picture of actually getting deals done. So how does Amazon accomplish that, to getting everybody pulling together and how can other companies do it?

John Rossman:   Yeah, so the idea that you’re referring to is Idea 12, get to yes. Finance, techs, legal and HR teams that matter. And really the essence is that in most organizations, the role of experts outside the business is they generally have risk aversion as their primary orientation and compliance as their primary orientation. And at Amazon, the role of those support teams is to be a business partner and help you get to yes. And you ask the question like, “Well, how do they do it?” That is strictly a tone from the top mindset expectation that if we are going to innovate, part of that innovation is always like, “How do we make it work from a legal standpoint, from a compliance standpoint, from an HR standpoint, from all of these support pieces?” And so those teams, those leaders have to be part of the problem solving team, not just showing up telling me what the rules and regulations and all the challenges that you’re going to have, and basically always be saying no to you. They have to actually demonstrate leadership and expertise by helping you get to yes.

And that’s just a mindset and I’ve seen other organizations who have support teams that have that business partner mentality and that get to yes mentality. And it is such a difference-maker. But I don’t think there’s too much more to it other than tone from the top in making sure it’s clear to those support teams. That being an expert is great, helping us be compliant in everything, yes, that’s good, but it’s not sufficient. You have to help us get to yes. And that’s the job.

Roger Dooley:     I think that is a huge lesson from Amazon. It’s something that I really try and emphasize, because so often you’ve got people in the organization who know what needs to be done, who know how to create a good customer experience or user experience, but somehow they’re hampered because they lack the power to deal with a more powerful adversary in IT or in compliance or in legal. So-

John Rossman:   Yeah, and really is… I mean, and I’ve also seen the opposite, which is those teams, they seem to make it their job to make it as hard as possible on people to make change and to get to something new. And they seem to take delight in that power and that control because it makes them important. And that type of passive aggressive behavior is unacceptable. It’s not acceptable at well-operating companies like Amazon.

Roger Dooley:     Yeah. I just saw an article, I can’t remember the name of the company, but they, unlike some of their competitors, had not been hacked. And the guy who was in charge of their IT and security said it was attributed that fact to that the CEO had basically told him, “If any department ever refused him, to call the CEO right away.” And I thought, “Well, that’s a pretty powerful statement, but at the same time you’re putting your IT person in charge of your customer experience, in charge of lots of things, but that person may not really have the best feel for it. Now hopefully the person actually had that right attitude that you’re describing, but to me that sounded like a pretty dangerous sort of thing to make this person pretty much the de facto authority of everything.

John Rossman:   One of the ideas, Idea 36 that I have in my book is called Information Security Must Die. Making security’s everybody’s job. And so I think what you’re getting at, which is the experts on information security and everything, those tend to be centralized teams, but it’s a business function and those teams need to equip their business partners with assessing, owning and managing information security and information risk. But that’s just another set of requirements that needs to go into the business. It needs to be part of the business. And so it’s kind of the flip side of decentralized teams have to get to yes, which is business teams can’t say, “Well, I’m going to outsource or deflect to an expert and have them be accountable.” Like, no, you have to be accountable as a business team. You need to make sure you have the right expertise and advising you and supporting you. And that expertise has to set up the right standards and approaches for you to take.

But at the end of the day, security is just another business function and it needs to be distributed out to the business team. And I wrote that chapter Information Security Must Die with a friend of mine, Larry Hughes, who was the first Head of Information Security at Amazon, and his definite perspective is like information security needs to serve the business and businesses need to be more aware to take higher degree of accountability of how security is just another set of business requirements.

Roger Dooley:     Great. Well, I’m hoping that someday United Airlines gets the memo on that. Anyway, that’s a good place to wrap up I think, John. Today we are speaking with John Rossman, author of The Amazon Way and Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader.

John, where can people find you, your company and your ideas?

John Rossman:   Yeah, well, they can find me on LinkedIn. So John Rossman on LinkedIn. My website is rossmanpartners.com and you can find Think Like Amazon in hardback, Kindle and audio versions at Amazon.

Roger Dooley:     Great. Wow. What a coincidence. Okay, well, we will link there to the books and to any other resources we spoke about on the show notes page at rogerdooley.com/podcast. John, if more businesses thought like Amazon, the world would definitely be a better place. Thanks for being on the show.

John Rossman:   Absolutely. Thanks for having me.

Thank you for tuning into this episode of Brainfluence. To find more episodes like this one, and to access all of Roger’s online writing and resources, the best starting point is RogerDooley.com.

And remember, Roger’s new book Friction is now available at Amazon, Barnes and Noble, and book sellers everywhere. Bestselling author Dan Pink calls it, “An important read,” and Wharton Professor Dr. Joana Berger said, “You’ll understand Friction’s power and how to harness it.”

For more information or for links to Amazon and other sellers, go to rogerdooley.com/friction.