2001 – Obsess over Customers and free cash flow

I have always been intrigued by the letters sent to shareholders by both Warren Buffet and Jeff Bezos. They are inspiring and for wannabes like yours truly a source of motivation and hope. So I am creating a series of articles on what learnings I took away from the letters of Jeff Bezos. This is the fifth letter in the series.

You can check out the complete series here: https://alphonserajdavid.com/category/book-reviews/non-fiction/jeff-bezos-stakeholder-letters/

The first year of the 21st century marked a trial by fire as the dot com burst brought the spiraling euphoria crashing down from the heavens and right in front of the gates of hell.

But Amazon endured. The twin focus on customers and free cash flow made sure that Amazon came out the mess stronger than almost all it’s competitors.

My major learning from this letter is this

Learning #1: Obsess over the customer and free cash flow; in that order

In the first few paragraphs Jeff drives home the point that Amazon is focused on Cost reduction. Maybe it’s a sign of the times, but he explains how cost improvement have been a core focus and how they managed to balance growth along with cost improvement.

He specifically explains this with the following statement, “Growth spreads fixed costs across more sales, reducing cost per unit, which makes possible more price reductions”

This gives me my second learning

Learning #2: The right kind of growth leads to reduced cost per new sale

Also, it is in this letter that Jeff adds the third tenet to customer experience. In addition to selection & convenience, Amazon will also focus on relentlessly reducing prices for the customer.

Learning #3: Keep on finding newer ways of adding value to your customers

This is an interesting point. Selection, convenience, and reduced prices. Adding newer ways of creating value is a sure fire way to keep wowing the customer

Another interesting component in this letter is the discuss on customer self service. This concept is extremely useful in the world of product management. The more you enable your customer to complete tasks by themselves the more you are able to achieve scalable growth

Learning #4: Better Customer self service gives way to scalable growth

As the firm expands, if innovation is one way of growing eliminating errors from within the system is the only way by which you can maintain your current market share. Relentless focus on error elimination is a key focus at amazon and that shows in decreased delayed and wrong orders

It may not be as sexy as innovation, but it sure does keep your customers coming back for more

Learning #5: Focus on error elimination in your current process.

He signs off reiterating that the focus is always on Shareholder value.