July 9, 2012 5:35 pm

The Bezos doctrine of ruthless pragmatism

Jeff Bezos©Bloomberg

While some businesses want to empathise with people who contact customer service and others have a robotic tin-ear, Jeff Bezos says the way you handle the calls is not the point.

“It’s already too late by the time you’re doing customer service,” Amazon’s founder told an audience in New York last year. “The best customer service is if the customer doesn’t need to call you, doesn’t need to talk to you. It just works.”

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So when, say, Amazon makes a mistake and a product arrives damaged, it does not just send another box and move on but works back to fix the root cause – a process that over 17 years has steadily cut the proportion of orders that trigger irate calls.

The approach exemplifies the modus operandi that Mr Bezos has instilled in the company he still leads – pragmatic, frugal, data-driven and rigorously analytical.

Such no-nonsense virtues would make Walmart proud – and an early Amazonian says managers read the biography of its founder Sam Walton at a corporate book club. But a bigger inspiration for Mr Bezos has been Toyota Motor.

He has fused the carmaker’s processes with a technological nous that rivals Facebook, Google and Apple. But while some denizens of Silicon Valley can be perk-filled dreamers, Amazon, based in rainy Seattle, is a no-frills doer.

“It’s a pretty brutal Darwinian atmosphere,” says Shel Kaphan, who was Mr Bezos’s first employee at Amazon, and left in 1999.

“Nobody above you is really looking out for you. It’s not: what can this organisation do to support you? It’s: you are responsible, you have to perform, or you will be out.”

Amazon’s greatest weakness, however, is arguably its dependence on Mr Bezos, who is both a details man involved in even small decisions and an oracle-like force, creating the same kind of “key-man risk” as Steve Jobs at Apple.

Mr Bezos set the vision behind big bets that have baffled Wall Street, such as opening Amazon’s website to rival retailers, creating the Kindle ereader that cannibalised its print book sales and moving sideways into cloud computing.

“Jeff always plays a very important role, especially in keeping the long-term focus of the company,” said Werner Vogels, its chief technology officer, at a 2010 conference.

Mr Bezos does not have an obvious deputy, but former employees say its most influential senior executives are fearsomely smart. The unified way they repeat Mr Bezos’s mantras suggests they are so well drilled that the company could tick over without him for a while.

His model draws on disciplines pioneered in the 1950s by Taiichi Ohno, father of the Toyota manufacturing system.

Anchored by the kaizen concept of continuous improvement – and rebranded “lean” by western disciples – it prizes quality control, efficiency and the relentless elimination of defects, waste and costs, which helps Amazon keep lowering prices.

“It’s rare you see people, especially at a company of Amazon’s size and at Jeff Bezos’s level, applying it across a business,” says Pete Abilla, an operations consultant who once worked at an Amazon distribution centre.

Toyota tools include the andon or signal cord, a figurative rope that employees can pull to stop a system when they see a defect, and the Five Whys, a trick to get to the root of a problem by asking “And why did that happen?” five times up the causal chain.

An employee once pulled the cord to stop sales of a table that kept arriving scratched, which Amazon found was because it was using the manufacturer’s inferior packaging and not reboxing it itself. The solution: tell the manufacturer to pack it better.

Mr Bezos has merged Toyota processes with a conviction that innovation is as much about improving the old as it is inventing the new.

So while Facebook, Google and Apple make buzzy new products that consumers never knew they wanted, Amazon uses technology to do humdrum tasks better – delivering boxes, managing inventory, setting prices.

Last year in New York, Mr Bezos said he was focused on customer needs that were not going to change, because he could plan for them. “I know for a fact that 10 years from now customers will still want low prices. I know for a fact that they will still want fast delivery. I know they will still want selection.”

Amazon says it “obsesses” over doing what is best for customers. But coddling them seems to depend on stretching its employees.

According to an investigation last year by the Morning Call, a Pennsylvania newspaper, workers at local warehouses said they endured punishing productivity targets and temperatures that soared above 38C in the summer, while Amazon parked ambulances outside to treat people with heat stress.

Federal regulators that received complaints from some employees recommended that Amazon take several steps to reduce the risks, the newspaper said.

Amazon says its safety record cannot be portrayed accurately with anecdotes and that its overall rate of work-related injuries and illnesses is lower than the average in the warehouse industry. Last month it said it was spending $52m this year to retrofit distribution centres with air-conditioning.

At head office self-starters can thrive, but delicate souls will wilt as their ideas get a no-holds-barred interrogation from colleagues, says Manfred Bluemel, former head of corporate market research at Amazon and now head of Zeitgeist Research.

“It’s not a luvvy dubby work environment,” he says. “You need to know your stuff and you need to have numbers to back it up … If you don’t understand the details of your business you are going to fail.”

Amazon says it is simply setting high expectations and measuring performance against them. But not even its supporters would say it excels at friendliness.

It consistently comes near the top of customer satisfaction rankings, but it is no coincidence that Mr Bezos’s definition of the best experience is one that requires no human contact with Amazon.

Every year he does a stint as a customer service representative himself, dreading the “excruciating” calls that are left because defect reduction has eliminated the easy ones.

“I have an experienced customer service rep sitting next to me helping me because otherwise I would probably give really bad service,” he said. “It’s not that easy.”

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