Amazon CEO Andy Jassy has released his annual letter to shareholders, in which he says the company should “operate like a startup (in our case, the world’s largest startup).”

Jassy starts his by emphasizing th𒈔e progres🔥s Amazon has made over the course of 2024.

Our total revenue grew 11% year-over-year (“YoY”) from $575B to $638B. By segment, North America revenue increased 10% YoY from $353B to $387B, International revenue grew 9% YoY from $131B to $143B, and AWS revenue in꧃creased 19% YoY, from $91B to $108B. For perspective, just 10 years ago, AWS revenue was $4.6B; and in that same year, Amazon’s total revenue was $89B.

Amazon’s operating income in 202ꦐ4 improved 86% YoY, from $36.9B (an operating margin of 6.4%) to $68.6B (an operating margin of 10.8%). Free Cash Flow, adjusted for equipment finance leases improved from $35.5B in 2023 to $36.ꦰ2B.

Jassy reiterated the goal of Amazon being “Earth’s most customer-centric company, making customers’ lives better and easier every day.” A key part of that is how executives go about making decisions, especially those that cannot be easily walked back if they don’t work.

We’ve had this long-held philosophy at Amazon about two-way and one-way door decisions. A two-way door decision is one where if you get the decision wrong, you can walk back through that door, revไert to where you were, and there are few (if any) ramifications. You can make these decisions quickly and locally. A one-way door decision is one where it’s quite difficult (if not impossible) to walk back through that door if you get the decision wrong, so these decisions are made more methodically. But, both of these constructs assume the door is unlocked. A lot of invention is about trying to open doors that have historically seemed bolted shut. And, over the past 30 years, we’ve found one of ꦜthe most important keys to unlock these doors has been a simple question: “Why?”

“Why does this customer experience have to be this way?” “Why can’t it be better?” “What are the constraints—why must we accept them?”🌳 “Why can’t we invent around that?” “Why will it take so long to get to customers?” Why?

Startup Culture

Jassy highlights the importance of Amazon acting as the world’s largest startup, emphasizing seven specific points.

Customers Versus Tech

One of the most insightful points🐷 Jassy makes is underscoring the importance of using technology to help customers, rather than being enamored by the technology itself.

First, whatever we’re contemplating building has to be focused on solving a real customer problem or meaningfully improving a customer experience. Companies can get off track prioritizing technology because they’re excited about the technology. Great startups are on a mission to change what’s possible for customers.

Jassy then goes on to highlight the ✨importance of hiring the right people to fill specific roles.

Second, we have a disproportionate need for builders༺. These are inventors. They’re people constantly dissecting custome🍃r experiences, even ones that seem pretty good today, and asking why they can’t be better. They’re divinely discontent (maybe annoyingly so for team members proud of what they’ve previously built), and never feel like the job is done.

Third, we want owners. One of the strengths of Amazon over the first 30 years is that we’ve hired really smart, motivated, inventive, ambitious people who have been great owners. And, that means that our teammates are constantly asking themselves, “What would I do if this was my own money?” “What would I do if I started this company and I was the majority owner?//www.aboutamazon.com/news/company-news/amazon-ceo-andy-jassy-2024-letter-to-shareholders?linkId=794951399” “Hey, I know I’ve only been asked to own a part of this project, but I’m not sure if the other parts are being driven well—should I stick my nose into this and make sure or just trust somebody’s got it?” Owners feel accountable. They care deeply about the quality and effectiveness of what they own, and view the company’s mission as their mission (we want missionaries, not mercenaries). That’s part of what our effort to increase the ratio of individual contributors versus managers is about. We want flatter organizations where our owners doing the work feel like they own the two-way door decisions (which are the vast majority), can move rapidly, and are fully accountable for solving the Whys of their customer experiences.

In his fourth point, Jassy emphasizes the need to move quickly, while simultaneously maintaining high quality. He says that “speed is a leadership decision” and that “the leadership teams has to believe it’s a priority, reinforce it constantly, organize and remove structural barriers, and build in modular ways that enable pace.” At the same time, Jassy says the entire company needs to embrace speed, including understanding the difference between process and bureaucracy, and eliminating unnecessary bureaucracy.

Jassy then highlights points five through seven, inꦯcluding the need to be scrappy an💯d take risks.

Fifth, you have to be scrappy. As businesses succeed and get larger, they sometimes forget how things got started. We built Amazon Simple Storage Service (S3) with 13 people; Amazon Elastic Compute Cloud (EC2) with 11 people. Managers can confuse themselves that the way to grow and get ahead🔯 is to accumulate large teams. Historically, we’ve had periods where we’ve allowed this thinking to hold sway. But, it’s not the way we fundamentally think about building teams and products, and have adjusted to reflect that again. Our best leaders get the most done with the least number of resources required to do the job. They pride themselves on being lean.

Sixth, you have to be willing to take risks. This sounds easier than it is. You need clever enough people to identify worthwhile bets. And if you have these inventive, ambitious builders withꦦ high standards, they’re not used to failure. They suspect external (and maybe internal) ridic꧙ule awaits them if they try something very different that doesn’t work out. So, people often play it safe. But, you can’t achieve something extraordinary for customers by playing “not to lose.” If your Whys take you down an invention path that delivers an experience that doesn’t look like what’s been done before, let customer obsession be your compass. You rarely, if ever, change the world by doing the same thing as everybody else.

And finally, you have to care most about delivering compelling results for customers. It’s not how charismatic you are. It’s not whether you’re really good at managing up or sideways. What matters is what we actually get done for customers. That’s what we want to reward.

Conclusion

Jassy’s letter is an important study in how established companies can maintain focus and compete with younger, more nimble companies. Any executive looking to help their company remain competitive should read Jassys letter in its entirety.