Dave Clark, the Senior Vice President of Worldwide Operations and Sales at Amazon, talked about innovating at scale at CSCMP’s annual conference last week. For Amazon this means innovating like a start-up but being able to bring to bear the scale and resources of a big company to support the kind of rapid innovation typical of startups. He talked about some “start-ups” they had launched in their company.
Prime Now was one such innovation. Prime Now is a service for Amazon Prime members that allows for one hour deliveries of daily essentials using a mobile app in select metro regions.
The company went from concept to launch in 111 days (their goal was 90). This included deciding where to pilot; launching a new urban DC located in the heart of the delivery area (which ended up being Manhattan); deciding which 25,000 stock keeping units to stock in the new warehouse; and developing software for customers and the internal operations team.
They started by working backwards from the customer. The first step is to provide a press release type document with detailed supporting material on how the promise to the customer will be accomplished. Engineers, software developers, operational executives, and others attend this meeting. For the first hour, no one talks. The attendees carefully read and digest the document and then discuss the business and technical case. The culture of Amazon is to ruthlessly probe the merits of ideas, but not to take those probes personally.
How deeply decisions are probed depends upon whether they are “one way or two way” doors. A two way door implies that even if the decision is not optimal, you can still fix it later. With one way door decisions there is no going back, you are locked into that decision for some considerable period of time or money. Clearly, one way door decisions require data gathering and detailed analytic analysis to a much greater degree.
Once the company has agreed to proceed with a start-up project, putting the right team together is critical. You need an entrepreneurial, experienced leader and passionate, dedicated team members committed to the project. A recent article in the New York Times – Inside Amazon: Wrestling Big Ideas in a Bruising Environment – suggests that finding dedicated white collar team members is probably not much of a problem. Employees interested in work/life balance don’t last long at Amazon.
A dedicated team helps you go through rapid release cycles. For example, they launched on mobile iOS first (the iPhone operating system) and then Android as a fast follower. Dave said, and this involved some understatement, that “this is not the way we would usually do it.” Amazon is in the Android operating system camp for its Fire Phone and Kindle Fire range of tablets. Once launched, they added new features on a regular basis.
Amazon also seeks to leverage internal technical services from the larger company. The goal is not to build anything they don’t have to. At Amazon, which is as much a tech company as a retailer and logistics company, they already have great internally developed software they can leverage; they are not a company that believes in off the shelf software. Presumably, many of the software components previously developed were reassembled and reused in developing the new consumer facing and logistical solutions.
According to Dave, the technology challenges were not the hardest, it was overcoming some existing processes that just did not fit a startup. He gave the example of their current warehouse lease process. Amazon has developed a detailed process for leasing space for their giant fulfillment centers. That process was just not appropriate for a much smaller warehouse that needed to be brought live in a much quicker time frame. Once they got permission to jetsam this process, they leased the fifth floor of a building in a prime location – both centrally located and next to a subway – and had racking up within 16 days.
To achieve one hour delivery goods needed to be picked/packed and out of the warehouse in 15 minutes. Normally, one might expect a tech company like Amazon to develop an alerting system to differentiate between one hour deliveries and deliveries slotted for a predefined two hour delivery window. But because of the need for speed, Amazon did not have time to develop that solution. Instead they just used a loud horn to alert workers to rush deliveries in the early days of Prime Now.
The fast iteration cycles associated with Prime Now has continued. They are now serving 14 metro areas. And the company just launched Amazon Flex which their web site describes as a way to “make $18–25 per hour delivering packages for Amazon with your car and smartphone. Be your own boss: deliver when you want, as much as you want.” This is basically an Uber type app for couriers that will allow Amazon to more economically scale their one hour delivery capabilities.