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"This is so important that you have to come over to my house on Saturday morning," declared Jeff Bezos. This was over a decade ago, and a team at Amazon was working on a new program that would lead to faster ship times for customers.
“I want to draw a moat around our best customers. We’re not going to take our best customers for granted," said Jeff Bezos, CEO of Amazon. The strategic direction was set: Amazon would do what it took to be the default shopping option for customers by doubling down on fast shipping.
Yet, at the time, there was still much dissent at Amazon. Not all leaders agreed—even though the strategy was coming straight from Bezos. "Back then there wasn’t a blind faith that every Jeff idea was going to be a home run. And so there was a lot of pushback," confesses Vijay Ravindran, the former Amazon director of ordering.
It's natural to look at some of the most successful business leaders and assume that the strategic direction they set and embark upon is indisputably brilliant. However, the reality is far more nuanced, often resulting in decision paralysis and diminished confidence. First, let’s start with why setting a strategic direction can be challenging. Then, we will dive into ways to overcome the decision paralysis that can arise from the complexity.
2+2 equals 4. So does 1+3. Not only are there multiple paths to solving a single challenge, there may be different goals within that challenge. There is often no "correct" answer...only answers that feature tradeoffs around what you want to focus on and optimize for. There are only different strategic directions that place greater emphasis and priority on different goals. Believing in a single path might limit creativity and openness, potentially leading to overlooked perspectives and opportunities.
Amazon actually created their own internal experimentation platform called a “Weblab”. This was a platform that they could use to test multiple different approaches in trying to reach one specific goal, measuring the impact of each experiment. The rise in the number of Weblabs worldwide—from 546 in 2011 to 1,976 in 2013—highlights the importance of exploring multiple paths to success.
Every decision requires evaluating multiple inputs, including ones that change frequently, whether that is the consumer taste or market dynamics. Recognizing the most influential variables at a given point in your business timeline can help establish a decisive strategic direction.
For example, at the time Amazon began introducing Prime, there was a gap in the e-commerce market. Competitors lacked consistently priced shipping with a guaranteed delivery time. Furthermore, the idea of memberships was less prevalent in the market. And lastly, no main company had already established a strong operational infrastructure to support the type of shipping that Amazon wanted to promise. Because all of these variables were true, Amazon was able to check off each of these boxes one by one to establish their competitive position.
By identifying what variables are the most important ones in the particular point in time of your business, you will be able to more confidently establish a strategic direction to move towards.
We are inherently prone to cognitive biases. Loss aversion is a mental error where we have a tendency to strongly prefer avoiding losses over acquiring gains. The availability heuristic is the common mistake of assuming whatever is top of mind is also the most prevalent. Perhaps the most perilous of all is confirmation bias: our tendency to ignore facts and information that contradict our beliefs, while naturally looking for data that confirms our beliefs.
These logic errors can lead to serious missteps when it comes to determining the strategic direction for a business. For example, if everyone at Amazon had fallen prey to the availability heuristic, they may have only been focusing on how to improve their existing program at the time: Super Saver Shipping. The data, teams, and projects were all organized around this one major area in the business. Yet, by expanding out of what currently existed, Amazon laid the foundation for what would become their long-term competitive advantage. This set the stage for them to re-assign investments internally according to this longer-term strategy.
Every leader, from Bezos to a first-time manager, will grapple with the challenging journey of defining and implementing a strategic direction—usually facing a fair share of dissenters. Yet, through a structured assessment of the business context, it's possible to de-risk and define an effective strategy. A robust strategy comprises three key elements:
Here are a few approaches to overcome decision-paralysis and confidently move forward with a direction.
Too often, people conflate the objectives, goals, and metrics, with statements like: "My strategy is to increase revenue by 10%." That's not a strategy, that's a metric.
To get to a clear strategy, you must first decide on what the core objective is. What are you really trying to solve for? This is where the 5 Whys, developed by Sakichi Toyoda, the Japanese industrialist, inventor, and founder of Toyota, can be helpful to get at the root cause or underlying rationale for a business.
By applying the 5 Whys, we can get to the core objective, which will set the tone for the overarching strategy. Often, we may have an intuitive sense of the objective, but may be struggling for ways to articulate it. The 5 Whys helps to clearly articulate the objective for your strategic direction.
Why did he propose the idea of Prime?
Because he thought that shipping needed to be faster.
Why did he think shipping needed to be faster?
Because he knew that some of Amazon's most lucrative customers cared about receiving products quickly.
Why did these customers care about getting products quickly?
Because they wanted to shop online but couldn't find reliable shipping options.
Why did customers need reliable shipping options?
Because inconsistent shipping prices, delivery timelines, and refund policies made customers hesitant to buy or added friction to online shopping.
Why did inconsistent shipping policies matter for Amazon?
Because Bezos wanted to make Amazon the default shopping option for customers.
So instead of goals and metrics, which often can lead to optimizing blindly toward a local maxima, focus on strategic objectives and evidence.
In the case of Bezos, his strategic objective was to become the default shopping option for customers. This is not just an intellectual exercise of logic, there must also evidence that shows the strategic objective is directly aligned with the long-term goals of the business.
The evidence of this being an objective that aligns with the long-term goals was that data showed Prime members ultimately ordered more frequently from Amazon.
Furthermore, evidence should be gathered across multiple areas of business: other stakeholders, competitive market dynamics, internal data, etc. The goal is to have thoroughly gathered and assessed existing evidence. What you've uncovered as evidence should support and point to the strategic objective as being in alignment with long-term goals for the business.
Now that you have a clear strategic objective and know what evidence you're looking for to help you know if you're heading in the right direction or not, you can determine a strategic blueprint for achieving it.
Strategy is the creation of a unique and valuable position, based on a specific set of activities that helps achieve the strategic objective. The strategic blueprint connects the dots between this set of activities so that deliberate tradeoffs that are being made still result in a net benefit. These activities should have a high "fit" compatibility, meaning they interact and reinforce one another in a positive manner.
In the example of Amazon, the strategy had a strong set of activities: the Prime membership fee, fulfillment centers, and shipping operations. Each of these activities were mutually reinforcing one another:
If customers liked Prime, demand would rise.
If demand rose, then Amazon had more freedom to build new fulfillment centers.
If Amazon could build more fulfillment centers, then they could continue to ship more products, faster.
Identify what the set of activities might be to achieve the strategic objective. This then becomes your blueprint for building a unique and valuable position.
By playing devil's advocate and looking at the strategy from multiple perspectives, you can feel more confident in your strategy. One mental model to apply is Second Order Thinking. This framework helps you look past the initial, first-order effects of a decision to think through the second, third, and N-th order effects. By spending the time to think forward into the future, you can avoid pitfalls and strengthen your own conviction.
To improve your ability to think forwards, practice asking yourself “And then what?”. For example, in the case of Amazon - what happens from the introduction of Prime is an expansion of Amazon as the default shopping experience across multiple categories, including video.
For Bezos to feel confident in Prime, he practiced 2nd and 3rd order thinking. What do the consequences look like in 10 minutes? 10 months? 10 Years? Because the benefits of Prime would continue to compound operationally, it justified the upfront investment and cost.
Another mental model to apply is inversion. This framework helps you invert your rationale to see if it is truly the best combination of activities. By spending the time to think backwards, you can catch areas you may have missed and be confident in your recommendation.
To improve your ability to think backwards, practice always asking yourself “And what if the opposite were true?". For example, in the case of Amazon - what would have happened if they didn't introduce Prime and continued down the path they were going?
Stress-testing your thinking helps you arrive at coherent reasoning behind your choices, ensuring that each decision aligns with your broader objectives. A well-structured justification not only strengthens your strategy, but also provides a persuasive narrative that can rally your team and stakeholders around a shared vision.
It's easy to get lost in a sea of potential paths, projects, or opportunities. Being able to deliberately choose tradeoffs and intentionally select the strategic blueprint of activities that will help you achieve your strategic objective is a fulfilling skill to master.
As Michael Porter says, “The essence of strategy is choosing what not to do." In the case of Amazon, Bezos started with the idea of Prime, tested into how it could work for the business, and doubled down on ways that would help Prime become a way to create a competitive moat for the business.
Once Bezos had the initial insight of the importance of shipping in eCommerce, he evaluated the many variables at play in the business landscape, even when many of his most trusted senior leaders disagreed with this new project. Furthermore, his team identified the strategic blueprint that would create a flywheel of growth for the Amazon Prime business, with the increase in orders helping them maintain low shipping costs. The rewards of this strategic direction are still being reaped by Amazon today, as they double down on music, video, and other benefits of the Prime membership.
Defining a strategy isn't a one-time event, but a continuous cycle of evaluation, execution, and refinement. In the long run, it's the commitment to the process that leads to successful outcomes.
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