The two-pizza rule and the secret of Amazon’s success | Daily News

The two-pizza rule and the secret of Amazon’s success

Jeff Bezos’s firm is good at selling things to shoppers, but that is the tip of its commercial iceberg

In the early days of Amazon, Jeff Bezos instituted a rule: every internal team should be small enough that it can be fed with two pizzas. The goal wasn’t to cut down on the catering bill. It was, like almost everything Amazon does, focused on two aims: efficiency and scalability. The former is obvious. A smaller team spends less time managing timetables and keeping people up to date, and more time doing what needs to be done. But it’s the latter that really matters for Amazon.

The thing about having lots of small teams is that they all need to be able to work together, and to be able to access the common resources of the company, in order to achieve their larger goals.

That’s what turns the company into, in the words of Benedict Evans, of venture capital firm Andreessen Horowitz, “a machine that makes the machine”.

“You can add new product lines without adding new internal structure or direct reports, and you can add them without meetings and projects and process in the logistics and e-commerce platforms,” Evans notes. “You don’t need to fly to Seattle and schedule a bunch of meetings to get people to implement support for launching makeup in Italy, or persuade anyone to add things to their roadmap.”

Amazon is good at being an e-commerce company that sells things, but what it’s great at is making new e-commerce companies that sell new things.

The company calls this approach its “flywheel”: it takes the scale that can smother a typical multinational, and uses it to provide an ever-increasing momentum backing up its entire business. The faster the flywheel spins, and the heavier it is, the harder it is for anyone else to stop it.

Perhaps the best example of that approach in action is the birth and growth of AWS (previously called Amazon Web Services). That’s the division of Amazon that provides cloud computing services, both internally and for other companies – including those that are competitors to Amazon in other areas (both Netflix and Tesco use the platform, for instance, despite Amazon also selling streaming video and groceries).

It started, like so many things at Amazon, with an edict from the top. Every team, Bezos ordered, should begin to work with each other only in a structured, systematic way. If an advertising team needed some data on shoe sales to decide how best to spend their resources, they could not email analytics and ask for it; they needed to go to the analytics dashboard themselves and get it. If that dashboard didn’t exist, it needed to be created. And that approach needed to cover everything.

From there, it was almost an afterthought to take the obvious next step, and let others use the same technology that Amazon made available internally.

Those humble beginnings spawned a beast. The business is now 10% of Amazon’s overall revenue, making so much money that financial regulations forced the company to report it as a top-level division in its own right: Amazon divides its company into “US and Canada”, “International”, and “AWS”.

AWS is large enough that it is dealt with on the same tier as the entire rest of the world. AWS is large enough that Netflix, a company that accounts for around a third of all internet traffic in North America, is just another customer.

AWS is large enough that in 2016 the company released the “Snowmobile”, a literal truck for moving data. The companies that work with AWS move so much information around that sometimes the internet simply cannot cope. So now, if you want to upload a lot of data to Amazon’s cloud, the company will drive a truck to your office, fill it with data, then drive it back. If you need to upload 100 petabytes – that’s roughly 5m movies in 4k with surround sound – it turns out there’s no quicker way to do it than driving it down the freeway at 75mph.

While AWS saw Amazon open up its internal technology to external customers, another part of the company does the same trick with Amazon’s actual website. - The Guardian


 

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