Much has been written about Jeff Bezos and his Day 1 philosophy at Amazon. Clearly, the e-tailer has done a lot of things right, and many large organizations would do well to embrace the principles that give this Fortune 10 firm the nimbleness of a start-up. The good news is that even the biggest companies can adjust their operations to become the Amazon of their respective industries. The first step is to identify and master fundamental principles of modern management.
Of the many different areas to focus a business—competitors, technology, innovation, etc.—Bezos considers “obsessive customer focus” the one that best protects the energy of Day 1 organizations. On the one hand, I agree with the emphasis on customers, but here at the Matrix Management Institute (MMI), we arrive at this conclusion by stepping back and taking a broader view of the organization. Specifically, we ask clients and prospects to identify their mission and what they want to accomplish. This exercise helps organizations sort out what business they are really in. How do they serve their customers? Framing the mission in terms of the service provided connects an organization to its customer base, which in turn offers insight into the core competencies needed to achieve that mission.
While a customer-centric philosophy makes sound business sense, the overwhelming majority of organizations struggle with integrating this mindset into their operations. Why? Because the underlying management system ignores customers completely.
Time and again, we ask business leaders to map out their operations, and they produce an organizational chart. This visual tool identifies internal reporting relationships, but it excludes customers entirely. At MMI, we describe this emphasis on organizational structure as Vertical Management 1.0 (VM 1.0) because it focuses on the various chains of command flowing from the top. This linear approach to management naturally leads to functional silos and internal competition, and it frankly doesn’t work in today’s complex, dynamic environment, where most business processes span multiple functions. Instead, organizations need to prioritize their horizontal processes, which transform raw materials or information into products or services for customers. We at MMI refer to this multi-dimensional approach to management as Matrix Management 2.0TM (MM 2.0TM); it’s the upgraded form of Matrix Management 1.0, which recognized the horizontal dimension but applied a vertical management approach through dual-reporting.
Next on his list, Bezos cautions his audience to “manage to proxies,” an insidious danger that many organizations encounter as they grow larger and more complex. He identifies “process as proxy” as a common example. Processes are important because they allow organizations to serve customers. At the same time, we have worked with countless clients that focus on process (how something gets done) instead of results (what gets done by when). According to Bezos, “It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.”
One of the primary challenges we encounter is that most processes exist within a single function. The goal is to create a single stream that flows across the organization to deliver the final product to the customer. Gaps occur when deliverables flow from one vertical function to the next. The output gets tossed to the next department, with little to no accountability for keeping the process flowing.
I witnessed this problem early in my career when working in research and development. Researchers would invest years on a single chemical and write reports for the development team. Developers would read the report and move ahead, with a lot of knowledge and experience getting lost in the shuffle. As project manager, I closed the gaps by bringing researchers into the development team. Then, we brought stakeholders from marketing and manufacturing into the process early so that, by the time the handoff happened, they already had the information they needed.
Before worrying about whether they have become slaves to process, most organizations need to address the basic task of mapping and fine-tuning their horizontal processes. Managing the cross-functional handoffs keeps the process flowing. With the fundamental process in place, it becomes automatic, which frees resources to focus on process improvement and innovation. But until organizations map those horizontal processes, inefficiency will continue to erode their productivity and drag them into a Day 2 death spiral.
Embrace External Trends
Bezos warns that the outside world can push an organization into Day 2 if it fails to recognize and embrace market trends quickly. Resistance will likely prove pointless, while early adoption will yield a competitive advantage.
Following this advice calls for organizational agility, which—again—requires fundamental shifts from the prevailing reliance on VM 1.0. First, organizations need to drive their operations from the customer-focused horizontal dimension. The next step is to develop seamless, cross-functional processes that are optimized across the system, rather than within each function. Once the primary operations for producing customer deliverables are working efficiently, organizations can assign resources to identify and capitalize on trends and opportunities.
A few years ago, I took my niece to England following her college graduation, and I rented a car with a manual transmission. Having learned how to drive on a standard vehicle, I didn’t fully appreciate the added complexity of this curveball until I attempted to navigate the British roads. Not only did we drive on the left side of the street, but the righthand position of the driver’s seat also required adjustments: shifting with the left hand, looking up and left at the rearview mirror. All these tasks that were typically unconscious and automatic when driving at home became conscious, exhausting and overwhelming.
The same principles apply to organizations. If business processes are broken and require constant attention, employees will not be able to focus on innovation and improvement; they will consume all their energy trouble-shooting and tending to processes that should be automatic. Only after core operations are nailed down and running on auto-pilot will an organization have the focused resources to scan the environment, see what’s changing, and then launch the appropriate new projects.
Because speed is important in business, Bezos calls for high-velocity and high-quality decision making—a trait often found in energetic, dynamic Day 1 organizations. Day 2 companies excel at decision quality, but arrive at those decisions slowly. The problem lies in the fact that larger organizations typically mire the decision-making process in bureaucracy. Instead of requiring department heads to review and approve all decisions within their respective functions—a VM 1.0 practice that falls apart for cross-functional (ahem, most) projects and processes—decisions should be pushed down to the right level. The team making the decision should be close to the action, yet also understand its context and organizational significance. Consequently, some decisions need to be made at the top, while others can take place at low levels.
When helping teams develop collaborative decision-making skills, we start by giving participants a decision to make, using their usual process for making decisions. People talk about various options and arrive at consensus. Usually, the power dynamics play out, and the person with the most authority will make the decision, even in a cross-functional group. The process is relatively rapid, but rarely well thought out. For the next round, we provide a structured process to make sure people are thinking together about the various elements of decisions. For example, how strategic is the decision? If the strategic value is high, shouldn’t more thought go into it? In a team environment, everyone should follow the same decision-making process, one that is explicit and visual so all participants can see where they are at each step. At the end, the team reaches consensus, based on what makes the most sense. Equally important, this visual approach documents the decision-making process, which makes it easier to secure buy-in from other stakeholders.
Truly collaborative decision making generates the best possible decision in a relatively short time. Supporting documentation builds a strong case for the team’s recommendation, which provides a comfort level for those who follow Bezos’s advice to “disagree and commit” as a means of accelerating the decision cycle.
In advocating rapid decisions, Bezos points out the need to recognize misalignment issues early, and to escalate them immediately. MM 2.0 addresses alignment proactively by establishing cross-functional priorities through steering councils. Communicating these priorities at every level keeps everyone aligned to support the best interests of the organization. In a former life, I managed a portfolio of 150 projects. Everyone in the organization knew what those priorities were, and nobody was going to disrupt the progress of Project #1. We all knew that the organizational good was served by completing Project #1, following by Project #2, etc. The people managing Project #149 knew they probably wouldn’t get very far, and that was okay.
Back to Basics
While it’s great to have beacons like Bezos’s Day 1 philosophy, organizations need to recognize these mantras for what they are: one company’s approach to executing its mission. Every organization is unique and must forge its own path to success. Case studies and even competitors can provide motivation and guidance, but ultimately, companies must master management fundamentals. In today’s complex environment, critical elements include shifting focus to the horizontal dimension, creating seamless handoffs between functions, and embracing collaboration. Only then can organizations achieve the agility they need to maintain the vibrant energy of Day 1.