These days, strategy is about placing a series of small bets
“When you look at something like, go back in time when we started working on Kindle almost seven years ago. … There you just have to place a bet. If you place enough of those bets, and if you place them early enough, none of them are ever betting the company. By the time you are betting the company, it means you haven’t invented for too long.
If you invent frequently and are willing to fail, then you never get to that point where you really need to bet the whole company.
JEFF BEZOS, quoted in Business Insider (7 June 2011)
I’ve always liked Jeff Bezos, CEO of Amazon.com, and regular readers of this column will know he features here often. He has revolutionized web commerce in his time, and come up with one dramatic innovation after another. His company was dismissed by analysts as “Amazon.toast” soon after its inception in the 1990s. Well, it has been raising toast after toast celebrating its successes ever since.
Bezos is at the heart of this success. He comes across as plain-talking and likable, with an infectious laugh. I often show video clips of him talking at my seminars and teaching events, simply so that other CEOs can see authenticity in action.
Bezos was in full flow recently, in one of his trademark unscripted spiels. He referred to Amazon’s very successful Kindle e-reader product – see excerpt shown. The thing strategists should note is this: Kindle was not a ‘bet-the-company’ product. Even though it has been transformational for Amazon and the book trade (e-books are gradually taking over from traditional printed books), it was not conceived as such.
Bezos advises that systematic innovation is about inventing frequently and continuously, and being willing to fail. Kindle was one of many, many bets the company placed on its future some years ago. Some succeeded, others failed. Kindle ended up in the ‘success’ group, and is now lauded as a breakthrough innovation.
The point is this: the modern strategic landscape is so unpredictable, so prone to disruption, that everyone is guessing at the future. No one can work it out precisely. In strategy terms, what is needed is the willingness to weigh the chances and make some bets. Not one bet, note: you can’t risk the entire company at this casino. Instead, 21st-century strategy is about intelligent assessment of probabilities and scenarios, and developing the appetite for many small risks.
Not sure what the future holds? No one is. Make some guesses, and try stuff out. Some of your innovation projects will pan out; most won’t. And maybe, just maybe, one project may lead to a game-changing new product like the Kindle. Note that the Kindle itself is already under attack from other, more sexy e-readers like Barnes & Noble’s Nook and Apple’s iPad. Amazon is now about to launch a new version that is more ‘tablet-like’ anytime soon.
That kind of continuous bet-placing requires a willingness to tolerate failures. Bezos puts the experience of giving up on an idea nicely: “On the day you decide to give up on it, what happens? Your operating margins go up because you stopped investing in something that wasn’t working. Is that really such a bad day?”
Most CEOs, unfortunately, are not able to think like that. They cultivate the false image of their own infallibility, and try to hide failures or seek scapegoats for them. Those managers who preside over projects that were shuttered are often marked as failures. That is precisely the wrong way to do it.
By the way, where was Jeff Bezos giving this insightful off-the-cuff speech? At an AGM, in response to a shareholder’s question. Would that EVER happen at our own tedious, over-scripted shareholders’ meetings?