- Amazon Web Services CEO Andy Jassy was asked at this week’s Goldman Sachs Technology and Internet Conference what advice he would give to others looking to build new businesses inside larger existing companies.
- AWS grew from a tiny project within Amazon to a leading cloud business with over $35 billion in annual sales last year.
- Jassy pointed to these four key principles he followed in building AWS.
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When Amazon’s cloud business first launched in 2006, it was a tiny part of the broader e-commerce company.
Fast forward 14 years, and Amazon’s cloud unit, called Amazon Web Services, is now one of the largest enterprise businesses in the world. It generated $35 billion in annual sales last year and now accounts for more than half of Amazon’s profits.
At the Goldman Sachs Technology and Internet Conference this week, AWS CEO Andy Jassy was asked what advice he would give to other companies looking to build new business lines inside their organizations, similar to what AWS did within Amazon.
Jassy pointed to the following 4 principles for AWS’s growth. He said while these ideas may not apply to every company, they are “generally useful principles” that could help others copy AWS’s success:
- Hire people who want to “build”: Jassy said the first thing is to hire builders. That doesn’t mean just hiring technologists, but people who are creative in operations or changing cost structures as well. “We think of builders as people who like to invent, people who look at different customer experiences and are honest about what’s not working and try to reinvent those customer experiences,” Jassy said.
- Organize in teams that can move quickly: Once you hire the right type of builders, you have to put them in teams that allow them to move fast. That means creating small, autonomous teams that can control their own destiny and “aren’t burdened by having to run the core business you’re running every day,” Jassy said. For example, in the early days of AWS, it was completely pulled out of Amazon’s core unit that was responsible for its consumer business. “New businesses will always lose out to the existing surer bets,” he said.
- Create a culture that encourages innovation: This may sound obvious, but a lot of big companies have trouble fostering a culture of innovation, as they tend to be more conservative and adverse to trying new things, Jassy said. At Amazon, his favorite meetings are the ones where he gets to hear new ideas, and spend energy to “problem solve” with the team, he said. “We don’t say yes to everything, but we say yes to a lot more than most,” Jassy said.
- Be willing to tolerate failure: Jassy said if you want to invent a new business within a significant existing business, it’s critical to have a culture of tolerating failure. That’s especially difficult because successful companies hire smart people who hate to fail. Jassy said Amazon’s Fire phone that ended up a big failure was a great learning experience that helped the company launch other new businesses. “Even though it didn’t work, we took the learnings and the technology we could reuse and reapplied it,” Jassy said about the Fire phone’s failure.
Jassy said these principles have also helped keep strong retention of his key employees at Amazon. Amazon may have a reputation for a tough work environment, with a heavy focus on data, but some of Jassy’s top deputies have worked with him for decades.
“You have to be intentional about what your culture is going to prioritize and who you want,” Jassy said. “And for us, as I mentioned earlier, we disproportionately index in hiring builders.”
SEE ALSO: Amazon’s annual filing reveals it loaded up on private-company stock while scaling back acquisitions last year — a change that may help as regulators crack down on the tech giant
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