Amazon failure

Happy Birthday Amazon! It turns out that one of the web’s greatest success stories is a glutton for failure. Here are a few examples of their embrace of failures…

  • Costing billions"I’ve made billions of dollars of failures at Amazon.com,’ Mr Bezos told a New York conference sponsored by the news website Business Insider. ‘My job is to encourage people to be bold… If you’re going to take bold bets, there’s going to be experiments.’ He added that "experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.’ The comments came after what appeared to be a disastrous introduction of Amazon’s Fire smartphone, which has failed to gain traction with consumers and led to a loss of $437m in the past quarter. Asked specifically about the smartphone, Mr Bezos said ‘it’s really early’ to judge its success or failure, and added that ‘some of these things need iteration’.” – My decisions have cost Amazon billions, admits founder Jeff Bezos
  • Engineering the Cloud for failure “A common misconception for consumers of cloud services is that SLAs ensure availability. In reality, SLAs do nothing to improve availability. SLAs only provide a way for attorneys to make money arguing over compensation after a failure. In most cases, the eventual compensation is the cost of the services for the outage period, not the loss the outage caused. Cloud service providers must plan and engineer for failure in order to be successful.” – http://www.sendmail.com/sm/blog/wik/?p=1765
  • Where are the losers?The question from an Amazon shareholder at its recent annual meeting: “Amazon seems to be executing well lately — is the company taking enough risks? If it’s still Amazon’s philosophy to make bold bets, I would expect that maybe some of them wouldn’t work out, but I am just not seeing that. So, my question is where are the losers?” Bezos reflected on a number of initiatives (Kindle, AWS, third-party seller business) as well as on the Amazon culture. But the comment that struck me was his more textured conclusion on failure, neither embracing nor rejecting it wholesale: “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.”
  • Annual Failure ReportOne area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins2. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. The reason that this willingness to tolerate and even celebrate failure is so critical, he continues, is that outsized returns hover behind potential failures: Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.” – 2016 Annual Corporate Letter

  

fail in public

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