CEO of Amazon and Founder of Blue Origin, Jeff Bezos is an accredited leader. He is sometimes referred to as the philosopher CEO for his insightful shareholder letters enumerating how he thinks about business. These letters, written each year since 1997, provide a rich corpus from which to peer into this business mastermind and evaluate him on the 4 Capabilities Leadership Model.

Sensemaking

The term “sensemaking” was coined by organizational psychologist Karl Weick, and for a leader, it is how well they understand or map the world around them. Bezos is constantly working out how he makes sense of his business landscape in his shareholder letters. For example, a core belief to Bezos is that customers are fickle and can’t be counted on to be loyal. They will choose what is expedient.

“Customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf” (Shareholder Letter 2016)

He has chosen to center his company around this belief.

“There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.” (Shareholder Letter 2016)

As business developed for Bezos, he developed the now famous Amazon Flywheel.

The flywheel explains how everything Amazon does is perpetually feeding back into making their business stronger. Business growth allows Amazon to have lower cost structure which in turn can lower prices, creating a better customer experience. This leads to more customers using the platform. If there are more buyers using Amazon, more sellers are likely to also sell on Amazon, increasing selection for the customers, which in turn betters the customer experience and the cycle continues.

Relating

One of Amazon’s leadership principles is to “Have Backbone; Disagree and Commit: Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.” (Amazon Leadership principles). This paints a picture of someone who stands firm for what they believe and are ready to stand up for it but also be bought in once a decision has been made. Bezos certainly models this. In an account by the book The Everything Store, Bezos was in a conference call where he asked his VP Price how long the customer service hotline takes, to which Price responded under a minute. To test this, Bezos picked up the phone and called the hotline. A painstaking 4.5 minutes passed before anyone answered. Bezos was reportedly very upset.

However, Bezos values more than righteous indignation. In 1994, Cadabra, later renamed Amazon, sent out its first job opening for a Unix developer, for which Bezos wrote: “Top-notch communication skills are essential.”. He hasn’t changed this belief, as another one of the Amazon leadership principles today are as follows. “Earn Trust: Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.” Clearly, Bezos highly values skills in relating.

Visioning

From the beginning, Bezos’ main motto has been “It’s all about the long term”. He has an uncanny ability to look into the future and make decisions that will benefit the shareholders far down the road. In fact, in his first shareholder letter in 1997, he gave the following address.

“We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.” (Shareholder Letter 1997, p.1, para. 4)

Since that first letter, he has continued to repeat this maxim, confirming his commitment to see the future with clarity and determination that inspires customers, shareholders and employees.

Inventing

Bezos is insistent on inventing, cycling back to the subject often in his shareholder letters. He calls the mindset of always inventing as Day 1. “Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen”. (Shareholder Letter 2016)

Bezos goes on to outline ways to make sure the company stays “in Day 1”. Among the list includes “the eager adoption of external trends, and high-velocity decision making”.

“The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind. … The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business — plus a high-velocity decision making environment is more fun too.” (Shareholder Letter 2016)

He is clear that he doesn’t invent just to invent. He invents to stay ahead of the customers’ needs and desires. “Start with the customer and work backwards. Listen to customers, but don’t just listen to customers — also invent on their behalf.” (Shareholder Letter 2009, p. 2, para. 6)

Summary of the 4 principles

Below sums up the key Amazon principles, which almost perfectly fit the 4-Capabilities Leadership Model.

In other words, sense making invokes invention which promotes long term thinking.

Leadership Signature

All this considered, Bezos clearly has a credo to be customer centric, invent and focus on the long term. His ability to make high-impact high-velocity decisions and consistently plow new ground shows his confidence. Furthermore, his credibility to carry through on his philosophies and build one of the most influential and impactful companies of the 21st century clearly gives him credibility.