Disagree and Commit
One of my favorite Bezo-isms is “Disagree and Commit.” I’ve seen it in articles a handful of times recently as the adulation around Amazon and Bezos’ management reaches a fever pitch.
Notwithstanding the disappointing forecast for Q418, Amazon’s recent operating performance has been spectacular. But, more interesting is that it has been “spectacular at scale” and across a very large and complex business.
While Revenue Growth YOY has been strong,
the real story has been YOY growth in Operating Income.
Those are beautiful numbers. It’s clear that in the past few years the company has turned on the profit machine.
For many years, Amazon (and Bezos) trumpeted their focus on revenue growth. The mantra was “we are reinvesting all of our profits in growth.” This is the same thing most startups say (and most VCs push for) as growth compounds rapidly if you can keep the growth percentage (yup – it’s simple math.) This has been particularly true for B2B SaaS companies, not withstanding the notion of the Rule of 40 for a Healthy SaaS Company.
While growth in revenue is still important, Amazon’s ability to generate this kind of growth on its operating income is a reminder that turning on the profit switch at some point does matter, if only to show how much leverage your operating model has (me thinks Tesla did that in Q318 for the same reason). The AWS numbers are remarkable to me – their YOY growth is 46% and their operating income is about 30%. That’s well above the rule of 40.
I would have loved to be in the meetings during the shift from “grow at all costs” to “keep growing fast, but flip the operating income switch.” There were many moments in time over the past 15+ years where I’m sure this came up. But clearly the focus on this changed in the last few years, and the results are now front and center.
I don’t hold any Amazon stock directly, nor do I play the stock market, but the financials in public companies have a myriad of lessons buried in them for private companies that are scaling. That said, the management lessons buried underneath the numbers are even more important. “Disagree and commit” seems to be working well these days for Amazon.