Day 1 vs Day 2 Companies

Amazon founder CEO, Jeff Bezos's annual letter to shareholders  is out (thanks to Jin Bains for drawing my attention to this). Jeff Bezos talks of an interesting concept called Day 1 and Day 2 companies (full letter attached to this post).

Day 1 companies are companies that are beginning at their potential. Day 2 companies on the other hand are companies in stasis.  Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. He says, Amazon therefore always wants to be a Day 1 company. 

Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. (Notice that this is applicable in our personal capacity too - Irrelevance, Decline, Death - chilling, isn't it)

Bezos credits Amazon's precise focus on customer outcomes for the company's success. He said Amazon focuses on always giving customers something better, even if it means inventing something totally new, like Amazon Prime.

"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," Bezos writes.

To that end, Amazon tries not to conflate the process of serving customers with the results, Bezos said.

"[In Day 2], you stop looking at outcomes and just make sure you're doing the process right. Gulp. It's not that rare to hear a junior leader defend a bad outcome with something like, 'Well, we followed the process,'" Bezos writes. "A more experienced leader will use it as an opportunity to investigate and improve the process."

The company has also embraced, and even pioneered, outside trends like cloud computing and artificial intelligence. While trends like those can be easy to spot, "Day 2" organizations resist them, he writes.

"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," Bezos writes.

That means making what Bezos calls "high-velocity decisions." That doesn't mean making low-quality decisions, but it does mean most decisions should probably be made with somewhere around 70 percent of the information you wish you had, Bezos said.

"You need to be good at quickly recognizing and correcting bad decisions. If you're good at course correcting, being wrong may be less costly than you think," Bezos said.