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Understanding Amazon’s flywheel

Anyone who has worked at Amazon for more than a couple weeks has heard the term “flywheel”. In fact, I suspect that many, if not most, people who interview here discuss the flywheel as part of their onsite interviews. So getting your head around Amazon’s concept of the “virtuous cycle” prior to interviews here is a good idea; I recommend researching it as part of your preparation process, not only to understand the idea of the flywheel but also to be able to articulate how your potential work at Amazon (and/or the work of the group you are interviewing with would contribute to spinning it.

The concept says a lot about how Amazon thinks about investment opportunities and why we are growing so quickly. Along with the Leadership Principles, I think it makes very clear how Amazon operates day-to-day. So I thought I would help explain the flywheel a little bit here to introduce the concept.

A flywheel is a system where each of the components is an accelerator. Invest in any one of the components and, as the flywheel spins, it benefits all components. And the flywheel spinning is how the system grows. Jim Collins popularized the flywheel concept in Good to Great. I’ll drop a link to his writing on flywheels at the bottom of this post.

Here’s Amazon’s flywheel:
Amazon Flywheel

I think seeing the image helps put Amazon’s customer obsession in context too. Because you can understand the different levers that ultimately lead to great experiences for customers and how all of us Amazonians are all part of it. If we do work that brings more traffic to Amazon.com, we’ll attract more sellers wanting to reach this larger number of potential customers. Attracting more sellers increases our selection, which improves the customer experience. This brings more traffic to Amazon.com. You can see how focusing attention on any of these components – traffic, sellers, selection or customer experience – distributes more energy to all of them. The whole system grows.

Then, as a result of the spinning, we are able to lower our cost structure which allows us to lower prices, also enhancing the customer experience. So the flywheel spins even faster as it grows; the growth itself is an accelerator. This is how Amazon went from a garage to the company you know today in a relatively short period of time.

Here are some links to additional content that will help you learn more about flywheels in general and how the concept applies to Amazon’s business in particular.

Inc. Magazine does a good job of explaining the flywheel concept

Steve Rosenbaum on how Jeff Bezos leads from behind

Jim Collins’ articles on the flywheel

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