In 2001, Jeff Bezos drew the Amazon flywheel. This graphic gave us the “winning strategy” for the next 20+ years. But the “winning strategy” does not automatically translate into operational success. This is where the true work begins.
I wrote a post last week about finding the right strategy and how the Amazon S-Team did it, drawing on Jim Collins’s book “Good to Great.” This is how Amazon decided to pursue the three pillars of its retail business: vast selection, low prices, and fast delivery.
But once those pillars were defined, we had to determine how to work toward them. Just because we had identified selection as an area for improvement didn’t mean we knew how to measure or execute an expansion of selection. We had to improve and operationalize our work with suppliers, our sourcing methods, our time-to-supplier-fulfillment, and our sourcing costs.
This is just one example of the operational parts of the business that took years to meaningfully improve, even after we had the “right strategy.”
In general, we had to ensure that every element of our operating plans aligned with this new strategy. Prior to this strategy, each team developed its AOP (Annual Operating Plan) based on its assessment of the right strategies.
But once we had this unified strategy, each team just had to align their AOP with improving selection, in-stock rates, cost structures, fulfillment, etc. This gave us clear rails to operate on and was a huge simplifier. It allowed operators at all levels to understand how their actions impacted broad, strategic goals. This understanding is the key to translating strategy into operational success.
When each individual contributor understands what they are working on and why, it enables relentless, year-over-year work that truly impacts the company. If operators don’t fully understand how their work impacts the company, they won’t be able to sustain improvement.
Structurally, the most important thing leaders can do is ensure operating plans align with a well-defined strategy. Everyone at every level must know why they do their work, and the CEO must understand what each level believes they are doing. It is this mutual understanding that ensures true alignment between strategy and operations.
And if your operating plans aren’t aligned with your strategy, why are they your operating plans in the first place?
