At Amazon, the Annual Operating Plan was a mechanism to align on initiatives, allocate resources, and assign ownership. The best plans followed a few essential practices and avoided several common pitfalls. Here are the most important Dos and Don’ts.
1) Do: Lead with Metrics
The best plans start with controllable input metrics. Begin by clarifying the customer outcomes you’re trying to drive and by defining the controllable input metrics that will move those outcomes. If you can’t identify or measure your inputs, your initiatives will be guesses, not processes.
2) Do: Define Problems and Opportunities Clearly
Before proposing solutions, articulate the problems. What customer pain points are you addressing? What friction or inefficiencies are you fixing? Clear articulation of the problem invites effective solutions and aligns stakeholders on the goals to pursue.
3) Do: Specify Your Initiatives in Detail
High-level summaries lead to vague plans. Each initiative should include scope, objectives, dependencies, staffing, timeline, and success metrics.
4) Do: Decide What Not to Do
A strong plan includes as much about what you’re stopping or deferring as what you’re pursuing. If everything’s a priority, nothing is. Real strategy requires tradeoffs.
5) Do: Think Big but Stay Grounded
Amazon teams were encouraged to think big, but not at the expense of realism. Your operating plan should push boundaries, but it should always come with a realistic path to execution.
a) Don’t: Cram Every New Idea into the Plan
The plan must identify and describe a short list (~5) of key initiatives. The plan is an exercise in prioritization.
b) Do: Spend more time planning for controllable Inputs than Outputs
You can forecast revenue, but you can’t control it. At Amazon, we made a clear distinction: input metrics are controllable and should be committed to. Output metrics, like revenue, should be forecasted, but they are subject to external factors like the economy, tariffs, and pandemics.
c) Don’t: Skip Dependency Resolution
The number one reason why most plans fail is that they have not identified and planned for all internal and external dependencies. These must be identified and resolved during the planning process. Each team must define their new initiatives in enough detail to understand what resources are needed to complete the project, both within their team and for other teams in the organization. Determine whether those teams are able to commit to your plan or not.
d) Don’t: Mix One-Way and Two-Way Door Decisions
Some decisions are reversible (two-way doors); others are not (one-way doors). Don’t treat them the same. We were deliberate about separating big, irreversible bets from low-risk experiments. Two-way door decisions should be made quickly, while one-way door decisions require more time.
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