One of Amazon's most important (and under-rated) innovations is its HR innovation.
is an incredibly important innovation and is the future of company scaling strategy. Bezos' core philosophy, that every team needs to be small enough to be fed by two pizzas, has allowed Amazon to be agile while many other companies have struggled with growth.'
Scaling companies is really hard. Really hard. As you scale you run into crazy communication and coordination problems (even at the very best run companies). Even (one of the best-run companies in the world) had to re-organize into ... essentially to break up the company and make it more agile.
A competent person can coordinate members of a small team. But to coordinate people in large scale, you need an entire system and apparatus with crazy smart people (often taking most of the CEOs time).
Amazon would only be a nice company without the Two Pizza Rule.
Amazon's secret sauce is its services architecture of the whole company. Every team, especially in product and engineering, owns what it does from end-to-end. Every team interacts with other teams as an API -- getting specific inputs and outputs (that can change over time). By interacting with others as an API, it means teams can move really fast, innovate, and eventually automate themselves so they can move to more interesting projects.
The most successful companies in the future will look more like Amazon.
Small groups understand their mission and they can act autonomously to accomplish their mission. They can even have budgets, etc. to accomplish their mission through getting vendors (or ultimately replacing themselves entirely with a vendor so they can move on to more interesting projects).
This HR innovation is the most important thing other companies should understand about Amazon. It allows Amazon to fulfill its promise of "Day One" and it allows it to move really fast. Each pod can innovate or fail on its own. And as these pods succeed, they create more and more opportunities for new pods to be built to support their visions.
Companies in the future will build their organizations to model Amazon's. The Two Pizza Rule beats the Matrix Organization.
It is not too late to make changes.
Even the largest companies today have the opportunity to make changes to affect their own Two Pizza Rule within their organization. The best place to start is in product and engineering because those entities are most like APIs (because many of the pods are literally APIs).
Another great place to start is HR and finance and other core shared services. In fact, many of the best gains is in shared services because these parts of the organization think of the rest of the company as their client and should be very client focused. Orgs like human resources, which have traditionally been the one of the worst run organizations in the company, have the potential to be the very best-run orgs once they look more like micro-services.
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