In 2015, Amazon became the fastest company ever to reach $100 billion in sales. In his letter to shareholders last spring, Jeff Bezos reflected on what he felt fueled such rapid growth:

One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins.

Most companies avoid failure like the plague. But in this instance, Bezos says embracing it is a big part of their success equation.

Why failure fuels innovation

Peter Drucker, the father of modern day business management said there are two basic business functions: marketing and innovation. Prioritizing these two areas are paramount because they are the ones that produce results for a business.

That's what Amazon has done. Their intense focus on innovation is what transformed them from an online bookseller, to an online retailer, to offering web storage services, and even offering same day delivery for certain products with Amazon Prime. And with their recent acquisition of Whole Foods, the company continues to demonstrate their willingness to explore new ways to serve their customers.

Here's Bezos again on how Amazon views innovation:

To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there.

Why building a world-class company requires boldness

Now the goal isn't to go out and fail on purpose. It's simply to be committed to trying new things and pushing the limits beyond what has been proven to work, so you can discover novel ways to serve your customers.

The key to failing and not losing your shirt is to fail in such a way that it doesn't put you out of business. It enables you to adjust, and experiment again, adjust, and experiment again until you find something that works.

The bottom line is, don't play it safe, that is, if you want to get better than average results. Here's Bezos again on why that is:

Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you're still going to be wrong nine times out of ten. We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it's important to be bold. Big winners pay for so many experiments.

It's time for you to start swinging for the fences. Sure, you will have some strike outs along the way. But the benefits that come with innovation and the corresponding results you do achieve will be totally worth it.

Published on: Aug 1, 2017