Is Amazon’s secret to revolutionizing logistics the willingness to say yes?

It is now widely recognized that Amazon ushered in a new era of logistics with its Prime two-day delivery service. The program not only changed the e-commerce game, even accelerated it, but it has infiltrated nearly every aspect of shipping today. Businesses now expect shipments in a timely manner. Transportation companies have had to adjust their scheduling to meet these demands.

It’s likely not an overstatement to say Jeff Bezo’s plan for two-day shipping changed the world. But, how did it come about? There are many theories, and plenty of insiders that can tell the full story. One of those is Doug Herrington, CEO of Worldwide Amazon Stores. Harrington sat with National Retail Federation CEO Matthew Shay last month for a discussion on Amazon at the NRF’s Big Show in New York City.

While Herrington discussed many issues during their nearly 45-minute conversation, there was a theme throughout about the way Amazon works internally that leads to the many innovations—both successful and not successful—it rolls out regularly.

Impact of fast shipping

In 2016, a report on parcel delivery by McKinsey found that fast delivery was expected, but not at the expense of cost. “Fast delivery is being requested more and more. Customers below the age of 35 are particularly keen to see faster deliveries. Older customers generally prefer to pay the lowest price for their delivery,” Jürgen Schröder, McKinsey senior partner and expert in logistics and postal services, is quoted as saying in a Supply Chain Management Review article at the time.

“Regardless of age, almost 80% of those surveyed always choose the cheapest standard delivery to their home,” the article noted. “When asked how much they would be prepared to pay for faster delivery, around 50% of those surveyed in the U.S. said around one dollar. Only one in six was prepared to pay $3 to $5 for faster delivery.”

Today, millions of Americans pay $139 per year for Amazon Prime; and millions more pay $98 per year for Walmart+ membership. While each program offers many benefits, fast shipping is a primary driver of their success. But why, if only half of people were willing to pay even $1 for faster delivery in 2016, are people willing to pay $139 a year?

Why Prime succeeded

It’s worth noting that if not for the internal culture that Bezos built at Amazon, fast shipping may not have taken off—at least for many years until someone else attempted it. And paying for fast shipping? Who knew people were willing to do that. Doug Herrington certainly didn’t think so.

Herrington had recently joined Amazon in 2005 as vice president of consumables when Bezos rolled out Prime two-day shipping at a cost of $79 per year. “I remember thinking, that sounds like a really dumb program,” he told Shay. “I had never bought two-day shipping and why would I want to buy a year's worth of two-day shipping in advance? But being a good corporate citizen, I was one of the first people to buy Prime. And lo and behold, within the first week or two, my wife and I started experiencing what every new Prime [customer] experiences which is not only was that this is so convenient, but then you start to think about the next thing that you have to buy.”

And our addiction to fast shipping was born. Today, that addiction permeates not only the consumer space, but also increasingly the business-to-business space, where managers are now expecting that Amazon-level of delivery speed.

“Although paid membership programs in retail were very rare when we started Prime and e-commerce unheard of, it’s actually a fairly common business model today, and I think that’s great. It obviously works for customers and I’m excited that many dealers are pursuing these strategies as well,” Herrington said.

But why did Amazon decide to roll out Prime two-day shipping? There are books that have been written on the topic, and many more that will follow, but part of it was the culture that Bezos created. He was willing to fail.

Loving failure

Herrington was asked by Shay what advice he could give attendees that they could adopt. His answer centered on the culture that Amazon had built, and one that many best-in-class companies follow. It is a culture built around failure.

“I’ll use an answer I heard Jeff give once,” he said. “He thought that our love of innovation is not what sets us apart, it’s our willingness to fail. And he pointed out that a lot of companies say they love innovation, but they also really dislike failure. And they end up intentionally or not with cultures and organizations that really do a lot to try to avoid failure.

“When it gets down to it, the phrase he used to use was that innovation and failure are inseparable twins,” Herrington continued. “And if you get too good at eliminating failure, you’re probably walking away from a lot of great innovation as well. We’ve been very intentional with our culture on trying to make sure that we’re willing to accept failure to get that innovation.”

Over the years, Amazon has launched a number of programs or products over the years that didn’t last long, including the Amazon Phone, Amazon Destinations, Amazon Wallet, Amazon Local, Amazon Restaurants and Amazon Spark to name a few. But, each of these initiatives were allowed to be launched because Bezos has a philosophy. It is one that Harrington explained with his own story.

“A number of years ago, when I was getting started, I presented to Jeffrey a business opportunity. Long story short, this meeting was not going well. He was asking me a bunch of good, hard questions challenging my assumptions. He was disagreeing with my mental models,” Herrington said. “I’m pushing, but in the back of my head, I’m like, I’m losing this argument. This is not going well. In fact, we get to the end and he says, ‘you haven’t convinced me.’”

But the project went forward because Bezos has instilled a “bias toward an institutional yes” inside Amazon. And that is a key reason to Amazon’s success. Herrington said Bezos didn’t see his acceptance of an idea as the guiding light for that project to go forward. Instead, he explicitly said “that's not my job. My job is to create a culture that’s going to generate bold ideas and be willing to take thoughtful risk in pursuit of those ideas.”

Remember, when Amazon first launched, it was an online bookseller. Over the years it expanded into many different products, ultimately becoming a launching pad for hundreds of thousands of small businesses and the leading online marketplace. It has also found great success with Amazon Prime Video, Amazon Web Services, its Kindle and Fire devices, its Amazon Go technology, and of course, its logistics and fulfillment operations.

Thinking positively

Herrington said that for most companies, a “no” on a project from any senior executive is enough to kill the project. But at Amazon, it is not the number of “nos” you receive, but rather the ability to get a single “yes.”

“Jeff was always very clear,” Herrington concluded. “He used to have this lesson which was that in the history of business, more value had been destroyed by companies that failed to try something new they should have, than by people who tried things that failed.”

Amazon, of course, has been one of the biggest successes in the history of American, and global, business, in large part because of its willingness to expand from an online book seller to a provider of nearly everything. And that growth was accelerated because of its Prime two-day shipping, which brought items to people’s doorsteps faster than ever before. Consumers loved it; businesses now embrace it. And competitors that don’t match the “Amazon experience” don’t last very long.

All because Bezos was willing to say “yes.”

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