Do you want to invest in management teams like Amazon’s? Here’s what to look for


A The management of the company is certainly one of the most important success factors. The decisions made by C-suite executives literally have an impact on the business worth millions and even billions.

And without a doubt Amazon‘s (NASDAQ:AMZN) Leadership has been some of the best in the business over the years.

If you’re looking to find companies with Amazon-like leadership teams, consider these three traits that have propelled the company’s dominance.

Image source: Getty Images.

1. A culture of experimentation

I recently Immerse yourself in Amazon’s storied history and unpacked how important optionality has been to the company’s success. This optionality springs from a culture of experimentation.

In a 2014 interview, founder Jeff Bezos once said, “What really matters is that companies that don’t keep experimenting, companies that don’t accept failure, eventually end up in a desperate situation where they just do something Hail Mary made a bet at the very end of her company existence.”

The focus on innovation through trial and error is well documented in Bezos’ many letters to shareholders. While many companies claim to prioritize innovationBezos realized that true innovation meant there would be big failures.

One of Amazon’s biggest failures was the Fire phone. The company invested over $170 million in the product in 2014, and it took off completely, selling just 35,000 units in its first month after launch.

In his 2019 letter to shareholders, Bezos explained why he is comfortable with such massive failures, saying, “This kind of large-scale risk-taking is part of the service that we, as a large company, are able to provide to our customers and to society. The good news for shareholders is that a single big winning bet can more than cover the costs of many losers.”

Without potential flops, Amazon probably never would have developed some of its best products and services like Echo or Amazon Web Services.

You can get a sense of how much emphasis a management team places on experimentation and innovation by listening to earnings calls or reading letters to shareholders.

2. Customer obsession

Amazon’s executive team uses a strategy they call “working backwards.” Instead of starting with competing products or those with the highest margins, they simply think, “What does the customer want?” and then work backwards from there to create exceptional products and services.

This obsession with the customer has driven great decisions by the executive team for decades. And Bezos has long credited this as the primary reason for Amazon’s success, saying, “The #1 thing that has made us successful by far is obsessive-compulsive focus on the customer as opposed to obsessing over the competitor.”

Ultimately, customers drive sales, and companies with an intense focus on customer service have a knack for it to win Long-term.

3. Publicly formulated, ambitious goals

Excellent companies are very often led by management teams with ambitious goals. Amazon’s first slogan was “the world’s largest bookstore”. Although Barnes & Noble took offense at this and sued the company back in 1997, this slogan represented the magnitude of Bezos’ vision for the company.

He could have used a simple slogan like “the first online bookstore,” but he publicly stated his global ambitions from the company’s early days.

Amazon’s mission statement today is “to be the most customer-centric company on earth” and it has a corporate vision in response to the harsh criticism of the brutal working conditions in its distribution centers “to be the best employer on earth and the safest place to work”.

Note the global theme in the company goals. This ambition is crucial to achieve even a fraction of the growth and Amazon dominance.

Another public company with an eccentric (and often polarizing) CEO that has set itself very ambitious goals is the electric vehicle maker Teslaled by Elon Musk.

The company’s mission is to “drive the world’s transition to sustainable energy.” with the last one extension With its “Gigafactories” to China and Europe and its industry-leading deliveries, Tesla appears to be meeting that ambitious goal.

Studying Amazon will make you a better investor

Identifying the nearest Amazon is not an easy task as there is uniquely one generation company. But studying this e-commerce juggernaut offers a treasure trove of insights into qualities shared by other great companies.

When analyzing companies, look for management teams that embrace experimentation (and failure), have a strong customer focus, and are public about their ambitious goals for the future.

By factoring these qualities into your management analysis, you can discover the next market-beating stock.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Mark blank has positions in Tesla. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has one confidentiality policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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