How Amazon define Metrics and achieve higher outcomes

Any company where teams are not able to define robust metrics, move very slow on the learning and growth. In most of the companies, the metrics defined and tracked at team levels are not relevant at all.

But there are companies who are able to define the relevant and robust metrics at the team level, and Amazon is one of them. At Amazon, metrics are defined and established before every initiative and objective is taken up. The progress on those metrics are measured on a real-time basis. Every initiative is a genuine scientific experiment focused on whether it will deliver value to the customer or not. As the metrics are tracked and monitored on a real-time basis, the company knows exactly what is happening on a daily basis.

There are many aspects that needed to be addressed to define enable your teams to define proper metrics within every team. The first is to understand the type of metrics:

4 type of metrics

  1. “Feel Good Metrics” – These are defined when enough influential people within the company believe that defining and tracking these metrics will have some benefits. The definition of the metrics are vague. In the worst-case- these metrics are promoting the interest of the specific group within the company.
  2. “Internal Focused Metrics” – There are metrics which are specific, better than “Feel Good Metrics”, and in no-way related to impact on improving customer experience, revenue and profit of the company(means improving something external), but focused on improving something internal.
  3. “External Focused Metrics” – More focused on improving the external things such as NPS, Revenue and Profit. But its impact on supporting the overall growth of the company is still not that relevant.
  4. “The Impactful Metrics” – These are metrics which truly impact your revenue and profits by improving the customer experience or changing the customer behavior in an expected way. They will truly delight the customer- examples such as availability of the item, speed of delivery, absence of returns and complaints, re-purchases of the product and related products.

Amazon tracks the execution on the fourth metrics – “The Impactful Metrics”. But why most of the companies fail to define and measure the “The Impactful Metrics”. The simple reason is defining and measuring the progress of execution on these metrics on a real-time basis is hard. But winning organizations understand this, and in every early in their stage of evolution, set the guidelines to define them.

Here are the 5 steps that Amazon takes to define and measure the progress under the “The Impactful Metrics”

  1. Obsession with customer value and not stakeholder value – This results in defining the right kind of metrics that enhance customer experience and value.
  2. The discipline of not starting execution on any project/initiative, without defining the metric to measure success. Sometimes the leaders and manager spend their days and weekend on what could be the right metrics before they jump onto executing the project/initiative.
  3. Work is done in small teams working in short cycles
  4. Reviews are around the “The Impactful Metrics”
  5. Linking compensation with achievement of “The Impactful Metrics” . Especially the executive compensation at Amazon is aligned with the core value and principle of “Obsession With Customer Value, Not Shareholder Value”.

Based on the read of John Rossman Think Like Amazon

Key Learnings

  1. Create the culture of defining metrics within every team before they take up the execution.
  2. Keep your teams small to achieve speed in your execution.
  3. Measure the progress on your “Impactful Metrics “ on a real-time basis.