The Impacts of Amazon’s Decentralization — A Two Sided Coin
When people ask me what Amazon is like, I end my description with a caveat. I explain that Amazon is decentralized to an extreme, so almost anything I describe might be different depending on where you work.
This decentralization is a core aspect of how Amazon functions, what the employee experience is like, and how product development works. It is the reason for some of the best and worst things about Amazon.
I’ll go over how the organizational structure works, and then get into positive and negative impacts of that structure. As with many operational decisions, you have to take the good with the bad.
Organizational summary
At a high level, Amazon operates like a large VC firm. However, instead of investing in external companies, it invests in internal companies. Each layer of management has ownership over their virtual company. This virtual company acts like the rest of Amazon, where they are also a VC firm, investing in the smaller companies under them. In this case, the core investment made is cash for headcount and other expenses. This is the marrow of the ownership principle, and why the words ownership mean so much at Amazon.
Organizational ownership example
If you are the SVP of Alexa, you own Alexa the business, technology, success or failure, and long term plans. You have a strong willed investor managing you, but for the most part the investor lets you run your company as you see fit.
Now imagine you’re five levels deeper into the organization chart. You are a manager responsible for the ring lighting up on top of Echo devices, and you report to the Alexa notifications organization (lets pretend, as I don’t actually know where that team reports). The ring lighting team is your business. You have a roadmap, goals, and technology that you own, and you build the long term roadmap of where you are taking this business in the future. You are a part of the Alexa business, but you are also a part of the Alexa notifications business, and you run the ring lighting business.
Every team deals with the requirements of the investors above them. So as the leader for the ring lighting team, you would be required to meet an Amazon wide goal to reduce hardware usage. Then the Alexa team may decide to launch Alexa on smart coffee mugs, and your team might become responsible to ensuring the mug light goes on properly. The Alexa notifications team may have a goal to increase notification quality, which you need to work on. Finally, your team would create goals for yourself depending on what you feel is important for your product. As you can see, goals and targets cascade down through the teams above them, and individual teams have their own goals as well.
This level of ownership continues to some degree to every single employee. When an entry level engineer is assigned to “create a report on ring light usage”, they become the owner of that report, working with their co-workers to build requirements, discuss what they plan with their manager, and then building the tool. The success or failure is their ownership to deal with. This ownership may pass from them once they finish the project, but the expectation of employees is to be the owner while they work on something.
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