Here is a great synopsis of comments Jeff Bezos wrote in his annual shareholder letter in 2015. So many decisions you may consider making are reversible, and Bezos’ point is make those quickly. Decisions that are not easily reversible need to be thought out extremeley well. Read below for some good insights. In our dynamic and changing insurance world, you cannot be afraid to try new things and experiment. Most of these decisions are reversible if they don’t work out. Execution is key. Cheers! Tague Team

2015: Don’t deliberate over easily reversible decisions

“Some decisions are consequential and irreversible or nearly irreversible – one-way doors — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. . . . But most decisions aren’t like that — they are changeable, reversible — they’re two-way doors. . . . [These] decisions can and should be made quickly by high judgment individuals or small groups.”

Takeaway

Big companies stop being creative because, in large part, their decision-making processes become slower and more drawn out as they scale. Caution creeps in, and people are less likely to move quickly or place risky bets.

For Bezos, the problem is that people treat reversible decisions like momentous problems requiring caution. They miss opportunities that nimbler companies don’t.

To remain innovative as you grow, you need to understand which decisions are reversible and should be executed on quickly, and which have lasting consequences and should therefore be mulled over more slowly.

Challenge

Big companies are less tolerant of failure because they have more to lose, especially if they are public and have shareholders. Companies say they want to remain innovative, but they’re often not willing “to suffer the string of failed experiments necessary to get there.”

But it’s a mistake to take the overly cautious approach. “Every once in a while, when you step up to the plate, you can score 1,000 runs,” Bezos writes.

The key is figuring out how to marry the innovative spirit with the reality of risk aversion that exists at any large organization.

Solution

Amazon’s success, according to Bezos, is rooted in the company’s acceptance of risk.

“I believe we are the best place in the world to fail,” he writes, “and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment.”

The way Amazon achieves its risk acceptance mentality, according to Bezos, is through acknowledging which decisions can be easily reversed (and should therefore be decided on by small, fast-moving teams) and which cannot (and should therefore be more carefully considered).

“Failure and invention are inseparable twins.”

He refers to these as two different types of decisions, Type 1 and Type 2.

Type 1 decisions are almost impossible to reverse. They’re “one-way doors.” Type 2 decisions, on the other hand, can easily be reversed. They’re “two-way doors.”

Type 1 decisions should be made slowly and with caution, and Type 2 decisions should be executed quickly.

Mistaking Type 2 decisions for Type 1 slows the team’s pace. It leads to unchallenged risk aversion. And, in the end, it means less innovation.

Bezos’ advises to figure out what types of decisions your organization is making and treat them accordingly. Don’t treat lighter Type 2 decisions like Type 1 decisions. When you know you can reverse the outcome if you don’t like it, don’t get too mired in details and projections (no one will know the outcome until it actually occurs), and don’t let the project suffer death by committee. Just execute.”

Link to article: https://www.cbinsights.com/research/bezos-amazon-shareholder-letters/?utm_source=CB+Insights+Newsletter&utm_campaign=41a1c1057a-newsletter_general_Sat_20191102&utm_medium=email&utm_term=0_9dc0513989-41a1c1057a-89987865#2015