11 Laws Driving Success in Tech, according to CB Insights [Part 6]

Jeff Bezos made the 2-Pizza rule

Indeed, the success and failure of tech companies have inspired several theories and what drives success and predicts failure in this world where we have several startups springing up everyday.

Moving on from the previous 5 laws driving success in tech, the 2-Pizza Rule, which is the 6th law enables us understand how Jeff Bezos journeyed to make Amazon do great today and how small teams can build great success.

The 2-Pizza Rule: Why small teams lead to big success

Jeff Bezos didn’t just leverage the basic insight of Gall’s Law to develop what has become Amazon’s fastest-growing internal unit — he is also responsible for popularizing one of his own tech rules.

In early 2002, Bezos decided that to reduce communication overhead and improve productivity, all of Amazon would be re-organized into so-called “2-pizza teams” — squads small enough that just 2 pizzas would be enough to fully feed them when working late in the office.

While this has also been interpreted as a rule for meetings — either capping the maximum size of meetings at Amazon or capping the size of meetings that Bezos himself will attend — the original formulation was an edict about team size.

Why 2-Pizza Teams Gave Amazon a Strategic Advantage 

According to analyst Benedict Evans, the 2-pizza rule has been a crucial structural advantage for Amazon.

The idea stemmed from Bezos’ attitude toward both centralization and communication. Bezos wanted Amazon to remain nimble even as it grew, and that started with encouraging independent decision- making rather than an over-reliance on hierarchy.

And Bezos hated the overhead created by excess communication. In “The Everything Store,” Brad Stone quotes Bezos as saying that “communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.”

Jeff Bezos

The main advantage this conferred upon Amazon was simple: having smaller and independent teams meant the company could spin up new teams much faster, giving it the power to scale more cheaply, explore new ideas easily, and ultimately ship more products to customers.

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While many of the new initiatives spearheaded by these small teams have failed, some — like Prime, Kindle, and AWS — have become core businesses for Amazon.

For Bezos, it comes back to the idea of building a corporate structure that can generate the maximum amount of innovation for customers. Big, centralized teams maintain companies. Small, autonomous teams find new ideas.

“We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture — great innovations, large and small, are happening every day on behalf of customers, and at all levels throughout the company,” he wrote in his 2013 shareholder letter. “[Decentralized] distribution of invention throughout the company — not limited to the company’s senior leaders — is the only way to get robust, high-throughput innovation.”

In other words, as Benedict Evans writes, “you don’t (in theory) need to fly to Seattle and schedule a bunch of meetings to get people to implement support for launching make-up in Italy, or persuade anyone to add things to their roadmap.”

There is a machine, and then there is a machine to build the machine, says Evans. And Amazon’s 2-pizza rule ensures that the company, aside from being a ubiquitous tech leviathan, can operate a machine to build more Amazons.

Not Everyone is Satisfied With 2 Pizzas

According to organizational psychologist J. Richard Hackman, the more interconnections you have between people, the slower your decision-making and the higher the management costs for the organization.

As you add people to an organization, the number of communication links increases exponentially.

“The cost of coordinating, communicating, and relating with each other snowballs to such a degree that it lowers individual and team productivity,” writes blogger Janet Choi. Two-pizza teams solve this inherent scaling problem by artificially capping the number of links.

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Despite the organizational clarity derived from the 2-pizza team, not everyone at Amazon and in the wider tech world is a fan of the rule.

Some former Amazon employees and others believe the strategy was counterproductive, and some think that building products using 2-pizza teams creates a disconnected user experience.

According to Brad Stone, the concept of 2-pizza teams was unevenly applied throughout Amazon. It took root most of all in engineering, while the idea barely touched the finance and legal departments.

Additionally, each team had to set up its own “fitness function” — some kind of quantitative, linear equation that could be used to judge whether that team succeeded or failed in its mission. For a marketing team, that might be the average email blast open rate multiplied by ensuing order value.

Yet, Stone writes, making some teams define this function for themselves was like “asking a condemned man to decide how he’d like to be executed.” For others, it was merely ineffective.

Kim Rachmeler, former VP at Amazon, said, “Being a two-pizza team was not exactly liberating. […] It was actually kind of a pain in the ass. It did not help you get your job done and consequently the vast majority of engineers and teams flipped the bit on it.”

Small, disconnected teams run the risk of producing disjointed products that don’t contribute to a seamless experience, according to product management consultant Matt LeMay. For LeMay, the most important aspect of a product for a customer is not the individual features of a product, but how those features come together to deliver a cohesive experience.

Given the vast number of products that Amazon has put out over the years, and how cluttered many of its website’s menus can seem, it’s fair to say that Amazon’s drive for 2-pizza teams has not been without its drawbacks.

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In fact, it’s no longer the norm. In their book “Working Backwards,” former Amazon executives Colin Bryar and Bill Carr reveal that the company eventually figured out the biggest predictor of a team’s success — and it wasn’t size. Rather, it was having a leader with the relevant skills, authority, and experience to manage a team focused on a single goal.

As a result, Amazon replaced the 2-pizza model with single-threaded leader (STL) teams, which focused on one project at a time. Each time was headed up by a leader who was solely committed to that one focus area, rather than dividing their time between projects.

The adoption of STL teams enabled Amazon to realize ideas that had languished in the vagueness of the 2-pizza model. Fulfilled by Amazon (FBA), a service that gives businesses access to the company’s logistics network, finally came into life through an STL — and now provides the company a steady stream of income through fulfillment and storage fees paid by sellers.

Takeaway

Jeff Bezos wanted small, autonomous teams that could be “independently set loose on Amazon’s biggest problems,” as Brad Stone writes. 

These teams wouldn’t have to waste cycles communicating with other teams, and they would each have all the resources and people necessary to launch new products. The result, Bezos thought, would be more creative offerings and faster results for customers.

Though not without its detractors, Bezos’ idea that over-communication between teams risks stoking inefficiencies has been implemented at other companies, including Google.



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