In 2001 Jeff drew the simple diagram below on a napkin to illustrate Amazon’s virtuous cycle, also called the “Amazon flywheel.” This sketch, inspired by the flywheel concept in Jim Collins’s book Good to Great, is a model of how a set of controllable input metrics drives a single key output metric—in this case, growth. In this closed-loop system, as you inject energy into any one element, or all of them, the flywheel spins faster:
Since it’s a cycle, you can start at any input. The metrics for Customer Experience, for example, could include speed of shipping, breadth of selection, richness of product information, ease of use, and so forth. Watch what happens when we improve customer experience:
Colin Bryar and Bill Carr – Working Backwards
Better customer experience leads to more traffic.
Colin Bryar and Bill Carr – Working Backwards
More traffic attracts more sellers seeking those buyers.
More sellers lead to wider selection.
Wider selection enhances customer experience, completing the circle.
The cycle drives growth, which in turn lowers cost structure.
Lower costs lead to lower prices, improving customer experience, and the flywheel spins faster.
The Amazon flywheel captures the major aspect of what makes Amazon’s retail business successful. Therefore, it should be no surprise that almost all the metrics discussed[…]”
