The Power of Layering Product Choices

How Amazon Leverages Compound Interest in Decision Making

Recently, I shared some lessons from my 1st week at Amazon, which was focused on quickly making a critical CX decision. In my experience, getting great at decision making can really super-charge an organization, and not being good at it is the root of all dysfunction. Our group at Box recently shipped a meaningful UX change, which was the output of stitching together a series of smaller improvements from the last 3 months; one of the PMs on my team described it as “compound interest paying off.” The insight was spot on, and it reminded me of a pattern of decision making I learned at Amazon.

First, let us hear from famous ex-Amazonian Albert Einstein:

“Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn't, pays it.”

There are 2 takeaways from this, product-wise:

1. you can layer product choices over time to compound value

2. you can exacerbate product debt over time by carrying it

If you spend enough time at Amazon, you start to build this pattern-matching / decision-making muscle. And occasionally you get to flex. When I was working on the original Fire tablet as a PM in the Kindle org, the execs would do weekly reviews with Jeff (Bezos) and I’d get forwarded notes to decipher. One throwaway comment I read early on was “Jeff thinks everyone that buys the tablet gets Prime”, and with all Jeff ideas it’s worth understanding…why? So I ambled over to the desk where the Kindle SVP / VPs sat and just asked one of them…why? Here was the story:

• you buy the tablet (not an e-reader) and you expect a kick-ass video experience

• we were already planning to put a version of our Android video app on the Fire

• the concern was the OOBE* (out of the box experience) on the video tab because

• you probably would have no content in your purchased / rental library to view but

• there was a deal being worked on with studios to create a video library for Prime

• so, let’s “grant” a (time-boxed) Prime subscription to everyone who buys the Fire

• and then they’ll have some popular titles to watch the first time they boot up

The ambition was mind-boggling. Kindles till that point had been a gateway to selling more books, with the average Kindle owner being a 10x reader. But with the Fire tablet:

• you start to sell more types of long-form content (comics, textbooks, audiobooks)

• you create a more compelling visual experience for a slice of content (magazines)

• you are able to sell your existing digital media (music, video) via another channel

• you are creating a new subscriber funnel for a very lucrative service (Prime**)

It was like a flywheel, within a flywheel, kickstarting another flywheel. And we had to get the CX right.

I sought out the PM on point and asked to understand the gameplan. The MVP was apparently to get a list of Kindle buyer emails, then send a subset an offer to sign up for Prime.

What?!? No…

I put on my (unofficial) CXBR hat and redefined it:

1. you auto-magically get a Prime subscription when you buy the Kindle Fire

2. unlike every Prime plan (e.g. student, mom) you don’t enter credit card (friction)

3. 30 days later you get a letter on your Kindle explaining expiration / subscription

Here’s what that meant in practice:

1. the Subscriptions Service PM had to get on board with “granting” (vs buying)

2. the Prime Offers PM had to get on board with a plan w/o payment (blasphemy)

3. the Kindle Campaigns PM had to get on board with non-Kindle messaging (huh?)

What authorized / qualified me to take things back to the drawing board? As I said in my recent post:

“you can make any decision with a cogent plan for why/how”

So let’s talk about the how, and this is where the compounding value of product decisions comes in. We had a service in place to trigger actions based on events (e.g. purchase event -> welcome email). The quick (and functional) solution was to hack this up to talk to a Prime service, because Jeff’s ask was explicitly “everyone that buys the tablet gets Prime”, and this met the requirement. But there was a pattern here.

Were we giving temporary Prime without payment to Kindle buyers? Or were we granting digital benefits with deferred purchase for physical orders? With a higher-leverage architecture, setup for scale, and some incremental effort, we could build the latter. There was no specific use case to prioritize a more foundational solution, but I made the call anyway. Hindsight is 20/20, so when I go over this story in my head now, I honestly don’t know…

1. Was it foresight? (unlikely, although it will read like it)

2. Was it instinct? (not really, although it sounds very cool)

3. Was it culture? (probably, I’d internalized this from others)

All this solutioning happened in the early days of the product, but a few weeks before launch 3 crazy things happened in succession:

1. the music team asked if there was a way to nudge customers to download their MP3 library to their Kindle tablet (music was the 1st type of digital content Amazon sold, even before e-books, and many customers had huge libraries)

2. the appstore team showed up in a panic, saying Jeff wanted to give away the app of the day for free to a device buyer as a promotion option for game developers

3. the Prime video library idea had been expanded from studios to publishers, and now a book library was possible in addition to a video library

All 3 ideas, which would create a delightful experience and insane buzz, needed some sort of generic digital benefit entitlement service. Was there such a thing? At scale?

What?!? Yes…

By layering your product choices and thinking long-term, you can build up to moments of immense pay-off in terms of customer value.

I’ll leave you with a quote and a request to hear about your own experience with decisions compounding in serendipitous ways…

“When we talk about decision-making, we usually focus just on the immediate payoff of a single decision — and if you treat every decision as if it were your last, then indeed only exploitation makes sense. But over a lifetime, you’re going to make a lot of decisions. “

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further reading / references

• the parting quote is from Algorithms to Live By via this article on explore/exploit

• * OOBE (out of the box experience) is what hipsters now call FTUX (first time user experience), because in the olden days you actually had to unbox product

• ** mind-blowing facts about Prime, the tl;dr being subscribers buy way more

• I used the word service a lot (and purposefully) throughout this post; you can read more about Amazon’s architecture transition and know this org chart is 100%

• a quick read on the importance of early decisions compounding in startups

• a primer on accumulative advantage as a pre-cursor to winner-take-all

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childish drawing / interpretation