Arnazon.com in September 1996, Fleishman felt, "it was like going t, the world's best college. I was surrounded by smart people." ~ 1 1 applicants were asked for their SAT scores and college grade poht average and if the scores weren't high enough, they might not be hired. As a result, Bezos snared a lot of the smart people he was after. Many were Ivy League graduates, and two-Dana Brown, who put in charge of ordering, and Ryan Sawyer, the vice president for strategic growth-were fellow Rhodes Scholars at Oxford. "We went to Harvard, MIT, and Columbia and recruited the smartest people we could get our hands on," said Brown, who came to Amazon.com with a B.A. in political science and Russian and a masters degree in Russian and Eastern European political science from Rutgers University. Back in those formative days of 1996, "we got a few people, but we had a hard time selling people into coming to work for us because of the low salary-$35,000 a year for people with a B.A. We were small fry. Nobody lrnew who we were. We didn't have people lining up out the door to interview with us. If we could get 10 people, we were lucky. The recruiting officers were somewhat skeptical." Scott Lipsky, who joined the company in July 1996 as vice president of business expansion, after an executive stint at Barnes 8r Noble, said, "The recruiting effort at Amazon was enormous, just to support the growth, which was organic." Early on, Bezos established relationships with the University of Washington Computer Science & Engineering Department. He o k n addressed students in their classrooms, and used the UW as source of strong technical help. CREATING A CULTURE It was Bezos7s task to mold a corporate culture from people who had come to the company from a variety of different corporate backgrounds. "Competitors can never copy a culture," he said. He often told employees he wanted a place that was "intense and friendly. . . . would do that before we'd be 'not intense.' " ~ c r o s o f tthe company that defined the ~ e a t t l e , business culture in 1 9 9 0 was a model for the nascent Amazon.com culture. "I think ~~ ,y recruit better than any other company that I know of," said ,,,s. Lauding Bill Gates for being "a smart guy," Bezos added that, , credibly smart executives in their own right." ~ u Bezos was looking t o create a more benign atmosphere than t mcrosofi model. "We often talked about how we wanted to have &e same sort of demanding nature as Microsoft, without being so )internally competitive," recalled Nicholas Lovejoy. ithe 11 (you can be like Microsoft but you don't have to be as combative as , merciful Microsofi (a contradiction in terms?), in reality, in the quest ' to get big fast, the seemingly mild-mannered Bezos is a fierce, talce, ' no-prisoners competitor, who has been unafraid t o battle for Amazon.com7sinterests in the marlcetplace and the courts. Bezos also cited FedEx as a model "because it grew up out of ; control where they couldn't deliver their packages. He wanted us to Bezos also admired the vision and innovation of Walt Disney. (He's visited Disney World at least a half-dozen times.) "The thing that always amazed me was how powerful his vision was," said Bezos. "He lrnew exactly what he wanted to build and teamed up with a bunch of really : smart people and built it. Everyone thought it wouldn't work, and he , . > m , . Bezos believed that an entrepreneur starts his company with an idea of what he wants the culture to be, and then the early employees carry the torch of what that culture represents. He estimated that the eventual corporate culture ends up being "a blend of 30 percent of what you set out for it to be, 30 percent who your early employees happen to be, and 40 percent random chance. The bad thing about the random chance part is that once it's set, you've got it. There's really no way to change a corporate culture." From the beginning, Bezos was, not surprisingly, "the soul of the company," said Scott Lipsky. "He's a leader who can inspire people with his success, his intelligence, his brilliance, his ideas-and the fact that he had these great ideas before many other people did." While agreeing with Lipsky's characterization of Bezos, Gina Meyers, who had come from the more staid and conservative Data I/O, found working at Amazon.com "a little bit of a culture shock. It was so chaotic and everything was changing so fast." Maire Masco, who came from Aldus Corp. (a part of Adobe Systems, Inc.), recalled coming in for her first interview and being "immediately enthralled by the speed and quickness7' of the operation. "People were dashing back and forth. There was a huge sense of camaraderie. A reporter and a camera crew were following Jeff around. Construction people were bringing in desks and computers. I t was total mayhem. I thought, 'This is great. I want to work here.' " With so many new managers, Amazon.com-just as Bezos had predicted-outgrew the 2250 First Avenue space in seven months. In August 1996, management moved a couple of miles north to the Columbia Building on Second Avenue. Only a block east of the Pike Place Market and a few blocks north of downtown's tony retail corridor and in the shadow of the sleek high-rise office buildings, this was one of the last seedy blocks in the area. The Columbia Building was around the corner from Wigland, the Holy Ghost Revivals mission, assorted T-shirts-for-touristsstorefronts and across the street from the Seattle-IGng County Needle Exchange (and I don't mean the Space Needle). It was a neighborhood where winos would relieve themselves in the alleys. The offices within the Columbia Building were only a small step up from what was happening on the street. The carpet was worn and stained with coffee. The walls cried out for a paint job. The cxpanded warehouse stayed on First Avenue South until November, when it moved to a larger facility on Dawson Street in South Seattle. In all the company had been in five different locations three years. "That's either poor planning or unusual growth, whichever way you want to think about it. I think every company ould move every four months," Bezos quipped. The warehouse quickly developed a subculture of its own, separate nd apart from management. It was filled up by an army of Gen-X eattleites-musicians, poets, geeks, students-in between gigs, who proudly displayed tattoos, multiple body piercings, and hair colors not previously found in nature. N o wondcr then-customer-service director Jane Radke Slade told the Wall Street Journal that she instructed temporary employment agencies (everyone hired for the warehouse started as a temp): "Send us your frealzs." Those first couple of dozen warehouse employees "were a bunch of hnlzy rock musicians and starving artists trying t o make ends meet," recalled E. Heath Merriwether, one of that original group. Looking out across the warehouse floor, "There was a purple head over there, and a blue head over there, and a green head over there. It was a very young crowd." I t was that young energy that was able to keep up with the growth rate at Amazon. The original crew "really did bond. We were the core. We were Amazon." Bezos would reinforce to the warehouse workers how important they were by reiterating that the only elements that customers knew about Arnazon.com was the website and the book they received in the mail. Without the warehouse, he told them, there's no company. Bezos backed up his words with actions. Hc and many of the other managers regularly helped to sort and pack shipments. "I remember the first time I heard someone in the warehouse call I one of the gang. He never put himself up on a pedestal. As Amazon grew, and it became more corporate, other people put him on this pedestal. But Jeff never put himself there." One day in July 1996, Bezos walked into the warehouse and Merriwether and several others spontaneously began firing rubber bands at him. Without skipping a beat, Bezos picked some rubber bands off the floor and immediately shot back. Some of the new hires were "horrified that I was shooting rubber bands at the chairman of the company," said Merriwether. "They were even more horrified that the chairman shot back." The following day, A Gore visited the Amazon.com offices and 1 briefly worked the customer-service phones for a photo opportunity. Seeing Bezos on television schmoozing with the vice president of the United States the day after the rubber band battle was "surreal; a Twilight Zone episode," said Merriwether. "I will say this about Jeff Bezos: I would want him on my side in a rubber band war." On November 3, 1996, Amazon.com moved its distribution operations to a 93,000-square foot facility on Dawson Street in South Seattle. "It was so big, it was like being out in the country-you couldn't see your neighbor. The break room was about the size of the old warehouse," recalled Merriwether. "We figured we'd never fill this space. We figured we would last there for years. Three months later we were elbow-to-elbow." The evening of November 3, the company threw a moving-in party at the new warehouse with a couple of kegs of beer and catered food from a Mexican restaurant. As part of an impromptu christening, warehouse manager Laurel Canan pulled out a copy of The Dilbert Principle. The Scott Adams bestseller was the first title that Amazon.com began shipping in mass quantities, so the warehouse was loaded up to the rafters with Dilbert. "Laurel took his beer and poured it over the book, ripped it apart, and threw it across the warehouse floor," said Merriwether "We all stomped on it, because we all hated that book and most of us do to this day." That copy was deleted from the database. "We certainly didn't want to take a copy of a book that a customer was waiting on." The organization of the distribution center "was an ongoing process," said Merriwether. As the company grew, it continually added new systems or improved existing ones, so "You had to adapt very quickly. Once we moved to the new distribution center on Dawson, it became more necessary for new employees to be even more flexible, because you learned something one week and it would change the next week." Two months after moving into the Dawson Street warehouse, Amazon.com finally hired someone with previous logistics experience (before then, they were just making it up as they went along). OswaldoFernando Duenas was a 47-year-old Mexican-American who had worked for Federal Express for 20 years. Duenas rose from being truck driver when FedEx was a fast-growth start-up to become a senior vice president. He helped build FedEx's first regional hubs and oversaw the transition from a system centered at a single hub in Memphis. He had also served as vice president of the Latin American division of International Service System, Inc., Latin America's largest integrated service company, where he oversaw sales, marketing, operations, and customer relations for the division and managed several thousand employees. As Amazon.com's vice president of operations, Duenas brought order and organization to the warehousing and distribution facilities. "At that point, we had a lot of people who had never worked anyplace before,'' said Gina Meyers. "They were figuring things out and doing a pretty good job. But it helped to have someone who knew how things were done so we didn't have to reinvent the wheel for everything. We immediately started looking at automation." The office people had just split off from the warehouse, and there was beginning to be a breakdown in communication, according to several former employees. Duenas took it upon himself to bridge that gap. "Fernando could talk to anyone," said Nils Nordal, who worked briefly in customer service. "He could talk to an 18-year-old pothead in the warehouse, and he could tallc to Jeff Bezos. He was the company adult. That was a pivotal role for him to play at that point in the company development." The hiring of Duenas was part of a process of building up a senior management team that Wall Street would approve of. (At this point, Amazon.com was prettying itself up before its eventual initial public offering.) For most of 1996, the ever-growing company had little managerial bandwidth, and Bezos depended on Dillon, Alberg, and Hanauer to "pitch in wherever we could," said Dillon. "We tried to keep Jeff focused as much as we could on business." From the fall of 1996 to the spring of 1997, in addition to Duenas, the company hired a parade of executives, including: Rick R. Ayre, vice president and executive editor. Ayre was formerly executive editor for technology a t PC Magazine and had Launched PC Magazine on the World Wide Web. He also ran PC Magazine's online services, including their online web site and P MagNet, which was part o f ZD Net on C CompuServe. Mark Breier, vice president of marketing. He had spent two and and half years i n a similar position with Cinnabon World Famous Cinnamon Rolls, and had worked i n product management with Dreyer's Grand Ice Cream, Kraft Foods, and Parker Brothers. (Breier later became president and C O of E Beyond.com, the online software retailer. He Left Beyond.com i n January 2000.) Mary E. Engstrom (later Morouse), vice president of publisher affairs, had been vice president of marketing a t Symantec Corporation, the developer of information management and productivity enhancement software. She had previously worked i n several management positions at Microsoft Corporation. John D. "David" Risher, vice president of product development, who had spent the previous six years i n a variety of marketing and project manage- Fx: ; " " " " ' " " " " " " ' . merit positions a t Microsoft Corporation, including team manager for Microsoft Access and founder and product unit manager for MS Investor, Microsoft's website for personal investment. Joel R. Spiegel, vice president of engineering, was another ex-Microsoftie, who was Windows 95 multimedia development manager, Windows multimedia group manager, and product unit manager of Information Retrieval. Spiegel, who had also worked at Apple Computer Inc., Hewlett-Packard, and VisiCorp., was able t o hire many good programmers fast. Scott E. Lipsky, vice president of business expansion, came t o Amazon.com from Barnes & Noble, where he had been chief information officer of B&Nfs superstore division and chief technology officer of B&N1s college division. Lipsky had extensive experience i n retail software development and systems integration. Lipsky took a 50 percent salary cut t o work for Amazon because, "When I met with Bezos and She1 Kaphan, it was just so utterly apparent that this was going to work," said Lipsky. He was sold on "the combination of the energy level, the intelligence, the out-ofthe-box thinking" about book retail, where Lipslcy had spent much of his professional career. Lipslcy did, of course, get some generous stock options, but, he ripostes: "Who the hell knows what is going to happen with stock options? There were no guarantees." Although those new executives were definitely essential to bringing Amazon.com into the next phase of its development, "There were a lot of tensions," said Dana Brown. "They were given new high-level, well-paid positions. They were relying on our knowledge of the company to accomplish their goals. A lot of us took that very hard. I couldn't even make my student loan payments with the salary I was making. I felt offended in a way. It's tough making ends meet. I'm working 18 hours a day. 1 don't have time to read any of the books I'm supposed to be ordering." During that time, the company added another director-Patricia Q. Stonesifer, an independent management consultant whose clients include DreamWorlzs SICG. She had been senior vice president of the Interactive Media Division of Microsoft Corporation. (A close friend of Bill Gates, she heads the Bill and Melinda Gates Foundation.) Another lzey addition was Maryann Mohit, who became the company's site producer. Although not a vice president, Mohit has had more influence over the design of the website and the integration of its features than anyone other than Bezos, according to a former company insider. Probably the most crucial hire was a chief financial officer who could help take the company public. By the middle of 1996, Bezos had set his sites on Joy Covey, who was then 33 years old, and had accomplishments that Bezos could admire. The daughter of a doctor, Covey grew up in San Mateo, California. Although she dropped out of high school at age 16, she went on to earn an equivalency degree fi-om California State University at Fresno in 1982, and a B.S. in business administration, summa cum laude. After earning the second-highest score in the country on the accounting exam, she became a certified public accountant at 19. Following graduation, Covey worked for four years at Arthur Young and Co. (now Ernst and Young LLP) as a certified public accountant. (Her first assignment was counting beans at Denny's restaurants.)Covey went on to earn joint degrees in business and law, graduating with honors from both Harvard Business School and H m a r d Law School in 1990. After an eight-month stint as an associate with Wasserstein Perella & Co., the New Yorlz mergers-and-acquisitions advisory company, in April 1991, Covey became chief financial officer of DigiDesign, Inc., a random access digital audio systems and software company and helped take the company public in 1993. Two years later, DigiDesign merged with Avid Technology, a Boston-based developer of digital media systems. After serving in a transitional role at Avid in Boston as vice president of business development, Covey left the company in February 1996 with a desire to hook up with a Silicon Valley start-up. "I had interviewed with nearly 40 high-tech companies (including Excite Inc. and Marimba Inc.)," Covey told a Harvard Business School study. "I was very particular, though I was not focused on a , pecifi~ role. I wanted to help build something significant, I wanted 0 work with very high-quality teammates, I wanted to build a business with a strong, virtuous-cycle business model, and I wanted it to be on the [San Francisco Bay Area] Peninsula," in order to pursue her other passion: windsurfing. In August 1996, an executive recruiter asked Covey to meet with ~ e z o sShe declined the invitation. But the headhunter was persistent, . m d Covey agreed-as a favor-to a lunch with Bezos. Despite acknowledging that her curiosity was piqued by the involvement of John Doerr, Covey spent the first 10 minutes of the meeting reiterating that she had no interest in moving to Seattle. "She said there was no way she was leaving the Bay Area and wanted me to understand that it was a waste of time to try to get her to," Bezos later told the Wall Street Journal. "But after that, we had an incredible lunch, since the pressure was off to impress each other." Atter the meeting, "I couldn't sleep," Covey related in the Harvard Business School case study. "I could not stop thinlung about Amazon. It was clearly a 'category formation' time and I wanted to be part of the team." The next day, Covey called Bezos and aslzed him if she could commute between Seattle and her home in San Francisco, and Bezos went along with it. Covey was hired in December 1996 as chief financial officer and vice president of finance and administration. (In March 1997, she became secretary and treasurer.) For the next eight months, Covey spent her weekdays in Seattle and her weekends in San Francisco, before moving full time to Seattle in the spring of 1997, just in time to run the initial public offering. When Covey joined at the end of 1996, Amazon.com had 150 employees and $16 million in sales. She immediately established stringent financial controls, and eventually installed a million-dollar Oracle accounting system. Gina Meyers, who had been brought in to do the basic accounting, was part of the group who interviewed four or five of the candidates for the CFO job. (Bezos interviewed many more people than that.) Meyers recalled being impressed by Covey's energy level and smarts. "At the CFO level, you get a lot of people who are risk-averse," said Meyers. "The other candidates felt that Amazon.com should slow down because the company was growing too fast. Joy had the attitude, 'We're going to do this tomorrow,' and do it. Joy could think out of the box and quickly grasp the important points. I t was a different business model than most people were used to." Nicholas hvejoy stated flatly: "Nobody is a quick as Joy. On hcr second day at Amazon, she cornered me and Shel and spent three hours with us to have us overview the entire system. And she's not a systems person. She asked great questions. Shc undcrstood every bit of it. She can cope with incredible volumes of information in incredibly short order." On the downside, said Lovejoy, when it comes to "human interactions slzills," Covey is "a bulldozer. She just crushes people." Covey brought fiscal discipline to Amazon. For the first time, managers had to work within budgets. Prior to Covey's arrival, "I never had a department budget or was aware in any way of the finances of the company," said Dana Brown. "We sort of went ahead and did things. It was very loosely organized. There weren't many limits on what we could do or plans for the future. It was just as it came up at the time. Joy Covey imposed more of a broader view on us and forced us to do budgets and plan and project growth." In March 1997, Shel Ibphan, the first employee hired and the architect of the basic Amazon.com system, was named vice president and chief technology officer. Nicholas Lovejoy, who worked closely with Ibphan, affectionately described him as "crotchety," but quickly added: "I love him. He was an incredible grounding influence on JeE" When it came to Bezos's marketing ideas, Ibphan "was a reminder to Jeff that you can't pull the wool over the customers' eyes." He was constantly hammering away: "They're gonna hate that! That's marketing bullshit!" Gina Meyers called Kaphan, "the nuts and bolts behind the whole system" and the reason why it was so well thought out, reliable, and flexible. "Yeah, we had a little down time every once in a while when % ' : / - i something crashed, but when I look back on it, it was just incredible &at he and one or two other people created." For his efforts, Kaphan has been greatly rewarded. In the ~ o v e m b e19, 1999, issue of Forbes ASAP, Kaphan was picked as the r ~nternet'sthirty-eighth wealthiest millionaire, with a net worth (on paper) of $808.9 million. In fact, there was remarlzably little down time on the system. The site went down in June of 1997, when a routine maintenance check turned up a computer problem, and Mice in 1998, and three times in November 1999, when a raft of new products were added to the mix. In January of 1 1998, the sitc went down at about 1 a.m., and was out of service for several hours. In September of 1998, it was shut down for 10 hours because a problem that occurred during routine maintenance. The company gave , out $5 gifi certificates to customers who visited thc site and couldn't order. The Amazon.com system tended not to break down in those early days because of Ibphan's insistence that things got done in the right way. Some called his attitude "technical pessinlism." "I remember a very small detail very early on," recalled Paul Barton-Davis. When the company moved into the Color Tile building, "We suddenly had a vast explosion of network cabling, since we now had three or four rooms with wires going through them. Shel was very insistent that all these wires got labeled at both ends. That was the lund of thing that I would tend just to shrug off. In fact, when we did end up having problems with olle or another machine, it became very easy to go in and unplug the wires and not spend hours figuring which one is which. That technical pessimism that he's got has been a rcal upside to the company in that he tends to want to make sure that things get done in the right way." B U I L D I N G THE B R A N D "It's very important, when planning a business, to look at what is the brand promise that you're going to make to customers," said Bezos. "And the brand promise that you make has to actually coincide very, REPRINTED FROM IBM SYSTEMS JOURNAL, VOL32, NO 1, 1993; 1993, 1999 472 HENDERSON AND VENKATRAMAN 0018-8670/99/$5.00 1999 IBM IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 VOL32, NO 1, 1993, REPRINT HENDERSON AND VENKATRAMAN 473 474 HENDERSON AND VENKATRAMAN VOL32, NO 1, 1993, REPRINT IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 VOL32, NO 1, 1993, REPRINT HENDERSON AND VENKATRAMAN 475 476 HENDERSON AND VENKATRAMAN VOL32, NO 1, 1993, REPRINT IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 VOL32, NO 1, 1993, REPRINT HENDERSON AND VENKATRAMAN 477 478 HENDERSON AND VENKATRAMAN VOL32, NO 1, 1993, REPRINT IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 VOL32, NO 1, 1993, REPRINT HENDERSON AND VENKATRAMAN 479 480 HENDERSON AND VENKATRAMAN VOL32, NO 1, 1993, REPRINT IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 VOL32, NO 1, 1993, REPRINT HENDERSON AND VENKATRAMAN 481 482 HENDERSON AND VENKATRAMAN VOL32, NO 1, 1993, REPRINT IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999 VOL32, NO 1, 1993, REPRINT HENDERSON AND VENKATRAMAN 483 484 HENDERSON AND VENKATRAMAN VOL32, NO 1, 1993, REPRINT IBM SYSTEMS JOURNAL, VOL38, NOS 2&3, 1999