In his latest letter to shareholders, Amazon’s CEO, Jeff Bezos, distinguished between two corporate operating models: Day 1 and Day 2. The former requires an organization to be customer-obsessed, ignoring all other constraints. The latter, more traditional approach, is to appease a broad range of stakeholders, and to rely on existing processes and resources when making decisions.
Naturally, a number of differences cascade from those themes. The dichotomy that has garnered the most notoriety is Bezos’ assessment that Day 2 organizations embrace high-quality decisions whereas Day 1 organizations focus on high-velocity decision-making. Indeed, the power struggle between speed and quality is the core challenge for global organizations and product teams trying to adapt to rapidly changing markets.
Of course, Bezos does not leave us guessing as to his opinion of which approach is better.
“Most decisions should probably be made with somewhere around 70 percent of the information you wish you had. If you wait for 90 percent, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.”
If Bezos is correct, companies who embrace high-velocity decision-making will thrive while companies who don’t will fail. So how can a traditionally “Day 2” oriented organization adapt? To answer that question, we recently hosted a dinner and panel with a diverse panel of experts and practitioners to share their insights. Our featured speakers included:
- Carrie Jaquith, Vice President, Digital Product Manager at Lazard
- Etugo Nwokah, Vice President, Product at Zipari, and former Chief Product Officer of WellMatch + iTriage (an Aetna business)
- Eric Feige, Head of Fintech Services at Magenic, and former digital leader at J.P. Morgan, Prudential, KPMG and Deloitte
- Benzi Ronen, Founder and CEO of Farmigo and former Vice President of Product Management at SAP
Each panelist drew on his or her experiences to explain how product teams can balance quality and velocity. Below are the four main takeaways.
Take the best of both worlds
Panelists immediately challenged the premise that an organization can be easily categorized as Day 1 or Day 2. Jaquith explained how forward-thinking organizations have a “Day 2” infrastructure with “pockets of Day 1” sprinkled throughout.
This structure enables companies to maintain and grow existing business units and customer bases, while simultaneously experimenting with new opportunities. Panelists discuss several models that have worked with varying levels of success, such as skunkworks, innovation labs, and giving product teams dedicated time and resources to test new ideas. Make an effort to understand risk thresholds for both the organization and your specific role, and realize that Day 1 and Day 2 aren’t necessarily mutually exclusive.
Apply a cost-benefit analysis
Not all decisions carry the same weight, Ronen explained, so make costs an explicit conversation. Talk with stakeholders, leadership, and junior employees about the ramifications of a wrong decision. If consequences are trivial or contained, then consider a high-velocity approach. If the potential fallout is enormous, then proceed with caution.
Ronen believes that without explicit cost-benefit analyses though, product teams quickly default to the status quo, which is often an unnecessary abundance of caution. Of course, costs are only one side of the ‘cost-benefit’ equation. To successfully achieve a high velocity, it’s important for product leaders to also advocate for its benefits.
To that end, the most common mistake product managers make is to quickly align with overzealous sponsors, Feige explained. To adopt “Day 1” practices or, perhaps more importantly, to avoid them being shut down, you need to actively identify and engage “backchanneling naysayers.” These are the executives that won’t make their skepticism obvious but who nevertheless need your convincing before they’re on board.
Fear is a great call-to-action
Sometimes, no amount of data or positivity can convince wary executives that it’s time for things to change, especially if the company’s stock price or revenues have yet to peak. In these cases, don’t be afraid to leverage fear, Ronen argued.
By now, you should know and be able to cite the figures. Since 2000, 52% of Fortune 500 companies no longer exist. Only 12% of companies that were on the Fortune 500 list in 1955 were still on the list in 2016. Companies that don’t constantly stay a step ahead are by definition a step behind.
In fact, striking fear is right out of Bezos’ playbook, as his recent shareholder letter clearly indicates: “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death.”
The picture is likely not as bleak or black and white as Bezos put it, but nevertheless, you should consider making fear a part of your argument for Day 1 practices.
Be prepared for the long haul
At the end of the day, a Fortune 500 organization is not a startup, and you shouldn’t have expectations that the two share much in common. So buckle up for the long haul, Nwokah urged, and pace yourself.
When asked about one lesson from driving a “Day 1” mindset that he’ll take with him for the rest of his career, Nwokah answered simply: get energized. Large organizations can be slow to change, and some legacy systems can require months if not years to change. It’s critical not to burn yourself out, and to understand that this is a marathon and not a sprint, Nwokah explained.
As Alpha powers product experimentation for dozens of the world’s largest organizations, we frequently find ourselves at the intersection of Day 1 and Day 2. We’ll continue to explore the strategies and practices that successful product teams adopt, and hope to see you at a future event. You can subscribe below to join our New York City newsletter and receive announcements about upcoming panels.