Bessemer’s laws of e-commerce #8

Stumbled across this list of e-commerce laws from BVP which contains several gems. #8 caught my attention: What Would Amazon Do? As a loyal Amazon Prime member, I enjoy learning about Amazon’s organizational structure and logistics. Most people have heard about the “two pizza team” concept but fitness functions—a concept borrowed from genetic algorithms—was new to me:

Each workgroup in Amazon must build a “fitness function,” a customized equation that incorporates the most important metrics for a particular group. When computed, the fitness function creates a single “fitness number.” This is the number each group presents to Amazon CEO Jeff Bezos. And if this all-important number isn’t going “up and to the right” consistently, the group is in trouble. Each group’s fitness function has to be approved by Bezos, and sometimes it takes months (if not years) for groups to arrive at the right function.

Understanding the key drivers of a business is like peeling back layers of an onion. The deeper you go, the more complex fitness functions becoming, drawing on increasing granular and specific aspects of the business model. It’s no surprise that an organization as complex as Amazon’s takes months or years to iterate through this process.