W16 - Reverse Working Method

This week I read Amazon's "Working Backwards" and found the roots of many of our company's methodologies. Amazon's methods are all built around the company's core purpose, keeping everyone in the organization constantly aware of why we exist, focused on controllable processes, and rational about relatively uncontrollable outcomes.

The working-backwards method. ‘‘Working backwards’’ means starting from the user and moving the actions required at the final node of the delivery process to the beginning of the workflow. Often the last action before a product goes to market is the launch, so the working-backwards method brings that launch forward. The beginning of every product or idea is a press release plus an FAQ. The PR highlights the customer experience for readers. The FAQ details every important aspect of the customer experience and provides a clear, thorough assessment of the costs and challenges the company faces in developing the product or delivering the service. Spend time upfront thinking through every detail of the product, identify which ones will have the greatest impact on customers and the business, and only then commit scarce development resources.

Working backwards is like a technical upgrade to the MVP concept in lean startup methodology, enabling a more concentrated production of ideas. MVP moved from broad, costly spraying to targeted watering; the working-backwards approach advances that further into precise, concentrated drip irrigation.

Input metrics vs. output metrics. Input metrics make everyone focus more on what benefits the user, rather than only on the company's P&L or their own department's performance. To exaggerate: if you look solely at profits, top chain brands like Haidilao and Starbucks owe much of their margins to rents well below the industry average. When Haidilao went public in 2018, rent accounted for less than 4% of total costs in its financials. Starbucks' average store rent is about 15% lower than peers. Low rent is an output metric, but if you use rent reduction as a decision metric, most actions will center on cultivating relationships with landlords. In reality, low rent is earned through brand, service, and the “third place” value propositions—these are the controllable roots and should be the input metrics to focus on.