How leaders can deal with uncertainty: Lessons from Amazon's early days

Julie Benezet joined Amazon in 1998, when the company was just another ambitious startup in the nascent business of internet retail. She was hired to find sites for Amazon’s distribution centers as the operation grew. There were a lot of unknowns at the time, but the risks taken back then clearly paid off. Benezet left Amazon in 2002 after building the company’s first global real estate function. She was an executive committee member of the Samuel Zell and Robert Lurie Real Estate Center at Wharton and also taught the Challenges of Leadership program at Harvard’s Graduate School of Design, Executive Education.

Today, she’s a consultant who teaches the value of taking risks, which is the focus of her new book, The Journey of Not Knowing: How 21st Century Leaders Can Chart a Course Where There Is None. Benezet recently spoke on the Knowledge@Wharton show on SiriusXM about the benefits that can come from being uncomfortable. (Listen to the podcast at the top of the page.)

An edited transcript of the conversation follows.

Knowledge@Wharton: How did your experience at Amazon shape the content of this book?

Julie Benezet: I was in a company that was in a new industry. There was no such thing as e-commerce when I got there. The organization was new. There was no such thing as a business plan, and we had a large plate of work to achieve. In order to achieve that end in that environment, we had to make up a lot of things.

I like to invent. I’ve always enjoyed the entrepreneurial spirit. Before, an entrepreneurial mindset was nice to have — it’s fun to go try to make something better that hasn’t been tried before. When I got to Amazon, it was a requirement because there was nothing that you could look back on and say, “OK, that worked well. We’ll do more of that.”

Instead, you had to look forward and ask, what does this new e-commerce customer want? What is it that they’re going to expect in terms of speed of delivery? [And] the way that things are handled in the back end, in the customer-service end. How do the programmers have to work together to create a new platform that will continue to address their evolving demands? You were always on your toes, trying to anticipate what these new customers wanted, and then making it work with no precedents.

What became our way of work at Amazon evolved into the 21st century, where everybody works that way. That created for me the Journey of Not Knowing, which is simply about the importance of going toward rather than away from the scariness of change to achieve something better.

Knowledge@Wharton: That’s an issue that a lot of executives have — they want to have the security of the known, and they do have the fear of the unknown.

Benezet: Absolutely. They get petrified when you say, “You don’t know if this new customer is going to like what you have to say, but how else are you going to find out unless you go and talk to this person?” I saw this at Amazon, and I see it writ large in today’s executives. People who have come in to present to us all the whiz-bang things they could do for our business without asking us what it is we were up to.

Part of the unknown is asking, being prepared not to know what they’re going to say, and being OK with the discomfort of that. A lot of executives feel like their job is to be super-confident, in-charge and in control. I believe that they’re going to miss what is actually going on because, at the end of the day, we live in a world of constant change. We are totally out of control. I mean, look at the madness of Washington. We’re out of control! But that’s an opportunity to learn.

Knowledge@Wharton: How has digital affected our ability to deal with the unknown in both our professional and personal lives?

Benezet: The digital world has created a life where everything’s hyper-connected and fast. It has sped things up so much that people have stopped thinking, and there’s a lot of reactive behavior going on, a lot of acting out, rushing to judgment. People take actions without the benefit of verifying facts. The digital world has accelerated this bias towards action, even when the action doesn’t make sense given what’s really going on.

Knowledge@Wharton: Early in the book, you write about these first couple of experiences of building fulfillment centers. You had to develop one in Germany, which was a unique dynamic in trying to understand the customer there, compared with the American customer. Can you tell us about that?

Benezet: In Germany, we weren’t exactly welcome. We had acquired an online book organization there. The owner was pleased to have the large check and the honor of having Amazon coming to buy it. But they weren’t pleased with us coming in and saying, “No, this isn’t right. We need to move your distribution facility to another part of the country where we have more space and we’re more centrally located. We can’t tell you where, but we can tell you why. We just don’t see you achieving that in the small space you have here.”

There was a lot of pushback of, “You don’t understand us, you don’t understand how we work. You don’t understand that if you move more than 30 miles away, you’re going to have to create a social plan which will fund people’s livelihood for the next 10 years. You just don’t understand.”

I don’t understand the German language, so it was a little inconvenient, but we worked around that. What we had to do, and in warp time, was to learn from them what the German setup was. We couldn’t have things like a nice database that told us where in the country everything was because there was no integrated database of real estate.

Amazon at the time was hardly creditworthy. We were beloved by Wall Street because our stock soared because people saw this great future, but the lenders weren’t so convinced. They said, “You have no credit. You’re not profitable. In fact, you stubbornly say you don’t want to make profits for the next few years” — which was not a very strong base to go in from.

When you arrive at the doors of landlords who have never met you, who say, “Yeah, we hear about in the United States, you got this thing going. But we don’t know about it here. We have requirements.” It took a lot of painting a picture of, “Here is the acceleration of the internet, which is growing at 2,300% a year. Here is the acceleration of people buying off catalogs. You put these things together, you have a business model that is only going to grow; it’s going to grow quickly. That’s why we have to get this super-sized facility to house all of this.” They finally believed it, and we were able to get a distribution center. But there was a lot of insanity along the way when people, just because of the scariness and the speed of it, pushed back.

I spent a lot of my time feeling like a social worker, asking, “What’s getting in your way? What’s stopping you?” Because the Journey of Not Knowing is not just knowing what idea is going to work, it’s also not knowing how people are experiencing things inside. How are they with the new? How are they in taking experiments? How do they feel about failure? One of the things that was very freeing in working with Amazon, which executives these days can learn from, is that failure was OK. We failed all the time. The important thing is what you learn from it. What do we need to change to push this forward?

Some things were abandoned entirely. For example, zShop was brought out in the late ‘90s as a competitor to eBay because we wanted an online auction kind of format. It failed miserably because we just didn’t know how to do it right. But what it led to was the format we have today at Amazon. It led to the Amazon Marketplace, which is an integrated model of being able to buy something from the vendor, buying something that is used, or buying something that is from a third party. And you can buy it all from the same place, on the same page.

Believe it or not, that made a big difference. About 50% of the retail activity on Amazon now occurs in the Marketplace format, but it started with a failure. Back in ’98, ’99, when we were trying to get this distribution center in Germany, we were awash in failures. But it led to something that was successful, and we got the distribution center.

Knowledge@Wharton: You have four key principles that you call the Core Four. What are they?

Benezet: The whole point of the Journey of Not Knowing is to learn to travel through the discomfort of trying out new ideas to make life better. Your job as an executive, or anybody in life, is to make something better. In order to do that and deal with the discomfort of going to this unknown place, you have to do four things.

The first is, discover your dreams. Choose something that you want to improve. It can be anything. Maybe you want a different communication culture in your company because people aren’t honest enough with each other. They resist giving each other feedback. What you want to build is a culture where you give honest feedback in a constructive way.

It’s a disruption because people are so conflict-avoidant, but it’s an important change. It can be choosing a new market to go into. It could be a different way of staffing teams, in which the teams themselves choose their members, rather than the managers choosing. The idea is, you choose something that you want to make better. That is your dream.

It’s often something that you’ve been avoiding because it bugs you so much and it’s going to be hard. But once you have that dream, then you have to go learn about the people who will benefit from it. If you are looking at project teams, and they are the ones who would benefit from changing to a regime where they choose their own members, you spend time with those teams. Ask, “What goes on for you? Where do things trip up? What happens when you have a member who’s not functioning at a high level?” That crystalizes what your dream is and allows you to hone it, so when you go to test it, you have better facts to deal with.

The second principle of the Core Four is to get comfortable with the scariness of risk. We spend a lot of time trying to de-stress ourselves, trying to be mindful and so on. All of these are good things. But when you’re in the business of trying new things and the new behaviors that go with that, you’re going to be in a place where you’re going to be nervous. It’s important to accept that as part of the deal.

However you experience it physically, however you experience it mentally is to not fight it, but to embrace it and say, “This is the cost of trying to improve things, and that’s good.” It doesn’t mean you sit and shake and do nothing, but you allow it to travel with you. In effect, allow it to say, “This is assigned to me. I have to pay more attention to what’s going around me, to learn from the others, to ask questions, to hear what they’re saying, to course-correct as we go along.” And be OK with the fact that they, too, are going to be nervous.I spent a lot of my time feeling like a social worker, asking, “What’s getting in your way? What’s stopping you?” Because the Journey of Not Knowing is not just knowing what idea is going to work, it’s also not knowing how people are experiencing things inside. How are they with the new? How are they in taking experiments? How do they feel about failure? One of the things that was very freeing in working with Amazon, which executives these days can learn from, is that failure was OK. We failed all the time. The important thing is what you learn from it. What do we need to change to push this forward?