How Amazon Turned A Problem Into A $bn Opportunity With Advanced Problem Solving

“It's not that I'm so smart, it's just that I stay with problems longer.”

-- Albert Einstein

Several years ago, Amazon was struggling with scaling its e-commerce infrastructure and realizing that many of its internal software projects took too long to implement, a major pain point from a competitive standpoint.

Andy Jassy, acting as a chief of staff for Amazon CEO Jeff Bezos, was assigned the task of figuring out why. What he realized was that what many of these teams were building wasn’t scaling beyond their own projects. For each new project, a team would have to reinvent the wheel.

Jassy and Amazon could have come up with a solution to this internal scaling problem and stopped there. But the team went beyond that, figuring that if they were having difficulty with certain technology infrastructure problems, it was highly likely that other companies were experiencing similar problems. Thus, if they could solve these issues for themselves, they could potentially also solve it for others.

So Amazon started to develop an architecture that could be re-employed over and over again by different engineering teams for different projects. These services allowed Amazon the retailer to move more quickly than it had previously.

But the company didn’t stop there, choosing instead to turn its solution into a new business line, offering cloud computing as a service. And so Amazon Web Services was born. Today, AWS generates roughly $3 billion in annual revenue and adds more infrastructure daily than it took to run all of Amazon in 2003 when it was a $5.2 billion retail business with over 7,800 employees.

The lesson of course is that Amazon didn’t stop by solving its problem, but found a “breakthrough solution” that opened up new business opportunities (see video below).

Andy Jassy, senior vice president of Amazon Web Services, discusse the formation of AWS at Michael Skok's Startup Secrets session at Harvard's i Lab

8 Levels of Problem Solving and 8 Ways to Encourage Breakout Solutions…

It’s not easy to create a culture that, like Amazon, sees opportunities instead of problems. But it helps to start with a simple motivational framework to focus people on assessing their own problem-solving abilities. Even better is to begin to reward them as you see their problem-solving abilities progress.

What level problem solver can you be?

Simplified Problem Solving Framework:

Level 0 – Can’t see the problem (!)

Level 1 – See the problem and raise it

Level 2 - See the problem and define it clearly

(a problem well defined is a problem half solved)

Level 3 – See the problem, define it clearly and identify the root cause

Level 4 - Plan ahead to avoid the problem or derivative problems re-occurring

(prevention is better than a cure)

Level 5 – Find a practical and viable solution to the problem

Level 6 – Find a breakthrough solution to the problem

(for example one that saves more than it costs, or opens the way to other breakthroughs)

Level 7 – Take initiative to implement the solution or develop the breakthrough

Level 8 - Look beyond problem prevention – create new opportunities from continuous improvement …

(Think 3M)

How Can You Create A Great Problem-Solving Environment ?

If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea. -- Antoine de Saint-Exupéry

1. Recognize and reward progress up these problem solving levels and, if possible, make recognition independent of titles, roles or traditional organizational constraints
2. Develop a culture that celebrates efforts to “run to the fire”
3. Be patient with problem solvers who make mistakes and ask yourself – could you have done a better job setting the context, providing the support, resources or mentoring?
4. Consider rewarding bold, well-conceived attempts. Especially when people are trying to break through conventional constraints
5. Provide resources and opportunities for people to stretch their talents, shining a light on creative solutions
6. Even if you have to have only one person accountable for something, make it everyone’s responsibility to solve problems at EVERY level in the organization. Grass roots collaborative solutions are so often the best.
7. Usually people closest to the problem are best able to define it and
8. when solved by those same people, they feel highly motivated to implement those solutions
9. Solutions from on high are less motivating and often fail to provide
10. the self-learning experience
11. Some of the best solutions come from multi- disciplinary, multi-level,
12. cross-functional problem solving
13. Try even to engage your customers, partners and communities from
14. outside the company. This co-creation often fosters trust and understanding. (Think open source and crowd sourcing)
15. Encourage self-awareness and motivate people to ask for help to develop their weaknesses and team around their strengths. Offer training and development for those who want to reach higher
16. If you're a manager, be authentic and don’t talk any of this. Just quietly walk the walk in a way that is authentic for you

Taking this approach to problem solving will build both abundance and resilience on your team. I've found that the companies that attract, nourish and reward people with great problem-solving skills as a core competency get tremendous competitive advantage from it. Furthermore, businesses are often born from the successful identification and solution to problems in the market

As always, I encourage you to share your thoughts in the comments below. What you have found and how do you encourage breakthrough problem solving?

Content from this column was originally published in Harvard Business Review and Forbes.

At Underscore VC, Michael and his team partner with daring entrepreneurs to invest in founders and build from inception to market leaders. As a former entrepreneur turned VC, Michael has backed and built teams that have created billions of dollars of value focusing on large, market-changing technologies such as Cloud Computing, IoT and Big Data as well as disruptive business models such as Open Source and SaaS. Current representative investments include Acquia, Cazena, Demandware (NYSE:DWRE), Mautic and Salsify.

Follow Michael on LinkedIn, Twitter @mjskok, his website, and in his Harvard Innovation Lab class, Startup Secrets. Follow Underscore VC on the web and Twitter @UnderscoreVC.

Photo: iStockPhoto