Why Amazon’s CEO Is Working to Undo A Bezos-Led Overexpansion | WSJ Tech News Briefing

[Music] this is your tech news briefing for friday june 24th i'm zoe thomas for the wall street journal july marks one year since andy jassy took over as ceo of amazon for amazon insiders he was a familiar face he spent more than two decades there and had been running the cloud computing division amazon web services the company's cash cow but since his promotion it's been a bumpy ride one that's forced him to undo some decisions made by his mentor and the company's founder jeff bezos to break down what jassy's first year as ceo has been like and what it tells us about the e-commerce giant's future is our amazon reporter dana matioli hi dana thanks for being here hi thanks for having me so dana what situation did jesse inherit when he first took over andy started on july 5th 2021 and if you remember that was a time when people were still relying on e-commerce and you know when earnings were coming in companies like amazon were just killing it they were you know above their estimates and amazon actually posted record earnings so that's sort of the amazon he walked into taking over but behind the scenes things had started to change you know customers had become more comfortable shopping in person again they actually liked it it wasn't you know viewed as a chore it was nice to get out and about and all of this infrastructure that amazon built to deal with this unprecedented demand became too much just given the change in shopping habits and so how has jesse been dealing with that change what's he been doing to help amazon through this shifting period once he took over it quickly became apparent that there are plans for this massive build-out of more warehousing and sortation centers and logistics network was way too big they weren't going to need all that so quickly they started just slashing their forecasts on that build out and part of the plan has been to sublease all the space that they bought to delay building these very expensive warehouses that they don't need right now and to stop hiring in the warehouses because they don't need quite as many people fulfilling these orders if there's fewer than they were expecting how did amazon end up in this situation kind of overestimating how much capacity it was going to need on the e-commerce side so back during you know the darkest days of the pandemic you know before a vaccine was like even on anyone's mind amazon became flooded with all these orders at the time jeff bezos was still ceo and the company has this credo of quote-unquote customer obsession and basically that means doing whatever it takes for the customer and i don't know if you remember this but people were hoarding toilet paper back then in hand sanitizer and you know there were shortages on the shelves because everyone was just taking whatever they can get and amazon was a destination for a lot of this so they were running out of you know inventory their quick shipping of two days extended to like more than a month on some items so they greenlighted this very very aggressive plan to grow quickly to meet that demand the problem with plans like that is that you can't just turn the switch on overnight in order to grow to meet that demand you have to make capital allocation decisions that take two years to execute so while they committed to the spend and building out these centers and all of that march 2020 it takes two years for them to come online and that's where we are now so all of that extra capacity is coming online now and jassy's saying you know hey maybe we don't need it he's looking at cuts and subleasing but how is that being read inside amazon what do people think of his leadership style i've heard that there hasn't been you know any disagreement between those cuts and you know the people that are implementing the cuts everyone agrees that they were a little bit too aggressive here where there is some daylight is andy's management style so he went from managing cloud computing at amazon which was very siloed off of the rest of amazon and so different you know it's not really a consumer-facing business it's b2b it's very technical it's tons of engineers you know the rest of amazon is you know shopping prime it's alexa it's just very different than cloud computing and at aws andy was a very very hands-on manager in the details in the weeds whereas at amazon you know there are lots of senior leaders who could be ceos of publicly traded companies on their own that's how big their orgs are running things and you had jeff bezos sort of floating above as the ceo that was not at least in recent years very hands-on and now that andy's the ceo i think part of it is any new ceo would sort of make the rounds and understand the business and ask lots of questions but his attention to detail and his different ways of managing have rubbed some people the wrong way and it even was part of the reason that the person in charge of all of the consumer business and logistics business decided to leave in the middle of this problem what about in terms of amazon's board or its investors what do they think of jassy's style the board is has really backed him they think he's the right person to lead the company in this time investors have been a little bit less patient you know the stock is down more than 30 since andy took over and wall street's not the most patient bunch and because amazon employees are compensated heavily in stock it's also an issue on that front because that's like a significant pay cut for a lot of these employees and it could cause people to leave or become antsy so that is something that they will have to figure out do we know what his plans are to kind of move the business forward and i guess maybe step out of the shadow of jeff bezos a bit i think you know a lot of his time will be dedicated to growth you know like advertising is this really big area for them that's really high profit and it's growing really quickly and project kuiper which is small but of interest and there's all these other areas that could become the next growth areas but he's also having to you know reel in some things that aren't working you know physical stores was launched under jeff bezos and they made a very significant cut there they closed almost every physical store except for grocery in the last few months because it just wasn't working so i think because andy is new and he has this opportunity to meet with all the division heads and go over the numbers and ask all the questions you could see some other things get cut that he doesn't deem worthy enough of keeping within the company all right so some changes coming to the everything store i guess all right that was our reporter dana matioli thanks for being here dana thank you and that's it for tech news briefing this week our producer is julie chang we had editorial support from scott salloway our supervising producer is chris sinsley our executive producer is kateriocum and i'm your host zoe thomas thanks for listening and have a great weekend [Music] you

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Id: YfKKjKaaJdE

Length: 7min 21sec (441 seconds)

Published: Fri Jun 24 2022