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Working backwards – strategy in a private-equity context

Updated: 6 days ago

I’ve never been a fan of popularising a management theory or tool unless I’ve been able to use it myself and achieve practical success. Has anyone actually used a SWOT analysis to inform a true strategic decision?


Given this, there are two principles from Amazon’s vast collection that I have found incredibly practical when working with private equity-backed Management teams. The first of these that I’d like to share is ‘working backwards’ (the other will follow in a future post).



As a brief primer, Amazon’s founding characteristics are described as customer obsession, long-term thinking, eagerness to invent, and operational excellence. There is a deeper set of 16 leadership principles, which include thinking big, having a bias to action and frugality. I’d recommend ‘Working Backwards’ written by Colin Bryar and Bill Carr (who started at Amazon in 1998 and 1999 respectively) if you want some background reading. I’d also recommend Amazon’s annual letter to shareholders, the 2016 version summarises a lot of their overall principles.


I’m sure that there is some element of post-hoc mythologising here, as with many corporate back stories. However, I’ve interviewed enough Amazonians to be confident that ‘working backwards’ is a widely adopted and trusted internal practice (and more transferable than writing six page memos before each meeting, then reading them in silence at the start).


The 'working backwards' method is a unique product development approach that emphasises starting from the customer's perspective. The process begins with the product team drafting a press release as if the product is already available. This mock press release is aimed at the customer and includes critical elements to ensure clarity and appeal:

  • Product Name: Clearly states what the product is.

  • Intended Customer: Defines who the product is for.

  • Problem Solved: Identifies the issue the product addresses.

  • Customer Benefits: Highlights the advantages for the customer.

  • Inspirational Quote: A quote from a company spokesperson explaining the product's purpose and aspirations.

  • Call to Action: Encourages customers to engage with the product immediately.

  • Optional FAQ: Answers common questions about the product's development and functionality.

This approach has several benefits for product development, grounded in understanding and prioritising customer needs:

  1. Customer-Centric Focus: This method reinforces Amazon's principle of customer obsession. By starting with what will delight the customer, the team ensures that the product is developed with a clear focus on customer needs and desires.

  2. Viability Check: Writing the press release helps the team gauge their own enthusiasm and the product's potential. If the press release does not inspire, it may indicate the product needs more development or a rethinking of its value proposition.

  3. Guidance During Development: The press release serves as a strategic guide, similar to a product roadmap, keeping the team aligned with the core ideas and goals throughout the development process.

  4. Identifying Questions: there may be issues or questions raised which need further investigation before product development can continue, for example what proportion of the potential customer base would truly value a particular feature.

  5. Forcing Simplicity: by its nature a press release should use simple language and avoid corporate jargon. The FAQs in particular force the solving of tough issues up-front.

The process is quite involved, but as Jeff Bezos explains: “Done correctly, the working backwards process is a huge amount of work – but it saves you even more work later…its designed to save huge amounts of work on the back end and to make sure we are actually building the right thing.”


I’ve applied this approach of starting with the ‘marketing’ of a product to inform several different decisions in the context of a private equity investment - considering new products or service lines, entering a new international market, or creating a new team.


However, my favourite use of the ‘working backwards’ approach in a private equity context is to create the target ‘first page of the IM’ – the summary of the business that we intend to sell in 3- or 4-years as summarised at the start of the ‘Investment Memorandum’ (the ‘brochure’ used to introduce a company to potential investors).


This exercise can be the cornerstone of the first ‘strategy day’ in a new investment, and create strategic direction for the whole investment. It is easy to fall into filling such a day with the ‘learnings from Due Diligence’ but this content is inherently either very tactical or theoretical. It also involves one-way communication from Due Diligence providers to a Management team, who other than a brief right of reply, might not engage fully with the content.


To facilitate a ‘first page of the IM’ exercise, you can take the following steps:

  1. Ahead of the strategy day, set some homework for the attendees, individually or at most pairs – to write up to 8 single sentence bullet points that describe the business at exit and which will be demonstrably true (ie you would be able to prove empirically).

  2. You can provide the ‘first page of the IM’ for the recently completed transaction as a starting point, but provide some extra suggestions – thinking about the role of new products, data, and technology; as well as the metrics that will really matter to a future investor. The goal is to design the most valuable, achievable version of the current business.

  3. Make sure to involve the wider Management team, non-executive directors and investors. I like to ask a third party e.g. a sector-experienced banker as well.

  4. Collate the inputs ahead of workshop and align where you all agree, and highlight the points of difference both thematically and in terms of level of ambition (e.g. reach 5% market share vs. 10% market share)

  5. In the workshop you can debate and refine a single version of the ‘first page’, based on what buyers will value and what is realistically achievable, with some stretch, in your 3-4 year time horizon.


Such an exercise in my experience can set the tone for the whole investment – aligning the level of ambition but also bringing clarity on the proof points that really matter. For example, you’ll probably get some inputs that make the claim of having the ‘best management team in the sector’ – that might be true, but how can you prove this? A track record of consistently beating forecasts, brilliant customer retention, a fantastic employee NPS and high employee retention? As the sales adage goes – sell benefits, not features.


Once you have an agreed ‘first page’ – you can include it at the start of your board pack to help anchor each strategic conversation, and then revisit it every 6-12 months at future strategy days. It can inform budgeting, organisational structure and hiring. It also flushes out potential uncertainties or areas of disagreement very early to give you time to figure them out – for example, if a major initiative being considered doesn’t support the ‘first page’, is it a good idea?


This approach works particularly well in a private-equity context because of the (theoretically) fixed timeline that you can work back from, as well as the construct of the IM. If you’re thinking about planning your next strategy day, I’d highly recommend giving it a go.

If you’d like to discuss how you can set strategic priorities as part of a value creation plan, please Contact Us.


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