In this episode of Partnering Leadership, Mahan Tavakoli speaks with John Rossman, Author of The Amazon Way book series, and managing partner and business advisor on strategy, leadership, and innovation at Rossman Partners. John talks about many lessons leaders can learn from the rationale behind Amazon's 14 leadership principles. John Rossman also shares his experience and advice on navigating and leading through disruption.
-John Rossman on how Amazon integrated its leadership principles into the organization's culture.
-The balance between the kind of organization leaders want and the organization's current reality.
-John Rossman speaks about operational excellence and its relevance to innovation.
-How the right approach to operational metrics can support risk-taking and innovation.
-John Rossman on the value of experimentation even when those experiments lead to failure.
-Why Amazon is a writing culture and how it helps teams with clarity and sound decision-making.
-Andreessen Horowitz podcast a16z
-Kevin Rose podcast Modern Finance
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More information and resources available at the Partnering Leadership Podcast website:
Welcome to Partnering Leadership. I'm really excited this week to be welcoming John Rossman. He's the author of the Amazon Way book series. He's a former Amazon leader and he is managing partner at Rossman Partners. They're an advisory firm helping clients compete in the digital era.
John's most recent book is the Amazon Way: Amazon's 14 leadership principles. I really enjoyed reading the book and the conversation with John as it helped clarify my thinking both with respect to innovation, how all of our organizations, not just tech companies can be more innovative. And also how many of these principles can be applied by us as we lead our teams, no need to be the CEO of a startup or a CEO of a larger organization. All of us can learn lessons from these 14 principles and apply them in leading our organizations and our own teams.
So I really enjoyed this conversation. I am sure you will too. And learn a lot from John. I love hearing from you. Keep those comments coming firstname.lastname@example.org, there's a microphone icon on partneringleadership.com.
Love getting those voicemail. Don't forget to follow the podcast. And finally, those of you that listen to these on apple, leave a rating and review. When you get a chance that way more people will find episodes and benefit from these conversations.
Now, here is John Rossman.
John Rossman. Welcome to Partnering Leadership. I am thrilled to have you in this conversation with me.
Mahan. Thank you. Thanks for the prep you've done for this and our conversation.
I absolutely love the Amazon way and the insights you share. And most specifically that these are lessons for all of us leading organizations on how we can lead better organizations ourselves. So before we get to that, though, John, I would love to know whereabouts you grew up and how your upbringing impacted the kind of leader that you eventually became.
Well, I grew up in a suburb of Portland, Oregon, very middle-class family, and I was the youngest of four kids. So my parents are very senior at this point. But their priority was always around education. And I think of all the great things that I got from my family. I think it's a commitment to always be learning and having good content and being willing to change your mind about things. I think that's maybe one of the ways that my upbringing influenced me because it was something my parents were extremely committed to, even though they had a tough time getting in college.
My dad was the middle of 10 kids, he was the only one to go to college. And from day one, it was just the assumption in our house. Like you're going to college. And I think for a lot of, especially world war, two era vets, which my dad was and everything.
I think you see that commitment to education as the path in America, was through education.
And that comes across in your work also, John, under recommendations that you make to all kinds of leaders, which is that need for constant learning and ongoing development. Now just curious, you spend time consulting, different career opportunities at one point, then you decided to go through 23 interviews over four months to get a position at Amazon.
What was it with Amazon? And these were the Amazon dot bomb days. Not the Amazon we know today that got you so excited working for this organization.
It was 2001 to early 2002. When I was going through the interviews. If you remember back then those were pretty dire days of the entire tech economy. The dot bomb era really happened. Not only did venture capital dry up, but it spending dried up too. I was leading a data integration technology company at the time.
And the interviewing process. My interviewing process, I think in particular at Amazon took that journey because we were really trying to figure out what was the business I was brought in to lead was the marketplace business at Amazon. So that's, third-party email@example.com. Today that's over 50% of all units shipped and sold.
And it was clear. Amazon was still thinking through what was this strategy going to be? It was actually their third try at a third party selling approach. So it was clear they were reconciling something and they were just taking their time to get to know me. At one point I started to think it was personal, but it really was everybody figuring out what the program was going to be. But when I started at day one, I was at a tremendous advantage because I knew everybody and what all the open questions were that we needed to figure out. And I understood how to navigate pretty well. So it was a tremendous orientation opportunity for me.
So you had deep expertise coming to Amazon, and you learned a lot while you were at Amazon, which specifically then comes to your book Amazon way and 14 leadership principles. Part of what I love about how this is done at Amazon is that it's part of the culture rather than a poster on the wall, John.
And what I wonder is how has Amazon made it part of the organization's culture? because I see so many organizations that have principles, but they literally are laminated cards that people have to pull out and look at or posters on the wall rather than principles that the executives and people in the organization are living and deciding by.
Well, I think you give the answer to the question. It's about leadership, and both senior leaders at Amazon, both taking time and figuring out. What, how do we make decisions? How do we think about leadership? How do we work together? How do we hold each other accountable? What are our priorities?
And So when I was at Amazon, I was there from early 2002 through late 2005. The leadership principles weren't codified. We were using them and we could talk about them, but you couldn't say you couldn't even show like, Hey, what are the leadership principles? And it was sometime after I left Amazon that they codified these leadership principles.
And they've made a couple little edits since then, but not many. And the key is really for the senior people at the company, not a group within the company, but the senior people, the company to be aware of their answers to those questions of how do we want to compete? How do we want to work together?
What sort of tone from the top do we want to set? How do we want to hold each other accountable? And then the willingness to practice those slow down conversations and not only focus on what decision or choice we have, but how are we making that choice? What's the underlying principle or perspective or tenant that we're putting in place relative to that, and then keep practicing that.
Those are the tribal things that you build as a tribe. And then when you get comfortable with what they are, Write them down, practice them some more, be willing to adjust them, but it really is about leaderships living these principles and that's what makes them effective.
So this is the third edition of the Amazon way, a lot of new material in it, but one of the new pieces is an appendix about building your own leadership principles. Because I do think that it really helps organization to scale in a purposeful manner, because if you don't specify your principles, which helps specify your culture, then it becomes the culture coming from other companies or different people's perspectives on what the culture is versus a common view of what that culture is.
Taking the time to be clear about what your perspective is on these topics is a valuable exercise for any organization.
So John, as you guide organizations on coming up with their leadership principles, what balance do you strike within the level of aspiration in the kind of organization that the leaders want to be versus the way the organization is operating, because it sounds like Amazon codified these principles by looking at what was in practice primarily rather than just coming up with a pure future aspiration. How do you strike the balance in guiding your client organizations?
That's a really good question. There could be multiple points of view on this, but I think you need to be fairly aspirational on what your principles are, but the most important thing you do is you figure out what are the mechanisms, the little tools and strategies that we put in place in order to actually manifest or practice the leadership principle.
So for example, one of the Amazon's leadership principles about customer obsession, customer centricity can be a really important part of a company's principles and their cultures. How do you actually practice customer centricity? How do you do that? There's lots of ways you can do that.
A voice of the customer program can be very important. Having leaders that work in the field, work with customers on a very routine basis. That can be a really powerful mechanism. Starting every meeting or every email, every discussion with who exactly is the customer and how does this topic impact them? That can be a nice mechanism to do. Sometimes having a chief customer officer with the right license with the right goals can be a step that you take. That's what you have to figure out.
Aspirationally, what's the principle? Where do we want to be? But close in, what did we actually do to start practicing it? Start supporting it, and put it into action.
I love the way you put it, because it makes it tangible and realistic for leaders to implement this in their organizations. Now, your book has been transformative in my thinking in a couple of different areas. One of them, you touched on John in that much of the innovation at Amazon has not been what people typically think of as innovation. It's been through operational excellence and that customer intimacy that you talk about, there's been a lot of operational excellence around that. So do you mind talking a little bit about that aspect and how it ties into innovation?
That's another great question. So Amazon from the beginning knew that they wanted to be the world's most customer centric company ever, that they wanted to have at their core, be inventors and builders. But they knew that to, to do those things and to hit customer expectations, they had to be operationally excellent.
And so this trifecta of customer invent and operational excellence was always in the perspective, always what we were working towards. And when you commit to operational excellence and certain service level agreements, SLA's, and high bar expectations for how you hit customer promise. What that oftentimes will do is to force you to take steps that are actually innovative steps in order to hit that.
For example, when Amazon says we want 99.9% of all customer deliveries to be what they call the perfect order, in order to do that they had to invent so many different approaches in their fulfillment network with other partners in order to do that.
So Bezos is on record of saying that 80% of all Amazon's innovations come from operational excellence. The heart of that operational excellence is data specifically metrics and using those metrics as your guide to where's their noise, where's their friction, where's their imperfections, and then bringing people together to action those metrics.
How do we hit our SLA? When we start hitting our SLA, how do we raise the SLA and get to that, those start becoming your competitive modes because others can't easily follow you into these high bar commitment levels to customer experiences. And so I've never had a challenge in bringing together that operational excellence is the heart and soul of innovation.
I think at some point you will see a transformational or what you might call big "I" innovation, but most of innovation is little. "I" innovation, right? How do we improve this quality? How do we improve the cost? How do we take lead times remove lead times? How do we do things in a real time basis?
How do we predict what the next step is for the customer and bring that to them? All of those types of operational excellent questions are what leads you to innovate.
And a lot of times I find people look at the end product of many iterations of that operational excellence and think that innovation came about as a result of a group of senior leaders sitting in a room and coming up with an innovative idea, including right now with Amazon, you could literally take your package without putting it in a package. Go to the UPS store and give it to them. It's a real innovation. It has removed a lot of friction in the customer return and therefore the satisfaction for the customer. But it has come about as a result of what you say is continual operational excellence and turning the knob on that operational excellence. It is not a big breakthrough idea based on an offsite or sitting together and coming up with ideas.
Yeah, I think one of the real keys is how do you organize around it? How do you resource it? And so if you have these metrics, you have these understanding of where the friction is, where the imperfections are, where the costs, where the quality is, but if you don't resource it so that teams can take action on it to build something that's better, that's I think more of the challenge is making sure that you resource these teams to fairly quickly take action relative to those. Don't put a ton of bureaucracy or process around which items they pursue. If they've got data and they rationalize it to themselves and they can do it in a small iterative manner, empower teams to do that quickly. And that picks up the pace of this type of innovation.
And you've repeatedly mentioned, metrics are a key part of that. One of the things you highlight is that a lot of times we choose metrics that tell us how great we are doing at all levels in organizations, rather than the metrics that can truly help us improve operations. So Amazon has a different view on all the metrics that they measure.
Yeah. I The goal is always find the noise, right? Find the imperfection, find the friction. And so if your metrics aren't telling you that, you've got the wrong metrics. But what happens in most organizations is you measure to the average you measure to the mean, and you end up telling yourself that you're doing a good job versus calibrating and finding the noise in that function or that step, or that customer experience that operational step where there is imperfection and then zeroing in metrics there. One of the tricks to doing that is service level agreements, SLA's. So take the 99th percentile for that metric, like maybe it's a service response time.
So instead of measuring the average for the service response time, measure what's the 99th worst service response times that we have. So it takes you to the very top of what that service response time is. And then zero in there, that's zeroing in on where the imperfection is and then figure out well, is "A", is that a good enough experience? And "B" is then how would we improve within that little area of noise?
At one level, it sounds like, yeah, we're still using metrics to drive change, but it's a completely different view in zero in focus on where the opportunity is in that data and in those metrics and it as you said yeah, most organizations, they find metrics as a way to say we're doing a good job and while that's true and one of the great sayings as celebrate for a nanosecond, you do want to recognize like, yeah, we had. Here's the problem solved and that being one of the leadership principles at Amazon is called the vocally self-critical. And earn the trust of others. And that is all about being confident and in control of the details of your business and leading with where did my service, my product, my business, not hit that high bar expectation, and this is what we're doing about it.
And that builds trust within the organization that everybody leads that way. We start with critical feedback, not telling ourselves how good a job we did, we lead with, where did we disappoint customers today.
That is a powerful statement by itself, John, because I imagine first of all, some systems and structures such as compensation, therefore cannot be tied into meeting some of the metrics and the kind of culture and environment that is nurtured is one that embraces that vulnerability and desire for constant improvement rather than one that just celebrates and glorifies successes.
And the real risk is if you're in a great business and in a healthy organization, and all you do is more or less, say, “we're doing a good job” and congratulate each other, you develop over time what Warren Buffett calls the. The A, B, C which is arrogance, bureaucracy and complacency.
And so part of this is about staying humble, we're not perfect. Our pursuit is to be relentless about perfection. And so you stay humble in your pursuit of that. So one of the little stories about Amazon is if you actually go to relentless.com, that URL belongs to Amazon, that was one of the early names that Bezos considered for Amazon and didn't choose, but he keeps that domain alive as a message to the employees that we are going to be relentless about the pursuit of getting to perfection. Even though we know we will never get there, we will be relentless about it relative to operational excellence in those things that impact customers and impact scaling.
And I imagine that also goes to making Amazon that day one organization or what I love. Andy Grove said only the paranoid survive in that the executives at Amazon continued focusing on day one and being paranoid, even though they have had much success in the past few years.
Well, I think that really gets to a number of the leadership principles at Amazon in particular long-term thinking and invent and simplify and being a day one organization has always been Jeff's way of saying that we're going to be a company that invest early in the internet, digital capabilities versus waiting and seeing how they impact the market and potentially being the victim of that disruption.
So I think it was this 2015 shareholder letter. He breaks down what's it mean to be day one company versus a day two company. And what can you do to become an be basically a day two organization is an organization that is complacent and is fairly comfortable in today's business and they aren't being eager about inventing tomorrow's business.
And that's what Amazon means by being a day one organization, which is we are going to be eager about inventing tomorrow's business. And I think that, especially when you're a successful organization, if you think about the horizons of your business, horizon one is the business you're operating today.
Horizon two is the one that's just over this planning cycle. Horizon three is really the businesses that could be tomorrow. How many of us actually have a growth? Plan and an innovation portfolio that has room in it, both horizon one opportunities. Those might be some of your operational excellence innovations, your horizon two, and your horizon three innovations.
Your horizon, three innovations might be truly new business models or concepts that today sound silly. They could never happen. They will never impact. But instead you invest just in education around those so that you're prepared better of when should we do a little experiment, try something out, build some organizational experience on this so that you can pick the time when to start investing, building capabilities versus waiting for the market to tell you, oh, you're late.
Now you have to react. And reacting is expensive and risky .
And in order to be able to do that, the organization needs to have what you say, controlled experiments. This is another one of those concepts, John, that you really clarified for me. One of my frustrations is typically hearing a lot of people, especially out of Silicon valley say celebrate failure. And I don't know, I don't see too many people celebrating failure or wanting to fail, but you frame it differently on how small bets can actually help move the organization forward. So what's the difference between celebrating failure and what you talk about should be done and also how Amazon approaches this.
Yeah. So the mantra of fail fast, fail forward is really about experimentation, and by failing what we're saying is we're testing something and we're getting a result. And sometimes that result is a “failure”, just as valuable as a “success”.
But oftentimes that term failure gets it's an overloaded term. It gets confused with poor management, poor decision-making being slow, being unresponsive all of those things that none of us would ascribe as good business hygiene or leadership. And so I always think of not use the term failure. We either need to be talking about experimentation, which is that deliberate process of having a hypothesis testing that hypothesis, hopefully as quickly as possible and then proceeding on it or our culture and our management hygiene and how we work together as an organization because that clarifies it for everybody.
We were either talking about experimentation or we're talking about how we conduct ourselves and how we work together. We're not talking about this confused term of failing and failing fast.
I mean experimentation really clarified it for me. I had a science background before going to business school in that you have a hypothesis, mine was in nutrition. You have to do everything well with the experiment. Now they experiment might work, proving your hypothesis or not work this proving the hypothesis, but it is not an excuse for failing in the execution.
So it is experimentation, and as you say, small experiments to test out what works when executed and implemented effectively.
And so oftentimes, especially in business, when you're taking a new product, a new service, a new go-to market approach, it's not this binary success or failure, it's oftentimes someplace in the middle. And really what you're doing is you're refining exactly how it has to work, exactly what is the pricing needed to be, exactly what's our operational model around this, so that you're perfecting what the go to market approach is for before you scale it. But I work a lot with organizations and this innovation portfolio work and one of the mistakes made is they have a promising idea, a promising concept, but we haven't proved out exactly what the customer experience should be, we haven't proved out exactly what the unit cost should be, we haven't proved out exactly what the maintenance or the ongoing field support models need to be, or any of those things. But the company gets impatient. They start playing what I call budget roulette. It's okay, how early are we going to go? We've got a winning idea. They get impatient. And they force the business, the team, the leader to scale prematurely. It's still a good concept, but they haven't perfected enough in order to scale it. And so understanding how to be patient and stay in that agile innovation space versus picking your point on when do you scale it.
Here's all the things we have to understand and prove before we're ready to scale. If you go about it in that way, then you're really specifying, this is my experimentation space. This is my scaling space. And you can set everybody's expectations as to this is the journey we have to go through, hopefully as quickly as possible, and then we'll be ready to scale it.
But companies get impatient and that's one of the mistakes they make when they're thinking about how to truly innovate and go to market with a new concept.
It does take effort and it does take patients. Now, John, I wonder with respect to your clients, some of them are in the professional services and in services industries, how some of this thinking can transfer to those. Because oftentimes I find whether it's from my clients or some of the podcasts listeners, they see these as systems and approaches for tech companies or product focused companies rather than professional services organizations. What has been your experience for other companies?
My experience has been significant and I've been both an advisor and a participant. So I was a partner with Alvarez and Marcel for 12 years after I left Amazon, loved it. It was great organization. And really, they did a nice job of I was the only like digital operator early on and they gave me room to help figure that out. And then we figured out like what's a bigger go to market capability. How do you bring skills and teams along? How do you integrate it? But professional service organizations have to think about these things. Exactly like any other business, which is, as Amazon talks about their innovation processes called start with the customer and work backwards, a professional service organization, you start with the client, what's their problem? What are they trying to achieve? And work backwards from that into how do we help solve that problem? Being distinct in the value proposition design relative to that, which is really your strategy of matching customer needs versus what we do. That's what a value proposition does. And then figuring out between intellectual property, tools, human capital is a big component of a professional services organization. Two things like how do we price it? What's our legal framework need to be for, how do we train our go to market mechanisms? How do we train our delivery mechanisms? How do we think about investing in prototypes early on to both gain experience and to get proof points out into the market?
It's exactly the same thing as an innovation and go to market launch. But again, all too often you get one little project done. Great. We're going to scale it. They scale it immediately without thinking through the litany of supports and capability that are needed to truly do it and make it a routine business versus a one hit business.
And that's what I've seen happen in too many professional service organizations as it's a guessing game as to when it's going to happen versus a system of when it's going to happen.
And another thing that I really love about your explanation of this. I had heard a lot about and read a lot about the six page memos at Amazon, future press releases. I'm not sure at these for myself, I fully understood the value of the writing culture. And I imagine there are executives all across the globe that write down, I'll have people writing six page memos without fully understanding the intentionality behind it.
So Amazon is a writing culture. Can you explain why, what purpose that serves and how that benefits the organization and can benefit all of us as we lead our organizations.
Yeah. So I break this down in the book and it is I use this mechanism a lot with my clients where you're, what you're trying to achieve is clarity and good decision-making upfront before we start running our experiments, before we make big commitments to some initiative.
And so Amazon's approach is, we would write six page narratives. We would write future press releases. We would write FAQ's. And all that did was to help get the team like communicating, right? Oh, exactly. How is this going to work? We always inserted the customer as the center of these documents and work backwards to what we would do, and it would get us to a point of debate and then having to write it down, forces you to have discipline in your ability to communicate it to others, which then gets us to the review meetings. Right? Review meeting start with 15 to 20 minutes of silence where the meeting would read the memo and then have conversations. It's actually more demanding for the senior decision maker.
But it's also the tremendous opportunity for them to both influence exactly. This is what I think the killer feature needs to be, or the customer experience, or here's the dumb, major risk you're going to have until let's put that early in our experimentation cycle here. And it allows the senior decision makers to make the most important decisions they make, which is resources deployment and resource allocation decisions. We don't have that much expendable or fungible resources. And so choosing, do I do option A or option B or program C. Those are the most important decisions I think organizations make and you equip them so much better to make those decisions and to be deliberate.
And which gets to one of the things in my experience organizations don't do when they have. Three options in front of them because the clarification isn't that good. They do a little bit of A, a little bit of B a little bit of C, versus having a good option B and a good option C but Nope we're going full force on to option A and that's what allows you to win typically is narrowing the number of new things you're doing in the organization and gaining organizational commitment to making this new product, this new service successful. So again, it's about resource allocation, making good decisions, having clarity. And then when you decide what you're going to do, and you go into your agile processes, everybody understands what the end points are, what our risks are, who the customer is, what the use cases are, exactly how it should look and feel like those things go so much better because, we thought them through upfront better, not perfect, but better. And so those development cycles go better and our experimentation goes better.
And there is so much more value to doing it this way. John I've spent a lot of time thinking about it. Everything from the clarity, it takes on the part of the person and the team that is writing this to the cognitive biases that come into play. When people are presenting their thoughts to the lack of focus at times we have on concepts that in this instance with everyone sitting down and reading it in silence, at that time it takes some of those biases away.
Let's talk about one of those biases. What typically happens is the idea that has the better speaker and maybe the more dynamic presenter, that one's going to work versus the one that maybe that's not the person's forte. There are great engineer or a great operators, but they're not that great in front of the room, in an audience.
What do you really want to make your decisions based on who the better presenter is? Or do you want to base your decisions based on what idea, what investment is better for our organization? Clearly it's B right. And this type of mechanism takes that type of bias, which is what you're talking about out of the equation or minimizes it. It's just about tamping these things down and creating a better environment for the best ideas to win, which is what we want.
Well, John Rossman, I'm really mad at you because these ideas and thoughts have been staying in my head on my walks and some of my runs, as I've been thinking them through you do a great job in your book. Dan was on way talking about the concepts and laying them out in a way that can easily be understood.
However, It won't easily be implemented. I think people really need to dig deep to understand the value of each one of the principles that you share and implementing them in their organizations.
Proceed with it on an agile basis, one of your early questions was about leadership principles. Try those things out for a while. Be agile about them. Test and learn. That's how we personally build new habits and new understanding.
That's how an organization truly makes transformational change happen. And so don't expect it to be easy, but also take it down into bite size components to it also. And I always talk about my work, these books, aren't about Amazon. They're about what other teams and other people can take from Amazon and think about an act to put into their own business, whether it's an Amazon's language or not find your own language, find your own mechanisms, but find a way to invent and create the future of your business.
That is really what digital disruption is about is we all have to become better innovators and operators along the way.
It is. And again, as I mentioned, you do a fantastic job in the book, laying out some of the path for some of that experimentation. Again, the mindset of experimentation effectively executed. So you learn from the experiments. Now, John, in addition to your own book, when you're asked for leadership resources, are there any that you typically find yourself recommending for leaders as they want to improve their leadership and impact on their organization?
My topic, the thing I'm both personally curious about as well as what I preach and try to drive in my clients is like stay interested in that stuff that's far out there. And sounds bizarre. So my topics here are my suggestions aren't purely leadership. They're more kind of technology and innovation related.
I do consume a lot of podcasts, so I love this median that we're working on together here. So I like the Andreessen Horowitz podcast called a 16Z. Kevin Rose has a podcast called modern finances all about cryptocurrency and NFTs that I know nothing about, but that's why I'm exploring it. There's a podcast out of the Seattle media organization called Geek Wire. They do a podcast called Day Two that I think is really interesting and helps me refine some ideas. So those are the types of resources that I lean to to continue to raise my own game.
Fantastic recommendations. I know I listened to the geek wire podcast, myself, and as a big fan, I need to listen to a couple of others. Thanks to your recommendation to, so John, how would you recommend for the audience to find out more about you and the Amazon way series?
The Amazon way is available at Amazon. It's in paperback, Kindle, and audible. You can find me on LinkedIn, John Rossman, or my blog is the-amazon-way.com and I really welcome questions, feedback, and connecting.
I want to highlight a couple of things as we wrap up again, as I mentioned throughout John you've helped me view a couple of things that I had heard repeatedly very differently, one with respect to metrics, one with respect specifically to this whole concept of experimentation rather than celebrating failure.
So there is a lot of value in this. And as you say, we all need to experiment more as we learn, it is not for any of the leaders or organizations wanting to become Amazon. It's understanding these principles, seeing the ones that resonate best testing and seeing what works best in their organizations. So I really appreciate the thoughts you've shared in the Amazon way and taking the time to share this and your perspective with the partnering leadership community.
Thank you so much, John Rossman.
Thank you for allowing me the opportunity to come and talk. And again, I appreciate your preparation and all you bring to this.
Thank you, John.