Delivering Happiness

1. Build a strong company culture based on core values

We believe that it's really important to come up with core values that you can commit to. And by commit, we mean that you're willing to hire and fire based on them.

Culture is your brand. A strong company culture, defined by core values, is the foundation for long-term success. At Zappos, core values weren't just words on a wall, but principles that guided every decision and action. They developed 10 core values, including "Deliver WOW Through Service," "Embrace and Drive Change," and "Be Humble," which became the heart of their culture.

To reinforce the culture:

• They created a Culture Book with unedited employee contributions
• Hiring decisions were based on cultural fit, not just skills
• They were willing to fire employees who didn't embody the values
• Core values were integrated into performance reviews and daily operations

By prioritizing culture, Zappos created a unique identity that attracted like-minded employees and customers, ultimately becoming their strongest competitive advantage.

2. Deliver exceptional customer service to drive growth

At Zappos, we think it's important for people and the company as a whole to be bold and daring (but not reckless).

Service as a marketing strategy. Zappos built its brand primarily through word-of-mouth, driven by exceptional customer service. They viewed every customer interaction as an opportunity to create a lasting positive impression, rather than a cost to be minimized.

Key elements of their customer service approach:

• 24/7 customer service with no call time limits
• 365-day return policy with free shipping both ways
• Surprise upgrades to overnight shipping
• Empowering employees to go above and beyond for customers
• Training all employees, regardless of position, in customer service

By investing in customer happiness rather than traditional advertising, Zappos created loyal customers who became brand advocates, fueling sustainable growth and profitability.

3. Embrace change and take calculated risks

We must all learn not only to not fear change, but to embrace it enthusiastically and, perhaps even more important, encourage and drive it.

Adaptability drives success. Zappos' journey was marked by constant evolution and willingness to take risks. From shifting their business model to carry inventory, to relocating the entire company to Las Vegas, they weren't afraid to make bold moves when necessary.

Examples of embracing change:

• Transitioning from drop-shipping to inventory ownership
• Moving headquarters from San Francisco to Las Vegas
• Developing their own warehouse management system
• Continually refining their hiring and training processes

Hsieh emphasizes that the ability to adapt quickly is crucial in a rapidly changing business environment. By fostering a culture that encourages experimentation and views mistakes as learning opportunities, Zappos was able to stay ahead of the competition and seize new opportunities.

4. Focus on employee happiness and development

Our goal at Zappos is for our employees to think of their work not as a job or career, but as a calling.

Happy employees, happy customers. Zappos prioritized employee satisfaction and growth, believing that engaged employees would naturally provide better customer service. They created an environment where employees felt valued, challenged, and part of something bigger than themselves.

Key aspects of their employee-focused approach:

• Extensive training programs for all employees
• Career development paths within the company
• Fun and quirky office environment
• Empowering employees to make decisions
• Offering to pay employees to quit if they weren't a good fit

By investing in their employees' personal and professional growth, Zappos built a dedicated workforce that was passionate about the company's mission and values, leading to higher productivity and better customer experiences.

5. Prioritize long-term vision over short-term profits

We're willing to make short-term sacrifices (including lost revenue or profits) if we believe that the long-term benefits are worth it.

Build for the future. Zappos consistently made decisions based on long-term value creation rather than short-term financial gains. This approach sometimes put them at odds with investors seeking quick returns, but ultimately allowed them to build a sustainable and valuable business.

Examples of long-term thinking:

• Offering free shipping and returns despite the cost
• Relocating to Las Vegas for long-term hiring advantages
• Investing in company culture and employee development
• Turning down acquisition offers to maintain independence
• Developing the Brand-Culture-Pipeline (BCP) strategy

By focusing on building a strong foundation and brand reputation, rather than chasing quarterly profits, Zappos was able to achieve sustainable growth and ultimately reach $1 billion in gross merchandise sales faster than expected.

6. Create alignment between all stakeholders

We realized I was relearning another version of the same lesson from LinkExchange, when our company culture went downhill: the importance of alignment.

Unified vision drives success. Hsieh learned the critical importance of aligning the interests of all stakeholders - employees, customers, investors, and partners. Misalignment, particularly with the board of directors, can lead to conflicts that threaten the company's culture and long-term vision.

Steps to create alignment:

• Clearly communicate the company's vision and values
• Seek investors and board members who share the company's philosophy
• Be transparent about goals and decision-making processes
• Structure incentives to reward long-term thinking
• Foster open communication between all levels of the organization

The eventual acquisition by Amazon was seen as a solution to achieve full alignment, allowing Zappos to maintain its culture and vision while accessing greater resources and creating value for shareholders.

7. Be passionate and pursue a higher purpose beyond profit

We thought of Zappos as being more high-touch, and Amazon as being more high-tech.

Purpose drives passion. Zappos' success was driven by a commitment to a higher purpose beyond just selling shoes or making money. They aimed to deliver happiness to customers, employees, and eventually to other businesses through their insights and training programs.

Manifestations of their higher purpose:

• Developing Zappos Insights to share their culture-building methods
• Public speaking engagements to inspire other businesses
• Creating a movement around customer service and company culture
• Viewing Zappos as a platform to change the world of business

By pursuing this larger mission, Zappos was able to attract passionate employees and customers who believed in their vision. This sense of purpose created a deeper connection with stakeholders and drove the company to continually innovate and improve, even after achieving significant financial success.

Last updated: August 9, 2024