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Zappo's Tony Hsieh Delivers Happiness Through Service and Innovation

Zappo's Tony Hsieh Delivers Happiness Through Service and Innovation

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Published by Brian Solis
Part three in a four-part series on innovation and change as the new schools of business management…

The article talks about Tony Hsieh, CEO of Zappos, how he took the company to become the powerhouse it is today.
Part three in a four-part series on innovation and change as the new schools of business management…

The article talks about Tony Hsieh, CEO of Zappos, how he took the company to become the powerhouse it is today.

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Published by: Brian Solis on Apr 14, 2011
Copyright:Attribution Non-commercial


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Zappo's Tony Hsieh Delivers Happiness ThroughService and Innovation
By Brian Solis, industry-leading blogger at BrianSolis.comand principal of research firmAltimeter Group, Author of the highly acclaimed book on social business 
Part three in a four-parserieson innovation and change as the new schools of businessmanagement…
To callZapposan online shoe store takes away from the brilliance behind the 12-year-old e-commerce powerhouse. While its original premise was based on helping people find the shoes theywant, in one place, online, and discounted, it certainly evolved into something nothing short of disruptive. As we hear so often with technology startups, Zappos was born in a college dorm room.Already a success by any startup standards in just a few short years, Tony Hsieh, CEO of Zappos,looked at the $32 million his company generated in 2002 and challenged his team to do better.
(cc) Brian Solis,www.briansolis.com- Twitter, @briansolis
Roughly four years into the game, Hsieh decided it was time to look beyond shoes and move hiscompany toward a more significant mission. His epiphany was the result of learning throughresearch that companies serving customers with a higher purpose outperformed those that focusedon market leadership and profitability in the long run.
Putting the Customer in Customer Service
In 2003, the Zappos brand evolved from an online shoe etailer toward a customer-centricorganization powered by service. Everything started with looking at the pains customers wereexperiencing and the options they faced when making purchase decisions. One of the biggest sorespots for the company was something that was out of the company’s realm of control. While dropshipping equated to 25% of the annual revenue at the time, it was also the very thing that preventedthe company from keeping its promise of delivering exceptional customer service. If the companywas truly to become customer-focused, it would need to take control of the entire experience, frombeginning to end. After killing drop shipping and taking control of its inventory, Zapposnewcustomer service program resembled that of industry retail giant Nordstrom where the customer experience was paramount. Leaders for both companies will say that doing so, directly correlatesservice to loyalty, repeat business, word of mouth, and increased revenues.“If you’re looking for a pair of shoes, and we’re out of your size, we made it part of our policy to refer them to a competitor that had it in stock.”Almost immediately, the team noticed a difference Customers weren’t the only people singingZappos’ praises. Employees were more engaged and passionate as a result. The new focus gaverepresentatives something they could stand behind. Customers could hear the passion of the personon the other end of the phone. They cared. And, vendors noticed too. Suddenly their onsite visitswould increase in frequency and length to see what the new Zappos was all about.Focusing on customer service caused a snowball effect that helped Zappos soar to new heights. Atthe end of 2003, Zappos nearly doubled its revenues to $70mm. By 2004, the company earned$184mm.
Culture Shock 
Business leaders, especially innovators, are continually looking at what’s working, but moreimportantly, what’s possible. By the close of 2004, the Zappos team believed that focusing oncustomers and their experiences had not only boosted revenues by 600%, doing so created a globalcommunity of enthusiasts and advocates behind the Zappos brand. In 2005, the team was set for itsbiggest transformation yet.“We never really paid much attention to what other companies were doing. We never knew that thedecisions we made were in direct contrast to those of our competitors.”Tony believed that if making customers happy would help improve business, then focusing oncompany culture was a natural progression. Making company culture the number one priorityresulted in the creation of a pipeline team, a group of trained professionals who host more than 40classes to help improve morale and career development. Courses ranged from career andinterdepartmental training to Zappos history to personal development programs such as strengthfinders, the science of happiness, and optimism. In 2005, early Zappos investor and professional lifecoach Dr. Vic moved into the Zappos HQ. He offered onsite coaching to employees looking for empowerment and direction and as a result, employees continued to evolve from a role driven by
(cc) Brian Solis,www.briansolis.com- Twitter, @briansolis
passion to one of now of a company stakeholder. The evidence of success was in the sales. 2005 hita new high with $370 mm and 2006 generated almost $600 mm. With a customer and employeefocused organization, the company would eventually hit $1 billion in 2008.
Delivering Happiness
In 2009, Zappos sought to reinvent Zappos once again, this time by focusing on employees,customers and also other companies through one powerful, yet uncommon business term,happiness.“Customer service is about making customers happy, company culture is about making employeeshappy, so let’s just simplify it and at the same time, amplify our vision for our customers, employees,vendors, and peers.”Following the success of investing in company culture and customer service, Hsieh was introducedto positive psychology. So the team took a step back and looked at the science of happiness in order to develop the company’s next growth strategy, delivering happiness to the world.It started within.For example, the management introduced elements of progress into its career advancementprogram to help employees stay happy consistently. Rather than give big promotions every 18months to deserving employees, management introduced incremental advancement every sixmonths.Zappos also formalized the definition of culture into 10 core values:1. Deliver “wow” through service;2. embrace and drive change;3. create fun and a little weirdness;4. be adventurous, creative and open-minded;5. pursue growth and learning;6. build open and honest relationships with communication;7. build a positive team and family spirit;8. do more with less;9. be passionate and determined;10. be humble.Following in the footsteps of the Walt Disney Company, Zappos looked externally to find ways toshare its experience with culture and service to help others reinvent their businesses. As a result,Zappos introduced its Insights program, a series of immersion workshops designed to bring other businesses into the world of Zappos. By exposing its company secrets around happiness, culture,
(cc) Brian Solis,www.briansolis.com- Twitter, @briansolis

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