Delivering Happiness

Summary Written by Peter Nakamura
"At Zappos, our belief is that if you get the culture right, most of the other stuff – like great customer service, or building a great long-term brand, or passionate employees and customers – will happen naturally on its own."

- Delivering Happiness, page 152

The Big Idea

Your Brand Is Your Culture

"Over time, as we focused more and more on culture, we ultimately came to the realization that a company’s culture and a company’s brand are really just two sides of the same coin. The brand is just a lagging indicator of a company’s culture."- Delivering Happiness, page 151

If there’s one thing that really stood out from Hseih’s story it’s the importance of building the right culture in your organization. Your culture is what attracts great talent, your culture is what keeps employees together, and your culture is what guides your organization during times of difficulty.

In Hseih’s first company, LinkExchange, there was a moment he describes where he felt like he had “lost” the culture of the company. Working there became painful and it was actually a very valuable experience which changed the way that he built up the Zappos culture.

As part of their two-week on boarding experience, all new hires at Zappos spend time on the customer service line. It’s an opportunity for them to learn firsthand how Zappos treats their customers and the importance of branding through helpful customer service conversations.

Every year, Zappos also releases a “Culture Book” which is a crowdsourced document that has employees share how they’ve embodied Zappos’ 10 Core Values. It’s so popular that even customers and suppliers join in on sharing their stories in the Culture Book.

There are so many other examples that make Zappos’ culture unique. And this is what drives their business today. Anyone can sell shoes online. Zappos is a leader in this because they’ve created something other companies can’t replicate… a great culture.

Insight #1

Never Outsource Your Core Competency

"It was a valuable lesson. We learned that we should never outsource our core competency. As an e-commerce company, we should have considered warehousing to be our core competency from the beginning."- Delivering Happiness, page 119

Early in the growth of Zappos, they decided to partner with a logistics company that would handle all of their shipping and returns. The logistics company was located closer to the UPS world hub in Kentucky and theoretically they would be able to handle and ship the shoes a lot faster.

Unfortunately, that didn’t end up being the case. The warehouse that the logistics company ran was a disaster and shipments weren’t being sent out on time. Customer complaints piled up and severely hindered Zappos’ reputation.

In a gutsy move, Hseih and his team decided to take back the logistics component of their business. In a very short amount of time, they traveled to Kentucky, purchased a warehouse, and setup their own logistics operation. It was a work in progress initially but within a few months they were back to meeting (and occasionally exceeding) delivery expectations again.

To Zappos, logistics was and still is a critical part of their business. As an e-commerce company, getting the merchandise quickly and accurately to customers is critical. More importantly, this is a key part of the customer experience. If a customer gets the wrong shoe size or has to wait a few extra days for their shoes, it hurts their experience.

Ensuring customer happiness and satisfaction was a critical strategy for Zappos and not having control over logistics hurt their ability to be the best in customer service. In fact they made multiple modifications to their business (e.g. going from a drop-shipping company to an inventory-holding company) to ensure that they could deliver an exceptional customer experience.

I’m sure it hurt their short-term profitability to make these changes but it was because they had a guiding core value that was helping them make these decisions. It’s a reminder to all to deliver the best customer service you possibly can.

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Insight #2

Keep The Long-Term View in Mind

"Anyone who wants to compete with us has to learn the same things, so problems are just mile markers. Each one we pass means we’ve gotten better… It’s hard…but if we weren’t doing something hard, then we’d have no business. The only reason we aren’t swamped by our competition is because what we do is hard, and we do it better than anyone else."- Delivering Happiness, page 173

What stuck out to me about Hseih is how he didn’t build Zappos purely to make money. He built Zappos because he wanted to create an organization where employees love their work and customers love the experience of interacting with the company. Because of this shift in perspective, he and his team were able to focus on how to build a company for the long term.

Zappos could have made the easier decision to keep their head office in San Francisco rather than move it to Las Vegas, or outsource their customer service team overseas to save money. But they didn’t because both decisions were core to what makes Zappos… Zappos.

It all goes back to the importance of culture. It’s not easy to establish and nurture a culture that is supportive, open, and entrepreneurial. That part takes a lot of time and keeping the long-term view, in spite of the financial obstacles, is how Hseih and his team has made Zappos so successful.

To me, building a great culture is about having solid core values that you live up to everyday. Core values that are clear and visible to the entire company so there’s no doubt in the employees’ minds what the mission is. It’s not easy to develop the right culture and it takes time. But in the 21st century workplace, there may not be a more important task for companies than culture building.

What are some great organizational cultures you’ve been around? What made them special to you?

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Tony Hsieh

In 1999, at the age of 24, Tony Hsieh (pronounced Shay) sold LinkExchange, the company he co-founded, to Microsoft for $265 million.

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