Book Review: “Delivering Happiness” by Tony Hsieh, CEO of Zappos.
The book, though not an auto biography, documents the business exploits of Tony Hsieh, the CEO of Zappos. Zappos, derived from zapatos (which means shoes in Spanish) is an online shoe company. Tony’s background is that of Asian parents who wanted him to be any of the following ; mathematical geek, musical genius or a doctor, be it medical or PhD but Tony “veered off” to read Computer Science at Harvard University.
In 1996, he co-founded LinkExchange, which was sold to Microsoft in 1998 for $265 million. With the proceeds, he started an investment fund with the name, Venture Frogs. By sheer serendipity, he got a call from Nick Swinmurn, who had just started a site called Shoesite.com. Nick’s idea was that this venture will be to shoes what Amazon.com is to books. Tony did not buy into the idea at first but when Nick started reeling out statistics of the shoe industry, Tony showed some interest. Nick got in touch with a guy named Fred, who was climbing the corporate ladder at Nordstrom for 8 years, who just bought a house and had child. Leaving where he was to this start-up with no future was a big risk but after a couple of discussion, the trio decided to start the venture. The name was changed from Shoesite to Zappos.
The strategy was to meet with shoes manufacturers; sign off their brands and market them online. It was a novel idea that met the hesitancy of the day. It turned out to be a tough sell but slowly some manufacturers signed on. Financing was always a problem but the company kept growing, increasing sales, looking for new funds and expanding their markets.
The book details the many near bankruptcies that almost eclipsed Zappos; starting from the inception of the company till the time that Amazon bought it for a whopping $1.2 billion. It also has some quotes on business titled “Tweets To Live By”, the many strategies that worked and the tons of others that didn’t and Zappos 10 Core Values.
Lessons From The Book
- Go With Your Heart: This is easy to write but hard to practice. The single reason is because it is not a straight forward journey. No cartographer can imagine the road map talkless of putting it into print. Tony had always wanted to make money in life by offering services. He’s one of those you could say was born an entrepreneur. At an early age, he tried his hands on a few ventures. Some failed woefully; some succeeded but could not be sustained, while some were for subsistence. He got a good job with Oracle after Harvard but was not “satisfied” with the job and resigned. He partnered with a friend to go in this new thing called the internet and to design websites for clients. After one major job, that was it. He tried his hands on other things until the LinkExchange idea was born. The sale of LinkExchange is another story of following your heart. The company was sold and Tony was promised that if he stayed on for 12 months, he will be guaranteed $40 million of his own as a severance pack. If he didn’t he will have to give up 20% of that amount. He agreed at first but after a while, he walked away from the whole arrangement. Yes he lost money but he followed his heart.
- There Is No Free Lunch For An Entrepreneur: Though many fantasize of working for themselves, it is always the easy part of having time for yourself that is the attraction. Unfortunately, there is more to that. The initial years of entrepreneurship are usually hectic as it is with any project at the take-off phase. Tony realised his life’s dreams were falling apart and he had to work extra hard to get this on track. Thankfully he was blessed to have a core team who believed in the Zappos ideals and they worked day and night to build the company.
- Entrepreneurs See Opportunities And Take The Calculated Risk: Zappos metamorphosed from Shoesite. Nick, the man with the original idea, was stunned when he couldn’t get the type of shoes he wanted from a number of shoe stores. He thought to himself “I could only imagine the kind of trouble people had elsewhere”. So he thought of starting something online and within weeks he was getting $2,000 worth of orders per week. Nick decided to seek investors who will be interested in the business idea and at the same time seek people who know the operations of the shoe business. This search led him to what is now Zappos.
- Start With The End In Mind: This is one of Steven Covey’s Seven Habit of Highly Effective People. Tony’s idea of a company was always a place where people are happy and free to be themselves. As such, no matter what was the issue he valued investing in people above just profits. This ideology met many brick walls at different junctures. Infact it was the reason, he sold the company to Amazon. The present board then thought what Tony was doing was a “social experiment”. You wouldn’t blame them, that’s the stuff venture capitalist are made up of. Tony decided to look for a board that will align it views with that of Zappos. Amazon was the choice and some how, both companies made for two good bed fellows. Always think long term even when grappling with short term issues.
- Never Outsource Your Core Competency: The business model of Zappos is structured thus: advertise product on the internet, customer buys, Zappos picks the product from the nearest warehouse and sends to the customer. In the beginning of the company Tony mentioned meeting with a company called e-Logistics who owned a warehouse next to the UPS Worldport hub. The company promised to handle Zappos inventory. It sounded like a great idea and so Zappos signed on this company. Tony thought that from shipping from a central location the company would be able to ship products faster to customers. Immediately 5 containers were shipped to Kentucky, one didn’t make it. 20% of inventory lost!!! As time went on, Zappos learnt that eLogistics were making mistakes; shipping inaccurate shoes sizes to customers and also the warehouse was not properly laid out. As such Zappos decided to take ownership of the warehousing and inventory part of the business which was the core of the company’s operations. It took a long while to get this off the ground but that kept Zappos afloat till date.
- Create A Culture That Binds Your People: Tony wrote that Zappos decided to embark on this, since this was the kind of company he would want to work for. Employees are free to ask questions; any question. Infact it is called “Ask Anything”. The culture grew and since it was an accepted way of life in the company, Tony decided to ask every employee to state in 100–500 words what the Zappos culture meant to him/her. All employees gave their input. Except for typos, nothing was edited and the information was bound into a book called the “Zappos Culture Book”. The book is used for induction of new employees and every year a new edition is made. This at least tells why the company has been on the list of “Best 100 Companies To Work For”. I asked Zappos for a copy of this book and they sent it to me. Yes they did; all the way to Nigeria. This was before they put it online.
- Be Known For Something: Tony talks about the exceptional customer service that Zappos offers to its customers. Customer Service is priority in the company and everyone in the company knows that. He details experience where customers have been “wowed” by the way their transactions were handled and as such they kept coming back. Tony encourages his customer service representatives to direct Zappos customers to whosoever has a product that the customer is looking for, whenever Zappos does not have the product. Tony believes that the mantra should be service and not sales at all times. Another story s told of someone calling Zappos for the nearest Pizza restaurant and the person was given the direction despite the fact that this is way off the radar for Zappos as a business. Zappos is known for great customer service.
At the tail end of the book is a page for online resources.
Of recommendable mention is the site www.zapposinsights.com Tony’s story of Zappos is a must read for every entrepreneur and Human Resources practitioner. Zappos claims it puts people above every other thing and that people are united by a culture and the company creates an enabling environment for that culture to thrive. In the book, Tony pontificates on the science of happiness and its spin off effect on both employees and customers.
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