Summaries: Delivering Happiness

Companies with a social purpose deliver greater success, according to Tony Hsieh, CEO of Zappos.com. Zappos is an online clothing and apparel retailer founded in 1999 and grossing over US$1b in revenue annually. In his 2010 book Delivering Happiness: A Path to Profits, Passion and Purpose, Hsieh (pronounced: shay) recounts his entrepreneurial experiences through first-person narrative, explaining how creating happiness through Zappos became his purpose.
Under the banner of delivering happiness, Hsieh writes of how Culture, Customer Service and Communication come together to create lasting corporate relevance and profits.

 

Culture

Without a strong company culture, employees will lack direction, satisfaction and belonging. Hsieh explains the influence of Tribe-mentality on his operating systems and how creating a family at work is the quickest way to develop a unified and organic culture. Some actionable takeaways from the book include:

Defining Your Culture

A company culture is best developed organically towards a shared vision. This culture, however, can easily derail if it isn’t carefully defined. At Zappos, the 10 Core Values were created to ensure existing employees were all operating under the same beliefs and new employees could understand quickly what it meant to be a part of the Zappos family. Ambiguity in culture will always lead to confusion, causing inefficiency and breakdown.

Your list of values doesn’t need to be as extensive as the one at Zappos, but it must be written down, easily accessible for all employees and required reading for new hires. Start out with four core values that you can describe in unambiguous terms on a single sheet of paper. This will ensure your values are actionable and concise, eliminating any room for confusion.

Creating a Family

Going hand-in-hand with defining your culture is creating a family within your company. A family environment encourages communication and teamwork which may lead to increased business success. The major decision of shifting the Zappos headquarters (along with most of the staff) from California to Nevada effectively forced the newly relocated staff members to become instant-friends and family. This option won’t be suitable for all companies, however there are other methods that are easier to implement and will contribute to the same goal.

Zappos also created a single entrance to the office building, increasing the likelihood of employee interaction and chance encounters. Increasing the amount of time employees spend interacting by adjusting floor plans and movement paths can literally and figuratively bring employees closer together. You can also achieve the same result by creating communal working spaces or shared resources between departments. Areas such as lunchrooms, brainstorming areas and supply rooms are perfect examples of sharable infrastructure that will increase employee communication.

Getting to Knowing Your Colleagues

The awkwardness of speaking to a colleague and being unsure of their name is a common and avoidable corporate plight. This can be less of an issue if your company is highly segmented and employees spend their time exclusively with a small group of other workers. However, in order to create a familial office environment and develop a strong culture, inter-departmental collaboration should be encouraged.

Zappos created a computer system that quizzes employees on the names of their colleagues each time they log in to their computer. Right or wrong, the computer then shows the personal profile of the employee that was depicted. If this idea won’t work for your company or is too technically demanding, other methods such as creating an Organisational Chart can reduce the occurrence of name-amnesia and even simplify inter-department collaboration.

 

Customer Service

All businesses work with at least one external party to complete their objectives. These parties may include customers, suppliers, stakeholders, donors and others. Delivering Happiness teaches us that Customer Service is not only about meeting the needs of those who purchase from you, but also ensuring that all external parties are cared for and included as part of the family. Here’s what we can learn from Zappos regarding Customer Service:

Your Suppliers are Your Business Partners

Early on in Zappos Fred Mossler, one of the first partners of the company, realised the need to treat suppliers as you would treat your customers. Especially with newly formed companies, your suppliers can be one of your greatest sources of knowledge. They’ve often been in the business far longer than you have and, especially in a retail context, know more about their product than you will.

Leverage this relationship by developing trust and commitment. If a supplier calls or emails you, get back to them in the same amount of time that you’d want to get back to your best customers. Be prompt, courteous and open and you’ll both reap the rewards that greater insights and collaboration offer. Zappos took this one step further and even revealed their financial details to their suppliers, so that both parties could work from the same information and develop plans of action together. This step may seem a little extreme to smaller businesses, but as we will read further down this method can reap great rewards for your financial situation.

Branding Through Customer Service

As with creating a company culture, developing your brand is a long-term project. Rather than spending all of their money on marketing and advertising (they still have a small budget for these activities), Zappos chose instead to focus on Customer Service as their way to develop a strong brand. Offers like free domestic shipping and returns, a 365-day return period and surprise upgrades to overnight delivery are just some of the ways that Zappos focus on serving their customers to develop their brand. The goal, letting the customers do the marketing for them through word of mouth by delivering outstanding service and value every time.

Australian eyewear company Bailey Nelson have a similar philosophy. Instead of giving customers multiple options on the quality of their eyewear, they include as standard add-ons such as anti-glare and anti-scratch coating onto all of their lenses. These are features that other companies often charge the customer for, but Bailey Nelson provide it for free. As a result, Bailey Nelson has grown to more than 20 stores across Australia in the five years since starting. It’s more important to give your customer an extraordinary service experience rather than trying to tell them through advertising how extraordinary your company is. As with Zappos and Bailey Nelson, you can try offering “premium” extras for free on all your products. It won’t break the bank and will give you a great source of differentiation that your customers can rally behind.

Don’t Outsource Your Core Competency

Zappos learnt this the hard way when they chose to use an external warehousing partner to manage their orders and shipments. After only a short time of working with this partner, Zappos orders weren’t being shipped out correctly, stock was left for days without being scanned into inventory and major delays affected the Zappos mission of providing outstanding customer service. This decision very nearly bankrupted Zappos. As an online retailer, shipping and warehousing was one of the core competencies of Zappos. An external partner can’t be expected to care for your customers as deeply and passionately as you do, so don’t give them the opportunity to control a major point of contact with your customers.

If there is one part of your business that you consider Mission Critical, be sure to do it right. That may mean more time, more money and more effort is poured into this activity, but it’s worth it’s weight in gold if it allows you to serve your customers better. Consider the example of a local hand-poured soap business that sells primarily to their neighbourhood. Local design and production is a core competency. If this business was to suddenly stop producing their products within the neighbourhood and instead enlist the aid of large, overseas manufacturing plants they may lose an essential aspect of their identity. The key differentiation that the soap business enjoyed will no longer exist and the current customer base will feel alienated. Prevent this by staying true to your core competency and managing it in-house.

 

Communication

Without proper communication the above points become near-impossible to carry out. We can see this when a high-profile company’s brand is being ruined because of a scandal that they keep quiet about. Or when an important employee leaves a company as they didn’t think their ideas were being heard, when really it was just a failure of the communication systems in place. Some benefits to developing your company communication are as follows:

Communication Buys You Time and Trust

In a particularly tight financial spot in Zappos’ history they were forced to choose between paying their employees or paying their suppliers. They decided to pay their employees and each week had enough cash leftover to pay roughly 70% of their suppliers. They would alternate which suppliers to pay on a week-by-week basis, sometimes depending on who was asking for the money or on which relationships they wanted to avoid damaging the most. Zappos eventually made it through this turbulent period after being given a line of credit with Wells Fargo bank, but there was one major choice that got them through it; Constant communication. Usually in a situation like this most suppliers would abandon their agreements to the company and withdraw their stock. Hsieh and the other founders made it a point to maintain constant communication with their suppliers and be utterly transparent about their situation. Their honesty made them more trustworthy, and as such, more deserving of a helping hand. Had they not been honest, their suppliers would have had every right to be angry and demand their money on the spot.

This is a valuable lesson for other companies who may be in tight spots themselves. Honestly communicating your situation to your external partners can result in temporarily extended payment terms and save your company reputation. A few more weeks to correct your financial woes is definitely worth a slightly bruised ego.

Communication Makes the World a Better Place

The overall theme of Delivering Happiness is to set the stage for a happiness revolution. To spread the insights developed at Zappos to others so that they can make use of these lessons to live a better life. As a commitment to this ideology, each year Zappos releases their Culture Book, a collection of values, comments and lessons lived by the Zappos team, which is available to the public and competitors alike. They don’t hide the values and systems that made them great, they openly communicate and share them so that others can be successful too. This is the essence of Delivering Happiness. Share what you’ve learned, build on the teachings of others and commit to making a world a better place in the process. This is not to say that you should leak your trade secrets to all of your competitors to your own detriment, but sharing the processes that got you to where you are is less harmful than you would first think. This is the oft-mentioned Purpose of Zappos, one that can be shared by all companies, who show that corporate transparency and success are not mutually exclusive.

 

Other Insights

Hsieh also includes a concise summary of the business lessons he learnt through his years of playing Poker in Delivering Happiness. Listed below are just a few of the points covered in this great section:

Evaluating Marketing Opportunities

  • “Table selection is the most important decision you can make.”

Marketing and Branding

  • “Act weak when strong, act strong when weak. Know when to bluff.”

Financials

  • “Make sure your bankroll is large enough for the game you’re playing and the risks you’re taking.”
  • “Play only with what you can afford to lose.”

Strategy

  • “Don’t play games that you don’t understand, even if you see lots of other people making money from them.”
  • “Differentiate yourself. Do the opposite of what the rest of the table is doing.”

Continual Learning

  • “Learn by surrounding yourself with talented players.”
  • “Don’t be afraid to ask for advice.”

Culture

  • “Don’t be cocky. Don’t be flashy. There’s always someone better than you.”

Delivering Happiness is a book about creating a greater good in the world around you through the influence of business. Hsieh shows that there is more than one way to be successful in business and not everyone has to be the bad guy to get there. You can purchase a copy of Hsieh’s book here.

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