Will Amazon Kill the Zappos Magic?

January 22, 2010

In a recent NYT interview Tony Hsieh (pronounced “shay”), CEO of Zappos, described his management priorities in this order:  culture first, service second.  This may come as a surprise to anyone who has first-hand experience with the Zappos service model, which consistently produces excellence at virtually every customer touch point.  I myself was surprised.  I’ve heard many executives talk about the need to align culture with service, but I’ve rarely heard someone describe culture as their organization’s primary purpose.

When pushed to explain what got him there, Hsieh reflected poignantly on a prior company he built and sold (for a great deal of money) that had a culture he and others hated.  He vowed never to let it happen again:

When it was starting out, when it was just 5 or 10 of us, it was like your typical dot-com. We were all really excited, working around the clock, sleeping under our desks, had no idea what day of the week it was. But we didn’t know any better and didn’t pay attention to company culture.

By the time we got to 100 people, even though we hired people with the right skill sets and experiences, I just dreaded getting out of bed in the morning…when I joined Zappos about a year later, I wanted to make sure that I didn’t make the same mistake…in terms of the company culture going downhill. So for us, at Zappos, we really view culture as our No. 1 priority. We decided that if we get the culture right, most of the stuff, like building a brand around delivering the very best customer service, will just take care of itself.

How do you “get the culture right?”  In Hsieh’s case, he and his team decided to live and die by a series of core values:

…we formalized the definition of our culture into 10 core values. We wanted to come up with committable core values, meaning that we would actually be willing to hire and fire people based on those values, regardless of their individual job performance. Given that criteria, it’s actually pretty tough to come up with core values.

I was particularly moved by his take on his own role in designing and protecting the Zappos culture, which involved a central responsibility to create an environment where other people will thrive:

Maybe an analogy is, if you think of the employees and culture as plants growing, I’m not trying to be the biggest plant for them to aspire to. I’m more trying to architect the greenhouse where they can all flourish and grow.

So what happens to the greenhouse once Amazon buys it? I wrestled with this question when I wrote about Zappos culture in a post last year, as I was getting ready to go on a case visit.  We wrote the case just as the Amazon purchase was going through (for just under a billion dollars).

Amazon has clearly indicated its respect for Zappos culture and its desire to leave the company alone to continue to deliver wold-class service.  My hope is that Amazon can resist the temptation that has tripped up so many other acquirers, the temptation to provide a bit too much help the moment the acquired misses its numbers, a tweak here, a tweak there, to improve its performance.  That kind of help can be a lethal blow to the true drivers of a company’s value.  In the case of Zappos, I’m not convinced its culture could survive this well-intentioned support.


Service Excellence Defined (and Illustrated)

April 7, 2009

Service excellence can be hard to define — it often falls into the “know it when I see it” category of vague, but important distinctions.  Part of the challenge is the subjectivity of a word like excellence. Not all customers value service attributes in the same way. The intimacy you enjoy with a waiter who asks about your children and remembers how you like your burger may feel intrusive and jarring to me (hypothetically, of course).

I’d like to ground the definition of service excellence in the idea of reliability.  Service excellence is the consistent delivery of a high value/price experience, day after day, year after year, regardless of who happens to be on the front lines of the delivery process. It is the systematic output of a service model that is designed explicitly to produce it.  It is not the typical way we consume good service today, which is when entrepreneurial employees take it upon themselves to meet our needs in spite of the system.

In the spirit of know-it-when-I-see-it, I’m starting a highly subjective, incomplete list of service organizations that have reliably offered me (or people I know) excellent service.  I hope this brings the concept to life a bit. I also hope to learn from you. I would love to hear about other organizations you’d add to this list.

  • Lexus Service Centers – incredible that this level of service is possible and its competitors are choosing not to do it.
  • USAA – very difficult to find an unsatisfied customer
  • Zappos – very difficult to find an unsatisfied customer or employee
  • Wine.com – two-day shipping, scheduled at your convenience (including evenings and weekends), for $49 per year
  • Progressive Insurance – offers differentiated features such as Immediate Response vans and Total Repair
  • Four Seasons – unobtrusive excellence, if you like that sort of thing
  • J. Crew – straightforward excellence in the retail stores (thanks Kristin!)


Chief Culture Officer

March 20, 2009

In an interview for a recent Business Week article, Zappos CEO Tony Hsieh described the source of the company’s exceptional performance and increasingly legendary customer service:

Ask Hsieh to describe his secret sauce, and he’ll tell you that much of Zappos’ success comes down to the company’s culture and the unusual amount of openness he encourages among employees, vendors, and other businesses…

If we get the culture right, most of the other stuff, like the brand and the customer service, will just happen. With most companies, as they grow the culture goes downhill. We want the culture to grow stronger and stronger as we grow.

Hsieh understands that another name for CEO is Chief Culture Officer. When culture is built and protected deliberately by the CEO — as it is by Hsieh, who embodies the values he wants Zappos to compete on, including transparency and excellence — culture sets the stage for a company to thrive.  As Steve Kaufman, a dear friend and colleague who used to run Arrow Electronics, likes to say, “culture eats strategy for lunch.”

Culture drives the millions of invisible choices that aren’t covered in the strategic plan or employee handbook and would be silly if they were, norms and attitudes like unfailing respect for customers and  pride that’s linked to group performance. Culture manifests visibly too, of course, often by leaders who do whatever it takes to defend it. In Zappo’s case, this means that all new hires who complete the introductory training are offered $2,000 to walk away.  People who are the strongest fit with Zappo’s culture don’t take the money.

But culture is the strong, sensitive type. For all its power, it reacts strongly to neglect. When culture is not a high priority for CEOs — which is often the case — culture can lose its swagger, show up unevenly across business units, and quickly stop being a source of competitive advantage. In today’s economic climate where customer retention and customer value are increasingly vital, excellent service will be a differentiator.  Tony Hsieh is a powerful reminder of the role that culture and its stewards will play in that journey.