Delivering Happiness

In this book Tony Hsieh (CEO of Zappos) gives his personal story of life. The book gives you a good view on what Tony learned from his entrepreneurship and what he feels is important to become a successful company. The 3 main focus points according to Tony are Customer Experience, Culture and Employee development/training.
In terms of social media and conversation management Tony tells his people: be real and use your best judgment. The way Steven Van Belleghem (author of The Conversation Manager) is spreading his conversation management philosophy also has similarities with Tony: be passionate and use personal stories.
The book, Delivering Happiness is an easy read and goes from selling lemonade and self made newspapers as a kid to selling Zappos to Amazon for 900 million dollars. In between these, Tony sold his company LinkExchange to Microsoft for 265 million dollars. Successful you could say, but the path to success was not an easy one. You might think that the selling of LinkExchange and having that much money is the only reason why Zappos could be so successful, but that’s not the case.
Let me try to summarize the story for you.
The road to Zappos maries Amazon
After selling LinkExchange to Microsoft Tony had a lot of money in the bank, together with some others he started Venture Frogs and invested in a lot of companies (more than 27 to be correct). The idea was that they would invest once and then be an advisor to the companies if they needed the advice. One of the companies was Zappos, originally named shoesite.com.
While running Venture Frogs, Tony had a lot of time and started playing poker to kill time. In the book Tony makes a comparison between running a business and poker. A very interesting comparison on evaluating market opportunities, marketing & branding, strategy … My favorites among the list are:

  • Table selection is the most important decision you can make, and it is okay to switch tables if you discover it’s too hard to win at your table.
  • Remember that it’s a long-term game. You will win or lose individual hands or sessions, but it’s what happens in the long term that matters.
  • Stick to your principles
  • Hope is not a good plan
  • Learn by doing. Theory is nice, but nothing replaces actual experience.
  • Don’t be afraid to ask for advice.
  • You’ve got to love the game. To become really good, you need to live it and sleep it!
  • Share what you’ve learned with others.

When investing in companies and playing poker became a bit boring, Tony started to go to raves and organize parties. Here he got inspired about how important the feeling of a tribe is. Later this would be the base for the focus on company culture. In the meanwhile, Venture Frogs became an incubator and some of the companies they funded in where moving in the building Tony was living in. The .com crisis has been very hard for start-ups and of all the companies VF invested in, only Zappos was left. Tony tried to get funding for Zappos for the future, but as they were not profitable they could get no funding. The main focus in the next two tough years was becoming profitable.
To keep the company going Tony started investing personal cash in the company. At a certain point he only had some properties but ran out of cash. In order to become profitable, Zappos has changed their business model with success. At the start of Zappos they only worked with brands who could work in a drop ship model. This means people buy on Zappos.com, the order goes to the brand and they ship to the customer. This resulted in only specific brands being offered on Zappos.com. And not the brands the customers really wanted. In order to change this they had to have a brick-and-mortar shop, start a warehouse AND find 2 million dollars to pay the inventory.
And so they did. They changed their business model. Finding 2 million dollars was the most difficult thing to do! Tony believed that Zappos had a future and decided to sell everything he had, except his loft, to get the money. The switch worked, sales went up but they still were not profitable.
The next thing they did was moving closer to the UPS distribution center to be able to ship faster. They partnered with eLogistics in Kentucky. But eLogistics oversold their capabilities and Zappos ran into operational problems. In the meanwhile they also ran out of cash … Tony, while climbing the Kilimanjaro, decided to sell his loft. And even that was not an easy sell at that time. He lost 40% on the value doing this.
Zappos had cash and was saved, for now.
eLogistics became a big problem and at that time Tony and co realized that running their own warehouse was core to their business. This switch boosted the sales again and at that time the BHAG of 1 billion dollar turnover was set for the future, together with the focus on customer experience. But still, not profitable meaning no investments. The future of Zappos depended on the go or no go of Wells Fargo to give Zappos a loan.
June 2003, that day, it happened … they had a go and Zappos was saved and became the success we all know. They moved to Las Vegas and focused on culture, customer service and employee development. Although in 2008 they had to lay off 8% of the staff, the company was later sold to Amazon for 900+ million dollars.Zappos.com
Later this week I’ll share some more insights on Delivering Happiness, talk to you soon!
 

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