On Tuesday, September 7, Tony Hseih, CEO of Zappos, stopped by 37signals office in Chicago on his Delivering Happiness Tour to do Q&A with Jason Fried, David Heinemeier Hansson, and 37 other guests. I was stoked to be a part of the conversation! Below are some of my notes from the Q&A. Enjoy!
On writing the book Delivering Happiness:
- Tony went on a retreat to get the book written.
- Once I was in the mood to write it was easy.
- The hard part was getting into the mood to write.
- Tried alcohol, caffeine, RedBull, coffee beans in vodka, etc.
- They just started a 3 month long bus tour hitting 23 cities to promote the book.
- They’ve already been on the road for 11 days, and have hit 4 cities so far.
- The tour is more about the message, less about the book.
- They are using the tour as an opportunity to see and learn about what’s happening out there.
- They want to inspire and be inspired.
- Learn more at DeliveringHappinessBook.com and DeliveringHappinessBus.com
Tony to Jason and David: One of the challenges of a bus tour is that there are 2-3 events per day. It’s like planning 80 weddings over a few months. The bus is like a startup. You guys are all about productivity and efficiency… what tips do you have?
- Typically, we wouldn’t do a 3 month bus tour; we’d stay in 1 city for 3 months.
- Everything we do is all about doing it the simplest way possible first.
- Instead of taking on many possibilities, we take on the easiest one first.
- Anything you do is more than adequate for people who want to get to know you.
- Go as low-fi as you can go… add on extras only when you need to.
Tell us about what Zappos stand for, what makes it different, what is your book about?
- Zappos has evolved.
- It started in ’99 during the height of the dot com boom.
- It initially all about selling a lot of shoes online
- 4 years into it they had to figure out what they wanted it to really be all about.
- They decided they wanted their brand to be all about delivering the best customer service
- In 2005, they shifted to make culture their #1 priority.
- Everything else would happen naturally with a strong culture.
- As many companies get larger they tend to lose their culture.
- At Zappos, they want to scale their culture to make it stronger and stronger as the company gets larger
- Having a strong culture causes you to be very explicit about what people’s jobs are all about.
- Your job is not a job you do, it’s a culture that is a part of what you do.
- Making customers and employees happy is their thrust to deliver happiness.
- Check out zapposinsights.com
- They help other companies figure out their core values to build their own strong cultures.
- What’s important is having a strong culture.
- What separates good companies from great companies is a strong culture and a vision that has a higher purpose above money or profit.
- By having a higher purpose you generate more.
- Zappos’ higher purpose is about spreading the idea of happiness as a business model
How did you implement culture 4 years into the life of your business?
- They had 100 people when they decided to make culture the priority.
- It’s different than when you are starting from the beginning.
- When you are at the beginning of a start-up everyone knows each other… it’s easy to know when someone isn’t fitting in.
- It’s hard as you get larger to have a handle on that.
- Tony used to interview everyone personally
- Zappos established 10 core values as a means to establish and define culture.
- The problem with most core values is that they sound like a press release and are incredibly lofty… you can’t tell the difference between a company and their competitor.
- They aspire to have Committable Core Values.
- They hire or fire people based on their values.
- Core values are a way to scale culture.
- Core values are a formalized definition of our culture
- They are the DNA of the company
- There are no leader birds in the movement… each bird has simple rules embedded in their DNA that allows them to fly in unison
What is 37signals take on all of this?
- When you are small you can talk to almost everybody.
- Lead by example
- You can’t have the disconnect of asking people to do something and not do it yourself or show them how.
- You have to set the best example
- The trick of being a small company is that you have to learn how to do everything.
- You have to get better at doing everything.
- If you’re not good at what you are telling people to do it won’t work.
- Small companies must be focused on efficiency; there’s no room for slack.
- Half of their company is in Chicago half is in 10 cities around the world.
- Now that they’ve built an office there is a more unique experience for people who are in Chicago, to keep balance and a sense of keeping everyone on the same page, most of their communication happens online via Campfire, even if they are sitting across the room from one another.
To Zappos: How do you manage the decision making process?
- I [Tony] do as little decision making as possible
- Decision making is pushed to the front lines as much as possible.
- The advantage of that is that all of the teams are much happier.
- Customers experience the consistent culture.
- Zappos tries to align themselves culturally with all of their vendors.
- Any place that has a distributive force makes it difficult to ensure culture.
- Zappos has 2,000 employees… 1,000 in Kentucky and 1,000 in Las Vegas
- Visit tours.zappos.com to see their office if you are in Vegas.
- They send employees in both directions… every employee has to see the packaging and shipping in action.
Jason Fried to Tony: You aren’t price competitive. What’s cool about that is that on the internet people go to the cheapest place. Zappos culture and service is more important than price. Was that intentional?
- Zappos doesn’t offer coupons, etc.
- They want customers to shop with them for service and selection, not the price.
- They launched 6pm.com as discounted service site they offer but doesn’t have the same service, etc
- Whatever doesn’t sell on Zappos goes to 6PM. It’s like an outlet mall.
To Jason and Tony: In Rework: you say failure is not a rite of passage, they you shouldn’t learn from your mistakes, etc. In Delivering Happiness, Tony says that we need to fail our way towards success. Please explain!
- There is something to be learned from failure.
- There’s a lot to be learned from success.
- Not enough people focus on that.
- If you keep focusing on what didn’t work you’ll keep learning what not to do.
- Since everyone is talking about failure, look at what’s working instead.
- Keep doing what’s working.
- You get better by doing something better each time.
- It’s not a great way to learn if you keep looking at what you did wrong.
- Learning from your mistakes is an oversold idea.
- Failing doesn’t mean you’re succeeding.
- There’s a difference between correlation and causation.
- Learning from success can be hard because you could be learning the wrong thing from your success.
- There are very few entrepreneurs who did their first thing very well to the point that it succeeded.
- If people fail at something they can look at themselves as a failure.
- Failure is part of the path to where you are going to end up.
- It’s a necessary step in the journey.
- Entrepreneurial spirit is about optimism and creativity.
- Being an entrepreneur is like being MacGyver for business.
- It’s never a question of not having a enough resources but not having enough resourcefulness.
How do you both feel about the issue of transparency?
- I don’t know what transparency really means.
- Transparency doesn’t mean everything is available to everyone.
- Some things are not people’s business.
- It doesn’t benefit anyone. It’s like trivia. It doesn’t help.
- It’s fine to give something away for free but you have to have something to sell.
- Example: First Citywide Bank skit from SNL:
- It’s only in the web industry where FREE is a qualification for success.
- One of the fastest ways to grow trust is through transparency.
- Initially focus on being transparent with your employees.
- Transparency gives every employee the feeling of greater ownership.
- They livestream all employee meetings to the general public.
- There’s a lot of techniques for running companies and building culture that work at a certain skill.
- Techniques and tools are different dependent on the scale. Advice can be very context-specific.
The service industry has a bad reputation… if you have a huge staff in customer service, how do you instill value in them?
- It goes back to having a greater purpose.
- They are building Zappos to be all about delivering happiness to the world.
- The same tasks have different meaning and value to people.
- There’s many ways to motivate employees [money, fear, incentives].
- There’s a major difference between motivation and inspiration.
- If you can inspire your employees with your higher purpose and values that match their own you can accomplish more.
- Motivational incentives are detrimental to creative/knowledge-based fields.
To Jason: How did you decide to NOT take money from investors when you were starting out?
- Fundamentally, it all comes down to your schedule.
- Are you on you own schedule or someone else’s?
- When you take money early on you are someone else’s schedule.
- When you start something and invest in it yourself, you are on your own schedule.
- 37signals started as a design company and now they do software… they choose to do what they do.
- Being on your own schedule, deciding what you want to do, how you want to do it, etc is the best way to go.
- Own your own schedule, don’t rent it from someone else.
- Control and progress are essential ingredients in happiness.
- Faster progress can be addictive.
- If you do take money you give up control.
Rapid Fire Q&A
- Slow down growth to build for the long term.
- Most entrepreneurs have a strong bias towards fast.
- Slow down growth by raising prices.
- Focusing on culture isn’t expensive.
- Be explicit about allocating attention to culture.
- Implement your personal core values from day 1.
- In the interview process at Zappos, they ask people what their top 5 happiest moments are in their lives. Those uncover your key core values.
- People desire connectedness and being a part of something bigger than yourself.
- Happiness looks different for different people.
- Once you break even, invest as much as possible into your customers.
- At Zappos, most money that would have been spent on marketing is focused on building the customer experience.
- Customers will do their marketing for them via word-of-mouth.
- Interestingly, people who spend the most aren’t the ones who talk the most.