Episode #28: A Tribute to Tony Hsieh, Zappos CEO and Innovator

So sad to hear the news about Tony Hsieh. He was a forward-thinking, visionary entrepreneur who was deeply committed to customer satisfaction. This Tony quote pretty much sums up his focus:

“Our philosophy is about delivering happiness to our customers and employees.”

Simple… and powerful. His passion and creativity will be missed.

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Welcome to the CXM Experience. Today’s a tribute show, kind of sad. But it’s a great story about a great person. Happened over the weekend. And I was deeply saddened when I heard of it. And you may have heard as well that Tony Hsieh has passed away. For those of you who don’t know, Tony is the CEO, and one of the founders of Zappos, and has had an amazing career, mostly focused on customer experience. And I’d say that, his secret weapon was customer experience. So I wanted to give you a little bit of my story with Tony Hsieh and a little bit about him, give you a couple things to read. And along that journey, I’ll also share a little bit of insight on customer experience with Wikipedia. And we’ll just ramble for a few minutes here and take a few lessons from Tony and thank him for everything that he’s taught us. And I think there’s still quite a bit left to learn.

So I have been an entrepreneur, and a corporate citizen as well, over the course of my career. Kind of gone back and forth. And at one point, I ran a startup called Open Cola with Cory Doctorow and John Henson. And we got our original round of funding from a now defunct VC firm in Toronto called Mosaic Venture Partners. Vernon Lobo was the LP there who led that round with us. And Vernon still runs a different Mosaic company called Mosaic Capital Partners. And as part of that, one thing that Mosaic did nice job of… and this is back in the day, right, so this is late 90s. They did a nice job of bringing in leading speakers and thinkers and entrepreneurs and, other VC firm leads, etc. And in one of those meetings, we met Tony Hsieh.

At that time, Tony had just sold something called Link Exchange to Microsoft for a couple hundred million, had a bit of coin in his pocket and had started his own VC firm, which was, I think, probably one of the most interesting names for a VC firm ever, called Venture Frogs. And they decided to call it Venture Frogs, because a friend of his said that she’d invest everything she had in the firm, if they called Venture Frogs. So he did, although she didn’t. But they invested in a wide variety of tech and internet startups, including Ask Jeeves. And Ask Jeeves was a search engine. And open Cola was a search engine as well. So it’s a good combo. And I think at one point, we were talking to Tony about investing in Open Cola. He also invested in Open Table one of my favorite apps, and then Zappos, where he joined the founder, Nick Swinmurn, and then became CEO… was CEO there for 21 years.

So I had a chance to meet him and at an earlier stage, and I remember him talking about happiness then, and talking about culture then. And it was interesting, he had such an incredible focus on culture. And it was interesting to me that he was so focused on it. And it was a real blind spot for me at the time, because  I’d come from Procter and Gamble, where culture was very strong and very powerful and very effective. And so I didn’t really, I don’t really have a dysfunctional culture story to lean back on understand what happens when it goes bad. And then after that, I’m running my own companies. So, kind of feel good about those. Since then, I’ve had the opportunity to experience culture gone wrong. And I’ll tell you, boy, it’s a killer. And so that focus on culture that Tony had, from a very early stage, served him quite well. He took Zappos from complete startup to… sold it to Amazon for 1.2 billion, and it’s generally regarded as one of the best places to work, and still quite independent of Amazon, but leverages a lot of Amazon’s technology.

So as I was preparing this tribute today to Tony… I want to talk about Amazon in a second because he’s got a great book you should buy there. I was doing a little bit of research on Wikipedia to remind myself of some of the particulars of his life and things that he’d done. And when I got to Wikipedia, they asked me to donate. They’re doing one of their donation campaigns right now. And apparently, if we all donate $2.75 they’ll be set for years to come. So I decided to do my… I usually do about 20 bucks a year. I would say I probably get more than $20 in value from Wikipedia. I thought they did a nice job this year on the positioning. They said, if you think we’ve given you $2.75 worth of value this year, we’d like you to donate it to us. That’s pretty compelling. It’s like a value realization sale, which is, did I get basically three bucks of value from Wikipedia this year? And it’s like hell yes. I get that kind of value from them almost every day. And so I kind of feel like I’m still ripping them off giving them 20 bucks, but at least it’s 10X, what they asked for.

What was interesting is that I went, I clicked on the link, and I had the opportunity to use Amazon Pay, PayPal, or credit card. So I chose Amazon Pay, took me through, I had to do an authorization on my phone with the link, I logged in, it was prefilled. So that was easy. Chose the $20. cashed out, it was done. Great. However, I ended on a thank you page on Wikipedia, which was great. I’m glad they were thankful. But I could have used that as an email. Because what I really wanted to do is go to the page that I had entered originally. And so they took me out of that flow, and I had to kill it, and then start all over again. Not a big deal. But if you’re listening Wikipedia, that flow after I pay, take me to the thing I was searching for originally, and make me feel really good about that. That transaction getting me to the information I wanted right away.

So anyway, so back to Tony. So he’s got a book that he wrote, you should read it if you’re in a business that deals with customers. It’s a book called “Delivering Happiness, a Path to Profits, Passion and Purpose.” He wrote it back in 2013. But it’s just as relevant today. And he has all sorts of things that he did at Zappos to make it a new and different kind of culture. For example, they would pay brand new employees who weren’t working out, they pay them $2,000, to quit, and just to get them to move on. They made customer service the responsibility of the entire company. And this is something I’ve been talking about over and over again, which is, if care is the new marketing, care can’t just be the responsibility of the care department, or even just the marketing department. Everyone has to be engaged in it. And one of the things I love about Zappos is that at Zappos everybody actually works in care. So when you first start, you’re on a four week training program. And a part of that time you spend in customer service. At Sprinklr we have a customer experience center. When new employees come into the marketing department, they work in the CXC, learn how the product works, but they also get to engage with customers. And so I think this idea of being able to put people on the front lines is really important as well. What I think is also really cool is that they also make sure that when things are busy, you can actually… everyone does it. So as part of the company’s unique culture, all employees work on the customer service desk during the training, and they also help out during the busy holiday season. Even Tony Hsieh would work the phones during the holiday season.

And if you go online, there are all these memorable stories from Zappos employees, about amazing customer service experiences that they’ve had. And what’s interesting when you read them, and there’s different themes to them. And I think the great thing about Zappos is if you’ve got a problem, they’ll solve it. You can return shoes up to 365 days after buying them. And they’ll help you find an exchange. In one case, someone tried to return shoes, but her credit card that she originally used to buy them was gone. So she couldn’t refund it to their credit card. So she could get a new pair of shoes and the person spent hours on the phone helping pick up shoes with the person. In fact, I think if I recall that story correctly, that particular story was a 10 hour call. And so the Zappos person was on the phone for 10 hours with a person exchanging a pair of shoes. A pair of shoes, for 10 hours. So they talked about New York, they talked about Friends, a TV show, they talked about kids, they talked about household chores, the customer’s on the speakerphone and they just talked for 10 hours. And the agent says it was so easy and natural, it felt like long lost best friends. We’re still Facebook friends, but we still haven’t met in person.

And this idea of easy go through all these Zappos stories. They’re all about creating personal connection, very authentic personal connections. And then frequently they talk about how long they’ll spend with someone on the phone. There’s no time on call metric at Zappos. And so they can spend the time they need to get done what needs to get done and create a really loyal customer. And that of course, amplifies like crazy.

One of the other things about Zappos which is quite unique is its management structure. They run on a principle… and they’re relatively unique in this, There’s other companies that play with it, but in terms of a major corporation, I think they’re one of the only ones that run on the principle of holacracy. And there’s actually a holacracy organization. So that is essentially a registered trademark of HolacracyOne LLC. And it is defined by the holocracy constitution, which was released under Creative Commons 4.0 ShareAlike license. And it was invented originally by someone named Brian Robertson, at a company called Ternary Software, which is in Exton, Pennsylvania. And he laid all this stuff out in the early 2000s, and actually has released a book called “Holacracy, the New Management System for a Rapidly Changing World.” Medium tried it for a while, but moved on. But Zappos is committed to it. And in fact, so committed that in 2015, they actually said, if you’re not fully committed to this, you should leave the company because this is where we’re going. And so in 2015, about 14% of the Zappos company voluntarily left, because they didn’t want to stay aligned to holacracy, which I think is fascinating.

So it’s basically a system where there’s not the strict management structure that you typically see. But basically, you structure the organization as a system of self organizing circles. And the circles are organized hierarchically. And each circle’s assigned clear purpose and accountabilities by its broader circle, but the circles all have the authority to self organize internally to best achieve their goals. And each circle conducts their own governance meetings, they assign members to fill roles, and they take responsibility for carrying out work within their domain of authority. And so there are link people that sit between the circles. But the idea is to create a very flexible, fast moving system that integrates input from different parties and ensures that everything is done to meet the needs of the customer.

So I think it’s a fascinating idea. I’ve never worked in a system like this. So I don’t know. All I can say is that boy, boy, did they do a great job at Zappos. So there’s probably something there. And it’s interesting to see how committed Tony was to that. I was watching some videos of him on the weekend, just after I heard the news, and he was talking about holacracy in detail.

So there we go, Tony Hsieh… innovator, forward thinker, orthogonal thinker, someone committed deeply to customer satisfaction, committed deeply to being human and having passion, committed deeply to trying to find new ways to do things. Real loss. 46 years old. To lose Tony at this stage, probably as he was about to embark on a career of influencing a whole new generation of companies is a real tragedy. But you can read his book, you can read more about his company, and you can find more about his philosophy. And, I guess, probably the best thing you could do today to really recognize it is go buy a pair of shoes at Zappos.

The CXM Experience. This is Grad, I’ll see you next time.