Zappos Exists To Live And Deliver Wow

Ignite, Science of Story October 31, 2016

Zappos Exists To Live And Deliver Wow

Andy Swindler
Conscious businesses prosper through purpose-driven people-first practices, but many still struggle to tell their courageous stories. I help connect the dots.

Maybe this has happened to you. You’re looking for a pair of shoes, wandering from store to store searching for a pair that fits you, looks good and has some style. More often than not, your quest for the perfect shoe turns into a quandary and you leave disappointed. That’s exactly what happened to Nick Swinmurn, but he went home and turned his disappointment into founding a now billion-dollar company called What makes Zappos such a success? Perhaps it’s their enormous selection of merchandise. Or maybe it’s their free shipping both ways and super speedy delivery. Or perhaps it’s because their Why is to live and deliver wow, which powers everything they do.

When Zappos was founded 1999, it had a typical hierarchical top-down structure. That system served them well as current CEO, Tony Hsieh joined the company and helped them grow from a small company to one with 1500 employees and more than $1 billion in gross merchandise sales annually. Zappos is also listed by Fortune Magazine’s annual Best Companies to Work For list. A big reason for Zappos’ success is the pride it takes in providing the best customer service possible. In other words, they deliver Wow!

Although their customers might not know or care, Zappos is one of the best examples of a well functioning Holacracy.

shoesBy 2010 Zappos had grown so much that it started taking a lot longer for them to make operational changes. They realized they needed to restructure their company and found Edward Glaeser’s book, Triumph of the City, to be compelling. As John Bunch, Advisor to CEO and Holacracy Implementation Lead, of Zappos explained it, “We are at the tipping point when more people are living in cities than in rural areas for the first time. Every time a city doubles in population, productivity goes up, but every time a traditional business doubles, productivity goes down.”

Zappos set out on a journey to find a system that would increase their productivity rather than bring it down. They also wanted a system that could unpack their organization’s purpose in a different way. Drawing inspiration from self organization in the natural world, Zappos found their way to Holacracy.

According to John, “Holacracy helped institute a system that forced us to think about purpose at every level.” But, he notes, “It’s an all-in structure change.” They had to abandon their hierarchical structure and adopt one that distributes authority and empowers all employees to take leadership roles and make meaningful decisions. After piloting the system, Zappos began their company-wide rollout. John recalls it took two years to educate and train 1,500 people and to get them to understand Holacracy so they could use it to get work done. In recent years as people became familiar with the new model, Zappos has shifted away from training and education to focus more on the systems side.

communicationAlthough Zappos was ready to change their system, it was important that the system aligned with their company’s core values of transparent communication. Since in a Holacracy transparent rules replace office politics, Holacracy appeared to be a good fit. As people began to use the new system, they realized that, not only did it align with their core values, it challenged them to be even more open and honest than they were before. As a result, Holacracy gained traction and forces them to consider their Why for every decision and process. Zappo replaced static job descriptions with dynamic roles that helped new areas get off the ground that had never existed before.

That’s one of the biggest benefits John sees with Holacracy, but he warns, “it doesn’t come automatically and our number one priority is our culture. We put it before a lot of other things, including our profits and business operation.” When they talk about how to live to deliver and wow, it’s not just talk. They are serious about living their Why. And it starts with hiring. When Zappos interviews someone, they aren’t just looking for a good technical fit. They are screening for culture above all else.

Holacracy has changed the way Zappos does business and their business is doing better than ever. However, John believes it is important that people realize Holacracy is really just the tool that helps them live their purpose and values. Self organization will never replace Zappos’ Why to live and deliver wow. Zappos knows the average caller doesn’t care if they use Holacracy and that’s just fine with them. At Zappos they want people to come to them and expect to be wowed.