There comes a spark which needs to be grabbed and held on to. There is passion which must be nurtured and grown to the next level. There is an idea that can make you or break you. The story relayed in Delivering Happiness- A Zappos Story by Tony Hsieh is about a spark that ignited, passion that exploded and an idea which became a phenomenon.
This book is a must read, even for non-readers. To make it accessible for all, I have produced a summary for each chapter.
The book of the present
Chapter 1 Summary
Chapter one is based on the CEO (Tony Hsieh) of Zappos who was celebrating with his employees upon the good news that Amazon had bought Zappos. He looks back at his journey, trying to pinpoint when he started as an entrepreneur and he realized that it dates back to elementary school and his venture into worm farming.
He discusses key values that he learned from elementary school to Harvard. He’s from an Asian heritage which came with a lot of predetermined obligations to be the best student and getting into the best college. As he explains that for an Asian family in America, their children are their scorecard. However, he worked smart rather than hard. He found creative ways to fulfill his responsibilities such as tape recording his piano lessons and playing them at the scheduled time. Then he would read whatever books he liked, especially Boy’s Life magazine.
The chapter is based on the various ways Hiseh tried to gain a profit from various business ventures. He was successful with some idea, he wasn’t in others. He learned lesson by taking risks. Thinking outside the box was a core value in his early stage learning experience. This was especially profound when he submitted a poem based on Morse code for a Shakespearean assignment in high school.
Hsieh writes about his experience in Harvard where his business analytical skills had been honed enough to recognize a need such as McDonald’s hamburgers, identifying the target audience which is the dormitory he was living in and marketing that need for fulfillment at a profit margin. And he wasn’t afraid of taking risks. He converted the burger selling business into a pizza selling business which had a higher profit margin. He also came to meet Alfred, who was to become the CFO and COO of Zappos.
The chapter ends with Hsieh trying to find a high-paying job after college graduation. It shows his personal trait of wanting a well-paid job where he didn’t have to work a lot.
Chapter 2 Summary
Chapter Two is about Hsieh’s journey after graduation and how he reached the decision to walk away from millions of dollars that Microsoft was willing to offer. His journey starts from Oracle, his first job after graduating. He receives a healthy $40,000 pay-check a month to test out software which leaves him having more time to get bored. Over five months, he realizes that he does not have any interest in spending the day unproductive with a steady pay-check. His room-mate, Sanjay is in a similar situation and they both decide to do an independent project in their free time to combat boredom.
They build a Website designing start-up with Hsieh in sales and customer service and Sanjay in designing. They attain an important ‘client’ (chamber of commerce) for whom they do the work for free and market the name for paying services. Eventually the start-up gets a paying client and both realize that the fun and excitement is incomparable to the boredom at the office. So they quit their regular jobs and venture out on their own.
This leads them to bigger obstacle; their start-up is not innovative enough. It doesn’t provide enough fun and soon they fall into boredom again. Hence they venture into building another start up called Internet LinkExchange (ILE). This idea blooms considerably as they sell ad inventory to company websites which is run on credits. Once the company obtains 100 credits by the click-through-rate, they receive 500 times impressions by ILE and the website can use the ILE domain for advertising their company. This enables free exposure for companies who are unable to spend on conventional advertising. It becomes more than a million dollar idea!
The chapter ends with LinkExchange getting sold for $265 million dollars by Microsoft and Hsieh gets $40 million if he stays for a year. However, the change in company culture from fun and exciting to politics and profits bores the CEO into leaving within a month. He realizes that happiness is not about money. It’s about passion.
Wise words from a fun-loving CEO
Chapter 3 Summary
This particular chapter gives a comprehensive insight in investing into a startup and the entrepreneurial skills required for its success. The chapter provides a progress into how to go about business networking and creating meaningful connections with those around you. There has to be an effort to create a relationship or engage in matters that may not be related to the company you represent. With his two friends, Alfred and Nick, Hsieh invests in the shoe company called ‘Zappos’. One specific business strategy used for the online shoe store was the ‘drop-ship’ concept.
“We were pioneering a new concept of having brands drop ship directly from their inventory to the customer.”
Hsieh learns a new skill, poker. He finds it fun and challenging and also finds similarities between poker and business strategy. To name a few, he learns about Marketing and Branding as follows:
- Act weak when strong, act strong when weak. Know when to bluff.
- Your ‘brand’ is important.
- Help shape the stories that people are telling about you.
He also spoke about Evaluating Marketing Opportunities, Financials, Strategy, Continual Learning and Culture.
His excerpt from Ivana Trump’s Book is also quite insightful into creating an environment of connectedness. He explains the necessity to know the person first and then know what he does and form a relationship which is ever-lasting.
Hsieh’s passion comes through when Zappos does have enough funding and not many investors were interested in the company. He learned about taking risks and believing in the idea. He feels strongly that Zappos can work if marketed right as it is definitely a growing industry. His passion to prove everyone wrong was all the motivation he needed to put aside his investing hat and put on his entrepreneurial hat.
Chapter 4 Summary
An important lesson was learned in by the Zappos Hsieh in this chapter:
“We learned that we should never outsource our core competency. As an e-commerce company, we should have considered warehousing to be our core competency from the beginning. Outsourcing that to a third party and trusting that they would care about our customers as much as we would was one of our biggest mistakes. If we hadn’t reacted quickly, it would have eventually destroyed Zappos.”
At lunch with his colleague/friend Fred, Hsieh takes about the bigger vision of Zappos. By the end of lunch, they realize that the biggest vision would be to build the Zappos brand about the very best customer service. Then Fred initiates another way to apply customer service to the vendor community. It was something that was never done before. Vendors do not have the best relationship with retailers, especially department stores, usually trying to squeeze the last dollar out of them. (Due to their conversation at lunch, where on the side they recommended books to read to each other, Zappos library was born).
Their big vision about the best customer needed to come to fruition as Zappos was tight on funding and possible solution for cash flow into the company was running thin. Internally, the employees were excited about implementing the core value of customer service but was it all talk? Or were they committed to take on the challenges? Thus, on March 2003, Zappos removed the drop-ship products from their website permanently.
Chapter 5 Summary
This chapter begins with the decision of Zappos headquarters to be moved to Las Vegas. Different employees give their intake on the move and from 90 employees; around 70 employees agree to move to Las Vegas. This is mostly due to a great correlation of company culture within Zappos. To maintain this sort of culture, Hsieh initiates the Zappos Culture Book which has a new edition every year. It’s given out to prospective employees, vendors, and even customers. Ask Anything is the company newsletter which is a by-product of the culture book. The employees could ask anything they want and their question will be answered. One of the questions asked were “Do vegetarians eat animal crackers?”
It is because the Zappos team invested in improving customer service (the main reason the whole Zappos HQ was moved to Las Vegas), strengthening their company culture, and caring about their employee’s personal and professional development, that they reached their gross merchandise sale of $1 billion in 2008 instead of 2010.
“Looking back, a big reason we hit our goal early was that we decided to invest our time, money, andresources into three key areas: customer service (which would build our brand and drive word of mouth), culture (which would lead to the formation of our core values), and employee training and development (which would eventually lead to the creation of our Pipeline Team).”
The brand philosophy Zappos invested in was to take most of the money they would have spent on paid advertising and invest it into customer service and customer experience instead, letting their customers do the brand marketing through word of mouth. The CEO had tapped into a resource not known by any company: the WOW experience.
“The combination of a 24/7 warehouse, surprise upgrades to overnight shipping, and having our warehouse located just fifteen minutes away from the UPS Worldport hub means that a lot of customers order as late as midnight EST, and are surprised when their orders show up on their doorstep eight hourslater. This creates a WOW experience, which our customers remember for a very long time and tell their friends and family about.”
Kew lesson learned in this chapter: “Your Culture is Your Brand”, out which 10 core values were born.
What it means to be an entrpreneur
Chapter 6 Summary
“If you just focus on making sure that your product or service continually WOWs people, eventually the press will find out about it” – Tony Hsieh
The beginning paragraphs of chapter six tells about the marvel of word of mouth. It organically gets news coverage or publicity on blogs and it spreads like ‘wildfire’. It wasn’t initiated by the company, it just happened because it was a different way of conducting a business – Keeping the customers first. The increase media coverage gained the CEO opportunities of public speaking at summits and events. He would personally be a nervous wreck but it helped his brand gain a positive impact so he accepted as many public speaking events as he could. This gained him an insight: people love hearing personal stories and about the company culture. He made three basic rules for his talk:
- Be passionate
- Tell personal stories
- Be real
Another unexpected result of public speaking was the realization that Zappos was changing other companies and other people’s lives as well. They had helped in implementing a combination of profits, passion and purpose. This gave birth to Zappos Insights – an online video subscription service and Zappos Insights Live – a two day immersion seminar. The company’s initiative to create a valuable company culture with the best customer service grew their gross merchandise sale to $1 billion in less than ten years. This was possible because their focused on their core values time and time again.
Although they had achieved their billion dollars goal way ahead of schedule, there was misalignment with the board of directors. They did not see the need for the previously mentioned activities, they wanted a financial exit. Hence Tony, Alfred and Fred came up with a plan to buy out their board of directors. An opportunity came in 2009; Amazon reaches out for an alignment with Zappos. After months of talks and understanding of both companies Zappos and Amazon, they come to a ‘definitive agreement’. It would help Zappos maintain it company culture and grow exponentially. The transaction for Zappos shareholders was over $1.2 billion.
If you like the summary, read the entire chapter in the book here. Or better yet, read the whole book! 😀
P.S. There are couple more chapters in the book. Read them if you like.