Did Hsieh sell Zappos to save its customer experience?

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Tony Hsieh’s piece in Inc. on why he sold Zappos to Amazon is more than a summary of the themes of his new book, Delivering Happiness: A Path to Profits, Passion, and Purpose. It’s cathartic discussion of the lengths Hsieh has been willing to go to ensure the Zappos customer experience and company culture remain intact. How far? Selling his business to Amazon. Why did he do it?

To save the customer experience.

There were financial pressures, Hsieh explains, that influenced the decision to sell. The economy was starting to decline. Investors were ready to exit. These pressures were manifested themselves in tension within Zappos’ board of directors about the role of and investment in company culture – which Hsieh says is integral to the Zappos’ customer experience.  He writes:

Some board members had always viewed our company culture as a pet project — “Tony’s social experiments,” they called it. I disagreed. I believe that getting the culture right is the most important thing a company can do. But the board took the conventional view — namely, that a business should focus on profitability first and then use the profits to do nice things for its employees.

Hsieh sympathized with the board’s position but he was adamant that focussing on profits at detriment of culture would hurt sales in the long run.  This is a terrific example of using an ideal customer experience as an operating strategy to drive decisions across the company, winning financial performance as an outcome.  He says:

Better service would translate into lots of repeat customers, which would mean low marketing expenses, long-term profits, and fast growth.

Tony was, as was his board and investors, out for profit as an outcome. But HOW to achieve it – the day by day operating strategy – was the point of contention. The details are worth reading and I won’t give away the punch line, but the lesson is in the discipline Hsieh exercised for the Zappos happiness experience. Once convinced that Jeff Bezos and the gange at Amazon shared this goal, he sold his company.

How has it worked out? Investors at Sequoia made $248 million in the deal.  And in the first quarter of 2010, net sales at Zappos were up almost 50 percent.

Hsieh and Zappos’ success go a long way to dispelling the myth that organizations don’t have to trade off profits in order to invest in customer experience. Or more directly: Get as clear about your target experience as Tony Hsieh is about his.  Use it to drive daily decisions across your organization. Reap reward.

Photo by Charlie Llewellin

You might also find interesting:

Zappos Best Customers Are the Ones Who Return the Most Orders: Fast Company, April 2010

Selling Shoes Online and Making a Billion:  Richard Pachter, The Miami Herald

About Zappos and Amazon: A video by Jeff Bezos

Republished with author's permission from original post.

Linda Ireland
Linda Ireland is co-owner and partner of Aveus LLC, a global strategy and operational change firm that helps leaders find money in the business performance chain while improving customer experiences. As author of Domino: How to Use Customer Experience to Tip Everything in Your Business toward Better Financial Performance, Linda built on work done at Aveus and aims to deliver real-life, actionable, how-to help for leaders of any organization.

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