Keynote Speaker: Tony Hsieh • Presented By • Speakers.com • Advice for Entrepreneurs

Summary

The speaker shares their journey, starting from college entrepreneurship with a pizza business to founding Zappos, a major online retailer. They highlight the company's unique focus on customer experience, culture, and happiness as key drivers of success. The speaker discusses Zappos’ strong values and their impact on business growth, emphasizing the importance of company culture and having a vision beyond profit. The story also includes anecdotes, like a customer discovering their spouse’s $62,000 lifetime spending on Zappos, underscoring the company’s dedication to customer service and culture.

Takeaways

• 🛒 Many men haven't personally shopped from Zappos, but their wives often do, leading to amusing discoveries about large spending habits.
• 🏢 Zappos' headquarters is in Henderson, near Las Vegas, but the company is preparing to move to downtown Las Vegas.
• 📞 Zappos emphasizes customer loyalty and service, with detailed metrics displayed in their call center to track customer interactions and performance.
• 🍕 The speaker’s journey with Zappos began in college, where they ran a pizza business, which led to meeting future Zappos CFO Alfred, who became a close partner.
• 💼 Before Zappos, the speaker co-founded LinkExchange, which they sold to Microsoft, but left due to the deteriorating company culture.
• 📈 Zappos focuses on company culture as its top priority, believing that a strong culture naturally leads to excellent customer service and business success.
• 💬 Zappos' growth is driven largely by word of mouth and repeat customers, with a strategy of investing in customer experience rather than paid advertising.
• 📚 The speaker references key books like *Good to Great* and *Tribal Leadership* to explain the importance of strong culture and vision in a company’s long-term success.
• 🌟 Zappos' brand philosophy centers around the 'three Cs': clothing, customer service, and company culture, all tied together by the goal of delivering happiness.
• 🔑 Great companies, according to research, share two traits: strong cultures and a vision that goes beyond just profits, which ultimately leads to greater financial success.

Q & A

What was the ratio of women to men in the audience during the Zappos survey?

The ratio was about two to one, with more women than men.

Where is Zappos currently based, and where are they moving to?

Zappos is currently based in Henderson, a suburb of Las Vegas, and they are moving to downtown Las Vegas to the former city hall.

What is the significance of the white boxes mentioned in the story about the executive from a major record label?

The white boxes are Zappos packaging, and the executive noticed them appearing and disappearing from his doorstep, indicating his wife's shopping activity without his knowledge.

How much money did the executive's wife spend with Zappos over her lifetime?

The executive's wife had spent over $62,000 with Zappos in her lifetime.

What business did the speaker and his roommate, Sanji, start during their college years?

The speaker and his roommate started a pizza business in their college dormitory.

What was the role of Alfred in the pizza business during college?

Alfred was a regular customer who would order large pepperoni pizzas, and later it was discovered that he was reselling the slices to other students.

What was the name of the internet advertising company that the speaker and Sanji formed?

The internet advertising company they formed was called Link Exchange.

Why did the speaker and Sanji decide to sell Link Exchange?

They decided to sell Link Exchange because the company culture had deteriorated and it was no longer a fun place to work.

What was the primary reason for the decline in company culture at Link Exchange?

The decline in company culture was due to the company growing and hiring based on interviews and resumes rather than the 'friends and friends of friends' strategy, which did not preserve the original culture.

How did the speaker end up joining Zappos full-time?

The speaker initially invested in Zappos and other internet companies, but found investing boring and missed building something. So, he joined Zappos full-time.

What is the number one priority for Zappos according to the speaker?

The number one priority for Zappos is company culture, which they believe will naturally lead to great customer service and a strong brand.

What are the 'three C's that Zappos focuses on?

The 'three C's that Zappos focuses on are clothing, customer service, and company culture.

What does the speaker suggest entrepreneurs focus on rather than money when starting a business?

The speaker suggests that entrepreneurs should focus on what they are passionate about, even if they don't make any money from it for 10 years.

Outlines

00:00

📦 Zappos Customer Experience

The speaker starts by conducting a survey to gauge the audience's familiarity with Zappos, noting a high response rate. They mention the company's relocation to a new downtown location and invite visitors to take a tour. The narrative then shifts to describe Zappos's operations spread across three buildings, focusing on the merchandising area and the Customer Loyalty team, which is their call center. A humorous anecdote is shared about a record label executive who discovered his wife's significant spending on Zappos. The speaker reflects on his journey to Zappos, starting with a college pizza business and then moving to an internet advertising company, Link Exchange, which was eventually sold to Microsoft. The story highlights the importance of company culture and the impact of growth on it, leading to the decision to sell Link Exchange.

05:01

🚀 From Link Exchange to Zappos

The speaker recounts the challenges faced at Link Exchange as the company grew beyond 20 employees, eventually leading to a decline in company culture. They describe the hiring process that initially relied on friends and acquaintances but had to shift to more formal methods as the company expanded. The realization that the work environment had become undesirable prompted the decision to sell the company. Post-sale, the speaker, along with Alfred, another co-founder, started an investment business and invested in various internet companies, including Zappos. However, the speaker found investing less fulfilling and missed being part of a company's growth, leading to his full-time role at Zappos. The narrative also covers Amazon's acquisition of Zappos and the agreement that allowed Zappos to maintain its independence and culture. The speaker emphasizes the importance of company culture at Zappos, which they believe is the foundation for delivering great customer service and building a strong brand.

10:02

🎯 The Power of Company Culture

The speaker discusses the significance of having a strong company culture, as evidenced by research that shows great companies have cultures that align with their values, regardless of what those values are. They reflect on the early resistance to formalizing values at Zappos but emphasize the importance of doing so for long-term success. The research also points out that companies with a higher purpose beyond profits tend to perform better financially. The speaker advises entrepreneurs to pursue their passions rather than focusing solely on profit. The narrative concludes with a mention of the speaker's book, which is influenced by the principles from 'Good to Great' and 'Tribal Leadership,' and the importance of the three C's—clothing, customer service, and company culture—at Zappos.

Keywords

💡Zappos

Zappos is an online retailer known for its strong focus on customer service and company culture. In the video, Zappos is highlighted as a company that prioritizes creating a positive experience for both customers and employees, which has led to its success and growth. The speaker discusses Zappos' history, its unique approach to customer loyalty, and the company's acquisition by Amazon.

💡Customer Loyalty

Customer loyalty refers to the commitment of customers to repeatedly purchase from a company due to satisfaction with the product or service. In the video, Zappos' 'Customer Loyalty team' is emphasized as a key part of their business strategy, with a focus on exceeding customer expectations and fostering repeat customers through great service.

💡Company Culture

Company culture encompasses the values, practices, and behaviors that define the work environment. For Zappos, company culture is the top priority, as the speaker explains that a strong culture leads to good customer service and long-term success. Zappos formalized this with '10 core values' and even hires and fires employees based on cultural fit rather than just job performance.

💡Customer Experience

Customer experience refers to the overall interactions and satisfaction a customer has when engaging with a company. Zappos invests heavily in enhancing customer experience rather than traditional paid marketing, aiming to 'wow' customers and drive word-of-mouth referrals. This philosophy has contributed to Zappos' high sales and growth over the years.

💡LinkExchange

LinkExchange was the first company co-founded by the speaker, Tony Hsieh, and it was an early internet advertising company. He shares the story of building it up and ultimately selling it to Microsoft due to its declining company culture. The experience taught him the importance of prioritizing culture in future ventures like Zappos.

💡Acquisition

Acquisition in this context refers to Amazon's purchase of Zappos. Unlike most acquisitions, Zappos retained its independence and company culture after being acquired. The speaker emphasizes how Zappos' agreement with Amazon allowed them to keep their brand identity and cultural practices intact, which was key to their continued success.

💡Core Values

Core values are fundamental principles that guide a company's actions and decision-making. Zappos has 10 core values that are integral to its operations, including how they hire, train, and manage employees. These values are seen as crucial for maintaining a strong culture and aligning employees with the company’s mission.

💡Pizza Business

The pizza business refers to the first entrepreneurial venture the speaker was involved in during college, where he and his roommate ran a pizza service in their dorm. This experience was an early introduction to managing a business, dealing with customers, and working with partners, which laid the groundwork for future ventures like Zappos.

💡Good to Great

Good to Great is a book that the speaker references as an influence on his thinking about company culture and leadership. The book studies companies that achieved long-term financial success and highlights the importance of a strong culture and a vision that goes beyond profits. Zappos incorporates these lessons into its philosophy.

💡Vision Beyond Profits

Vision beyond profits refers to the idea that a company should have a higher purpose than simply making money. The speaker explains that Zappos' mission is to deliver happiness to customers, employees, and partners, which has driven its success. Companies that focus on a larger purpose often end up being more profitable in the long term.

Highlights

The majority of customers who shop at Zappos are women, often purchasing on behalf of others.

Zappos offers tours of their headquarters, emphasizing their unique company culture and inviting visitors to explore the inner workings.

The focus on Customer Loyalty is key, with Zappos referring to their call center as a 'Customer Loyalty team,' reflecting their service-oriented philosophy.

A customer spent over $62,000 at Zappos without her spouse knowing, demonstrating the level of repeat business and customer loyalty Zappos generates.

Before Zappos, the speaker was involved in a pizza business during college, where he learned entrepreneurial lessons that later informed his work at Zappos.

The speaker co-founded LinkExchange, which was sold to Microsoft. Despite financial success, the company's culture declined, leading them to sell the business.

Zappos' focus on company culture stems from lessons learned at LinkExchange, where poor company culture led to dissatisfaction among employees.

Amazon acquired Zappos, but Zappos was able to maintain its independent culture and brand identity, differing from typical acquisitions.

Zappos reached $1 billion in sales in 2008, with its growth driven by repeat customers and word of mouth, rather than heavy advertising.

Zappos’ core philosophy is investing in customer experience and service, leading to organic growth through customer referrals.

The company's number one priority is company culture, believing that if culture is right, everything else, including customer service, will naturally follow.

Zappos formalized its company culture into 10 core values, which guide hiring, firing, and day-to-day operations.

The importance of having a strong company culture, as supported by research from books like 'Good to Great' and 'Tribal Leadership,' is a core theme in Zappos' strategy.

Zappos teaches employees about business philosophies from books like 'Good to Great' and 'Tribal Leadership,' emphasizing their focus on growth and culture.

The speaker emphasizes that companies with a higher purpose beyond profit tend to be more successful in the long run, a principle that Zappos follows.

Transcripts

[Music]

thank you

thank you

wanted to do a quick survey first how

many of you have actually shot from

Zappos before

oh wow very cool so normally when I do

this survey to a random audience in

understanding this one's a little

different the ratio is actually about

two to one women to men and a lot of

guys I asked say they haven't personally

shot from us but a lot of times they're

wise or something others have and

actually a lot of times assign their

behalf and I was giving a tour to an

executive from one of the major record

labels a few years ago at Zappos and and

right now we're actually based in

Henderson which is a suburb of Las Vegas

and we're about a month away from moving

to downtown to the former city hall

which I'll talk a little bit about I

would definitely encourage you guys next

time you're in town to come take a tour

of Zappos we should be moved in by then

and we'll pick you up from the airport

in a Zappos shuttle give you a tour and

then drop you off at your hotel

afterwards and so I was giving this tour

and right now we're spread amongst three

different buildings and in the building

I'm in we go through the ground floor

which is our merchandising area and then

we go upstairs to our Customer Loyalty

team which is our name for our call

center

and I asked him had he shot from Zappos

before and he said no he hadn't

personally shot from us but he suspected

his wife had because these white boxes

would show up on his doorstep and then

they'd disappear and he had no idea what

was going on he didn't know if she was

buying stuff or exchanging things and

stuff or returning stuff and every time

he asked her he would just flat out

refuse she was just flat out refused to

answer him and change the subject so as

I'm giving this to her on this on the

second floor there's this white board

that you'll see and has all different

stats of our call center a number of

phone calls we took yesterday percent of

phone calls we answered in 20 seconds or

less

sales to the call center and so on and

as I'm going and explaining all these

different stats to him I turn around

and he's disappeared and like oh that's

kind of weird so I go back looking for

him

and look around for a little while and

then finally I find him turns out he had

actually gone halfway down one of our

aisles sat down next to one of our

customer service reps and forced her to

pull up his wife's account

and he discovered that she had spent

over 62 000 in her lifetime

so hopefully we weren't instrumental to

any divorce proceedings or

anything like that so um actually before

getting into Zappos and then talking

about downtown project wanted to talk

about what led me to Zappos and the

story actually begins with pizza this

was during my college years I lived in a

dorm there were probably three or four

hundred students in the dorm and on the

ground floor of the dorm they had this

kind of kitchen area eating area set

aside where every year students could

bid on having the right to operate out

of that space and when you're my

roommate Sanji and I won the bidding and

we decided to get into the pizza

business and so that meant that we had

to invest some pizza ovens hire

employees were basically other students

deal with suppliers and occasionally I

was making the pizzas myself

and this guy named Alfred who later on

actually ended up becoming the CFO at

Zappos he would stop by every night and

this is actually how he met he would

stop by every night and order a large

pepperoni pizza from me which wasn't

actually that weird I had heard about

Alfred's reputation for eating a lot he

had nicknames like human trash compactor

and monster and so on and uh and

actually later on when we became friends

uh actually witnessed this myself

there'd be 10 of us late night at a

Chinese restaurant somewhere and he

would literally finish everyone's

leftovers so not that weird he would

order a large pepperoni pizza but then

sometimes he'd come back a few hours

later and order another large pepperoni

piece of running and I thought okay he

has to pull an all-nighter or maybe he

skipped breakfast

well I found out several years later

Alfred was taking the pizzas upstairs

and selling them off by the slice

so that's why he became our CFO at

Zappos later on

so that was the pizza business and then

after that uh Sanji and I got together

and formed an Internet advertising

company called link exchange and we grew

that to about 100 or so people and then

ended up selling the company to

Microsoft two and a half years later but

what a lot of people don't know is the

real reason why we ended up selling the

company

and the real reason is because it just

ended up not being a fun place to work

at anymore and the company culture just

went completely downhill and I remember

when it was just five or ten or ten of

us we were kind of your typical.com

startup we were working around the clock

sleeping under our desks had no idea

what day of the week was but it's

actually really exciting as as we

started growing and and then as we

started hiring and uh as in our hiring

strategy was we would hire friends and

then friends of friends and I remember

there was one friend of mine that I had

known since high school and he was on

this cross-country road trip from New

York to Silicon Valley where we were and

we needed a little extra help for the

weekend and then that became a week and

then two weeks and then eventually he

actually ended up joining the company

full-time and never made his way back to

New York and so this whole strategy of

hiring friends and Friends of Friends

actually worked really well for us until

we got to about 20 people and then we

ran into a major problem and the problem

was we basically

ran out of friends so

then we had to figure out how do you

hire people based on interviews resumes

and stuff we'd never really done before

we were fresh out of college uh I think

you know did a decent job in terms of

hiring people based on the right skill

sets and experiences but we didn't know

any better to pay attention to company

culture and by the time we got to 100

people I myself dreaded getting out of

bed in the morning to go to my own

company which was definitely a weird

feeling and and then I was thinking if I

was feeling this way how much all the

other employees feel so that's really

what led us to sell the company and

shortly after sale I left Sanjay the

other co-founder left in in fact most of

the early employees all left within a

few months as it turned out this was

back in 98 during the whole.com the

first.com uh boom and craziness and so

we got super lucky with the timing and

it worked out well financially and I was

in the position thinking okay what do I

actually really want to do with my life

now and decided to get together with

Alfred and uh we decided to get a new

investment business and invested in 20

years so different internet companies of

which Zappos just happened to be one of

them but then over the course of a year

I realized that actually for me

investing was kind of boring I felt like

I was sitting on the sidelines all the

time and I really missed being a part of

building something so within the year I

actually ended up joining full-time I've

been with Zappos ever since many of you

may have heard that is actually almost

four years ago that Amazon acquired

Zappos but it's actually very different

from most of their Acquisitions and most

of their Acquisitions the plan is to

integrate the company being acquired

into the parent company and then over

time the original company kind of loses

its identity and joins the mothership

whereas for us we told them we'd only do

it if Zappos could remain independent if

we can continue to have our own culture

our way of doing business in in our own

separate brand and they actually agree

to that and I'm happy to report almost

four years later they've actually

remained true to their word and so if

you look at the history of Zappos start

out with no sales in 99 2008 was the

first time we hit a billion dollars in

Gross merchandise sales we're now doing

uh well over 2 billion on three billion

a year in Gross merchandise sales and

the number one driver of all that growth

has been through repeat customers and

word of mouth and our whole philosophy

is really focus on the customer

experience and customer service and

think about how do we wow our customers

and take most of the money that we would

have normally spent on paid Advertiser

and paid marketing and rather invest in

that invest into customer service and

the customer experience and then have

our customers do the marketing for us

through Word of Mouth and for all this

focus on customer service though

the number one priority of the company

is actually not customer service

our number one priority is company

culture and our whole belief is that if

we get the culture right then most of

the other stuff like delivering great

customer service or building a long-term

enduring brand or business will just be

a natural byproduct of that and there's

a lot of stuff we do culturally in terms

of hiring firing training and so on so

in terms of how we think of our brand at

Zappos we have something internally we

refer to as the three C's clothing

customer service and Company culture

and the way we think about it is whether

it's the happiness that customers feel

from getting that perfect outfit or

perfect pair of shoes or the happiness

that customers feel from getting great

customer service or the happiness that

employees feel from being part of a

culture where the values of the company

match their own personal values the

thing that we realize has all these

three C's together is that Zappos is

just about delivering happiness whether

it's to customers or employees and we

try to apply that same philosophy to our

vendor Partners as well and hence the

title of my book that came out a few

years ago

a quick summary of my book uh actually a

lot of it is based on these two other

books good to great and tribal

leadership which I actually wish had

existed prior to zap was being founded

because it would have saved us a lot of

trial and error and uh for any of you

that have not read those books would

highly recommend it we even teach

classes on these books to our own

employees that's how important I think

these books are and the reason why I

think it's important is because the

authors researched and looked at what

separated the great companies in terms

of long-term financial performance from

just the good ones or mediocre ones they

were actually kind of surprised by their

findings they found that the great

companies had two important ingredients

that the good ones are mediocre ones

generally did not have first ingredient

was that the great companies all had

strong cultures and for us at Zappos we

formalized the definition of our culture

into the 10 core values for anyone that

wants a copy of this presentation I'll

make it available later but what was

really interesting about the research

because because a lot of times people

come through they try our offices and

say okay happy for you Zappos you have

the strong culture and uh made the

fortune best companies to work for a

list and so on but the stuff you're

talking about would actually never work

at my company like we can't have all

these crazy decorations and and parades

and so on that you might see at a

Zappa's office but what was really

interesting about the research I thought

was that it they found it actually

doesn't matter what your values are

what matters is that you have them and

the power actually comes from the

alignment that you get from actually

having values and being able to hire and

fire People based on values it's

completely independent of their actual

job performance so uh advice to anyone

on any entrepreneurs on there is really

and for us at Zappos we actually didn't

roll out our values formally for uh

several years and if I could do it all

over again I would do it from the

beginning because because it was

actually one of those things a lot of us

myself included kind of resisted in the

early days because it felt like one of

those big corporate things uh that big

corporations do the second ingredient

that they found through the research

that separated the great companies in

terms of long-term financial performance

from just the good ones or mediocre ones

the second ingredient I actually found

really counterintuitive the second

ingredient they found was that the great

companies all had a vision that had a

higher purpose Beyond just money or

profits or being number one in Market or

beating the competition

and the ironic thing is by actually

having a vision that had a higher

purpose Beyond profits it actually

enabled these companies to generate

significantly more profits than their

peer group and so sometimes I'll get

approached by entrepreneurs that ask oh

what's a good Market to go and get into

where I can make a lot of money

and my advice to them is actually rather

than have money be your primary

motivator think about what would you be

so passionate about doing that you'd be

happy doing it for 10 years even if you

didn't make any money from it and that's

what you should be doing