The feel good factor

When he was 24 Tony Hsieh sold LinkExchange, the company he co-founded, to Microsoft for $265 million. Now CEO of US-based online shoe and clothing store Zappos and author of Delivering Happiness, he tells us about his approach to business deals and big decisions.

Tony Hsieh is one of those people for whom business vision seems to run in their veins, a natural at creating good feeling in the companies he is involved with and achieving a staggering amount of success as a result.

Hsieh graduated from Harvard University with a degree in computer science, but quickly decided corporate life was not for him, founding his first internet company – LinkExchange – shortly after. LinkExchange was one of the earliest platforms for managing online advertising. Hsieh explains: “I remembered it was a lot of fun when we started, with less than ten of us working around the clock, building the business up. We didn’t know anything about company culture, however, so when we quickly grew to 100 people there wasn’t any overarching ethos. It was one of the reasons we decided to sell, and I knew this would be a vital part of any other company I was a part of in the future.”

After LinkExchange was bought by Microsoft in 1998, Hsieh used the profits from the sale to start a venture capital incubator firm, Venture Frogs. It was in this capacity that in 1999 he began to work with shoe and clothing store Zappos as a company adviser, joining as CEO two months later. Zappos’ revenues then quickly built from $1.6 million in 2000 to $1 billion by 2009 – when stepped in with an offer to buy the company outright. It was not the first time the retailing giant had made an offer, and making the decision to sell was not easy.

In an edited extract of his book, featured by in 2010, Hseih wrote: “Our plan was to stay independent and eventually go public, but our board of directors had other ideas. The recession and credit crisis had put Zappos and our investors in a very precarious position. We initially considered buying out the board, but the offer by Amazon was too large to ignore and we knew they were more open to us operating as an independent entity.”

The acquisition eventually went ahead, at a valuation of $1.2 billion, with the board replaced by a management committee including Hsieh and Jeff Bezos, CEO of Amazon. Hsieh added: “Our relationship is governed by a document that formally recognises the uniqueness of Zappos’ culture and Amazon’s duty to protect it. We think of Amazon as a giant consulting company we can hire if we want – for instance, if we need help redesigning our warehouse systems.”

Zappos’ culture has certainly not suffered. It might not be well-known in the UK, but in the US the brand is synonymous with friendly and reliable customer service, with a huge and loyal following akin to a fanbase. Says Hsieh: “People are drawn to Zappos because of our huge selection of shoes and clothing, but what creates the passionate loyalty is our focus on customer service. This includes free and fast shipping both ways, a 365-day return policy, and the fact that we are very accessible, actively seeking out conversations with our customers. We run our call centre pretty differently from most others, with our goal to ‘Deliver WOW Through Service.’ We don’t have scripts, call times, or up-selling the way most call centres do.”

Hsieh is also interested in the emotional side of business, publishing a book, Delivering Happiness, where he shares his business and life lessons. Adds Hsieh: “It’s important to me to build a business where money isn’t the primary motivator because, in tough times, I’ve found it isn’t enough. I believe success is created by following your passion and going through the journey of redefining what success means.”

5 business lessons

  1. Focus on making company culture your number one priority: Inspire and be inspired, concentrating on the happiness of those around you
  2. Make customer service the entire company, not just a department: Your employees should live your brand and pass this on to customers
  3. Hire people slowly: But move fast in removing those who don’t share your company’s values
  4. Help employees to grow: Both personally and professionally
  5. Seek to change the world: Use happiness as a framework for combining profits, passion and purpose in business as well as in life

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK