This past week I made it over to Henderson, Nevada and took a tour of Zappos Headquarters.  I went with all the folks in the startup I’m working for, just because we thought it would be fun and we liked their approach to business.

I also ended up reading the new book by Zappos CEO, Tony Hsieh, Delivering Happiness which I’d highly recommend.  The story of how Zappos came to be a billion dollar company is filled with many twists and turns, and near death experiences.

I just wanted to jot down a few ideas that stuck with me from the tour and the book:

1. Customer service = good marketing
   Zappos today is known for having great customer service.  But that wasn’t always the case.  When they were nearly bankrupt and had no money for marketing, they decided to reach out to their existing customers in the hopes they’d become repeat customers.  It worked.  Taking a $39 loss on a free pair of shoes might appear to be bad business on the surface.  But when that person told 5 of their friends, it ended up being more cost effective than $39 worth of advertising.

   This is a powerful idea that your customer service can actually be your best marketing.

2. Don’t outsource your competitive advantage
   At one point Zappos was relying on manufacturers to drop ship all the products they sold on their site.  This allowed them to carry zero inventory and run a simple business, but the orders only had about 95% accuracy and were slow to ship. It also limited the selection of what products they could sell.

   At some point they had to make a tough decision: if customer service is what they were all about then they needed to control the entire customer experience from beginning to end.  They made a major shift (and nearly went bankrupt) in the process of starting to keep their own inventory, but it paid off.

   It’s worth spending some time thinking about what your core competency is and focusing only on that.  Once you decide what it is, you may have to sacrifice in other areas to achieve it – so you can’t make everything your focus.  As Jim Collins said, “If you have more than three priorities, you have no priorities”.  What are you willing to sacrifice so that you can focus on your competitive advantage?

3. Fun & purpose > Money
   Finally, one of the most interesting take aways is that Tony ended up preferring fun and purpose over money.  Even after nearly going broke trying to keep Zappos afloat, he still realized that the money wasn’t that important.  He started valuing seemingly unimportant things like hanging out with friends at work or playing pranks around the office as bigger contributors to his happiness than money.

   This definitely showed during their tour as there were plenty of shenanigans.  It’s surprising how once a person’s basic needs are met, money starts to become much less important than how they get along with bosses and coworkers.

You can check out Tony’s talk from South by Southwest here and checkout Delivering Happiness on Amazon.

Thank you Zappos for the tour!

Until next time, keep breaking free!
Brian Armstrong