Talent
Companies that resist the Thank You Economy are going to see an exodus of talent. The people who understand where the culture is going but don’t get support from their companies are going to find the courage to leave for new pastures. In communist societies, people resist covertly. They’re suppressed; they fight the system; and as soon as they can, they leave.
One day these companies are going to realize that they have to get on board. They’re going to look internally for the leaders to take them there and execute, and find that the people they need bailed out of frustration a few years earlier. They didn’t appreciate what they had until it was too late.
Communism in Corporate America
The economy and our culture are inextricably linked, to the point that, in my mind, they are one and the same. If you understand the culture we’re in right now, you understand that there’s nothing an employee can say that will irreparably damage your business, especially if you fix it quickly. That’s what capitalism understands and communism doesn’t.
Tony Hsieh’s Letter to His Employees
When Amazon acquired Zappos, even the way the acquisition was announced was culturally significant. Tony Hsieh, CEO of Zappos, wrote an incredibly personal letter to Zappos employees explaining the details of the transaction, what it meant for the company, and how it would affect their jobs.
Date: Wed, 22 Jul 2009
From: Tony Hsieh (CEO—Zappos.com)
To: All Zappos Employees
Subject: Zappos and Amazon
Please set aside 20 minutes to carefully read this entire email. (My apologies for the occasional use of formal-sounding language, as parts of it are written in a particular way for legal reasons.)
Today is a big day in Zappos history.
This morning, our board approved and we signed what’s known as a “definitive agreement,” in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock. Once the exchange is done, Amazon will become the only shareholder of Zappos stock.
Over the next few days, you will probably read headlines that say “Amazon acquires Zappos” or “Zappos sells to Amazon.” While those headlines are technically correct, they don’t really properly convey the spirit of the transaction. (I personally would prefer the headline “Zappos and Amazon sitting in a tree…”)
We plan to continue to run Zappos the way we have always run Zappos—continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.
We think that now is the right time to join forces with Amazon because there is a huge opportunity to leverage each other’s strengths and move even faster towards our long term vision. For Zappos, our vision remains the same: delivering happiness to customers, employees, and vendors. We just want to get there faster.
We are excited about doing this for 3 main reasons:
1) We think that there is a huge opportunity for us to really accelerate the growth of the Zappos brand and culture, and we believe that Amazon is the best partner to help us get there faster.
2) Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture.
3) We want to align ourselves with a shareholder and partner that thinks really long term (like we do at Zappos), as well as do what’s in the best interest of our existing shareholders and investors.
I will go through each of the above points in more detail below, but first, let me get to the top 3 burning questions that I’m guessing many of you will have.
TOP 3 BURNING QUESTIONS
Q: Will I still have a job?
As mentioned above, we plan to continue to run Zappos as an independent entity. In legal terminology, Zappos will be a “wholly-owned subsidiary” of Amazon. Your job is just as secure as it was a month ago.
Q: Will the Zappos culture change?
Our culture at Zappos is unique and always evolving and changing, because one of our core values is to Embrace and Drive Change. What happens to our culture is up to us, which has always been true. Just like before, we are in control of our destiny and how our culture evolves.
A big part of the reason why Amazon is interested in us is because they recognize the value of our culture, our people, and our brand. Their desire is for us to continue to grow and develop our culture (and perhaps even a little bit of our culture may rub off on them).
They are not looking to have their folks come in and run Zappos unless we ask them to. That being said, they have a lot of experience and expertise in a lot of areas, so we’re very excited about the opportunities to tap into their knowledge, expertise, and resources, especially on the technology side. This is about making the Zappos brand, culture, and business even stronger than it is today.
Q: Are Tony, Alfred, or Fred leaving?
No, we have no plans to leave. We believe that we are at the very beginning of what’s possible for Zappos and are very excited about the future and what we can accomplish for Zappos with Amazon as our new partner. Part of the reason for doing this is so that we can get a lot more done more quickly.
There is an additional Q&A section at the end of this email, but I wanted to make sure we got the top 3 burning questions out of the way first. Now that we’ve covered those questions, I wanted to share in more detail our thinking behind the scenes that led us to this decision.
First, I want to apologize for the suddenness of this announcement. As you know, one of our core values is to Build Open and Honest Relationships With Communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way. Unfortunately, because Amazon is a public company, there are securities laws that prevented us from talking about this to most of our employees until today.
We’ve been on friendly terms with Amazon for many years, as they have always been interested in Zappos and have always had a great respect for our brand.
Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), we decided it was worth exploring what a partnership would look like.
We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. (I think “unique” was their way of saying “fun and a little weird.” :)
Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other’s strengths. We realized that we are both very customer-focused companies—we just focus on different ways of making our customers happy.
Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch (“WOW”) customer service.
We realized that Amazon’s resources, technology, and operational experience had the potential to greatly accelerate our growth so that we could grow the Zappos brand and culture even faster. On the flip side, through the process Amazon realized that it really was the case that our culture is the platform that enables us to deliver the Zappos experience to our customers. Jeff Bezos (CEO of Amazon) made it clear that he had a great deal of respect for our culture and that Amazon would look to protect it.
We asked our board members what they thought of the opportunity. Michael Moritz, who represents Sequoia Capital (one of our investors and board members), wrote the following: “You now have the opportunity to accelerate Zappos’ progress and to make the name an
d the brand and everything associated with it an enduring, permanent part of peoples’ lives…You are now free to let your imagination roam—and to contemplate initiatives and undertakings that today, in our more constrained setting, we could not take on.”
One of the great things about Amazon is that they are very long term thinkers, just like we are at Zappos. Alignment in very long term thinking is hard to find in a partner or investor, and we felt very lucky and excited to learn that both Amazon and Zappos shared this same philosophy.
All this being said, this was not an easy decision. Over the past several months, we had to weigh all the pros and cons along with all the potential benefits and risks. At the end of the day, we realized that, once it was determined that this was in the best interests of our shareholders, it basically all boiled down to asking ourselves 2 questions:
1) Do we believe that this will accelerate the growth of the Zappos brand and help us fulfill our mission of delivering happiness faster?
2) Do we believe that we will continue to be in control of our own destiny so that we can continue to grow our unique culture?
After spending a lot of time with Amazon and getting to know them and understanding their intentions better, we reached the conclusion that the answers to these 2 questions are YES and YES.
The Zappos brand will continue to be separate from the Amazon brand. Although we’ll have access to many of Amazon’s resources, we need to continue to build our brand and our culture just as we always have. Our mission remains the same: delivering happiness to all of our stakeholders, including our employees, our customers, and our vendors. (As a side note, we plan to continue to maintain the relationships that we have with our vendors ourselves, and Amazon will continue to maintain the relationships that they have with their vendors.)
We will be holding an all hands meeting soon to go over all of this in more detail. Please email me any questions that you may have so that we can cover as many as possible during the all hands meeting and/or a follow-up email.
We signed what’s known as the “definitive agreement” today, but we still need to go through the process of getting government approval, so we are anticipating that this transaction actually won’t officially close for at least a few months. We are legally required by the SEC to be in what’s known as a “quiet period,” so if you get any questions related to the transaction from anyone including customers, vendors, or the media, please let them know that we are in a quiet period mandated by law and have them email
[email protected], which is a special email account that Alfred and I will be monitoring.
Alfred and I would like to say thanks to the small group of folks on our finance and legal teams and from our advisors at Morgan Stanley, Fenwick & West, and PricewaterhouseCoopers who have been working really hard, around the clock, and behind the scenes over the last several months to help make all this possible.
Before getting to the Q&A section, I’d also like to thank everyone for taking the time to read this long email and for helping us get to where we are today.
It’s definitely an emotional day for me. The feelings I’m experiencing are similar to what I felt in college on graduation day: excitement about the future mixed with fond memories of the past. The last 10 years were an incredible ride, and I’m excited about what we will accomplish together over the next 10 years as we continue to grow Zappos!
—Tony Hsieh
CEO—Zappos.com
Compare this letter to some of the stiff, jargon-filled letters most CEOs send out to their companies when they make big announcements. They may as well have been written by HAL, from 2001: A Space Odyssey, for all the genuine personality, compassion, and concern they project. Very few employees feel safe after receiving one of those, yet I imagine that most of the Zappos staff who read Hsieh’s letter believed that the decisions made on behalf of the company were made with the right intent. And good intent, as we’ve discussed, goes a long, long way.
How Innovation Feeds Culture
You can never lose by going out on a creative limb. Even if your campaign doesn’t result in the sales you might have hoped for, your company culture will benefit from having tried. Talent wants to follow talent. Any creative team who sees that you tried something innovative will keep you in mind when they’re ready to job hunt.
Choosing a Community Manager
Put the best people in charge of social media, not the people you don’t know what else to do with. Teams don’t pick the chubby, out-of-shape guy first if they want to win; you shouldn’t pick the second-rate player to do something that requires smarts, empathy, and flexibility.
Viral Ping-Pong
People like surprises. When somebody who is known for his or her television or film appearances shows up on Diggnation, a popular video blog, or starts tweeting great content, it becomes noteworthy; it’s like suddenly getting a peek inside the head of someone you’ve always wanted to get to know better. It can work the other way, too.
If Hallmark ran a TV commercial for Mother’s Day and featured a bunch of popular online characters and their moms, like Kevin Rose, iJustine, and Tony Hsieh—or if these Web celebrities did a “Got Milk” print campaign—I’m sure the ads would go crazy viral. Seeing those personalities on television or in print would take the public by as much surprise as if they saw a fish walking down the street. There are a lot of impressions to be made if brands would take advantage of the reciprocal relationships between traditional and social media.
The Interplay between Traditional and Social Media
There’s still a perception that traditional media works—that people see it—and social media doesn’t. What a lot of people fail to realize is how much traditional media is seen because of social media. The 2010 Grammys experienced a 35 percent hike in viewership since 2009, and was the most watched Grammys event since 2004. Credit could be given to the stellar mainstream lineup, or an increase in country fans, or various promotions, but I’m sure social media had something to do with it, too. When Pink started spinning, wet and nearly naked, in a Cirque du Soleil–style harness while singing “Glitter in the Sky,” Twitter went nuts, leading people to think, “Huh, maybe I should tune in.”
People who weren’t planning to watch the Grammys saw that their friends were watching the Grammys and saw that there was some crazy stuff going on at the Grammys, and tuned in. We used to do that. We’d be watching something awesome on TV and pick up the phone and say, did you see that? If we were super advanced, we might have three-way calling and be able to talk to two friends at the same time! But what were we going to do then—hang up, dial another friend, and another? Of course not! With one click, we now can tell everyone we know to get their butts in front of the TV before they miss the awesome show.
Tactics
Intent will make your tactics work better. Your re-tweet tactic will work really well if you care like crazy for a year before you try the tactic, and even better if what you do isn’t really a tactic at all; it’s just what you do. It’s like when you’re nice to someone and then you ask the person a favor…that person is a lot more likely to do something for you if you’ve been a great friend and neighbor than if you’ve ignored him or her the whole time you’ve lived next door to each other.
I use tactics, too, but my engagements far, far outnumber them. Tactics are like dessert. Dessert is great unless you eat it with every meal, every day.
Earned Media
In the spring of 2010, Vaynermedia facilitated a campaign between the New Jersey Nets and the geo-location site Gowalla. The goal was to raise brand awareness and bring more fans to the games. The Nets dropped 250 pairs of virtual tickets around sports venues, including sports bars and gyms, near the Nets’ arena in New York and New Jersey; anyone who checked in with Gowalla could find the tickets and redeem them for real ones to the final home game of the season. Virtual merchandise that could be redeemed for real team memorabilia would also be awarded to people who checked in at the game.
Business insider
s wrote that the Gowalla campaign was a failure because only 15.2 percent of the Gowalla winners made it to the game, but they were mistaken. First of all, we knew there would be challenges to getting people in the seats: the Nets had had a lousy season, the game was on a Monday night, and the arena is extremely hard to get to via public transportation, which is the only way many New Yorkers travel. Given those obstacles, a 15.2 percent conversion rate wasn’t too bad. Second, what the critics didn’t realize is that by writing about the campaign, even if only to criticize, they made it work by extending the story. It also got a lot of positive attention from ESPN and bloggers. Last, the participants themselves had a great time and helped make the campaign work. Their numbers may have been small, but many of them tweeted and sent photos of the event throughout the evening, and continued talking about their experience for days after the game.
Some people suggested that Gowalla might have gotten something out of the campaign, but not the Nets. The Nets did enjoy added business, though, and on top of that, they could now claim to be a brand that’s willing to push creative boundaries. Only “B”-playing businesspeople would look at that campaign and dismiss it as a waste of time. Forward-thinking, creative individuals saw the initiative and thought, “There’s a brand I want to work with.” People who care only about the numbers often miss the most interesting part of the story. In the end, Gowalla and the Nets each got exactly what they wanted from the campaign.