The Zappos business model, selling shoes online, looks obvious in hindsight. But the real Tony Hsieh Zappos lessons come from how it was actually built—through iteration, mistakes, and deliberate choices.
Founder Tony Hsieh learned a few lessons building Zappos. One: learn by doing, not overplanning. Two: never outsource your core competency. Three: invest time, money, and resources into customer service, culture, and employee training.
Let’s start with the first lesson: learn by doing. Avoiding analysis paralysis was a core tenet of how Hsieh operated. It’s one of the reasons Zappos was successful.
“Quality means doing it right when no one is looking.” — Henry Ford
Tony Hsieh Zappos Lessons: Learn by Doing, Not by Planning Forever
Zappos’ success and growth were achieved by throwing ideas against the wall to see if they stuck. They’d improvise until the idea worked. Rinse and repeat.
Hsieh loved experimenting with ideas. He embraced weirdness and encouraged a culture of serendipity that led to innovation. It reminds me of Chris Sacca, who recommends we celebrate the weird, not shun it.
To Hsieh, experimentation meant providing a safe space for employees to try new ideas without having to navigate red tape. The opposite was seeking consensus, which he deliberately avoided.
In addition to experimentation, Zappos had a core value of creating a fun and a little weird environment. Employees were encouraged to think outside the box—try unconventional marketing strategies or operational ideas. It reminds me of Jeff Bezos’ creative wandering concept.
Weirdness meant Zappos was open and spontaneous. Serendipity manifested itself through a culture of connection. Meaningful chance encounters at the office sparked innovation.
Offices were designed to force everyone to walk through common areas. In turn, spontaneous collaboration happened by bumping into colleagues.
Running into new colleagues built new friendships. Even socializing outside of the office fostered trust. It made teams more effective, more creative.
Creativity generated new ideas, not all of which resulted in predictable outcomes. Hsieh argued against trying to focus on what you can’t control. Instead, he favored a learning-first approach where everyone would adapt as the business scaled.
Zappos scaled to dizzying heights. In its growth, they learned a valuable lesson: never outsource your core competency. Focus on what you do better than everyone else.
Never Outsource Your Core Competency
Hsieh learned many lessons building Zappos, one of which was to never outsource your competency. Hold onto what you do best.
Delivering Happiness shared an example of a core competency at Zappos that was outsourced—warehousing.
Zappos outsourced warehousing to a third party. They trusted that the company would care as much about their customers as Zappos did. Huge mistake. Fortunately, they reacted quickly. If they hadn’t moved fast, it could have sunk the company.
The warehousing mistake made Hsieh realize that no one would care for their customers as much as they did. Call centers, a cost-cutting opportunity for the company, were another area he considered a core competency.
Zappos kept customer service in-house because Hsieh considered it the most important brand-building tool in his toolkit. He could create customer loyalty through personal, lengthy calls, instead of quick one-off calls.
Outsourcing call centers, like warehousing, taught Zappos that third parties couldn’t replicate the exceptional customer service offered internally.
Hsieh wanted to create a “WOW” experience with customers. It was fundamental to how they operated. Outsourcing ran counter to this experience and could kill their valuable business model.
Zappos did everything it could to protect its competency and control what made it unique. Don’t give it away. It’s fine to outsource non-core competencies, but any direct interaction with customers is an opportunity to build your brand.
Touch points with customers build lifetime value. Offer unparalleled customer service. Ignore short-term cost savings from outsourcing. If the activity is core to your business, keep it in-house.
The Three Gears That Drove Zappos’ Growth
Three gears: customer service, culture, and employee training. That’s where Zappos decided to invest its time, money, and resources to hit its goals.
Customer service would build its brand and drive word-of-mouth. Hsieh wanted to create “WOW” experiences with every customer touchpoint. Customers should love to interact with Zappos.
Hsieh viewed Zappos as a customer-service company that happened to sell shoes. Exceptional customer service was its core purpose. He wanted employees to go above and beyond for customers. That’s why he implemented free shipping/returns and allowed customer service agents to have unscripted calls.
When customer service is your guiding principle, you naturally attract individuals who value meaningful customer interactions. These people, in turn, build the culture that forms core values. Strong cultures contribute to employee retention and lead to improved customer service.
Zappos’ number one priority was culture. Hsieh said that if you get the culture right, everything else will naturally take care of itself. Culture manifested itself by focusing on employee happiness, creating a customer-focused environment, and encouraging employees to be themselves.
Once culture is nailed down, Hsieh wanted to develop employees. It’s one thing to bring in top talent. It’s another to continue developing your talent. To me, it’s analogous to college sports—recruit top talent into your program and then develop that talent to bring championships.
Employee training at Zappos included mandatory call center shifts for all new employees, offering new hires money to quit if they didn’t like it, and a merit badge system where employees earned badges for new skills they acquired that translated into advancement and increased pay.
Closing: Building Something That Lasts
Zappos worked by doing, not planning forever. Through action, they realized what they were good and bad at, and, most importantly, kept what they were good at in-house. Customer service guided every decision, but Zappos also wanted to build a culture of people who aligned with its mission and wanted to grow and develop through the training offered by Zappos.
Delivering Happiness taught me a few key lessons. The best Tony Hsieh Zappos lessons are simple but hard to execute: avoid analysis paralysis through forward motion, never outsource what you’re good at to someone else who doesn’t care about your customers as much as you do, and prioritize customer service, culture, and employee training to deliver results to your customers.
