Case analysis is a multi-step process. This exercise will help you to learn to analyze a case by framing questions, labeling variables, synthesizing information, summarizing facts, and drawing conclusions. You can use this approach to develop thoughtful solutions to any business issue or situation. Zappos.com Having sold his first company to Microsoft for $265 million in 1999, 25 year-old Tony Hsieh launched Venture Frogs, a venture capital investment fund. One of his most promie u Os Prom Questions Navigation Menu tle-known, but growing online shoe retailer called Zappos. Created in 1999 by 27-year-old Nick Swinmurn, Zappos was originally named shoesite.com, but Swinmurn quickly changed it to Zappos because he thought that it would be easier to remember and was similar to the Spanish word for shoes, zapatos. When he launched the company, there were more than 1,500 retailing sites that sold shoes, but within 2 years, Zappos, with Hsieh's investment and managerial advice, had taken the lead as the largest online shoe retailer. Zappos's success was attributed to two primary factors-its unrelenting focus on customer service and its deeply rooted, employee-centric culture. In fact, the two were intertwined. Since its inception, Zappos sought to mitigate some of the potential disadvantages of buying shoes online. Fit, style, functionality, and price were the four common factors that consumers considered in buying shoes. To address these concerns, Zappos offered next day shipping and free returns on all its shoes, which allowed consumers to try on their purchase in the comfort of their own homes. Zappos also offered more shoe styles than any other online or offline retailer. Most important, Zappos provided relevant, timely, and effective customer service through its website and call center. Zappos's wide product selection, fast shipping, and expert customer service allowed them to charge full prices for its products, which was a key advantage in supporting a cost structure that was focused on high touch customer service and extensive employee development. Hsieh decided to formally join Zappos as co-CEO in 2001 and became the sole CEO by 2003. Swinmurn stayed on as Chairman for a few years but eventually decided to move on to other entrepreneurial ventures. As CEO, Hsieh championed the company's focus on employees with a special emphasis on happiness. Alfred Lin, Zappos's Chief Operating Officer, agreed, We only hire happy people and we try to keep them happy. You can't have happy employees without having a company where people are inspired by the culture. We view this as a strategic asset. We have 1,200 to 1,500 brand relationships and a good head start against the competition, but that can be copied. Our websites, policies-all can be copied, but not our special culture."il Hsieh believed that the company's special culture enabled it to provide the type of customer service that set Zappos apart from other online and offline retailers. To solidify his commitment to employees, Hsieh promoted the development of Zappos's ten core values by soliciting input from everyone in the company. While its first core value is Deliver WOW through service," other values include Build a positive team and family spirit," "Be passionate and determined," and "Be humble." Hsieh believed that there was a direct correlation between employee happiness and productivity. To that end, he encouraged his employees "to spend 10% to 20% of their time socializing with team members outside work."ili Hsieh believed that if employees built personal emotional connections with their coworkers, they would model that behavior with customers as well. By building these connections, he hoped that employees would be more willing to collaborate, to solve problems, and to brainstorm new ways of serving the customer. Employees were expected to "bring their full selves" to work, not to separate their home life from their work life. Zappos's third core value is "create fun and a little weirdness." This value was reinforced in the company's hiring practices starting with the employee application, which included a crossword puzzle, maze, and cartoon graphics. During the interview, applicants were asked to name their personal theme song and rate themselves on weirdness and lucky scales. Zappos sought employees who considered themselves somewhat weird (not too weird) and very lucky. The recruiting manager noted, If someone rates herself as being on the high end of the lucky scale, then she is probably going to be the type of person that we're looking for, who will be creative, adventurous, and can think outside the box." One sure deal breaker in the hiring process was the core values. The core values were not just words on a document; they were embedded deeply in the culture, and prospective applicants were expected to embrace them. Hsieh commented, "We are willing to hire and fire based on whether people are living up to [our] core values, independent of whether they're doing their specific job function well enough." In 2014, Zappos scrapped the traditional process of posting job openings on such career management sites like Monster.com and CareerBuilder.com. Instead, job applicants must join Zappos's private social network called Zappos Insider to be considered for a possible new position. Zappos employees interact with potential job applicants through this social network to better understand if they will fit with the culture of the company, and if so, what type of role would make sense. The Insider network also allows the applicant to have a better sense of who they will be working with and what will be expected of them." Regardless of the position an individual was hired to fill, all new employees underwent an extensive orientation program that required them to spend time answering customer service calls. In fact, this was one way of assessing a candidate's humbleness. If a finance manager or high- level supervisor balked at answering the phone, it was an indication that the cultural fit with the company may not be right. Zappos was so committed to hiring the right employees that it offered them $2,000 (no questions asked) at the end of the four-week orientation program to leave the company if they so desired. While very few individuals took the offer, it was a quick way to assess new employee commitment to the company and its core values. Once an individual passed through the four-week orientation program, they were required to take an additional 200+ hours of training each year. Some of this training included new skill development on topics such as communication, conflict management, and coaching, and some of this training focused on softer topics such as happiness and the search for meaning in work and life. vii Zappos's deep commitment to employees produced strong results. The company grew to over $1 billion in retail sales in less than 10 years and 75% of its business came from satisfied repeat customers. Amazon was so impressed with Zappos's results and focus on customer service that it acquired the company in 2009 for approximately $847 million. Hsieh has stayed with the company through the transition and has been allowed to operate independently. Since the acquisition, Zappos has continued to be listed on Fortune's Best Companies to Work For" list. Framing 1. A central component of Zappos's strategy was: O O O O a good communication. b. discounted products. c. free shipping. d. happy employees. Labeling 2. Why did Hsieh encourage the development of Zappos's ten core values with input from all employees? O O O O a. To develop Zappos Insider, a social network for recruiting b. To remain competitive with other online shoe businesses c. To solidify his commitment to employees d. To recruit employees through Monster.com Summarizing 3. Why did Zappos offer employees $2,000 at the end of the orientation program to leave the company? O O O O a. To foster its playful, fun-loving culture b. To assess employee commitment c. To assure that their salary levels were competitive d. To maintain a smaller, more cost-effective work force Synthesizing 4. What orientation alternative contributed to Zappos's success? O O O O a. Zappos monitored competitors to remain current on orientation practices. b. All new employees spent time answering customer service calls. c. Zappos used realistic job previews. d. Employees were sent to career development programs. Concluding 5. The success at Zappos illustrates the philosophy that: O a. human resources are a strategic asset to an organization. b. employees can be trained to embrace a corporate culture. c. performance evaluations can be useful in retaining qualified employees. d. online businesses represent the future direction of retailing. O O