Tony Hsieh’s rise to business icon is the stuff of entrepreneurial legend. After a stint running a pizza business while at Harvard University in 1994, Hsieh headed west to found LinkExchange, an online advertising cooperative, which he later sold to Microsoft Corp. for $265 million.
From there, the executive — who died on Friday at age 46 — established the venture capital firm Venture Frogs, which invested in, among other companies, an online shoe retailer named ShoeSite.com, to be renamed Zappos.com. Two months later, Hsieh joined the company full time as CEO. In 2009, he sold it to Amazon for $1.2 billion and continued to run the business independently.
Hsieh retired from the Zappos helm this year after pioneering many revolutionary concepts that transformed the shoe industry — and changed the world. Here are seven of his biggest ideas that will define his legacy.
Twenty-one years ago, he charted the future of the footwear — proving that shoes could be sold online. Today, e-commerce has never been more important for the industry.
There haven’t been a lot of truly groundbreaking concepts in the footwear business, but Hsieh is responsible for one of them.
“Tony was instrumental in proving that customers could trust and enjoy buying footwear online. He set the oath for us and the industry” said Dave Powers, CEO of Deckers Brands.
When Hsieh, Nick Swinmurn and Fred Mossler landed on the scene in 1999, selling shoes on the internet was unthinkable for most people in the business. It wouldn’t work, many said. Hsieh quickly proved them wrong.
“Our industry does not have many pioneers, but Tony Hsieh makes up for any scarcity,” said designer Stuart Weitzman in 2009, when Hsieh won FN’s Person of the Year Award. “He helped us launch a new [online shoe retail] industry, and we all are grateful for such vision.”
That same year, Skechers USA Inc. CEO Robert Greenberg told FN: “I’ll always respect Tony’s courage as an adventurous businessman, for blazing new trails in an industry that has been around since the time of Moses.”
Today, e-commerce has never been more critical as the pandemic dramatically reshapes the way people live and shop.
Long before corporate culture was a buzzword, Hsieh redefined it.
Since its early days, Zappos has functioned as something of an incubator for testing theories about corporate culture and productivity — long before those ideas became the buzzwords they are today. Much of the credit for that lies with Hsieh.
Burned from the experience with his first company, LinkExchange, which grew large and impersonal, the CEO used Zappos as a platform to champion connectedness and employee relationships, and looked for ways to bring happiness into the workplace.
When asked last year about his biggest career accomplishment, he responded with an answer that didn’t surprise anyone who knew him well: “The relationships and friendships. We focus a lot on company culture, so these are not just co-worker relationships but true friendships, where people choose to hang out with each other after work or go on trips together. [That also applies to] the relationships with our vendors and other business partners.”
Hsieh built Zappos as a “service company” — and his formula became a model for many other internet startups.
In April, when the pandemic upended every aspect of American life, Zappos — which pioneered free shipping and returns — launched its new Customer Service Anything Hotline to help people find answers or solutions as they deal with the pandemic with no purchase required. But the outreach didn’t stop there. Zappos’ customer service team is also available to simply chat with people about everyday issues or concerns.
That initiative is just the latest example of how Hsieh’s intense focus on customer service — which to him was an extension of company culture — plays out every day.
Hsieh, who loved telling the story of the Zappos rep who fielded a 10-hour customer service call, never stopped referring to Zappos as a service company.
“A lot of our growth and innovation moving forward will be based on thinking about what we’re in the business of differently,” Hsieh said last year, on the occasion of Zappos’ 20th anniversary. “We used to say we’re a service company that just happens to sell shoes, and now it’s turned into: We’re a service company that just happens to sell blank.”
The leader got people to rethink the concept of happiness and how to achieve it.
“Scientific research … shows that people are very bad at predicting what makes them happy,” Hsieh told FN when he was writing his best-selling memoir, “Delivering Happiness: A Path to Profits, Passion and Purpose.”
He continued, “The reality is, if they ever get to that point, they might be happy for a moment, but it’s almost never sustained.”
After looking at research on human behavior, Hsieh said, he found that happiness is about four things: perceived control, perceived progress, connectedness and vision, or in other words “being part of something bigger.”
He took those concepts and begun implementing programs at Zappos that, scientifically speaking, could lead to happiness. For example, he established a system that allowed employees to increase their pay by learning new skill sets and incorporated a program that promotes staffers to slightly higher positions every six months rather than a larger move every 18 months.
The fearless CEO boldly introduced a new management experiment. While it got mixed reviews, holacracy was a jolt that corporate America needed.
In 2015, when the company did away with managers in favor of a form of self-organization called holacracy.
In a blog post at the time, Hsieh wrote, “Like all the bold steps we’ve done in the past, it feels a little scary, but it also feels like exactly the type of thing that only a company such as Zappos would dare to attempt at this scale.”
Hsieh’s vision was to to build off holacracy and turn Zappos into a marketplace of small businesses that operated independently, share information freely and propel the company into untapped revenue streams.
“Instead of 300 circles arranged hierarchically, we’re transitioning so that each circle is its own small business or startup,” said Hsieh.
At a time when many M&A deals stumbled because company cultures didn’t mesh, Hsieh convinced Amazon to leave Zappos alone.
In 2009, Zappos was acquired by online behemoth Amazon.com Inc. for 10 million shares of Amazon stock, which, at the time of the closing, Hsieh said was worth roughly $1.2 billion.
While many market watchers celebrated the union, they also speculated that the new parent could impose its own culture on the new division. But true to the initial agreement, Zappos has continued to operate separately from Amazon, maintaining its own leadership team and unique character. (The one area of overlap is fulfillment, as Amazon took over Zappos’ warehouse operations in 2012.)
It’s remarkable that Amazon, known for its intense corporate structure, has been largely hands off — at least when it comes to Zappos. That’s a testament to Hsieh and his determination to keep Zappos’ quirky culture intact.
As the rebirth of American cities dominated the global conversation, Hsieh reinvented downtown Las Vegas.
“We are thinking of the city as a startup,” Hsieh said of his vision for the Downtown Project, at FN’s summit in 2019. “We want it to be the anti-Strip — with bars and coffee shops.”
Hsieh said that by creating a hybrid between a city and company headquarters it would drive productivity. A cornerstone of his plan involved moving the Zappos headquarters from the Vegas suburbs to smack in the middle of downtown.
“I remember we started looking around in 2007-2008, and I had toured some amazing corporate campuses like Nike and Google and Apple. We realized a lot of those campuses are great for employees, but you don’t integrate to the surrounding community the way we wanted to. So we designed our campus so that we were encouraging employees to leave the campus and interact with people in the community,” Hsieh said.
His ultimate goal for the city that he loved? “What we want people to say about downtown Vegas is that it will make you smarter, which is about the last thing you might usually say about Vegas,” quipped Hsieh. “If we can make downtown Vegas a place of passion and inspiration, that’s our [greatest goal].”
Launch Gallery: Zappos CEO Tony Hsieh Through the Years
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