Join top executives in San Francisco on July 11-12, to hear how leaders are integrating and optimizing AI investments for success. Learn More

Tony Hsieh has founded two very successful companies. Along the way, he has learned innumerable lessons and develop a model for creating intensely passionate corporate cultures.  In “Delivering Happiness,” he gives insight into both.

Hsieh is the first entrepreneur I have seen to take many of the tenets from the emerging field of positive psychology (a.k.a. how to be happy) and apply them to a business, ultimately making his customers, partners and employees work together for a great, shared outcome.

In 1998, he sold his first business, LinkExchange, to Microsoft for $250 million. Today he continues to run Zappos, which he sold to Amazon in 2009 for $850 million.

Big ideas from “Delivering Happiness”:

Develop core values – Even after building a successful startup, Hsieh realized he wasn’t happy with the culture he had built.  Not excited about going to work every day, he sold the company and decided that in his next company, Zappos, he would develop a set of core values among the team so he would always enjoy being with the people at work.  He outlines the process he created to develop and ingrain the culture.

Focus on a core competence – Hsieh wanted to do more than build a company. He wanted to pursue an inspirational mission.  After talking with other founders, he concluded that THE thing to focus on was outstanding customer service.  With a reputation for amazing service, the company would be able to expand well beyond shoes to be an e-commerce vendor of a wide range of products.   As a low margin e-commerce vendor, however, this was an expensive and (at the time) risky decision.  They made three audacious moves to purse the goal: they walked away from 30 percent of their revenues overnight, brought their warehouse capabilities in-house (in Kentucky) and moved the company (which was then almost 100 people strong) from San Francisco to Las Vegas.

Develop a great team – Hsieh knew that achieving the service quality he wanted meant he had to have the best people trained, focused and working together toward the goal.  The resulting innovative talent development program begins with four weeks on the customer service desk, followed by incentive pay to leave after four weeks (to weed out the non-comitted). From there, employees receive extensive training on the Zappos way of doing things with a focus on the steady progress and career growth they can achieve.

I was very impressed with Zappos University, and the company’s ongoing program to help employees continue to improve. By continuously investing in the pipeline of talent, Hsieh will have a steady stream of future leaders to drive growth and realization of their shared vision.

Transparency – To promote, ingrain and promote Zappos, every year the company publishes a community-generated and visible book about what the company’s culture means to the employees and partners.  It also hosts tours and shares much more information with partners than most e-commerce vendors.   The theme for these initiatives is transparency – make your goals, actions and results visible to build trust.

Pulling it all together – Hsieh’s program, BCP, stands for Brand, Culture and Pipeline.  A company’s core competence becomes what it is known for, which becomes the company’s Brand.  If people are really living to the values and mission, the culture will be easy to identify.  The Pipeline of talent, trained to execute against the core values and focused on the shared mission creates an impressive workforce.

Long-term view – Hsieh thinks about a long time horizon to achieve ambitious goals. That gives him the flexibility to make long term investments in junior talent that few competitors would seriously pursue. This long-term vision can be a problem for investors that have shorter time horizons.  When Zappos was bought by Amazon, though,  Jeff Bezos had so much respect for the model that he agreed to run Zappos as an independent business, giving Hsieh and the Zappos team room to pursue their vision.

Applied knowledge

Great teams make great companies – and founders and executives with a strong (and coherent) set of core values and a strong mission are the most successful.

One of my companies had five well-defined core values:  drive, integrity, collegiality, humility and intellect.  By embracing these values, we were able to manage a large scale recruiting effort growing to over 400 people with a homogeneous culture.  These values, coupled with an inspirational mission enabled us to assemble a great team and grow dramatically in people and revenues.

They also helped us build a set of lifelong relationships that have transcended that business.

At a glance:
TitleDelivering Happiness: A Path to Profits, Passion, and Purpose
Authors: Tony Hsieh
Publisher: Grand Central Publishing
Length: 253 pages

Javier Rojas is a managing director leading U.S. investment activities for Kennet Partners.

VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative enterprise technology and transact. Discover our Briefings.