Tag: Zappos

Zappos Just Pulled Off the Boldest Change Management Move Ever
Why aren’t we mad at the bad managers?

Have you heard that 210 people left Zappos at the end of April because they apparently don’t like the new flat management system called Holacracy® that the firm is moving to?

I’ll bet you have.

In the 12 days since that happened, have you heard that:
- US Steel announced more layoffs, bringing them to 9000 people cut for the year.
- Siemens cut another 4500 people, bringing their cuts to more than 12000 for the year.
- Lenovo laid off 235 people.
- Labinal Power Systems let 480 people go.
- Manitoba Telecom and Mountain Iron both laid off 400 people.
- Zynga cut 364 people, Conduit Global cut 592, Corrections Corporation of America cut 252, WMS Gaming cut 247, Jennie-O Turkey cut 230, General Motors of Canada laid of 1000, Mercedes-Benz laid off 259, Conoco-Phillips 200, WorleyParsons 2000, and Dow Chemical let 1750 people go.
That’s nearly 15,000 people that have lost their jobs in 12 days – it’s a bloodbath. And I’m willing to bet that there are three primary reasons for those layoffs:
1. The firms are looking for “efficiency gains” or,
2. The upper management teams are incompetent, or,
3. Both.
How many blog posts have been devoted to this corporate management problem? Any?

Here’s my question: how is possible that 15,000 people have lost their jobs due to bad management and we don’t hear a peep about it, but people have gone nuts over Zappos having 210 people volunteer to leave?

It’s as though we’re acting out this quote from John Maynard Keynes:

Worldly wisdom teaches that it is better for reputation to fail conventionally then to succeed unconventionally.

The issue isn’t whether or not Zappos is succeeding or failing, but rather that they are doing things unconventionally.

This is terrible.

A change management stroke of genius?

There are two important questions here, and the discussion around them is confused. The first is: how do we effect major change within an organisation? The second is: is holacracy the best way to implement flat management principles?

The first question is the real story with Zappos. Any time you try to change things, there are three groups within an organisation. There will be the bunch that loves the new idea (usually around 20% of people). There is another bunch that hates the new idea, or often any new idea (usually also around 20%). And the majority in the middle is usually indifferent.

Whether or not a change management initiative succeeds depends on which way the 60% in the middle decide to go. This usually involves a long, drawn-out political process of negotiation, power, influence and everything else that goes into moving a bureaucracy.

Here’s what Tony Hsieh might have just accomplished at Zappos: knocking nearly all of the change-resistors out of the company in one quick action.

This is potentially brilliant.

The critical question is who makes up the 210 people that left? Are they middle managers that are unwilling to adjust to a new role (these are probably change resistors)? Are they people that are genuinely uncomfortable with lower levels of hierarchy (a mix of change resistors and the indifferent middle)? Or are they some of the best people, who are capable of easily finding other jobs, and just wanted the financial benefit of the buyout (these would be change drivers)?

Often, when firms have voluntary redundancies, the people that leave are the change drivers – which is a bad outcome. Zappos has taken some steps to try to ensure that most of the people that left are either change resistors or in the indifferent middle.

If Zappos just knocked out the change resistors, it’s one of the boldest change management moves ever.

Holacracy does not equal Flat

An entirely separate question is whether or not holacracy is the best way to implement flat management principles. I’m not so sure about the answer to this question.

First off, like Dave Snowden and Dan Pontefract, I am skeptical of the book being used to frame the change – it’s not well-supported by data, and it’s pretty fuzzy. On the other hand, firms like UnderCurrent seem to be having some success with holacracy, after a tricky implementation.

I believe that we have to be moving to flatter management structures. In that context, holacracy is important because it is the highest-profile version of flat management out there right now. My hypothesis is that the high level of bureaucracy that lies underneath it will ultimately make it really hard to implement holacracy, and that eventually we will settle on a model that looks more like that used at Morning Star Farms.

Digital transformation is real, and getting flatter management structures is an important part of the response to this change.

The important point is that holacracy is a version of flat management, but it is not the only one.

One argument that seems to be being made is:

Zappos is implementing holacracy, 14% of people have left because of it, so holacracy has failed and flat management is clearly bad.

This is wrong.

The 210 people leaving doesn’t tell us anything about whether or not holacracy or flat management is good. It tells us that Zappos figured out how to get rid of the change resistors.

This is important, because now if holacracy fails there, it won’t be because of internal sabotage – the potential saboteurs are gone.

If it works, then that tells us something about holacracy and flat management. If it doesn’t, it is a pretty good test of holacracy, but we still need to test other versions of flat management.

Regardless, people need to stop freaking out just because the approach is unconventional. Zappos will be fine. I’m much more worried about Siemens, Dow Chemical and all the others that are in trouble right now.
13 May 2015
Reading This Post Will Change Your Brain!

Reading this post will change your brain

I’m not sure if the change will be good or bad, but reading this will change your brain. I’m sure you’ve heard the arguments about the internet – google is making us stupid, and even more alarming – using the internet changes your brain! That must be bad, right? Well, not necessarily. The problem with this argument is that everything you do changes your brain.

Using google changes your brain, eating a donut changes your brain, and yes, reading this post changes your brain. The correct question to ask isn’t “does doing X change my brain?” but rather “what activities do the changes enable?” Nicholas Carr wrote the original article Is Google Making Us Stupid, and he understands this distinction. His argument is that the rewiring in our brains caused by internet usage makes it harder for us to concentrate for extended periods, and that we are losing the ability to focus and follow complex arguments. Ironically, his argument is sophisticated enough that a lot of people seem to misconstrue it.

My actual personal brain!

Interactions change us

So yes, using the internet does change our brain. It makes it easier for us to do some things, and harder to do others. Personally, I’m not convinced by the evidence people have suggesting that internet use decreases our powers of concentration. And as for google, well, we’ve been outsourcing complexity to various tools for centuries – I’m not sure how this is all that different.

It was Plato that argued that writing things down was causing a horrible deterioration in our ability to remember things.

That might be true, but it also means that the part of our brains that devoted to remembering stuff could now work on other activities – and some of those have turned out to be pretty useful.

Who do you want your customer to become?

The idea that interactions change us is the central issue driving Who Do You Want Your Customer to Become? by Michael Schrage. Seth Godin outlines the implications of this question in his new book The Icarus Deception:

Everyone you interact with is changed forever. The only questions are: How will they be different? and How different will they be? Author Michael Schrage wants you to ask, “Who do you want your customers to become?” At first this seems like a ridiculous question. Your customers are your customers. Your coworkers are your coworkers. This isn’t true.

Connection creates change. Unless you are selling a standard commodity, the interactions you have with the market change the market. Zappos turned its customers into people who demand a higher level of service to be satisfied. Amazon turned its customers into people who are restless with online stores that don’t work quite as well or quite as quickly. Henry Ford turned his customers from walkers into drivers.

When you disappoint someone (or exceed their expectations), that interaction is going to color all the interactions that person has tomorrow and next year. Apple is talked about more than any other company for one simple reason: They have huge aspirations for who they want their customers to become, and they deliver on them.

… Answering Schrage’s question honestly gives you a chance to describe the change you want to see in the world. Not at the Henry Ford industrial-scale level, of course. No, but even if you connect with six people, you are changing them.

Changing them how? Whom do you want them to become? I’d like you to become an artist. To make connections that matter. That’s my mission.

By writing, Godin wants his readers to become artists. And Schrage himself wants to change how we innovate:

Significantly, they should become managers and leaders who are justifiably more confident that they are asking the right questions when they look to innovate and create new value in new ways. They should have the courage to take smarter risks and the ability to learn faster because they know they’re committed to treating their customers with empathy and respect. Most importantly, they should become more successful. Why? Because successful innovators know how to ask the right questions and create the most value for themselves and their customers. The Ask of this book is that you become an innovator who gets the best possible return on the innovation investments you make in your customers.

Who will we become?

I think that both Schrage and Godin miss an important point though. Yes, when we send our ideas out into the world, they change the people with whom they interact.

But sending these ideas out, and seeing how they interact with people changes us as well.

Asking who you want your customers to become is a great way to clarify your value proposition. Changing your answer can help you innovate your business model. I think it’s a transformative question, and Schrage’s book is definitely worth reading.

But we need to pair this with another question – who do we want to be? If we make our customers stupider, it makes us shallower. If we make our customers more transactional, we’ll often end up greedier.

Here’s the change that I’d like to see from our interactions over ideas: that together we figure out how to make work work better.

For too many people, work is lousy. Most organisations are mediocre, at best (maybe even 90% of them!) We need to innovate how we manage, how we deal with our people, and how we deal with customers.

If my writing this and your reading this helps us take even a small step in that direction, I’d be very happy.

Reading this post will change your brain. Now let’s change our behaviour.

27 January 2013
Here’s Why Many Innovation Initiatives Fail
Wouldn’t it be great if you could do customer service like Zappos? Or design like Apple? Or innovation like 3M?

Who wouldn’t want to be like those firms?

Well, it’s not so simple.

Barry Dalton wrote an excellent post called You Can’t Be Zappos (and why would you want to be?) addressing exactly this issue. His main point is that the entire Zappos business model is built around delivering awesome customer service – and that unless you build your entire business model around this as well, you won’t have Zappos-level service. And furthermore, Dalton argues that you shouldn’t want to do so – the says:

So, instead of trying to be like Zappos, how about try this first. Stop. Stop and think about your customers. What problems do they have with your business model? What customer issues are you trying to solve? Then, build a customer experience strategy that addresses that.

He’s exactly right.

Zappos is Zappos because they’re built to deliver awesome customer service. You can’t just bolt Zappos-style customer service onto an existing business model. To deliver it, your hiring needs to be organised around service, so do your partnerships, your value proposition, your revenue model, and (very importantly!) your cost structure.

Same deal with delivering design like Apple or innovation like 3M.

This is why many innovation initiatives fail – they are just bolted onto an existing business model that isn’t built for and can’t accommodate them.

You can’t just tack on 20% time and get the same results with it that 3M and Google do – you need all the supporting systems in place too. You can’t look at Procter & Gamble’s Connect and Develop and just replicate that – it took P&G about 6 years to get the system in place and operating the way that they wanted it to.

You can’t add “Innovation” to your company values and then tell the middle managers to go figure out how to do it.

It’s relatively easy to add any of the innovation tools that you see elsewhere – but making them work is another matter entirely. Making an innovation initiative work requires a change in behaviour. This is what makes business model innovation such an effective tool – it’s really hard to duplicate!

Most of our innovation initiatives fail because organisations add in the tools, but they don’t change the behaviour. We fail to empower the people that have to make the new ideas work. We don’t build a culture of experimentation. We forget to build learning into our build-launch loops, so it’s not an iterative process.

We fail to really commit to making our organisations more innovative by failing to change the way we manage.

If you want to buck this trend, and make your innovation initiative successful, you could do a lot worse than following Dalton’s advice.

Find a genuine problem, then build a business model around solving it. If you integrate innovation into this, then your odds of success just went up.

(image from There I Fixed It)

Related articles
- Connectedness Is Zappos
- How Zappos Lesson Does Customer Service Metrics
25 November 2012
Don’t Be an Innovation Gnome!

There is often a gap between your aspirations and your actions.

I was reminded of this at a strategy workshop where I gave a keynote speech last week. At the start of the second day, one of the participants said that the process reminded him of the Underpants Gnomes in South Park. If you haven’t seen it before, here it is (warning: it includes all of the usual South Park crudeness, so skip the video if that bothers you):

Gnomes
Get More: SOUTH
PARK more…

Here is the summary. The Underpants Gnomes steal underpants. A lot of them. When the boys ask the Gnomes why, the response is that “Underpants are just phase 1!”

Here is their complete strategy:

Underpants Gnomes Business Model (Photo credit: John Swords)

The guy at the workshop was pointing out that their strategy had a similar hole in Phase 2.

This is surprisingly common.

This is another version of Nilofer Merchant’s air sandwich:

An Air Sandwich is a strategy that has clear vision and future direction on the top layer, day-to-day action on the bottom, and virtually nothing in the middle—no meaty key decisions that connect the two layers, no rich chewy filling to align the new direction with new actions within the company.

Phase 2 is that critical middle step – what do we do to connect our day-to-day actions to our larger goals and objectives?

This is a problem in innovation as well. The Innovation Gnome approach looks like this:

If you collect a lot of ideas and expect to end up with innovation, you’re in for an unpleasant surprise. You need to have the middle step that connects ideas to outcomes.

This is why it is important to have some kind of outcome in the way that you think about innovation. This disconnect between generating ideas and turning them into innovations is one of the key reasons that firms end up as bewildered innovators – with a high investment in innovation but poor results.

Of course, I’ve also seen the opposite problem. The most common place is in pitches from startups. In this case, they get very hung up on the functionality of whatever it is that they’ve come up with – forgetting to connect their features to outcomes that are important for the customers. In other words, they have plenty in Phase 2, but nothing in Phase 3.

The bottom line here is that to innovate successfully, you need to have all three phases worked out. As Jorge Barba says, you need a purpose for innovating.

With that in mind, we can then start by defining value. Again, value means different things to different people. And here, is where it gets interesting because we are talking about an organizations value proposition. And, when we talk about innovation, we are talking about a different value proposition than that of what currently exists. This is when change really happens because you are changing the value proposition. Not the technology, not the branding, but everything that supports your value proposition.

So, coming full circle. What you need to do, is define a set of criteria of how you will define that new value that you will create.

But that’s not enough. You also need to figure out what day-to-day activities will support this value creation, and how these activities link up to do so. Jorge uses the example of Zappos:

My guess is he thought about how Zappos could create a different kind of value putting customer service at is center, and therefore enriched its value proposition by focusing on delivering exceptional customer service.

So here, exceptional customer service is Phase 2, and all of the actions that people at Zappos take on a daily basis are the Phase 1 actions that the whole approach is built on.

When you’re building an innovation capability, experimentation is a critical Phase 2 skill to develop.

You don’t want to be an Innovation Gnome – with a big gap between your daily activities and value you’re trying to create. To innovate successfully, think about how to address all three phases – that’s the best way to reach your goal.

12 September 2012