Case Study
Case Description:
If you like shoes and shop online, you probably have heard of Zappos.com. Nick Swinmurn
was inspired to found the firm after a frustrating shopping excursion in San Francisco where
he failed to find a properly fitting pair of shoes in the right size, style and color. Swinmurn
translated his unpleasant shopping experience into new business expressly designed to meet
the demanding needs of serious shoppers. As a result of his entrepreneurial zeal and his
shrewd exploitation of the tools of e-commerce, Zappos grew from its start in 1999 to over
$1 billion in gross annual sales by 2008, and was such a success that Amazon.com decided to
acquire the firm for $ 1.2 billion in 2009.
In 1999, the U.S. shoes industry was estimated to be a $40 billion market. As of that date the
shoes industry was heavily dependent on direct retail channels such as established chain
stores. It is also noteworthy that approximately 1 in 3 retail sales were lost due to out of
stock issues, including: inventory limitations, constrains on the number of brands sold in a
given location, the number of sizes and styles carried in each store, and so forth. Like its now
parent company Amazon had done with books, Zappos overcame these limitations through
the stocking of a vast inventory of all makes, styles, colors, and sizes, displayed and sold
through their e-commerce platform.
From Idea to Business Venture
In 1999, there was no web site that had a large enough scope of shoes online. To his surprise,
Swinmurn found that there was no major online retailer who focused primarily on selling
shoes. Knowing little about shoe retailing, he decided to test the idea of an online shoe
retailing web site by approaching brick and mortar shoe retailers close to his home and he
asked for permission to photograph their shoes. He posted his pictures to a modest
eCommerce Web site. To fulfill orders that were placed through his Web site, Swinmurn
would physically go to the store that carried the product buy the pair of shoes and ship it to
the customer. This prototype of an eCommerce shoe business provided Swinmurn with the
proof of concept he needed to build a real online business. Soon, he signed a collaborative
relationship with three major shoe distributors, whereby they would drop ship shoes to
customers who ordered them off Swinmurn’s Web site. Zappos.com grew out of this initial
set of activities – a new eCommerce giant was born.
As Zappos rapidly grew, order fulfillment became a challenge. The firm could not always
guarantee the timeliness of supplier drop shipments to individual customers. To meet the
expectations of its online retail clientele, Zappos began to open its own warehouse and
fulfillment centers, employing approximately 1,600 workers. By 2004, these centers carried
in excess of 3 million shoes, handbags, and other clothing items and accessories, drawing on
over 1,100 different brands. As a result, Zappos.com offered the best selection of shoes
available anywhere online. Zappos eCommerce site exploded with growing popularity. By
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Case Study
2010, the website served millions of users/visitors daily and processes between 60-65.000
purchases every day.
Customer Service
While the original idea behind Zappos was to create a web site that offered a huge selection
of shoes, the founder also believed that to compete in the eCommerce marketplace, the firm
must provide the “best service” as well as a vast product mix. Therefore, like Amazon,
Zappos’ fulfillment focused on fast and accurate order processing and speedy delivery to the
customer. The firm offered free deliveries and returns as well as a guaranteed 4-day
delivery window and a 365-day return guarantee. Furthermore, Zappos allowed its
fulfillment center personnel broad latitude in addressing customer needs and complaints.
The focus was on customer satisfaction and hence there were no call center scripts, time
limits on calls, or predefined responses to customer issues. Every employee was given fourweeks of training in the company's business strategy, culture, and customers focus. New
employees were paid their full salary during this training period.
Use of web-based Information Technology
Zappos embraced Twitter as a valuable tool for building company culture. From its
beginning, everyone in the entire organization was expected to use Twitter for
communications within the company. When the CEO saw that it helped
people connect at a more personal level, he began to encourage everyone
to use Twitter to create a more collaborative corporate culture. However,
Zappos also realized social media’s value in building an interactive
customer community – deemed “Zapponians.” Customers could send a
tweet to Zappos from most of the web pages on firm’s Web site and Zappos
directly interfaces with Twitter servers in order to monitor and track
Tony Hsieh, chief
Zappos-related conversations (including setting up a separate website
executive of Zappos.
Photograph: Zappos
called “Zappos Conversations”). The employees also used blogs to interact
Twitter account
with customers. Of course, not all interactions were positive, but the
overall result includes 1,200 social media “conversations” with customers per month, 600
positive monthly fan tweets, and over 2.6 million Twitter followers.
As its business grew, the firm opened more web sites, including Couture.zappos.com,
Outdoor.zappos.com, Rideshop.zappos.com, Running.zappos.com, Blogs.zappos.com, and
Deliveringhappiness.com. [Note: Students should visit at least one Zappos Web site and
assess its quality in terms of content, layout, and functionality.]
Having gained considerable expertise in the use of social technologies, Zappos implemented
the “Ask Zappos” initiative. Ask Zappos was another means through which prospects and
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Case Study
customers (through their mobile phones) could interact with Zappos
employees. If you saw someone walking by with a pair of shoes you like
you could take a picture and send it to Zappos for stylist advice on a
comparable Zappos product. Ask Zappos required an IT architecture that
enabled photos to be sent via text, email, and even via Instagram. Keeping
up with demand proved challenging though – a direct appeal for response patience was
posted on corporate websites.
Worker Retention
In most retailing companies, employee turnover was generally high. Zappos had a unique
way of dealing with the problem. New employees went through an intensive four-week
training program, immersing them in the company's culture, strategy, and processes. After
a week or so into this training program, the firm proposed what was known at Zappos as
"The Offer" to its new employees. The firm offered to pay its newest employees money if
they chose to quit at that point in their tenure with the firm. The Offer, which applies to all
new Zappos employees, not just front-line service people, started at $100, went to $500, then
$1,000, and now stands at one-month’s salary. Zappos actually offered an incentive for its
employees to quit! But of course the objective here was to ensure that only those committed
to the success of Zappos stayed with the firm.
Culture
Zappos’ employees live by a set of core values. First among these was that the employees
were encouraged to create a fun atmosphere at work. For example, the staff could dress in
funny costumes. They could bring their pets to work and organize entertaining events
during office hours. All these activities were intended to maintain a creative and open
atmosphere in the work place, and a sense of “coolness.” For his part, Swinmurn was very
much part of this fun culture, communicating with the company via blogs and Twitter.
Overall Zappos’ corporate culture celebrated and embraced diversity and each worker’s
individuality. Even with all the fun, the firm achieved considerable business success.
Sources:
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Twitter account: https://twitter.com/tonyhsieh
Corporate websites: http://askzappos.apps.zappos.com/faq
Taylor, B., “Why Amazon Is Copying Zappos and Paying Employees to Quit,” Harvard Business Review,
April, 2014.
http://apmblog.compuware.com/2010/03/01/best-practices-from-zappos-to-deliver-wow-performance/
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Case Study
Case Questions:
1. Describe three critical success factors for Zappos profitability going forward?
2. List and describe the application software (front end) supporting the respective business
processes at Zappos and the IT infrastructure (back end) enabling the application
software. [Hint: if needed, see the IT checklist for what components are classified as
infrastructure]
3. Describe the role the Zappos’ eCommerce web site plays in supporting the company’s
customer intimacy and operational excellence business objectives. Your answer should
address the website’s design (layout, functionality, and content).
4. Assess and describe Zappos’ level of social technology maturity. Your answer should
consider people, process, and technology evidence.
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Zappos Case Questions:
1. Identify and explain three critical success factors for Zappos profitability going forward?
Three Critical Success Factors
Explanations
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2. List and describe the application software (front end) supporting the respective business
processes at Zappos and the IT infrastructure (back end) enabling the application
software. [Hint: if needed, see the IT checklist for what components are classified as
infrastructure]
Application
Software
Description
IT Infrastructure
Description
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needed
3. Describe the role the Zappos’ eCommerce web site plays in supporting the company’s
customer intimacy and operational excellence business objectives. Your answer should
address the website’s construction (content, design, and functionality).
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b. Design:
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c. Functionality:
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4. Assess and describe Zappos’ level of social technology maturity. Your answer should
consider people, process, and technology evidence.
a. People:
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b. Process:
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c. Technology:
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SOCIAL TECHNOLOGIES OVERVIEW
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Why do you need to invest in social technologies?
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Source: McKinsey Global Institute (2012) "The social economy: unlocking value and productivity through social technologies."
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Consumer vs. Enterprise Use of social tech
Activity
Consumer
Enterprise
Identity
User profile
Corporate directory
Secure Space
Trusted, affinity groups
Intellectual property protection
Following
Mutual Agreement; Twitterlike subscriptions
Organization chart, teams, and
communities
Collaborative content
messages, event schedules,
photos, links, etc.
also includes wikis, blogs,
discussions, and documents
Content Organization
Tagging images / photos
Tagging intellectual property
Ambient Awareness
Social presence for chat
Availability for problem solving
Application Integration
Embedded Games, Multiplatform Sign on
Content sync, events tracking
Value of Social Graph
Finding old friend,
advertising, strength of weak
ties
Relationship leverage,
stakeholder analysis, problem
solving
Value of Search
Finding people or brands,
filtering activity stream
Search provides a key
navigational role, profile search
augments expertise and solution
search
Source: Guy Creese, Gartner Group
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Firms gain the most from social technologies:
Customers:
• Need to maintain strong reputation and build consumer trust
• Heavy reliance on brand recognition and consumer perception
Products:
• Experiential (hotels) or inspiration (personal improvement)
product/service offering (beyond just buying a discrete product)
• Digital distribution method for products or services
Operations:
• High percentage of knowledge workers
• High reliance on intellectual property / lessons learned in
service offerings
Source: McKinsey Global Institute (2012) "The social economy: unlocking value and productivity through social technologies."
Source: McKinsey Global Institute (2012) "The social economy: unlocking value and productivity through social technologies."
What can you do to maximize the value of social technologies?
Social analytics is the practice of measuring and analyzing human
interactions across social platforms to inform decisions (e.g., social
graphs)
Social graphs capture and display
(visualize) social interactions
Assessing Social Technology maturity
Source: Sean Corcoran (2011, Forrester Research)
Adoption framework source: Diffusion of Innovations, by Everett Rogers (1995)
Assessing Social Technology maturity
Stage
Description
Dormant
Not currently making use of social technologies. Tend to be risk
averse in highly regulated industry or with few customers and
competitors.
Testing
Social technology use growing organically in pockets
(decentralized). Experimentation occurs to determine value of
social technologies to the company.
Coordinating
Management recognizes the risks and rewards of social media
and begins to put the resources and governance in place to
create consistency across the organization for a more centralized
approach.
Scaling &
optimizing
Key stakeholders (e.g., social steering committee) are focusing on
optimizing their social media budget, policies and activities – from
improved processes to more advanced metrics to integration with
other business activities.
Empowering
At this stage, all relevant employees have been trained and
empowered to use social technologies to address customer
concerns. Only a few companies have even just entered this
stage but we expect many more to follow.
Source: Sean Corcoran (2011, Forrester Research)
Social Technology maturity - “Empowering the organization”
“A business that leverages social technologies to
enable better connections and relationships
between empowered customers and employees
– ultimately leading to better products, more
efficient workflow, more loyal customers, lower
costs, and greater revenue.”
HERO: “highly empowered and resourceful operatives”
Source: Sean Corcoran (2011, Forrester Research)
Social technologies – considerations?
• Do you have a culture of transparency or secrecy?
• Is social technology additive or disruptive for your
enterprise (internal/external)?
• Will governance be central, decentral, or federal?
• How do you address hacking and hijacking? (risk
management)
What about crowdsourcing?
What about crowdsourcing?
Short definition:
“the act of taking a job traditionally performed
by a designated agent (usually an employee)
and outsourcing it to an undefined, generally
large group of people in an open call.”
(Howe 2006)
Jeff Howe, School of Journalism
What about crowdsourcing?
Long definition:
a type of participative online activity in which an individual,
an institution, a non-profit organization, or company proposes
to a group of individuals of varying knowledge,
heterogeneity, and number, via a flexible open call, the
voluntary undertaking of a task. The undertaking of the task,
of variable complexity and modularity, and in which the crowd
should participate bringing their work, money, knowledge, or
experience, always entails mutual benefit.
(Estelles & Gonzalez, 2012)
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Crowdsourcing types by “Great for” types
Source:
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Crowdsourcing types by problem types
Models - Problems solved by crowds
Knowledge
discovery
and
management
Source: Brabham 2013
Distributed
humanintelligence
tasking
Broadcast
search
Peer-vetted
creative
production
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Crowdsourcing types by problem types
Knowledge discovery and management: This approach is best for information-gathering (e.g.,
surveys) and cataloguing problems through an online community to a central source - such as the
reporting of earth tremors, potholes, or conditions of hiking trails.
Distributed human-intelligence tasking: This approach is most useful when human intelligence is
more effective than computer analysis. It involves distributing "micro-tasks" that require human
intelligence to solve, such as transcribing handwritten historical documents into electronic files. For
example, when the handwritten 1940 census records were publicly released in 2012, the National
Archives catalyzed the electronic tagging of more than 130 million records so they could be searchable
online. More than 150,000 people volunteered.
Broadcast search: This approach is most useful when a company is attempting to find creative
solutions to problems. It involves broadcasting a problem-solving challenge widely and offering an
award for the best solution(s). NASA, for example, offered a prize for an algorithm to predict solar
flares.
Peer-vetted creative production: This approach is most useful when an organization is looking for
innovative ideas that must meet a test of taste or market support. It involves an online community that
both proposes possible solutions and is empowered to collectively choose among them. For example,
Threadless is a company that runs weekly t-shirt design competitions where a close-knit community of
online designers and consumers vote on top designs (financial compensation going to the weekly
design winners).
Source: Brabham 2013
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The Wisdom of Crowds
Requirement
Description
Diversity of opinion Each person should have private
information even if it's just an eccentric
interpretation of the known facts.
Independence
People's opinions aren't determined by the
opinions of those around them.
Decentralization
People are able to specialize and draw on
local knowledge.
Aggregation
Some mechanism exists for turning private
judgments into a collective decision.
(Surowiecki 2004)
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