Zappos founder and CEO Tony Hsieh released a book, Delivering Happiness: A Path to Profits, Passion, and Purpose, last Tuesday, recounting his experience as the creator of the Zappos brand, from start-up phase to its eventual sale to Amazon last summer. The book looks great – full of insights on how Hsieh created the Zappos culture of employee and customer happiness. Having had a number of positive customer service interactions with Zappos myself, I’m excited to read about how he scaled his vision across what became a $1.5 billion business.

In advance of the book release, though, Hsieh released an excerpt to Inc. magazine, detailing how that vision created conflict between he and his investors – venture capitalists who sat on the Zappos board:

Some board members had always viewed our company culture as a pet project — “Tony’s social experiments,” they called it. I disagreed. I believe that getting the culture right is the most important thing a company can do. But the board took the conventional view — namely, that a business should focus on profitability first and then use the profits to do nice things for its employees. The board’s attitude was that my “social experiments” might make for good PR but that they didn’t move the overall business forward. The board wanted me, or whoever was CEO, to spend less time on worrying about employee happiness and more time selling shoes.

As Hsieh (correctly!) points out later in the excerpt, Zappos’ corporate culture is its biggest differentiator. When you order from Zappos, you know that you’re going to get exactly what you ordered, delivered directly to your door overnight, and if there are any problems with your order, an extremely friendly customer service rep has the power to unilaterally fix them. Hsieh intuitively knew something that MLC research has confirmed – emotional differentiation leads to much higher customer loyalty than functional differentiation.

Creating this culture isn’t easy. For one thing, it’s expensive, as Zappos investors found out. But in the online space, where trust reigns supreme, encouraging that culture turned out to be the right investment. Hsieh ultimately sold to Amazon, with explicit promises that they would preserve the Zappos culture.

What I thought was most telling, though, were the jaded reactions of the venture capitalists who questioned Hsieh’s “social experiments”. Surely these folks had read, at some point, a marketing guru talk about “authenticity”.  It’s a mantra that has pervaded marketing thought in the last few years, nearly to the point of meaninglessness. But here, directly in front of them, was true authenticity – a founder sacrificing short-term profits in exchange for implementing his vision and building an enduring brand – and the only value they could see was that it might make for a good PR stunt; a short segment at the end of the local evening news, maybe, or some cred in the marketing blogosphere.

I see Hsieh’s story as a leadership challenge. Authenticity isn’t something you can just implement – it starts with a vision, an idea for how an organization will change the world, and that vision has to be baked into every aspect of the business.  You have to be willing to take risks to preserve it, as Hsieh did when he defied his investors, and when he sold to Amazon. And, most emphatically, it’s not just a way to get some good press.

MLC Members, revisit our 2009 study, “Accelerating Loyalty“, for our insights on how authentic cultural and emotional differentiators can lead to increased customer loyalty.

Related posts:

1. Will Your Brand Clear a Higher Authenticity Bar?
2. Your Agency Roster is an Authenticity Millstone (Not in a Good Way)