I’ve read a lot about Zappos and have followed their journey for quite some time. I’m very interested in the art of customer service and have found Tony Hsieh to be a great role model in that regard. However, I’ve never actually bought anything from Zappos. To be honest, I just don’t have that many pairs of shoes, nor do I buy new shoes frequently. When I do purchase new shoes, online shopping isn’t generally what I think of first.
But there was a pair of shoes I really wanted and saw they were available on Zappos; so I placed an order. The order included free regular shipping (4-5 business days). The day after I placed my order I received a notification that the package was shipped and much to my surprise, the very next day my package was delivered.
Unfortunately when I opened the package I found the wrong pair of shoes (although the packing slip was correct). I immediately called to tell them and what happened next was one of the best customer service experiences I have ever received. First, after I gave them my information, they apologized and empathized that this wasn’t a good way to deliver my very first order. Second, the customer service rep told me the truth: that they made a mistake labeling in the warehouse and my order was actually swapped with someone in New Jersey. Third, they remedied the situation by shipping out my shoes next business day (which means I’d still get them even before I was even originally supposed to). Lastly, they upgraded my account to free next business day shipping on all future orders and provided me with a coupon for my next purchase.
Zappos did things correctly every step of the way. Many companies spend a lot of money on customer acquisition, but never think to spend a proportionate or even larger sum in customer retention. It is much more valuable to keep a lifetime customer. While I’m happy that I was provided some “freebies” for future orders, the real service was in acknowledging the mistake, being truthful (even though it was embarrassing to them), and working to solve the problem as quickly as possible. Any company interested in delivering world-class service should follow Zappos’ lead.
In the start-up world we tend to think big corporations are evil. If you’ve worked for a large corporation and are now an entrepreneur, you might even hate your past corporate experience. But there are some things that large corporations do well that start-ups can learn from.
I’ll take a step back a number of years to when I was right out of college. I had graduated with a degree in Computer Engineering, but after a couple years decided that I was much more interested in business. I sped through the DePaul Kellstadt part-time program in two years and received my MBA in entrepreneurship and finance all while working for a fairly large corporation (~$1B, 7000 employees). I was really lucky in the opportunity that came my way. I took a position in my company’s New Business Development group (which was a two person department, including myself and my boss), where I was responsible for evaluating new business ideas for the company. My job was to research them, look at the feasibility, resource requirements, identify potential strategies, and then provide my recommendation to executives.
But the role got better… a business idea crossed my desk that we really loved. My boss, who was based in Italy, and I really thought this business could have enormous potential. Most of the other ideas we evaluated were new service lines or extensions to existing offerings. This was a huge new business that built on our company’s core competencies, but had to be built from scratch. I spent a long time working on the business idea, from concept through implementation. To make this long story short, I lead the spin-off of the company into its own entity, built the entire company from scratch, and for a couple years ran Global Operations with employees in the U.S., Europe and Asia. It was my baby and I really enjoyed working there – it seemed like the utopic entrepreneurial state… Working for a big company with a lot of resources and money, but being able to do things your own way, building something from scratch, and not having to adhere to most of the corporate policies and politics.
Of course, that was too good to last. During my stint with the large company, my entrepreneurial bug again began to itch. The company was becoming more political and filled with red tape as we grew and the corporate headquarters wanted to be more involved. There was not a lot of upside potential working for the corporation either, as I had no equity in the spin-off, just a half-decent salary. A company in the industry came calling for an opportunity out in San Francisco. I would have the ability to build a team and lead business development. It was a few year old startup with what I thought was a great product and some heavy hitting VC’s behind them. So I packed up and moved out to the Bay Area to partake in my dream of living in the startup world on the West Coast. Looking back on my experiences now leads me to a lesson I have come to appreciate:
There is a lot startups can learn from corporations. In the entrepreneurial community we come to think of big corporations as the bad guys- they are slow, inefficient, wasteful and don’t fully appreciate their customers. Most of these adjectives describing corporations are true. But I’ve also learned that corporations do some things right that startups should emulate.
Having standardized documented processes is a good thing. I don’t mean creating 100 page SOP’s, but documenting what you are doing, how things should be done, what policies should be followed, etc… is very helpful for a startup (and can be done in a way that empowers employees). It seems like there isn’t enough time to worry about this in a startup, but I believe it is critical. Having worked in a startup in San Francisco that completely ignored processes, I can say firsthand it leads to increased business and legal risks. Different employees do the same things in different ways resulting in different outcomes, employees tell customers different things in the same situation, customers get angry because you are doing things differently for their competitor than you are doing for them. Not having a standard policy caused us to be threatened with legal action from a major retailer, which ultimately hurt our credibility, ate up much more time and money on dealing with the issue. Not to mention the difficulty in training new employees as you grow without any processes in place.
Not pivoting too quickly, stay focused and aligned. “Pivot” is the big buzz word these days… how can startups pivot when things aren’t working. But I have seen too many startups pivot without giving things a chance. Especially on the West Coast, it seems like startups try something for a couple weeks and if it doesn’t work they need to pivot. The problem with that is that it doesn’t give you enough time to have all of your resources aligned. To really test out an idea in the marketplace, you need to ensure that your engineering team is aligned with marketing, is aligned with sales, is aligned with customer service, is aligned with the science team, is aligned with your executive team, and so on. Just telling your sales guys to go out and try to sell something without everyone else internally aligned, will almost always result in poor results. On the other hand, corporations make sure to align all departments on a new service line before going to market and may test out a new service line for months or years before giving up. The key is to find a balance between these two. It most cases, you can’t test out a new idea in a few weeks (and if your CEO tells you to, you should push back, because otherwise you will always fail).
- Defined responsibilities and accountability are important. In a start-up there are many jacks of all trades and everyone takes on many responsibilities. This is necessary for the small things, but when it comes to the large strategic roles, there needs to be responsibility and accountability. The responsibilities and accountability needs to be clear between everyone so that people know what is expected of them, what their roles are, and perhaps most importantly- how they could help their co-workers. Just as important, these responsibilities need to be aligned to the company strategy. If you have a small start-up and you have three different people doing various aspects of marketing without an alignment of goals, your company is probably wasting a lot of resources chasing its tail without maximizing the output.
Entrepreneurship has been in my blood since I was little. Over the years I’ve graduated from shoveling neighbors’ driveways as a little kid to a college business running a semi-successful entertainment site to numerous other businesses I have started or helped start in the years since. My results have varied; with some failures and some moderate successes. But there is one thing I have realized throughout my entrepreneurial life – it is much easier to be successful as an entrepreneur if you focus on delivering real value to customers and focus from day one on how your own business is going to make money.
Although this thought has been with me for a while, it has become increasingly clear in the last couple years. It all started a couple years ago when I was allured to the Bay Area by grand startup promises and the hype of the Silicon Valley entrepreneurial ecosystem. In the last few years, I’ve learned a lot about myself and hopefully a thing or two that will help me (and others) build successful businesses in Chicago. I’m writing this blog post to share my thoughts and opinions of the startup culture in Chicago versus that in the Bay Area, as well as a couple lessons I’ve learned along the way.
After my stint in the Bay Area, I have now been back in Chicago for a few months. It has been a great summer so far and I am glad to be back in my hometown. I am working on two companies at the same time which is a little crazy, but I am loving it. I’ve also met some great entrepreneurs and seen some really great companies in Chicago in the last few months, which has caused me to reflect on the difference between the startup world in the Valley versus right here in Chicago. Note- I am making broad generalizations, but I think they accurately represent the attitudes of a large number of start-ups in the different ecosystems.
The number one difference between a startup in Chicago and the Valley is that Chicago entrepreneurs look to build a business that delivers value. Chicago entrepreneurs are much more likely to try to solve an actual business or consumer problem. A problem that is a pain point. A problem that consumers or business would be willing to pay for to have it go away or get easier. In the Valley, many startups are more about developing a cool feature than developing a valuable product or service.
In Chicago, entrepreneurs generally start thinking about making money from day one. Many businesses in Chicago are bootstrapped. In Chicago, it is in our DNA to build a viable business that focuses on bringing in revenue. In the Valley, it is like the Field of Dreams mentality, “Build it and they will come,” except it is “Build a cool feature or product and we’ll figure out how to make money later.” The problem with this mentality is that it is much harder to inject monetization into your company culture down the road than it is to build it in your DNA from day one. Once your company has 20, 50, 100 or 1000 employees, it is much harder to shift your employees mindset to making money from making a cool product or increasing users or whatever the company goal has been.
As difficult as it seems to find employees for startups here in Chicago, the quality of employees we do find are significantly better. In the Valley, the pool is much larger and many more people work in startups. People make their career in jumping around from start-up to start-up. The goal for many people is to pick up a little bit of equity from each of them and hope one or more hits it big. I’d argue that is a bad thing… I met way too many people who have never worked at a company for more than two or three years. These are guys in their 40’s whose longest tenure is a few years and have worked for over a dozen companies. They might have broad experience, but where is the passion and dedication. When are they going to jump ship from your company and move onto the next startup? There are some brilliant and smart people in the Valley, but in Chicago you can find people that are smart, hard-working, dedicated and passionate. People in Chicago care about working for a company that brings them meaning and that they can grow with. You just don’t see that type of mentality in the Valley.
In Chicago we care much more about delivering a great experience to our customers. I have met a bunch of great entrepreneurs in Chicago who are building businesses not because the status quo solutions are bad, but because they think they can deliver a better experience to customers. I am a big believer in building a business around exceeding customer expectations and I look up to companies(people) like Zappos (Tony Hsieh) and Disney (Lee Cockerell). I think here in Chicago, we are much more in tune with the impacts customer service can have on building value in our businesses. We build relationships with our customers, our suppliers and our partners based on mutual trust and delivering value to all parties. In the Valley, you build relationships with your partners based on quick wins and creating value only for yourself. It is a short-term strategy that backfires in creating long-term value for your organization (but helps small startups get acquired for millions of dollars).
Those are my thoughts and opinions on the attitudes in Chicago versus the Bay Area. I hope to integrate my own lessons and perceptions into my two companies.
One of my companies, Uncorkd, is a platform for restaurants to create an iPad wine and beverage menu. I saw high-end restaurants spending close to $100k developing custom apps for their wine menus. I thought there must be a better way that enables all restaurants to have a cost-effective solution, so I created a platform for any restaurant to instantly have their own iPad wine menu. For a few hundred dollars a month, a restaurant can customize and manage their own iPad menu in real-time, increasing their wine sales and driving more traffic to their restaurant. It’s not only economic value we are delivering to restaurants, but also providing a great experience and fantastic service. We are only successful if our restaurants are successful, so we’ll do whatever we have to do make sure they are satisfied and seeing great results. I’m happy to say we are now in restaurants across the country from Florida to Alaska and continuing to innovate on our platform.
I’m also working with two talented partners on a web-based solution for green purchasing, called Greencurement. As governments, schools, hospitals, and businesses look to increase their purchasing of green products, we are building software that will enable them to manage their procurement policies, find products that meet their requirements, ensure compliance, and help them buy greener products. We will be launching a beta version soon and working with a number of local and national organizations. As with most Chicago startups, we believe we are building something that delivers real value, that solves a problem and that organizations would be willing to pay for.
So what do you think?
Do you think Chicago startups are more likely to solve actual problems? Do you think Chicago startups are more focused on building solid business models that generate revenue early?