Hey Sebastian, thanks for commenting.
I did a little bit more research to find that the change to holacracy is largely based on the Zappos’ move to other merchandising areas. Although they dominate the e-commerce shoe market – they want to use holacracy to help them unearth new service models related to additional types of merchandise. I’m hesitant to say that this is the right move because I’m not convinced that this could not be achieved with a more traditional hierarchy.
More reading available here: https://hbr.org/2015/06/zappos-and-the-connection-between-structure-and-strategy
Dan, thanks for commenting.
Your question about transition to other merchandise is what I think Tony Hsieh is trying to tackle with holacracy. Their team is designed to sell shoes well but 75% of customers are repeat customers. So, I think his aim is to increase average ticket sizes from with these customers by using holacracy to help unearth new service models related to additional types of merchandise. More merchandise and stellar service may increase word of mouth marketing attracting more new customers down the road. More reading available about holacracy, if you’re interested, here: https://hbr.org/2015/06/zappos-and-the-connection-between-structure-and-strategy
Your second question about integration with Amazon is a good one. They moved their warehouse operations to Amazon in 2012, but I couldn’t find much information about how they are integrated with their dozens of warehouses across the globe. I would imagine that Zappos is able to leverage the numerous Amazon warehouses to improve their ability to ship and process returns quickly.
Hi Aki. Thanks for commenting.
Yes, the 14% turnover is directly attributed to the change to holacracy in April of 2014 and is above and beyond the typical turnover that the company realizes on an annual basis (I believe it’s around 13% voluntary + 7% involuntarily). When Tony Hsieh, the CEO, implemented the change, he offered all members of his team an opportunity to take severance and leave if holacracy is not for them. I would be fascinated to see what the demographic of those leaving was — were they high performers who favored a more structured system or were they low performers who would have left anyway? Also, will Zappos be able to achieve the same level of consistent service if everyone is their own entrepreneur under holacracy? Only time will tell!
Fascinating post, Sofia. I thought the idea of using distribution to dictate where new stores are opened is brilliant. Having high-turnover not only cuts out a middle man, it also allows the company to easily optimize SKU distribution to fit changing customer needs. In addition, incorporating the private label gives the company a ton of leverage — should relationships with a supplier not work out , Joes can simply move to another supplier without an impact on their customers.
Great post, Sojung. I too am concerned about the long term success of this business model. Beyond simple packaging and what must be a good web user interface, I don’t see how PillPack is well differentiated from the larger mail-order pharmacies. The web interface should be an easy challenge for big pharmacies to overcome, and while simple packaging would require some retooling of their distribution system, I don’t think that this company will be able to make it without other revenue streams.
This was a fascinating post, Alex. I agree that the operating model used by Spotify will help propel alignment and autonomy within the company but I wonder how they will manage this as they grow. There are certainly operational tasks that are less “sexy” than others and I’m worried that people may not want to self organize their work on these types of projects. When this happens I’m guessing that managers will have to delegate these projects to squads but I worry that this will significantly impact the operating model. What do you think?