Last we week we delved into 5 Truths Of Corporate Transformation. My daughter turned 18 on the weekend. And part of the gift giving, I suggested to Alannah that I take her to David Jones to ‘kit her out’, ‘Pretty Woman’ style. The retort I received was “who buys clothes and shoes in a store, Dad?” So where did this shift occur? Whilst many are skeptics of the Zappos way, notably humans aren’t designed to operate like software, there are many aspects of the Zappos culture to admire. There are the clichés: Banners hang around the offices declaring the company’s core values – “Create Fun and a Little Weirdness” to “Be Adventurous, Creative and Open-Minded” and “Be Humble.” But Zappos is not a cultural artifact from the go-go years of the late twentieth century. Inc. Magazine, the bible of entrepreneurship, has called Zappos “arguably the 21^stcenturies most innovative start-up.”The company has been hailed on the cover of Fortune as one of the country’s best places to work, and Tony Hsieh (pronounced shay) the wunderkind has become an executive role model.

Indeed, a month after it’s tenth birthday, in a powerful validation of how Zappos works, Internet giant Amazon agreed to use stock, eventually valued at $1.2 billion to buy the company – even as it vowed to keep its hand off the company, so it could do things its way. It was a huge and hugely unexpected deal that made a surprising amount of sense. Sure, Amazon is highly regarded for the way it serves customers. But its model is driven by muscle: low costs, huge warehouses, smart software. Zappos does much of that too, nut what makes it special is the depth of the human connections it has forged with customers. As Amazon founder Jeff Bezos said when he announced the deal, “I get all weak-kneed when I see a customer obsessed company.”

How has managed to shake up the brutally competitive world of fashion retail? A big part of the answer, as with Amazon, involves economics and logistics. The company offers an absurdly huge selection of shoes, clothes, handbags and fashion accessories – although shoes remain the sole (pun intended) of the operations. The company only sells merchandise it has on its shelves (no delays or back orders) and ships the items to customers for free. It also offers full refunds and free shipping for customers who return their purchases – up to a year after they order.

It sounds like a prescription for chaos – tens of thousands of returns coming in, even as tens of thousands of orders go out – but it’s crucial to the company’s success. Zappos’s operating efficiencies and open-ended return policies mean customers who are unsure about sizes and styles can order lots of different options, keep what they like, and ship back the rest. “We take the risk out of buying online,”Hsieh explains. “If someone likes to try ten different pairs of shoes with ten outfits, we encourage them to order all ten pairs and return the ones that don’t work.”It’s an easy to understand offer with hard-to-beat appeal.

So the Zappos value proposition is a winner. Everything about how Zappos does business is meant to reassure, amuse, and otherwise engage customers, even as it attends to the basics of price, selection and shipping. For example, the company’s free-delivery policy guarantees that orders will arrive within four or five business days – a perfectly reasonable timetable, other than in a severe fashion emergency. But since the warehouse sits down the road from the UPS sorting hub, items can sometimes leave as late as 1.00am and arrive the next morning. So for repeat customers, Zappos almost always provides next day delivery as a ‘surprise upgrade’ – an unexpected benefit that leaves a lasting impression. “Some customers order as late as midnight and get free delivery by eight o’clock the next morning,” Hsieh explains. “People ask me if it’s expensive to do that. It’s very expensive. But we are willing to invest to create a ‘wow’ experience that generates customer loyalty. Our whole philosophy is to take most of the money we would spend on marketing, put it into the customer experience, and let word of mouth be our true form of marketing. Repeat customers buy more and become our best advocates.”

Moreover, unlike virtually any other Internet retailer on the planet (Inc. Amazon), Zappos encourages its customers to communicate by telephone. According to Hsieh, Zappos handles more than five thousand old-fashioned calls per day, and almost all of its Internet savvy customers call at some point during the history of the company. Why? Because Zappos makes it so easy to pick up the phone, reach a human being, explain what you need, and ask for help – no matter how strange the question or how long it takes to answer. Indeed, according to The New Yorker, which published an in-depth account of life ‘inside the online shoe utopia,’ the longest call in Zappos history lasted five hours, twenty-five minutes and thirty one seconds. “We want to talk to our customers,” the CEO argues; although even he hopes customers don’t make a habit of five-hour conversations. “We encourage them to call. I speak at branding conferences and there’s always debate: Consumers are being bombarded by thousands of marketing messages, how do you get them to stand out? Well, as unsexy and low tech as it sounds, the telephone is really powerful. Most companies look at the telephone as an expense. We look at it as one of the best branding devices out there. You have your customer’s undivided attention. If you get the interaction right, if you focus not on ‘closing the sale’ but on doing exactly what’s best for that customer, it’s something they’ll remember and tell their friends and family about.”

Are you the most of anything? 
You can’t be “pretty good” at everything anymore. You have to be the most of something: the most affordable, the most accessible, the most elegant, the most colorful, and the most transparent. Companies used to be comfortable in the middle of the road—that’s where all the customers were. Today, the middle of the road is the road to ruin. What are you the most of?