Saturday, May 31, 2008

Zappos Makes It Pay to Quit

The online shoe retailer Zappos has an interesting option for new hires in its customer-service call center. After the first week of a four-week training program, you can take that week’s pay plus $1,000 and walk away. Yes, they will pay you $1,000 to quit.

Presumably, you take this offer if you realize the job isn’t going to work out. It’s like getting a bonus for making a mistake.

That’s the employee perspective. Now let’s look at Zappos’ angle.

10% of new hires take the money. Giving these people a reason to self-select themselves out saves Zappos the additional three weeks of training and avoids the marginal performance likely to follow until they move on.

And it saves far more if it removes bad hires who would otherwise never move on—the disgruntled employees who find it easier to stay and complain than get another job. $1,000 is nothing compared to the cost of keeping, or eventually firing, these employees. (Assuming they are capable of being happier elsewhere, these employees actually might be the biggest beneficiaries of having a specific incentive to leave.)

Although Zappos’ system is not quite to the level of a garden where the weeds pull themselves, it seems to be a clever approach in that direction.

[Original source on Zappos’ pay-to-quit program: Bill Taylor’s Why Zappos Pays New Employees to Quit—And You Should Too at Harvard Business Publishing’s Web site]

Sunday, May 18, 2008

Intelligent Cross-Sell at Office Depot

At work, we just released a case study that’s a nice progress report for Intelligent Cross-Sell, my group’s main product. The featured customer is Office Depot, which runs one of the largest e-commerce sites in the world at—it’s currently ranked #3 in the Internet Retailer 500, the Fortune 500 of retail e-commerce.

Here’s the main story:

In 2007, Office Depot deployed CNET Channel’s Intelligent Cross-Sell solution to automate and optimize merchandising on its e-commerce site, Doing so caused a doubling of online cross-sell revenue for the multi-channel global retailer. Cross-selling is an important tool that involves recommending accessories to products, such as a memory card with the sale of a digital camera.

One of the keys to success was utilizing Intelligent Cross-Sell’s “guided automation,” which combines merchandisers’ knowledge with the automation and scalability of a recommendation engine. For example, Intelligent Cross-Sell’s point-and-click interface allowed Office Depot merchandisers to target cross-sell opportunities by factors such as key selling features, popularity, compatibility, and brand affinity. Then, Intelligent Cross-Sell executed the rules across millions of possible product combinations. Compared to Office Depot’s previous cross-selling functionality, the result was a significant increase in the number and relevance of accessories offered as cross-sell opportunities across the site. This combination of more and better cross-sells drove the increase of cross-sell revenue.

Needless to say, I’m pleased. In my line of work, results are measurable, and these are the kind of results we like to see.

Sunday, May 11, 2008

Kindle and’s Big Thinking

I admire, both as a long-time customer and as a student of business. pioneered much of what makes online retailing useful: one-click ordering, personalized recommendations, and user reviews, to name a few standouts.

Beyond that, long ago transcended the category online retailer by providing a platform where other retailers can merchandise their wares alongside’s or via their own stores. In addition, created the first large affiliate-marketing program, where individuals or companies can merchandise products on their sites.

And in a more recent step, generalized its infrastructure to offer a cloud-computing service (basically, a giant on-demand computing system, available over the Internet) that other companies can rent time on, for almost any purpose, not just online retailing.

These developments have a common theme. They all anticipated important changes to how business could be done, and executed those changes early, before others grasped the concepts. However, as some of’s recent initiatives have gone further afield from’s core retailing business, critics have questioned whether is going too far. Is the company investing in areas that, at the end of the day, aren’t a retailer’s business?

That’s the subtext to a shareholder letter by CEO Jeff Bezos, discussing Kindle,’s electronic book reader. Other e-book readers exist, but decided to design and manufacture its own. In the letter, Bezos makes a compelling case that has both the expertise and missionary zeal to deliver a successful e-book reader where others have failed, yet he leaves unsaid why is doing it.

Here’s why: Kindle is not just an e-book reader but also a service by which one buys books from (you guessed it) If this is starting to sound familiar, recall that the iPod trumped existing MP3 players not just by providing better hardware but by linking the hardware to a well-designed service for buying music (iTunes). Thus, with both the iPod and Kindle, competitive advantage is about offering a superior total experience in buying and consuming musics/books.

Note the “total experience” concept, because it goes back to the question of what business a retailer should be in. For books, proved it can design a great buying experience. However, let’s say digital books go the way of digital music, where the best total experience—and the dominant market position—comes from an integrated offering of hardware, software, and service. If that happens, just being an e-book retailer won’t work. Go ask the formerly leading music retailers who watched Apple’s iTunes Store go from nothing to the largest music retailer in the world.

Of course, it’s not a foregone conclusion that the e-books business will follow the iPod/iTunes model. However, Kindle is a smart hedge in case it does, since has a lot to lose—or, with Kindle, to gain—in that scenario.

Whatever Kindle’s fate, its existence illustrates why is different. detected e-books’ potential for disruptive change and went well outside the standard retailer’s playbook to adapt—envisioning and implementing a better way to buy and read books. That’s big thinking.

I recommend you read Bezos’ letter (here’s that link again), plus his 1997 letter to shareholders, which is on the same page. Compared to the typical CEO missive, I think you’ll find Bezos’ letters refreshing.

(Postscript: The purpose of Bezos’ shareholder letters is to explain’s actions and strategy, but not too much. For example, the 1997 letter notes: “We are planning to add music to our product offering, and over time we believe that other products may be prudent investments.” Apparently, he chose that sentence instead of, “We plan to expand into so many product categories that we won’t be able to fit all their tabs across the top of the screen.” ;)

Sunday, May 4, 2008

The Eric Carle Museum

Having recently moved nearby, it was inevitable that we’d visit the Eric Carle Museum of Picture Book Art in Amherst, Massachusetts. Any museum that won’t instantly bore a toddler is a worthy museum for our current lifestage. Besides, having read The Very Hungry Caterpillar aloud several hundred times, I was a stakeholder.

For the uninitiated, Eric Carle is author of so many popular children’s books that his work often commands its own shelf in bookstores. Carle’s medium is the picture book: Each page has a picture and a small amount of text. A typical Carle book tells a story about an animal while teaching concepts like colors or counting.

The Very Hungry Caterpillar, Carle’s most beloved book, seems to charm every child (and parent) it meets—to the tune of more than 20 million copies. The only risk in giving the book to new parents is that someone else already has. (If you want another Carle option, Brown Bear, Brown Bear, What Do You See? is also a sure winner.)

Visiting the museum, I was interested to learn that Carle was formerly an art director at an ad agency. In a video, I believe he even said something to the effect that he thinks of each page in his picture books as a billboard. This explains much about his simple visual style, child-like in its own way, communicating essence with little ornament.

Carle’s visual recipes typically include basic shapes, vibrant colors with varied textures, and lots of white space. His textures are from painted tissue paper—cut, pasted, and layered into figures like the famous caterpillar below.

For a selection of Carle’s work, with commentary by the artist, see this three-minute slideshow by National Public Radio.

And if you’re in the Amherst area with small children in tow, check out the museum. It’s part Eric Carle, part other picture-book authors and illustrators. In addition to the galleries, the library has thousands of children’s books, the art studio lets children create their own collages, and the smartly curated gift shop goes well beyond just Eric Carle and kids’ books.