As you know, INDIE Business Book Club is now reading Delivering Happiness by Tony Hsieh. We had our first club meeting yesterday, and it was fantastic. We finished Part I: Profits, and this morning, I started reading Part II: Profits & Passion. The first chapter, “Concentrate Your Position,” tells how Zappos went from a drop shipping/warehouse business model to a 100% warehouse business model.
To do this, the company first fired eLogistics, a now defunct fulfillment house that was letting thousands of shoes collect dust on the loading docks. After bringing fulfillment in-house, they cut their revenues by 25% in one day by eliminating the drop shipping portion of the business altogether. Why would they do something so drastic?
To concentrate their position, of course.
Concentrate Your Position
Zappos was behind on hundreds of orders, and customers were unhappy. That is an urgent issue for any business, so the immediate problem was getting shoes from the loading dock and into a system that could eventually land them inside a box on your front door step.
But instead of dealing with that issue, which made up 75% of Zappos's business, their attention was diverted by the 25% of the business — which Tony describes as the “easy money” part — the vendors who were drop shipping products to customers.
In other words, a problem affecting 25% of the business was preventing the leadership team from fully addressing a problem affecting 75% of the business. Guess which one had to go.
Eliminating drop shipping allowed Tony and his team to concentrate their position. They began getting orders from vendor to warehouse to customer faster and more efficiently. Two months after eliminating 25% of the company's revenue stream, Wells Fargo approved a $6M line of credit. They had gone from “building the runway” to “getting ready for takeoff.” Zappos was saved.
As the owner of your business each one of your days starts at zero. If you don't eliminate productivity problems, they will eventually make sure you stay at zero, day after day after day. But if you concentrate your position, you clear a path for a very different outcome.
Whether it's cleaning toilets, or killing off short term revenues so you can enjoy long term growth, you'll get great tips and inspiration in Tony's book. I'm learning so much, and the best part is that I'm learning it with a group of motivated business leaders who are driven to achieve.
Here are the ladies who joined me yesterday. Follow them for inspiration, and some kick-butt health, beauty and DIY products and services: Lela Barker, Emily Caswell, Alyssa Middleton, Stephanie Craig, La Shonda Tyree, Paula Cattano, Gina Rafkind.
INDIE Business Book Club is packed to capacity for 2Q 2011, but I will open up more seats in 3Q 2011. In the meantime, you can read and learn along with us on Twitter at @INDIEBookClub and using the hashtag #indiebookclub. You can also discuss and share your insights with us at the INDIE FaceBook Page.
What things have you done to concentrate your position? What would you be willing to do?