Zappos is on a journey: a journey to become a 1000-year-old company. As we turn 20 years old this year, we believe we are just getting started.
But the reality is, in the landscape of company lifespans, we are old. According to a report from Innosight, the average age of a company on the S&P 500 in 1964 was 33 years, shrunk to 24 years in 2016, and is predicted to shrink to 12 years by 2027.
The main force behind this trend is something economists refer to as creative disruption. Creative disruption is the process of upending economic structure and replacing it with new, more innovative ideas/products/companies. Innovation in the market is happening faster and quicker. So is Zappos (and everyone else) doomed at age 20?
I mentioned Zappos is on a journey. Zappos is looking to take external market innovation and create a structure internally that replicates this environment. This doesn’t happen in an instant. It has been a journey to get to where we are today. And, we will continue to be a growing and innovating processes years from now. Our organizational structure evolution (Holacracy, Teal, market-based dynamics) is driven by metamorphosis in 5 main areas: profit to purpose, hierarchies to networks, controlling to empowering, planning to experimentation, and privacy to transparency.
Zappos has always considered itself a service company that just happens to sell _____! What fills in the blank? That isn’t for me or Tony Hsieh our CEO to decide. Well, it is, but it’s also for every other member of our organization. The blank can be filled by anyone at Zappos. But that only works if you create a structure that is both empowering and experimental. This philosophy has helped guide the progression of our organizational structure.
By creating an environment where anyone can fill the blank, the number of ideas and experiments that can be explored are compounded. This leads to a more diversified Zappos. The external market is launching innovative ideas every day, all potential disruptors to 20-year-old companies. Zappos is creating a space for these ideas to be launched from within.
Launching our own disruptors creates diversification. Diversification improves our network: the more networked a system is, the more protected it is against damages or changes to individual nodes. So every internal disruptor Zappos launches creates a new node in the system that protects the other existing nodes and the overall network. This improves the chances of longevity.
Zappos organizational structure is about creating a space where nodes and ideas can proliferate and letting creative disruption happen internally, allowing Zappos to grow and change. We hope to create a network that adapts along with the external market, shifting the paradigm of a company that can’t keep up.
Happy 20th birthday Zappos! Can’t wait to celebrate birthday 1000!
Lead Organizational Designer and Advisor to Zappos CEO