The Zappos Business Model Experiment

Hierarchical models of management in professional accounting firms all over the world are being challenged by new ways to build a business. It seems new business models (based on hearing every voice on the team), or focusing on results (and nothing else) are becoming more and more popular as the younger generations begin running the world. It seems some of these methods are hell bent on eliminating management, whether management is needed or not. Is it?

What is a business model, anyway? For that answer, let’s turn to the guru and author of Business Model Generation, Alex Osterwalder. In this book, Osterwalder defines a business model as “the rationale of how an organization creates, delivers, and captures value.” Basically, an accounting firm’s business model explains why they sell what they do, how they price for it, and how what they sell transforms their clients. According to Osterwalder, you need a cool chart, building blocks, and some markers to get it done. Business model creation is currently a fad, growing more and more popular every day. I guess it’s our search for why working at a lame firm sucks. But do we need a new business model?

This article on Zappos’ adoption of a new business model called Holacracy is a wonderful example of a company’s search for a new business model, but ultimately finding it more elusive than expected. Holacracy was created by Brian Robertson, who originally implemented the idea in his software company, Ternary Software. Holacracy is about self governance, and the ability for teams within companies to lead themselves, give themselves jobs, and eliminate the need for all management. In Holacracy, you have roles, not titles, and everyone is part of a voluntary circle (they look like committees to me). Drill into the HolacracyOne organization’s circles and people and you’ll see just how complex this new business model can be (reading the Policies are especially fun).

Similarly, Results Only Work Environments, or ROWE, is also a fairly new business model with the sole focus of eliminating the minutia of daily life in big corporations, while giving more freedoms to its employees to accomplish their real work. In fact, our firm adopted ROWE in 2012. The process was a little bumpy at first, but as we came to understand what it means to focus on results-only, we also came to understand who could and could not handle this burden. Let’s face it – some employees want to be told what to do. In the case of blind followers, adopting a ROWE in your organization could mean less work is completed, not more.

Many business leaders like Tony Hsieh, CEO of Zappos, are jumping on the bandwagon to find the better business model. According to the article above, Hsieh seems to be focused on adoption of a business model instead of building a business. But the former idea must serve the latter, right?. Zappos needs a leader. My firm needs a leader, and your firm needs a leader. One down side to the creation of all of these new business models is that we may forget the simple path forward in firm building. Firm building is about adding value to a customer by transforming them, and then capturing some of that newly crafted value in the form of a price for the firm. This is the goal, and we need leaders to walk this path with us. If we are honest, some firms have accomplished this with their hierarchical structures, while some are accomplishing this goal with no bosses inside of a Holacracy. But I fear we are ultimately losing our place in our search for that elusive model of a business that is the perfect model everyone wants to be a part of. Nothing is perfect.

Here are some truths about these ideas that we would be smart to heed:

1. Better business is about better leadership. Our firms still need leaders. There is just no way around it. Holacracy seems to be stating that ‘business socialism’ is the best path forward, with everyone’s voice having equal weight. But if you’ve run a business for any amount of time, you know that not everyone’s voice is equal. Nor should it be. The role of the CEO, the visionary, has the right and the burden to make decisions with information that not everyone can know. Experience, gut, skill, and looking back on where you’ve come from are benefits the CEO has over the team. This is not bad, it’s just a reality. A business model doesn’t lead a company – a person does. Businesses still need leaders.

2. We must communicate our value to the world. Long time Zappos employee, Fred Mossler, has as his title “No Title” so he can work in any department he wants. How is that communicating value to the world around you? If you need help switching your 401(k) at the company’s Human Resources department, do you ask Mr. Mossler? If a customer really needs to see a ‘supervisor’ (shudder) to get their problem fixed, is Mr. Mossler the guy? I have no idea – and neither do some of their employees (14% of Zappos employees chose a buyout to leave the company after they implemented a Holacracy). Titles, as one example, are great ways to tell the world what you do, how you can help them, and also what you do not do. Communicating these facts is very important to your team, your customers, and the value that you are trying to create in the world. No titles, or the ‘Czar of Results’ just won’t cut it in a world where we need to communicate more, not less.

3. Companies don’t self-organize. Yes, there is collective wisdom that business leaders of old have failed to tap into. That needs to change. And yes, the newer generations are adept at clearly seeing their value. These are real issues and must be addressed (and are being addressed in our world, thankfully). But right firm building is about grappling chaos into order. It’s a fight. And this takes a leader. Leaders organize businesses, businesses don’t organize themselves. Placing the burden on a team to figure out their answers without a leader is not cool, it’s called abdication. And the old school models are full of abdicating leaders who still claim the title of ‘Boss,’ while using the business for personal gain. Employees hate that crap. There are few great leaders for a reason – companies are hard to build. Leaders bring structure, and vision to rally around, and ultimate success to a company. Companies aren’t meant to self-organize.

4. Every team member has a burden to bear. Everyone in an organization has a job to do. Often, a team is skilled at executing the visions of leadership. A team can share a better way to do it too. Similarly, the leader is tasked with creating new value to sell, building a differentiated brand that can not be copied, and supporting a workplace where people can be transparent, real, and safe. Let’s not confuse these roles. When we place burdens on a team they didn’t sign up for, or wrongly put them in meetings they have no place being in, they are going to get furstrated. Team members know when the buck has been passed. Business models like Holacracy seem to place decision burdens on teams that are not their place to decide. In a Holacracy, anyone can place an agenda on a team meeting (and they have LOTS of meetings). Sometimes, the team wants the leader to make decisions about which vendor the company should use for professional liability insurance. And sometimes the leader wants the team to decide how they want to key data into a piece of tax software. Our goals should be to define what burdens we all should bear, not ask everyone to comment on every decision that every person in the organization finds valuable.

Let’s fight the right battles. New business models truly bring us closer to tapping into the collective wisdom found in wonderful people working together as a team. But that team still needs leadership. A sacrificing, supportive, listening leader who takes hits for the team, and who enjoys the benefits of the burdens they carry.

Jason is the Founder of Thriveal and with his partner, is the CEO of their CPA firm, Blumer & Associates. He is the co-host of the Thrivecast and The Businessology Show and speaks and writes frequently for CPAs and creatives, his firm’s chosen niche. Stay connected with Jason by signing up at

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