In just eight years, Zalando has grown from a small start-up selling flip flops online from a Berlin apartment to one of Europe’s leading Internet fashion retailers, publicly listed and with annual revenues close to €3 billion in 2015, up a storming 33% on 2014.
In the same year, orders rose by 33.5%, average basket sizes were larger, site visits increased by 21.5% and the number of visitors rose 22% to 17.9 million. Customer satisfaction increased as well.
But that’s not enough for the company’s management. According to them, Zalando’s future lies in being not just an online retailer, but also a fashion aggregator, providing a platform that ‘connects the fashion world’. In other words, Zalando plans to provide retailers, brands, logistics companies and app developers with the technology they need to connect to consumers. As they state in the company’s annual report:
The more products and partners join our fashion platform, the more varied and complex it becomes. Our expertise in technology and operations holds everything together and creates additional synergies.
Dealing with variety and complexity is not unfamiliar territory to Zalando’s 1,200-strong tech team, Zalando Tech - but the pace of growth and this new, ambitious goal have forced it to reevaluate how it organises its skills and resources, according to senior vice president of technology, Philipp Erler. This rethink, he adds, has resulted in the adoption of a new philosophy that he calls ‘Radical Agility’.
Sounds a bit bombastic, right? A little too blow-hard, a bit too showy? What’s wrong with good old Agile, anyway? It seems to work well enough for other European online retailers, including ASOS.
Dig beneath the surface at Zalando, and many Agile principles are still there: daily ‘scrums’ at Zalando’s tech hubs in Berlin, Dublin and Helsinki; small teams, working in short ‘sprints’; a focus on iterative development.
But Erler insists that Radical Agility goes further, with a strong emphasis on increased autonomy and continual learning, with tech staff allowed to spend 20% of their time on developing their skills. He says:
Radical Agility is centered around small teams of three to seven people, who own a topic, or a technological aspect of the platform, from end-to-end. We arm them with purpose and clear insight into why they’re doing something and how we believe the end result should look from the customer’s perspective, but it’s up to them to take it from there. We trust them, give them autonomy to take decisions on their own, but also expect them to be responsible for those decisions.
Three pillars define this philosophy - autonomy, trust and mastery. The strategy works, Erler insists, because engineers are, at heart, free-thinking problem solvers by nature:
Radical Agility works only under a certain condition: that people have the drive to succeed on their own. They need to want to build and achieve and be proud of what they’ve created. In the classic corporate world, that doesn’t happen. People can buy a house or raise children or other achievements, but when they enter their employer’s building, they leave their brains at the door. Someone tells them what to do - and we don’t believe that’s what working should look like in the twenty-first century.
But what about oversight? In other words, how can Erler be so confident that the result of this approach won’t in practice be the rapid development of high-quality software, but instead, a descent into chaos? After all, it all sounds suspiciously similar to online footwear retailer Zappo’s philosophy of ‘holacracy’, which saw a shift away from hierarchical management in favour of ‘self-management’ across the entire company - and a resulting exodus of staff unhappy with what they viewed as turmoil and uncertainty. Erler responds:
This was one of the challenges we anticipated in implementing this way of working and communicating how we’d work with the teams - but we’re not talking about anarchy here! We recognised from the start that some of the teams would need stronger leadership and we’ve invest a great deal in leaders who help teams to go in the right direction, without needing the weapon of telling them what to do.
In addition to that, we’ve introduced some concepts that work as a sort of social framework. We have a Constitution that lays down basic rights and reports for teams. And on that foundation, we’ve built a set of rules to play by, centrally issued, that let teams know what compliance requirements have to be fulfilled, what kind of testing they’re required to perform before something goes live and so on. And we have an audit department that continuously checks compliance with these rules. What we’re trying to model here are things that we know work well in civil societies.
It just over a year now from Radical Agility’s first introduction at Zalando and Erler claims the company is approaching the end of its ‘learning stage’:
What we’re seeing is that, the more teams really understand the concept, the more productive they get. Those teams that are fully working by this concept don’t need much leadership anymore and they do two things very well. First, they deliver more quickly on the things that actually matter and refuse to deliver on stuff that’s not that important - and from my point of view, that’s a good thing overall.
Second, with this ownership of topic, they invest more in making sure that what they build runs perfectly in production. They take care of their stuff, so that no customer or customer order is impacted negatively by what they’ve built. They build in quality right from the start, because they know they’re the ones who will have to deal with any problems that come up. And that’s great for customers.
It may also help Erler in his ongoing battle to hire the brightest and the best developers, often poaching them away from other high-profile Internet retailers. By the end of 2015, the Zalando Tech workforce numbered around 1,000 people. By the end of 2016, it should hit 2,000.
Recruiting the people we need, as anyone in the tech world will tell you, is very, very difficult. We have to invest huge resources into this and we have a rigorous interview process of six or seven stages, so that we can make sure that people fulfill not just the base qualifications but are also entrepreneurial, driven people who really want to get something done and who won’t be satisfied until things are really great, the numbers are up, the customer satisfaction ratings are right.
If you do this right, you’re not recruiting for numbers, you’re recruiting for the right people who can thrive under Radical Agility. It’s not trivial at all, but I think we’re doing well.