In this episode of Innovation Answered, we wanted to know, “How can digitally-native companies maintain their innovative culture as they grow?” To get best practices, Innovation Leader’s Molli DeRosa visited Wayfair’s Boston office to chat with the company’s co-founder Steve Conine.

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Transcript

[SPONSOR MESSAGE]

This episode is sponsored by Planbox, the number one ranked innovation management solution provider by Forrester. Planbox is the most flexible and comprehensive AI-powered, agile innovation management platform and service. Their team helps empower enterprise-wide continuous improvement, corporate venturing, data scouting, digital transformation, and innovation systems. Planbox can help you innovate consistently and experiment cost-effectively while managing your entire innovation pipeline and portfolio. For more information visit, planbox.com.

[MUSIC]

Molli DeRosa: Hey, you’re listening to season four of Innovation Answered, the podcast for corporate innovators. In each episode, we ask a central question about the things that make change hard at large organizations. Then we get answers from experts about how innovators can overcome these challenges and make an impact. I’m Molli DeRosa from Innovation Leader.

In this episode, we wanted to know: How can digitally-native companies maintain their innovative culture as they grow?

To find out, we turned to a role model: Wayfair, an e-commerce retailer that specializes in home furnishings and colorful decor. The company operates four brands in addition to the main Wayfair site, with each loosely dedicated to a certain style of decor.

Founded in 2002, Wayfair has aggressively grown its business. Between 2017 and 2019, Wayfair doubled its number of employees to 17,000, according to Seeking Alpha.

However, Wayfair’s growth has at times been tinged with controversy. This Valentine’s Day, the company laid off 3 percent of its workforce — 550 employees. Employees also staged a walkout in 2019 after the company supplied beds to a contractor that operated migrant detention centers in the US. And although Wayfair generated an $8 billion revenue in 2019, according to the company’s financial statement, the company has yet to make a profit since going public.

Wayfair continues to focus on building an omnichannel experience so customers can shop on their laptops, phones, and even in person. The company’s new store in Natick, Massachusetts, products from online to a brick and mortar location. The company also partnered with the digital startup, Magic Leap, to create an augmented reality experience that allows customers to view furniture in their own home. Users can drag items from a virtual dollhouse into their own space to get a better idea of how the decor fits in their room.

Wayfair doesn’t have one team explicitly dedicated to innovation. However, the company has created a culture of innovation that permeates the organization. Employees are encouraged to take risks and use data to inspire new ideas. To learn more, I met up with Steve Conine, the co-founder and chairman of Wayfair, at the company’s Boston office. We’ll be back from Wayfair after this break.

[AD JINGLE]

Kaitlin Milliken: Hi, it’s Kaitlin Milliken, the producer of Innovation Answered. We know the past few months have been tough — whether that be at home, or at work, or some combination of the two. We also know a little recognition can go a long way when it comes to boosting morale. So, we wanted to share a great way for you to recognize the teams that have made a big impact at your organizations: Innovation Leader’s annual Impact Awards.

The Impact Awards honor companies and individuals that have achieved extraordinary outcomes related to their innovation programs. If you want to celebrate an initiative that has had tangible, positive results for your company, this is a great way to do that. You can also nominate a new initiative with potential or the most valuable player on your team. We’ll honor the winner during our Impact Conference in October. To learn more and apply visit innovationleader.com/awards.

[MUSIC]

Molli DeRosa: And we’re back with Steve Conine from Wayfair. The company’s Boston office is located in Copley Place — a mixed-use development that includes a hotel, office space, and retail establishments. To get to Wayfair itself, visitors have to walk through a mall with brick and mortar retail spaces from luxury brands. We’re talking Jimmy Choo, Dior, Tiffany, and more.

A quick trip up a few escalators brings you to the e-commerce company’s office. We sat down with Steve in one of Wayfair’s conference rooms. The floor we were on featured standard-issue desks and cubicles, contrary to the stereotypical bean bags and open space typically associated with former startups.

So if it’s not the avant-garde office decor, what allows the furniture retailer to keep disrupting the industry — and competing with Amazon? Before Steve took a deep dive into culture, he shared a little bit about the company’s history.

Steve Conine: We started Wayfair in 2002 and Niraj [Shah] and I, who’s the other co-founder in Wayfair, had worked in technology basically since 1995 when we got out of school. We sort of had been very involved in the, I guess, internet V1, right. So if you think about the first internet bubble of ‘95 to 2000, we’d worked on a lot of different systems and sites and worked with a lot of different companies in that time period. And we left our initial industry, which was more tech consulting, started a small business in the mobile phone industry — that we call our failed startup that we did for about a year. And then in 2002, we’re trying to figure out what to do next. And you know, honestly, 2002 was an interesting time period, because I would say that the sort of euphoria over the internet and when people had sort of first seen it, and kind of mid to late 90s, they got very excited about it, that had sort of waned. But meanwhile, it was really starting to influence the way consumers behaved.

And one of the things we noticed in 2002, was that a lot of investment had actually stopped going into ecommerce. But if you looked at the ecommerce landscape, there was a lot of small, independent ecommerce retailers that were having quite a lot of success. If you looked at the US government’s numbers on ecommerce, actually, they were showing increasing online sales every year by the consumer. And so both of those things kind of, you know, opened our eyes to the fact that it looked like there was a very healthy ecommerce market and that there should be opportunity in different areas of ecommerce. And so that kind of was the I guess spark or inspiration that led us to start looking down the road that eventually became Wayfair.

Molli DeRosa: Awesome. Thank you. So could you just tell me a little bit about what your role as co-chairman of Wayfair entails for you?

Steve Conine: Sure. So, today, you know, my roles evolved a lot. It’s interesting to go from a company where there’s just two of us in a room together to a company of over 16,000 people. The way I described my role today, I would sort of put it into four major buckets.

A quarter of my time goes into our team. So you know, last week we were talking about a minute ago that we had visited all, a lot of our US call centers, so that would fall into that bucket, right? Interviewing. This morning, I kicked off the morning by going in and talking to all the new hires. Right? So a good chunk of my time goes to that.

A quarter of my time goes to what I would call corporate stuff, and that would be investor relations, board meetings, quarterly earnings. It’s kind of the corporate stuff that you’d need to do just to be a responsible business runner. And you know, as one of the co-founders, one of the key leaders here, I’m in a role where I end up doing a fair bit of that.

A quarter of my time goes to our suppliers. And so that would be going to trade shows, we have supplier summits, talking to suppliers. They’re an integral part of our business. And so they’re the people who manufacture and make all the products that we sell on our platform.

And then the other quarter really goes to innovation. It goes to the technology side of the business and sort of the operations, you know, tech/innovative side of the business. And really trying to figure out, you know, what should we be focusing on? Are there areas I can help push ahead? And I probably get the most excited about that particular part of my role.

Molli DeRosa: And could you talk a little bit about Wayfair Spaces. So moving into that, how was it brought to scale?

Steve Conine: We, geez probably two years ago now, maybe it’s probably longer. Three-and-a-half years ago, we really started looking at the use of 3D and 3D modeling, augmented reality, virtual reality, and where it could fit in our business. And so as we started down that road, obviously, there’s a number of different device manufacturers and platforms and approaches. One of the companies that fairly early on we got to know and that became excited about working with us was Magic Leap. They obviously have developed a very innovative sort of spatial computing platform and have some really neat optical technology that they’re using to create beautiful imagery and really create some really interesting experiences.

I think, as they were thinking about their platform and the uses for it, and then as we were thinking about the future uses of spatial computing in our space, it kind of became clear that in ecommerce the category that we service was really one of the core categories that there was a very strong use case for. That people’s ability to visualize product in their spaces before they buy it was important, and that would really become, we believed, down the road would become an influencer to how people shop and purchase products for their home.

And so the team we have here that was focused on that, we dedicated to working on a Magic Leap app and working with the Magic Leap team to develop and innovate on an experience that we thought would be a good version one illustration of what the potential of that technology could be. And that’s what evolved into what we’ve called Wayfair spaces with them.

Molli DeRosa: So I guess my next question is what should consumers expect in the future of innovation at Wayfair?

Steve Conine: You know, we’re constantly working on making the customer experience better. There’s still quite a lot of innovation to come in the virtual reality, augmented reality, spatial computing playspace. I think, you know, the mobile phones people have in their pockets are just starting to have some of these capabilities and are just starting to become tools that people use in other aspects of their lives. And I think you will see Wayfair over the next several years continue to push the envelope on helping you visualize products in your spaces, using a myriad of devices that you will start to adopt. Some of that will come through your phone. Some of that will likely be other devices that you purchase and have in your life. So we’ll certainly continue to push that.

The other big areas I think that we are innovating on, which you will notice as a consumer because the experience just becomes faster and easier, have a lot to do with transportation and logistics and how we move products around the country. And we have a very large initiative right now of really becoming the best in class furniture delivery and home delivery, or providing the best home delivery experience that’s available. And the innovations we’re doing there, I think, will have a meaningful impact in the way consumers perceive and the way they think about shopping for home online.

Molli DeRosa: So just taking a couple steps back who works on the innovation team at Wayfair, and what challenges do team members face while innovating?

Steve Conine: There’s not a specific team that works on innovation. We really look at it as, if you’re doing it right, you have a culture of innovation. Innovation really comes about when you have an environment that people can run experiments in. And so, we have tried to build this company in a way where we have a culture that’s accepting of risk. So we let people try things out, have an idea, figure out what appropriate experiments are to run. And then we have a high tolerance for running experiments and learning from that. And that’s really what drives innovation.

And so again, whether we are innovating in augmented/virtual reality, or whether we are trying to improve the put away process at our warehouses, or whether we are trying to improve the routing for transit of the products that we sell… Those are all spaces where if you have a smart team that’s enabled to run experiments, they can innovate, and they can uncover opportunity. And that’s what we’ve tried to build as a culture and an overall team that really embraces that philosophy. And has the environment within which to operate.

Molli DeRosa: And what do you think is unique to the innovation at wayfarer that other companies could learn from?

Steve Conine: You know, the thing I think that is unique to us or to strong innovators is really the culture. I think in order to have innovation take place, you have to figure out the right blend of drive in a culture coupled with risk tolerance and acceptance of failure. I think we make the point often to our teams that if you go into an experiment and you kind of think you know the outcome and you do the experiment, the outcome is what you thought it would be, you didn’t really learn anything, right? You now have a little bit more data, you were right.

If you go into an experiment, you have a strong point of view on a particular outcome, and it’s different, you really learn something through those. And so you always try to illustrate that type of thing that like, you need a culture that embraces that concept, when they see things that are different than they expected, and they can point them out. Those are really the opportunities where you learn and where you can innovate, where you can uncover opportunity. And so I think companies can easily fall into a culture where they’re not very risk tolerant. And, you know, they move slower or they try to offload the risk onto others.

I think, you know, a classic example in retail would be purchasing software. A lot of our competition by software to run their core systems, their core ecommerce purchasing or shopping platform systems. And that feels great because it actually offloads the risk of producing the systems onto someone else. You know, the downside of that is you’re never going to push the risk tolerance of that quite as aggressively as somebody who can actually take control of it and innovate and drive that themselves. And so we’ve built out a team that we take the risk tolerance on, and ergo, we play it faster so we can innovate faster. Illustrating it from a competitor standpoint, that’s how I would describe it.

Molli DeRosa: Great. And what advice can you give to innovators who are listening to this?

Steve Conine: Keep plugging away. [LAUGHS] You gotta enjoy the process, I guess. You know, it’s funny. Many times over the years, as you get into something new, there’s a funny, overwhelming feeling of like, “Oh my gosh, I’m never going to figure this out.” That when you sort of stick your head up in a cloud, you don’t know if you’re in a little town or major city, and to understand the sort of scope of what you’re embarking on can be daunting.

I would say, try to not worry about that. And really just try to clear the cloud right around you and understand what you can see. And before you know it, you will start to uncover things that are very exciting.

Molli DeRosa: And is there anything else you’d like to add about innovation at Wayfair? About your personal experience at Wayfair?

Steve Conine: I do think innovation in a company requires a culture of it. And that, I think, we’ve done a very nice job of creating a culture where everyone feels like an innovator and that there’s focus, but there’s opportunity to really uncover new opportunities and innovate across our technology platform.

Molli DeRosa: And how do you create that culture?

Steve Conine: Yeah, you have to be very deliberate about it. You know, I think cultures don’t just happen. We’ve been very deliberate from the start of this, when it was just Niraj and I developing the systems, as we started to build the team. I think in the early years, it was very easy for us to sort of pattern the behavior we wanted in front of everyone.

As the teams gotten larger, we still have a very open office environment, but we’ve been a little bit more deliberate about writing it down, and talking about it, and describing to people what our expectations are and what the bar is that we hold for ourselves culturally wise. And then we try to hire a team that cares and is putting in the effort every day to make sure that the culture stays healthy.

Molli DeRosa: So building an innovation culture must be deliberate, and that goes beyond organizing fun innovation activities that lead to little change. The most innovative teams blend risk tolerance and acceptance of failure to achieve big wins.

This interview was recorded in December 2019 — which feels like a completely different era. We reached out to Wayfair for an update on how their team has been affected by the public health crisis caused by COVID-19. One change: the company has implemented a no contact delivery system. Customers no longer have to sign to receive deliveries, to help maintain recommended social distancing guidelines. Wayfair has also provided support to the Federal Emergency Management Agency in New York and Massachusetts. This includes allowing access to the company’s logistics capabilities to move supplies needed by hospitals — like mattresses and sheets.

Further, people across the country have been spending more time inside to comply with stay at home advisories. And it seems like they’re looking for ways to upgrade their living spaces. As of early April, the company was expected to meet or exceed its predicted 17 percent percent net revenue growth year over year. In fact, according to a press release, the company saw its gross revenue almost double at the end of March 2020 while much of the US was on lock down.

For more insights from our conversation with Steve Conine, you can visit innovationleader.com.

[ACKNOWLEDGMENTS]

You’ve been listening to Innovation Answered. This episode was written and edited by me, Molli DeRosa. Kaitlin Milliken is the producer of this show. Additional reporting was contributed by Kelsey Alpaio. Special thanks to Steve Conine for sitting down with us. If you enjoyed this episode, be sure to subscribe to Innovation Answered wherever you get your podcasts. For more episodes of our show and bonus, web-only content visit innovationleader.com/podcast. We’ll be back next week with another new episode. Thanks so much for listening, and we’ll see you soon.

[SPONSOR MESSAGE]

Special thanks to Planbox for sponsoring this episode. We can all agree, as innovators, that investing in moonshots and quick wins are an essential strategy. That’s why many innovation labs have been created over the past decades — we’re not only talking about physical labs, but online innovation labs as well. In fact, online innovation labs are being used by most Fortune 500 organizations now more than ever, because virtual work is widely accepted and embraced. Online innovation labs are highly engaging and are a valuable collaboration tool for an organization’s entire innovation ecosystem.

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