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He’s Navigating the Dotcom Dustbowl

Peter Neupert, CEO of drugstore.com, offers a strategy for keeping your company on course and your employees calm, cool, and collected as dotcompetitors drop like flies.

Peter Neupert calls it the “Death Watch” — his daily scanning of the Wall Street Journal for news of yet another competitor gone belly-up. During a two-week span this fall, FuckedCompany.com reported that both Eve.com and MotherNature.com — beauty and nutrition sites for women — were calling it quits. Niche competitors of Neupert’s drugstore.com, these sites crumbled amid rumors of impending doom for other health portals such as healthshop.com and HealthCentral.com.

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While drugstore.com has outlasted the competition, Neupert is not dancing on any graves. He spent the fall working hard to prepare and inspire his staff for the upcoming holiday rush, while patiently answering their questions and soothing their fears about the fate of the online pharmacy industry and the company itself. Drugstore.com issued its IPO on July 28, 1999. Over the past year, its stock price has steadily fallen from a high of $70 to a current low of about $2. At the same time, the company’s net sales have continued to grow each quarter; though, it has incurred net losses totaling more than $275 million since its inception in April 1998. In short, drugstore.com is not a sure thing. (Read drugstore.com’s quarterly report.)

“I needed to separate our business from the perception of our business,” says Neupert, who became president and CEO of drugstore.com in July 1998. “You wouldn’t know it from listening to the press, but our company continues to grow. The perception is that our business is somehow flawed because some companies in our industry didn’t put in place the infrastructure to make their business plans work. We have nailed down that infrastructure, and now we’re moving forward to wow our customers.”

Days before the Thanksgiving holiday, Neupert spoke with Fast Company about keeping employees calm, cool, and collected — not to mention productive and innovative — amid dotcom uncertainty and pessimism. Here, he offers a four-point strategy for growing and strengthening your business during turbulent times.

Breed True Believers

In good times and in bad, Neupert says drugstore.com scouts for talented people who understand and respect the importance of delivering a great customer experience. He doesn’t concentrate solely on Internet masters or pharmacy professionals, but rather seeks out smart folks from disparate industries who will fight for their customers.

“No marketplace prognosis can change the way these people feel about customer service, or can dampen the passion they bring to their work,” he says.

Neupert calls these devotees “true believers.” And he has dedicated himself to making every drugstore.com employee a company zealot. In order to focus his team on the opportunities and challenges ahead, Neupert conducts monthly meetings with the 650-person staff. He talks about recent victories, upcoming goals, and the company’s long-standing beliefs.

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“I work to keep my talent focused on the very basic elements of our business and to remind them that I need them to work as evangelists for drugstore.com,” Neupert says. “I ask them repeatedly, ‘How are you creating value for the customer?'”

Confirm Employees’ Worth

In these days of gloomy headlines and disparaging financial reports, it’s easy for employees to lose sight of their strength and their impact on a company. Neupert has seen employees throw up their hands in despair, and he believes he can cure talent paralysis at drugstore.com with a strong tonic of recognition and praise.

“Financial awards are important, but more important is personal confirmation of your employees’ worth and their impact on the company,” Neupert says. “I give my true believers more responsibility than they know what to do with, and then I demonstrate how they’re going to have a huge impact on the company. Furthermore, I make sure we put in place the support they will need to excel. We give our employees the opportunity to do exciting work with exciting people, and we help them understand how their decisions impact the day-to-day success of the business.”

Create Cross-Functional Teams

In his effort to build a creative, innovative staff, Neupert has recruited drugstore.com employees of all shapes, sizes, and experiences. Together, the company’s diverse employees are forming metaphorical stained-glass windows — cross-functional teams consisting of people from unrelated departments with unrelated jobs who together can create something extraordinary. He pairs pharmacy professionals with Internet technicians, Web designers with communications teams members, and encourages them to learn from each other.

One such cross-functional team is taking center stage this week to meet the challenges of the holiday shopping season. For the past several months, Neupert has been recruiting people from the marketing department, from the IT staff, and from the content team to form a core staff of customer-service stars. The cross-functional team members, mostly folks with previous customer-service experience, are working to provide a superior online experience this holiday season — while simultaneously performing their “normal” jobs.

Neupert says that this added responsibility is not taken lightly, and that the chosen team members understand that drugstore.com truly appreciates and relies on their efforts during this crucial time. “This pinch-hitting is part of our company culture,” he says. “And it’s a highly valued principle.”

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Maintain Perspective

“We’re running a sprint and a marathon,” says Neupert, a former long-distance runner. “In the beginning, it was a race to achieve first-mover advantage and to move from idea to implementation. We won that sprint, but now we’re in mile 6 of a 26-mile marathon. The company must recognize a lot of milestones along the way, and also maintain the stamina needed to hit our next goal — then the one after that, and the one after that.”

In order to hit mile 6, Neupert says drugstore.com had to put in place a solid distribution model that would carry it through the duration of the race. Early this year, drugstore.com broke in a new distribution center that consolidated its previous infrastructure and offered the company more control over its merchandise. In July and August, the company introduced new customer-care tools that Neupert says will allow employees to answer inquiries faster and more easily.

Internal goals and milestones like these have remained stable at drugstore.com despite significant changes and expansions within the industry. As more click-and-mortar competitors such as CVS.com entered the marketplace and other retailers died off, Neupert says he made a concerted effort to communicate a consistent message reflecting drugstore.com’s emphasis on innovation and customer service. This consistency helped employees tune out distractions, he says.

“From the very beginning, we concentrated on establishing a solid infrastructure and on staying incredibly focused on our customers’ needs,” Neupert says. “The worst thing dotcom companies can do today is allow themselves to become distracted by media reports and industry predictions. They must pay heed to their environments, but they can not let outside forces set their agendas and their goals moving forward.”

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