How holiday card heavyweight Shutterfly outmaneuvered supply chain issues this season—and sees a future in NFTs

“We have a real advantage,” CEO Hilary Schneider told Fortune. “We have a lot of foresight into manufacturing, supply chain, and seasonal staffing shortages.”

Shutterfly, the category leader, produces 165 million cards in an average holiday season, Schneider said. According to the Ipsos survey, that’s about half of the total cards that will be sent this year.

Courtesy of Shutterfly

The advantage: because of the scale at which Shutterfly operates, and the market share it maintains, it’s able to procure commitments for the necessary raw materials in advance. “There certainly have been challenges, but with our ability to get the materials procured, we have everything in stock,” she said. “We’ve also been able to find significant offsets on the cost side, so we don’t have to pass that along to the consumer.”

Leadership training

Schneider joined the company in January 2020, just weeks before the pandemic made its way to the U.S. While leading during COVID posed a sizable challenge, it didn’t overwhelm her, which she credits to her time as CEO of pet care start-up Wag Labs, which she helped take public, and security firm NortonLifeLock. 

“You get a certain amount of muscle memory on staying calm as you continue to operate through life,” she said.

One of Shutterfly’s primary subsidiaries is Lifetouch, a school photography business. “Because of COVID-19, most schools were shut down, at least for portions of the year,” she said, which meant Lifetouch’s revenue fell by more than half in 2020. But this school year, business has mostly rebounded.

“That recovery took a lot of quick, tough decision-making about which resources we didn’t need, in terms of human capital,” she said. “Because there just weren’t as many photo sessions, we had to think strategically about those cost decisions, and which cuts will be most important, or which you can reverse fastest when things go back to normal.”

Since Schneider took the helm, the company has laid off or furloughed about ten percent of its staff, mostly those working at Lifetouch. The company has also initiated furloughs and salary reductions for the executive team to help it navigate through a period “with very little visibility,” she said. “And we needed to be responsible with investments.”

How to find the customer focus

“My life experiences prior to COVID-19 really helped me adapt my leadership style during COVID-19,” she said. She says maintining an “absolute customer focus, even during COVID, to really understand who our customers are, what they want, and how their needs are changing” is key.

Schneider draws her consumer insights from regular meetings with the customer-facing Shutterfly employees, she said, who update her on their priorities and shortcomings. Then, in weekly company-wide town hall meetings, she features a “voice of the customer” quote, ensuring those comments make their way to employee.

These are some of Schneider’s many skip-level conversations, meaning discussions with workers who report to her direct reports, to understand what’s top-of-mind. These conversations let her “pick up on themes that are either pain points or opportunities to lean into and improve customer experience.” 

Another approach she’s gradually adopted: what she calls radical transparency. “We started an all-company meeting during COVID in which any person can ask any question,” she said, noting that the company plans to continue the practice long after the pandemic.

In the meetings, questions are posted on an open platform where employees can vote on the ones they most want answered. In direct response to employee feedback, Schneider and her team have begun offering a broader range of healthcare benefit options, more substantial 401(k) matching, improved maternity coverage and paid parental leave, expansion of new family support programs, and pet insurance. Schneider also instituted a coordinated day off early in the pandemic, after employees pushed for it.

“We believe feedback is a gift,” she said. “We can’t fix anything in the organization, or for our customers, if we don’t know it’s broken. If we don’t enable that kind of input, we miss the opportunity.”

Shutterfly also conducts an employee engagement survey twice a year, and the executive team is “really transparent about what we hear,” she said. “Our action plan follows each engagement survey. My number one metric, as CEO, is employee connectedness, because it’s such a core indicator of long-term success of any company.”

Based on survey feedback, Shutterfly has begun using RACI, a responsibility assignment matrix, to provide better clarity into responsibilities across different teams. “So much of our work is cross-functional, and we’ve seen some good progress on shifting our culture to be more explicit about roles and responsibilities,” Schneider said.

It also has moved to take specific actions pertaining to inclusion and belonging. In the latter half of 2020, it stood up four Employee Resource Groups (which it calls ShuttERGroups), and added two more in 2021. “These groups not only provide participants with a sense of community, but help educate and engage others about our diverse cultures, while bringing us closer to the myriad customer communities we serve,” Schneider said.

The ShuttERGroups also serve a customer insight purpose: in elevating diverse voices within the company, it provides visibility into broad range of customer communities it serves, she said.  

Looking ahead

What’s next for Shutterfly? Earlier this year, rumors began swirling that the compaany was considering going public via a merger with blank-check company Altimar Acquisition Corp. The SPAC deal would come two years after Apollo Global Management took Shutterfly private in a $2.7 billion transaction; it had originally gone public in 2006. 

“When you’re a private equity company backed by Apollo, there are a lot of rumors in the marketplace, but we have no comment on that rumor,” she said. “We’re actively focused on how we think about the consumer, and how we continue innovating for that consumer.”

Shutterfly and Snapfish, the digital sharing and photo printing service Apollo acquired and merged into Shutterfly in 2020, were the original pioneers of photo personalization, she said. The company acquired Spoonflower, a fabric and wallpaper printing service, in August. 

Another potential avenue Schneider is eager to dive into: Web3 and blockchain. “We’re excited that, yes, we produce physical products, but also believe we could create digital assets, like NFTs,” she said. “We can enable our communities of artists to create things like NFTs.”

Last month, the company dipped its toe into crypto for the first time. It collaborated with 100-year-old Iris Apfel, a longtime textile and fashion icon, to create an exclusive NFT Holiday CryptoCard Collection, featuring three photos from Apfel’s collection. The cards were auctioned off on Giving Tuesday, with proceeds benefiting the Boys and Girls Club of America. 

“It’s so exciting to see consumers start engaging with the idea of owning a digital asset, with real value, associated with Shutterfly,” Schneider said. “We look forward to doing a lot more experimentation in the year ahead about how digital and physical products can live together and create value.”