Conquering the North Face

by Hap Klopp

  David Lloyd George said, “Don’t be afraid to take a big step when one is indicated. You can’t cross a chasm in two small jumps.” Although it is never wise to make decisions blindly, it is also true that risk-averse pensiveness is often the riskiest of all actions.

  Boeing proved the wisdom of a quick decision in a crisis following the crash of a Japan Airlines jet into a mountain in Japan. It was a horrible tragedy—hundreds of Japanese citizens died. Two days after the wreck the president of Boeing claimed full responsibility for the crash. In America this would have been a major mistake—the normal way in such tragedies is to let the courts decide responsibility. But the president of Boeing knew Japanese culture was much different. He knew about leadership. Despite his lawyer’s advice the president of Boeing took full responsibility, in the media, without the benefits of a full inquiry. The crash could have been the pilot’s fault, or a result of wind shear or any number of possible causes. But Boeing took responsibility, and the Japanese respected that. It was honorable, and it was clear that Boeing was run by responsible leadership. Weeks later Boeing sold hundreds of millions of dollars worth of planes to another airline based in Japan. That airline had seen and approved of Boeing’s actions.

  An opposite example is Exxon’s handling of the Exxon Valdez crisis, in which their tanker hit an iceberg and spilled millions of gallons of oil into pristine Prince William Sound in Alaska. Exxon followed the classic MBA-lawyer approach to crisis. Deny everything. Duck responsibility. Hope it will go away and talk about a historical success record. They hired a public relations firm from Houston to talk to the media, but the PR people didn’t even visit Alaska until more than two weeks after the spill. The PR people chose to stay in their offices in Houston issuing communiques trying to logically explain away the undermanned, single-hulled tankers Exxon was using, despite Exxon’s being continually urged to upgrade their staff and to use stronger ships.

  To justify its efforts in Alaska, Exxon had paid lip service to the concept of being a leader in conservation and environmental issues. At a time when Exxon was showing what many described as obscene profits, it severely tarnished its image by not even sending a high-ranking representative to Alaska to show it cared. Exxon just waited for things to play out rather than make a quick decision. It was the classic ostrich mentality—head in the sand.

  A quick decision in the Exxon Valdez case would certainly have helped. Granted, it was a no-win situation. But rather than wait and run from responsibility, Exxon should have moved forward to accept it and be the leader—even if it was in the cleanup process. Instead the company waited for the courts to dictate and to impose the cost of the spill. When anyone pays after being ordered to do so by a court, no one gives them any credit. People see them as only paying after being dragged kicking and screaming into court. Crisis is an opportunity to display leadership or shirk from it.

  A decision is a wonderful thing because it implies action. Even if a decision is no, it can be a positive force because it means a leader is confident in his abilities.

  Risk aversion is all about failure and fear of failure. One major cause of failure is expectation of failure. Conversely, one major cause of success is the expectation of such.

  Positive visualizion works. It has been proven. Professional athletes universally rely on visualization for improving technique. Even medical patients have found attitude a key ingredient to improving their health.

  In a study of basketball free-throw shooters the players were divided equally, based on talent, into three groups. One group shot zero free throws for a month. The second group shot 50 free throws a day for a month. The third group visualized shooting 50 perfect free throws every day for a month.

  At the end of the month the three groups had a shoot off. The lowest score was posted by those who didn’t practice. The highest was by the group doing the visualization. The lesson is clear: the group visualizing the perfect shots did not have the negative feedback of the practicing group (the group practicing missed a lot of shots). As a result the group doing the visualizing had a more positive attitude and better results.

  In reality, of course, it was not a group that was visualizing, but individuals. Decisions that motivate are always made by individuals. Individuals can make quick decisions. Committees, on the other hand, are by their nature stifling. They operate on the basis of consensus building in a world of compromise and institutional memory. Individuality is lost to the greater good of the group, and self-interests are beholden to others for potential future assistance. As time goes on the committee mentality intensifies and a risk-averse paralysis sets in.

  Just look at government—a world of committees. The backslapping and consensus building that often may be necessary to run a government is one reason very little ever gets done. There is always an unspoken fear that someone may have to take responsibility for a failure, and so no one tries anything.

  It is the same in business. If a committee is set up, it should have a sunset provision in its charter—mandating its extinction at a certain, set time. If a committee is not set up with a specific purpose in mind, its goal soon becomes preservation of the committee. And committees stifle decisiveness.

  The reason committees stifle decisiveness is because they overpower individuality, and thus audacity. If there is a strong leader, unimpeded by a committee, the audacity to make strong decisions will filter down into the rest of the company. Audacity in hiring, decision making, and especially in goal setting is inspiring internally and can frequently be the difference between two firms competing for the same customer. A strong decision is one in which the individual making it believes in his or her own strength of character as a force that will not be stopped.

  In 1975, The North Face was faced with an enormous problem that I could have easily ignored and blamed on outside forces. The quality and quantity of goose down in the market was below the standards acceptable to us. As availability dried up, importers and middlemen began to “cut” the product by inserting dust, feathers, used down, and anything else that would increase the weight. (Down is sold on the basis of weight.)

  By this time our reputation for making the best had been established. Much of our quality and leadership image was predicated on our goose down jackets—the best in the world. If we went along with what the goose down market offered, it would destroy that image and in essence kill the company.

  It was time to jump off the fence. I had to do something. Some suggested capitulating to the market conditions. Some suggested forming a committee to study the problem.

  But I jumped farther, as far as I could. I decided to visit the People’s Republic of China. That country represented 60 percent of the world’s raw goose down market. Some people even said it was 80 percent. In China the down was sold to middlemen from around the world who then processed it and sold it to manufacturers such as ourselves. But as I said, the middlemen were “cutting” it to give them higher profits and false levels of success. It was a major problem.

  There was another problem. It was shortly after President Nixon first visited China. After 25 years of the two countries’ arguing, hardly anyone was going from the United States to China, and doing business with China was very complex—requiring the use of intermediary banks and antiquated communication systems. At one point China would not even honor traveler’s check from the United States. Doing business with China took audacity—it was a battle with decades of political and cultural ill will behind it. My audacity was one born of desperation.

  It also took flexibility. I couldn’t accomplish this on my own. I needed help, someone who knew about China. Enter Frank Chang, a friend of one of the 60 or so Chinese employees at The North Face. “Give me your passport and I’ll get you an invitation,” Chang said. “I’ll send the invitation along with your passport to Washington, and you’ll get a visa.” I was wary. It was my passport—a most valuable item. But this was an opportunity. I jumped.

  Three weeks later one of my vice presidents and I
were on our way to Canton, China. We were on a mission to buy Chinese goose down and save the company.

  I knew virtually nothing of the worldwide goose down market. I didn’t have much need to—until the opportunity to go to China arose. Before the trip I began to ask around. And I took out some books on the goose down industry from the library. Airplane reading—this was not so much a jump as a free-fall into a decision. Our hand was forced, since to do nothing would be to fail.

  We had heard China didn’t have enough down for the world market and therefore would sell only to “old friends.” We weren’t old friends. We weren’t even friends. Not yet, anyway.

  There were other problems. Processing down is a cumbersome procedure that requires lots of machinery and space. The machinery is expensive, and the space is needed to handle the voluminous nature of the down. Purchasing directly meant we would be competing with our suppliers—a potentially touchy situation. Finally we estimated it would cost more than $100,000—a significant chunk of our cash flow—to buy the down we needed. This was not going to be easy, but the alternative of lower quality was absolutely unacceptable.

  I made a decision, and off we went on another adventure. I started out logically. I analyzed the problems, and our sales pitch, on the plane to China. Our legitimate need for down was a selling point, even though we were not old friends. I knew that if our suppliers were so greedy as to debase the product for profit, they would probably also process it for us—even though they didn’t like our competition. I knew I could come up with the cash because the market demand was greatly exceeding supply, so retail prices would surely go up. The investment made so much sense that I was convinced even our bankers would agree.

  The Canton Trade Fair was incredible—a huge fairgrounds of socialistic celebration. There were tremendous pictures of Mao and Chou En-lai hung everywhere. Martial music played continually on the outdoor speakers. It was ungodly hot in this city on the Pearl River—90 degrees Farenheit and 90 percent humidity.

  We stayed in the Tung Fang Hotel, a clean, spartan establishment famous for its proximity to the Canton Trade Fair; its mosquito netting over the beds; and the steel-wool, rough blankets on top of them. On the only table in my room there was a large rotating fan—“the people’s fan,” we called it. The room had all the comforts of modern Chinese technology; there were no capitalistic excesses.

  The first night, after an exotic and excessive dinner, we went to the top floor of the hotel—a nightclub of sorts. It was very strange, not like any nightclub we had ever seen. There was bare neon tube lighting in a stark, cement-walled room. Humidity ran down the walls and in some places formed puddles on the floor. There were people from everywhere, of every commercial persuasion, though most were from the socialist part of the world. At one point, like a scene from a grainy black-and-white film, two apparent Arabs in long, flowing robes got into an argument. They wrestled each other to the floor, rolling in the muddy water. It was utterly comical, quite disorienting, and an unsettling prelude to the negotiations for Chinese goose down.

  The next morning was just as comical. When we got to the fair, we had to go to a starting line, which all who weren’t “old friends” had to do before the fair began. In an egalitarian, socialistic way meetings for newcomers were truly on a first-come, first-serve basis.

  We got to the starting line first. A ribbon was strung across it. The day was already hot, and it was damp and slippery. People began to crowd around us and the martial music played on, with the pictures of Mao and Chou En-lai sitting in approval. The bell signaling the start of the fair sounded. The ribbon in front of us dropped, and everyone started running. We did. We laughed too, for this was almost slapstick—a United Nations’ representation practically, and we were all running in our native dress for the opportunity to buy Chinese exports.

  When the bell had sounded, some people just out of the starting gate fell on the slippery, muddy floor. But we survived—through force of will and lots of luck. I presume it was also our American athletic prowess. We were the first to arrive at the Animal By-product Import and Export Corporation, the one that sold all the down. They had a monopoly. We arrived in dark suits, dripping wet from our mad dash in the heat and looking nothing like international business leaders. Still, I was really charged up.

  At the table, there were three of us—my vice president, our translator, and myself. And fourteen of them. They were all dressed alike in ill-fitting blue jackets and white shirts, all except the head of the delegation, who appeared to have a better tailor, though the same blue jacket and white shirt. The outfit appeared to be a Chinese version of the American business suit. Conformity has no cultural bounds—there’s embalming fluid everywhere.

  The head of the committee stared at me. He asked me to explain to him the world goose down market. He gave off an air of fraudulent authority, that he was better than me by virtue of his power. He tested me.

  “You know better than I, but if you want my version, I’ll be glad to tell you,” I said. I gave him facts. I gave him figures. And I told him how the middlemen were destroying the quality image of China by cutting the down.

  “You are wrong,” he said. “Wrong, wrong, wrong.”

  He looked at us in silence. His comrades did too.

  I decided to jump once again. “You say no,” I repeated. I looked him right in the eye as I said the words I knew he needed translated. “But my research and experience tells me what I’m saying is true.” I called his bluff. I knew, or at least I thought I knew, that my facts were correct. I really didn’t have another choice.

  He smiled a wry smile. I looked across the table to a man next to him. That person was busy writing. I looked again. He was copying my notes, in English, upside down from across the table. It was incredible—this man had never spoken any English or even indicated any knowledge of my language.

  The head of the delegation told us there was no down for sale. My heart sank. I was on the other side of the world and my worst nightmare was happening—I was failing in my quest. Our company was threatened. My employees were threatened.

  I did the only thing left to do. I started talking, and so did my vice president. We went into overdrive—holding out our naked spark for them all to see.

  “We’re not here to exploit China,” I said. “We are valid users. It’s the middlemen who are dishonest. You know, the ones you’ve been selling to. We want to maintain quality. We are good for China’s image. The middlemen are harming your image. I had to come here to tell you this and make something different happen.

  “Don’t you see?” I asked. “We are your friends in America. We have 60 loyal Chinese workers. One of them helped me to come here. If you turn me down, they will be out of a job, we will be out of business, and you will have missed the best long-term opportunity you’ll see in a long time. We’re here to give you flexibility and to establish a long-term relationship.”

  I finished. I looked at him—I was raw nerve at that moment. Fully exposed with sensation to the core of my existence.

  “Come back tomorrow,” he said.

  The next day he asked how much down we wanted. I said, “We need five metric tons. That’s how much we need to keep the factory running.” It all seemed to be going better. Perhaps we had passed his test.

  He asked if we would sell to others. We said no. We just wanted the quality and quantity that we needed for our own factory. He told us to come back tomorrow—maybe, just maybe we would have a contract.

  We were overjoyed. The next day he did indeed have a contract for us. But instead of five tons, it was for 500 tons. We could not possibly use 500 tons. To use that much we would have to sell it all over the world. It was way beyond our needs. My mind started spinning. We didn’t have the facilities to store even five tons—never 500 tons. If we were to buy the down and resell it, we would have to be dishonest with the Chinese, whom we had told we did not intend to sell the down. Financing was a third issue. Now we were talking about millions of dollars, no
t $100,000. And finally, we would have to change the nature of our business from a high-quality goose down clothing manufacturer to that of a middleman in the market.

  There was a good side, a huge good side. The market for down was sure to double in price due to the shortage, and we would get rich in six months.

  I jumped again. I said no. “I think a mistake has been made,” I said. “We only need five tons for our factory.”

  He smiled his wry smile again. He apologized and promised to rewrite the contract.

  It was rewritten, we got the down, and our quality image prospered. Many of our competitors did not. When it was time to jump off the fence and make a decision, the competition waited to see what would happen.

  When they ended up with lower-quality down, some lowered the quality of their products and told their customers. Others lowered their quality and didn’t tell their customers. By then, any decision for them was a bad one. The honest companies suffered because of their lower quality goods. The dishonest ones suffered more. The government investigated many of those companies and filed actions against those that didn’t comply with government standards.

  Decisions are not always easy, but the returns are constant—immediate feedback, more opportunities, and a greater camaraderie. When it is time, when you know what you stand for and what your vision is, you might as well jump. Take a risk; you won’t regret it.

  Risk is exactly what it says, a chance. Each challenge accepted should be a hypothesis based on two things: ability and desire. You must have the ability and the desire to accomplish something. Without both, risk is folly.

  There is more to it than blindly and endlessly throwing your body into the wind tunnel of risk. You must continually assess your goals and means of reaching them. You must have an absolute inner confidence that you can continually tap. The spark is always your strength—find it and jump.

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  STARTING IN THE WAREHOUSE: