Little Black Stretchy Pants

by Chip Wilson

  Little Black Stretchy Pants

  Copyright © 2018 by Time is Tight Communications, Ltd.

  All rights reserved. No part of this book may be used or reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the publisher.

  First edition published 2018 by Time is Tight Communications, Ltd.

  This book has not been authorized by the official maker of black stretchy pants, lululemon athletica.

  ISBN-13 (hardcover): 978-1-7327-4731-9

  ISBN-13 (ebook): 978-1-7327-4730-2

  “In the end, it is impossible to have a great life unless it is a meaningful life. And it is very difficult to have a meaningful life without meaningful work. Perhaps, then, you might gain that rare tranquility that comes from knowing that you’ve had a hand in creating something of intrinsic excellence that makes a contribution. Indeed, you might even gain that deepest of all satisfactions: knowing that your short time here on this earth has been well spent, and that it mattered.”

  —Jim Collins, Good to Great: Why Some

  Companies Make the Leap…And Others Don’t

  To all past, present, and future employees of lululemon,

  and my wonderful family and friends.

  lululemon Vision

  (Defined as an unwavering commitment

  to the number one principle)

  “Elevating the world from mediocrity to greatness.”

  Mission Statement

  Providing components for people to live a longer,

  healthier, and more fun life.

  Number One Principle

  The store Educator is the most important person, and all decisions are made with this in mind.

  Number One Goal

  Within six months of hiring, a person will have taken

  the Landmark Forum and be coached on how to set

  their two, five, and ten-year goals, which include two for each of health, business and personal.

  Core Values

  Quality

  Our customers want to buy our product again.

  Product

  We create components designed by athletes for athletes.

  Integrity

  We do what we say we will do when we say we will do it.

  If we cannot keep our promise, we immediately contact all

  parties to set new by-when dates.

  Balance

  There is no separation between health, family, and work.

  You love every minute of your life.

  Entrepreneurship

  We treat and pay employees as though they run

  their own businesses.

  Greatness

  We create the possibility of greatness in people

  because it makes us great.

  Mediocrity undermines greatness.

  Fun

  When I die, I want to die like my grandmother who died

  peacefully in her sleep.

  Not screaming like all the passengers in her car.

  CONTENTS

  Foreword: Something Bigger Than Ourselves

  Cultural Foreword: Loving The Individual

  Introduction: Why I Am Writing This Book

  Prologue: The End of the Surf, Skate, and Snowboard Business

  Chapter 1: From California to Calgary

  Chapter 2: The 70s

  Chapter 3: Fine as Wine

  Chapter 4: Lessons Learned

  Chapter 5: The Shift

  Chapter 6: The Next Level

  Chapter 7: The Rise of Snowboarding

  Chapter 8: Hard Times

  Chapter 9: The Business of Snowboarding

  Chapter 10: The Genesis of lululemon

  Chapter 11: The World in 1998

  Chapter 12: lululemon Takes Shape

  Chapter 13: A Retail Operation

  Chapter 14: Moving On

  Chapter 15: Goals, Culture, and People Development

  Chapter 16: Toronto

  Chapter 17: Other Expansions

  Chapter 18: The Business of Family

  Chapter 19: Looking South

  Chapter 20: The Valuation

  Chapter 21: Change Management

  Chapter 22: The IPO

  Chapter 23: After Bob

  Chapter 24: The Founder and the CEO, Revisited

  Chapter 25: Friction with the Board

  Chapter 26: Uncertainty

  Chapter 27: Quality Issues

  Chapter 28: Damage Control

  Chapter 29: The Interview

  Chapter 30: Post-Truth

  Chapter 31: The Next CEO

  Chapter 32: Pouring My Heart Into It

  Chapter 33: 2015

  Epilogue: My Responsibility

  FAQs

  APPENDIX 1: My Goals

  APPENDIX 2: Integrity: Without It, Nothing Works

  Note: Landmark Worldwide LLC has granted permission to include in this book Landmark’s copyrighted material, some of which exists in its copyrighted form and some of which has been altered for the author’s purpose.

  FOREWORD:

  SOMETHING BIGGER THAN OURSELVES

  I believe that lululemon was so much more than a retail company. It attracted people that came from all over to make a difference in the world and to follow a leader and a vision who were doing just that. Chip is a retail genius, yet, I believe the greatest gift he gave to the people of lululemon and the greater community was the culture.

  He created a movement of happiness at a time where no one was really even talking about it. In the beginning, people said we were a cult with a crazy, devoted following and a disruptive manifesto repeatedly spoken in stores and printed on bags. But, as we hired more people and opened more stores, the number of people who were inspired and wanted to be a part of it grew.

  The employees of lululemon loved him. When he visited the stores, hundreds of people showed up to see him. He was generous with his attention and believed in the greatness in people before they even saw it in themselves. It wasn’t always “easy” with Chip. He could be hard to work with, travel with, and his expectations were enormous. But he always believed in us.

  He inspired all of us to be great in our lives.

  He led us to believe that anything was possible at lululemon and in our personal lives. Whether intentional or not, Chip’s intuition created a movement that had people love their lives, then love their work, and ultimately create incredible business results.

  It allowed people to be their best—myself included. This culture of greatness changed my life and the lives of so many others forever.

  Delaney Schweitzer, former Executive Vice President of Global Retail at lululemon

  2018

  CULTURAL FOREWORD:

  LOVING THE INDIVIDUAL

  Lululemon may have started organically but it never started small. Chip thought big, and lululemon always had a big horizon. This way of working and visioning became an integral thread in the fabric of lululemon. It became the way that we, the people of lululemon, led our own lives. It was how we interacted with each other, and how we worked toward greatness every day. It’s very best moments—whether on the floor of a store or during a teleconference amongst regional leaders—were conversations where people held each other lovingly to a higher degree of possibility. We called this standing for someone’s greatness.

  The result of working with people who have authored their vision and goals, have studied how to release habitual patterns, and who have taken responsibility for not only those patterns, but the impact of those patterns from moment to moment, is that everyone around them is elevated. Countless current and former lululemon employees have brought these skills to other practices
and businesses. The culture of lululemon and its ability to practice the business of faith (i.e. vision) continues to thrive and expand with whoever has the courage to speak boldly and listen for a new future.

  All elements of lululemon came together to create a culture that, at its core, loved the individual. I came to lululemon with twenty years of experience in corporate mergers and acquisitions, high-level corporate communication consulting, and creating cultural shifts. In all my work, I had never experienced a culture that so valued each individual participant. This was my first time encountering a corporate culture that did not start with the company first.

  Chip always started with the individual. He shared with them the whole string of learning he had experienced. This learning eventually became the onboarding process for every individual that joined the organization, the details of which you will discover in this book.

  By listening to people, by testing things, by having people try things on and walk around in them—by having people sweat in them—Chip crafted an innovative product. He crafted the culture with the same type of physical and mental rigor with which he approached the product. He also did it by being in a relationship with people. This radical approach is what makes the lululemon culture groundbreaking and sustainable.

  Almost every day I meet someone who has been affected positively by the culture at lululemon. They tell me, “I met the right guy”; “I bought that house”; “I forgave my Dad”; “I started my own business.” I am grateful to see the legacy of Chip Wilson in action.

  Susanne Conrad, founder of Lightyear Leadership

  2018

  INTRODUCTION:

  WHY I AM WRITING THIS BOOK

  This is a book about ordinary people who took an opportunity to be creative, to be innovative, and to maximize their potential. My part in this story comes from the learnings gleaned from thousands of mistakes. I set the culture, business model, quality platform, and people development program, then got out of the way. Lululemon’s exponential growth, culture, and brand strength have few peers, and it is because of those employees who choose to be great.

  This book is also about missed opportunity—five years of missed opportunity. I was playing to win, while the directors of the company I founded were playing not to lose. There is a big difference. Lululemon invented a new context for apparel and how we think about dressing. In 2013, just when five years of exponential growth was in its infancy, when the way people dressed was at the precipice of the most significant change in history, lululemon self-imploded. The company went from owning 95 percent of the women’s technical apparel market in 2011 to 10 percent in 2018. It is this part of the book from which I hope entrepreneurs will learn.

  There are two parts to a successful business. First, there is the product and customer—the two aspects which started the business in the first place. This is the part the entrepreneur knows better than anyone in the world.

  Second, there is the business of public board governance. It includes the Machiavellian power moves and survival struggles of top executives and board members. This is generally not something the entrepreneur knows very well—certainly not as well as he or she knows the product and the customer. In this regard, my story is not unusual. The more I speak to successful entrepreneurs, the more I see that what happened to me is quite common.

  I believe every person in life has a different genetic makeup and unique expertise that the world needs. My expertise was seeing athletic and apparel trends. With my first company Westbeach, it was the rise of the surf, skate, and snowboard culture from 1979 to 1997. In 1998, I had the same sense that something big was about to happen with yoga.

  I had no way of knowing just how huge yoga would be—and how lululemon would explode like nothing else. The little company that I founded in Kitsilano, Vancouver would go on to redefine how a generation of people dressed and lived. The financial rewards for my family and me would be enormous, but at the time I was rolling the dice. I could have just as easily lost everything multiple times. The journey was exhilarating and terrifying. I was forty-two, I had a young family, and I bet the farm.

  After a thrilling fifteen-year ride at lululemon, I got hit by a proverbial “sensational media” bus. The need of the media to create fiction for advertising revenue was just gaining traction. I became gun shy of discussing my thoughts and played defense for the first time in my life; being authentic was no longer acceptable or possible. However, I am no longer concerned with negative media because I choose not to acknowledge comments from writers of fictional sensationalism. I am out to live a great life—and to be great, one must have a point of view.

  This is the story of that journey and an account of what I’ve learned.

  Chip Wilson, 2018

  PROLOGUE:

  THE END OF THE SURF, SKATE, AND SNOWBOARD BUSINESS

  The Final Days of Westbeach

  The year was 1995. After sixteen years in the surf, skate, and snowboard markets, it had become clear that my company Westbeach Snowboard wasn’t going to pay the mortgage or feed my family. There was too much product for too few snowboarders. Profits were non-existent. Westbeach found itself taking bigger and bigger risks.

  Finally, the inevitable happened. We had a $5 million order of snowboard jackets being manufactured in Asia, and we ran out of zippers. We told our suppliers we needed $30,000 worth of zippers on credit. They said no. We had extended ourselves repeatedly and had reached our limit. The goodwill of our suppliers had dried up.

  We asked our bank. They also said no. The bank then put us in special accounts—a euphemism for impending bankruptcy.

  This was a do-or-die situation. We needed money for zippers, and we needed it quickly. In the seasonal apparel market, if you’re a month late in delivering your inventory, the consequences are dire.

  A private equity (PE) firm called Mercantile Bancorp had been waiting on the sidelines. They quickly invested in Westbeach for 30 percent of our company, providing the capital we so badly needed to address the zipper crisis. Mercantile saw value and believed a cash injection would allow us to flourish.

  Even though we were in dire straits, giving up 30 percent of our company seemed unfair. My two partners and I had been working hard for years, always intent on maintaining our independence. Unfortunately, there was no alternative.

  Mercantile suggested we form a board of directors made up of mentors with no vested interest other than helping three inexperienced owners negotiate their way through the world of governance and oversight. A guy named Blair Mullen was the operating partner for Mercantile inside Westbeach. Blair got our accounting systems straightened out and fixed our inventory procedures. From the very start, Blair did a good job, and I respected his work.

  Not long after that, I was in Japan showing our line at Tokyo Levante, the office of our Japanese distributor. I was wrapping up there, getting ready to head to Norway, when a fax from Blair came through.

  “I’ve decided to take over as CEO of the company,” Blair’s fax advised.

  I was in shock. Even though I didn’t hold the title, I had always considered myself the unofficial CEO of Westbeach. I’d founded the company, and I believed I drove the outcome of most key decisions. I hadn’t had a boss in ten years. The whole scenario was the polar opposite of what I’d wanted to achieve by going into business for myself.

  Team of One

  I knew myself well enough to know that in crisis or survival situations, I often acted like a Team of One, taking everything on because I couldn’t trust others to do what I thought was right. It seemed like Westbeach had always been in crisis.

  On the other hand, Mercantile had also made many weak areas stronger and fixed things I hadn’t recognized as problems, due to my inexperience.

  With three owners, we each wanted to use our third of the budget to make our own areas work effectively. But, mediocrity is inevitable when there is not one final decision-maker to manage priorities, differentiate the company, and take advantage of a changing
marketplace. Perhaps getting out of the way and accepting Blair as CEO was best for Westbeach.

  Here we were, fifteen years after I started Westbeach, and ten years after partnering as a trio. We had a wholesale business with a few vertical retail stores, a board of directors, and an experienced CEO, but we still weren’t turning a profit. (By ‘vertical retail’ I mean we owned retail stores and essentially sold to ourselves, eliminating the middleman-wholesaler. Consequentially, a vertical-retailer is able to create double the profits compared to other apparel companies that use a wholesale model.) Year after year, our mixed vertical and wholesale model just wasn’t working. After we’d covered our expenses, there was never anything left to move us to the next level.

  The Snowboard Scene

  Meanwhile, the snowboard market was about to hit its first major obstacle.

  In 1995, the snowboard business was robust, particularly in Japan. But, by 1996, both the Japanese yen and their snowboard market began to falter. Japan represented 30 percent of our global sales. I was concerned. We still had our lease obligations, wages, operating costs, and everything else; if 30 percent of our sales went away, our company would collapse.

  Within a few years, the snowboard market, just like the surf and skate market before it, entered a widespread product commoditization phase followed by many mergers and acquisitions. As consumers begin to see products as commodities, they no longer see the unique features of individual products and often make purchasing choices based on price alone. Companies must merge with or acquire competitors to prevent endless price dropping. The only two public companies were Ride Snowboards (where my brother was VP of Brand) and Morrow Snowboards. Both companies had been hit hard trying to save their brands by limiting backdoor sales through fake overseas companies to big Japanese trading houses.

  As public companies, Ride and Morrow (who both made snowboards) wanted to acquire companies to replace lost Japanese sales. They were playing the public market quarterly analyst game and needed to show higher sales to maintain investor confidence. An easy solve was acquiring other snowboard apparel brands… brands such as Westbeach, which had been around since the beginning.