Little Black Stretchy Pants

by Chip Wilson

  I want my clothing to work for me. I want to know exactly how my body is positioned in any sport and I want a perfect ergonomic design to enhance my ability to perform. Pockets must be an exact length, and at the right angle. I must be able to get at my smartphone in two rings. I need a place for my earbuds. My backpacks must have a pocket for everything, and I must be able to get at my toothbrush, Kindle, laptop, phone, lip balm, cards, sunglasses, computer cords, pens, and vitamins in under three seconds.

  I have to have a place for my wet clothing, and I need a backpack with breathability for stinky shoes. I want zippers to open with one hand and to be positioned perfectly. I want venting, so air flows through the front, under my armpits and escapes out the back. I want manual venting so I can control for sweat and outside weather.

  Without my background in athletics, lululemon would never have come to be. When I was a competitive swimmer, the water provided a natural cooling system. After my swimming era ended and I started running or biking or playing squash, my body went into overdrive, and it would take forty-five minutes of perspiring to cool down. As someone that exercises three times daily, the very thought of putting on a non-stretch-cotton collared shirt, tie and—god forbid, a jacket—was appalling to me. It is no way to dress or live life. I saw no reason to wear clothing that I associated with an archaic way of dressing. A suit seemed to be a piece of apparel in which to look good but feel terrible.

  The West Coast had no overhangs of the East Coast uniform. Especially in the extreme sports realm.

  I am a technical apparel scientist. I look at the body of every person I see in complete detail, and I log, extrapolate, and run algorithms from the information I absorb. I have done this since I was ten years old. I look at a body and correlate sex, age, sport, muscle, fat, height, race, passion, and colour of clothing.

  I look at bodies down to the molecular level in my desire to make the perfect garment. I want to know exactly what type of body performs best for each sport. I want to know exactly how a short, muscular gymnast operates and wears clothing differently than a wiry marathon runner.

  I am passionate about solving for testicular compression when on a bicycle or during extended periods of sitting. I want to understand how different sized breasts affect performance in different sports and what is needed for athletic perfection. I want to know which bodies correlate to which fabrics in winter and again in summer. I was meant to do what I do. I love analyzing why each Olympic sport requires radically different clothing to allow the athlete to perform microns better than a competitor.

  I live, eat, and breathe apparel technology, and at no time in my life could I do this with more freedom than the years immediately following the Great Recession.

  My mind always seems to be in the future. I have a difficult time articulating a fuzzy idea in the present.

  I had to marry into humour, and my wife always made me laugh. I had a poster near my desk that said, “If I could remember your name I would ask you where I left my keys.”

  The Olympics

  One highlight of our great years was the 2010 Olympic Games, which took place in Vancouver. Seven years earlier, our city had been named to host the event. This was a great guerrilla marketing opportunity for lululemon and I knew that we could make the most of it by unleashing the creative brain of Eric Petersen.

  Like me, Eric had a very unorthodox and irreverent approach to marketing (exemplified in the Times Square demonstration). I told him I had questionable respect for the International Olympic Committee. I saw the IOC as an organization that had created a great athletic event, but who contradicted what they stood for with the acceptance of sponsorship money from corporations like Coca-Cola and McDonald’s.

  John Furlong, a long-time member of the Canadian Olympic Committee, was made the CEO of Vancouver’s Organizing Committee (VANOC), which was set up shortly after the city won the bid. John is one of my heroes. I have never seen a person inspire a country and an organization to do so much with so little. If John calls me up at any time, I am at his service.

  I ran into John in 2004 and told him that lululemon was going to put in a bid to provide clothing for the Canadian athletes.

  I absolutely did not want to win the bid to sponsor the Canadian team. Sponsorship deals usually come with a lot of IOC regulations that restrict creative freedom. My goal was to let everyone know I would bid as a ploy to have Roots pay top dollar. This money would help VANOC stage a successful Games, and that success would ultimately benefit the City of Vancouver for years to come.

  For thirty years, Roots Athletics had outfitted Canadian Olympic athletes, but creating high-performance technical clothing was way outside their wheelhouse. It just wasn’t their core business, but they’d had a monopoly on providing clothing for our Olympians because no one else thought to compete for the rights. I figured that if lululemon put in a bid of $2 million, Roots would have to put in a higher bid to be an official clothing sponsor.

  We put in our bid, but then the Hudson’s Bay Company stepped in with an offer of their own… $100 million. This was both to outfit the Canadian athletes and become an official sponsor for three Olympic Games. Their exorbitant bid was one of the dumbest business decisions I’d ever seen. Just like all sponsorship I had experienced, I believed Canadian athletes would end up with mediocre quality apparel and would have to pretend they liked it.

  Laws were introduced to protect the Olympics’ paying sponsors and give them special legal protection. Embargos were put on words like Vancouver, 2010, Olympics, Games, winter, gold, silver, bronze, sponsor, Whistler, and medals. The legislation making this special protection legal was supposedly intended to address “ambush marketing” (by which they meant attempts by businesses to associate themselves with the Olympics without becoming official sponsors).

  We planned to navigate around the IOC rules and make fun of their seriousness. In December 2009, just two months before the opening ceremonies, lululemon avoided all embargoed words and called the apparel “Global Sporting Event That Takes Place in British Columbia Between 2009 and 2011 Edition.”

  We put the slogan on labels inside of a line of hooded sweatshirts, toques, and T-shirts, which came in combinations of colours representing Canada, the US, Germany, Norway, and Sweden, which were the countries we expected to have the most visitors at the Winter Games. We also included gold zippers on the Canadian hoodies.

  VANOC couldn’t ignore what we were doing because they had a legal obligation to protect the IOC sponsors, so they sent us some threatening letters. Despite the letters, VANOC couldn’t do anything since we’d been so careful and smart about our wording. Their only real option was to express public disappointment in us.

  Bill Cooper, Director of VANOC’s digital rights management, accused us of bad sportsmanship.30 Cooper also plugged the “real” merchandise being sold by the Bay.31

  That didn’t matter to us. The uproar caused a lot of media attention, which was basically free advertising for lululemon. Break-even, innovative, controversial marketing won the day once again, and I couldn’t have been happier.

  Vertical Victory

  There was no template for a vertical technical product. There was no how-to manual for lululemon’s business model. We were winning because we were inventing daily. We got to leapfrog the retail industry because we didn’t know what we shouldn’t be doing.

  Each day I walked into the office and asked myself, “If I had to compete against lululemon, what would I do?” This allowed me to cannibalize what was working today for what would be best for the future. I was fanatical about building a moat around our success.

  We were also open and undefended about our weakness, and we coached each other whenever we found ourselves out of integrity or complaining. We enjoyed feedback because we wanted each other to succeed. This wasn’t just internal—this was the culture we brought to our customers, which they then brought to their families and to the community. Through our Ambassadors and community-building formula, we cou
ld see consistent proof of how we were elevating the world from mediocrity to greatness.

  Lululemon was firing on all cylinders.

  The Founder and the CEO

  From 2008 to 2010, Christine and I worked very well together. It was like a great marriage where each person appreciates the other’s differences, synergy exists, and everyone wins. Christine was a pure operator who knew exactly what to put in place to handle our high growth and multiple store openings. I was the brand builder, innovator, and cultural founder. I knew where the market was going, and Christine knew how to build a solid chassis to get us there.

  The financial crisis ended quickly. It ended even faster for lululemon because our business suffered minimally. We’d maintained our status as a cash cow, and we kept to my mandate of no debt and lots of money in the bank. I wanted lots of money in the bank because I knew opportunities would present themselves, and with that money, we could move fast and stay ahead of future competition.

  We continued the same incredible sales and profit numbers we had done since inception. We just had to keep doing more of what we were doing and hone our expertise. We were coming to the end of 2010 with no visible competition.

  Our stock had climbed dramatically and our shares split. We were all living a utopic life. The Super Girl managers were driving the company. They cared, they had integrity, they were smart and responsible, and every decision they made was for the long game.

  At this point I stopped attending the quarterly analyst calls. Within the definition of integrity, I felt that lululemon should be open and undefended on these calls, which we were not. We would only take soft questions from the analysts and anyone with a tough question was ignored. If we could be open and undefended, then there wouldn’t be any tough questions because there was nothing to hide. My authenticity didn’t mean providing the competition with any undo information, but rather that if we told them our worst, then they would believe our best when we said it.

  Lawyers and litigation dominated these conversations, and I believed I could do more for the company by working on the company than I could attending these calls.

  ____________________

  25 Business Wire, “Lululemon Athletica Appoints Christine Day as President, Chief Operating Officer and CEO Designate,” lululemon athletica, April 2, 2008, investor.lululemon.com/releasedetail.cfm?releaseid=302772.

  26 Herb Greenberg, “Lululemon CEO’s Sweet Deal.” MarketWatch, February 25, 2008, www.marketwatch.com/story/lululemon-ceos-sweet-deal.

  27 Ibid.

  28 Melinda Peer, “Christine Day Breathes New Life Into Lululemon.” Forbes, April 3, 2008, https://www.forbes.com/2008/04/03/day-christine-lululemon-face-markets-cx_mp_0402autofacescan03.html#4425fb639f37.

  29 Reuters Staff, “ANALYSIS-Lululemon Seen Growing in Lucrative Niche Market.” Reuters, November 2, 2010, www.reuters.com/article/idUSN0116446120101102.

  30 The Canadian Press, “Lululemon scolded for linking clothing line to Olympics,” CBC, December 16, 2009, www.cbc.ca/news/lululemon-scolded-for-linking-clothing-line-to-olympics-1.843999.

  31 Ibid.

  Chapter 24:

  The Founder and the CEO, Revisited

  Missed Opportunities

  Although we finished 2010 in a position of strength, success, and with “best in the world” business practises, the next seven years were going to be a time of significant change for lululemon. Sadly, this change would include many missed opportunities.

  Much of this is the cautionary tale of how “not firing” a manipulative employee quickly led to directors acting in ways they would not have otherwise. To provide context, the following includes highlights from a paper called “Where Boards Fall Short,” written by Dominic Barton and Mark Wiseman for Harvard Business Review. The reader is encouraged to read the entire paper.

  “Boards aren’t working,” Barton and Wiseman tell us.32 “It’s been more than a decade since the first wave of post-Enron regulatory reforms, and despite a host of guidelines from independent watchdogs such as the International Corporate Governance Network, most boards aren’t delivering on their core mission: providing strong oversight and strategic support for management’s efforts to create long-term value.”33

  According to Barton and Wiseman, of some seven hundred directors surveyed, there are only a small percentage (34 percent) of directors who understand their companies’ strategies; an even smaller percentage understand how their companies create value (22 percent).34 With these shocking figures in mind, how can boards better serve the companies they lead. The answer, as Barton and Wiseman put it, isn’t “good-governance box checking”—something I would see on lululemon’s own Board in the years to come.35

  Barton and Wiseman suggest that it is crucial for everyone in a company to understand what a director’s duty is. Legally, that duty consists of “loyalty (putting the company’s interests ahead of your own) and prudence (applying proper care, skill, and diligence to business decisions).”36 A director, committed to his or her duty, does not prioritize short-term financial gain above all else. Rather, the dutiful director should, if necessary, push management to bet on a “credible corporate strategy that will take years to bear fruit.”37

  Another key shortfall Barton and Wiseman observe is that public boards don’t do enough to attract the right expertise. “If you truly get the importance of thinking and acting long-term, you’ll do whatever it takes to attract [expertise].”38 Here was another failing I would see—the lululemon Board of Directors had little interest in finding the right people… or, more critically, planning for CEO succession.

  The plan for lululemon, as Wiseman and Barton have demonstrated, should have been for our Board to attract directors with deep, relevant experience, who were able to think long term. Unfortunately, this was not the case.

  Moving my Desk

  Our most important Operating Principle had always been “The store Educator is the most important person in the company.” They deliver the technology and brand to the Guest. After the Educators, it was the managers, then the CEO, followed by the Board, and the shareholders. As the founder, I was at the bottom of that list. If a company wants to deliver amazing value to the shareholder, I believe they must elevate the very people who drive the profits; in our case, the Educators.

  One day, a strange thing happened. The Board asked me to move my desk out of the design area. They explained this was so Christine could manage and be responsible for results without the messiness of dual direction and interference from me.

  I agreed that this was the best next step. I did not want to be the excuse used to explain why management did not hit their numbers or collect their bonuses. I said I needed six months to find the right person to head Innovation—someone as finicky about apparel as I was, who had the same love for small technical details. Probably someone with a background in technical outerwear.

  Six months was not soon enough for Christine, so in late 2010 she hired Sherri Waterson as the Head of Product. I liked Sherri, but she approached design primarily from a fashion viewpoint. I thought maybe she just needed time to prove herself.

  In addition to hiring Sherri, Christine also hired consulting companies to look at the way we designed and brought a product to market. These consultants had never seen a technical vertical retailer, and by bringing them in, we essentially paid $2 million to educate them on our business. The consultants recommended we adhere to “best in practice” operations set out by wholesale companies. I never understood the point of this contract, but I do know that it slowly started to unravel our “best in the world” business practices.

  These same consultants soon came out with an “expert paper” telling the world how vertical retailing worked. It was disheartening to me that we had opened our kimono to a group of consultants who would go on to invoice our competitors as they taught them our business model. I thought I was the ultimate consultant, but our Directors believed better processes, information, and validation were possible from East Coast a
pparel consultants who were experts in fashion wholesaling.

  The Harvard Business Case

  Around that same time, Christine had asked me if Harvard Business School could come in and do a case study on lululemon. She told me they wanted to document lululemon’s history, and since we’d never had the time to do so, it seemed like a win-win, so I agreed.

  Harvard professors looked at our stores, our past performance, and our history. I took them up the Grouse Grind and answered interview questions about the transition between Bob Meers and Christine Day. That was the extent of my part, and after it was done, I didn’t give it much thought.

  The business case was published in December 2010 as a series of twenty or so videos, each maybe three or four minutes long, designed to be presented in business school classes.

  My heart sunk when I looked at the published business case. The videos gave away 50 percent of our unique culture and business practices, our successful formula, and our Operating Principles.

  Further, the videos were done in the context of Christine arriving at the company in 2008, at the worst of the Recession, and fixing everything. Christine was quoted as saying: “The whole organization slowed down… because people weren’t aligned.”39

  This wasn’t a fair or accurate depiction of how things had been going before Christine had arrived at lululemon or the successes we’d experienced despite the Recession. In reality, the financial crisis was a positive. It gave us the opportunity to slow our growth, get our feet under us, and create a super solid foundation.

  Once that foundation was in place, all we needed to do was open more stores while sticking to our successful formula. Any good operator could do this. Suddenly, the whole case study seemed a brand-building exercise for Christine herself… one that could’ve arguably cost lululemon billions of dollars as our successful formula was handed to the competition.