Little Black Stretchy Pants

by Chip Wilson

  However, if creative product people and financial operators can appreciate the intelligence that each contributes, the company gets a synergistic multiplier of 3.

  In February 2018, the rise in lululemon’s stock created the PR opportunity for lululemon to “let go” of its CEO, Laurent Potdevin, without triggering instability in share value. This makes eight years the Board of Directors has not fulfilled on its number one job of ensuring amazing leadership or a leadership pipeline. Two large gaps without a CEO and other top management has cost the company billions of dollars, despite the recent uptick in the stock value.

  Glenn Murphy, as Chairman, has publicly stated that lululemon is committed to finding a CEO who is a cultural fit. To find that cultural fit, I fear that the Board will simply redefine the culture. They could change the culture to suit the needs of their star candidate, and then support that change by claiming the culture needs to evolve as the company grows.

  The challenge is that culture needs to be embraced from the top down. Everyone needs to be aligned. Lululemon’s Directors could support the transformational culture and identify a cultural fit, because the board understands how culture creates profits.

  Letting go of Laurent provides lululemon with a great opportunity. I sincerely hope the Board reflects on the large gap in CEO leadership and the lacking CEO pipeline and avoids a repetition of the last eight years. Lululemon needs an athlete as the CEO. A person who understands how to physically push through barriers.

  In many ways, lululemon has created its own way to survive, just like individuals do. In lululemon’s case, it decided to survive by not rocking the boat, not risking and never sticking its neck out. What lululemon receives from this survival mechanism is incremental growth with no bumps. No one need answer to fringe social media, litigation is minimized, and institutional shareholders are not shaken. To outsiders, it looks as though lululemon has adult supervision.

  On the other hand, there is a lot lululemon does not get from its survival mechanism. It does not get entrepreneurial-inspired employees or new top talent who are looking to be mentored by superior management. It does not get to learn from mistakes and adjust accordingly. Lululemon does not get breakout ideas because they are deemed too risky.

  Employees

  Integrity starts at the top. I look forward to a time when the Directors and employees have the same standard for integrity. If the last three chairmen of the Board can disclaim, avoid, and reframe questions of a shareholder at a virtual AGM, then they can and will do the same to the employees.

  The employees know this. This is how a lack of integrity works. A good result cannot come from unethical actions. Thus, lululemon’s Directors could choose integrity as a way to better profits while doing the right thing for the employees and customers.

  One of my reasons for writing this book is my deep commitment to the employees who built lululemon and contributed to the creation of an extraordinary and unique company and culture. It’s important that they understand how directors in a public company are often unable to see, and unfortunately, are almost never interested in the reasons these employees came to the company in the first place. I know the employees of lululemon may not get the whole picture. Perhaps too much time has passed. Perhaps the poor leadership has onboarded too many people in the head office staff who do not have the context to know what “great” is. Few are left with the knowledge to train new people, enshrine the Operating Principles or promote the culture.

  Employees deserve to understand the level of influence directors have over the culture and integrity of a company. They should also have the opportunity to experience the possibilities that are created when a board aggressively supports and nurtures the culture of that company. Employees deserve to know the difference between a metric vision set out for Wall Street and a non-metric vision set out to change the world.

  Present Day

  Lululemon value has more than doubled in the last year (as has Under Armour); both Nike and Adidas have had amazing performance in 2018. My point is that lululemon’s doubling stock value over a small base (caused by the missing five years) is much less than a 20 percent increase over a large base. Lululemon could have seen much larger growth than its competitors if the lost five years had not been squandered.

  There will be media who will want to refute long-term metrics, but these are the very media that support inconsequential short-term gains with meaningless press coverage. I think it would be prudent for the Board to spend an hour discussing and reflecting on the lost five years so that history will not repeat itself.

  Lululemon’s recent quarterly results are exceedingly strong. However, I am not interested in a short-term fix. I think it would be prudent for the Board to spend an hour discussing and reflecting on the lost five years so that history will not repeat itself.

  Our shareholders, employees, and Guests suffered through that time. Lululemon has the ability deliver innovation to Guests before they know they want it and provide the intangible gifts for which long-term thinking allows. Gifts that build competitive moats, build brand, create superior margins, and keep extraordinary people motivated. It would be incredible to see lululemon expand its business with its billion dollars in cash rather than continuing to buy back stock. Buying back stock is the last resort of the unimaginative.

  Just as short-term parties have played their strategies to profit from lululemon, this book is my request for the Board to consider growth-minded Directors who take a different road to work each day. Directors who can shrug off sensationalist media and listen only for what is important to our iconic customer. Directors who will hire and incentivize management for the long run.

  Attracting the right diversity of directors is an arduous job, as creative people or visionaries do not want to participate when trailblazing ideas are dampened. The best solution is to figure out how to keep the only creative people crazy enough to want to be on a public board. Those are the creative founder or founders of companies who lululemon may acquire. It is well documented that public companies with founders produce significantly more value than those who do otherwise.

  My success in life has come from my appreciation of those who think differently from my growth mindset. In today’s world of social media, I might be a liability, but maybe the pendulum will shift back to people wanting authenticity instead of a protected PR shield. To find gaps in the marketplace, I am continually challenging the status quo of society, politics, relationships, and apparel. Part of my process is to think out loud. Those attached to the status quo will not always agree with me.

  Lululemon Directors may continue to defend their oversight of the company because this story will not enhance their short-term interests. The Directors were complicit in their silence after the Bloomberg incident, and I believe have been vocal in directing the lululemon PR consultants to adversely spin my public comments regarding long-term value.

  Directors don’t want their reputations to come into question, so they’ll use their Wall Street public relations consultants to work the media.

  In many ways, this is a great system. Lululemon Directors get what they want, the PR consultants get paid to write stories, the business reporters don’t have to work for their stories, and the media outlets get low-cost content. It’s win-win… unless you care about the truth.

  I want the conclusions in this book to lead lululemon to a great five-year future, but change takes time, patience, and investment. If employees had acted in the same manner as lululemon’s Directors, they would be fired. As I’ve already demonstrated, lululemon’s governance model protects the Directors from the level of accountability to which they hold employees. This self-perpetuating mediocrity risks putting the company into another dark period.

  As of this writing, I do not have power inside lululemon.

  I have taken the time to continue to be the best in the world at technical clothing. I am currently reading my third selection of one hundred business books to hone my skills further. I love
going to TED conferences every year to hear about innovation. I will continue to hold high expectations for lululemon. I will continue to believe that the power of a growth mindset is critical for lululemon’s future.

  I’m choosing to let go of the past so that I can create a future that would otherwise not have occurred. The last five years is only a setback. It is a failure from which to learn. The future I want to create is a company with integrity at the top. A company where public quarterly analyst meetings are truthful, and the CEO can answer questions without fear of short-term ramifications. A company where leaders create leaders. A company with a diverse board that appreciates both fixed and growth mindsets. A company where Vancouver athletes drive brand, product, and innovation. My dream of lululemon being the world’s number one technical apparel company led by people development is very attainable.

  The bar for what is great has been reset to a level of mediocrity, but we can raise it once again.

  Good is the enemy of great66.

  ____________________

  65 Steven Davidoff Solomon, “Online Shareholders’ Meetings Lower Costs, but Also Interaction,” The New York Times, June 1, 2016, www.nytimes.com/2016/06/01/business/dealbook/online-shareholder-meetings-lower-costs-but-also-interaction.html?emc=edit_dlbkpm_20160531&nl=%3Fnl%3Ddlbk&nlid=51768508&_r=0.

  66 Ibid., 95

  Epilogue:

  My Responsibility

  My Personal Outlook

  I have a passion for mentoring people between the ages of twenty and forty. Certain concepts, when shared early enough in life, can help people to grow exponentially. (I wish some of the greatest learnings in my life had happened in my twenties rather than my forties!). When I’m thanked for what I’ve provided to younger people’s lives, families, communities, and businesses, I respond that they too will be my age one day and will be thanked in the same way if they pay it forward.

  My dream for lululemon is that the business model would be a template for how more businesses can be run. Perhaps “elevating the world” combined with six degrees of separation has affected the world more than I know.

  Postscript

  At the 2018 virtual AGM, I submitted three questions and one further question was sent in by another shareholder. Glenn Murphy, as Chairman, answered one of my questions and the one from the other shareholder. He then went on to say, “We only received two questions, two questions is all we have.”

  On June 7, 2018 the company agreed to buy back 3.3 million shares in a private transaction with funds affiliated with Advent International. The shares were purchased under the $600 million share buyback program and funded with cash on hand and borrowing.

  I feel that I accomplished what I wanted to when I sold fifty percent of my thirty percent ownership in lululemon to Advent in 2014. My strategy was to shake up the Board and continue to offload Directors who supported inappropriate CEOs. I knew this alone would double the lululemon stock value. Investors have decided that lululemon is a company that can thrive and compete against Amazon and the stock value has caught up to lululemon’s massive ability to create profit with no debt. It will be easy to create another five to seven billion dollars in value by now focusing on the underlying principles which originally differentiated the company.

  In July of 2018, lululemon announced their new CEO as Calvin McDonald. What is exciting about Calvin is that he is an athlete, and this is a could be a great start of a new era.

  Attitude of Gratitude

  At present, I appreciate all that has been accomplished by lululemon and its current and former employees. The world is ready for businesses built on the lululemon philosophy because everyone wins.

  I give ultimate thanks to my mom and dad who are in their mid-eighties, and my mentors in the quest to live 40,000 days.

  Thanks to my brother, Brett, who’s an inspiration to me, both from an athletic viewpoint and as my first partner in lululemon when we expanded to the US. To my sister, Noel, who’s probably one of the best brand marketers in the world and who has worked at lululemon and our other businesses.

  Thanks to my lifelong friends Frank Cosman, John Starratt, Mark Polet, Eric Libin, and Frank Troughton. Thanks to Torchy McCarthy who got me a job on the Alaska pipeline and to my step-mom, Cathy, who provided me with fifty-five free trips anywhere in the world.

  Thanks to Josephine Terratiano (and family), my original seamstress at Westbeach.

  A heartfelt thank-you also goes to my Westbeach partners Scott Sibley, Richard Mellon, and Marco Allinot.

  Thank you to Werner Erhard. Thank you to David Cunningham and everyone at Landmark. Thanks to Treya Klassen and Anurag Gupta.

  I’m thankful to Morrow Snowboards for buying out Westbeach. I would never have had the money to start lululemon otherwise. I want to thank Don Steele, who came in as private equity inside of Westbeach.

  Thanks to Nancy Herb, the wonderful mother of my eldest sons.

  Thanks also to Dave Halliwell, Jackie Slater, Amrita Sondi, Amanda Dunsmoor, and Anthony Redpath for being there to get lululemon off the ground.

  Thanks to Shannon, my highly intelligent, beautiful wife and the mother to my three youngest boys who did such a phenomenal job as lululemon’s second CEO for a year. I’m very thankful for the way she took everything on with such passion and intelligence at a time when lululemon could have gone under multiple times. Shannon is the true partner of which I have always dreamed.

  Thanks to the people in the Kitsilano Beach community who came to work at lululemon in the early days on a small salary with only a promise and a passion for athletic clothing: Deanne Schweitzer, Delaney Schweitzer, Eric Petersen, Jen Barry, Jenna Hills, Eoin Finn, and Fiona Stang, my first yoga teacher.

  I want to thank Carla Anderson, Julie Ball, and Karen Wyder from the first Toronto crew. I also want to thank Dave Andru, Bree Stanlake, Michelle Armstrong, and Russ Parker. A heartfelt thanks to George Tsogas, Lori Jane Budd, Jill Chatwood, Erin Westelman, and Bonnie Fong.

  To the great Americans who believed in our culture: Paige Kerr, our first US store manager; Kerry Brown, our first US showroom manager; Parker Pearson, who opened the Cow Hollow store and led the Santa Monica store. Thanks to Angela Hartman, Leah Taylor, Celeste Burgoyne, and Carla Anderson.

  In Australia, thanks to Alexie O’Brien and David Lawn. In Japan, thanks to Kano Yamanaka.

  I want to thank my sister-in-law, Susanne Conrad, who with Lightyear Leadership was instrumental in keeping the culture going at lululemon, even after I left.

  Thanks to the lawyers that helped me put my first deal together. Despite not having dual-class shares, I’m thankful for everyone that helped me through that public process. I especially want to thank Jonathan McCullough, John Pitfield, and Tina Swinton who safeguarded my interests.

  I also must thank the manufacturers who I love, Frankie, Elky, and Richard Hon from Charter Link. Everyone at Eclat. Kevin Chan in Taiwan. Jeff from Maxport in Vietnam. Amy Hsu at RSI and Dilan Gooneratne and Mahesh Amalean at MAS. Thank you very much.

  Thank you to Cowie and Fox who designed the original artwork for the lululemon Manifesto.

  I want to thank everybody that has chosen to leave lululemon to pursue their own goals and greatness. You took action, and for that, I am proud of you.

  I want to thank the Board of Directors at lululemon. It’s been a great experience. I may not agree with you, but the education I’ve gained has been phenomenal and has given me tools with which I can mentor my children and others.

  Thanks go to Darrell Kopke (who was also a key figure at lululemon for many years). Thanks to my EA, Samantha Mullett (amazing!), and to everyone at Hold It All. I know I am missing names of hundreds of people who have helped my life get to where it is. Thanks!

  Finally, thanks to my sons, JJ, Brett, Tor, Tag, and Duke. At the time of this writing, my youngest sons are twelve and fourteen. I feel like I have only days left with them before they’ll start pulling away. With JJ and Brett, as they come to the end of their twenties, I ho
pe I can mentor them in their own careers and personal lives. My family is my priority, now as much as ever. I hope my experiences will make you better people. If I have 17,000 days remaining, I want to spend every one of them with you.

  In closing, I’ll offer this: don’t waste a second of your life. You only have 40,000 days to live. The longer you live, the quicker time goes. To a toddler, ten minutes feels like ten years. To a ninety-year-old man, ten days feels like half a second.

  Examine who in your life is eating up your precious seconds. Who around you complains but doesn’t act?

  Ask yourself, “What is my real passion? Where do I thrive? Where can I give the most back to the world?”

  We get too hung up on what our social values and morals say we should do, what our parents or friends say we should do. For this reason, I’m always impressed by people who live their own great life.

  Peace, love, dove, and Hare Krishna, all you groovy cats.

  I invite you to add to the story. My book is just one perspective.

  I realize it took a small army of dedicated and passionate people to bring lululemon to life. Every year in September, I will publish a revised account of what it was like to be a part of the foundation, growth, high points and low, inside and out, of lululemon—from a variety of perspectives.

  Visit chipwilson.com and insert your part of the story into my open-source, multi-contextual account of life at lululemon. The next chapter starts with you—I look forward to reading it.