There is a great deal of information and background detail that, in the interests of time and pacing, were not included in the preceding story. These FAQs are but a few of what I am often asked. However, I believe these details may be of interest either to an entrepreneur running her or his own business, or to the reader, who may simply want to know more about the history of lululemon athletica.
What are you doing now?
I define retirement as being able to get up in the morning and do whatever I want. This often includes work. In this sense, my work fulfills my business purpose of “elevating the lives of 20 and 30-year-olds with transformational development via the technical apparel and shoe market”. I am thrilled to own 20 percent of the Amer Sports group, as well as my investments in lululemon, Zwift and FIGS. My long-term blue-chip holdings are in real estate in Vancouver, B.C. and Seattle, Washington. I’ve applied the same muse premise to real estate that I did with clothing design. Our Low Tide Properties real estate team takes functional buildings in run-down areas and makes them beautiful and attractive to 32-year-old professionals.
My present life allows me to be not only creative, but also to devote a lot of time to my family. I do parking patrol at the school that my three youngest sons attend. And, I do all the presentations and talks the school asks me to do – usually on business or entrepreneurship or Dragon’s Den-style projects.
The most fun I have is coaching my twins’ flag football team but this has been halted by COVID (which, I will say, is a real bummer).
I have a type of muscular dystrophy (FSHD) and have invested in and am a director of Facio Therapies, which is researching and developing treatments for this disorder.
I am in my third “life learning session”, during which I will read or listen to one hundred new business, development, biographical or experimental fiction novels each year. I am out to consistently re-create who I am.
I am committed to doubling the value of all my investments every five years.
My family has more wealth than is possible to fathom. We want to leave the world with a lasting legacy. Our two priorities are:
- To raise wonderful children who can choose to be positive influences on the world.
- Our family devotes much of our philanthropic efforts to purchasing land and donating it to park conservatories to forever be preserved as park land. I am forever thankful to those who came before me who donated parks for all to enjoy. My family is dedicated to the idea of movement and the joy it brings to people. We enhance parks with outdoor art but ensure art does not interfere with nature’s beauty.
Could lululemon have started anywhere other than in Vancouver?
To be blunt, no. Jared Diamond’s Pulitzer Prize-winning book Guns, Germs and Steel discusses how modern civilization came to be. As I remember it, the premise of the book is that man started somewhere in Africa and moved north with grains that could be easily grown using beasts of burden. Civilization exploded east through Asia and west to France. Then after a long period, Europeans conquered central and South America with germs (smallpox, etc.) and a few steel guns. The upper East Coast of North America was populated, but due to the lack of hearty grains and beasts of burden, man’s movement west was very slow. Vancouver, on the north-west coast of North America, may well be the youngest major city in the world.
Vancouver was a lumber, mineral, and fishing mecca, and these industries dominated an industrialized waterfront. When the World’s Fair came to Vancouver in 1986, Vancouver had a massive, underdeveloped waterfront. City planning, as a concept, had just emerged, and Vancouver was a blank canvas surrounded by snow-capped mountains and an ocean with hundreds of near-by islands. The government developed the waterfront into biking and running paths to meet the demands of a population that commuted differently due to its temperate rain forest climate that rarely dips below freezing.
Vancouver became Canada’s hippy city, parallel to all that had happened in San Francisco in the 1970s. This lifestyle included the drug culture, communes and the surf & skateboard lifestyle.
Vancouver created its own version of the self-development culture that came complete with Vietnam draft dodgers. The underground discarded retroactive, traditional medicine in lieu of a proactive approach. They wanted to find out why people got sick in the first place.
Every civilization creates its own functional form of apparel to match climate and culture. The unspoken psychology of Vancouver is one of work-to-play. A Vancouverite is always ready to take off work when the snow is deep, the wind is blowing, and the sun is shining.
Living here, we’re able to access Vancouver’s wondrous natural environment, so dressing in a suit and tie seems arduous, archaic, and time-consuming. The business culture of Vancouver is overwhelmingly made up of small entrepreneurial ventures with only a few major head offices. Nowadays, it seems the only people in suits are those who once worked for East Coast conglomerates. West Coast business owners prioritize identifying with their sport when choosing how to dress.
In 1966, Whistler Mountain, the world’s number one ski resort, opened ninety-minutes north of Vancouver, and its summer glacier became the world centre for snowboarding. Squamish, thirty minutes north of Vancouver, was tagged as the outdoor capital of Canada. Westbeach, lululemon, Mountain Equipment Co-Op and Arc’teryx, whose clothing transitions from sport to the street, began a technical sports apparel boom.
There’s a joke that in any bar in Vancouver you can sit down next to someone who claims to have founded Greenpeace. After the World Fair in 1986 (“Expo ’86), Vancouver was “discovered” because of its beauty and favorable weather and soon came to be known as “Hollywood North”, Canada’s gateway to Asia, and the world’s most diverse livable city.
The American tech companies, eager to employ foreign workers who could not get past American immigration officers, set up major offices in Vancouver, and the tech look couldn’t be distinguished from the laid back Vancouver athletic look.
In 1990, the North Shore of Vancouver became known as the birthplace of world-class mountain biking. The history and legacy of trail building on the North Shore are remarkable. Arguably “The Shore” has inspired and evolved more aspects of mountain biking than any other area in the world.
In 1998, lululemon emerged as a personal development company largely due to the fact that it was the intersection of everything West Coast. It epitomizes Vancouver. Lululemon’s branding is based on a “social experiment” to fight social health injustices. Lululemon’s stance against the food marketing ma- chines endears it to its Guests. We produced technical athletic apparel while pursuing the idea of “What makes a person great?” as the way to superior profits.
Vancouver has continued its own self-development. In 2000, Vancouver set a goal to become the greenest city in the world. In 2010, the City hosted the winter Olympics and since 2011, has been the home of the TED Conference.
Why was integrity so important to lululemon?
I have been so concerned with integrity because I am so inconsistent with it. I continue to talk about integrity as a way to keep myself in integrity. I learned to define integrity as “doing what I say I will do when I say I will do it, in the expected way.” This was the adopted definition at lululemon up to 2013.
What I have observed in most companies is that each individual believes they have integrity, but each person also has a different definition of it. Therefore, there really is no integrity. With one definition of integrity for lululemon, we all knew what we meant.
Why was personal development so important to lululemon?
A runner’s high, which occurs after thirty-five-minutes of aerobic activity, creates naturally-occurring dopamine. The reason drugs are fun is that they dim our past from our thoughts. Future thought is only possible from past experiences, and if we have no past, then we have no future. The only thing left is the present. In the present, we are free to create our lives unconstrained by the past. We have a blank slate, as though we woke up in the hospital from a car crash with amnesia.
Living in the moment allowed lululemon to constantly re-create itself because it never got stuck continuing a process or design just because it worked. As we could re-create designs, business processes, and ourselves daily, we lived into our future, not from our past.
A decade ago, Oprah Winfrey hosted Eckhart Tolle on her show to talk about his book The Power of Now. I laughed while reading this book because Eckhart is from Vancouver, and I think he attended the Landmark Forum then wrote a book about it. So, millions of people have read The Power of Now and, therefore, understand the context of the Landmark Forum, which is based on “giving without expectation” and “choosing the present from a created future.” The ideas are not necessarily Eckhart’s or Landmark’s, but are rather an amalgamation of hundreds of books, philosophies, and scientific research. What was missing, however, was the concept that there are benefits to taking the Landmark course with one hundred other people. When participating with a large group of people, one comes to understand that every person’s brain is built in the same way. Our brain deceives itself to protect us in the act of survival. No single person is special.
The library was the recommended reading at lululemon, plus a couple of more recent additions that I felt were important to include. The list is divided into two ‘libraries,’ reflecting the intended order of reading:
- Good to Great, by Jim Collins
- The 7 Habits of Highly Effective People, by Stephen Covey
- Psychology of Achievement, by Brian Tracy
- The Goal, by Eliyahu M. Goldratt
- The E-Myth, by Michael E. Gerber
- The Tipping Point, by Malcolm Gladwell
- Why We Buy, by Paco Underhill
- Execution, by Larry Bossidy and Ram Charan
- Atlas Shrugged, by Ayn Rand
What were the linguistic abstractions that allowed for one common language at lululemon?
ACT: A way of being that was shaped in early childhood. There is a moment perceived as “a period of survival” during which a child’s parents are unavailable to “rescue” them. The child survives through a particular way of being (funny, dominant, blaming, competitive, quiet, etc.), and not being aware of the ability to “choose” (like choosing to be happy or sad when waking up), the child continues to default to this one way of acting, even as an adult.
BEING AUTHENTIC ABOUT BEING INAUTHENTIC: Being open and undefended about who a person is and how they protect themselves, so they are coachable in moments where they revert to their Act.
BEING CAUSE IN THE MATTER: Choosing to take action on the court rather than complaining in the stands.
BEING PRESENT: The most powerful way of being. Fully choosing to eliminate the past as though one had amnesia. If there is no past, then there is no future, and all one has is the present. The present is where we are free from social, parental, or self-imposed conditions, and where we can choose to create our present from the future.
BY-WHEN DATE: The date on which a project or task is promised to be completed.
CHOICE: A decision made that is free from complication from past experiences and from social, parental, or self-imposed restrictions.
CLEARING THE PAST: When someone’s mind is fully focused on something else, it inhibits the person from listening. The “something else” must be discussed (cleared) for effective communication to occur. There is no point wasting time talking to someone who is incapable of listening. The power in communication always lies with the listener.
COMMITTED LISTENING: Listening without obligation to act while paying attention to both verbal and non-verbal communication.
COMMITTED SPEAKING: Communication that includes by-when dates and conditions of satisfaction.
COMPLAINT: A way of speaking in which the speaker has an underlying, unidentified commitment to their position. If their commitment can be identified, the person can take action to move through their complaint.
CONDITION OF SATISFACTION: An action or criteria against which completion can be measured.
CREATING THE PRESENT FROM THE FUTURE: Creating options informed by our past, not constrained by it.
GIVING WITHOUT EXPECTATION OF RETURN: (This is the premise lululemon was based on.) The highest form of being is giving to others with no strings attached. Our lives will be amazing because, through the law of attraction, we will attract like-minded people into our lives.
HEDGEHOG CONCEPT: The intersection of three circles is where a business finds success. These three circles are (1) our passion, (2) what we are best in the world at, and (3) our economic engine. (from Good to Great, by Jim Collins).
LAW OF ATTRACTION: We attract people into our lives who reflect our same values and who act according to those values.
LOOKING GOOD: pretending to be someone who we are not, in order to be protective of our ego.
MISSION: The functional application of a vision.
RACKETS: A recurring way of speaking (complaining) in which the speaker is unwilling to take responsibility for the situation and unwilling to take action to resolve the situation.
TALKING INTO THE LISTENING: Within a conversation, each person’s position is based primarily on how they were raised and their life’s experiences. For a conversation to be effective, the person speaking must consider the filter through which the listener hears.
TIPPING POINT: The moment in which the brand conviction of a group of consumers is so strong it emanates to the entire population as a desire to belong.
TRIBE: A group of people who, when exposed to a brand, take it on as their own. By nature, tribe members communicate, blog, and live life on a level playing field. There is a shared excitement and deep understanding of other people’s experience. A tribe is small at the start and is not mainstream (e.g. surf/skate/snowboarding/yoga).
VALUES: The framework people use for decision making.
VISION: An unreachable goal and a statement of “giving without expectation or return” that elevates people to be more than they know how to be.
WINNING FORMULA: A declaration of who we are that was created in a moment when we decided who we could never be (i.e. “I will never be the President of this company, but I am a fantastic Vice President.”).
TIME IS PRECIOUS: Our every action or communication respects another person’s imminent death.
MANIFESTO: A collection of thoughts that comprise the soul of the brand.
What is the law of attraction as it pertains to lululemon?
The theory was that making the absolute best quality product would attract high-quality employees who would only work for a company that produces quality products. The superior quality and service would attract a quality customer who valued their time, was too smart to be sold to, and could not afford to waste time returning deficient products.
The combination of these produces best-in-the-world profits, which then attracts best-in-class private equity firms, directors, investment bankers, and public investors.
How did lululemon think about corporate social responsibility?
In 2004, our general manager, Darrell Kopke, brought in a group of consultants to discuss corporate social responsibility (CSR) standards. After listening, I rejected their proposal, as some of them were too far behind with how we were running our business. I believed the lululemon people development program outshone CSR foundations.
My belief was that training people in integrity and responsibility would enable them to make the best decisions based on lululemon’s vision, mission, and values. I believed too many rules from external consultants would handcuff a smart person from doing the right thing.
For me, the basic tenet of CSR dictates that a quality product cannot be made without developed employees and happy factory workers. We considered family life, wages, and even lighting in the workplace. We also considered that what Asian factory workers desire is far different than what North American media or socialists think the workers want. The only way to have incredible factory quality is to treat the workers well – from their point of view. This is what sets great companies apart from mediocre ones.
I know who Ocean is, but who is Duke?
Ocean was the name we gave our thirty-two-year-old highly-educated, professional, condo-owning, well-travelled, marketing savvy, athletic, fashionable muse. Duke is the name Shannon and I gave our son in 2003 as we were looking for the iconic male to define the lululemon masculine muse. This is what I wrote at the time:
“Duke does not have to talk about himself. He has confidence in himself as a good person, and he is smart enough to know others will do the talking for him – good or bad. Duke does not want to win with performance-enhancing drugs because he competes against his own set of morals and goals. Overwhelmingly, he wants to have a nice family, a great business, and decent friends. He doesn’t want to die early or walk poorly because of sports injuries in old age. He is a decent person that wins by helping others with no expectation of return. Those he has helped speak highly of him, and they are willing to drop anything to be part of his team. People will give him business because he has integrity and is humble. He does not dance in the end zones.
Duke’s sport is old English Rugby played with a Canadian or Swedish hockey mentality. He is an “aw, shucks” type of guy, much like Steve Nash (NBA) or Markus Naslund (NHL). He is not the biggest nor the fastest, but he is the smartest. He leads his teammates by example and never talks about himself.
Think of the English notion of fair play. Think of rugby players, old-school hockey players, and competitive swimmers. Lululemon must show Duke doing these sports as it differentiates us from Nike and Under Armour.
We must think about what it is to be a Vancouver male. We know hockey and rugby better than the rest of North America. The lululemon male is defined by cooperation, athleticism, and teamwork.”
How did you handle sizing for athletes and the lululemon target market?
The way apparel is sized is another make-or-break quality issue for many companies. Let’s start with the example of Nike shoes in the year 2000. I wear a size 14 shoe. Nike makes an extra set of lace eyelets for a size 14 shoe compared to the number they would for a size 8. However, the same lace length is used in the size 8 and size 14 shoe alike, and the lace is not long enough to go through the extra eyelets of a size 14. For many years, whenever I bought Nike shoes, I had to go somewhere else to buy longer laces – things like this happen in clothing design and manufacture.
When most apparel companies are making their template sample of a garment, they’ll make it out of their bestselling size. For men, that might be a 34-inch waist, and for women, that’s often a size 6. Once they’ve got the garment to fit perfectly on the model, pattern makers grade the size 6 down to size 0 and up to size 12. My method is to build samples for size 0 and 12 and grade inwards to the best-selling size.
What was the theory behind lululemon logoing?
My theory is that subtle logoing has real value in that it connects the quality of the garment to the quality of the person. The logo should be discreet enough to be able to walk into a restaurant unnoticed but not so subtle as to not be seen. I wanted the garment to be so beautiful that other people would want to look hard to determine the brand. I believed no guest should look in the mirror and see a logo, so I placed the lululemon logo along the sides or on the back of the garments.
Lululemon’s first big selling pant (the “groove pant”) had a low-slung fabric belt sewn into the pant. The fabric strip mimicked the low-slung hippie belt women wore in the seventies. The belt was sexy be- cause, as a woman moved, the belt would accentuate the movement of her hips. Because the weave of the fabric smoothed out a woman’s imperfections and because the diamond crotch gusset eliminated camel toe, the pants became acceptable to wear outside the studio.
I made the logo reflective because I connected reflectivity to athletics and function.
The Scuba Hoodie was the first time I blew up the stylized “A” from inside the circle of the logo and used it as a design feature on the front of tops. We took this idea into tech tops and tanks. The placement of the logo was discreet because we sewed it into the garment and only the seam line showed. The un- known effect at the time was that it enhanced a woman’s natural body shape. I liked this because it was exactly what European fashion had done for women for decades.
Women’s long hair covered the logo at the nape of the neck, so we placed the logo on the lower left hip. The logo placement was thought of in response to how stores were built. The logo, hang tag and any specific pocketing or apparel feature was always put on the left side, so the customer knew exactly where to look. When the customer looked for the price and size, they subconsciously saw special features and the logo. Too often, I see special apparel features put on the opposite side of the hang tag, and the customer does not equate the value of the garment to the price.
For men, the logo on the top could be in the middle of the back near the neck because men do not, for the most part, have long hair. Although it was a subtle differentiator from the competition, I wanted some logoing on the front of tops. In the surf industry, surf shorts always had three rows of stitching because crouching when surfing puts tremendous pressure on butt seams. I equated three-row stitching with quality, so, in snowboarding, I started using three bar tacks to reinforce all corners of pocketing. I then took this into lululemon pants. I loved the quality look of the three bar tacks so much that I decided to use it as the front logoing on men’s shirts. The bar tacks on the left side also help me quickly determine which side of the shirt is the front and which is the back.
One of my favourite inventions is the rip out label inside the back of the garment where most companies put a heavy, sharp, scratchy logo tag. If there is one thing that drives me crazy, it’s a stiff label with a sharp corner digging into my neck. Fashion people may put up with this, but not athletes. Athletes shouldn’t have to think about their clothing. It should just perform.
How was the original Luon fabric developed?
Getting the iconic lululemon pant fabric just right was a challenge. I had developed a thicker version of the fabric at Westbeach as the first layer of women’s snowboarding pants. The primary downfall of Lycra was the expense of the fibre.
Lycra-infused fabric was used by dance companies, but they used skinny patterns when cutting fabric to save money. When stretched far enough, the fabric would appear shiny, transparent, and cheap.
I saw solving this problem as a challenge.
So, I used four times the standard amount of Lycra and cut patterns wider. I peached the fabric so microscopic hairs would stick up, thereby providing a cottony feel and eliminating the plastic feel of synthetic fabrics. With this synthetic fabric, I could build in anti-stink and moisture wicking properties. I also wanted to eliminate rashing, which is arguably the top issue with athletic garments.
I cannot, for the life of me, recall where I learned about flat seaming, but this process eliminated threads and seams that would rub on skin. Seams, I decided, had no place between the legs, under the arms or anywhere there was excessive movement. The stitch would be visible, even colourful, and used to enhance body shape – yet another innovation.
Gore-Tex had, by then, solidified its name in outerwear even though there were dozens of comparable fabrics in the marketplace. The name Gore-Tex was synonymous with technical outwear and it inspired me to trademark my fabric.
I branded the fabric “Luon” (lululemon-nylon). It wasn’t long before competitors were asking fabric mills for Luon, which was a great compliment. Once they asked the fabric price, they realized, as wholesalers they couldn’t come close to matching lululemon sell-price. This was our first moat to competition. Competitors didn’t know that I cut and preshrunk the fabric in hot water and then a hot dryer. An athlete could buy our clothing, sweat in it, wash it in hot water, dry it on a hot setting, and the garment would re- main the same for 5 years. This was a process that was very difficult to replicate unless the competitors could replicate the lululemon business model.
What defined brand for lululemon?
In old-school wholesale financial statements, brand is categorized under what is spent on traditional media or, in today’s e-commerce world, the cost of acquisition of a single customer. These costs are easy for finance people to wrap their minds around and slot into the right place. Management and directors want to see the relationship between brand spend and sales. In most wholesale brand companies, the rule of thumb is 10 percent of sales are allocated to brand spend. At lululemon, the amount was 2 percent because our brand costs were embedded in other departments.
Because brand costs were hidden in random areas of the company it was easy for financial experts to eliminate that which differentiated lululemon the most. These hidden brand costs were:
- Thirty percent of retail leasing costs to locate stores in the right place to drive brand awareness for e-commerce (meaning customers understood quality, fit and tactile feel to be able to buy multiple items more frequently on ecommerce).
- Design meetings to authentically connect the sales support centre (head office) with the customer. These meetings require 20 percent more designers, design labour costs and travel.
- Hiring and paying highly-educated salespeople to be Educators.
- Developing reusable shopping bags that promoted lululemon’s futuristic stance on health and longevity.
- Creating quality garments to last five years.
- Choosing to hire and train inexperienced executives who were athletes over the hiring of experienced executives who were non-athletic.
- Hiring executives six months before they were required full-time and having them work part- time in the store. Brand value was enhanced as employees evaluated the new hire to ensure a cultural fit.
- Stores and ecommerce designed for speed of shopping, not for fashion outfitting. This values guests’ time and subconsciously attaches a value to the brand.
- Transformational development and ongoing goal-setting training of employees.
How do you know if branding is working or not?
- We measured every brand initiative against two things:
- We spent money on marketing and branding only if people would go to coffee and talk about what we did. We believed the best return on investment was to give a pair of pants to an athlete and then budget time and money to follow up with the athlete to obtain feedback to give that feedback directly to design. A high-end athlete who is part of the solution is very inexpensive and 100 per- cent authentic. If it cost us $200 to reach one person who influenced two hundred others, then the return was unbeatable.
Why do we rarely see discounting at lululemon?
The six-step quarterly meltdown meeting (described in an FAQ below) ensured the right product was being delivered at the right time. The key is to order only 80 percent of what the demand for a product is, and then use a quick-turn production team to chase best sellers and turn old product into new product.
We never put rolling racks in the store to subconsciously indicate that the items hanging on them were discounted, except for a period between December 26th and January 10th. I believe all shoppers forgive brands for discounting during this period.
Lululemon’s operating procedures revolved around constricted purchasing of product to have zero goods available for sale. Our buying methods were 98 percent effective, but we did have excess goods when we bought too much of a size, colour, or style. I wanted the website to say, “we bought too much,” instead of, “sale,” or “discount.” “Sale” and “discount” were two words banned at lululemon.
Can you give us examples of the operating principles designed to make a vertical apparel business work?
In 1996, I read a simple concept book called, The E-Myth, by Michael E. Gerber. The learnings from this book were critical to lululemon’s success. The E-Myth explains to the uninitiated that although it appears entrepreneurs are in control of their lives, nothing could be further from the truth. Most entrepreneurs are growing personally and business-wise at an exponential rate. There is no time for vacation, reflection, or reinvention of their concept.
The E-Myth theory is that a business be set up as a franchise with all processes documented so an entrepreneur can get hit by a bus or go on holiday and the company continues without a hitch.
When I first started lululemon, I hadn’t thought about franchising, but I was very keen on having a company run as though I could have the time to think about the future. I documented every company operation, from people development to finance, design buying, logistics, store size, and location. I documented how the store was to be set up, from the ratio of cash registers to change rooms, to the quantity of inventory. The final book of lululemon’s operating principles was a testament to twenty years of mistakes and unproven ideas.
As a result, when we chose to grow fast, we flew with few stumbling blocks. The operating principles guided new employees, short term employees filling in for maternity leaves, and people being promoted into new positions.
We were okay with people making mistakes, but one objective of the operating principles was to ensure we wouldn’t make them twice.
The following are a sample of the operating principles (OP) (I have over three hundred) that were critical in guiding our rocket ship trajectory. My next book will outline the entire set.
Sample OP 1: Every piece of lululemon clothing must be able to be put through a hot water wash and a hot dryer and continue to look new for five years.
WHY? Athletes are busy, and they may want to wear the same clothing the next day. A hot wash and dry is quick and kills bacteria. As part of our quality guarantee, we promise clothing will not shrink more than 2 percent after being washed hot water and dried in a hot dryer.
HISTORY: Before lululemon, people would buy garments one to two sizes too big, so after a wash, the garments would fit. We decided to make clothing that would continue to look exactly the way it did on the day it was purchased five years later.
Sample OP 2: All invoices are paid in seven days.
WHY? The worst thing that can happen to us is not to get delivery of product on time. The first com- pany to pay the factories gets the first delivery, the best seamstresses and tailors, and access to the best technology, all of which is critical to quality-control and innovation.
HISTORY: With Westbeach, I never had enough money to pay on time. As a result, I often got delivery last, the least experienced seamstresses and tailors and was the last to be offered innovation.
Sample OP 3: Every dollar a garment is discounted takes $10 off the company’s value.
WHY? Guests subconsciously attach more value to full-priced garments and correlate full price to a strong brand.
HISTORY: Customers are trained by merchandisers (who are incentivized by short-term bonuses) to wait for sales and these customers psychologically discount the value of the brand.
Sample OP 4: We value our customers’ time as though they are making $100/hour.
WHY? We assume our Guests make $100 an hour, and if they are delayed fifteen minutes due to lineups and other delays, they subconsciously add $25 to the purchase price.
HISTORY: observation and gut feeling
Sample OP 5: SPRINGERIZE! Take all unsold winter pants and make them into crops and shorts and resell them in the spring. Take all dark-coloured long sleeve shirts, hem them into short-sleeve shirts and screen on a bright graphic.
WHY? To create a business model with zero discounting.
HISTORY: This is arduous and a great business practice. Once we started operating this way we made more margin and profits with less inventory.
Sample OP 6: When naming a new fabric or functional design, budget the required dollars to trade- mark the name and logo worldwide.
WHY? To create a competitive moat by owning the name, design, or technology.
HISTORY: I noticed that even though there were thirty great fabrics in the world, Gore-Tex owned the outerwear fabric business by trademarking the name of their fabric.
Sample OP 7: Retail stores must stock enough inventory for a Guest who is driving thirty minutes to the store to have an 80 percent chance of getting what they want (a version of this also applies to e-commerce).
WHY? Subconsciously, a customer will shop more often where they can maximize their time. If a customer cannot find what they want quickly, they are likely to leave and even less likely to return. As this guest experience is repeated, fewer customers will return and the number of visitors declines. A store that is busy is a store more people enter, much in the same way people are attracted to a busy restaurant. Critical mass of inventory will bring more people to the store and consequently, attract new customers that may have otherwise walked by. It is key to be prepared with full inventory so that the store stays busy and customers return.
Sample OP 8: Essential Oils. Essential oils are always to be present, and fresh flowers must be de- livered to the store weekly.
WHY? The Guests subconsciously want to stay in a place that appeals to all of their senses. A pleas- ant aroma makes everyone happier.
HISTORY: This story is in the book. One day, my yellow lab, Bagels, tripped and spilled essential oils over a part of the rug in the store. This turned out to be a stroke of good fortune: the amazing smell lasted for eighteen months, and customers loved the aroma.
How often do you do yoga?
My yoga practice was very consistent from 1997 to 2007, when I had back surgery. Yoga was the ultimate challenge. But, at thirty-two, I found out I had facioscapulohumeral muscular dystrophy (FSHD). FSHD comes with an exaggerated curvature of the lower spine, back problems, minimal upper body strength, and poor balance. I stopped being able to do downward dog because I have no triceps and con- sequently cannot do a push-up. Any yoga but Bikram is near-impossible for me. However, my legs have compensated, and I have replaced yoga with mountain hiking.
Which books have been the most influential in your life and are on your essential reading/ listening list for 2021?
- Catch 22, by Joseph Heller
- Atlas Shrugged, by Ayn Rand
- Good to Great, by Jim Collins
- The 7 Habits of Highly Effective People, by Dr. Stephen R. Covey
- The Goal, by Eliyahu Goldratt
- The Psychology of Achievement, by Brian Tracy
- The Tipping Point, by Malcolm Gladwell
- The Prince, by Machiavelli
- Black Box Thinking: The Surprising Truth about Success – And Why Some People Never Learn from
- Their Mistakes, by Matthew Syed
- 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works–A True Story, by Dan Harris
- After On: A Novel of Silicon Valley, by Rob Reid
- “How I Built This”, by Guy Raz (NPR podcast series)
- Middlesex, by Jeffrey Eugenides
- The E-Myth, by Michael E. Gerber
- The Potato Factory, by Bryce Courtney
- Guns, Germs, and Steel, by Jared Diamond
- Tinker, Tailor, Soldier, Spy, by John le Carré
- The Lord of the Rings, by J.R.R. Tolkien
- The Fountainhead, by Ayn Rand
- The Magic Strings of Frankie Presto, by Mitch Albom
- Disunited Nations, by Peter Zeihan
- Out of the Gobi, by Weijain Shan
- Legacy, by James Kerr
- Endurance, by Alfred Lancing
- The Long Walk, by Slavomir Rawicz
Do you have any new manifesto sayings for the side of the lululemon reusable shopping bags?
“Brains are designed for human survival. For the most part, the brain isn’t concerned with living a phenomenal life, only for survival. The human being must consciously choose to override the brain to live a great life.”
“The brain is not necessarily correct about 80 percent of the time. We give the brain a bit of an idea, and it fills in the blanks.”
“If I wasn’t concerned for my survival, what would I dedicate my life to?”
“I know what is going to happen because I start in the future and work backwards.” “Integrity is not right or wrong. It just gives workability and performance.”
“The game of life is not looking good for others; the game is making life work.”
“The individual is a drop of water, and the family is the whole ocean.”
“Everyone learns differently, and I must find out what is important to other people. It is the key to having people want to work with me.”
What was so different about lululemon’s design strategy?
Lululemon was never about the “enhancement” of women’s bodies. We never wanted to fool anyone. We were not a Spanx-like product that was made to shape bodies, and we didn’t pad bras to create an illusion (except for in the Japan market). Lululemon was about being a real authentic human being. We were comfortable with all bodies. This core belief came from a life of competitive swimming, Olympic clothing, and triathlon, where functional tight stretch apparel is a necessity for competition.
The mission statement of “providing people with the components to live a longer, healthier, more fun life” dictated that lululemon was in the longevity business. The mission statement provided designers with a guiding light towards:
- Athletic performance
- Function before fashion (or more to the point, function is the fashion)
As lululemon grew exponentially through the second half of the 2000s, finding the right designer became an interesting process.
Big businesses and other large organizations – say, sports franchises – seem to always have three people on top who produce more than the five thousand people below them. This equation is a weird version of Pareto Principle where, instead of 20 percent delivering 80 percent, it’s more like 3 percent delivering 97 percent. With designers, I found there was usually one designer who could create consistently more than twenty others.
To me, that one super-talented designer brought more value to lululemon than a CFO or head of HR. With financial, administrative, and managerial people, systems are in place where specific roles are quantifiable. It’s the opposite for designers, even those who have gone to design schools.
Taking it a step further, designers must re-create four to eight times a year and the best ones can do it effortlessly.
We would find the best designers by setting up labs. In these labs, the idea was to observe multiple designers to see who could consistently re-create. After a designer proved her or himself to have special abilities the designer would be offered employment at the SSC (store support centre).
What is the real story behind offshore sewing factories?
To make a quality product, employees in sewing factories must be at the top of their game. Food, lighting, and pay must all be superior to make a superior product. For the most part, the best factories in the world are in Asia, and the worst factories are in North America. The Asian factories are new and designed to produce large quantities with the latest and best machines. The factories in North America are, for the most part, old and dingy.
Sewing factories are the primary drivers to bring countries out of poverty by moving into countries with low-cost labour, high unemployment, and low standards of living. Sewing factories are the first to leave a country when poverty is no longer an issue.
In my early days in China in the 1980s and 1990, most sewers came from impoverished West China to work on the East Coast factories. These women were leaving their homes and families behind, and their goal was to work for five hard years and then go back home and start a business of their own. They wanted to work twelve to fourteen hours a day, seven days a week. Human rights activists used social media to voice their opinion on what they thought working conditions should be. Often, this worked against what the workers wanted. The result is women would work eight hours in one factory, and then walk across the street to work six hours in another.
There is a vast difference between high-quality technical garments and fast fashion cotton garments. Athletic apparel must function, but fast fashion only has to look good on social media platforms for one night. Sewers learn their trade in low-cost sewing factories, and, as they become more proficient, they move to technical factories where quality-control and working conditions are superior. New sewers must start somewhere and are happy to have any job that allows them to bring money to their families.
No one wants to see child labour, but if a child is not meant for school as often happens in North America, I would prefer to see that child learn a skill, work in a factory, and earn money, rather than wast- ing away doing nothing. In areas of poverty, we must allow anyone who can and wants to work to be employed. Human rights activists cannot understand the dire straits some families are in and just how happy they are to have any opportunity. All incentives possible must be given to factory owners who are willing to risk setting up in an impoverished part of the world where there is little electricity or transportation. These factory owners will only risk it if they can get inexpensive labour.
After WWII, Japan, Taiwan, and South Korea exported finished garments and were paid in foreign
dollars. With foreign dollars, they paid taxes to build foundational infrastructure. China took one billion people out of poverty in the last twenty years with low-cost labour. China’s previous one-child policy has created a demographic that does not have their parents’ drive to succeed. They have two parents and four grandparents babying them and have never been forced to compete for attention with siblings. This has the effect of pushing wages in China too high for many apparel manufacturers’ low cost clothing production. Consequently, low-cost labour has now moved to Vietnam, Cambodia, and Ethiopia.
Can you give us an outline of what the meltdown meetings were and why they differentiated a vertical company from a wholesale company?
To be a truly design-led company, I knew we had to do things much differently than they were done in wholesale. The vertical retail model works on a nine-month calendar, which let us be a year or even two years ahead of our wholesalers since we didn’t have to make samples and show them to middlemen or fashion magazines. This led to developing something we called ‘the quarterly meltdown meeting,’ which became the single most important meeting at lululemon because it set the direction for every other department.
In descending order, our line plan was built based on a series of rankings from the sales of the last quarter. Each new ranking was built onto the ones listed before it:
- Inside each category (i.e. pants), we ranked styles by percentages sold from best to worst.
- We readjusted rankings by what could have sold if we had perfect inventory delivered at the perfect time.
- We readjusted again based on what could have sold if we had perfect styles (i.e. the right number of styles in the perfect length, width, or fit).
- Then we’d readjust the rankings again, using new or old styles to use up any excess liability fabrics or trims. All excess fabric had to be used up in the next season’s line plan.
- From there, we’d readjust to show how a future-focused design team would rearrange the ranking based on their knowledge from working in the stores, leading design meetings, forecasting books, and competitor’s designs. The styles that went or remained were determined by the head of design and not the buyer. This is a control system. Before the era of lululemon, a buyer was incentivized to order what worked the previous season (buyers are naturally risk-adverse and beholden to finance, wants what is best for accurate financial reporting but not what is best for long-term demand). A design-led team might eliminate a good-selling item because the style negatively affects long-term brand value.
- Finally, we’d readjust the list to show what the production manager would change given fabric, factory bottlenecks, import duties, or opportunities. What if there is only enough fabric for four styles but the line plan asks for fifteen? Which factories are easy to work with? Which mills can guarantee fabric delivery?
We looked for bottlenecks. For instance, if the factory was using a new sewing technique with few sewers trained in that technique, or few machines that could do it, then there was no point in making many styles using that method. The goal of the meltdown meeting was to deliver product to the warehouse fifteen days before it was required in the stores.
There were also various opportunities to consider. A mill might say they could make one great fabric and a lot of it at a really low price because they have excess raw materials. Or a factory may have six lines of sewers who are underemployed because of low demand for specific machines or sewing techniques. The factory with unused capacity can offer a great price.
The meltdown meeting dictated how our line plan was developed, by taking the right amount of past and future information and combining it with what we knew about bottlenecks. There would only be a handful of people in these meetings – the merchant, the designer, the head of product, the CEO and three to five bright store Educators who could give instant validity to this creative process.
What was lululemon’s initial real estate strategy?
Starbucks and lululemon had the same customer. Our customers were willing to pay three times the going rate for better quality. The real estate strategy was simple. Go into every city and build in the same order as the first three Starbucks. Eventually, Whole Foods moved in near our store locations, and then Apple became our neighbour as well.
How did the invention of the pop-up stores come to be?
We fell into pop-up stores purely by accident. We had small, inexpensive studios in Toronto and Vancouver that were break-even within three months. The best part was that people were coming to us, and this meant we were really connecting with the community.
We would open for three days out of the week and, on the other two, our staff would lead yoga and running classes or hold design meetings. Most importantly, they would research which products our customers liked and where they most wanted to see us open another store. It didn’t even matter where we stationed these pop-up stores – on the second floor of a building, on the seventh floor, or in a back alley. What mattered was that people knew our products, knew they were helping us get them the perfect product for their community and knew we were coming.
Nothing about lululemon’s ability to reinvent retail was traditional because we didn’t know how any other retail company operated. We built a fundamental model for success based on the sales results of small pop-up stores. The sales gave us perfect confidence to spend up to a million dollars to open larger stores. We could recover the build-out costs of stores in eighteen months’ time.
The economic crisis of 2008 created a perfect time to develop pop-ups. We didn’t want to risk invest- ing a million dollars into a single store when pop-up stores cost us virtually nothing. At worst, a pop-up store broke even. It was the perfect time to develop the market by opening three hundred pop-up stores. We would keep them open for a few years and, if we chose not to pursue opening a larger store, no harm, no foul, the pop-up had cost us next to nothing.
From the data of these three hundred stores, we could determine which pop-ups would fail and which would rise to the top and become our next retail stores. That test, combined with tracking where most of our e-commerce sales were coming from, helped us better understand the lululemon market.
Around this time, I wanted to open pop-ups in Europe. I understood that market quite well, having conducted business there for Westbeach. Why not scatter around sixty to eighty pop-up stores? It didn’t matter if we made money from them or not. We had money in the bank, and we had orders with factories we couldn’t cancel as the fabric was already purchased. Given the way the economy was behaving, we had excess inventory and nothing to lose and everything to gain. Whatever sold in Europe could easily pay the salaries of the twenty-two-year-olds fresh out of university who were working in our pop up stores.
The board wasn’t on side – especially Tom Stemberg, who had opened a Staples in Germany that performed terribly. But that was an expensive big-box store, and I was talking about something small that was certain to break-even. The success of these pop-ups would cement us as first-to-market and set the brand forever. All we had to do was start somewhere.
The board was nervous, and we settled on opening a few pop-ups in the U.S. From my experience in the surf, skate, and snowboarding business, I could feel the competition in the athletic apparel industry coming like a tsunami. It wasn’t even a matter of keeping competitors at bay; it was a matter of taking advantage of this multi-billion-dollar opportunity that was occurring despite the economy. People were radically changing the way they dressed and this was 10 years prior to the COVID pandemic of 2020/21.
What concepts or inventions could be attributed to you?
As a technical designer, there is much that I am proud of having contributed to the world:
- Triathlete clothing (1979)
- Technical apparel vertical retail model (1979)
- The “streetnic” movement (1979)
- Prohibiting smoking in a retail store (1980)
- Reversible shorts (1981)
- Long surf shorts (1981)
- Dual-front chest zippers on jackets to allow for intake-outtake venting and airflow (1989)
- Vent zippers on inner thighs in snowboard pants (1990)
- Pop-up stores (1991)
- Zipper guards at the top of the zipper to solve for neck rashing (1991)
- Gator clips on snowboard pants to solve for powder climb into in boots (1991)
- Sleeve thumbholes to solve for sleeves riding up and for warmth (1992)
- Chest pockets for cell phones to ensure the wearer could access their phone in two rings (1994)
- Free in-store hemming to solve for perfect long pants made for taller girls (1998)
- Flat seaming in stretch pants to solve for rashing (1998)
- Yoga pant (Groove Pant) featured in the MoMA in 2017 (1998)
- Matte look in yoga pants to solve for “lightbulb butt” (1998)
- Diamond gusseted crotch in women’s yoga pants to solve for camel toe (1998)
- Luon 12 percent Lycra fabric to solve for transparency of women’s tights (1998)
- Rip out fabric content labels (1999)
- Removal of inner-thigh seams to eliminate rashing in running shorts (2002)
- Silver threads sewn into first-layer tops to eliminate bacterial stink (2005)
- Mindfulness model for business (2012)
- Denser, thinner threads in athletic tights to solve for athletic compression without pilling (2013)
- Retail stores with half-flush toilets and recycling (2000)
Who were the honorees of “The Holder of The Flame” award at lululemon?
This award was given to employees who stood for the vision, mission and values of lululemon; those who understood and could easily communicate the linguistic abstraction. The winner of the award was someone who would uphold the development program of transformational development and goal-setting.
Since the Award’s inaugural year in 2009, several winners were instrumental in lululemon’s story. Some notable winners included: Susanne Conrad, Shannon Wilson, Eric Petersen, Chloe-Gow Jarrett, Bree Stanlake, Erin Westelman, Delaney Schweitzer, Deanne Schweitzer, Parker Pearson, Jenna Hills, Marina Hui, Jill Chatwood, Katie Cotter, Bonnie Fung, Carla Anderson, Jesper Nilsson, Cassandra Sze, Carolyn Manning, Celeste Burgoyne (Keeley), Julie Ball, Shannon Savage, and Ben Savage.
What were some of lululemon’s key philosophies?
Lululemon was a social movement as a philosophy.
We did not understand, contemplate or spend time on women’s inequality, pay, diversity, sustainability and inclusion. In 1997, we believed these were things of the past and we operated as such. Our philosophy was to be futuristic and create the present from the future.
We were not in the wellness business; we were in the mediocrity to greatness business.
Transformational self-development created a company of people who required no extrinsic motivation. Employees became intrinsically motivated to elevate the world by spreading our development system.
We gave no discounts to celebrities.
Digital is exponentially changing the world. Businesses used to morph slowly from one business model to another. This stopped being an option in 2005. Lululemon had to keep the cash flow from one old model (yoga) while investing in the new business of running, mindfulness, or technical street apparel. To have two ideas running at the same time required a higher overhead than the old model. If two models weren’t operating in parallel, the competition would eventually catch up – which it did.
What was it like at lululemon following the murder of Jayna Murray in 2011?
2011 was a uniquely challenging year. It was also punctuated by a terrible human tragedy that struck one of our US stores. On March 12, just after eight o’clock in the morning, police arrived at the lululemon store on Bethesda Row in Bethesda, Maryland. There, they found one employee, Jayna Murray, brutally murdered. Another employee, Brittany Norwood, was still alive after having survived an apparent robbery-turned-homicide.
I met Jayna just a few months prior to her death. She was a wonderful and authentic person; as a father, I couldn’t imagine the anguish and heartbreak her parents were experiencing.
The day wore on, and the surviving employee told police that two masked men had broken in, sexually assaulted her, killed Jayna in a horrific way, then left. It was a terrible thing to happen anywhere, but it hit even harder because it was in one of our stores.
Jayna was laid to rest in her home state of Texas a week after her murder. I attended the funeral. There’s little good that can be said about a funeral where parents are burying their child – it is my worst nightmare as a father.
Over the next several days, I thought about how we would get our employees through this seemingly random act of violence perpetuated by men. Fear had rippled through the entire lululemon family. Everything we did at lululemon was about making employees feel powerful, self-motivated and part of a community. We contributed to the reward offered to find the two assailants, hoping that their arrest would be a first step toward understanding what had happened.
A week later, the story took a strange turn. Police arrested the surviving lululemon employee – Brittany Norwood – accusing her of having committed Jayna’s murder and then staging an elaborate cover-up. It emerged that Brittany had been stealing from the store, something Jayna had discovered. Brittany had previously worked at another lululemon store where she’d also been suspected of stealing. No theft had ever been proven, and, as there were no definite grounds for her dismissal, the legal system would have interminably tied us up in litigation had we fired her.
Instead, Brittany was moved to a store where her actions could be better monitored. On the night of the murder, Jayna confronted Brittany with definitive proof that she’d been stealing, and the confrontation turned violent.
I asked myself if there was anything lululemon could have done better to prevent this. We’d put cash-counting procedures in place and had policies to ensure there were at least two people present. We’d implemented systems to ensure the security and safety of our staff. I just couldn’t understand how something like this had happened. Maybe it was a symptom of the world we were living in.
Three-and-a-half months after the murder, the Bethesda store reopened, embracing and showcasing a theme of love in Jayna’s memory. Later that fall, Brittany Norwood’s trial lasted six days before she was found guilty of first-degree murder. The jury deliberated for less than an hour. She was sentenced to life in prison.
In 2003 lululemon started an organic company called OQOQO. Why did you start it and why did it fail?
During the mid-nineties, besides being introduced to yoga, I’d also been introduced to a different perspective on the environment. I’d come to see that awareness of human impact on the world would only increase as markets in the developing world strove to attain a similar standard of living as the one we enjoy in Canada and the US.
As I thought about environmental awareness and sustainability, I realized recycling, renewable technologies, and energy conservation would be things more and more people would prioritize. When we opened the first lululemon store, we did things that were unheard of in any business at the time. We installed half-flush toilets, used recycled wood floors, and put recycling bins in the stores. These actions were completely aligned with our yoga-inspired Kitsilano culture.
Then, by 2003, I could feel there was a growing demand for organic, ethically-sourced goods, borne from the same awareness about our impact on the planet. Like surfing, skating, snowboarding, and yoga, I could sense people were being pulled toward something. I wanted to address that demographic, so I began to look at organic clothing, something no one was doing in a large-scale way.
I looked at things like soy, hemp, organic cotton, bamboo, even recycled plastic – all materials which don’t use nearly as much land, water, or agrochemicals as cotton. I liked what I saw and decided that organic clothing was something lululemon should get in front of.
We developed some unique fabrics that integrated natural fibres into the new synthetic fabrics we were already using in our apparel. The initial goal was for each garment to be at least 75 percent natural, organic, or sustainable.
We began a line of organic clothing, and once sales proved there was a strong interest in these garments, I decided the idea was strong enough to exist as its own brand. We called it OQOQO (pronounced oh-co-co). Like lululemon, the brand name was fun to say and pleasing to the ear. Also, because the word used Q’s not followed by U’s, it both looked unique and was easy to trademark. We set up one store near our original lululemon store in Kitsilano.
While we were expanding across Canada and making our first forays into the States, and developing OQOQO as a new brand, we began to find the concept challenging. First, we discovered that many organic fabrics are, in fact, worse for the environment than their non-organic synthetic or natural counterparts because it takes too many chemicals to break the fibre down to make it soft.
In addition, we found the only people willing to buy organic fabrics were very thrifty women who were unwilling to pay for quality. We stopped the whole concept.
The only designers I could get involved in OQOQO were people that loved organics.
Very few people had the design savvy to make organic fabrics cool. Shannon and I knew that OQOQO would succeed if it took organic fabrics and paired them with inorganic elements like zippers and bright colours, things that our target market would want to wear. Try as we might, we could not get designers to bridge the gap between organic fabrics and the lululemon customer.
There was also a logic gap that was beginning to undermine the whole initiative. The original in- tent for OQOQO was to create great clothing that was better for the environment and more sustainable. Cotton goods, including the organic cotton we were using at OQOQO, lasted around eight months to a year. After that time those items were often tossed out.
As time went on, we found that lululemon clothing, which was chiefly comprised of inorganic material, was still looking great and performing perfectly anywhere from six to eight years after it was purchased. To be worthwhile, our OQOQO line would have to be many times more sustainable than typical clothing. It wasn’t. Especially when you consider that the chemicals used to break down and dye soy to make it usable as fabric are little better than the chemicals used to grow cotton.
In any case, we had to shut down OQOQO in early 2009. The 2008 financial crisis notwithstanding, part of the problem with getting OQOQO off the ground was timing. As with some other things, whenever we were poised to do an adjunct concept, we would experience an exponential growth spurt in lululemon. We would need all-hands-on-deck to keep pace with the growth. Anything that wasn’t part of our core line was too low a priority, and I didn’t provide the right incentives to have people spend time on a side development.
As the OQOQO experiment ended, we thought about a spin-off that was both truer to our culture and less likely to fall short of the existing technological limitations. After a brainstorming session with the top thirty-five people in the company, we came up with the idea to develop an athletic line for girls.
Unlike with OQOQO, we would be using the same fabric and the same manufacturers as our lululemon products. We had to figure out how to appeal to this different demographic. We had to think about how we would set up a store and how our Educators would interact with people who probably weren’t buying the clothes with their own money. We needed to get a handle on how to make it different from lululemon, while still staying connected to it and sharing the same high standards.
It would not be about yoga. We had to think about what activities it would support. Was it for dancing? Gymnastics? Soccer? Was it going to be for the fourteen-year-old girl, the twelve-year-old girl or the ten-year-old girl?
While we thought about these big questions, I gave the brand a name: Ivivva athletica. Like lululemon and OQOQO before it, the name Ivivva had a similar consonance and sounded feminine, vibrant, and alive. Adding “athletica” connected it to the brand from whence it came.
Ivivva was a good concept, but not great. The issue with separate men’s stores or Ivivva stores is that their consumers shop on weekends and after four o’clock in the afternoon on weekdays. The days are mostly very slow, and this makes it tough to justify retail rents. The solution is to move Ivivva and men’s into the larger lululemon stores where shoppers are mostly women who shop for both their husbands and daughters during the day.
Ivivva was created under the assumption that lululemon’s men’s clothing would be a $1 billion business by 2012. Management’s focus was taken from men and put into the much smaller opportunity of Ivivva, which turned out to be the wrong decision.
Is building a company like raising a child?
With the experience of having five boys, I can easily see the similarities between raising a child and building a business. In both cases, the first two years are dreamy and time moves quickly. Then, there are the terrible twos and then the fucking fours. At six, the children can communicate, play is fun, and the child’s (or company’s) growth is fascinating.
As the company or child moves into its teens, it starts to flex its independent muscles. Top executives have their own thoughts and visions for the company. An incremental, almost invisible struggle begins between the founder, executives, directors, and advisors. Everybody becomes an expert, and the vision gets watered down.
The eighteen-year-old rebels. It wants to get out from underneath its parents’ control. It wants the keys to the car but wants the parent to pay for gas and food. The teenager wants no oversight and has no interest in the loving coaching of the parent. The child simply cannot hear the parent, and the child (or the company) looks to outside influences (or consultants).
The child and the company feel the parent or founder is impeding their progress. The founder feels the company is being led astray by directors (step-parents or other selfish teenagers) who don’t care about the long-term health of the teenager. The child is taking drugs for short-term highs and enjoying every minute of it. The company is addicted to quarterly reporting. The step-parents, or directors, know something is wrong but do not have the desire or incentive to act like a parent or a company founder. The parent or founder is depressed because he or she sees so much of the eighteen-year-old’s potential going to waste.
The child grows up and begins to appreciate their parents’ love and values by their mid-twenties. She or he will interpret their errant and wild university days as a learning, but it is now time to be effective in life. If the company or child does not come back to the founder or parent, it is because of psychological issues, and the company or child rarely survives in a Darwinian world.
Have you ever thought about buying lululemon and or taking it private?
Yes, I have considered it, but I won’t. Lululemon has always had a high valuation, and the multiples it would take to buy it back make the possibility too risky. Lululemon cannot be bought and broken up into different entities to provide more value to the purchaser. The staggered board structure only allows three board positions to open up annually, and that, in my opinion, has inhibited a superior bid. I believe a proxy to change governance at lululemon is a non-starter because 70 percent of lululemon is owned by passive equity groups who would rather sell than get involved in an ownership struggle. The passive investors put no pressure on the company to perform or change the board structure. They vote against poor governance by selling their shares which they have done consistently from 2013 to 2017.
What allowed competitors to catch up to lululemon?
The critical juncture came in 2012/13 when non-solid-colour graphic tights came onto the market. All indications in 2010 showed prints to be the future of tights. Small graphic prints on inexpensive polyester pants solved the same issue as lululemon’s solid-coloured, nylon Luon fabric. Small graphics hid women’s imperfections, and the polyester fabric was a third of the price. Lululemon correctly refused to use polyester fabric because it maintains a bad odour and went against lululemon’s quality principles. Lululemon made only one print in the better quality, more expensive nylon. Lululemon needed to make twenty prints to meet demand and not leave the door open to competition.
What were your 2014 goals for lululemon?
In 2014, I wrote out for the board what I thought lululemon’s specific goals should be:
By December 31, 2015, $40 million would be put into “owning” mindfulness in the marketplace.
By December 31, 2016, we would design, make, and sell more styles of sports bras than any other company in the world.
By December 31, 2018, we would have the same sales as Under Armour with double the profit. We would do this by providing a better quality product at a better price. I estimated a $40 million investment would be necessary to make this happen.
By December 31, 2018, forty percent of our sales will be done through e-commerce.
By December 31, 2019, our men’s sales would be 40 percent of sales. We would achieve this through branding, product, and by focusing on “owning” hockey and rugby with technology.
By December 31, 2020, we would put twenty thousand people a year through our transformational employee development program.
By December 31, 2020, we would have a thousand stores worldwide. Of those, four hundred stores would be women/men/Ivivva combined stores and six hundred would be break-even showrooms.
Can you share the 2015 ValueEdge report on lululemon’s board of directors?
One of the first things ValueEdge examined was the number of top-level executive departures and determined it was more than that of our peer companies. “Resigning is often an unexpected event which causes more disruption in the business than does a departure due to a retirement or promotion.”
The real problem was that lululemon had taken longer than six months to fill these spots, which was simply too long. Further, they were bringing in external people, rather than promoting from within.
This proved something I’ve already discussed at length – lululemon had no succession plan for its highest levels. Instead of grooming and developing the next CEO internally, the lululemon board was driving people away. They were filling positions with outsiders who could not benefit from our original training and development, and who would further water down what was left of our cultural soup. Much of this, I believed, was due to the nominating and governance committee also headed by Michael Casey.
The ValueEdge report lauded lululemon for finally adopting majority voting for board members, but the staggered board structure was still a big problem. Not voting for each director annually, ValueEdge reported, was preventing shareholders from playing a meaningful part in the director election process. This was stopping the board from being refreshed yearly and was contributing to a lack of board account- ability. Again, these were issues I’d been aware of for some time.
The report ended with a list of detailed recommendations. Among them, it was recommended the board get more expertise in clothing retail. The current skillsets of the directors – who mostly came from strictly financial backgrounds – were putting lululemon at a disadvantage, since nobody had experience in brand and product management.
Another recommendation was to openly evaluate the potential conflict of interest presented by directors (namely, RoAnn Costin and the late Tom Stemberg) involved with City Sports.
A third recommendation from ValueEdge was to establish management development and succession plans as a way of addressing our senior executive departures. On that same note, ValueEdge strongly suggested lululemon should “allow for more executive positions to be filled with internal candidates” rather than consistently going with outside people whenever a top spot opened up.
Other recommendations included finding systemic causes for the unusually high number of corporate crises lululemon had faced (water in the soup, perhaps?), de-staggering the board to allow for annual elections of all directors, a comprehensive board evaluation process, and disclosing the rationale for the board management structure – or having a means to make the board account for its actions.
Every one of ValueEdge’s findings and recommendations spoke to a multibillion-dollar company willfully lagging behind its competitors and failing to provide best-in-class practices. I was not surprised. ValueEdge’s draft report answered my questions and confirmed much of what I’d suspected about the board.
But by now, my feelings about the board, upper management, and the overall direction of lululemon have moved beyond the quantifiable aspects of the draft report.