"Never Ask What Is Or Was, But
Always Ask What Can Be"
7 companies in 28 years-a record that would do an MBA proud. And 90 countries in 9 months. Another record-this one would do an explorer credit. Only, Carl J. Yankowski is neither. Reebok's new CEO is hoping that this experience, across categories as varied as industrial photography and beverages, and his newly-acquired knowledge of local cultures will help him refurbish the Vector. BT's George Skaria caught up with the peripatetic CEO on the Delhi-leg of his get-to-know-the world trip for some insights on how he plans to do it. Excerpts:
Q. Mr Yankowski, what are the factors driving tomorrow's trends today?
A. First, customers across the world will become more sophisticated. The customer today is much more sensitive to product value. And brands. Second, communications is changing. Old mass marketing and distribution techniques will change in the future. With the advent of the Net, companies will be able to focus on an individual through electronic communications. Third, the personalisation and customisation of products will assume more importance.
When you buy a car, you have a choice of different colours and styles. The same thing will happen in the footwear industry: products will be manufactured in a way that they can be quickly turned around exactly as desired by the user. This can happen both through the retailer, and, electronically, directly to the customer. The next element: new manufacturing techniques, which will automate some of the labour-intensive processes that we have today. This will facilitate 2 things. One, localisation, so that it will be cost-effective to manufacture in both high and low labour-cost markets. This will change the face of our industry.
The other issue, which will support this, is that technology in the shoe will itself advance. If you think about it, in the 1950s, 1960s, and 1970s, the basic shoe was the sneaker. In the 1980s and the 1990s, we discovered segmentation, which meant we had running shoes, walking shoes, tennis shoes, and adventure shoes. And now, in 2000 and beyond, we will shift to the era of personalisation of products, and focus the benefit of technology on the product. You needn't have laces; you needn't have the opening on top, but at the back; you don't have to have full sizes or half sizes, you can have third sizes. Or custom-made shoes to the nearest millimetre.
How do you think all this will change the way companies function?
In 2 ways. The corporation will have to think less about mass-marketing, and more about individual marketing. Actually, it is mass personalisation, which means that you have to pay more attention to an individual's needs. That will also change marketing because, as opposed to marketing to a broad group of people, you will then have the ability to reach individuals through such devices as the Net. So, for example, if we know that someone buys basketball shoes, we can inform them by e-mail when the next generation of shoes will be in the market. It will also mean changes in the financing of the business because, if it is highly-automated and not labour-intensive, it will mean that the capital required will be less. Unlike today, you will be able to build smaller plants.
How do companies keep track of fluid trends, like fashions and fads?
You do it at 2 levels. At one level, you talk to people all the time. You should really know your customer and your demographic groups. At another, you have new electronic media, which means you can pinpoint messages to different segments so that you learn more quickly where specific trends are developing in mass markets. Then, you can break them down into specific sub-markets.
We know that, in the business of marketing, tomorrow's trends are being implemented by somebody today. So, the trick is to find out who the opinion-leaders are, and what they are doing today. On the other hand, you can create fashions too by coming out with great ideas, and showing them off. So, you do both: react and pro-act.
So, how does innovation work at Reebok?
We do this by creating trends. Let me give you a specific example from the US. We created the DMX technology which is, basically, about moving air with valves. Customers had merely told us that they wanted greater comfort, but they did not tell us that they wanted valves. So, we created the concept, marketed it, and, in just the second year of its launch, 40 per cent of the people in the US know about DMX. And it is now cool to have DMX. So, you start with a consumer benefit, underline the technology, market it as the cutting-edge, and then, it becomes cool.
There is a certain similarity creeping into the strategy of both Nike and Reebok. Where will the differentiation come from?
Personally, I feel that, to some extent, Reebok has copied Nike's approach too much globally. But that is my personal opinion. In the next 2 years, we will develop the humanity positioning, which will clearly differentiate us from the competition. We also plan to dramatically improve the design of our shoes. A new Chief Design Officer has come on board. I want our product to be so distinct that if I take off the name and the logo from the shoe, you can still tell it is a Reebok. Just as we can take off the name and logo of any car, and still know which one it is.
Essentially, we are talking about a design character. If you think about it, the humanity positioning is our brand character. What I want is a complementary character that will be unique, and set us apart. Frankly, when I walk down the street, I cannot differentiate between a Nike and a Reebok today. It is also my hope that we will have a more global approach than Nike. To some extent, both companies have focused on the US market, and sold overseas as if through an international sales function. They have not been truly global. You will now see an increasing amount of focus by us outside the US whereas, in the past, most of our focus was within the US.
How will you ensure that?
In my first month on the job, I restructured the company into 6 strategic business units-similar to what ge did when I was there. These business units are for performance footwear, classic footwear, kids footwear (a major growth market), apparel, business development, and retail. I took the best people we had, and staffed half of them. I took the best fresh thinkers I could from outside to staff the other half. Each of these business units has global Profit & Loss (P&L) responsibility for its area of business. Now, each of these managers is responsible for managing their global business, which means that they have to allocate business between the developed and developing countries, and be accountable for that.
Suddenly, our senior management has started travelling around the globe. That is good because they are learning about the global market. We now recognise that we need to develop high value, quality shoes at different price-points for the developing markets. Our manufacturing people were in India to expose a line of such shoes to the top managers here to see if we could expand our distribution and reach.
All this came out of 3 things: my own travels, my receptiveness to our international managers, and my 2 global video-conferenced meetings every month. Everybody in the organisation around the globe hears and sees the same thing. This is new for our company. And I have actually participated in these meetings: from Tokyo and San Paulo to Johannesburg. Wherever we are in the world, we just sit down twice a month, talking about our businesses.
How will the changes in communications technology and the Net's emergence impact business structures?
I don't think anyone has a full answer to that. I do think that the retailer is still going to play a role because there are some people who still want to feel, touch, and physically buy a product. That will never go away. It might, probably, change. The retailer may play the role of a demonstrator, if you will, and take a different piece of the profit from the value chain because his role will be different. Over time-we are already seeing this in the developed nations-the retail market gets saturated. This means that there will be some consolidation.
I was amazed when I joined the footwear industry and walked into shoe stores in the developing and developed nations. There were so many that I could not tell the difference. I call it the wall-of-white effect. I had to rely on the salespeople. I can invest hundreds of millions of dollars in advertising, but the salesperson still plays a critical role. With new communication techniques, we can present a better story of our products directly to the customer. Let me give you a simple example. I can put a small magnetic stamp on the bottom of every demo shoe in a retail outlet. The customer can take it, move it over a transponder-type device, and automatically see and hear a playback over a DVD or a CD-ROM on the benefits of that particular shoe. You won't even need a salesperson to intervene.
This means that companies will have to listen more closely to the customer. How do you do this across the corporation?
Simple. We have created 5 new operating principles. First, focus on external and internal customers. Second, innovate and take risks. Third, never ask what is or what was, but always ask what can be. Be a dreamer. Fourth, always exceed your customer's expectations. Finally, I want to emphasise the at cause versus at effect factor. If you're sitting at a fountain, with a cup of coffee, saying: ''Did you see how Carl messed that up? I can't believe how stupid he is! Why was he hired for this job?,'' that is being at effect. Being at cause is saying: ''Carl really messed that up. But he is a smart guy. Why don't we take him out for lunch, and share our experience with him?'' That is the culture only some companies have developed. We are also trying to build team-orientation across the company.
Can you do so across the globe?
I am cataloguing a global matrix of best practices for Reebok. No country has got all the elements of the business-mix perfect. There are excellent best practices in country after country, which, often, are never shared with the rest of the world. I am also trying to find a way by which various people around the world will take on the responsibility for projects globally instead of focusing exclusively on their own functions.
As CEO, what does it take for you to make such dramatic change happen?
Four things. First, articulate a clear vision for the company. Every CEO has to clearly articulate where the company is going. If you don't tell your people where you are going, they won't know how to get there. Angel Martinez, my Chief Marketing Officer, says that even if you don't know you're supposed to head north, how do you know you're supposed to go east, west, or south?
Second, you need to involve them in the vision. This is done through lots of communications. Micky (Muktesh Pant) gave me an hour-and-quarter to talk to all the senior managers of Reebok India to explain my vision to them. Then, one by one, I went around the room asking everybody if they agreed or disagreed with it. I can now honestly say that this is not my vision, but our vision because we have shared it.
Third, you have to be a good motivator. Once you have the vision and the alignment, you have to make sure that everyone is motivated. It is not always easy. To do this, you need accountability. So, our SBU structure reinforces the accountability dimension. Everybody now talks about the P&L and accountability. And knows how they will be measured. Management systems and the ability to track the business financially at the global level and by segments and areas is an important part of this. I have always said that you cannot manage what you cannot measure.
The other element which I focus on is human resources because having the right people with the right thinking in the right jobs is terribly important. This is why I travel so much to ensure that I personally have the opportunity to learn more about each country. I try to know and ensure that everybody from the janitor to the board of directors is saying that this is the direction in which Reebok is moving. Then, everyone is proud to move in the same direction. It is as simple as that.
Thank you, Mr Yankowski.
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