WHAT CAN BUSINESS FAMILIES LEARN FROM THE CREATOR OF LITTLE BLACK STRETCHY PANTS?
Article | February 2019 | by Peter Creaghan
We love great books about business, and we especially love great books about family-owned businesses. We believe the values and ideals that form the heart of great family businesses are something to be celebrated, and we’re always on the lookout for more inspiring stories.
Our most recent favourite is Little Black Stretchy Pants, an unorthodox and remarkably candid memoir by an iconic Canadian entrepreneur – Chip Wilson, the founder and creator of lululemon.
Although lululemon is a public company now, and Chip himself currently owns only 15%, at its core the company’s success is due to the family values and culture instilled by Chip from the beginning. When the company eventually does go public, and then gets taken over by the financial people, those “family values” (and Chip’s patience) get put to the test.
The story reads like a dramatic novel, a mythical journey, where our hero starts out to impart lasting change in the world (Chip’s mission for lululemon was to “provide components for people to live a longer, healthier and more fun life”), and then runs into a great tragedy – the loss of control of his creation to private equity owners, a saga that’s still unfolding today.
The building of lululemon is a fun and engaging read – and full of practical lessons for both business and life. I love learning about these lessons, for all the reasons I love great business books. To me, though, the most engaging part of the story is Chip’s recollection of selling and going public in 2007 – and then slowly, painfully losing control of the company he created to “corporate money guys” who have a completely different agenda.
The ideals and principles of a visionary company infused with the values of its founder loses its “soul” – all because the new owners are driven more by short-term financial results than building for the long haul. It’s a story for the ages, and a cautionary tale of what can happen when “traders” take control from a true business builder.
What’s evident, along the way, is that Chip created lululemon on the foundation of some core building blocks, including:
1. Intense customer focus. Chip created lululemon products by always keeping in mind the persona of the 32-year-old “Super Girl” – young, educated, working, perhaps not yet married or with a family, vibrant, health-conscious. He never lost sight of Super Girls as lululemon’s target customer, and regularly hosted focus groups in which they offered real-time input to new product designs. It’s an inspiring example of “know your customer.”
2. Dedication to craftmanship. Lululemon’s commitment to quality – pure craftmanship in developing products for the Super Girl – was relentless. Chip constantly looked for ways to improve the fabric of the clothing, how it felt to wear, how the moisture wicked, the subtle placement of the logo, the tiniest of details. Chip wasn’t just an entrepreneur, he was an artist – carefully paying attention to every stitch in every product he created.
3. Commitment to culture. All of this was rooted in Chip’s most fundamental building block of all – instilling a culture of creativity, curiosity, inspiration and “transformational development” at lululemon. Where clear, measurable goals kept everyone accountable. Where customers were “Guests.” Where salespeople were “Educators” helping Super Girls to understand and appreciate the product, and to purchase with confidence.
These are the kind of core values that make up the heart of every great family-owned business. And it’s what defines them and makes them special. Sadly, lululemon’s corporate owners appear to have compromised Chip’s building blocks at practically every turn. And, as he spell out in detail in the book, the proof has shown in the company’s financial performance. For the five-year period from 2013-2018, lululemon delivered an annualized return of 1.4%. Other results for the same period were 16.9% for athletic competitors (like Nike, Under Armour and Adidas) and 18.9% for the NASDAQ overall.
We salute Chip for sharing his story (and some of his hard lessons learned) so honestly. Here at CMG – going back to our own founder, Frank Creaghan – we’ve always believed in a commitment to customer focus, craftmanship and culture in our own unique way.
Like Chip, we see these as important cornerstones of great businesses, and we are saddened when founding families sell or lose control. It’s one of the reasons why we stand for – and continue to work in support of – Canada’s business families maintaining ownership and control over their companies for the long term.
If you get a chance, read Little Black Stretchy Pants. We think you’ll find it worthwhile.
Peter Creaghan is a CMG co-founder and partner. He develops specialized funding strategies for family business transition plans.