How tech thinking, not tech alone, saved Levi’s

Profile picture for user gflood By Gary Flood September 27, 2018
Summary:
We didn’t escape going broke with fancy new toys, says the company, but trying to become a 145-year old start-up

levi jeans
Without a doubt, technology is a transformative and incredibly powerful tool for the enterprise. The problem is that we sometimes drink our own Kool-Aid a little much, and believe no business can really turn itself round without some spectacular digital intervention project.

A case in point is what’s been quietly happening at one-time default standard for blue jeans - Levis, a company that was once in serious trouble but which has managed to grab itself a future down to mainly, old-fashioned business re-thinking.

From the 1960s until 1996, we could do no wrong and were top dogs. Then, the wheels came off. We were $2bn in debt and had reached the stage in our decline which Jim Collins would call the last one - ‘capitulation to irrelevance or death’.

So says the company’s European Executive Vice President Seth Ellison, who has some pretty brutally honest things to say about just how much of a hole the once ubiquitous brand had got itself in - stuck in the middle between expensive, but desirable designer brands pressing from above, and cheap, but fashion-conscious contender brands from below.

We had three sorts of buyers: the ones who were still with us, the ones who had left us - and the generation we’d managed to skip who didn’t know about us at all.

Ellison, a veteran of other major consumer brands like Quiksilver and Nike, says he was reluctant to join the struggling company when initially approached, so sceptical was he of the prospects:

We were basically nearly broke, while everyone assumed our best days were behind us. When I came on board, it was even more messed up than I thought - far too many meetings about improving process and not about thinking about what the consumer wanted: we were only managing to actually shop about half the orders we were getting, for example.

We were at the at crossroads where you either accept you’re going to be commoditised, or you reinvent yourself. I was having to tell people, don’t assume we’re going to be bust in two years - assume we’re going to bust tomorrow morning. We have to do things today to save the company.

‘Rock’n’roll on the outside - Swiss watch on the inside’

The good news is that Levi’s now has a pretty great turnaround story, recording its best results in decades in the past two years, very high shareholder return figures, 20% growth in the European business since the turnaround started in 2013.

Impressive stuff, but Ellison is not the kind of exec who says it’s down to smart use of computers alone:

We have three SAP systems worldwide that don’t really talk to each other, have had a lot of work to do getting our data centrers up to shape and have retail platforms that were set up for 200 outlets when we now have 900 in Europe. You can spend so much on your back-end processes that you end up spending less on marketing, which is fatal for a consumer brand.

For sure, technology did eventually play a part in the revival of the brand, and will play a big role in the future, as we shall shortly see. But what really seems to have been the deciding factor in the Great Escape from corporate extinction here is more the adoption of tech-like thinking - something he characterises as the company becoming a 145 year old start-up (as, famously, the idea of securing working men’s clothes with rivets happened in 1853):

The brand is back and so has the consumer, and we think one of the best brands of all time is where it should be again. How did we do this? By adopting start-up thinking and tactics.

By this, Ellison means going back to trying to think of the future instead of the past, being prepared to pivot and try new things, and even be prepared to fail. Markets that it had neglected like women and younger buyers immediately became a focus of interest at last, with a lot of work going into actually talking to them and starting new business lines for the groups such as upper body apparel (T-shirts) and supporting easier, in-store, customisation of what they bought:

We also have made a big commitment to testing. We test, we kill things off now that don’t work, we iterate, we have a new store that’s a total experiment in Amsterdam just for Gen Z we have set up to see if it works. We have two new digital showrooms in London and Paris, and we have expanded the range of sizes - we actually once used to assume women would wear exactly the same thing as men, if you can believe it.

Ellison’s contention is that start-up thinking and bravery is what has settled the company back onto a growth path, but he also is happy to say some basic process re-engineering around the supply chain has happened too:

We see ourselves as rock’n’roll on the outside and a Swiss watch on the inside. You have to be both.

The programme, then, has won back market share and relevance, supported by a lot of creative advertising and commercials that have won some younger interest, but that tech wasn’t a big part of the narrative. But, that’s changing, it seems:

We spent three years of R&D on working with laser, to the point where we are market leaders in giving you any finish you want with it - a process that results in better products and is also much more sustainable. We have projects going on in Europe with AI, robots and analytics, but it’s all early days - we’re building the right foundations.

Levi’s will never be the best at e-commerce or warehousing and so on. But what we will be the best at bringing it all together and being the best omni-channel player in the market - and continuing to do that will be our ultimate competitive advantage.