Jochen Zeitz: "A Brand Is Like a Living Creature"
Credit Suisse E-Magazine February
05.02.2007 Jochen Zeitz is a man with drive. He takes on as many challenges in his free time - what little there is - as he does in business. The pilot and marathoner took on his biggest quest in 1993 at age 30 when he was elevated to chief executive officer of Puma, a company that was bankrupt. Back then, the wild cat was hibernating, today its jaws are firmly locked around the global marketplace.
In Focus: What was the state of the brand when you took over in 1993?
Jochen Zeitz: It had lost its value even though it was well known. It had been hibernating for a very long time, so people forgot what it was about. That's history now.
At that point, was reviving the brand the biggest issue you were faced with?
We couldn't really focus on brand value at first because the company needed to be completely restructured and engineered as it was close to bankruptcy. After eight years of consecutive losses, we needed to create positive cash flow and generate a positive earnings stream. Parallel to that, we tried to eliminate everything that was negative for the brand, such as its low-price positioning, the fact that it was sold in undesirable distribution channels, and that it was marketed with the wrong tools from an endorsement and advertising point of view.
How long did that take?
After six months we were profitable again, followed by four years of record earnings. During those four years another challenge was reestablishing our credibility in the financial community. That was quite difficult. To do that, we also had to restore the balance sheet from minus 45 percent equity to positive 55 percent, get rid of all our debt and just put the company on sound financial footing. We had to be competitive. Six months is a remarkable turnaround, not to mention the following four years.
Can you go into more detail about what you changed first?
We just turned over every stone in the company. In order to become competitive again, we outsourced the entire production, mainly to Asia. To raise desirability we increased the average price point of our products and virtualized the development set-up. A staff cut by over 30 percent was also necessary. Additionally, we internationalized the whole set-up and closed unprofitable subsidiaries. In other words, we went the whole nine yards to turn Puma around.
Those were the weakest points of the company when you took over. What were the strongest?
The brand and the logo. The animal that stands behind the word Puma and the potential power of the logo were tremendous assets that I strongly believed in. They were what made me join Puma in the first place.
Although the Puma logo as it is today was designed in the '70s, you never hesitated to keep it?
That's right. I never seriously considered changing the logo. We kept what is the most valuable to our brand. We believed that the Puma logo had incredible potential and a name that is understood globally. The logo just needed a new story built around it.
What was that new story?
Puma had a successful history in sport and that heritage was an enormous asset. We decided to reposition Puma as a brand that mixes the influences of sport, lifestyle and fashion to increase its desirability.
Did you immediately know that was the formula you wanted to pursue?
We first needed to fully understand the Puma brand in order to decide what its potential could be for each of our five-year phases. This was not something that could be figured out within a few months. A brand is like a living creature, it changes and evolves. After managing the financial turnaround we decided to reposition the brand based on new values. Coming up with those values and implementing them took some time and it created the need for a revolutionary mind-set within the company. A lot of people internally and externally felt that Puma was solely about performance and sport. To transform Puma into a real sport lifestyle brand was not accomplished over night. First, we tested this concept in one category. Once that was proven successful, we took sport lifestyle across the company and made it our brand positioning.
What was your inspiration for focusing on lifestyle?
Consumers were looking for a less formal way of dressing and the macro trend was that people were pursuing healthier lifestyles. Doing sports was just on the move and we believed that people like to portray their individuality through an individual dressing style. As a company based in sport, we were able to bring fashion into the equation and provide products that combined design, fashion and functionality that appealed to athletes and to individuals who just wanted to wear comfortable products that are stylish.
How big of a role did innovating product design play?
The company in 1993 was very manufacturing-driven with a primary focus on functionality. We changed that mentality dramatically, making sure that Puma, although it had its roots in sport, became meaningful and desirable to today's consumers and their changing taste. Innovative designs played a very important role in that, because it was our opportunity to differentiate ourselves from other companies that had more money to spend overall.
When putting more of the focus on design, was there a risk that people might believe that performance was sacrificed?
I wouldn't say that. The consumer never had a problem with the change of focus, but the investment community, retailers and even our competitors did. They didn't think we could do both. When you talk about design in our business, you need to start talking about fashion and lifestyle and those were words that were not in the sporting goods industry's vocabulary until we proved the formula of sport lifestyle we had created for Puma to be successful. We believed that we needed to completely revolutionize our way of thinking to create value.
To start, you brought in two completely different designers, the very established Jil Sander and a skateboarder.
We decided that the Puma animal stands for power and sport, but also for elegance and individuality. That meant that there were several consumer groups that we could target. At the time, sport was defined in a very conservative and traditional manner. Our definition of sport was living an active lifestyle. Others considered skateboarding as just an activity, but we said it was a sport. Skateboarding was also a lifestyle phenomenon with untapped potential, so we created skateboarding shoes by revitalizing shoes from the '70s and the '60s in order to cater to the original look and then combined old styles with contemporary design elements. The Jil Sander cooperation successfully supported our goal to generate credibility with the more fashionable consumer by merging sport and fashion in what was then an unheard-of approach.
What exactly led you to skateboarding?
The person who at the time was in charge of our sport lifestyle category happened to be a skater. Today, Antonio Bertone is our global head of brand management.
How old was he when he came on?
He was 22.
So, you not only restructured the company, you rejuvenated it with many younger employees.
In the early '90s, age was an issue because Puma had a very old-fashioned mind-set, one we just didn't want to embody any longer. Therefore, the median age level had to drop dramatically. Now that we have created a clear mind-set, we would never say that age matters. We have established a corporate culture, and anybody who joins the team, regardless of age, must fit into that culture. In general, people today are a lot more open-minded than 15 years ago.
You became the CEO for Puma at age 30. Was it difficult to gain acceptance?
When I became CEO, I didn't care much about my age, although the press and the public made a big deal about it. I'm sure there were a lot of people in and outside of the company who asked how a 30-year-old could take on that much responsibility. This was absolutely unheard of at the time in Germany, where you had to be at least 50 to be considered for a board. Looking back, my age did help me because I wasn't stuck on the way things were. I was able to see things more freely - without the baggage that age sometimes brings.
Did Puma's German roots make it easier to reestablish the brand in Europe than in the US where Nike is the leader?
The brand had to deal with a lot of negative baggage in Europe. That wasn't the case in the US because the brand had completely disappeared. Building on nothing is hard, but building something surrounded with negativity is also very difficult. We had to establish different goals in each region, but ultimately, I would say it was as challenging in Europe as it was in the US.
How important is the Asian market to the brand?
Very important. Asia is a very influential and growing market. In fact, Puma has always had a very strong presence in Asia, in particular in Japan. In the early '90s it was still a very strong market for us because our licensees had decided to part from the mother brand and avoided most of the mistakes it had made by running the business independently. They managed rather successfully, so we've been well positioned there. Trendsetting is generally very important for the Asian consumer and that has helped us over the years to expand our overall presence in the Asian markets.
Are you marketing the brand differently in Asia than in Europe or the US?
In principal, we have developed a global approach with some local adaptations.
Has the changing consumer spending in Asia had an influence on the brand?
Asia is a very diverse region and we can't look at it as a whole. Japan and China for example are at a completely different stage economically. The Japanese consumer has a long history with luxury goods and with sports goods, while the Chinese consumer is just building purchasing power in order to get in touch with those types of businesses and products.
And how does India factor in?
It's an important growing market for us - the same as China. That is why we set up a subsidiary in early 2006 as a long-term, highpotential market for Puma.
Asia holds a lot of potential for Puma, but does it also present threats, such as pirating?
Of course, counterfeit products also affect Puma, but we have built strong protection against this development and I think global legislation and the reinforcement are getting better by the month. The fact is, when you are a desirable brand, you will always have to face that challenge.
What other potential threats are there to the brand today?
Companies are always challenged by the future. Our business is product -driven, so you are only as good as the last product line that you launched. Our biggest threat is not being able to keep up with your own success. That's why we have to innovate every day, every month and every season.
Innovation is one of your corporate values. How do those corporate values influence the brand?
If you want to be what we are, you have to have an open attitude toward innovation and to everything you do. You need to live what you want your brand to represent. Therefore, I think our corporate values are very important. The values and the culture that you establish ultimately have an influence on the brand and vice versa.
How do you define your corporate culture?
It is a culture defined by teamwork, openness, self-belief, entrepreneurship, no politics and no bullshit.
Is that your personal management motto? " No bullshit"?
(laughs ) I guess it starts at the top.
Jochen Zeitz broke a four-generation family tradition of studying medicine to attend the European Business School, where he graduated in 1986 with a degree in international marketing and finance. His first job in marketing was with Colgate-Palmolive in New York and Hamburg. In 1990, he joined Puma as business manager of marketing for footwear and, just a year later, was made head of marketing. Two years later, at the age of 30, he became the youngest chairman and CEO in German history to head a company on the German Stock Exchange. Six months into his first year as CEO, the company delivered its first profitable performance since 1986. Today, Puma is one of the highest ranking athletic apparel companies in the world.
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