What could be more inspiring than the
melding of cool and sport?
hen Jochen Zeitz took the helm of the German sports shoe maker Puma
in 1993, his first priority was survival. The company had gone through
four chief executives in as many years. After eight straight years of
losses, it was mired in debt and was being hopelessly lapped by
industry leaders Adidas, Nike, and Reebok.
W
Worse, no one expected Zeitz to succeed. At 30, he was an apprentice by European
standards, the youngest CEO of a publicly held German company. Manager magazine
predicted he would “crumble under the pressure.
Reminiscing, Zeitz said recently, “When you look at the photos, you think, I was so young.
How could anyone give me so much responsibility?” But as Puma’s marketing manager,
he had made a solid pitch to the board, and the directors saw no better choice. Luckily,
control of the company was then in Swedish hands; German owners never would have
taken a chance on him, he says. “At the time I didn’t feel scared or anything,” he recalls. “I
was just very excited.” And Zeitz did what was needed: He launched a classic
restructuring that peeled away layers of bureaucracy, laid off 400 employees, closed the
German factory, and moved production to Asia. Within three months, Puma was showing
a profit.
But all that, Zeitz knew, was merely emergency surgery. Puma had survived, but if it were
to succeed, much less compete with Adidas and Nike, it needed a long-term strategy.
Above all, it had to inspire its customers to forge a tight and lasting connection with the
company. Zeitz found his strategy – and the way it has worked to make Puma the world’s
third-largest sports apparel company is a classic story of inspiration and authenticity.
If the shoe doesn’t fit
Puma’s long conflict with Adidas amounted to fratricide. The companies were founded by
brothers, Adolf and Rudolf Dassler, who had inherited their father’s shoe business in the
tiny Bavarian town of Herzogenaurach in the 1930s. They scored an early victory when
Adolf, known as Adi, took a suitcase full of track shoes to the 1936 Berlin Olympics and
persuaded America’s star, Jesse Owens, to wear them during his triumphal refutation of
Adolf Hitler’s racist creed. But the brothers fell out. By one account, Rudolf became
convinced that his brother had contrived to have him sent to the front during World War II,
and Rudolf retaliated by telling the victorious Allies that Adi had collaborated with the
Nazis.
Despite their feud, the brothers cohabited in a villa with their families until 1948, when
Rudolf and the workers loyal to him split off to form the company that became known as
Puma. Adi renamed the original company Adidas, and Herzogenaurach became a town of
warring factions, with loyalists on each side who wore only the “right” brand of shoes, kept
to their own stores and taverns, and sometimes refused to speak to people on the other
side.
Over the years, the two companies competed viciously. They sponsored dozens of
professional teams, especially in soccer, and waged bidding wars for star endorsements.
In a move that still echoes in Olympic competition, they shrugged off the rules and went
after potential medallists with cash and favours. In her 2008 book Sneaker Wars, author
Barbara Smit reports that during the 1968 Olympics in Mexico City, Adidas agents
somehow managed to get Puma shoes impounded by Mexican customs and may even
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have arranged for a Puma representative to be arrested and jailed. The intensity of the war
between Adidas and Puma seems to have blinded both to the rise of Nike and Reebok in
the 1970s, and the German companies lost ground. Adidas’s US market share dropped
from 60 per cent to just 2.5 per cent in 1990, and Puma fared even worse. The heirs of
Adolf and Rudolf got along no better than the brothers had, and both companies passed
out of family control.
These days, Zeitz and current Adidas CEO Herbert Hainer take the competition a good
deal less personally. But the rivalry is still there, and it irritates. Adidas bought Reebok in
2005, giving it a 26 per cent share of the global market against Nike’s 33 per cent. By
contrast, Zeitz’s solo strategy has clawed Puma back from near-oblivion to a 6 per cent
market share, with sales of $3.2 billion – and he’s determined to gain enough ground to
make it a genuine three-way race again.
Back in the early 1990s, when he settled on his strategy, Zeitz knew that head-on
competition in the classic sports shoe market would be a losing game. Puma was simply
outgunned by the big players, which could sponsor more and better teams and buy
endorsements from bigger stars. So he bet big on an untried gambit to inspire a wider
universe of customers, stretching beyond sports: Puma would focus not on the
performance of its shoes, but on fashion for people who cared about performance. “We
had to position the brand as edgy and design driven,” he says. “By doing this, we
changed the formula of the industry. We created the term sports lifestyle.” Despite the fact
that no one knew what that meant, Zeitz set up a new sports lifestyle division. And he hired
an uninhibited 21-year-old skateboarder, Antonio Bertone, to run it and experiment with
fashion innovations.
For all the company’s diversity and fearless experimentation, Zeitz is highly conscious of
its roots in the sports shoe business, and he has been careful to preserve the brand’s
authenticity with real sports fans. As his treasury has expanded, he has moved back into
direct competition with Adidas and Nike by sponsoring 32 national soccer teams (12 of
them in the latest World Cup competition, 5 in the European championship) and
supporting star athletes whose endorsements sell shoes. In a marketing triumph at the
2008 Beijing Olympic Games, Jamaican sprinter Usain Bolt won three gold medals
wearing Pumas – and then took off the golden shoes and kissed them while
photographers snapped away. “It wasn’t something we staged,” Zeitz said later. “He did it
because he really identifies with Puma.”
August 2009.
Jim Champy, Chairman of Perot Systems’ consulting practice, is recognized
throughout the world for his work on leadership and management issues and on
organizational change and business reengineering.
This is an excerpt from INSPIRE, the second book in a series of compact volumes on the
key topics of strategy, marketing, managing people, and operations. Taken together,
these volumes deliver the most current intelligence available on how to succeed in today’s
brave new world of business. That’s because they are rooted in the actual experiences
and insights of a select group of companies that have found new and better ways to
innovate and grow in spite of our challenging economic environment.
To find out more about Jim Champy and to order the book, please visit
http://www.jimchampy.com
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