Key to Burberry's doubling of revenue and profit in the last five years has been re-focusing on the iconic, core trenchcoat, according to this HBR interview with CEO Angela Ahrendts. Thanks to Ian Norman of Nexus/H for the tip-off.
When Ahrendts took over as CEO in 2006, the company was growing at only 2% a year. She quickly concluded that Burberry had stretched too far from the core: "It had lost its focus in the process of global expansion. We had 23 licensees around the world. We were selling dog cover-ups and leashes... a whole section of kilts. Together they added up to just a lot of stuff—something for everybody, but not much of it exclusive or compelling."
Here are some of the key insights from her story of transforming Burberry bang in line with the sub-title of the new Grow the Core book: "How to focus on your core business for brand success"
1. Remember what made your famous
Ahrendts did what we always do on projects: she looked back to see what made the brand famous in the first place:
"For more than a century the Burberry trench coat was cool. But when I became CEO, outerwear represented only about 20% of our business. Fashion apparel and check accessories were leading our strategy.
It’s not unusual for a luxury company to be born from a single product and then diversify. Louis Vuitton began with luggage, and Gucci with leather goods. But each continued to earn the majority of its revenue from its original core products. Burberry wasn’t capitalizing on its historical core. We weren’t proud of it. We weren’t innovating around it.
2. Re-focus on the core
Re-focusing on the core was key to the growth strategy, as Ahrendts comments: "We would reinforce our heritage by emphasizing and growing our core luxury products, innovating them and keeping them at the heart of everything we did."
It is interesting to read that this strategy was met with some resistance inside the company: "I have to admit that some managers were cynical. A lot of them had been at Burberry for a really long time. I’m sure they left saying, 'Focusing on trench coats—that’s our strategy?' " Re-focusing on the core isn't as sexy as brand stretching, and can even seem basic and boring. But it can be highly effective if done well.
3. Refresh the core
Stronger creative leadership was key to re-focus on the core. Back in 2006 there were separate design teams in Hong Kong and the USA. Ahredts could have tried to engage and align these teams to get them on board. Instead, she was much bolder. She closed down these teams and centralised creative leadership in London under Christopher Bailey, acting as a "brand czar.” Ahrendts comments that: “Anything that the consumer sees—anywhere in the world—will go through his office. No exceptions.”
The same centralisation of creativity, with uncompromising brand standards, has also been key to success at Gucci with Tom Ford, and Apple with Steve Jobs.
Re-focusing on the core required a lot of effort internally to align the sales teams' efforts, and help them to sell the higher priced trench coats rather than "easier" sales of cheaper items like polo shirts: "We created videos to demonstrate Burberry craftsmanship. We equipped our sales associates with iPads. We knew that beautiful, compelling content would connect customers to the brand and our iconic trench."
6. Product passion starts within
My favourite bit of this brilliant story concerns the wearing of trench coats by leaders inside the business. When Ahrendts arrived she was shocked by what she saw as top managers arrived at her first strategic planning meeting: "They'd flown in to classic British weather, gray and damp, but not one was wearing a Burberry trench coat. If our top people weren’t buying our products, how could we expect customers to pay full price for them?"
Contrast this with how the CEO describes the company today: "If you ask a Burberry senior executive how many trench coats he or she owns, the answer is likely to be eight or nine. As for me, I can safely confess to owning a dozen. They’re not just raincoats anymore. They are the foundation of a great brand and a great company."
In conclusion, this has to be one of the best examples of how to re-focus on the core business for brand success. As Ahrendts beautifully sums up, "Today it’s taken for granted that the trench coat must remain our most exciting, most iconic product. It guides all our decisions. Our sales associates understand it. This product is who we are."