The New York Times carried a recent report on the struggles The Gap, the clothing retailer, is facing in trying to refresh its brand. It stock price fell from $53 dollars in February of 2000, to $9.50 in November of 2008. It is now at $28, half its peak price. While it once dominated retailing by creating a clothing style that made informal dress look fashionable, it seems to have lost its sweet spot. Interestingly, a study of Gap stores, by students in a design oriented MBA program, found that they were uninspiring physically, and that the sales clerks seemed bored and disinterested. Contrasting Gap stores with competitors such as Abercrombie+Fitch, Anthropologie and American Apparel, the report suggested that employees on the front line lacked passion for the product. (http://www.nreliu.com/content/work/docs/HLiu_Gap_Proposal.pdf)
It is interesting to ask how a brand goes stale and what we can learn more broadly from this kind of experience. A beginning can be a foretelling. The Gap was founded in 1969 and was called “The Gap” because, by dressing young people in denims and jeans, it was emphasizing the generation gap. In this sense The Gap both rode and interpreted, through fashion, a major cultural movement. As the "generation gap" term suggests, this movement was expressed through the reworking of authority relationships, stimulated by the declining social and psychological distance between parents and children, bosses and workers, and leaders and followers.
This process of reworking has taken decades, and we have not yet seen the end of it. This may help explain how The Gap was able to sustain its leadership and differentiation by for example, establishing Old Navy and buying the Banana Republic, while keeping The Gap brand fresh. It was offering a sustained interpretation, through fashion, of how the meaning of authority was changing. By the year 2000 The Gap was the largest pure apparel company in the world.
So why did The Gap brand grow stale, and what broader lessons can we draw from its experience? The Times article emphasizes the decisions taken by its current CEO, Glenn Murphy who was hired by the board in 2007. Murphy had a strong background in retail, but in a decidedly non-fashionable business-- drug stores. To improve The Gap’s fortunes he focused on cost cutting, efficiency, inventory control, and promotions to increase same-store sales. Indeed, one explanation for The Gap’s troubles is that cost cutting undermined quality. As one person quoted in the Times article notes, “Finishes, washes, all the things that gave a garment more character — trims, sweater yarns, were all switched to lower-cost options.”
But I want to suggest a different explanation. Though Murphy increased The Gap’s efficiency as a retailer, he left the fashion side of the business alone. When asked why he had taken so long, some 4 years, to put a leadership team in place on the design side, he answered, “It’s in the company’s and my best interest to allow the creative team to do what they think is right.”
Perhaps his response reflects the practice of judiciously delegating the work experts have to do, to… the experts! After all, we don’t expect hospital administrators to be the best doctors, university presidents to be the best scholars, or orchestra CEOs to be the best musicians. On the other side, these enterprises are at their most vital when there is a strong symbiosis between the creative or scientific leaders, and the organizational leaders.
One is reminded here of the relationship between General Leslie Groves, the director of the Manhattan project- the project to build the first atomic bomb- and Robert Oppenheimer, its scientific director. Groves appointed Oppenheimer despite the fact that the latter had little administrative experience and was rumored to be a “fellow traveler” of the Communist Party. According to Robert Norris, he saw in Oppenheimer a man of genius but of thwarted ambition whose drive for recognition could be harnessed to Grove’s responsibility for building the bomb. “Part of Groves' genius was to entwine other people's ambitions with his own. Groves and Oppenheimer got on so well because each saw in the other the skills and intelligence necessary to fulfill their common goal, the successful use of the bomb in World War II.” (http://www.atomicheritage.org/mediawiki/index.php/The_Unlikely_Pair:_General_Leslie_Groves_and_J._Robert_Oppenheime) My colleague, Tom Gilmore, describes this as a symbiotic relationship between “church and state.” One hypothesis is that Murphy’s comment reflects a wish or desire that he not be held accountable for building and sustaining such a relationship.
The fashion business may be particularly demanding on this score. At its best, fashion expresses a culture’s basic questions about authority, the differences between men and women, the meaning of the body, the salience of taboos and the tension between the sacred and the profane. When fashion is linked to these underlying issues, the resulting products reflect not only a designer’s talents, but also the synchronicity between the designer and his or her wider cultural milieu. It would seem that a CEO in the fashion business should take special care to tune in to this culture, seek out such designers, and build strong relationships to them.
There is a complementary issue that is important, and that is the distinction between the “primary task” of a business and the business of making money, a distinction my colleague Chatham Sullivan emphasizes. The former focuses on how the company creates value for its customers, the latter on how it makes money by creating this value. Facing economic difficulties, a CEO can lose sight of the first and focus only on the second. Creating value is risky, but making money is predictable within limits. For example, you just cut expenses. This approach could work for drug stores, but in the world of fashion this can be a self-defeating process. This may be one reason why The Gap stores became increasingly drab, why front line employees were demotivated, and ultimately why the clothing lost its luster. The Times quotes a former Gap designer reflecting on Murphy’s leadership, “If there were six things you used to do on a T-shirt, you’d do three or two.”
We might propose that all organizations lose their romance after a certain period of time. Perhaps they have extended honeymoon periods when founders first light upon an idea and implement it through a business or delivery system. But The Gap’s experience sheds some additional light on this process. It suggests that leaders will cast their businesses as routine and ordinary to defend themselves against the risk and work entailed in keeping a business concept alive, in linking church and state, and in staying connected to the wider culture. Making money becomes an end not a means.