CEO's Leadership Helps Levi Strauss Succeed

When Chip Bergh became CEO of Levi Strauss in 2011, he soon discovered that the company's financial condition was unexpected. After almost three decades of managing brands for Procter & Gamble, Bergh expected that an icon like Levi's would have greater financial strength. Levi's proudly notes that its work pants became the first blue jeans in 1873, when the company and its partner, Nevada tailor Jacob Davis, received a patent for Davis's idea to secure denim with rivets so the clothing would hold together under stress. Like the sturdy apparel itself, the brand has weathered the decades and developed a worldwide image associated with the freedom, hard work, and wide-open spaces of the American West. But sales at the privately held company, which had climbed to a peak of $7 billion in 1997, fell to $4.1 billion in 2002, after which they bumped along below $4.5 billion annually. Consumers respected the brand, but when shopping, they chose up-market brands or even yoga pants. Worse, when Bergh asked the company's top executives about their vision for the future, he found little evidence of a clear strategy or sense of urgency. Bergh had joined Levi's to make a lasting difference, so he set about his work in earnest. First, he focused on listening, so he could identify what needed to change. He met one-on-one with the top 60 executives, which is how he discovered they had difficulty linking their areas of responsibility to the company's overall business strategy. He held a town hall meeting, where he learned that employees generally thought the company was doing fine, despite its mediocre results. And he traveled to meet customers, learning that despite management flaws, they still loved the jeans. Bergh started replacing his executive team and working with the finance department to craft a growth strategy. Within six months, they had developed a four-part strategy. First, Levi's would maintain profitable operations of its core products: men's jeans and Dockers apparel, which brought in 80% percent of company profits, primarily from sales in the United States, France, Germany, Mexico, and the United Kingdom. Second, it would seek expansion where it had low market shareincluding women's clothing, especially topsand sales in developing markets. Third, it would become a leader in "omnichannel" retailingthat is, selling on the company website and in its stores as well as through retailers. Finally, it would improve efficiency, which would help the company pay down its substantial debt. Early successes freed up enough money to open the Eureka Innovation Lab near Levi's San Francisco headquarters. The Eureka Lab then contributed to the company's growth and efficiency objectives. Its people started by redesigning Levi's women's denim to make it more appealing in today's market, where casual clothing is more focused on comfort. Greater stretch and softness have boosted the sales of Levi's for women, yielding quarter after quarter of sales growth. More recently, the lab created Project FLX to automate the production of distressed jeans. The process consists of fully digital design combined with the programming of lasers to etch the design into each pair of jeans (rather than workers in factories using scraping and chemicals). This high-speed process lets the company get specific designs to market as fast as they are introduced and consumers make purchases. As Bergh led the implementation of these changes, he was also changing himselfin particular, learning to manage the fast-paced product cycles of the fashion business and to understand the requirements of serving customers directly. At the same time, he found the biggest challenge was changing the organizational culture. Levi Strauss's financial performance suggests the company is on a better course. Revenues have grown in each of Bergh's first five years, nearing $5 billion in 2017 and placing Levi's in the top slot for sales of jeans. Its market share in women's apparel is increasing, and international sales have surpassed domestic sales. On the omnichannel objective, the company has posted greater than 50% growth in sales via its website and company-owned stores, which offer better profit margins than do sales through retail chains. Efficiency has improved with the automation of production and other functions, even finance. The company has paid down debt to the point where it finally owns more than it owes. The National Retail Federation named Bergh the winner of its Visionary Award for 2019, signaling that his peers see him as a leader in creating positive change. Bergh's vision is now for Levi Strauss to increase revenues to $10billionthe level he had expected when he signed on.

1. What traits and behaviors do you think have helped Chip Bergh succeed as a leader at Levi Strauss?

2. When Bergh arrived at Levi Strauss, he identified a need for the organization to be transformed. Consider the kinds of changes transformational leadership brings about in a leader's employees. What are some challenges that Bergh faced in bringing about these changes?

3. If you had been coaching Bergh in how to be a transformational leader, what would you have suggested he do to bring about change in the organization's people and culture? References