Angela Ahrendts - Former CEO of Burberry

Sal: Well I just wanted to introduce everyone to Angela Ahrendts. Just as a little bit of background on how all of this happened. You all know I was just in England two weeks ago and as part of that you came to the talk at the London School of Economics and then the next day we met at Heathrow Airport. Angela: Yup. Sal: I had my $6 Old Navy shirt feeling very insecure the entire time. (Angela laughs) Both Esther and I were there and you inspired us. When you said you're going to be in this area we're like well we would love you to do the same thing with the team just talk about what you're doing etcetera, etcetera. If you could talk a little bit about just how you ... I mean fashion, the world of fashion is this world, I mean it's not obvious to most people how does someone get in to it and especially get to the level that you've gotten. How did you start and what kind of, at least at the early stages allowed you to get here? Angela: I mean honestly it's not a dissimilar story to yours, right? My thing is you ... I think the greatest thing that anybody can do when they're young is discover their passion and what they love. I know it sounds really, really terrible but I love stuff and I love to shop and I love fashion magazines and I love to sow and create. It was the only industry I had to get in to but I went to university and signed up for all these design classes and realized I really wasn't that creative. I had a really strong opinion on what everybody else was doing. I had a professor say that we call you a merchant. I'm like "Okay" and so then I signed up for a lot of merchandising and marketing courses. My university degree is in merchandising and marketing. In the world of what we do I always say I'm the monkey in the middle. We have Christopher Bailey who's the Chief Creative Officer and he is so creative and so brilliant and his whole creative team does all those videos but then, so that's on my right and on my left we have the chief financial officer, we have our chief operating officer, we have a number of our teams that have just arrived as well. You have this balance so I will say I'm a 50, 50. I am half left brain analytical, I am half right brain creative and that was actually one of the reasons that I wanted to chat with Sal. Because I said someday as you guys start to take over the world, you're going to have to also start to introduce some right brain curriculum and the Burberry Foundation would be honored to help you start creating some of those things when you're already down the road [unintelligible]. Sal: Yeah, and no we're already starting a little bit and we could talk more about that. No, absolutely and I think ... I mean say you're not creative, I mean that I think you're really underselling your … Angela: Yeah, the design creative. Sal: You obviously had a very strong aesthetic, you had a sense for what connective … Angela: Yeah, again I'm absolutely a merchant and I will tell you the reason Christopher and I created the foundation is this, because we are both creative thinkers. Sal: Right. Angela: We feel very strongly that the curriculum specifically in America has become so left brain, so much of the arts and things have been cut out. It is I think for where the world's going we need creative thinkers. We need and so many times they're getting lost out of the system, so we created the Burberry Foundation. We give 1% of our profits into the Burberry Foundation and what we do is, we try and pick up the youth that is starting to fall out of the system because they think they're dumb because they don't. Hopefully we can help turn them on to you guys to help them. If they're still just not left brain but they're incredibly creative thinking. We bring as many of them as we can. We show them a whole another world that companies like us need and that's been our calling. Sal: Yeah, I know it's incredible. I mean you yourself you said, “Okay I'll be a merchant”. A professor tells you this and you just go to New York and then you're not even 30 and you're the president of Donna Karan? (Angela laughs) Is that right? Angela: Yeah. Sal: How does that happen? Is that normal? Are there a lot of 20 something's running a major fashion houses in the world? Angela: Probably not and I will tell you I'm really guilty because I'm not great talking about myself, I'm just not because I'm only as good always as the great teams that are around me and no different than you guys. Yes, I think what happens always is when you discover who you are and you discover your passion and then it's not work at your life and so you just get in to that zone. I was so fortunate that met the right people, things fell into place, absolutely worked my butt off because I was single, alone in New York and why not. It's all I did was, but I found my zone, I found … Sal: Was there a moment where … I just find if a member of my family says "Hey," "I'm going to go to New York" "and I'm going to go work in fashion," like "Okay, I'll see if I can help support you" "at some point or …" Just the left brain, the left brain side of me. I mean how did you break in and then obviously left such a big mark with people that by the time you weren't even 30 you're a president of a major fashion organization? Angela: It's funny, I don't think of any different than a great athlete or a musician or a … I think that what happens is this is all what I've ever done. I've always just stayed in my lane and then you become ... Whether you're a footballer or whether you're ... I didn't jump around, this is all that I've done and I have always been so passionate about it. I think when you direct your energy and you become so passionate and you unite people, right? You lead people all around believing in something and then things just fall into place. I know that, and when I say things, the revenue, the profit, right? I never went in saying, "I'm going to do this". I went in saying, "What if we did this?" I've always been a dreamer. My father used to always say, "Take off your rose-colored glasses" and I would always say "No". Now I don't have to, I can keep dreaming but the important thing I've learned is though I have to get enough people, right? I have to surround myself with enough people that can help execute that dream now and that's all that I've ever done. I don't want to over simplify it but I found my zone, I absolutely love what I do, it is not work at all. I have never once woke up in the morning said, "Oh God, I got to go to work". It's not work, this is my life. Everywhere that I've been because it's not work and the Monterey at Burberry or anywhere that I've been because the stronger companies get then the more they can do and the bigger influence they have. At Burberry we've always said that we have the power to touch and transform lives through the power of our performance. The bigger and the stronger we get, the more we can do and that's just always been ... I'm from the heart of Midwest, real strong family faith up bringing and I have been raised to give. That's how I was raised and so why wouldn't you apply that back in business and so it just ... Sal: I think you are underselling yourself a little bit Angela: Thank you. I do want because the interesting about this and why we video them is I think just the Khan Academy user base, there's a lot of young people out there who would say "How do I do that?" If you had advice for someone who's 16 years old or 20 years old and they find this world intriguing, what should they develop in themselves? How should they think about the world and what should they do? Angela: Well, and I always say to the fashion industry is deceiving because everybody just thinks it's only this creative part where in a company like Burberry there are 18 different departments that comprise the company. We need, we hire a lot of people from Silicon Valley. We need great, we have 130 people just in the IT department in the company. People don't realize that so we need extreme right and we need extreme left. I think sometimes the fashion industry gets a short, it's the short stick sometimes when they think "It's just fashion, it's just ..." In order to create and here's my thing I always say that what we're doing is we're creating a great brand and a great company and we happen to the in business of fashion. We didn't set out to create a really great fashion, we set out to create a great brand. I say that because there's a part of me that says that is your mission as well. Sal: I mean following on that but I do want to think about, well what in your mind is, what does a brand mean? I've heard multiple definitions of a brand and how would you view Burberry's brand and how would you view our brand in the same, they're very similar. (Angela laughing) Exploring a line of overcoats. Angela: To me a great brand and here's my thing, think of yourself and when you interact with products. What coffee do you drink every morning or you might walk into Starbucks or you might walk in the ... You might have Apple products, you might ... How do you feel about and so you want to be a part of that brand because you're proud to be a part of that brand because that brand makes you feel a certain way. You trust that brand and it's authentic and it doesn't ever let you down. It exceeds your expectations so you want to engage with it, right? Those are all of the attributes of a great brand, honesty, integrity, authenticity, quality but always doing what you … To have a great engagement or what's the word ... Great brand presence, there has to be a very trusting relationship with your constituency. In that way we are absolutely because your users they have to trust what you're telling them. I mean and if you're wrong … (laughs) Sal: Yes, happens every now and then. (Angela laughing) Angela: To me it's a part of what a great brand is and in Burberry's case and that's how we measure it. Sal: How do you think about these things? You joined Burberry in 2006. I guess in the previous five or 10 years Burberry had been rejuvenated. If you could talk a little bit about that rejuvenation before you got there and then when you took over the job and what do you tell yourself? How are you going to steer the ship? Angela: What I think happens and again we're 158 years old and you guys are ... What you're building right now ... No but so we had gone through a lot and so we got the whole management team together. You're starting out that way but we got the team together and said, "What is our core?" "What is our core product proposition" "and what's our core purpose?" We realized that 158, it's 150 years then but 158 years ago now, we were born from a coat. We had our own weaving facility in the North of England, we had our own factory to produce all of those coats. It's interesting we were driving innovation everywhere else but in our core product. Whenever we talked about global warming and they gave me all the reasons why we couldn't do that. It was like “No, no, no”, every great brand ... What would Starbucks be without coffee? I mean every great brand has to have a core and I think people get bored with that. As you grow bigger and bigger what is your core products proposition and don't ever lose it. Keep innovating that core because people get bored really easy. Then also what is your core purpose and because I don't believe people just want to work, I think people all want deeper meaning in their lives. It was hard for us, people don't just want to make stuff. People want to make stuff that has meaning and has a purpose and so we created our core values which are to protect, explore, and inspire. We didn't come up with those, we took those out of a book that Thomas Burberry wrote 158 years ago when he was 21 years old and he founded the company. We always say his spirit lives on and it should because it was his company, it was his vision and he created that waterproof gabardine fabric to protect the military in the trenches that's why he created the trench coat, etcetera. We said that is our core, that's what he founded the company on. How do we make the trench coat the most cool, relevant, hip thing in the world? That's what we are born from. Nobody else can say that but us. To revitalize and transform the company we simply went back to the basics. We went back and revitalized our core and we took that category which was about 22% of the business, seven and a half, eight years ago today it's half of the business. When you watch a runway show, nearly every item that goes down has some type of a trench coat or some type of. The innovation that we've driven in that core and that has single-handedly ... Harvard Business reviewed the great article on just that topic revitalizing the core. Sal: I mean how do you decide on that? Is that just a gut instinct, I mean or do you ... Is there some data that you look ... We look at all the brands that have a core versus don't have a core. On that and then as you move and continue to innovate and get new products, I'm sure everyday someone comes to you "Hey, we should have a line of whatever it might be", how do you decide? How much of it is analytically driven and how much of it is gut or whatever else driven? Angela: It's a great question. I'm going to answer it three ways. One is we always say that we are a creative thinking company and everything we do is driven by intuition. Then we can fuse ourselves with facts but we always lead with intuition. Because we always say that we do value feeling over knowing because if we only focused on knowing, we'd never move forward because you can't prove something that hasn't been done before. We are and that is a part of being a creative thinking culture. I forgot my other two because I told you there were three and I … Sal: Well you say you confuse yourself with facts, I mean what does that mean? Does that mean that you feel or collectively not just you, the whole organization feels like something is the right direction but what if someone says, "Hey, but look" "everyone who's gone in to this phase before" "has failed or there's 800 players already in that market" "that they got zero margin on what they're doing." It's a commodity, do you ignore that? Do you sometimes ignore that? Do you say, “No, we still feel good about it" and you move ahead? Angela: Seven years ago, came up with all the hard, we call them hard strategies. Those are all the ones that are very fact based. When we talked about retail led growth brought in the consultant company told that, I said, "Tell me every key market in the world" "that has, where are peers have at least two stores" "and we have none." Then tell me their productivity per square foot so we had a strategy, put all the hard metrics behind it and but the gut … Our instincts were, and we were 75% wholesale when I started, today we are 75% retail, our own stores direct to consumer. Our instincts said, we had to go direct to consumer, we had to control the brand, the environment, everything. Again brought in the firm but we did that on every strategy and they would reaffirm etcetera. Then I put them in front of the board. Very first been in the company six months strategies are done, everything's outlined, we know exactly where we're going. At the very end they told the board and we said that that point in time we would double the revenue and the profits in five years. They, the guy, that I won't mention the company on video but the guy sense up at the end of the meeting and the board says, "Well how do you feel" "about this going through it?" He says, "There's about a 5% probability" "that they will do this". Sal: Who's this guy? Angela: Well he works for a huge consulting firm and I'm not going to mention the firm. Sal: Okay, all right. Angela: We had them come in and for six months we had them work with us on validating these strategies. Sal: Right, and so the strategy was based through as a number strategy where you're looking at the retail density in different geographies and how productive those stores are. That is what you used to decide where you're going to go? Angela: Yeah, again there's always both. There's always the … Well and that was the other part of the thing I just forgot so one was intuition but the other is balance. Sal: Right. Angela: Right? We talk a lot about the right and the left, a lot. When we had five hard strategies and we had five soft strategies. The foundation was a soft strategy, the culture was the soft, all of the [company] had been, free lunch, the benefits for all of these stuff, or all the soft strategies and we said that these will enable those. Just focusing on these, we may not get the job done. The consulting firm didn't work with us on the soft things, they only worked with us on the hard. When they told the board there's only 5% probability, the board kind of like we're nuts but we actually achieved the plan a year early. Sal: They thought it was a 5% probability because they've advised on lot of the fact part Angela: They thought we were being far too aggressive. Sal: On the aggressive, when you said you're going to double your revenues, you said? Angela: And profit in five years. Sal: And profit in five years, that was the part that they were giving you Angela: Absolutely. Sal: They said, "I'm sure you'll grow etcetera, etcetera." But to really … The soft things are just stuff that felt right? Angela: The soft things were that we knew, I knew that we would be as good as our people. That we had to build a team, we had to unite and connect this culture and they had to believe in the dream, right? This is leadership and they had to lead everybody. We were 3,200 people then and some of them, we had people then with the 30 years, 40 years right? How do you get everybody united around a new vision, a new dream? The thing is this they have to believe, every single person has to believe you can do this. That's the positive energy that comes around something when you are breaking new ground or trying to do something transformative like you are. If they don't believe, and I told them upfront after that six months I said, "If you do not believe" "that we're going to do this," "then maybe you should go now." Because we knew we wanted to do something really big and transformative. We used our instincts, we confused our self to the facts and then we build a very balanced strategy, hard and soft, very balance teams. We need creative's but we need operational excellence and the strategies were built that way. I always say in every single store we have, we need left brain and we need right. in every country, in every region because I don't think you'll build a great brand that resonates and touches people without both. You need the engagement but you need the reach and they're very different. Sal: The projection of doubling and there's no precedent for this? I mean that's why it was, that's probably why … Angela: Well the precedent was, they had done it before. Sal: I see. Angela: The probability of a company doing it twice was what really took the odds down. Sal: Right, I mean through that process were there moments where you yourself were like "Gee, I don't know if this is going to happen." I've got … Angela: Never. Never. Sal: That's why I am too, I never doubt. Angela: Never. Sal: I'm always doubting. Angela: You are not. Sal: Not really. Angela: No, you're not. No, I think he's a bigger dreamer than I am. Sal: Maybe, we can compete. Angela: Yeah but you have to because you are on, you are disrupting a sector that is so overdue to be disrupted, it is so overdue. The next generation is in your hands and they need you to do this, the country needs you to do what you're doing. You got to do it and you got to keep going and you got to get your reach out there, you are engaging. I mean the fact that 30,000 teachers are using your content in schools. I son't know, it's unbelievable. Get it to 100, get it to 200, I mean just don't stop. Sal: Can you Skype in to our company updates, it would be very … (people laughing) Let's do this. Angela: That's how I feel. Sal: Yeah. Angela: I mean that is how I feel and if you, and it's not going to be easy but don't stop. Sal: Yeah. Well that by itself is really powerful advice if you'd ... I mean what would you tell us as we go, I mean you're 158 years old, we're 158 weeks old. (people laughing) How do we … Any advice for … I mean beyond that just kind of alter focus, believe, power through. Angela: Definitely focus and we still do the same thing today. We always say that every year we only do three new things. That's it, because they take ... We call them big brand moments whether it was launching burberry.com. I mean it took us a year to unite thousands of people around the world. We said that we had to do this and we had one chance to change 150 years of perception. We knew that and this year they'll be pretty close to 100 million people that go into burberry.com and you guys we're up to, a lot but for a luxury brand that's a lot. Sal: Well that's pretty good. Angela: It's a lot and not all buying but engaging and spreading what the brand's about, etcetera. Three things a year and we still hold on to that no matter how big we are. Sal: That's not individual products, that is new initiatives like burberry.com. Angela: Exactly three big brand things that we unite 10,000 people around the world to do. Sal: Right, and what's next in the queue? What are the three things you are doing now? Angela: It's probably no surprise that we are aggressively working on our ... Continuing to work on our digital platform and specifically when it comes to mobile. I mean the whole world is becoming mobile and it's crazy all the metrics of the consumers that are engaging and that's probably a challenge to you guys too. Because that is where you'll get your kid, that is where, on the mobile device. Not just a phone but any mobile device, I mean the whole world ... It's just so heavy investment, lot of focus going there, so digital mobile etcetera. We always have operational or internal initiatives as well. We do as we get big, areas get sloppy so we still have to drive a lot of efficiencies out of the business. We call it commercial procurement we're building, we build tons of stores a year so we've hired some additional expertise to make sure we're doing that in the most efficient way in. I mean right now if you ask any of our executives around the world, they know those are the three things that we're focused on this year. If we do those right, we will put up the results that we budgeted, etcetera. Sal: Wow and you're all growing fast. I mean for a large company, you all grew 24, 25% last year? Angela: Yeah. Sal: That's fairly dramatic. Angela: We just put up this year's results. We just did our trading update a couple weeks ago and our retail business was up 13% on a really, really big base and … Sal: That's not what global retail is doing today? Angela: No, no, our largest competitor put up a 3% retail business and they're the biggest in the sector. Now we're absolutely continuing to out perform but I will tell you because it's the people. Because there are 10,000 people around the world that are so passionate about this company and so passionate about our performance and creating again a great brand, a really great company but they also know that every time we open a flagship store ... Because again it's shallow luxury retail, right? That always bothered Christopher and I because it's not where we came from, right? We love what we're doing and that's what we've been focus on, a great company. Every time we open a flagship store, we partner with a local institution. In Chicago we partnered with [Hype] and we gifted them a million dollars. We created a program to help the youth in the Chicago area with our programs Burberry Beyond, etcetera. We've done it in New York, we've done it in Beijing, we're getting ready to do it in Shanghai. Anytime we open up this huge luxury store which could come across a little, elitist if you will, we always make sure that the company also, like in New York we said we're lighting up Manhattan with a store. Well we're also going to light up people's lives when we gave the million dollars to the Robin Hood Foundation and put our program in place for the chartered schools, etcetera. That's a big part of the balance and that's a part of being a great company. Sal: When you look at the organization, you must be looking at people "Oh, look at him, look at her." "She's got some potential, he's got some potential." "Hey, that could be the next CEO." What are you looking at? What are the traits that you're seeing in those people that are really striking you as someone who might be able to one day step into your shoes? Angela: It's a great question. We look at it honestly in all levels of the company and I would even say probably less my shoes, right? Because that would mostly be a lot of my [direct report], etcetera so I would tell you at every level of the company and we hire for it as well. It sounds terrible but we culturally compatible. We always say we don't want tissue rejection because it's tough to bring people into your culture. Sal: Tissue rejection like skin grafting or ... Angela: Yeah. Sal: Yes, yes Angela: We just don't want that. People go to such rigor before we bring them into the company. We always said, "Are they culturally compatible?" "Do we trust them?" Do we like them obviously but do we trust them? Do we believe them? Do they believe in our mission, in what we're doing? Because we can't afford to make a mistake. I would tell you with anybody going to the next level, there is transparency, trust, our core values, all those soft things we talked about. When they reach a certain level it's a given their smart. It's a given they have high IQ but we need high EQ. I always say that everybody in the company needs a little right and left brain, right? Two extremes because then they don't feel. We always say that we can teach people anything but we can't teach them to care, we can't teach them to feel and when you're in a human business and you're communicating like we're communicating, they have to be authentic. We have a leadership council which is the next generation talent. We spend hours just helping them understand who they are. Who are they, right? Because then only if they really know who they are, can they build very balance teams around them and it's a real self-reflective phase that they go through but they will become better leaders having peace and confidence with who they are and to thy self be true. That is a part of our talent plan. I always say no different than me. I tell investors you would be so surprised at every decision I don't make everyday. (Sal laughs) But you can't. I have to try trust the people we brought in and I have to give them very simple clear messages. The three things we're going to do this year and all the metrics behind it and uniting everyone but it is trust, intuition, great communication, authenticity, people have to feel them or they will never rise as a leader in the company. Sal: Right. I mean is it something that you think you can ... I mean you talk about personality fit and cultural fit, do you trust them, but is there some way that you can screen for that? For that balance of the whole brain. I read the whole book now. Angela: Fascinating. Sal: Very good book. Angela: Did you really read it? Sal: I did, I read it on plane, it's a long flight. Angela: I gave him a copy of Daniel Pink's book. It's called the Whole Mind, Why Right-Brainers Will Rule the World? Sal: One thing that I pointed out to you because one thing that I did react to that book. It's funny because in that book it says, "Oh, we don't need programmers anymore," "we need inventors." I said, "What's a programmer? It's an inventor." It is a fundamentally a right-brained activity. I actually most strong ... When people say, "Khan Academy stem ..." I was like stem is, it should be a right-brained activity. I mean in my mind the learning to factor a polynomial or to do the basics of algorithm, that's like a painter learning how to paint. The real expression is when you actually create something so I actually think we're more similar Angela: I think so too but I think that's what you've unlocked. I think that's your unique brand positioning. Sal: Right, the creative … Angela: You're taking what most people would take as a traditional left-brain and you're adding fun to it, you're adding energy to it. You're making it, you're combining, you're making it more of a right, left brain exercise not just an analytical exercise. Sal: Yeah, no and how are we doing on time now? Voiceover: I think we only have, like three more minutes. Sal: Okay, three more minutes. I will ask you again because it was so inspiring in the Dopamine, just start, we're talking about Dopamine earlier and you got us all very excited. Angela: (laughs) I won't ask. Sal: Yeah, we were talking about, well and other things. I mean, just parting words, advice for the team here and people look good greater Khan Academy community. Thoughts on just what we should be doing and how we should approach life. Angela: Yeah, you are … It's funny because I had the honor right before the Olympics. Mr. Bill Gates was in London and had a wonderful luncheon. We'd met a couple of different times and I had the honor of sitting next to him at the luncheon table. He was talking about all of his different philanthropic efforts etcetera and to the who's who of the UK if you will. He had mentioned the Khan Academy and I was so excited, why ... At the very end he simply said, "Is there anything else?" I said, "Well what are you plans for the Khan Academy?” He looked at me like how did I know about this and nobody in the room knew about it and these are huge big executives running Glaxo and every big company in the UK. He then went on to share with them what you were doing and why that he felt strongly and his foundation was investing, etcetera. Then the luncheon broke and then he looked at me and he goes, "What would you do?" I said, "You created" "the greatest brand in the world, Microsoft." "You were so laser and you had such a vision.” I said, "It is absolutely" "no different with the Khan Academy." "I believe you have the ability to create" "one of the greatest brands" "and one of the greatest companies in the world." I told him, I said, "When you did it, there was a need" "and you filled that need." There is a tremendous need and you are filling that need and it's in a different way but you're using and you're leveraging the technology that exist today, as he did. He then sent a follow up note afterwards saying, "Could we continue the conversation," "I found it fascinating, etcetera." I shared this with you because at this young age that you are, to have someone of his vision and his caliber believe in you, you know you're on the right track. I just think that I am absolutely nothing in comparison to the people that are watching you, the people that are following you, the lives that you're impacting. You're impacting teachers lives, you're impacting the next generation. You are actually impacting people who didn't finish their education. Who are going on and learning now. You will create a phenomenal brand, you will create an amazing company and you are in the mist of disrupting a sector that is so desperately in need of being fixed. You're doing it in such a modern way, leveraging everything that exist today and my counsel to you is just don't stop and don't slow down. Stay focused, keep the right pace but do truly understand that what you're doing has far greater meaning than anything you've ever done in your lives before. Not just that America need you to do this, the world needs you to do this. Education is the biggest issue that inhibiting future economies all over the world. I am so honored to be here to chat with you and just I am so thankful for what you're doing, I really am. Sal: Well I feel like going back to work now. (people laughing) No, thank you so much. I mean this was, I mean for me personally when we met in Heathrow with my $6 shirt on, that by itself was a really powerful. I mean Esther was there too and we were like “She’s amazing!” Esther is the number search resultant Olympic attitude on Google. (people laughing) She has authority here but we were transfixed and blown away by meeting you then and this I think I could speak for everyone where this was incredibly inspiring and motivating for all of us so thank you so much. Angela: No, you are more than welcome. Keep up the great work. (clapping)