A chief executive’s game plan in trying times

Most Harvard case studies start with ‘It was a dark and stormy night,’” says Christine Day. “Mine could have started with ‘It was a perfect storm.’” By January 2008, when she joined Lululemon Athletica as executive vice-president of its retail operations, she had spent 20 years helping Howard Schultz turn a tiny chain of coffee shops called Il Giornale into the global retail phenomenon of Starbucks, which by then had more than 12,000 outlets.

Lululemon, a “yoga-inspired” clothing retailer with a cult-like following, a habit of recruiting yoga instructors as brand ambassadors and a reputation for remarkably high sales per square foot, had similarly entrepreneurial roots, founded by Chip Wilson in 1998 with one store on the same premises as a yoga studio in Vancouver, Canada.

Nine years on, the company had opened more than 100 outlets in the US and Canada in little more than a decade and gone public, but, Day recalls, “there was quite a schism between the founders and the people they had brought in to run the company. Both camps were ready to quit. There wasn’t a lot of trust.”

By June 2008, Robert Meers had retired as chief executive of Lululemon, and Day was appointed to run the company just as the recession started to bite. One of her first moves was to send two of the founders on the Harvard Business School advanced management programme she herself had attended in 2002, and a third to Stanford, to try to “solidify the board” around a single approach and strategy.

“What I saw in the founders was that they didn’t trust a public company because they didn’t understand it,” she says. “By creating the experience for them at Harvard, it created an opening for me to coach and develop the founders … By pushing them aside, we would lose something in the company.”

Michael Tushman, professor of business administration at Harvard and faculty chair of the advanced management programme, has in turn published a Lululemon case study, focusing on how to work with founders. Day, who participated in an earlier Harvard examination of Starbucks, has returned to the school several times to speak, and is a firm believer in the benefits of the programme and the influence it has had on her management style.

“What I learned at Harvard Business School made me make a lot fewer mistakes at the early growth stage of Lululemon,” she says. “I’m a very team-orientated leader. I really believe in setting a strategic plan and having all functions align with that. We focus on planning together, and we all commit to the plan. I wouldn’t have seen that without Harvard.”

Day, a regular yoga practitioner who led the initial public offering that helped fund Schultz’s acquisition of Starbucks, recalls that by the time she came to consider executive education, most of the training at the ever-expanding coffee-shop empire had focused on developing retail store managers, rather than executives with a more administrative, general management background.

“I’d grown up inside the Starbucks organisation … and [going to business school] seemed a good opportunity to benchmark myself outside the company,” she says. She considered Stanford Graduate School of Business but felt it would be strong on strategy but too heavily concentrated on technology industries, and saw other executive education programmes as too financially focused.

“I was looking for broader general business experience,” Day says, adding that she liked the Harvard case-study approach (and its Boston campus). One Starbucks colleague had also completed the advanced management programme before.

She already had a BA in business administration from Central Washington University and three years’ experience in financial services before Starbucks, but had only ever worked in North America.

“What attracted me to the [Harvard] programme was that it had a large international base of participants. I knew that building that international base would be invaluable,” she says. According to Harvard, the 150 people who enrol in the advanced management programme each year typically come from at least 50 different countries, and case studies are drawn from 30 countries.

“The world is changing so quickly, you need to take a step back, invest in yourself and look at things happening on the global stage,” Day says. Taking 12 weeks away from a day job for the course, for which participants study three cases a day, six days a week, “is obviously hard to do”, but she was helped by attending it between management jobs at Starbucks.

Of the professors who lectured at Harvard, she says she was particularly impressed by Robert Kaplan’s teaching on management accounting and Richard Vietor’s classes on international political economy. (“Working on global strategy, that has become so helpful now,” she notes.)

According to Harvard, the $64,000 course “reflects the issues and conditions of the moment”, and Day says enrolling just after the Enron scandal meant that “governance was a hot issue”. Corporate social responsibility, she recalls, “was at an infant stage, but we really got the best of the thinking on CSR early on. It shaped a lot of my thinking processes.”

She adds: “I also think the whole strategic activity mapping I got from Harvard helped me design the company’s strategy and what we invest in to protect the brand.”

Many of the lessons came not from the professors but from her classroom peers, she adds, and she soon saw the value of her international alumni network when she moved from running North American finance and strategy at Starbucks to its international group as president of Asia-Pacific operations.

The alumni network was particularly useful in Asia, she says. “You can imagine arriving in India at 2am, knowing no one, and the next day you have breakfast with your colleagues from the Harvard Business School programme. That was particularly valuable for a woman travelling alone to all these unfamiliar places.”

After visiting one former colleague, Haibo Dai, a senior official of Shanghai’s Pudong district, Day remembers being delivered to her next meeting in a government car.

“You should have seen the faces of the people I was meeting,” she says. “They were trying to figure out how in the heck I knew all these people.”

She also did business with one Harvard class member, striking a partnership deal for him to sell Starbucks’ bottled Frappuccino drinks in South Korea. The alumni still write holiday letters, and receive a monthly update co-ordinated by one graduate of the programme.

With a franchise in Australia, an office in Hong Kong and a small wholesale presence in London (in time for the expected boost to all things athletic from the 2012 Olympic Games), Lululemon’s international reach is still a long way from that of Starbucks.

In spite of her international experience, Day says Harvard helped teach her that no business can do everything at once. “We’re still a small company and we’re focused on building out in North America,” she says. “Saying no has got to be one of my great strengths.”