Chapter 9
What Could Be More Inspiring Than the Melding of Cool and Sport?

Reminiscing, Zeitz said recently, “When you look at the photos, you think, I was so young. How could anyone give me so much responsibility?” But as Puma’s marketing manager, he had made a solid pitch to the board, and the directors saw no better choice. Luckily, control of the company was then in Swedish hands; German owners never would have taken a chance on him, he says. “At the time I didn’t feel scared or anything,” he recalls. “I was just very excited.” And Zeitz did what was needed: He launched a classic restructuring that peeled away layers of bureaucracy, laid off 400 employees, closed the German factory, and moved production to Asia. Within three months, Puma was showing a profit.

But all that, Zeitz knew, was merely emergency surgery. Puma had survived, but if it were to succeed, much less compete with adidas and Nike, it needed a long-term strategy. Above all, it had to inspire its customers to forge a tight and lasting connection with the company. Zeitz found his strategy—and the way it has worked to make Puma the world’s third-largest sports apparel company is a classic story of inspiration and authenticity.

If the Shoe Doesn’t Fit

Puma’s long conflict with adidas amounted to fratricide. The companies were founded by brothers, Adolf and Rudolf Dassler, who had inherited their father’s shoe business in the tiny Bavarian town of Herzogenaurach in the 1930s. They scored an early victory when Adolf, known as Adi, took a suitcase full of track shoes to the 1936 Berlin Olympics and persuaded America’s star, Jesse Owens, to wear them during his triumphal refutation of Adolf Hitler’s racist creed. But the brothers fell out. By one account, Rudolf became convinced that his brother had contrived to have him sent to the front during World War II, and Rudolf retaliated by telling the victorious Allies that Adi had collaborated with the Nazis.

Despite their feud, the brothers cohabited in a villa with their families until 1948, when Rudolf and the workers loyal to him split off to form the company that became known as Puma. Adi renamed the original company adidas, and Herzogenaurach became a town of warring factions, with loyalists on each side who wore only the “right” brand of shoes, kept to their own stores and taverns, and sometimes refused to speak to people on the other side.

Over the years, the two companies competed viciously. They sponsored dozens of professional teams, especially in soccer, and waged bidding wars for star endorsements. In a move that still echoes in Olympic competition, they shrugged off the rules and went after potential medalists with cash and favors. In her 2008 book Sneaker Wars, author Barbara Smit reports that during the 1968 Olympics in Mexico City, adidas agents somehow managed to get Puma shoes impounded by Mexican customs and may even have arranged for a Puma representative to be arrested and jailed.

The intensity of the war between adidas and Puma seems to have blinded both to the rise of Nike and Reebok in the 1970s, and the German companies lost ground. adidas’s U.S. market share dropped from 60 percent to just 2.5 percent in 1990, and Puma fared even worse. The heirs of Adolf and Rudolf got along no better than the brothers had, and both companies passed out of family control.

These days, Zeitz and current adidas CEO Herbert Hainer take the competition a good deal less personally. But the rivalry is still there, and it irritates. adidas bought Reebok in 2005, giving it a 26 percent share of the global market against Nike’s 33 percent. By contrast, Zeitz’s solo strategy has clawed Puma back from near-oblivion to a 6 percent market share, with sales of $3.2 billion—and he’s determined to gain enough ground to make it a genuine three-way race again.

Back in the early 1990s, when he settled on his strategy, Zeitz knew that head-on competition in the classic sports shoe market would be a losing game. Puma was simply outgunned by the big players, which could sponsor more and better teams and buy endorsements from bigger stars. So he bet big on an untried gambit to inspire a wider universe of customers, stretching beyond sports: Puma would focus not on the performance of its shoes, but on fashion for people who cared about performance. “We had to position the brand as edgy and design driven,” he says. “By doing this, we changed the formula of the industry. We created the term sports lifestyle.” Despite the fact that no one knew what that meant, Zeitz set up a new sports lifestyle division. And he hired an uninhibited 21-year-old skateboarder, Antonio Bertone, to run it and experiment with fashion innovations.

Luck lent a helping hand in 1994, when members of the Beastie Boys appeared in concert wearing blue-suede Puma Clyde sneakers. That line hadn’t been hot since the 1970s, when it was named for New York Knicks basketball star Walter “Clyde” Frazier, but the rap band’s nostalgia trip inspired its fans to comb stores for Clyde sneakers. In the midst of his move to Asia, Zeitz ramped up production. And when major U.S. retailers turned up their noses at what they saw as a passing fad, Bertone cruised clubs and concerts, handing out Clydes to trendsetters and pitching them to urban boutiques, where sales took off.

Frazier was far from the only star in Puma’s galaxy. In its heyday, before the financial woes, the company had bought endorsements from soccer stars Pelé and Diego Maradona, and football’s Joe Namath, among others. Zeitz’s next big break came in 1998, when rising designer Jil Sander called and asked if she could use Pelé’s classic soccer boot in a fashion show. Zeitz was delighted. Sander’s minimalist style was the antithesis of conventionally flashy sports design, and he saw her interest as a chance to revamp Puma’s image, inspiring a whole new group of customers with no previous interest in sports shoes. She made Puma attractive again—and in short order, Puma was marketing a Jil Sander line, working variations on its classic sneakers with new textures and edgy colors. And when Madonna appeared on a magazine cover wearing customized Pumas with three-inch heels, Zeitz ordered up another line of shoes featuring the singer’s style. He sponsored skateboarding’s World Cup and ventured out of sports altogether to back the Berlin Love Parade, a rave festival.

Meanwhile, Bertone was pushing beyond shoes to sports apparel. Puma turned out a catsuit for tennis star Serena Williams and a one-piece uniform for the Cameroon soccer team. The international federation banned the outfit, but Zeitz defends it as a worthy technological innovation: “It was the lightest jersey that has ever been created.” Puma has become the prime producer of driving shoes and auto-racing suits, and it recently launched a line of sailing clothes. Zeitz has also begun collaborating with a string of diverse designers, ranging from Alexander McQueen and Philippe Stark to Mihara Yasuhiro and Hussein Chalayan, and with model Christy Turlington and jeans maker Evisu. Their designs in upscale outlets have engaged and inspired a new class of customers, raising Puma’s gross profit margin above 52 percent.

To be honest, all this seems more a cacophony of styles than a cool, rebellious image, but Zeitz sees the mélange as an actual advantage, forcing his in-house designers to keep reimagining their work from many points of view. The celebrity designers “come at it from completely different angles,” he says, “and I think that’s what helps Puma constantly keep an open mind.” Creativity that fuses fashion and performance, Zeitz maintains, is a far better innovative tool than market research. With research, “all you will get fed back is a perception of today, not tomorrow,” he says.

Puma’s sort of creativity can be as fruitful as it is risky. In 2002, Bertone bought 600 pounds of vintage clothing and had it refashioned into a limited-edition line called Thrift, a seemingly nutty idea that evolved into an online, customized-sneaker business called Mongolian Shoe BBQ. “I always describe working for Puma as, ‘They give you all the rope in the world to hang yourself with,’” Bertone deadpanned. “Your job? Don’t hang yourself.” More recently, the company has ventured beyond shoes and apparel. Puma now has a line of aluminum-cased luggage for business travelers and, in partnership with London designer Vexed Generation and Danish bike maker Biomega, Puma offers a hot-selling, foldable urban bike that has been exhibited at New York’s Museum of Modern Art.

For all the company’s diversity and fearless experimentation, Zeitz is highly conscious of its roots in the sports shoe business, and he has been careful to preserve the brand’s authenticity with real sports fans. As his treasury has expanded, he has moved back into direct competition with adidas and Nike by sponsoring 32 national soccer teams (12 of them in the latest World Cup competition, 5 in the European championship) and supporting star athletes whose endorsements sell shoes. In a marketing triumph at the 2008 Beijing Olympic Games, Jamaican sprinter Usain Bolt won three gold medals wearing Pumas—and then took off the golden shoes and kissed them while photographers snapped away. “It wasn’t something we staged,” Zeitz said later. “He did it because he really identifies with Puma.”

In fact, Zeitz insists that Puma’s association with Bolt is “something that you can’t translate into money. We picked him up very early when he was nobody—just a great talent—and really believed in his potential and stayed with him. We made him a hero in our global advertising campaign without knowing he would have a breakthrough at the Olympics.” Still, the payoff is real: “Those visuals and images go around the world, and there are very few that haven’t seen them.”

In 2007, Puma’s comeback story inspired and engaged a different kind of customer: Francçois-Henri Pinault, the French luxury-goods tycoon whose PPR empire includes the Gucci, Yves St. Laurent, and Stella McCartney brands. Pinault became a customer for the company itself, paying €3 billion ($4.2 billion) for a 62 percent stake in Puma. But Puma continues to operate as an autonomous company, and Zeitz says the relationship is “nothing but positive.”

Lean and rangy at 44, Zeitz could personify the Puma brand: He still runs marathons, flies his own plane, has an estate in Africa, and speaks seven languages, including Swahili. And he’s very much in charge of his company. “The changes haven’t affected me. The strategy is the same,” he says. In the narrowest of terms, that means “to grow our business again and to close the gap with the two leading brands.” But in a broader sense, Puma’s strategy is to lead, not follow, the competition. “We always try to do extraordinary things and push the boundaries,” Zeitz says. “We constantly need to change ourselves to stay ahead of the game.”

For all the changes, however, the brand must stay true to itself—a new kind of authenticity that goes far beyond testimonials to athletic performance. For athletes and ordinary customers alike, Puma is about looking good in a distinctive, sporting way—or, as Zeitz puts it, “It’s about fashion and styling, and not just blood, sweat, and tears.” That means he can’t just sign up the next hot designer or any potentially record-breaking athlete. “We pick designers and athletes because they fit the Puma profile,” Zeitz explains. “Their personality needs to work with the brand. We don’t say, ‘He’s fast.’ We say, ‘He has a lot of potential and fits the Puma brand.’”

Usain Bolt’s celebratory antics in Beijing, where he broke the world records for both the 100-and 200-meter sprint, raised some eyebrows and drew a sour reproof from Olympic Committee Chairman Jacque Rogge. But Bolt inspired millions around the world when he kissed his shoes, draped the Jamaican flag around his shoulders, and did a hip-swiveling dance around the “Bird’s Nest” national stadium. That was the authentic Puma—and it was the real payoff on Zeitz’s investment.

Rules of Engagement

• Build on your past. Puma has leveraged its sporting past by building on the power of its brand and the mystique embodied in its history. As with legendary gun maker Smith & Wesson, another diminished legacy company that I wrote about in Outsmart!, the first book in this series, a dying Puma has been reinvigorated by a new CEO, Jochen Zeitz, who knew which part of the company’s past was worth keeping and what had to change. And in an appropriately feline coincidence, Zeitz was following a principle set down by the Sicilian author of The Leopard, Giuseppe di Lampedusa, who wrote, “If we want things to stay as they are, things will have to change.” Under Zeitz’s brilliant guidance, Puma has inspired customers old and new by holding on to the best parts of its past and changing the rest.

Throughout its makeover, Puma has stayed true to its legacy as a maker of shoes for serious sport, while developing a style that appeals to a broad cross-section of consumers. At almost every track-and-field event and World Cup soccer match, the Puma brand is very visible, both on the playing fields and in the stands.

• Don’t try to go head-to-head with entrenched market leaders. Business is too tough to challenge competitors at their own game. Take on competitors laterally by finding another distinctive way of getting into the market. Puma did it by developing a unique image of edgy cool.

You can also look for a distinctive frame of reference for your company. Puma never directly entered the sneakers war; it defined itself as a sports lifestyle company and then built an apparel and shoe business that could challenge adidas and Nike. Alternatively, you can simply look for something that you can do better than your competitors. Puma, for example, had no trouble besting the tired image and styles of Reebok.

• Use outsiders to challenge insiders. If you want to keep refreshing your product line at a rapid clip, you may need more design capacity than you can keep in-house. Besides, an inside design group can get bogged down in old industry paradigms and often needs to be challenged. Puma broke through the lethargy by engaging celebrities to generate new ideas. Sometimes new ideas work and sometimes they don’t. Customers are key to the experiment, the ultimate judges of what’s cool and what’s not. It’s another way of keeping them coming back, as long as cool prevails most of the time.

• Follow a well-marked highway, but also test side roads now and then. Puma keeps its edgy style but tests many designs consistent with that style. Its designers come from different worlds of “cool”—sports, art, architecture, and fashion, to name a few—which ensures that the customer experience is anything but boring. When customers enter a Puma outlet, they experience a smorgasbord of consistently edgy cool that engages ages 6 to 65, and they keep coming back because they know things are going to change. It’s a reflection of Lampedusa’s revelation that things have to change if we want the overriding experience to stay as it is.

Iconic brands achieve this balance of consistency and change. Despite all the change it has undergone, Puma’s style remains very recognizable. This summer, I bought a pair of sneakers at the Puma outlet store in Kittery, Maine. They are about as daring as I get when it comes to fashion: dark green with orange laces and an orange Puma logo. When I wore them on a trip to France, people kept asking where I got my cool Pumas. I will go back to the Puma store because the styles make me feel younger.

• If you’re the underdog, play it up. Remember, people like the underdog. They will come to your aid and buy your products if they are good. It’s gratifying to engage in the campaign of an underdog. Puma played its underdog role well, adopting a feisty, scrappy image. Then it tamed the image for some product styles to broaden their appeal. The last time I went into a Puma store, most of the apparel and sneakers still had a feisty edge, but there was also an elegant white jacket with the BMW Racing Team logo. The more conservative turn suggested that the underdog had gained considerable ground.

• Keep your edge authentic. For all the companies featured in this book, authenticity is necessary to keep customers coming back. At Puma, authenticity is about always presenting an edgy coolness while staying rooted in serious sport, a two-pronged requirement that most apparel companies don’t have to meet. When an athlete wears a Puma jersey or sneaker, the pullover or sport shoe must work well while also looking good. It should enhance the performance of the athlete while also inspiring an amateur to think she can perform like a pro.

For me and for entrepreneurs everywhere, it’s inspiring to see a legacy company like Puma that can balance everything needed to rebuild itself and still maintain its edge in terms of fashion and athletic competition.