Reebok recently moved its employees from a suburban office campus in Canton, MA to new offices at Boston’s Seaport District as part of a larger effort to drive innovation and revive growth in the U.S.
Open-office floors, no assigned seatings and a slew of start-ups nearby the new digs are all designed to bring more of an entrepreneurial spirit to the brand.
Acquired by Adidas in 2005, Reebok’s shift away from traditional sports to fitness, as well as away from promotional pricing to premium pricing supported by cutting-edge innovation, has been spotty at best.
“While Reebok has recorded top-line growth for several years in a row, the brand’s overall market share remains below levels seen in the past,” Adidas wrote in the company’s 2017 annual report. ”In addition, there has been no growth in Reebok’s home market, North America, in the recent past and the brand’s margins are not accretive to the company’s overall profitability.”
As a result, Reebok in 2016 updated its turnaround efforts with the launch of “Muscle Up,” a four-year plan designed to accelerate Reebok’s top-line growth in the U.S. and improve its overall profitability.
Here, SGB Executive talked to Matt O’Toole, Reebok’s CEO, pictured right, about the move to the heart of Boston, the Muscle Up strategy, and the fitness-first brand’s untapped opportunities.
Why was the move to Boston important for Reebok? We really wanted to create a Reebok-focused environment for the brand. Over the years in Canton, since the acquisition a lot of other pieces were there both from an Adidas Group function perspective, but we also had some of legacy businesses ourselves, such as SLD, our sports licensing business, and Rockport. So the idea was we’ve got to have this kind of unit that’s every day 100 percent focused on Reebok and we also need to bring the North American efforts together with our global efforts. So we saw the opportunity with the move as a time to do that.
The new offices put a big emphasis on collaboration. Can you tell us how, and why the focus? One of the things that almost every business culture is dealing with right now is meetings and e-mails and people really kind of not having enough time to do the work that we need to do together. So we were very intentionally looking into what kind of setup in our new facility would create less e-mail, less meetings and more just natural collaboration. So we went to this system called “My Arena” where nobody has an assigned seat. There’s no permanent desks or offices and folks are pretty much out in the open like you would be in a coffee shop or something like that. And I can say for me personally that I get so much more done outside of e-mail and outside of meetings. There’s just a much more natural flow to the day and I think this has also been the experience of my colleagues so far. So we’re pretty energized. I think that’s really the biggest driver of collaboration so far. So far so good.
How does being in the big city help innovation? At Canton we had this beautiful gated campus and we were very much kind of a product of our own ideas, which in some cases were spectacular and in other cases not as spectacular as we would like. And I think we really believe that one of the key tenets of our company strategy, which is called “Creating The New,” is open source. We needed to connect the brand and the business much more to what was happening more generally in innovation. So we chose our location here because there’s so many start-ups in this building. There’s also so much happening in the city of Boston, not only from an academic perspective but from a tech and innovation perspective. We’ve made it kind of a point since we’ve moved to make a lot of connections and try to find places where we might be able to work with some of these businesses here in Boston.
How is the innovation focus being accentuated inside the headquarters? We’re a product company. Making amazing product for our consumer is really at the heart of what we do and it wasn’t very visible in our old headquarters. So we put in our Makers Lab, our prototype lab where anybody who works can go and work on product. We put our pattern people, sewing machines, etc. all kind of in easy access to everybody who works here and in close proximity to our archives. Our archives house, the collective memory of Reebok and all the great products over the years. So just making what we do and what we’re passionate about more visible and front-and-center for everyone who works here and everyone who visits was an important change.
Was acting more entrepreneurial more challenging for the brand in Canton? We have this big amazing brand that is pretty well-known. But in our assessment we weren’t moving as fast as our consumer. So part of the physical move was to really work on a cultural change in creating this much more fast-paced, little more risk-taking environment with the soul of a startup. I don’t think you can look at our old building or the new building and say one was preventing us versus the other. But it really is a recognition that our consumer is moving so quickly today and the pace of play has increased, and we need to get closer to the consumer in the moment. And that’s why we’ve done things like we put our digital business at the center of our building here. We also integrated the U.S. business with the global team so people have duel responsibilities, mostly so they’re at the pulse of what’s happening to the consumer every day.
Have you gotten much feedback from retailers? We have had a number of retailers through here and I think the comment we get most often is just how energetic it feels and that they really feel there’s been sense of a motion about the place. Sometimes when you’re in a bigger, corporate environment, things might feel a little more slower paced.
What’s the goal of the Muscle Up program and why was it launched? I think the way we talk about Muscle Up is that it is our business plan. It’s what we need to do both from a growth perspective as well as an efficiency perspective to reach our 2020 goals so we gave it a clever name, Muscle Up. But things that we talked about, like bringing the U.S. closer to rest of the business and about creating a culture that’s faster moving, are all part of Muscle Up, but also Muscle Up has efficiency-driving topics and margins for our full-year 17 results are up 400 basis points as a result. So the game plan is a four-year plan.
Is Reebok basically taking a “less is more” approach to marketing and honing in on key franchises? I think it’s part of our strategy that we believe, even if we go back to kind of our more traditional sports days, that making a lot of different products that might not have a deep relationship with the consumers is not the way we want to go. We really want to have bigger, impactful innovation that drives scale. That means you’re going to have fewer big products in your range. And part of that was going from sports to fitness, but more recently it’s focusing on big innovations like our Float Ride in running or Liquid Factory, which is coming next, and making these the centerpieces of our product innovation and brand story.
What’s working and what’s falling short in the U.S. for Reebok? We’ve had really nice growth outside the U.S. for the last several years and the U.S. hasn’t followed that. So we took the first phase of Muscle Up, if you will, to reset the U.S. and close some retail doors that haven’t been successful for us and really refocus on our fitness strategy. So what’s working for us right now are the innovations we’re bringing, along with reestablishing some relationships with key retailers in the U.S. I think there’s a real openness right now on the part of these retailers to bring some new stories and fresh brands to what in many cases is a new consumer.
Reebok recently partnered with Victoria Beckham and Gal Gadot. Was a more female-centric focus part of Muscle Up? It’s definitely a core emphasis of the Muscle Up plan, but our brand first came forward on the global stage as a fitness and particularly as a women’s fitness brand with the Freestyle. So we see it as part of a brand that was early on encouraging women to work out, to sweat and to have muscles. So we have our collaboration with Victoria Beckham and more recently signed Gal Gadot and there’s many other amazing women we have partnered with, like Ariana Grande. We definitely see that there’s an opportunity with us as a brand to over-index with the female consumer, and vis-a-vis some of the other big brands we already we do over-index in share of our women’s business versus men.
Millennials and certainly Gen-z weren’t around for Reebok’s heyday. How do you plan so reach younger consumers? Look, it’s real. Some of our biggest successes were before many of today’s consumers were in the marketplace, if not born. What we are finding though is there’s a tremendous openness to the Reebok brand. You see some of that in the international growth. But even in the U.S. This is a consumer who is really, fully interested in authenticity and what the backstory of a brand is. And I think we have such a rich story related to what the brand has done in the 80s and 90s, and the 90s are so important today. So what’s really giving us entree with this consumer is the authenticity of the Reebok brand and what the Reebok brand has stood for for so many decades. Maybe more so than any other generation, they’re very interested; they want to know. And if there isn’t a real authentic story, things aren’t going to go so well.
What’s exciting on the product side these days? There’s very few brands that can connect their heritage to what they’re doing in the present in a meaningful way and I think it gives us an opportunity versus some of the newer brands in the space to have this great heritage business, Classics. And certainly the Classics business has been a strong driver of some of that growth outside the U.S. and our job is to connect the success that we’re having in Classics to our modern fitness ambition to make sure that we’re introducing consumers to the amazing training and running product that we’re creating. So I would say that the strength for us right now is the solid momentum on the Classics side and also I would say on our training apparel side. The opportunity for us is to really establish ourselves particularly in performance footwear and running footwear.
Why is running so critical for a fitness brand? I think running is that silhouette of choice for people who not only run but who do any kind of workout. I’m sure if we walk into any gym most people will be wearing a running shoe even though they might not be running that day, and we’ve been working very hard to rebuild our running business. We had an exciting Boston marathon in all that rain where we had two of the top ten finishers wearing our new Floatride Run model, and we’ve been winning awards in Runner’s World, etc. to build authenticity but also make sure we got really exciting innovations that represent what’s new and what’s next in that critical running category.
Any closing thoughts? There’s just a lot of excitement and optimism about the future here. We’ve got a really strong pipeline of new products coming and we’re building an amazing roster of partnerships, and we can feel that momentum for the brand building. It’s an exciting time.
Photo courtesy Reebok
