The case of the CEO of Puma and how he saw sustainability as a business necessity.
This article is based on research by Tobias Hahn
Managers who only think about profits risk missing out. Thinking exclusively about business-as-usual can become a handicap in strategic leadership.
In his award-winning article, Esade Professor Tobias Hahn analyses the mindset of the former CEO of Puma, Jochen Zeitz, who, at age 30, became the youngest businessman in German history to head a public company. Hahn's article explores how changes in the leader's mindset and behaviour transformed the business beyond increasing profits and towards sustainability.
At the beginning of his time as CEO of Puma, Zeitz focused his leadership efforts purely on the business side and had little to no consideration for sustainability: "I grew up loving nature, spending a lot of time in nature, but you know, you sort of enjoy nature as all of us do, and then you go back to business and you don't really think about it," said Zeitz in 2012.
"His priorities when taking over as CEO – the company was bankrupt - were very clear: restructure Puma, cut costs and become profitable again. Sustainability was not part of the equation," says Hahn.
His deputy at the time wanted to hire an environmental expert, but Zeitz rejected this idea, stating that "they didn't have money for that."
After a quick and successful financial turnaround, Zeitz started to look for business opportunities that distinguished Puma from its competitors. "We realised that we had to redefine the purpose of the business and the brand. Just selling decent shoes – performance shoes – was not really taking us anywhere," said Zeitz.
"We need to turn sustainability into something that's desirable for the consumer"
Sustainability can be desirable and profitable
In this business-repositioning process, Zeitz identified sustainability as a business niche that could differentiate Puma from other sportswear companies: "Sustainability needs to be packaged and made sexy if consumers are actually going to switch over from traditional products. We need to turn sustainability into something that's desirable for the consumer."
By doing this, Zeitz was able to convince investors that consumers would prefer to choose Puma products because of the company's engagement with sustainability. Puma expanded its range of sustainable products in order to ultimately increase sales and profits.
In 2009, Zeitz formalised sustainability as a central strategic business priority within Puma: "Sustainability is something every business has to look at if you believe in more sustainable long-term shareholder value" (Zeitz, 2012).
Zeitz put together a team of quite unusual business people. "His chief marketing officer was a skateboard rider and his chief financial officer used to work in a warehouse," says Hahn. "He had a very eclectic group of people who all wanted to change the traditional paradigm of doing business and challenge a company that was used to selling low-priced shoes."
As a result, Zeitz chose little-known niche markets in Africa for some of Puma's key products and started to sponsor numerous African sports teams. Marketing stunts such as putting Cameroonian national football players in one-piece suits or dressing tennis player Serena Williams in a black catsuit led the press to label Zeitz as a "rebel."
Zeitz's challenging of traditional business practices and norms was welcomed by many shareholders, and many business leaders called Zeitz a revolutionary.
Over time, Zeitz established interconnections between his business lens and his other life experiences. More and more, he realised that non-business aspects – such as his personal engagement in sustainable farming and tourism in Africa and his deep personal exchange with a Benedictine monk - were closely intertwined with his way of doing business. These insights helped him develop leadership skills that went beyond business-as-usual.
A truly responsible leader takes on responsibilities that go beyond the business case
Zeitz and his team started to question their business model and began to see sustainability as an opportunity to differentiate Puma from its competitors and become attractive to investors. This happened during the period when Zeitz's business lens, environmental consciousness, and personal beliefs were becoming more and more interconnected.
"The challenges our world is facing are so big that the current business-case approach to sustainability is no longer enough. A truly responsible leader takes on responsibilities that go beyond the business case. She does the right thing for the sake of doing so because she knows it's her responsibility towards the world," says Hahn.
Zeitz's many different perspectives and experiences helped him go beyond business-as-usual. Over time, he started to see sustainability not only as a business challenge but as a business opportunity and, finally, as a business necessity that turns sustainability into an imperative for Puma, as reflected in his own words: "If we suffer widespread ecological disaster, if people have no jobs and if financial systems collapse, what happens to corporate profits? It may be that companies will take the lead in creating a sustainable world not because they're the last ones standing, but because the drive for profit will leave them with no other choice."
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