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Since becoming chief executive officer of the Estée Lauder Cos., Fabrizio Freda has helped propel the company to unprecedented growth. Sales in fiscal 2012 gained 10.3 percent to $9.71 billion, growing at twice the rate of the global prestige beauty category. Here, Freda, an avid sailor who believes that businesses, like boats, need the wind behind them to gain momentum, describes how he positioned the company for optimum growth.
This story first appeared in the February 8, 2013 issue of WWD. Subscribe Today.
The first thing a leader has to do in creating a vision is to look reality in the eyes and analyze the current reality of the company, the business, the people and the aspirations. You also analyze how the future should look—how the world will be in three, five, 10 years from now—and what you want to be in that world in the future.
Second is asking the question, how do you leverage the current strengths of your business—your company, your people—in this reality that you have identified?
The concept of leveraging strengths is so important. A vision is difficult to achieve if you fill your path with areas of improvement and gaps. On the contrary, if you focus on leveraging the strengths of the organization, the vision becomes more achievable—and more fun to achieve.
To form a vision, you need to have a dream—a big dream—that can be turned into very ambitious goals. This vision has to be super exciting, because the vision of the future determines your current state more than any- thing else. When I go to China and I speak with consum- ers and ask them, “How’s it going? How do you see the future?” what I hear back is, “Today is much better than yesterday and I’m sure that for my children, the future will be much better than today.”
I just came back from Europe, and frankly, I didn’t hear that. I heard, “Today is worse than yesterday and I’m very worried for my children, for the future.”
Imagine a billion people thinking in the former way and on the other side, another group of people thinking in the latter. Who is going to create the most positive and constructive emotional environment? The answer is pretty obvious.
It’s important to understand that vision doesn’t get created alone. Visions are created by leadership teams, by the shareholder point of view, by the board input. It is an enormous work of collecting inspiration and experience and trying to bring all this together.
Lastly and most important, the only thing in my experience that gives energy [to a company] is the vision.
To be a visionary leader, you need to have your own enthusiasm and passion, but you also need to have a lot of experience. Any visionary leader is moved by an enormous willingness to succeed, an enormous energy to win, and can pass this to an organization. If you’ve never lost, you don’t have this energy. The experience of being in the locker room of the losing team or of having failed is a fundamental piece of creating the energy of wanting to win.
Once you have a vision, what do you do? I believe in the concept of reverse engineering, as opposed to the model of continuous improvement. Once we had the vision for the Estée Lauder Companies, we worked on a strategy and plan to achieve the vision, which I call Future Back: If we want to be that kind of company and achieve those kinds of results in five, 10 years from now, what has to happen? What has to come true five years from now, three years from now and then next year? Then, we start moving and strategizing.
Many businesses have been handled with the methodology of continuous improvement, which is based on experience. When the experience of the past is very relevant to the future, continuous improvement tends to work. But in today’s world, when future success has less to do with the previous experience and the previous reality, continuous improvement is a risky strategy. The risk is that the organization will miss the point, miss what is changing and miss what could be the big opportunity of the future.
The other element of our strategy process is focusing on our strengths. We analyze how the markets, channels and consumers will be in the future, and we try to get inspiration from anything which is big and growing.
You can have the best intentions in the world, but if you’re not able to position your business on the fastest- growing segments—on the big one, the winning one—it will be very difficult to be successful over time. I call this putting the boat in the wind. I’m a sailor and I like this vision. You can have the best boat in the world and be in a bay, ready for competition, but if there’s no wind, you’re never going to move. The concept of building our business based on our strengths and then putting our beautiful boat in the winds of growth wherever they are is a very strong starting point of how to achieve the vision.
As part of our vision and strategy for the future, we have recognized the importance of China and the need to make China our second home market. The size and growth potential of this market has no comparison, in terms of potential for the future. But most importantly, this market fits with our strengths as a company. It fits our brand portfolio, where we have great brands that have a very high acceptance with Chinese consumers. It fits our strength in skin care and our R&D and technology strengths. It fits our distribution channels. The Chinese market had more development of department stores than many other emerging markets around the world.
It’s also a market that has very high standards. Chinese consumers have very high expectations in the area of skin care, so the market serves as a benchmark for developing innovation and ideas that in the future will influence other countries or, even in some cases, our global business. China has the potential to become not only a market, but a source of innovation and ideas. That’s why we call it potentially a second home market.
China is also a great place to train one of the key capabilities of the future, which is local relevancy. I don’t believe in globalization as standardization. I believe the world’s consumers are very different, one from another, and that they want to stay different. They want products, brands and companies that respect their differences. But we need to do this in an economically viable and efficient way, and so developing the ability to be locally relevant but globally efficient is one of the big strategy issues in front of us in the next years.
Today, at the Estée Lauder Cos., we have a common strategy and common goals for the company. All the energy that had been directed internally is now directed towards external competition. Our vision is that we are the only company that is completely dedicated to prestige luxury cosmetics. We want to be the category builders of prestige cosmetics around the world. We are not only building our brands, we are building the category. This idea has united the entire organization and all of the brands. Every brand, every region, every country, every function knows its role in achieving this goal.
I believe in leveraging people’s strengths. I don’t believe that trying to improve people on every aspect, to make each one of us a 360-degree individual, is necessarily a good idea. Each one of us has unique strengths. Some of us are amazingly creative. Some of us are superbly analytical. Others have incredible commercial expertise. Others are able to develop fantastic products. The key idea is to allow every one of us to be the best we want to be and then build teams where all skills are represented, so that the team can win. With this model, we have created a very interesting way to collaborate. Collaboration is designed to leverage each other’s strengths, rather than just being a nice way to behave in a conversation.
The other important process that has created our team is sharing knowledge in a transparent way across the organization to where it needs to go. Knowing the score is important. If you have a common goal, and you have your own contribution to give, you need to know how things are going, at every time, at every level of the company. A transparent measurement system allows people to know the score.
The last point on team building is that you need an enormous amount of personal energy and commitment. I am personally very engaged in developing the team, our team spirit and spending time with my team. I spend a lot of energy in that specific task. I believe that people join people. People do not join corporate goals. Corporate goals are needed, but people join people. Unless you’re personally engaged, there will not be enough energy.
What is most exciting for me as a leader in this process is success. Success creates energy and particularly the ability of the entire organization to focus on future opportunities, rather than focusing on fixing short-term issues. Success has a double energy. It is very motivating and energizing, but it also helps to focus the organization on the right priorities.
What is even more gratifying in my experience is continued learning. To continue learning yourself, and most importantly, to see the young people in the organization growing, learning, becoming better leaders themselves. At the end, the role of a leader is to generate and educate other leaders.
In my leadership seminar, I discuss the importance of leaders needing to have the courage to change, but also the honesty to accept what should not be changed and, most important, to recognize what should not be changed before changing anything. Most important is having the wisdom to distinguish the first from the second, meaning what has to change from what should not be changed. I believe that true leadership is, in reality, this wisdom. —As told to Jenny B. Fine