It has happened again.
A terrific company is felled by hubris. Twenty-two years old, Under Armour, is struggling. It had a horrible 2017. The good news is that it was not as bad as analysts predicted, so the stock rose at the FY 2017 reporting. If there is an underlying issue, it is the mishandling of incredible growth fueled by the arrogance of success and losing touch with changing customer customer needs and behaviors relating to the “athleisure wear” category.
And, let’s not forget that Under Armour’s competition is pretty formidable – Adidas, Lululemon, and Nike.
Hubris and losing track of core customer needs are paths leading to brand trouble. Behaving in these bad brand ways has a disastrous effect on the business culture, on employee pride, and on the heart and soul of the brand itself.
Under Armour’s founder, Kevin Plank, was 23 years old when he created the original product in his grandmother’s basement. He created a tee shirt using micro-fibers that wick moisture away from the body while keeping athletes cool and dry. It was a revolutionary product. The business took off. The products were featured in movies. Sports figures were photographed wearing Under Armour. The brand expanded from men’s wear to women’s wear to sneakers. It is easy to see how success could go to one’s head. But incredible growth can fuel hubris. GoPro is undergoing a similar review of its business. Nike, Adidas and Reebok immediately adopted Under Armour’s product idea.
In 1991, Pepsi CEO Wayne D. Calloway stated that arrogance was the single biggest reason people did not succeed at Pepsi. “He said that there is nothing wrong with having confidence, but arrogance is something else. Arrogance is the illegitimate child of confidence and pride. Arrogance is the idea that not only can you never miss [shooting] a duck, but no one else can ever hit one.” As Mr. Calloway said, “Arrogance is an insurmountable roadblock to success in a business where the ‘team’ is what counts. The flipside of arrogance is team-work—the ability to shine, to star, while working within the group.”
When there is incredible brand momentum and growth, arrogance often leads to losing touch with the customer. The business leader knows best… “We will do what we have always done.” “We will not change.” The world does not stand still. Losing touch with customers’ behavior can be deadly. Never take your eye off the ways in which the world is changing. Instead of looking back, look ahead. Be anticipatory and flexible. Stay relevant.
Along with hubris and losing track of customer changes, there is another sign of brand trouble ahead. When things are slow in the US, go overseas. Instead of addressing the brand’s challenges in the US, expand to new geography. Chasing the instant revenues of entering new geographic markets merely buys time. This does not solve the problems; it merely spreads the problems to more markets.
The Financial Times reports that current fiscal performance is being driven by international sales. The Wall Street Journal states “…latest quarter revenue grew despite a decline in North America.” As The Wall Street Journal reported, Mr. Plank stated in a conference call “sales growth abroad will continue to offset weakness in the company’s domestic market.” But, The Wall Street Journal reminds us that Under Armour’s competition, especially Nike, are stronger overseas. And, although The Wall Street Journal says, “exceeding low expectations is admirable” investors will not continue to make excuses for poor performance.
Bloomberg Gadfly is also not impressed by Kevin Plank’s remarks about the trajectory of the Under Armour business. Slow growth is acceptable. Bloomberg Gadfly worries that the brand will not be able to overcome its “massive stumble”. The main concern is brand mismanagement due to letting hubris get in the way, blinding everyone to the changing customer.
All the restructuring in the word will not fix Under Armour if the culture and mindset is one of arrogance insensitive to the changing needs of customers. Arrogance, insensitivity to changing needs, and geographic expansion to compensate for domestic market decline are brand traps that take brands off track.
Larry Light, a global brand revitalization expert, is co-author with Joan Kiddon of Six Rules for Brand Revitalization. He also is the Chief Executive Officer of Arcature, a marketing consulting company that has advised a variety of marketers in packaged goods, technology, retail, hospitality, automotive, corporate and business-to-business, as well as not-for-profit organizations.
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