{"id":2914,"date":"2015-12-08T15:23:27","date_gmt":"2015-12-08T20:23:27","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/patagonia-dont-buy-this-jacket\/"},"modified":"2015-12-09T21:52:30","modified_gmt":"2015-12-10T02:52:30","slug":"patagonia-dont-buy-this-jacket","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patagonia-dont-buy-this-jacket\/","title":{"rendered":"Patagonia: Don\u2019t Buy this Jacket"},"content":{"rendered":"<p><span style=\"text-decoration: underline\"><strong>Introduction<\/strong><\/span><\/p>\n<p>Yvon Chouinard is not your typical corporate businessman. The 77-year-old rock climber and environmentalist turned CEO is the founder of Patagonia, an American clothing company that sells high-end outdoor clothing.<a href=\"#_edn1\" name=\"_ednref1\">[i]<\/a>\u00a0Chouinard, now retired, has developed Patagonia into one of the world&#8217;s most environmentally-conscious and socially-responsible brands. Not only does Patagonia urge their customers to consume sensibly, they have also developed an operating model that minimizes Patagonia\u2019s ecological footprint. And the company\u2019s anti-consumerist message has resonated with consumers \u2013\u00a0according to <em>Business Insider<\/em>, the company tripled its profits between 2008 and 2014.<a href=\"#_edn2\" name=\"_ednref2\">[ii]<\/a><\/p>\n<p>For these reasons, I believe Patagonia is a clear TOM Challenge \u201cWinner\u201d \u2013 the company\u2019s tight alignment between its business model and its operating model has allowed Patagonia to grow revenues while staying true to its mission statement. Below I outline the core elements of Patagonia\u2019s two models in order to concretely illustrate the ways in which they work together to create and capture value for Patagonia, and for society more broadly.<\/p>\n<p><strong><u>Business Model <\/u><\/strong><\/p>\n<p>Patagonia\u2019s mission statement is <em>\u201cto build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.\u201d<a href=\"#_edn3\" name=\"_ednref3\">[iii]<\/a> <\/em>This mission statement is reflected in the following core tenets of Patagonia\u2019s business model:<\/p>\n<ul>\n<li><strong><em>High-Quality Products that Last:<\/em><\/strong> Chouinard has long been guided by principles of functionality and simplicity.<a href=\"#_edn4\" name=\"_ednref4\">[iv]<\/a> As such Patagonia\u2019s focus is on using high-quality material and cutting edge technology to build durable, highly functional products that last a long time.<\/li>\n<\/ul>\n<ul>\n<li><em><strong>Premium Pricing:<\/strong><\/em>\u00a0The quality of its products is rationalization for the company&#8217;s premium pricing policy. The extended useful life of its products allows Patagonia to charge a higher price as customers are able to buy fewer items over time.<\/li>\n<\/ul>\n<ul>\n<li>\n<figure id=\"attachment_2911\" aria-describedby=\"caption-attachment-2911\" style=\"width: 300px\" class=\"wp-caption alignright\"><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Jacket-2.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2911 size-medium\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Jacket-2-300x172.png\" alt=\"\" width=\"300\" height=\"172\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Jacket-2-300x172.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Jacket-2-600x344.png 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Jacket-2.png 737w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-2911\" class=\"wp-caption-text\"><em><strong>The Don&#8217;t Buy this Jacket Campaign<\/strong><\/em><\/figcaption><\/figure>\n<p><strong><em>Anti-Growth Messaging:<\/em><\/strong> In 2011 Patagonia launched a much talked about advertisement campaign called \u201cDon\u2019t Buy this Jacket.\u201d The company took out a full-page, Black Friday ad in the New York Times urging consumers to think twice before purchasing another Patagonia fleece (as a way to reduce worldwide waste). It seemed like a counterintuitive strategy for a company that relies on profits to exist, but the campaign struck a chord with customers \u2013 profits jumped 30% in 2012 (and Chouinard argues that the jump was due to a capture of <em>new <\/em>customers rather than increased purchases from existing customers.)<a href=\"#_edn5\" name=\"_ednref5\">[v]<\/a><a href=\"#_edn6\" name=\"_ednref6\">[vi]<\/a><\/li>\n<\/ul>\n<ul>\n<li><strong><em>Consumer Trust:<\/em><\/strong> Finally, Patagonia has very purposefully built strong and trusting relationships\u00a0with its consumers. Patagonia recognized early on that individuals\u00a0want to purchase from brands they trust, admire, and identify with. As a result of its focus on trust,\u00a0Patagonia has built a very loyal (some call it fanatic) customer base.<a href=\"#_edn7\" name=\"_ednref7\">[vii]<\/a><a href=\"#_edn8\" name=\"_ednref8\">[viii]<\/a><\/li>\n<\/ul>\n<p><strong><u>Operating Model<\/u><\/strong><\/p>\n<p>I\u2019ll turn now to Patagonia\u2019s operating model (which features investments in primarily scope, processes, and human capital) in order to demonstrate how Patagonia\u2019s operating decisions are closely linked to and reinforce the business strategy discussed above.<\/p>\n<ul>\n<li>\n<figure id=\"attachment_3035\" aria-describedby=\"caption-attachment-3035\" style=\"width: 356px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-3035\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Picture120-300x140.png\" alt=\"\" width=\"356\" height=\"166\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Picture120-300x140.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Picture120-600x280.png 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Picture120.png 996w\" sizes=\"auto, (max-width: 356px) 100vw, 356px\" \/><figcaption id=\"caption-attachment-3035\" class=\"wp-caption-text\"><strong><em>\u00a0Cutting-Edge Materials and Technology <\/em><\/strong><\/figcaption><\/figure>\n<p><strong><em>Raw Materials Selection: <\/em><\/strong>In accordance with the company\u2019s focus on high-quality\u00a0products, Patagonia puts careful consideration\u00a0into the selection of raw materials. According to their website, their materials \u201cresist degradation from wearing and washing, [are] easy to care for, and are grown or manufactured with care for people and the planet.\u201d The company has developed a \u201c<span style=\"line-height: 1.5\">quality testing lab\u201d that analyzes all potential materials against a set of minimum requirements that the company has spent \u201cyears\u201d refining. The laboratory &#8220;may test as many as 70 different materials options&#8221; in order to identify the highest-performance fabric.<\/span><a style=\"line-height: 1.5\" href=\"#_edn9\" name=\"_ednref9\">[ix]<\/a><\/li>\n<\/ul>\n<ul>\n<li><strong><em>Supply Chain Management<\/em><\/strong>: In order to adhere to their mission statement and to maintain the trust with consumers (as outlined above)<strong><em>, <\/em><\/strong>Patagonia chooses its supply chain collaborators carefully, placing great emphasis on ethical labor practices and environmental impact. According to to their website Patagonia \u201cbuilds relationships with the right suppliers [and] &#8230; requires that all fabric and trims suppliers audit their factories for key social responsibility indicators, such as hiring practices, employee grievance mechanisms, recycling policies and other social and environmental efforts.\u201d<a href=\"#_edn10\" name=\"_ednref10\">[x]<\/a>\u00a0According to Chouinard, the company follows every one of their products all the way from the farmer to the end of the production process to ensure there are no &#8220;unintended \u00a0consequences&#8221; of Patagonia\u2019s supply chain decisions.<a href=\"#_edn11\" name=\"_ednref11\">[xi]<\/a><\/li>\n<\/ul>\n<ul>\n<li><strong><em>Recycling: <\/em><\/strong>In alignment with Patagonia\u2019s anti-growth messaging, the company has introduced a recycling element into their production process. Patagonia works with consumers to collect old clothing that can\u2019t be resold and then sells the used materials back to its upstream suppliers \u201cat a lower price than comparable virgin materials.\u201d<a href=\"#_edn12\" name=\"_ednref12\">[xii]<\/a> The creative recycling campaign has allowed Patagonia to adhere to its mission to reduce waste, while generating a new (albeit small) revenue stream.<\/li>\n<\/ul>\n<ul>\n<li>\n<figure id=\"attachment_2910\" aria-describedby=\"caption-attachment-2910\" style=\"width: 313px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2910\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Footprint-chronicles-300x159.png\" alt=\"\" width=\"313\" height=\"166\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Footprint-chronicles-300x159.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Footprint-chronicles-600x317.png 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Footprint-chronicles.png 685w\" sizes=\"auto, (max-width: 313px) 100vw, 313px\" \/><figcaption id=\"caption-attachment-2910\" class=\"wp-caption-text\"><strong><em>\u00a0The Footprint Chronicles<\/em><\/strong><\/figcaption><\/figure>\n<p><strong><em>Transparency:<\/em><\/strong> As part of Patagonia\u2019s commitment to consumers as outlined\u00a0above, the company goes to great lengths to provide transparency into any and all supply chain management decisions. Patagonia has created the Footprint Chronicles \u2013<br \/>\na map that showcases all of the factories around the world that Patagonia partners with. The websites outlines the address of each factory, the gender breakdown of the factory workers, the languages spoken in the factory, and the Patagonia items produced at each plant.<a href=\"#_edn13\" name=\"_ednref13\">[xiii]<\/a> This form of radical transparency demonstrates the company\u2019s commitments to its values and thus increases customer trust.<strong><em>\u00a0<\/em><\/strong><\/li>\n<\/ul>\n<ul>\n<li><strong><em>Human Resources: <\/em><\/strong>Finally, Patagonia considers labor a critical part of their operating model. Patagonia subscribes to the belief that happy and productive employees leads to high-quality final products. The title of Chouinard\u2019s memoir, \u201cLet My People Go Surfing\u201d is reflective of the company\u2019s approach to human capital development \u2013 many Patagonia employees hit the waves during lunch time, employees are actively encouraged to balance their work and personal lives, and all employees can take a two-month sabbatical to work on an environmental project of their choice. These, along with other benefits, ensure Patagonia continues to attract and retain high quality talent \u2013 according to the Patagonia website the company receives around 200 resumes every month and turnover is in the &#8220;single digits&#8221;.<a href=\"#_edn14\" name=\"_ednref14\">[xiv]<\/a><\/li>\n<\/ul>\n<p><strong><u>Alignment Overview &amp; Summary<\/u><\/strong><\/p>\n<p>Not only has Patagonia developed a winning business proposition, but just as importantly, it has created an execution strategy that is highly complementary to the business model. Both models are aimed at building high quality materials, minimizing the company&#8217;s environmental impact, and developing long-lasting relationships with consumers. Patagonia, an obvious TOM Challenge winner, uses strategic and operational alignment\u00a0to transform assets into valuable products and to capture value for Chouinard, Patagonia employees, and the world.<\/p>\n<p>&nbsp;<\/p>\n<p><strong><u>Endnotes<\/u><\/strong><\/p>\n<p><a href=\"#_ednref1\" name=\"_edn1\">[i]<\/a> https:\/\/en.wikipedia.org\/wiki\/Yvon_Chouinard<\/p>\n<p><a href=\"#_ednref2\" name=\"_edn2\">[ii]<\/a> http:\/\/www.businessinsider.com\/patagonia-business-strategy-2014-9<\/p>\n<p><a href=\"#_ednref3\" name=\"_edn3\">[iii]<\/a> http:\/\/www.patagonia.com\/us\/patagonia.go?assetid=2047<\/p>\n<p><a href=\"#_ednref4\" name=\"_edn4\">[iv]<\/a> http:\/\/www.newyorker.com\/business\/currency\/patagonias-anti-growth-strategy<\/p>\n<p><a href=\"#_ednref5\" name=\"_edn5\">[v]<\/a> http:\/\/www.bloomberg.com\/bw\/articles\/2013-08-28\/patagonias-buy-less-plea-spurs-more-buying<\/p>\n<p><a href=\"#_ednref6\" name=\"_edn6\">[vi]<\/a> http:\/\/groundswell.org\/the-bottom-line-patagonia-north-face-and-the-myth-of-green-consumerism\/<\/p>\n<p><a href=\"#_ednref7\" name=\"_edn7\">[vii]<\/a> http:\/\/www.businessinsider.com\/patagonia-business-strategy-2014-9<\/p>\n<p><a href=\"#_ednref8\" name=\"_edn8\">[viii]<\/a> http:\/\/blog.zoomint.com\/blog\/friday-five-let-customers-design-their-own-experiences<\/p>\n<p><a href=\"#_ednref9\" name=\"_edn9\">[ix]<\/a> http:\/\/www.patagonia.com\/us\/patagonia.go?assetid=68444<\/p>\n<p><a href=\"#_ednref10\" name=\"_edn10\">[x]<\/a> http:\/\/www.patagonia.com\/us\/patagonia.go?assetid=68444<\/p>\n<p><a href=\"#_ednref11\" name=\"_edn11\">[xi]<\/a> https:\/\/www.gsb.stanford.edu\/insights\/yvon-chouinard-patagonias-secret-its-supply-chain<\/p>\n<p><a href=\"#_ednref12\" name=\"_edn12\">[xii]<\/a> https:\/\/hbr.org\/2011\/10\/patagonias-buy-less-campai<\/p>\n<p><a href=\"#_ednref13\" name=\"_edn13\">[xiii]<\/a> http:\/\/www.patagonia.com\/us\/footprint<\/p>\n<p><a href=\"#_ednref14\" name=\"_edn14\">[xiv]<\/a> https:\/\/www.washingtonpost.com\/business\/a-company-that-profits-as-it-pampers-workers\/2014\/10\/22\/d3321b34-4818-11e4-b72e-d60a9229cc10_story.html<\/p>\n<p>Featured image:\u00a0http:\/\/jaykinghorn.com\/2009\/06\/02\/patagonias-the-footprint-chronicles-visualizing-a-corporate-philosophy\/<\/p>\n","protected":false},"excerpt":{"rendered":"<p>How tight alignment between its business and operating models has allowed this outdoor clothing company to reap profits while bettering the world.<\/p>\n","protected":false},"author":1046,"featured_media":3069,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-2914","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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