Levi's Changes Everything

Record sales. Record profits. Committed workers. Great brands.

Change everything!

Over the last four years, Levi Strauss & Co., one of the business world's most successful companies, has been engaged in one of its most far-reaching transformations. The program provides a once-and-for-all rebuttal to the tired maxim, "If it ain't broke, don't fix it."

Levi's has set the standard for combining hard-headed business results with soft-hearted values. Last year, the company generated record sales of nearly $7 billion and profits of more than $700 million. Its market value is an estimated $10 billion -- four times its value when it went private in 1985.

This financial performance has been accompanied by a uniquely progressive business culture. The Levi's Aspirations Statement, adopted with great fanfare in the late 1980s, is an unusually articulate expression of values-driven competition. It emphasizes participation and diversity, accountability and teamwork, a top-to-bottom commitment to open communication.

So what's the problem? Quite simply, no matter how big and prosperous Levi's becomes, the outside world keeps changing. Customers are more demanding and powerful. Suppliers are more numerous and dispersed. Consumers are more fickle.

The response? "The largest change program in the history of the company," says Thomas M. Kasten. "We've set extremely aggressive goals. They represent massive change. They're radical for our business. They sounded impossible to many of our people. They sounded impossible to me!"

That last point is worth noting -- since it's Kasten's job to turn the goals into reality. Tom Kasten, 53, doesn't act the part of corporate renegade. He's a Levi's vice president and member of the company's U.S. Leadership Team. He's thoughtful, measured, precise. He joined Levi's in 1966, when it was a $100 million outfit that sold blue jeans and western wear, and has since managed nearly every part of the company: Youthwear, Womenswear, Levi's men's jeans.

In 1993, Kasten signed on for his biggest challenge yet: leading the campaign to remake Levi's for the 21st century. Why accept such a risky assignment? "How often," he asks, "do you get the chance to have a dramatic impact on how a corporation does business?"

Kasten and a team of hundreds -- many drawn from the middle ranks of the company -- became a flying wedge of change. These activists, who occupied the third floor of Levi's headquarters in San Francisco, hatched a plan to totally redesign the company: new business processes, systems, facilities. The Third Floor brigade invented thousands of jobs -- complete with formal job descriptions, qualifications, and titles -- along with a staffing process (now unfolding) through which current employees apply for the jobs. It created a remarkable collection of hands-on tools and resources to help their colleagues prepare for the future.

"You can't expect people to change if you don't give them the tools," Kasten says. "On the other hand, people have a personal responsibility to get involved. We create opportunities for people to change, but we can't change them."

In a series of interviews, Tom Kasten shared his insights about the hard work of leading change. Members of his team added their voices by describing both their personal experiences and the tools for change they've created. The result is part manifesto, part manual -- a handbook for building the company of the future.

The Customer Makes the Case for Change

I look at Levi's performance -- nine years of record sales, profits of $700 million in 1995 -- and I can't believe you're pushing such radical changes. Why mess with success?

You change when customers say you have to change. One of my favorite warnings about the hazards of success comes from Andy Grove at Intel: "There is at least one point in the history of any company when you have to change dramatically to rise to the next performance level. Miss that moment and you start to decline."

That's where we were five years ago. We had great products -- always have. We had great marketing -- nobody can touch us. But customers were telling us our service wasn't good enough. We were slow. It could take us 30 days to restock a store. In Womenswear, one of the divisions I led, it could take a year to source a new product. We weren't reliable, either. We shipped less than 40% of our orders when we said we would.

The closer we looked, the more we realized how deep-seated our problems were. They involved the entire supply chain -- the worldwide set of activities that begins when someone gets an idea for a product and ends when that product sells at retail. It's awesomely complex. We have 600 contractors in 50 countries. We sell 65,000 different combinations of brand, design, fabric, color, and size to 8,000 different customers.