rP os t
9-306-064

REV: FEBRUARY 12, 2008

ROSABETH MOSS KANTER
RYAN L. RAFFAELLI

op yo Innovation at Timberland: Thinking Outside the
Shoe Box

In December 2005, CEO Jeff Swartz and COO Ken Pucker headed for a meeting in Timberland’s
Stratham, New Hampshire, world headquarters, to celebrate achievements and ensure that plans were in place for several important product launches in the spring. The approach of a new year gave them a chance to reflect on progress made and consider opportunities ahead.

tC

Jeff and Ken walked past the festive, holiday-decorated company store, with its promotion of ornaments to support Share Our Strength, a hunger relief organization. At the entrance of the company’s cafeteria, they stopped at a display featuring a campaign to stop the genocide in Darfur and an adjacent wall of customized Timberland boots designed by City Year to celebrate sixteen years of partnership in the community. Since 1989, Timberland had served as National Leadership
Sponsor to the national youth service corps. All of these reflected the values that constituted
Timberland’s soul. Now soles (the in-shoe variety) were on the leaders’ minds.

No

Over the past 3-4 years, Timberland had booted up a formal system to produce greater innovation—in some ways, a return to the past. The company’s early growth had come from bootstrapping significant inventions in footwear, including one of the world’s first waterproof boots.
More recently, Timberland’s dramatic hike to $1.5 billion in revenues had stemmed from a proliferation of 1400 new footwear products and almost as many new apparel offerings each year
(sold through over 25,000 domestic and international wholesale doors and over 650 retail doors) that put Timberland in competition with prestigious fashion companies. While happy with the profitable growth, Jeff and Ken had not waited for the other shoe to drop, a common mistake in the fickle fashion industry. They had already taken steps to develop an R&D unit, the Invention Factory (called iF), to create a future that did not depend solely on fashion.

Do

Under Doug Clark, a biomechanics expert and footwear veteran, iF produced award-winning concepts. In 2005, at semi-annual meetings with analysts, Clark described prototypes of flame and shock resistant boots for firefighters, shoes with superb traction modeled after the toes of gecko lizards, and hiking boots with chimney mechanisms to channel heat away from the foot.
In over three years of operation, Invention Factory had proved highly imaginative but had yet to have a consequential impact on the rest of the business. Now Jeff and Ken wanted to take steps to

________________________________________________________________________________________________________________
Professor Rosabeth Moss Kanter and Research Associate Ryan L. Raffaelli prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006, 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

ensure that innovation would more profoundly influence Timberland’s results and the culture. For that, they needed to examine iF as it was presently organized to see if its structure was effective and whether it was using state-of-the-art change management skills to connect with the mainstream of
Timberland. And they might need to ask themselves what they saw as the essence of the Timberland brand, as that would help determine iF’s role and how many trails to blaze for the future.

Timberland History: The 3 Big Ideas

op yo Nathan Swartz started his bootmaking career as an apprentice stitcher in 1918. In 1952, he bought half an interest in The Abington Shoe Company in Boston, Massachusetts. Three years later he bought the remaining interest and brought his sons, Sidney and Herman, into the company, which made shoes for leading manufacturers.

In the 1960’s, Sidney and Herman decided to address a problem for Northeastern construction workers who faced brutal winter conditions in workboots that were not waterproof, were poorly insulated, and quickly fell apart. Sidney noticed that suppliers had been able to open the pores of leather and inject color and believed the same process could work if silicone were injected. Working in concert with Prime Tanning, the Swartz’s and Prime invented the first silicone impregnated leather. A direct attach bonding process fused soles to leather uppers without stitching, producing one of the first truly waterproof boots. Consumers could dump the boot in water and flex it 15,000 times before it leaked (equivalent to a five-mile walk downriver).

tC

The boots were an instant success with construction workers throughout the New England region.
But the waterproofing technology made the boots much more expensive than their competitors’ as
Timberland was paying a premium for leather, equipment, and latex. And even though the boot worked better, it looked like everyone else’s. In 1973, Sidney noted that athletic companies were branding shoes with logos and applied the same concept to his boot, naming it Timberland; a brand name that offered the boot an identity and distinguished it from competitors. The company developed a marketing campaign that appealed to performance-driven customers: “Boots that cost plenty…and should.” It was the first time that a boot company had used marketing to tell a story.
The boot’s soaring popularity led to changing the company name to The Timberland Company.

No

Timberland boots became a favorite among college students on winter-challenged campuses. By
1978, college kids on almost every New England campus had traded in their felt lined pack boots for workboots. A new customer segment grew up thinking of the boot as a winter boot, not a workboot.
The next big idea helped Timberland move beyond a seasonal product. Recognizing a need for more durable boat shoes, Timberland leveraged its tooling, machinery, and parts to create a comfortable casual shoe that could be used on boats as well as for walking. The boat shoe made Timberland a popular brand with young urban professionals. Expansion into apparel followed because consumers started sending letters to Timberland asking where they could buy the jeans appearing next to boat shoes in print advertisements. Timberland started selling clothing and accessories.

Do

Timberland developed its third big idea in the 1980’s when hiking boots became the rage. The industry’s leading hiking boots were hot and heavy. Timberland decided to apply technology used to make running shoe midsoles to hiking shoes. The result, the Euro Hiker, created a category called day hiking. It was category defining and established Timberland as a major force in outdoor footwear.

Through inventions, the company earned a leadership position in boots, casual footwear, and high-performance outdoor recreation. (See Exhibit 1 for illustrations of the three core products.) But by 1995 Timberland was growing its global footwear franchise, but was unable to deliver against its

2
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

internal forecasts. A financial crisis ensued as an overly optimistic forecast for footwear growth was not met and, at the same time, Timberland’s less profitable apparel, retail, and international divisions were growing faster than footwear. Fortunately, in 1996, the outdoor business accelerated and from
1996 to 2000 became Timberland’s largest category. A shift had occurred in consumer preferences, and Timberland was able to move its casual shoe resources toward the outdoor brand. In late 1990’s, the outdoor brand began to decline. However, a trend in urban boot sales (which first emerged in the
1980’s) took off. By the 1997, sales from urban young adults who needed a sturdy and durable boot to go with their baggy pants exploded. Timberland responded by creating an urban line that preserved the company’s focus on performance, fused with an understanding of urban fashion.

op yo “Pull on Your Boots and Make a Difference”: Boot, Brand, Belief

Jeffrey Swartz, Sidney’s son, joined Timberland after receiving his MBA from Dartmouth in 1984; in 1991, he became the company’s COO. Jeff later became CEO in 1998 when Sidney took on the role of Chairman. Ken Pucker, an operations executive, moved up to become COO. Jeff wanted to infuse the company with a culture of community service. Under his leadership, Timberland became a founding sponsor of City Year in 1988, a Boston-based “urban Peace Corps” that brought together young people from diverse backgrounds for a year of full-time community service, served as a model for Americorps, the U.S. national service program, and by 2005 operated in 16 U.S. sites and South
Africa. Timberland invited City Year to establish a New Hampshire site at Timberland’s Stratham offices, and a City Year veteran joined Timberland.

No

tC

Even during the 1995 financial difficulties, Timberland held steadfast in its commitment to service.
Timberland employees were given 40 paid hours for community service each year, through its Path to Service program. That same year, their Path of Service benefit expanded from 16 to 32 hours of paid time for employees to invest in their community through service. By 2005, Path of Service was
40 hours and included Service Sabbaticals of up to six months full time paid leave for capacity building at local non-profits. Annually, the company’s 5600 employees partnered with communities to contribute over 50,000 hours in 27 countries worldwide. The company had been named to Fortune magazine’s “Top 100 Companies to Work For” for the eighth consecutive year, Working Mother magazine’s “Best Companies to Work For,” and Business Ethics magazine’s “Most Ethical
Companies.” President Bush singled out Swartz at a private White House meeting of US executives as a corporate model for building a better America.
Timberland had added environmental issues to the company’s social responsibility agenda, looking at sources of its raw materials and their impact on the environment. The company worked with its contract manufacturers globally, including those in China and Vietnam to ensure they met high standards. Timberland engaged its own Chinese employees in community service projects, unusual for that country. Timberland’s pledge to corporate social responsibility was grounded in their corporate values: humanity, humility, integrity and excellence. Swartz said:

Do

My grandfather built the boot, my father built the brand—what was I left to do? I believed it was our mission is to equip people to make their difference in the world, not my difference. I wanted to appeal to the greatness inside our people.

Organizing for Consumer Focus
Jeff Swartz shifted Timberland’s focus in other ways. Under Sidney, the business had been product-led; he developed new products that became the foundation for Timberland’s brand. Jeff
3
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

Swartz and COO Ken Pucker believed that a new era required Timberland to amplify attention on the consumer to remain competitive. According to some veteran executives, Timberland made a fundamental change in how they did business. They shifted emphasis from inventing new core products toward servicing customer groups with variations of those products.

Cross functional product teams Instead of remaining organized by function—design, marketing, and sales teams—Jeff Swartz reorganized Timberland by customer into so-called in-line teams that “owned” a consumer segment: a boot/urban team, a men’s casual team, a woman’s casual team, an outdoor performance team, a kid’s team, a pro team, and apparel. These cross functional teams identified with their specific consumer and tried to meet their needs. They had membership from supply chain, brand management, and product management. This helped Timberland to improve gross margins and exploit efficiencies for their core products.

op yo To satisfy the need for capacity and development expertise, Timberland added production to factories in the Far East. This move created an opportunity to strengthen policies and standards for factory partners and to innovate programs to enhance the quality of life for workers. In the late 90’s, the company formalized a Code of Conduct that embodied Swartz’ philosophy of “doing well and doing good” and clearly defined the performance expectations for prospective business partners.
They also created an assessment tool to rate the environmental performance of each of their leather tanneries, and footwear and apparel suppliers.1

tC

Product variation and growth Product teams had been kept small so they could work collaboratively. Towards the end of the 1990’s, Timberland added many consumer focused teams for new segments (e.g., a new Kids line, a Mountain Athletics line, and a PRO industrial line). The expansion in footwear created opportunities and challenges. With each new season, the customer driven strategy opened doors to new and previously unidentified markets. To serve these markets, the in-line teams created 4000 new products every year (of which 1400 made it to the line). Over the six year period ending in 2005, Pucker reported that Timberland generated approximately 50% of its revenue from new products, compared to an average of between 15% and 25% in previous years.

No

Function versus fashion Rob Koenen, Vice President and Head of Men’s Casual and Kid’s, commented, “There is a delicate balance at Timberland between function and fashion; we want the marriage of innovation and consumer relevance.” The push for increased product variations forced the in-line teams to evaluate the balance between function/performance products versus those built for fashion. Fashion products could bring in quick profits, but functionally driven products invented to solve consumer problems required more time to cultivate. Doug Clark, a veteran Nike and Reebok biomechanist who came to Timberland in 1994 to head the in-line outdoor team, commented:

Do

There were too many tempting dollars on the fashion side. It was a lot more work to build innovative products than market responsive products. Our history said our big success came from our core products. But for fashion products, we believed we didn’t need innovation to permeate every shoe. It was hard to argue with the success the fashion shoes were having.
There was pressure to keep the profits growing every single season. Category managers were saying, “We need to feed the beast first, Doug, before we do invention.” Our challenge was that there weren’t sufficient resources, capacity, or energy to do the next new thing.

The push for segmented products forced the in-line teams to create more fashion products and made it very difficult for designers to come up with functional inventions. Since innovation was the responsibility of the in-line team designers, the new strategy compromised innovation, Clark said.
1 In recognition of their efforts, SustainableBusiness.com named Timberland named one of the world’s top sustainable stocks for the third consecutive year in 2005.

4
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

Smart Comfort Pucker invited 60 people to meet in Portland, Maine, for a week-long conference. The group was asked to develop a revolutionary concept by the time they left. Everyone involved in making a shoe was invited: designers and developers, partners from tanneries, factories, material suppliers, mold shops, and cement companies. By the end of the week, the group had developed a new concept, Smart Comfort; a comfort system for the men’s casual shoe line. Clark said,
“It was the most innovative, creative, and productive period at Timberland. It was proof positive that advanced thinking and technical improvements weren’t just the domain of athletic categories. It showed there was a place for this type of thinking.”

op yo At first, it looked as though Timberland’s structure would prevent Smart Comfort from going to market. When the idea returned to Stratham, the in-line teams were worried it would stymie their already full in-line calendar obligations. Pucker noted, “When we developed Smart Comfort, we did it on an in-line calendar. Our first launch was a failure. The product was late, we had quality problems, it didn’t work the way it was engineered.”
Although plagued with difficulty, the Smart Comfort idea eventually survived because it had the support of leadership and the team recognized that the process would help them define the delicate balance between function and fashion for the men’s casual team. The team used Smart Comfort’s rollout to better define the needs of their consumer. They divided the market into men who wanted a traditional performance shoe, and men who wanted a performance shoe but were also influenced by current fashion trends. When Smart Comfort was launched again, it was a success and considered a breakthrough innovation for the men’s team. The process reminded Timberland that they could invent new ideas—but highlighted many of the barriers that the mainstream structure had created.

tC

Clark brought his concerns to Pucker: What was the push for fashion doing to the perception of their brand? Did they have a basis for the brand five years from now? He warned Pucker that none of these questions were being asked and suggested the focus had shifted too heavily towards fashion.
Pucker recalled, “Doug kept impressing upon me the need for investment in invention, which was separate from an in-line calendar. He insisted that invention took longer. We needed more time for trial and error and to work with outside partners. It was tough to build an in-line product, support our needs from a fashion standpoint, hit our budget, meet our international constituent’s needs, and invent.” No

In-line Team, Speed Team, and Advanced Concept Team
In 2002, Swartz and Pucker made some organizational changes on a global scale. The in-line teams would remain organized by consumer segments and focus on products in the seasonal calendar.
Marc Schneider, a former Senior VP at Macy’s and the head of Timberland’s apparel line, became
Senior VP of Global Product Management. To promote collaboration, in-line business unit leaders ran sales and distribution by geography while functional experts (in supply chain, product, and marketing) supported the business units.

Do

Under Schneider, the in-line teams began to focus heavily on global consumer segmentation and brand marketing. They researched customer segments around the world, tested hypothesis about consumer needs, and attempted to carve out new segments that Timberland could serve. The in-line teams also spent a great deal of time reviewing how the consumer viewed the Timberland brand in the U.S. and abroad. Schneider explained, “We needed to create clearer and better focused positioning statements. I called them point of views, not just points of differentiation, on whom we were serving, how we intended to serve them, and why we believed we served them with distinction and priority in the marketplace.” Each in-line team asked several questions relating to their consumer and how they related to the Timberland brand. The research required each team to develop a
5
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

positioning statement identifying consumer benefits and the brand’s character. (See Exhibit 2 example of Outdoor Performance Position.) In-line team members took pride in knowing their customer segment better than anyone else.

A new group, called the Speed Team, was formed to handle fashion responsiveness for products that could be placed on a shorter calendar, developed quickly, and immediately sent to market. The nine person team serviced all the in-line teams and prioritized their project based on workload and market demands. Most of the 300 new SKU’s the Speed Team developed each year fulfilled unexpected color and fashion trends that could accompany the current in-season lines.

Invention Factory (iF)

op yo Pucker also commissioned an advanced concepts team, with a longer time horizon, called the
Invention Factory, in the spirit of Timberland’s past innovations, which would focus on new ideas requiring longer development, new factory partnerships, higher risks, new platforms, and, hopefully, produce Timberland’s next breakthrough product and process concepts.

tC

The Invention Factory, or iF’s, mission was “to identify and develop innovative and high impact concepts (products, processes, and materials) that will enhance and extend Timberland’s brand equity, foster business opportunities, and drive profitability over the long term.”2 It was future oriented, but aimed to take Timberland back to its history of developing category defining breakthrough products. Pucker asked Clark to head the team because he understood the value of science in the shoe making business. Swartz and Pucker were intrigued with Clark’s belief that the same level of scientific rigor could be applied to the “brown shoe” industry as was done by the best in the “white shoe” business.3 iF’s scientific approach would rely heavily on material sciences, biomechanics, morphology, and physiology.

No

With an initial budget of a few million dollars, the lab was located in the space adjacent to the designers for the in-line teams and consisted of design and development areas, as well as a biomechanics lab—the first of its kind in the brown shoe business. Instead of basketball courts and tracks as at Nike, Clark designed Timberland’s biomechanics lab with pressure plates that could measure the impact of a U.S. Army soldier jumping out of a helicopter with his pack, treadmills modified for running surfaces that simulated hiking trails and river bottoms, and self-help stations where designers could, for example, test how forms of origami might serve as models for boot soles.
A special space, called The Connection Room, exposed iF members to new materials, such as puncture resistant woven fabrics and new composites. When visitors walked into the iF area, they were greeted with signs and rubber floor mats that displayed the iF logo and underneath said, “Restricted Area.”
Signs were placed throughout that emphasized communication. Storyboards and pictures covered the walls with new ideas, and projects were given clever names that attracted attention.

Do

Members of the team were hand-picked by Clark on the basis of their creative and distinctive work on the in-line teams. He recruited three basic functions: business planning, research & testing, and concept creation. Dave Vattes and John Healy, two of Clark’s former colleagues from Nike, to join the team. During the first six months, the nascent iF group worked on everything together and relied on functional expertise to drive innovation. Their first task was to develop an initial list of projects and present them to Swartz and Pucker at a steering committee meeting for approval. The
2 Timberland internal company documents.

3 Within the shoe industry, “brown shoe” referred to the casual leather, hiking, and boot markets. “White shoe” referred to the athletic market.

6
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

committee (made up of Swartz, Pucker, and the heads of supply chain, product, and distribution teams) listened to Clark’s initial 30+ ideas, asked questions, and decided where they should proceed.

Organizational qualms surfaced at the start. Although people seemed supportive of the concept, when Clark started pulling star members from the in-line teams, he received some pushback. It became clear that staffing would require more time than they had originally expected. In addition, the steering committee expressed significant reservations about Clark’s desire to brand the lab (iF) to distinguish it from the in-line teams. The members were concerned that a new name and different business cards would create too much separation between the groups.

iF’s Initial Project: Travel Gear

op yo The steering committee gave its first approval to a project that aimed to address the common dilemma travelers face when deciding how many shoes to pack. Clark employed his “duct tape” method, meaning put duct tape (figuratively) over team members’ mouths, to study how users behaved. The method required his team to tune into the user needs by watching them deal with the problem first-hand. Five iF members visited airports and hotel lobbies around the globe with instructions not to speak with any travelers. This approach provided pure data, rather than hypothetical consumer responses. After observing users, they realized that there was no consensus about shoes to wear during travel. Clark asked, “How do you break this compromise between function and aesthetics?”

tC

After several rounds of brainstorming and market research, they created the Travel Gear concept, a revolutionary, modular approach to footwear that separated the aesthetic (shell) and the core
(chassis) function of a shoe and made them interchangeable. Wearers would have access to many more style and function options that could fulfill their needs for hiking, business meetings, and rainy day weather. (See Exhibit 3 illustration.) Travel Gear required the team to put technologies together in a new way to solve an undefined problem. But implementation was challenging.

No

Factory partnership During their initial brainstorming sessions, the iF team wondered how they would prototype. It was one thing the draw pictures of the new concepts, but they needed to physically make mock-up samples that they could use to evaluate and also generate excitement. Dave
Vattes, iF’s Senior Director of Product Development, was asked to analyze Timberland’s existing factory partners and determine which had the most versatility, the longest relationship with
Timberland, and had shown they had some of the competencies to solve problems and create new things. They eventually chose the Pou-Yuen factory in China; it was part of the Pou-Chen Corporation, which owned a leather tannery, several mold makers, and other companies.

Do

The agreement meant the Pou-Yuen would dedicate resources, including people, facilities, and project budget to support iF each year. In return, iF would move all its current prototyping functions from Stratham to China. Pou-Yuen would have early insight into Timberland’s longer term direction
(potentially presenting new business opportunities for them), and as an important benefit, their employees would gain unique training in problem solving and the creation of new materials. Clark and Vattes convinced Pou-Yuen to dedicate a team to iF and placed Timberland employees
(including newly-hired Chinese nationals) at the factory to focus on speed, confidentiality, and expertise. To prevent the pirating of new ideas and materials, the factory agreed to create an isolated area for the singular focus of iF projects.

Integration to in-line teams When prototypes started coming back from the factory, Clark approached Pucker to discuss which in-line team was best suited to take over the concept and prepare it to go to market. After several meetings, they agreed that the men’s casual team would sell
7
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

Travel Gear. Pucker called the head of the men’s team into his office and they agreed that Chris
Heffernan, a former P&G associate brand manager, would become the point of contact. He was tasked with looking at the product story and how to talk about the benefits for the consumer.
Heffernan recalled his initial reaction to learning about his new assignment:

op yo My job would be to determine how best to market, or position, our idea to the consumer. I knew iF had done its homework in identifying the footwear compromises consumers made while traveling and I was confident the IF team had built a 'potential' product solution. We still had to determine: Which consumer segments would be most interested in a travel footwear solution? How to communicate this unique, new product solution and which features and benefits were most appealing? Due to the componentry nature of our product, we needed to find the optimal combination(s) of product components that appealed to the broadest number of consumers. How to price these packages to maximize revenue? There was a lot of work to be done and a chance we would learn that our product concept was flawed. Yet, everyone was like, “Here, you package it up, get it to market, and it will be a huge hit.”

Packaging & pricing Although Heffernan was not part of iF, he had several of his own innovative solutions. He hired an independent research company that had pioneered a method to evaluate consumer preferences when faced with multi-variable decisions to help determine what combinations of shells and chassis consumers would be willing to buy. According to Heffernan, the
700 sample surveys suggested that consumers preferred the combination with the most options, even though it reflected the highest price point. Pucker and the head of the in-line teams were wary of the data and they eventually pared back the price. Paola Murialdo, the original iF business planning director, recalled the challenge: “Now we were changing the size of the box, changing how you sell it, the price points, and the entire value equation. You mean for $150 you get the equivalent of three pairs of shoes? We were changing the whole playing field.”
Wholesaler acceptance

No

tC

Before trying to sell the concept to Timberland’s wholesalers,
Heffernan and the iF team tested Travel Gear in Timberland’s retail stores in North America, Europe, and Asia during the 2004 test pilot season and then for a full season to follow. The team was surprised to see that data suggested consumers were extremely interested in the concept. Then,
Business Week awarded Timberland the silver medal Industrial Design Excellence Award (IDEA)4 for Travel Gear. However, selling the concept to their wholesale accounts was difficult for the in-line teams. According to one in-line member, they did not leverage the data from the retail store sales to convince wholesalers who were unwilling to gamble with a crazy, unknown product. It was “too crazy and they had never heard of selling anything like it.”
Due to lack of wholesale interest, Travel Gear was deemed too complex and was tabled while future options were considered, such as licensing it to a key retail partner or adapting it for wholesale feasibility. Both iF and in-line members agreed that Travel Gear offered lessons about managing the innovation and integration process. One iF member commented:

Do

iF didn’t factor in the problem of adaptation by the in-line category manager. The men’s team said, “Yeah, we love it, but this doesn’t hang together with anything else we’re making.
It’s a really great story, but it doesn’t flow with what we’re saying for the season. I didn’t plan
15% slack in my calendar for this new and complicated concept, making shoes the way shoes have never been made before, selling shoes the way shoes have never been sold before, telling

4 The Industrial Designers of America IDEA award honors designs that are considered the best in the business, among peers, clients, and consumers. Source: www.idsa.org/idea/idea2005/idea2005.htm.

8
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

a story that takes 30 minutes to explain, not 2 minutes, the way my five favorite new designs take.” It is labor-intensive to launch something new if it is truly different.

Reinventing Invention: Quicker Strides, Shorter Sprints

In October 2004, after two years of work, Clark’s teram, now 19 strong, revisited their scope, priorities, and organization. iF now had a budget now 20% higher, conducted bi-annual concept shows to highlight new ideas in the pipeline for the broader Timberland community, managed a fully operational biomechanics lab, and oversaw a Chinese factory. Clark challenged the group to evaluate what they had learned over the two year period. (See Exhibit 4 for a list of key learnings.)

op yo Based on their internal review, Clark and his team agreed they should redefine iF’s mission. They had not done enough to facilitate innovation within the mainstream in-line teams. They would shift their focus toward getting in-line adoption, rather than only product creation and development. iF wrote a new mission statement: “To foster a company-wide culture of innovation by identifying, creating, validating, and delivering breakthrough concepts and process”. Concepts were grouped by intended impact. Platform invention projects aimed to reinvent the traditional categories of shoes (like
Nathan’s original waterproof boot had done); systems projects would redefine the process in which all shoes were made, regardless of customer segment; and enablers were inventions that provided solutions that could be immediately applied to existing SKUs. This categorization helped the team assess if they were spending too much time on enablers, and failing to create breakthrough ideas in the platform inventions category. (See Exhibit 5 for current vs. future project mix.)

No

tC

To support their new mission and objectives, they created a formal four phase innovation process:
1) understand, 2) observe & visualize, 3) evaluate & implement, and 4) transition. During the understand phase, members would conduct market research, and define the problem. The observe & visualize phase required Clark’s “duct-tape” analysis of learning from the user via observation, a clear problem statement, and a list of conceptual solutions that flowed from three-day brainstorming sessions with members of supply chain, outside materials vendors, and factory partners. The evaluate
& implement phase helped the group narrow its options and evaluate and test various prototypes.
Finally, the transition phase would complete the design and development of the product and move toward handing the concept off to the in-line teams to go to market. (See Exhibit 6 for the 4 phases.)
They also created an integration team that consisted of members from both in-line and iF to alert the product category managers of projects in the pipeline. All new concepts were tracked on a dashboard that identified where each project fell within the four phase process, its likelihood of success, projected resources, and its impact on the in-line teams. (See Exhibit 7 dashboard.)

PreciseFit

Do

One early steering committee directive was for iF to look into the broad issue of improving shoe fit while reducing complexity in the shoe sizing process, which could mean significant efficiency gains, service improvement, and enhanced margins. Categorized as a systems project, it sat for awhile before Clark handed it over to his Research & Technology Director, John Healy. Healy had previously worked for Nike and Converse and taught physiology at the University of New
Hampshire.

Healy started with scientific research to better understand the parameters of size on a foot, beyond traditional length and width measurements. His team invented a point contact instrument with a three-dimensional arm that allowed touching the foot in 15 predetermined points. The instrument

9
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

stored data in a database on girth, width, and length for many different size populations (i.e., size 9 vs. size 10). Using information from 4000 sample feet, they conducted statistical analyses and began to identify trends and relationships between the various data points. Healy recalled:
We started to understand that if you look at all of the lengths of the foot—heel to big toe or heel to the fifth metatarsal head—those things are all fairly predictable. But when we looked at things like widths and girths we realized they weren’t very predictable; so there was large variation within a population (people with a size 9 shoe). If we couldn’t predict width or a girth based on the length of the shoe, then it had to be another answer. The answer was adjustment. The statistics showed that the most variation in size took place in the forefoot area.

op yo With statistical results in hand, the iF team brainstormed options. Using their knowledge of the shoemaking business, iF agreed they did not have to change the physical width of the shoe (a very difficult and expensive task), but rather, change the internal volume of the forefoot area. Healy’s team developed a solution of foam inserts that would compensate for different forefoot sizes.
In parallel with their scientific research, iF asked a Harvard Business School student team to analyze how the product could be launched, how Timberland could take it to retail, if the consumer and retailer would accept it, supply chain issues, and inventory management challenges. At a subsequent steering committee meeting, Clark and Healy presented both the scientific and business findings in tandem. Response was very positive, Pucker declared, “This idea could remake
Timberland’s balance sheet and create a defendable competitive advantage with our trade partners.”
The steering committee decided the idea, now called PreciseFit, would be handed to the men’s casual team, but the team was not immediately receptive when Healy presented the idea. Healy said:
“They would nod their heads and were polite. But it looked like it was going south and they were not going to adopt it. Transition into in-line wasn’t going well.”

No

tC

Healy cited several reasons for lack of initial acceptance. First, his team had originally estimated that they would be able to save 50% on molds, but in reality it would only save 20%. Second, they would have to teach the retail and wholesale people how to sell the new concept, who would then have to convince the consumer. Even though Healy had officially passed the concept to the men’s inline team, he decided to stay involved. He called several meetings in which he asked the senior executives to offer support to in-line teams. He created a cross functional project team composed of senior leaders and product management resources to shepherd PreciseFit into the line. Finally, Healy stayed on message; his basic response to naysayers was, “Let’s not forget that we’re actually making a product that fits better, fits more people better more times, and if you could produce that product without any savings on the supply chain side of it, wouldn’t you do it?”

Do

Next, Healy and the in-line team decided that they needed to do a pilot study to convince the wholesalers that the concept would sell: 5,000 PreciseFit shoes to be sold in select Timberland retail stores. iF and the in-line team outfitted a popular men’s casual shoe with the PreciseFit technology embedded in the footbed. To test user acceptance, they sold the PreciseFit model next to the same shoe minus the technology in 52 retail stores around the world, also experimenting with different price points. At the end of the retail test period, they discovered the PreciseFit shoes sold 1.7 times more than the control version, and sales revenues increased 80%.
Having learned from missteps with Travel Gear, Healy and iF invited the in-line team to reshape the original design to better meet the needs of their line. By changing the colors and introducing a different locking system, the in-line team made the inserts much more user-friendly and appealing to the wholesalers. In an important meeting with the senior team, Healy reported the pilot results and showed the improved product the in-line group had created. According to Healy, “Geometrically it
10
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

had all the same parameters, same thickness and bevels, but they came up with something that was much cooler. I was the first to admit it was better, in front of the senior management team.” He also conducted informal side conversations. After meetings with the senior team, Healy would follow up with the head of the men’s team and ask for his concerns and ideas. Healy said:
A lot of times if you have a couple of people that champion an idea, it gets the creative ball going and keeps it rolling, as opposed to a formal meeting. Taking feedback and saying, “You know what, good idea, let’s use yours.” Those were all basic techniques that went a long way.

op yo By December 2005, PreciseFit had been given approval to go to market. The men’s in-line team was busy creating creative marketing tools to help retail stores explain the concept to consumers as they prepared for a June 2006 roll out in 2000 targeted stores around the world. PreciseFit would be offered in 22 men’s SKUs and in some of Timberland’s urban offerings. After three years, it looked as though iF had successfully transitioned a major systems project to the mainstream.

Mi ōn

During the spring of 2005, iF’s pipeline was filled with ideas. The previous year, iF formed a partnership with the Rhode Island School of Design to recruit interns from classes at which Clark and iF staff spoke—a sign that iF was becoming known as an innovator in the brown shoe business.

tC

Timberland’s commitment to innovation attracted Martin Keen, a legendary sailor who had helped found Keen footwear. After his separation from the company Keen, Martin Keen worked on a shoe that could perform in the harshest land or water conditions. He approached Pucker with the concept and Pucker presented it to Jeff Swartz and the steering committee. After debating where such a product might fit into Timberland’s line, they decided iF should make it a separate brand. Since this would be the first time Timberland had ever created a separate brand, iF seemed the perfect candidate to “own” the project. The new line, called Miōn (pronounced “my-own”) would keep the feet of “amphibious athletes” as comfortable as possible in wet conditions.

No

The iF team worked closely with Martin Keen to prototype several versions and expand the line beyond a sailing shoe. By the end of August 2005, iF had applied for patent protection for the central
Miōn concept, including an Ergomorphic footbed that could take the shape of the foot after about 12 hours of wear, a sculpted super-structure that held the foot in place, a 360-degree lacing system, and a traction system that would maintain traction in water. It would be available as a sandal, shoe, flip flop, and a slide. (See Exhibit 8 for a photo.)

Do

Miōn used iF’s design and development expertise, but presented Timberland with new challenges that came from managing it as a separate brand. Since Miōn would not transition to the in-line teams,
Helen Kellogg, iF’s Director of Business Planning, was assigned to oversee the project. She said,
“When it came time to start this new business, I became an internal director of how we would build
Miōn’s infrastructure within Timberland’s system. I had to ask about legal representation, organization structure, sales force, packaging, and factory partners. It literally became a startup.”
Kellogg managed these roles on top of her responsibilities as head of iF’s business planning.

Miōn was expected to enter stores in March 2006. It would be the first major platform invention that iF had incubated from beginning to end. Initial market surveys predicted success. Miōn also introduced an EcoMetrics label, which featured a table listing the energy used to produce the shoe and how much material was wasted. In December 2005, Miōn was mentioned in the New York Times
Magazine as one to the top new ideas of the year and was featured on NBC’s Today Show. With

11
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

anticipation of Miōn’s launch, Pucker felt that they had made the right decisions. He said, “Different inventions require different organizational solutions. It’s not called Miōn by Timberland; that’s intentional. Some people say it’s wrong. I think it’s right.”

Urban Renewal

op yo One of iF’s enabler projects focused on utilizing expertise in new materials to develop boots for firefighters, police, and SWAT team members. iF tested and prototyped firefighter boots that incorporated Timberland’s comfort technology with materials made out of fireproof leather and materials found in iron plants that could withstand 500 degree temperatures. The boot design borrowed hockey player ankle guards and motocross jacket shoulder pads, leaving only the toe to be made out of rubber. Within the biomechanics lab, iF tested how the boot reacted to various conditions and tested it using PreciseFit technology to address sizing issues. By December 2005, iF had created 20 variations of the boot for various “first-responders.” One such variation was developed with input from the U.S. Army Soldier Systems Center (Natick) (NSC), which was in charge of footwear procurement for soldiers, including special operations teams. The relationship with NSC had potential to turn into an opportunity for Timberland to work with the government.

tC

iF also conceived of an offshoot of the line, called Urban Renewal, which replicated the firefighter boots and made them available for urban youth. Near a boot display in the iF lab was a poster of a hip-hop band wearing firefighter boots from a photo in a leading music magazine. The goal of the project was to focus on heroes, especially those made popular after the 9/11 terrorist attacks. The concept drew on a philosophy created by the Timberland and City Year partnership: everyone who wore Timberland boots could be a hero in their community. The in-line teams had agreed to adopt
Urban Renewal and launch it in the holiday line of 2006. However, some in-line team members were concerned that the line would not resonate with consumers. One team member said:

No

If Invention Factory knew more about our consumer and category, they might not have charged down this path so quickly. But since they are working by themselves in a group, they have an idea, they sell it, and senior management thinks it is a great idea. Shazaam—here is the product! You can imagine how the in-line team who gets it might say, “What? You want me to do what with it?” The urban team is not adopting any of these products because the wholesale accounts are saying, “No way!”

Reflecting on iF

Reactions from the in-line teams were taken seriously by iF team members. Dave Vattes, iF’s
Senior Director of Product Development, observed that iF was very good at idea generation but the challenges occurred in the next phases. Helen Kellogg, iF’s Director of Business Planning, felt that even if iF could sell a concept, the increasing demands on in-line teams, plus a little “not-inventedhere” disinterest, created a major barrier to commercializing innovations:

Do

We would sell an idea very well, with lots of people enthusiastic about a new traction system or what have you, enough so that senior management would say, yeah, absolutely, give this to the men’s team. But then the volume of work that came with taking the idea and bringing it to market was more work than was feasible for the in-line teams. The in-line teams needed fully proven, tested and commercialized products. Also, because they didn’t give birth to this idea, they didn’t have passion for it.

Doug Clark thought that tensions were inherent in the innovation process itself:

12
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

The business that iF is in is high risk, time consuming, and resource intensive. There is never any guarantee that what we take on is ever going to work in the marketplace. Our biggest challenge is building the discipline and patience that it takes to let a new idea see the light of day before it is tweaked, changed, diluted, or manipulated to have an impact right away. Our strategy has been to balance our portfolio with long term projects like PreciseFit and short term projects like fire and military boots. All have some elements of invention, all push the boundaries of what the in-line teams can do with design.

op yo Another view of whether resistance was inevitable was provided by Chris Heffernan, the men’s in-line member who had worked on Travel Gear. He felt that if iF focused on just the ideas and got buy-in for those, rather than handing in-line teams a finished product, the acceptance level would be much higher. “There is resistance when you are handed something that is finished or close to finished and is supposed to be the next great thing. The in-line teams have no say in the product development or positioning of the new concept. Yet the in-line teams carry all the responsibility for the acceptance
(sell in) and success (sell through) in the marketplace,” Heffernan said.
Ken Pucker and the executive group had their own discussions about the relationship between iF and the rest of Timberland. Pucker knew that invention couldn’t be rushed. He wanted people at
Timberland to realize the value of invention and felt that Clark’s concept shows and anticipated successes in the marketplace—Miōn and PreciseFit—accomplished just that. He was committed to
Invention Factory but wondered, with his colleagues, how it could best be organized:

tC

Where do you draw the line: Concept? Finished product? Do you go beyond finished product and put together a separate business team? Should we expand it more? There has also been discussion about taking people out of IF and putting them on the in-line teams to manage integration. For the time being, I think we are in a good place. I want the experiment to continue as is: keep IF as a separate organization, but very connected to the company.

Timberland in 2005: “There’s No Business Like Shoe Business”

No

From 1998-2004, Timberland’s revenues had increased from $862 million to $1.5 billion, operating profits rose from $95 million to $234 million, and market capitalization bourgeoned from $523 million to $2.2 billion. Timberland’s top executives attributed the growth to several factors: significant expansion in international sales, growth of new customer segments (e.g., urban, kids and PRO), and improvements in gross margin and working capital management. (See Exhibit 9 for Timberland’s product, channel and geography portfolio.) By 2005, Timberland competed in both footwear and apparel, occupying the #6 position in the industry for revenue, #3 for operating margin, and #2 for return on investment capital. (See Exhibit 10 for Timberland industry data and Exhibit 11 financial data.) In 2005, Timberland acquired SmartWool, known for its premium performance socks, apparel and accessories, for $82 million. SmartWool was expected to remain an independent subsidiary.

Do

Timberland had become much more than a footwear company. With its expansion into apparel, watches, hats, backpacks and luggage, the company competed with other “superbrands” such as
Ralph Lauren, Columbia, and North Face. In addition, GEOX and Merrell were also plotting to be more than footwear companies by moving into luggage and backpacks. Schneider thought it was critical that Timberland not confuse their customer about what they stood for:
It’s important for Timberland that when you close your eyes, you think of much more than a specific item, you have an emotional reaction. Timberland’s authenticity is genuine. The right wide array of products should continually enhance your positioning as a brand. Apparel and

13
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

the other categories play a strategic role. We have to make sure a category does not diminish the brand from a yellow boot. Innovation has been a mainstay for our company; the next series of innovations need to come rolling through.

Looking to a New Year

op yo In June 2005, Timberland invited 150 of its top managers to its annual First Circle strategy meeting for three days in Vermont to review their progress and plan for the future. The meeting’s name, drawn from the City Year partnership, evoked the concept of a team rather than a hierarchy. As with any Timberland community gathering, the meeting included a service project; this time they spent a day in the Vermont woods. By working together on service projects at company meetings, people from different groups built relationships and shared ideas. At a plenary session, a Harvard Business
School professor spoke about innovation and leadership for change, casually tossing off the phrase
“green chic” as a label for the Timberland value proposition. During the question and answer period, the audience argued that Timberland’s biggest impediment for change was a lack of collaboration across groups. “We sometimes fight ourselves,” a senior executive said.

As Jeff Swartz and Ken Pucker walked through Timberland headquarters in December 2005, they noted the physical proximity of the design workspace for the in-line teams and the Invention Factory, only a few feet away. But living together didn’t always mean working together effectively.

tC

They thought about the events of the year behind them, which were exciting platforms for the future. The SmartWool acquisition… Several big new concepts to be launched in the spring such as
PreciseFit and Mion, which was also a new organizational model…. Enormously successful service projects and contributions—although the “humility” value had stopped them from trumpeting this in marketing or brand-building… Each could take Timberland in various directions. As Timberland grew beyond the lines called Timberland, was the company taking advantage of all of its assets to define effectively the soul of the brand? Were soles still at the core?

Do

No

Swartz and Pucker also wondered about the future of innovation at Timberland. How could they provide sufficient focus to ensure the best use of resources without restricting innovation? Was a culture of innovation, and the change leadership skills required for innovation, spreading far enough and fast enough? What, if anything, should they change to get the biggest bang for the boot? And what were the essential elements in putting Timberland’s best foot forward?

14
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Timberland Core Products

Classic Waterproof Boot
Source:

op yo Exhibit 1

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

Casual Boat Shoe

Euro Hiker

Timberland website, www.timberland.com.

Timberland Outdoor Performance Positioning Paper

Do

No

tC

Exhibit 2

Source:

Timberland company document, January 2006.

15
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

Exhibit 3

Travel Gear Illustration

rP os t

306-064

Select an upper style. Slide in the active or comfort chassis. Put on Hydrosok, if needed. Put on your Timberland
TRAVELGEAR shoes—and go! Timberland TRAVELGEAR shoe components mix to match your schedule. Wear them in different ways, for different occasions. Our range of styles have you covered for business, touring or adventure.
Upper

Touring Shell

Business Shell

Source:

Comfort Chassis

op yo Adventure Shell

Chassis

Active Chassis

Hydosok

Timberland Travelgear promotion materials.

Exhibit 4

iF 2-Year Review Key Learnings, 2004

Resources: Have staffed across a wide spectrum of functions, and obvious start-up constraints have limited our ability to solicit and invest in adequate support for development, commercialization and production.

•

Structure: Continued belief that our ultimate mission is best served by a cross-functional team that can create comprehensive business and process solutions.

•

Start-Up: We underestimated the time and energy required to assemble our team, to refine our process and to build our infrastructure. This has impacted our overall productivity and delayed the realization of our vision.

•

Commitment: Our budget of a few million dollars, though limited, represents a substantial investment within the Timberland community.

•

Calendar: There continues to be difficulty in integrating our projects into in-line teams who operate in a world of rigid calendars, limited advanced development expertise, and tight matrices.

•

Deliverable: We transitioned midway through our projects from producing fully commercialized shoes to providing concepts only. Our resource needs are impacted by how we define our desired output (concepts vs. shoes) •

Oversight/Governance: We have established a Steering Committee (senior level project approval, status check) and an Integration team (manage in-line transition) but both teams are not yet as effective as we need them to be.

Do

No

tC

•

•

Source:

Engagement: We have had two powerful and professional concept shows however, the impact (what people do with the information) is questionable and attendance needs to improve if we are to realize the full potential of these shows.
Timberland iF internal document, October 2004.

16
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Exhibit 5

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

iF Current vs. Future Project Mix, 2005

Today

Definitions
Systems: broadly impacting system changes. Ex: Precise Fit.

40%
35%

Platform Inventions: Creation of breakthrough platforms. Ex: Travel Gear

30%
25%
20%
15%

op yo Platform Innovations: Development of new platforms using existing tools. Ex:
Urban Renewal.
New Businesses: Building new businesses for the enterprise. Ex: Mion.

Inline Enablers: Developing solutions to isolated needs. Ex: pull out linings

Future

10%

5%
0%

Systems

Platform
Invention

Platform
Innovation

New Business Inline Enablers Foundational
Support

Foundational Support: basic research and IP management.

Timberland internal document, May 5, 2005.

Exhibit 6

tC

Source:

iF Innovation Process

Phase 1

Phase 2

Phase 3

Phase 4
Transition

Observe &
Visualize

Evaluate &
Implement

Deliverables:

Deliverables:

Deliverables:

Do

No

Understand

Source:

• Literature searches • Competitive map • Opportunity assessment • Project brief
• Basic research

•
•
•
•

Researched needs
Problem statement
Consumer targets
Conceptual
solutions or enablers •
•
•
•
•

Concepts
Testing
Concept cars
Concept shows
Applied
research

Deliverables:
• Design &
Development
training
• Test Reports
• Tech packages
• Ongoing development assistance

Timberland internal document, “2005-2007 Long Range Plan.”

17
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

-18-

Source:

Exhibit 7

Timberland iF internal document, May 5, 2005.

No

iF Project Dashboard, 2005

tC

op yo rP os t

306-064

Do
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Miōn Sandal

op yo Exhibit 8

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

Represents the new standard in fit, protection and performance in a sandal

Ergomorphic™ Footbed—An anatomically shaped surface that permanently takes the shape of each individual foot after about 12 hours of use. A footbed customized to your foot provides greater distribution of pressure, greater comfort and better responsiveness.

Sculpted Super Structure Upper—Each rib of the structure wraps itself around the foot in critical areas to ensure that the foot is held in place during static and dynamic conditions.

Super Structure Cord— A one piece climbing-grade spiral cord traces the Super Structure, pulling it onto the foot with the

tC

precise pressure needed for each individual area of the foot.

Gripstick™ Wet/Dry Traction Rubber—The best wet/dry traction is only achieved through the combination of excellent sole tread designs, Quad Cut™ siping and proprietary compounds that actually get stickier in water.

Protection—Miōn™ Super Structure protects the foot from banging into harsh objects like deck hardware and rock.

No

Ultra-Lite—Miōn™ footwear is extremely lightweight, wet or dry. Miōn™ footwear is made from some of the lightest, toughest materials available, making them among the lightest high performance footwear in the world. Men sandal size 9:
12.5oz, Women size 7: 10.5oz

100% Water Compatible—Miōn™ footwear does not get wet like leather or fabric footwear. Miōn™ footwear literally cannot absorb or retain water. As a result, your foot stays comfortable in all conditions.

Do

Source: Company documents and www.mionfootwear.com.

19
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

Exhibit 9

rP os t

306-064

Timberland Product, Channel, and Geography Portfolio, June 2004
Product

Channel

Geography
Other
1%

Asia
8%

Apparel &
Accessories
22%

Wholesale
75%

Retail
25%

United
United
States
59%

Europe
32%

op yo Footwear
78%

Source: Timberland internal document, June 23, 2004.

Exhibit 10

Timberland Industry and Growth Data, June 2004

Coach
Ralph Lauren
Timberland
Columbia

74%

Kenneth Cole

Nike

32%

Coach
20%

50%

Columbia

49%

Timberland

46%

Nike

13%

46%

Jones

12%

No

Tommy

Operating Margin

tC

Gross Margin

45%

42%

16%

25%

Nike

21%

11%

Ralph Lauren

13%

11%

Wolverine

13%

Tommy

11%

Stride Rite

11%

Steve Madden

10%

Jones

10%

39%

Wolverine

9%

Stride Rite

38%

Steve Madden

7%

Skechers

38%

Reebok

7%

Stride Rite

7%

Do

Kenneth Cole

Ralph Lauren

Steve Madden

37%

29%

Columbia

Reebok

Tommy

Wolverine

47%

Timberland

11%

39%

37%

83%

Coach

Kenneth Cole

Reebok

Jones
Jones

ROIC

Skechers

0%

Skechers

19%

-2%

Source: Timberland internal document, June 23, 2004.

20
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

306-064

rP os t

Innovation at Timberland: Thinking Outside the Shoe Box

Exhibit 11a Consolidated Statements of Income for the years ended December 31, 2004, 2003 and
2002 (Amounts in Thousands, Except Per Share Data)
2004

$1,342,123
717,666
624,457

$1,190,896
672,610
518,286

405,412
99,800
505,212
233,863

356,447
83,708
440,155
184,302

306,962
72,499
379,461
138,825

op yo Operating expense
Selling
General and administrative
Total operating expense
Operating income

2002

$1,500,580
761,505
739,075

Revenue
Cost of goods sold
Gross profit

2003

Other (income)/expense
Interest expense
Other, net
Total other (income)/expense

700
(3,570)
(2,870)

236,733
84,040

Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle
Net income

$ 152,693
$ 152,693

$ 117,879
$ 117,879

Earnings per share before cumulative effect of change in accounting principle
Basic
Diluted

$
$

4.39
4.28

$

Earnings per share after cumulative effect of change in accounting principle
Basic
Diluted

$
$

4.39
4.28

$
$

884
(828)
56

182,757
64,878

No

tC

Income before provision for income taxes
Provision for income taxes

1,039
506
1,545

Weighted-average shares outstanding
Basic
Diluted

34,814
35,655

138,769
48,569

$
$

90,200
4,913
95,113

3.32
3.23

$
$

2.42
2.36

3.32
3.23

$

2.55
2.49

35,498
36,475

37,308
38,142

Do

Source: Timberland 2004 Annual Report.

21
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

Innovation at Timberland: Thinking Outside the Shoe Box

rP os t

306-064

Exhibit 11b Consolidated Balance Sheets as of December 31, 2004 and 2003 (Amounts in
Thousands, Except Per Share Data)
2004

Property, plant and equipment, net
Goodwill
Intangible assets, net
Other assets, net
Total assets

op yo Assets
Current assets
Cash and equivalents
Accounts receivable, net of allowance for doubtful accounts of $8,927 in 2004 and $7,704 in 2003
Inventory
Prepaid expense
Deferred income taxes
Total current assets

Do

No

tC

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
Accrued expense
Payroll and related
Other
Income taxes payable
Derivative liabilities
Total current liabilities
Deferred compensation and other liabilities
Deferred income taxes
Stockholders' equity
Preferred Stock, $.01 par value; 2,000,000 shares authorized; none issued
Class A Common Stock, $.01 par value (1 vote per share); 120,000,000 shares authorized; 45,359,009 shares issued at December 31, 2004 and 43,050,277 shares issued at December 31, 2003
Class B Common Stock, $.01 par value (10 votes per share); convertible into Class A shares on a one-for-one basis; 20,000,000 shares authorized; 5,871,830 shares issued at December 31, 2004 and 6,942,834 shares issued at December 31, 2003
Additional paid-in capital
Deferred compensation
Retained earnings
Accumulated other comprehensive income
Treasury Stock at cost; 17,049,457 Class A shares at December 31, 2004 and
14,972,185 Class A shares at December 31, 2003
Total stockholders' equity
Total liabilities and stockholders' equity

2003

$309,116

$241,803

155,024
128,311
27,659
28,937
649,047

125,088
119,581
25,906
27,182
539,560

78,979
14,163
5,381
9,940
$757,510

76,360
14,163
3,807
7,826
$641,716

$ 52,370

$ 38,026

55,459
68,579
34,737
15,047
226,192
12,543
7,268

54,846
60,579
27,482
16,058
196,991
9,318
6,944

-

-

454

431

59
238,829
(22,584)
876,398
10,228

69
175,629
(8,209)
723,705
1,306

(591,877)
511,507
$757,510

(464,468)
428,463
$641,716

Source: Timberland 2004 Annual Report.

22
This document is authorized for use only by Ricardo Ubeda until April 2012. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.