Larry thomas is chief executive and director of Fender Musical Instruments Corp. Pictured with a vintage .

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ore often than not, the sound of rock is the sound of Fender. The products of Fender Musical Instruments Corp., including the iconic Stratocaster guitar, the Precision , and the Bassman and Bandmaster amplifiers, are as ubiquitous in rock ’n’ roll as a backbeat. The Fender sound is also integral to jazz, country and Motown music, as well as a host of genres loosely identified as world music. MLike Harley-Davidson, Fender is a brand that customers and admirers tattoo on their skins. From its humble beginnings as Fender’s Radio Service — named for founder Leo Fender — in Fullerton, Calif., Fender has grown to a global company that also owns such storied brands as , Guild and Ovation. Today Fender has headquarters in Scottsdale, Ariz., with manufacturing in Corona, Calif., and Ensenada, Mexico. But even the most hallowed of heritage brands can run into a rough patch. In early 1965, Leo Fender sold his companies to the Columbia Broadcasting System (CBS) for $13 million, almost $2 million more than CBS had paid for the New York Yankees a year before. CBS acquired many other fine names in music, including Steinway pianos and Rogers drums, but cost-cutting and quality issues marked their ownership. Pre-CBS Fender instruments became valuable collectables. Fender got a comeback tour in 1985 when it was purchased in an employee buyout led by William “Bill” Schultz, who had been president of CBS’s musical instrument division. Schultz rebuilt the company, but it struggled again after his death in 2006, as new management emphasized making the numbers at the ex- pense of musical innovation. A flood of Asian imports and young peoples’ shifting allegiance further weakened the brand. Enter Larry Thomas, a guitar player and self-professed enthusiast, who had risen up the ranks from shipping and sales to chairman and chief executive of Guitar Center, Inc., the largest chain of musical instrument retailers in the world. Under Thomas’s leadership, Fender has reclaimed its position as the pre-eminent brand in amplified music. Korn/Ferry’s Briefings on Talent & Leadership interviewed him at Korn/Ferry International’s offices in Los Angeles. Connected Leadership

on it became a colored telephone and then it became a wire- By Lawrence M. Fisher less telephone, and today my kids don’t even have landline telephones. The Stratocaster hasn’t changed in 60 years. It was created in 1954, and it has not changed since in terms of its form or its function, the way that it looks. I bought a 1954 Stratocaster for the company last year; I paid $110,000 for it, and you have to try hard to find ones that are still authentic.

Fender owns the most iconic musical instrument Q: How do you keep the new ones authentic? since the Stradivarius violin, the Stratocaster. How THOMAS: My role as the custodian of a brand is to honor do you maximize the return on an asset like that without the past, as well as look at the present and design towards the diluting it? There once was just the Stratocaster, now there future. In today’s world our consumers’ tastes are very frag- are many variants. mented. There is no one-color telephone. As a manufacturer, THOMAS: It’s the only instrument to be recognized as an we don’t do long runs like Henry Ford did, where everything American icon by Rolling Stone magazine. An interesting was black. We do short runs, and we change things. We want thing about the Stratocaster is that it really hasn’t changed. to offer the same authenticity through which the brand was Typically, things change over time. Either technology changes developed, but we want to reflect changing technology and them or its form and function [evolve], and there’s a function tastes to offer more choice. In the past you didn’t have much the product needs so the form changes. When we grew up, choice, but today we make small guitar necks (the fretted part in most homes there was a black telephone, and then later of the guitar where the guitarist plays the notes), we make big necks, we make fat necks. We shape them differently. We have guitar pickups (the part of the guitar that converts the notes from the strings to an electrical current) that are hotter, we

Pickups: Three expressive single-coil pickups; often modified with various combinations of noise-cancelling pickups and switching configurations. From sparkling to soaring to screaming and beyond, the versatile voice of the Stratocaster remains unequaled.

Tremolo Bridge: Now as always, Stratocaster are revered for the innovative design, tonal stability and solid reliability of their tremolo bridges. have pickups that are not hotter, we have humbucking (noise- mortar and online retailers. Guitar Center acquired Musician’s reducing) pickups, single-coil pickups. All of those things are Friend when I was CEO of Guitar Center, so I understand the a smorgasbord of what we offer the customer, so that he or value and the need for online sales. Trying to build and sus- she can use those tools to express his or her creativity. tain a brand, I find that the customer experience is even more important to me in the physical sense. You cannot communi- Q: Looking at your Web site brings to mind Harley- cate how a golf club or a guitar feels online. But there’s a big Davidson and some of the ways they’ve capitalized on a place for online business where people either don’t have access heritage. You have factory tours, you have involvement to go out and try products, or because their jobs and busy lives with the community, you keep the designs going. make it more convenient to go online. Online is a great place THOMAS: You have to be authentic and people see that. I to do research because you can get a sense of what might or came to Fender about three years ago, and I’m the first guitar might not work. But increasingly, we want to take ownership player to run the company in all of its years. What I saw locked of the message. So we have invested a lot of resources over the up in the factory were all the things I could express my passion last three years in our Web site, in our own Web experience. with, all the things that I loved about the brand. I saw a story We want our Web site to be an educational source because it’s that needs to be told. My phone is filled with photographs hard to get staff in stores with enough knowledge of the differ- sent to me of people with the Fender brand tattooed on their ences in our products and our history. bodies. When you have that kind of an association or dedica- tion to a brand, it charges you with a sense of wanting to share Q: How you deal with changes in demography? Today’s high that story. I knew if we opened the factory up to tours, people school boys don’t aspire to be . They aspire to would come, and they come from all over the world. be Mark Zuckerberg. Or if they’re into music, they might prefer electronic dance music or hip-hop, which aren’t Q: Increasingly, this is an online business. People go to really -centric. Musician’s Friend or other musical instrument retailers’ THOMAS: I believe what you’re saying is true, but I don’t Web sites. How have you changed to accommodate online believe it’s really changed. I think there were always guys like instrument sales? Bill Gates or Paul Allen around who pursued computers and THOMAS: Our business is balanced between the independent software. But as the CEO of Guitar Center, I traveled to a lot dealer channel and the Guitar Centers, Sam Ashes and other of Silicon Valley companies, and while you have a lot of golf big retailers of the world. It’s also balanced between brick and clubs floating around these offices, there are a lot of guitars

TIMELESS Classic: The Stratocaster

The Stratocaster is an archetypal instrument — among the world's most popular guitars and an elegantly versatile creation that is both a musical and cultural touchstone. At its heart, Neck and Fingerboard though, the Stratocaster remains a fantastic tool — with Stratocaster guitars unmistakable sound and timeless design that have made it the are known for comfortable and first choice among players worldwide, many of whom have used easily adjusted necks it to create much of the most important music of our time. with a variety of profiles, eminently Sleek Body Shape and Contours: Stratocaster guitars have a sleek playable fingerboards and balanced two-horn design, with well-placed forearm and body and an unmistakable contours that make for a comfortable playing experience. headstock.

2013 : Q4 korn/ferry INTERNATIONAL 51 “I bought a 1954 Stratocaster for the company last year; I paid $110,000 for it, and you have to try hard to find ones that are still authentic.”

1983 1985

CONTINUED Commercial rap is born when the “We Are the World” is recorded to FROM PAGE 33 single “White Lines (Don't Do It)” raise money for African famine relief. is released by Grandmaster Flash. The song tops charts worldwide.

52 briefings on talent + LEADERSHIP Connected Leadership

too. There are a lot of closet guitar guys and girls, and they’re owned Ducati at one point. They’ve owned J.Crew. They’ve of all demographics. I do think the tools we use to create owned some other big brands, and they’ve done a great job. music today are quite different. When I was growing up, When we sat down and brainstormed what can this brand be, you had an amplifier and then some pedals, and you could there were really no boundaries. change the sound that way. Last Christmas we had Fender instruments online at Apple that you plug directly into your Q: Did that deal give you capital to invest? USB and the guitar would track into GarageBand. Fender THOMAS: Yes, we did in fact renegotiate the debt. It gave has partnered with several different companies on iPad us some dry powder. It gives us the opportunity to look at apps, so you can plug your guitar into an iPad and/or your acquisitions. It gives us a chance to look at strategic growth in computer and there’s virtual effect pedals so you can change various categories where we may not be, opportunities to look the sound of your pedal or change the sound of your amps. at the world with a bigger lens. Every time there’s been a shift in technology, there’s actually been a new opportunity to create music in new ways. Music Q: How has revenue grown since you arrived? is inherent in society, and the reason Fender is the brand that THOMAS: Our growth has not been high on the top line. it is is because the body of work in Westernized music, where We’re in a recession. The dealer channels are just trying Fender has been an integral part, is so vast. to get through this economy. So our revenues have been pretty stable, but really low single-digit growth in the last Q: Let’s talk about finance. You attempted an IPO in 2012, couple of years. I would tell you that in our business, that’s and it didn’t fly. Why didn’t it work? good growth right now, because a lot of companies that we THOMAS: The timing was the main reason there was no compete with have been on a decline for the last several years. public offering. The company was ready to do an IPO, but Everybody’s still waiting for this thing to be over with, and almost 50 percent of our business has been in Europe, and it’s not over. There’s still high unemployment. But I do expect Wall Street was really afraid that Europe was going to fall in with all that we’ve done, we’ll come out of this with a big the ocean — you had the bailout, Greece, lots of noise. We tailwind. A lot of competitors in business tend to batten down felt some pressure to do it because our private equity firm the hatch and just try to ride it out. I tend to be opportunistic. had been in the company about 10 years and were looking to move on. We also wanted to renegotiate our long-term debt, Q: You have what the computer industry would call a huge which was coming due in ’14. We knew the market was rocky, installed base, millions of Fender players around the world. but we were gathering advice and information from several How are you going to take advantage of that? banks that forecasted market improvement. At the time, THOMAS: Well, you know, the question is, “How many the strength of the Fender brand coupled with an improving guitars do you need?” And the answer is always, “Just one market showed positive signs. However, Facebook went more.” So we’re working hard to build our CRM (customer public and we all know how that played out. It wasn’t the relationship management). We want a direct response. Apple right timing, so in the ninth hour we pulled it. has been the great leader and teacher. They have a direct rela- tionship with their customer base, and those companies that Q: What did you do as an alternative? have direct relationships with their customers have the pulse THOMAS: As an alternative, later in 2012, we found TPG of their business. They know where to go. They understand, Growth as a partner, and between them and one of the guys because of that relationship, what their customers need. on our board, his company, we took out our private equity. When I got to Fender they had been in business since 1946, TPG and Bill McGlashan, who is a partner there, sees the but there was very little customer data. It was not something world kind of like I do, and TPG really sees the opportunity that previous management looked at as a strategic priority. I for Fender to be a big lifestyle branding company. They look around and see what other companies have done having

1987 1990 1991 Nike uses “Revolution” in the The world’s first Grunge goes mainstream first commercial to feature an Web site and with the release of Nirvana’s original Beatles recording. server go live. “Nevermind” album.

2013 : Q4 korn/ferry INTERNATIONAL 53 the data, and it’s not only Apple. It could be Ducati, which Q: Have they influenced you in what you do in business? is a very small company. It could be Ferrari, who knows a THOMAS: No, I’m a coach. In some ways, I’m a player-coach, lot about their customers. It could be Louis Vuitton. These but I’m the head coach. I have flattened out the organiza- lifestyle and luxury brands, these companies, see opportuni- tion. I’ve broken down all the silos. To the extent I can, I’ve ties quicker and execute towards them better. We’re putting gotten rid of the politics. And we’re creating a transparent a lot of money today into consumer data and building that culture so people can say what they want to say and they’re relationship with the customer. We’ve sold through channels not in fear. I’m one of the oldest guys in the company and I all these years, and customers weren’t really incentivized have a lot of experience in the industry, and I have friends in to come to our Web site to give us data, but we’ve made a the industry, contacts. So I’ve brought a lot of relationships focused shift in the last couple of years. We’ve now got close to the company. I try to be a mentor. I’ve had great mentors to 1.5 million people on Facebook, and we’ve got a lot of in my life, so I think mentoring is really important. I try to people coming to our Web site for both product informa- spend a lot of one-on-one time with my VPs, with my product tion and lifestyle content. We ask customers to register. managers. I don’t sit in an office all day like I did when I was We do surveys with them on social media. We’re very much much younger, staring at a computer screen. The biggest involved with the artist community, and we ask them to look thing about leadership is the ability to shape people’s thinking at new products and evaluate them before they’re released. about the journey, about accomplishment. It’s about what you We do a lot of signature models with artists. That part of our can get done, and you recognize there’s no “there.” Because business is important because, again, we’re an aspirational when is “there “? As a rock star, you think if you make that brand. So if we can inspire people through the artists to record, it’s going to happen, and yet they find out that after want our brand, then we can create products that satisfy the the taxes and after everything else, they have to go back to inspiration as we build on it. work the next day because it didn’t happen yet, right? I’d been retired for five years. I retired from Guitar Center at the peak Q: When you were playing guitar and getting into this as a of my career. I had five years to play golf and enjoy life, and the kid, did you see yourself in business or did you see yourself Fender thing came along and it appealed to all of my boyish in a rock band? senses. It was a chance to go play in the chocolate factory. But THOMAS: No, I was like everybody else. I wanted to be a when I got there, I found this team of people that were pretty rock ’n’ roll star. I got into the business by working in a music disillusioned. But I relished the opportunity to coach people, store. Once I realized I wasn’t going to be a rock star, I knew not to tell them what to do, but to coach them on how to think that I needed to get a job. I ended up in a store called Guitar about what they need to do. What’s been wonderful about Center in San Francisco and because I had a good work Fender is the opportunity to let people be creative. When I ethic, I quickly moved through the ranks and became store got to Fender, the offices were in Scottsdale, and nobody ever manager. I went to night school, and took accounting and went to the factory. Today, three years later, the creativity finance classes. I’ve never finished college. I was in college comes from every corner of the factory. I’d rather hang in the during the Vietnam War. I lost my deferment with the lottery factory because you get to watch all this process, and you get and then I did alternate service during the war. Back then I to see the cool stuff coming off the line. I always look at this wanted to be like Dave Mason from Traffic and I wanted to like I’m building my very own guitar. But the most rewarding play like Eric Clapton. Those were my two biggest influences. part for me is helping to empower this incredible group of But the interesting thing is that Dave Mason became one of passionate Fender employees to build upon the incredible my best friends, and I’ve got pictures of Clapton at home with legacy that Leo Fender began. It’s about harnessing all of the my wife. He’s got his arm around her and she’s having a drink. power and potential of these wonderful products and sharing I’ve met all of these heroes and then some of them have gone all of the stories, creativity and joy they continue to bring to on to be some of my best friends. the world. That is really important to all of us. K/F

1991 1995 1996 Compact discs surpass The Dow Jones Industrial Spanish duo Los Del Rio cassette tapes as the preferred Average closes above 5,000 have a smash dance hit with medium for recorded music. for the first time. the single “Macarena.”

54 briefings on talent + LEADERSHIP Connected Leadership

Left, Fender American Vintage 1952 Telecaster; right, 1960 Jazz Bass NOS

1998 1999 Google files for Napster’s peer-to-peer file-sharing service is TIMELINE CONTINUES incorporation in wildly popular until it is shut down by court order, ON PAGE 60 California. becoming the poster child for copyright reform.

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