Gibson’s Bankruptcy is a Cautionary Tale about Corporate “Innovation”
It’s official: after over 116 years in business, Gibson guitars is filing for bankruptcy. Amidst tumultuous leadership and declining sales, the iconic brand responsible for the Les Paul and the SG could no longer afford to pay down its debts.
This news does not come as a great surprise. About a year ago, the Washington Post ran an article about the “slow, secret death of the electric guitar,” painting a bleak picture of “plummeting” sales, shuttering brick-and-mortar shops, and fickle millennials rejecting the “guitar heroes” of their boomer parents. Plain old electric guitars, it turned out, were not all that exciting in a world of iPad synthesizers and YouTube stars.
Nobody agreed with this sentiment more than Gibson CEO Henry Juszkiewicz. Juszkiewicz, who is widely credited with saving the brand from oblivion when he took over in 1986, is one of the most staunch advocates for “innovation” you could ever hope to find. During his tenure as CEO, he sought to transform Gibson from a guitar manufacturer into a “music lifestyle brand.” He acquired the consumer electronics arm of Philips, a company that was itself dedicated to “improving people’s lives through meaningful innovation.” He insisted on introducing bold new technologies to Gibson’s core line of instruments, over the objections of “purists” and “trolls.” And, by most accounts, he ran the company into the ground.
In other words, Gibson didn’t go bankrupt because they failed to innovate — they went bankrupt because they were obsessed with innovation. Innovation at all costs. Innovation over the objections of their most loyal customers — and in spite of their own sales figures. As recently as February of this year, Juszkiewicz was casting himself as a misunderstood iconoclast in a backwards industry:
“Imagine if the camera had never changed. Innovation is a part of every business to some degree, but [the guitar industry] hates it. The kids demand it, and if you don’t have it, they walk.”
The problem, Juszkiewicz insisted, was not the high-tech doodads he had introduced — which, he had claimed in 2017, would one day be “recognized as a great innovation [like] the advent of the television remote control.” Instead, it was an overall decline in the industry and a lack of interest among young people, which left Gibson only able to acquire new customers “with great difficulty.”
There is, however, one major wrench in Juszkiewicz’s narrative: Gibson’s biggest competitor, the equally iconic Fender Musical Instruments. While Gibson begins its Chapter 11 proceedings, Fender is actually growing faster than the musical instrument market overall — which has been slowly but surely regaining steam after the 2008 crash.
If Gibson’s “innovative” approach ran the company into the ground, what was Fender’s strategy? Did they simply stick to the “classics,” and wait for the market to rebuild itself? Not quite. This quote from Fender CEO Andy Mooney, worth reproducing in its entirety from a recent Forbes interview, lays out exactly how a customer-first approach to innovation allowed Fender to evolve both its product offerings and and its marketing strategy:
“About two years ago we did a lot of research about new guitar buyers. We were hungry for data and there wasn’t much available. We found that 45% of all the guitars we sell every year go to first-time players. That was much higher than we imagined. Ninety percent of those first-time players abandoned the instrument in the first 12 months — if not the first 90 days — but the 10% that didn’t tended to commit to the instrument for life and own multiple guitars and multiple amps.
We also found that 50% of new guitar buyers were women and that their tendency was to buy online rather than in a brick and mortar store because the intimidation factor in a brick and mortar store was rather high.
The last thing we found was that new buyers spend four times as much on lessons as they do on equipment. So that shaped a number of things. It shaped the commitment we made to Fender Play because we felt there was an independent business opportunity available to us that we’d never considered before because the trend in learning was moving online. We also found we needed to communicate more to the female audience in terms of the artists we connect with, in terms of using women in our imagery and thinking generally about the web.”
In other words, while Gibson was dismissing and name-calling their customers, Fender was actually listening to their customers. And the things they heard challenged some very fundamental assumptions about what they were selling, and who was buying it. A cursory glance at Fender’s website tells you a lot about how the company has implemented their findings: pictures of women playing their instruments dominate, and the “Fender Play” platform for learning how to play guitar is given equal billing with the guitars themselves. (Gibson’s website, on the other hand, features a picture of Slash with the headline “global brand ambassador” — a noxious and deeply company-centric piece of marketing jargon if ever there was one.)
My point here is not to blame Gibson or its CEO for poor leadership, but rather to call into question our collective belief in “innovation” as the sole path to success in a fast-changing world. As a culture, we are obsessed with innovation, with “disruption,” with entrepreneurs and hustlers and go-getters. But as companies follow this “innovative” path, they can quickly fall into self-obsession, often at the expense of customer obsession. In a telling interview with the LA Times, Juszkiewicz offered that his dream was to be “the Nike of music lifestyle” — a comment that betrays a deep and ultimately irreconcilable disconnect between how Juszkiewicz perceived Gibson and what its customers actually wanted.
Fender CEO Mooney — himself, somewhat ironically, a former executive at Nike — put it in almost brutally simple terms when asked about the state of the industry overall: “Gibson’s travails are all of their own making.” Sure, educational tools for beginner guitarists might not scream “innovation” like Les Paul holograms and ROBOT GUITARS. But, as the respective fates of the two companies show, “innovation” for its own sake often comes at a great cost. Here are a few key lessons for companies that do not want to meet a similar fate:
- Close the gap between your executives and your customers
When’s the last time a senior leader at your organization had a direct, face-to-face conversation with a customer? For far too many organizations, direct customer feedback is seen as low-status work, and customer insights only make it to senior leaders in the form of sanitized verbatims and 200-page PowerPoint presentations. Juszkiewicz’s thoughtless framing of his own customers as either “purists” or “the kids” speaks to what happens when company leaders are way, way, too far removed from the actual people who will ultimately determine the success or failure of their business.
- Stop chasing industry plaudits and self-congratulatory awards
Each and every one of Gibson’s “innovations” generated a ton of buzz in guitar magazines and tech blogs. At large events like CES, Gibson was known for putting on lavish spectacles to impress marketing and industry insiders. Far too many organizations — especially in the marketing and advertising space — chase industry plaudits over customer insights. This only reinforces corporate self-obsession, and creates an even greater distance between a company and its customers.
- Use data to uncover the entire customer journey
The data that Fender collected — both quantitative and qualitative — uncovered opportunities to meet customer needs beyond the point of purchase. Armed with this data, Fender was able to expand into a previously untapped adjacent business — music education — that perfectly suited their existing brand. Gibson, on the other hand, continued to see their products as the sole lever of innovation — and in doing so, missed out on what could have been a company-saving opportunity. (For more on this, check out my business partner Tricia Wang’s incredible TED talk “The Cost of Missing Something.”)
- Smash the false idol of “innovation”
“Innovation” is one of those very dangerous words that imparts a feeling of success and momentum without actually describing much of anything. The next time you’re in a meeting and somebody discusses their plan for “innovation,” ask them exactly what they mean. What “innovation” do they have in mind? What will it accomplish? And, most importantly, what is the customer insight driving that innovation?
Paraphrasing Mark Twain, Fender CEO Mooney posited that “the death of the guitar… is greatly exaggerated.” Beloved musical instrument marketplace Reverb.com recently suggested that we are in the golden age of electric guitar building. Despite the bankruptcy of an iconic brand, the electric guitar does live on — and there are some incredible small builders out there who are offering up their own unique, player-focused twists on classic designs. To see a few instruments that are making this customer very happy, check out Lincoln Guitars, Creston Guitars, and Deimel Guitarworks.