Exemplifying a Systems Leader — Katrina Lake, CEO Stitch Fix

Systems Leadership — April 16, 2019

We knew that when Katrina Lake agreed to come to our class we were going to have an engaging session. As the youngest woman ever to take a company public, Lake has become an iconic symbol in Silicon Valley of a leader who has seen the ups and downs of building a successful company which is still in the throes of competition with fierce competitors. As Lake and her team have worked to build a business that has expanded to serve multiple markets and demographics (e.g. men, children, etc.), Stitch Fix is combining data, fashion and service into a unique shopping experience for their customers. Lake provided insights both into the opportunities and challenges for the company’s business , as well as in her role as CEO and Systems Leader of the organization.

Lake backed by the iconic picture of Stitch Fix’s IPO

Platform (Horizontal) + Personal (Vertical)

Great Systems Leaders need to blend how they think about building a scalable business (offering platforms that can span horizontally across many customers) while also providing enough customization to hold on to these customers over time (personalization through vertical solutions). Stitch Fix is doing both of these things by offering a way to purchase clothes at scale (providing a wide variety of options), but with highly customized input for each customer via the company’s 3,300 stylists that help end users select their wardrobes.

One item that caught our attention was when Lake pointed out that the Stitch Fix system enables customers to give extremely detailed feedback on the clothes that they both do and do not purchase, with specific information on fit (e.g. How was the placement of the first button in a shirt or blouse? Where did the back pockets sit on a body for a pair of jeans? etc.), in a manner that is impossible for any retail store to gather. Stitch Fix can thus take that data and not only use it to make better suggestions to other end users based on style preferences and body types, but also to feed information back to clothing manufacturers so that the latter can improve their products. Stitch Fix is in the unique position of being able to have an intimacy with their customers, and to also use that opportunity to deliver better customer outcomes (new clothing purchases) through a highly customized but simultaneously scalable system — with data that is unique and proprietary to Stitch Fix. This blend of horizontal and vertical is currently impossible for incumbents to copy without a massive restructuring of their businesses.

Blending Self Confidence with Self Awareness

Lake’s session focused on the topic of leading through uncertainty, as the types of disruptions that are confronting the fashion and retail industries are happening at the channel, product and personnel levels at the same time. Lake talked about the role of personal growth and its correlation to company growth — if the company has grown by 40%, individuals need to ask themselves if they have grown by 40% over that same period in order to scale into their positions. She talked about the notion of “re-hiring yourself” for your job, and being intellectually honest in understanding one’s own performance as a business changes.

As one of the most visible icons of a successful leader in the technology industry who is also a woman, Lake talked about the importance of hiring a diverse team, but perhaps most interestingly, framed it in a way that profoundly resonated with the class: She talked about the importance of hiring with the notion that when evaluating a new potential teammate whether he/she will be a “cultural add” or a “cultural fit.” As companies bring in new people, making sure that someone can successfully function in an environment is obviously a key variable to long-term success. However, this can drive an organization to hire others that are mostly like what already exists inside of a company, thus limiting diversity of opinions, thoughts and capabilities.

But the idea of looking for cultural additions brings to the forefront the idea of bringing on new teammates that are not only different than what currently exists, but that can also grow and expand a company in a positive and productive way. This very powerful but subtle framing (doesn’t every company want growth?) of how to build a team of varied competencies and styles exemplified a compelling blend of self-confidence and self-awareness that is critical for Systems Leaders going through these frame-breaking industry changes.

Into the Fire — Move Towards Disruption

Lake talked about the importance of making aggressive changes and going “risk on” during times of great uncertainty. Stitch Fix’s ability to achieve disproportional growth is predicated on the notion of moving towards industry disruption and not trying to avoid the hard and uncertain parts of their business as they scale in size and complexity. The challenge, of course, is that this will lead to high volatility and uncertainty in the outcomes of the company’s actions.

In some ways, this is easier for Lake and other disruptors because seeking disruption is their very reason for existence — to change what came before and build new opportunities for their companies. But, this attitude also exemplified what is necessary for incumbents: Without moving towards disruption (running into the proverbial fire), a company will end up being a passive receiver of the changing technologies, trends and behaviors of a market. In some ways, incumbents are going to have to think and act like Stitch Fix and their ilk as the inevitable tide of technological progress will continue as long as leaders like Lake seek new opportunities of under-served markets.

Moving towards disruption is not a choice — it is an existential requirement. And while this means that outcomes will be uncertain, the certain outcome of not moving towards the disruption is ceasing to exist.