I really appreciate you writing about Brooke, especially given its focus on human capital and developing its teachers. I’ll echo some of the questions brought up previous posters as far as scalability. In my experience, it can be difficult to get talented individuals to join the teaching profession in general, let alone in the numbers required to scale the Brooke model. How might incentives need to change to bring the right individuals into education?
Super interesting post!
I think American Apparel lost their way. In so many ways, the company’s operating model seemed designed for success. By optimizing SKUs and focusing on “basics,” American Apparel should ave been able to avoid the obsolescence risk and inventory management problems that plague so many retailers. By manufacturing their clothing in the USA, American Apparel should have been able to capitalize on the sweatshop-free ethos of its core consumer.
So what went wrong?
I think the first piece was around the clothes themselves. While its true that they were made in the USA under humane working conditions, the quality was not great. Further, since many of their SKUs were “basics,” they were subject to considerable price pressure. Could their brand justify the premium price charge for poor quality clothes? Obviously not. At the same time, their founder’s very public problems with sexual harassment and mistreatment of employees actually detracted from the brand. Couple this with the controversial advertising and you have a recipe for stagnating growth and diminishing profits.
It will be interesting to see if and how American Apparel emerges from its Chapter 11. Will it alter its business model to lower costs and improve margins? How will the company’s culture change? What about the brand? With all of that said, will American Apparel reemerge at all?
DryBar presents a very interesting operating model, in that it creates affordable “luxury” in a very standardized manner. Simply put, we don’t generally associate a standardized experiences with luxury, instead thinking as luxury as a customized experience. So what happens when you offer a standard menu of simple luxury items, charge prices within customers’ willingness to pay, and take the pain out of the booking process? You get a successful and rapidly growing business.
I also find it fascinating that many higher end salons have taken note of DryBar’s success and have started offering reasonably priced blowouts with their junior staff as a means of keeping their chairs full. What does this mean for the long term viability of DryBar and its business model? Will customer loyalty cause DryBar’s patrons to visits the stylist who cuts their hair for their blowouts instead of visiting DryBar? Will these more custom experiences be more attractive to consumers? Only time will tell, but definitely interesting to think about.
Thanks for sharing!
As someone who has frequently partaken in a still-hot KK, this is a great post!
In particular, I have always thought that KK’s operating model was a key driver of their value creation. Quite literally, by manufacturing the donut mix and making the actual donuts in-store, KK is able to reduce certain operational costs, such as transportation, storage, and spoilage loss, while increasing consumer perception that KK is a premium product and hence enabling KK to charge premium prices. I’d be curious to know more about the human capital costs associated with this operational model, since the decentralization of donut production may cause KK to incur additional costs. Is turnover, on average, high or lower than for KK’s competitors? What is the annual expense, per factory store, of training staff? Is there additional corporate overhead? Furthermore, given the incremental expense of the donut making machines required in each store, is the premium charged for fresh donuts sufficient?
In all, a very interesting operating model to consider. Thank you for sharing!