This month, Herman Miller opened a leviathan flagship showroom in Manhattan. The sprawling 60,000-square-foot temple to a furniture empire represents an ambitious five-year plan to change the way it approaches business.
Herman Miller’s history dates back to 1905, when it was known as the Starr Furniture Company and made traditional bedroom suites. During the 1930s, it began producing furniture tailored for modern living, and in the 1940s became the company as we know it today under the guidance of its visionary design director George Nelson. During the postwar era, Nelson worked with Charles and Ray Eames and and essentially developed–and popularized–what we now call midcentury design.
Beginning in 1960s, the company’s main focus turned to office design when it invented a modular furniture system called the Action Office, aka the cubicle, and later had the singular distinction of turning task chairs into objects of desire. Since then, it’s been deeply entrenched in furniture for corporate settings–a fairly lucrative model until the ’00s, when growth rates began to diminish and the economic crash upended business.
Amid dramatic shifts in the marketplace, Herman Miller vowed to change course. Now, the legendary brand wants to sell consumers on a better life through good design. “It’s about helping you envision a lifestyle, whether it’s a lifestyle about work or a lifestyle for your home, or a lifestyle for where you heal,” CEO Brian Walker says about Herman Miller’s ambitions.
In short, it’s becoming a lifestyle brand.
The “Shift” strategy is the formal name of Herman Miller’s five-year initiative to reposition itself in the furniture market. It revolves around four points: moving from the realm of offices to every interior environment, expanding its market from North America to other corners of the globe, and shedding its reputation as selling solely to design professionals–towards an approach that includes consumers.
The company implemented the plan in 2011 and since then, it’s steadily overhauled its business from how research and development is structured to how sales people talk to customers to how it even thinks about consumers in the first place. It’s scooped up complementary companies to bolster its offerings and carried out one of the largest real estate transactions in its history to bring its family of brands under one roof at the flagship. But at the heart of Shift is a pivot from peddling products to providing lifestyle solutions.
“As companies go thorough maturity cycles, it’s easy to start focusing your energy on competing at the same dimensions and being more about features and benefits, or trying to protect where you’ve been versus saying to get to the new place,” CEO Brian Walker says of the Shift strategy’s inception. “We’re going to have to challenge even some of our own norms, and we’re going to have to be willing to rethink who we are.”
The way Walker saw it, in the last 40 years Herman Miller had narrowed its approach to focusing on one particular audience: its bread and butter, American corporate customers. However, amid the volatile economy in the ’00s (between 2000 and 2003, Herman Miller’s sales dropped from $2 billion to just $1.3 billion), slow growth in the contract furniture industry, and changing demographics and living styles, the company saw the writing on the wall. It had to either change its approach or keep fighting with its competitors–including Knoll, Steelcase, and Humanscale–for a piece of a smaller pie.
“Our fundamental belief was that people’s lives were blurring and they no longer live compartmentalized,” Walker says. “We also thought that Herman Miller’s unique gift was not its specific focus so much as its ability to reinvent itself based on understanding of social change.”
In other words, how does an industry stalwart revamp for 21st-century relevance? By mining its rich history, remixing it, and bringing it to new audiences.
For a brand that’s over a century old, changing course isn’t as easy as issuing an idea and saying “make it so.” It involved rethinking the entire company’s operations and finding the right individual to steer the ship. The man Herman Miller hired to do that is Ben Watson, who became the company’s executive creative director in 2010.
“Ben and I first met when we were beginning to think about building our consumer business, and this was before the financial crisis, around 2007,” Walker says. “Frankly, we didn’t hit it off very well.” But the market crash tabled plans to bolster the consumer end of the business that year and eliminated the need to fill the position for which Watson was a candidate. Yet when the economy began to recover, Herman Miller’s executive team revisited the conversation. While they recognized the company’s skills with research and development, its branding, marketing, and messaging weren’t fulfilling their potential.
So in 2008, Walker decided to build a creative advisory board to triage Herman Miller’s operations. Composed of designers Bruce Mau, Kim Colin, and Sam Hecht as well as Collin Burry, the design director of Gensler, the group met regularly from about 2009 to 2011. About a year in, they presented Walker with the idea of hiring a creative director and laid out what a potential management structure could look like. Walker then asked a number of trusted colleagues both inside and outside of Herman Miller about who would be the best fit for the role. “The name Ben Watson came up three times in a row,” Walker says.
Before Watson arrived at Herman Miller, he was no stranger to the business of design, working as global creative director of apparel for Nike, global marketing director at the Swiss furniture company Vitra, and CEO of the high-end Italian furniture house Moroso. “I don’t claim to have authored the description, but creative direction is managing the intersection of strategy and design,” Watson says of his approach. “It’s frequently confused as art direction or design direction, which are actually different practices.”
Watson—together with the advisory board, senior leadership at Herman Miller, and Walker—helped craft the Shift strategy. “It’s how do we align all of our creative work in products, experience, and communications to actually make that strategy happen,” Watson says. “My work is saying, ‘Are we aligning all that work to make this strategy come true?’”
There’s a dichotomy in the furniture industry: contract and consumer. Interior designers and architects are the contract customers, who usually place large orders through dealers for spaces like hospitals, offices, hotels, and restaurants. Consumers are nonprofessionals who purchase through retail. One of the biggest shifts in Herman Miller’s strategy was thinking more broadly about who the consumer is and how to engage them.
To accomplish that, Watson tapped into his experience at Nike. “Nike is extraordinary in their obsessive focus on the consumer and it’s a wonderful thing, but it is an obsession,” he says. For example, to understand its female tennis consumers, it talks to Serena Williams. It has teams on the ground at tennis clubs talking to aspiring junior players. It heads to local courts across the country where women of all skill levels are playing.
“They want to know exactly what is hanging in their closet, what magazines they read, who they think does a fantastic job and why, who they aspire to be, what fashion brands they’re buying, what they love and hate or wish they had when they’re playing,” Watson says. “Going back to Nelson and Eames, Herman Miller has an extraordinary legacy of being human-centered in our product designs, but we hadn’t been as obsessive about focusing on our consumer holistically, not just in the design of our solutions for them, but how we serve them completely.”
In a similar way that Nike identified the needs of its consumers, Herman Miller conducted intensive demographic research to inform the furniture solutions for living challenges. For example, one of its core groups is a “design-passionate” consumer, which is more defined by a mindset than a particular income level or age range. They could be empty nesters looking to downsize, people buying a second home, apartment dwellers who don’t have a lot of disposable income but want something that can last a lifetime, or someone interested in sustainability.
“For an urban-living, design-passionate consumer, who can be 25 or 65, what are the things that they need at home?” Watson says. “What does it mean to work at home today? I wouldn’t want an Aeron chair at home because I don’t have an apartment large enough, so I need something that can serve multiple demands.” One of the products that speaks to this problem is the Distil desk and table by Todd Bracher, which Herman Miller introduced in 2015. The design features storage and cable management for work purposes, but is handsome enough to function as a dining table.
“It’s not just responding to the market but being aware of it to actually know enough about the problems to solve them in a way that’s truly helpful and authentic to us,” Watson says.
This focus on consumers and their needs also came to bear on building the Herman Miller Collection, a group of furniture named after the first catalog George Nelson produced for the brand in 1940, featuring designs that can work equally well in residential, office, work, or hospitality environments. Many of the classics Herman Miller is known for–from the likes of Nelson, the Eameses, and Noguchi–live in this group, as do contemporary pieces from European brands it distributes, like Magis and Mattiazzi. Just as Nike made sure that it could supply products to any athlete of any level, Herman Miller assembled the products in the Herman Miller Collection to serve anyone that needed furniture.
“Business has more than doubled in the last four years because we gave it focus, saying we’re going to pay attention deeply to the make and finish to the Eames products we create, refresh it where appropriate with new material options, and think about how people are going to use them today,” Watson says. “We’re also going to create new designs that solve problems that continue to be unearthed that weren’t in our classics. We’re thinking—like Nike—that obsessing around a customer doesn’t stop just at designing a product to solve a problem. It’s actually meeting them where they are, solving their problem not once but in every way with our products. It’s where we meet them, the experiences we deliver, and are we inspiring them always.”
Another example of this “consumer-obsessed” strategy is the Living Office, a philosophy of office design created to help customers build environments that help people work better and mesh with a company’s culture. The company is framing the Living Office not as a workstation system but rather as a point of view. “Ultimately you’ll need our furniture to do that, but it’s not about the furniture—the furniture is what’s necessary to make the place happen,” Watson says. “If you’re the CEO of Bank of America or Nike, you’re trying to create a campus or a building or a floor or a space that’s going to empower your people to do great things. We’re saying, we shouldn’t just be down there at the commodity level trying to sell one object—pick my chair!—so let’s bring all of our deep knowledge that started in the Action Office days, where dozens of researchers focused on asking, how does great work happen? It’s not just is a desk that goes up and down healthier than one that doesn’t. How do you as an individual or a group measure, is the space working for me?”
Focusing on the consumer was also an avenue to boost contract business. “We knew that offices were becoming much more of a mix between residential and what had been a contract-institutional feel, so we made the move [to consumers] commercially because of that,” Brian Walker says. “The second reason is we had a belief that more and more, companies are beginning to allow and are beginning to ask for input from their employees on how the company is going to evolve and what it’s going to become. We believed that if we were in the hearts and minds of those people, our chances of serving them in their companies would go up.”
One recent trend is offices having more residential touches, like a communal kitchen or sofas for employees to work or lounge upon. Case in point: many of Airbnb’s offices. For some businesses, telecommuting and working from home is becoming more common. Herman Miller’s consumer-based approach taps into both of these shifts.
The physical embodiment of the Shift strategy is the Park Avenue flagship, which encompasses 60,000 square feet of retail, showroom, and office space. When the ground-floor retail storefront opens in late 2016, customers will be able to spy vignettes featuring furniture and housewares for every room in their home. The second floor will host retail and some office furniture organized into the Living Office’s concepts. The third and fourth floors will have office furniture from most of Herman Miller’s range, and the fifth floor is dedicated to Geiger, the line targeted to executive offices. Maharam–a textile company Herman Miller owns–is also located in the building, and design professionals will be able to peruse their textile library.
“Part of the exercise when we built our Shift strategy was to imagine a timeline and imagine what does nirvana look like when we arrive?” Watson says. “Very early in that process, we imagined that a flagship location as the top of the pyramid, which embodies our shift from being just a contract company or just an industry brand to truly be a powerful lifestyle and consumer lifestyle brand—to make that palpable and a physical experience that all of our customers can walk through.”
Herman Miller’s first foray into retail was back in the 1960s in the Alexander Girard–curated Textiles & Objects shop, which sold folk art sourced from around the world, fabrics, and decorative items. “We’ve taken that as one of the guideposts—how can we awaken that desire to curate your own life?” Watson says. “It’s important that we don’t envision us as just a furniture store, but that for the consumer, can we help you imagine a modern way to live?”
While the flagship’s retail space will contain a similar mix of goods, it’s also more comprehensive and will give visitors—both professional and nonprofessional customers—a look at everything under the Herman Miller umbrella, all under one roof. While you may come in for a task chair, you could leave with new upholstery for your sofa or see something that sparks a bigger redecorating project.
Buying the formerly beleaguered retailer Design Within Reach in 2014 for $154 million gave Herman Miller an instant consumer business and e-commerce channel, plus the proprietary knowledge DWR gained from developing its back-end system, which will help Herman Miller refine its own online digital retail operations. The company plans to revisit its website and online shopping experience this year—which has seen double-digit growth since it launched in 2010—with a particular focus on mobile.
“Sometimes you’re an architect in Midtown who needs an office chair at 8 a.m. for a presentation with their board—we need to serve that need,” Watson says. “But sometimes you’re a consumer at home daydreaming about your new apartment. Are you able to find us in search when you’re thinking about sofas? Able to find us when you’re thinking about Herman Miller? Are you able to be inspired when you do find us? We’ve got to do all of those things.” Herman Miller has also begun to sell task chairs on Amazon–part of its strategy to meet consumers where they are.
To move away from solely an industry focus, Herman Miller has tried to jettison jargon and tell stories that appeal to a general audience. “Industries begin to speak their own language,” Walker says. “And they speak in languages to their customer that sound more like what the industry cares about rather than what the users care about.”
This sparked Why, Herman Miller’s online magazine, which features stories about the company’s history, the philosophy of designers it works with, the pioneering design principles it has developed, documentaries about how its customers use its products, and more. The stories let readers glimpse into Herman Miller’s huge network of design. The narrative format, custom illustrations, and multimedia are more engaging than brochures of product features. While the magazine lives on Herman Miller’s website, the company also promotes the stories on social media.
“When we look at statistics, like our social following, which is four times the contract industry combined, it means people want to have a conversation with us, but are we engaging in inspiring conversations with them?” Watson says.
Because Herman Miller is so large, the company can come off as siloed to people who only know if for one thing, like office furniture or design classics or health care. Discussing sustainability practices or why it’s working with a particular young designer or how an important figure from its history shaped its philosophy invites people to learn about what the company stands for.
“I think our job is not to build customers, but to have fans,” Walker says. “We don’t really want to have transactions, we want to build relationships. We’re not trying to build places, we’re trying to build inspiring experiences.”
Herman Miller’s headquarters are in Zeeland, Michigan—a town about 25 miles southwest of Grand Rapids—but it also has a network of 660 dealers in 109 countries. To better serve international markets, the company has opened e-commerce stores for Japan and China, and will also do so for India and the U.K. by the end of the year. In 2011, 79% of company sales were in North America and in office products. That percentage dropped to 58% by the end of the 2015 fiscal year thanks to a more global mindset.
“We know that there will be a greater conversion of labor-based economic drivers to knowledge-based economic drivers in places like India and China in the next 10 to 15 years, which is a lot of what happened in the United States in the ’70s, ’80s, and ’90s that really fueled the office furniture industry,” Walker says. “So that’s not to say the United States won’t grow, but that conversion for us is not going to happen at the same pace because we’re further along the curve. So certainly by being in emerging markets where that conversion is going to happen, we think we’re better positioned that, over time, we can ride [economic] cycles.”
Moving beyond market share, the company also rethought its international approach to research and development–a department that has historically been a badge of honor for the brand and a powerhouse for innovation. Take, for example, the groundbreaking ergonomic design of the Aeron chair and the material engineering behind its eco-friendly fiberglass. While it used to be based solely in Michigan, it’s no longer a single team, but rather a series of teams spread around the world in the United Kingdom, China, North Carolina, and Wisconsin. (Maharam and DWR also have their own R&D teams.) Within the last 18 months, Herman Miller has also instituted commercialization teams to bring new research to market faster, though no products have been released as of yet from the program.
“What we looked at a year and a half ago is that we have fantastic ideas coming from the design partners, and we have great people and engineering solutions, but we have too many handoffs and start and stops,” Walker says. “We’re not enabling our people to spend enough of their concentrated time on a specific task so that they can get those products in the hands of customers sooner.”
So far, Herman Miller’s strategy seems to be working. For the third quarter of fiscal year 2016, which ended February 27, Herman Miller posted a 33% increase in profits, beating estimates. Net sales totaled $536.5 million, a 3.9% increase compared to the same quarter last year. In 2015, 22% of sales originated from products developed within the last four years. The contract furniture industry as a whole grew at a compound rate of 5.5% over the last five years and Herman Miller outpaced that, growing by 8% organically and 10% overall. In 2011, when the Shift strategy was developed, annual revenue was $1.6 billion. That sum grew to $2.1 billion by the end of fiscal year 2015.
The furniture industry as a whole is susceptible to swings in the economy, which is part of the reason Shift was needed in the first place. Businesses grow–they need more workstations and equipment. The housing market expands–people need to furnish those spaces. When the market contracts, pocketbooks do, too.
“I don’t know that we have necessarily changed the business in a way that makes it less cyclical or counter cyclical,” Walker says, noting that an economic situation like the financial crisis hit virtually every segment of the market. What the strategy is about, however, is the long game. “What we’ve created is a much larger market opportunity, and we’ve positioned ourselves in places that have better long-term demographics for growth.”
This strategy–of scooping up other design brands, taking a more holistic approach to its customer base, adopting a global approach, tapping into history, and leveraging e-commerce–is not unique to Herman Miller. In 2013, the Swiss manufacturer Vitra (which holds the European licensing for Charles and Ray Eames’s designs) acquired the historic Finnish company Artek, which was founded by Alvar Aalto in the 1930s. Vitra’s parent company, Ormand AG, bought the two-year-old e-commerce brand Hem in 2016, taking a chance on the upstart’s direct-to-consumer model for contemporary furnishings. In 2014, Haworth—a privately owned office furniture company based in Michigan—inked a $270 million deal to buy a 58.6% stake in the Poltrona Frau Group—a luxury Italian brand that owns Cassina and Cappellini—to strengthen its international footprint. Knoll—which is Herman Miller’s closest American counterpart thanks to its textile, health care, office, and design classics divisions—bought Holly Hunt, a transitional residential brand, in 2014 for $95 million in an effort to diversify its customers after slowing demand from government and financial services clients.
Herman Miller has made big shifts in its business model before. The year was 1930, and the business was reeling from the Great Depression. Company founder D.J. DePree feared that his business—which produced big, ornate, traditional furniture—would be shuttered within a year. Then he met designer Gilbert Rohde, who preached the virtues of Modernism and earned a contract from Herman Miller to produce his designs, which were forward-thinking and tailored for new modes of living. By 1945, Herman Miller had phased out its period pieces, going on to become a beacon of accessible modern design.
This fundamental pivot in the brand’s history informed its core philosophy and in some ways, the Shift strategy is attempting to achieve the same spirit of transformation. Will the results prove to be as successful? Time will tell if the groundwork laid by Watson, Walker, and the rest of Herman Miller’s leadership will pave the way for another century of business.
All Photos: courtesy Herman Miller