What I would do with Gibson Guitar (repost)

I wrote this in May 2018, originally posted on LinkedIn, and have updated it a few times since then as noted throughout, most recently Sept. 20, 2018 — JS

Guitar enthusiasts and industry watchers already picked through accounts of the fall of Gibson Brands, Inc., into bankruptcy, looking for nuggets to suggest what will happen to the conglomerate’s core, namesake business: making stringed instruments. And they found some:

  • Henry Juszkiewicz, the corporation’s controversial owner/CEO, will be replaced but gets a consulting deal on the way out.
  • Holders of the surviving company’s restructured debt say they want it to return to its instrument-making roots and shed the electronics/technology acquisitions Juszkiewicz made trying to evolve Gibson into a “lifestyle brand.”
  • The bankruptcy filing indicates the company’s core guitar sales improved by more than 10 points year-over-year in 2017. Observers say the Gibson Guitar unit maintains an operating profit amid the debt and losses from the acquired businesses.

Most of this sounds like good news for the future of Gibson’s guitar making business. Some watchers would say the best news is Juszkiewicz’ exit. But I was never a pure “Henry hater.”

Since I don’t know him personally, I can’t speak to any of the discussion of his personality or leadership style. As an executive, I can grasp what he tried to do by moving into electronics. He would have been hailed as an industry hero had it worked, and it did have a chance. But you cannot discount dumb luck as a factor in the success or failure of any business decision. I even sympathized with his recent laments that traditionalists crushed any attempts at innovation in guitars, though I think the way he applied and marketed innovations came across as tone-deaf.

Still, remember the company’s history. Give Juszkiewicz credit for rescuing Gibson years ago from a different predicament that had dragged the core guitar manufacturing enterprise well into the mud. People can (and do) quibble about recent Gibson quality control, but take a look back at financial performance, as well as design and build compromises the company made, during the era of Norlin ownership. The 2019 lineup includes fewer of the oddities of the 2000s-early 2010s, and generally respects the time-honored designs and materials the Gibson brand represents (but the MSRPs for long-running models keep going up).

And I don’t think quality control in Gibson’s U.S. plants has declined recently, so much as build quality and consistency in instrument factories worldwide has improved by comparison. Asian- and Mexican-made instruments generally go on the rack at lower prices than U.S.-made models they mimic. If import build quality rivals domestic-made models, other than differences in woods and hardware used, U.S. builders wind up with fewer differentiators and a harder time justifying prices. Players associate the Gibson brand with high prices, now more than ever.

So … what if they handed over the keys?

Listen, the chances Gibson comes around begging me to be the next CEO are way down there with the chances Jimmy Page asks me to grab my guitar and go on a state fair tour with him in an old VW Microbus. I am not pining by the phone (what’s the internet equivalent of that … pining by Twitter?) for either conversation.

But I can imagine what I’d do if handed the keys to a new Gibson Guitar Co.:

  • Follow the Clayton Christensen line, and be “patient for growth and impatient for profits.” Christensen says this in the context of describing disruptive innovation, of course, and Gibson’s far from a brash startup. Still, the reasoning applies: Gibson exists in a slow- to no-growth industry, and will be coming out of bankruptcy owned by debt holders who certainly will expect those debts to be serviced. Only a profitable company has resources to pay its debts and shareholders while investing for the future.
  • Meet personally with as many bricks/mortar and online retailers as possible in the first 90 days. Guitar Center/Musician’s FriendSweetwaterAnderton’sSam Ash, of course, but also top-tier independents. I get the impression the company needs to work on relations between it and even the biggest Gibson enthusiasts among retailers. In cooperation with those retailers, I would try to learn from pricing, sales, service and marketing data how to go to market with product lines that are most likely to succeed, and improve merchandising and service.
  • Meet personally with the leaders of Fender, Ibanez, Yamaha, PRS, and other major guitar makers. Each brand has staked its position, but in an industry that has little growth at best and secular decline at worst, the big makers need each other. Fender Play is a smart move to build interest in learning and playing guitar among young people (Peavey just started a similar program), but Gibson could provide more effort and investment toward that goal.
  • Spend as much time as I could looking over shoulders and learning the details of sourcing and manufacturing processes — today and yesterday — from the company’s best, most experienced techs, not necessarily from VP-level operations execs.
  • Revitalize the marketing team and develop a new marketing plan top-to-bottom, including: Clear delineation of Gibson and Epiphone value propositions; refinement and clarification of the product lines; modernizing media planning and buying; investing more in digital content marketing, P.R., and event marketing. (“Only a Gibson is good enough” may have been a clever tagline once, but these days it has a little too much slapback echo on it. Too many out there would say, “Only a ’59 Gibson is good enough,” reinforcing the image of a company well past its glory days.)
  • Find a way to honor and celebrate the history and tradition of Gibson guitars while innovating in ways that make sense for today’s players. At face value, this resembles what Juszkiewicz and his product people tried to do: they kept the classic body styles and materials, but added robot tuners, adjustable zero-fret metal nuts, and printed circuit boards instead of traditional wiring, pots and caps. Robot tuners and zero-fret nuts purportedly added player-friendly functionality but players found the tuners fussy and had mixed opinions of the nuts (better once Gibson started making them of titanium instead of brass, but many players still prefer Corian or bone). The circuit boards? They’re widely considered to be a cost-cutting innovation (though I found a forum postfrom 2015 that gives an inside view on the PCBs, indicating they were never intended as money-savers), and plenty of players swap them out for aftermarket “’50s-style” wiring harnesses. To me, introducing innovative features to a tradition-minded customer base means being extremely selective about where, when and how. Almost all of Gibson USA’s 2015 lineup came out with robot tuners and zero-fret nuts, and a corresponding price hike, and the message boards foamed over with grumbling. The company responded by dividing its product lines between “traditional” and “high performance” features, but the cost difference between the two remains out of whack vs. relative perceived value of the two lines. Meanwhile, a much bigger innovation challenge looms: how to replace increasingly scarce and regulated tonewoods with more sustainable, cost-effective materials that deliver the expected look, tone, and feel at a manageable price. No matter what traditionalists say or think, tonewood material sourcing must evolve, and every guitar manufacturer will have to find a new path as well as an effective way to communicate why.
  • Gibson needs to find a bit of marketing leverage from guitarists’ reverence for gear from its golden age. Yes, the Custom Shop makes painstaking reissues of all those storied old ’50s Les Pauls. But what if Gibson also selectively engaged in the used marketplace, expanding its Repair and Restoration unit to buy up a few pieces of vintage gear and carefully restore them for resale? Forget about the 6-figure vintage Bursts and other untouchable museum pieces. But south of that heady price range, we see so many collectible and/or player-grade vintage guitars that just need a little factory-authorized TLC. What a fantastic show-and-tell for the restoration unit, even if it’s only a half dozen axes a year. This initiative would be much smaller than enough to affect the vintage/used marketplace, because that’s not the intention — it’s all about giving a hat-tip to proud tradition while demonstrating subject-matter expertise in repair and restoration.
  • And here’s a total lark: Buy Heritage Guitars but keep that brand distinct, made in the old Gibson Kalamazoo plant. Maybe add a Gibson Custom team there — my understanding is Heritage does not use all the space. This move adds boutique-builder credibility and shows that respect for tradition. (It works only if Heritage sticks close to its, um, heritage, which may be in doubt. And it works only if Heritage either runs at a profit or is close to it; the last thing the new Gibson needs is a margin diluter.)

Insiders might look at my list and dismiss it as hopelessly naive. It might be. I’m on the outside looking in, have never built a guitar from scratch nor run a company that did. I just want to believe Gibson has a bright future, but who knows?

Maybe Gibson can’t change enough to come back strong. Maybe the guitar really is over. In either case, the next CEO will just manage a slow downward spiral. Or maybe those new owners/debt holders will go all Alden on Gibson Guitar. I’d hate to be CEO of that, so I guess it’s off to tour with Jimmy.