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So YouLike Leather?
An Interview with Lew Frankfort,
Chairman and Chief Executive Officer, Coach, Inc., New YorkCOMPANY BRIEF Founded in 1941 andbased in New York, Coach, Inc., is a leading marketer of modern, classic American accessories. With more than 200
Coach stores within the United States andan additional 200 outlets in 18 countries
worldwide, it reported sales of $616 million and net income of $64 million forfor the fiscal year ended June 30, 2001.
Coach operates in the competitivemarketplace of high-end, luxury
brands. What makes it unique?
We have several points of differentiation. First, Coach is truly an American
brand. We were born in New York City,
and we just celebrated our 60th birthday.
Coach products are inspired by the uniqueenergy of New York and are rooted inauthentic, natural materials, making them
immediately recognizable. A second pointof difference is our extremely strong andloyal consumer franchise that has been
built up over generations as a result of our
focus on building lasting relationships. We
continue to attract an increasing
number of new consumers to
the franchise while providing
existing ones with new reasons
to purchase. We see
our consumers
embracing theworld of Coachacross all pricepoints. They trust
Coach and recognize the quality,
durability, function,and value that our
products offer. Third, weare a broad, international,
multichannel business; our products areavailable in our own stores, in catalogs, on
our Web site, and in department stores.
Lastly, Coach is able to offer accessible luxury products with strong intrinsic value.
While the materials we use are the finest in
the world, coming from excellent tanneries and fine Italian mills, we are able toprovide consumers with exceptional value.
Our stylish products are today’s fashionand tomorrow’s classic.
Do you see your product lines

Lew Frankfort

EDITORS’ NOTE A “hands-on, knowledgeable, demanding” leader, Coach Chairman and Chief Executive Officer Lew
Frankfort is well aware of the recipe forsuccess in the high-end accessories market. In his opinion, Coach owes its “leading market share” in “handbags andwomen’s small leather goods” to “a strong
blend of magic and logic – combining thetouch and feel of Coach with rigorous
analysis and planning.” Further, the combination of “a staff with strong humanvalues and high integrity,” products madefrom the “best materials” in the world,
and a “strong and loyal consumer franchise” (made up largely of repeat customers) has helped make Coach a true
American success story. For, at once nostalgic and modern, “Coach products are
inspired by the unique energy of New
York,” Frankfort reports, which makes
them “immediately recognizable” and,above all, “quintessentially American.”A graduate of Hunter College andholder of an M.B.A. in marketing from
Columbia University, Frankfort began
his career in New York City government,
most notably serving as commissioner ofthe Agency for Child Development in the
mid-’70s. He joined Coach in 1979 as vicepresident of new business development.
He was appointed president in 1985, andhe was then named chairman and CEO
in 1995.
April, May, June 2002 • Volume 25, Number 2

remaining consistent, or do you see
growth in new areas?
Over 60 percent of our businesscomes from handbags and women’s smallleather goods, an area in which we havethe leading market share in the UnitedStates. We also have a growing presencewith Japanese consumers. We see handbags and women’s small leather goods
continuing to drive our business, sinceconsumers of these products are particularly loyal to brands. At the same time, we
expect to see growth from other accessory categories and diversification into
additional areas as well.
Does Coach have any plans to diversify into other products like jewelry or watches?
Our primary focus will continue to beon modern, classic American accessories
because of our inherent brand strengths
and leadership position. Even if we venture into broader markets in the coming
years, Coach will continue to be known
first and foremost for our accessories.
Consumers have given us the backing
to venture into other areas, such as
watches and jewelry, but we do so cautiously. We have repositioned our company to be a lifestyle accessories brand, so
to speak. As such,
we offer fine gifts
and accessories thatcomplement people’s
diverse lifestyles. You
will not see Coach trying
to dictate our consumers’
lifestyles; instead, we will continue to be a brand that complements people’s individuality.
Have corporate sales been a major focus for Coach?
We have many different focus areas.
However, we’re a consumer-driven brand,so we spend a lot of energy analyzing who
our target consumers are and how we canmeet their needs and wants. Once we dothat, we then look at how and where they
spend. As a result, we’ve developed a corporate business, and we’re pleased withits dimensions. Though modest, it continues to grow and offers a great deal of

Copyright © 2002

Magazine. Reprinted with permission.

potential, as a gift from Coach is wellappreciated by the recipient.
Will there be an increase in
Coach boutiques, or do you see consistency in your distribution?
Today, company-owned Coach retailand factory stores in the United States
represent about 60 percent of our sales.
We are rapidly growing the number of our
U.S. retail stores, in both the cluster markets and new markets. In fact, we expect
to double the number of retail stores overthe next four to five years. The Japanese
consumer is also a significant growth
opportunity for Coach. We’re accelerating
new store openings and enjoying substantial increases in same-store sales
quarter after quarter. Today, weare the fifth-largest imported
brand in Japan, and as aresult of our recently
formed joint venture,
we are looking to double sales in Japan within the next three years.
U.S. department storesalso continue to be avery important part ofour business.
So is Japan yourkey focus for international growth?
The Japanese consumer spends nearly 50 percent of the world’s luxury accessory dollars. Our strategy is to market to theJapanese consumer wherever she chooses
to shop. As a result, we have followed her
through east Asia and to Australia as well.
How do you define the target
Coach customer?
Our target female consumer is college educated and self-assured. She values
products that are well made and classic instyle, yet fashionable at the same time. She
likes accessories that complement her
wardrobe but do not overwhelm her. On
average, she has a household income of$100,000, and her male counterpart earns$125,000 or more and also tends to be welleducated, self-assured, and is looking foraccessories to complement him as well. In
America this translates to the top 20 percent of households, while in Japan we target the top 50 percent.
Coach’s fine reputation is built
largely on the skill and attentivenessof the craftsmen who produce youraccessories. How much of a role does
technology play in production?
Virtually none. There’s no substitutefor the skilled hands of a craftsperson or
the trained eyes of a leather cutter. We
Leather cell-phone case with strap and hidden magnetic
closure (opposite page, top); handwoven straw bag withcalfskin trim, signature jacquard lining, and brass feet
(opposite page, bottom); rugby-striped duffle sac withlightweight leather, adjustable strap and signature lining(above); Legacy canvas field bag with lightweight leather
accents and cotton-twill lining (right)

have extensive quality-control standards,
which extend to both the leather and fabric from the tanneries and mills, as well as
to the finished product from the factories
we use. These standards ensure that we
make only the finest products from thebest materials.
In view of the current economic
climate, are you optimistic for shortterm growth?
Despite a challenging environment,
Coach continues to enjoy strong sales,
which reflect the cumulative impact ofseveral years of efforts to rejuvenate thebrand through fashion innovation, updating our retail environment, sharpening
our assortment, and strengthening
our merchandising, presentation,
and advertising. As I mentioned,
we have a very broad and very
diverse consumer base, andwe have the capabilities toreach consumers across many
geographies and through varied channels. This allows us
to modulate our marketingstrategies while taking into
account the fluidity of the marketplace. We had a strong firsthalf of fiscal 2002, and we’re optimistic that we will continue togrow and achieve our objectives.
In the retail sector, employees tend to move rapidly fromcompany to company. Have you
been happy with Coach’s ability to attract talented employees who understand your products?
We have been fortunate in that people enjoy working with Coach, and they
believe in our product. They understandthat their role is to build lasting relationships, not to sell individual products. Our
recruitment approach is unique. We frequently recruit among teaching populations and social workers because we want astaff with strong human values and highintegrity. On average, we find that we’reable to attract a different person than one
typically associates with retail. We have avery strong team, which I’m extremely
proud of.
How do you think Coach’s corporate-level employees and senior
executives would describe your approach to work?
I think they would say I am hands-on,
knowledgeable, demanding, and that I
maintain extremely high standards. I
expect the same level of commitment
from my senior executives as I have tothis business. I like to think I inspire
pride in the Coach brand. I believe in astrong blend of magic and logic – combining the touch and feel of Coach withrigorous analysis and planning.
We don’t take a formulaic approach to business, although we work
hard to develop strategies
that are programmatic and that

April, May, June 2002 • Volume 25, Number 2

have a high level of predictability. In thisway we can help ensure enhanced consumer value and the highest possible
shareholder return.
Coach’s global market is active
virtually 24 hours a day, seven days aweek. Are you ever able to get awayfrom the business?
Occasionally, for 24 to 48 hours, but
not much more than that. Just recently,
one of my top people said he didn’t receive a voice mail or e-mail from me on
Sunday and that he was concerned something was wrong. I had actually gone 22
whole hours without listening to voice
mail. Work is a way of life when you run a
dynamic business. Because of the need torespond to ever-increasing, rapid changes,
you need to be in touch.
You seem very calm and relaxed,though. Is that your nature?
No, not typically. I’m actually fairly
wired.
Looking to the near future, what
do you see as the key challenge for
Coach?
We have a set of proven strategies,
which we continually fine-tune to meetchanging marketplace conditions. We’reextremely pleased that we’re able to continue to grow the business materially,
despite the decline in tourism since
September 11. Over the next months, wewill go on focusing on our tactical marketing initiatives, so that we can continue torealize the profitable growth that we’reenjoying, while maintaining the robust
programs we have to achieve sustainablelong-term growth.
How would you describe the
Coach philosophy?
As America’s leading lifestyle accessories brand, our philosophy is to continue to offer accessible luxury products
to our consumers worldwide. We have avery strong consumer focus, and we work
hard to anticipate what our consumers
want. With Coach, what you see is what
you get. There’s no smoke and mirrors,
and our consumers respect that. Our
founder had a vision of offering consumers a quality product that was madeout of supple, rich materials. We continue
to express that view in our products andthrough our culture. The attitude of our
product is quintessentially American.

•

Copyright © 2002

Magazine. Reprinted with permission.

Four-page sample (special reprint cover, two-page interview, special back cover)i n t e r v i e w

JANUARY, FEBRUARY,MARCH 2002

The Next Waveof Productivity

VOLUME 25, NUMBER 1

An Interview with Solomon D. Trujillo, Chairman,
President, and Chief Executive Officer, Graviton, Inc., La Jolla, California
both undergraduate and graduate degrees in business from the University of
Wyoming, he serves on the boards of PepsiCo, Target Corporation, Orange S.A.,
and Comstellar Technologies.

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Solomon D. Trujillo

EDITORS’ NOTE There are reasons why,“at most businesses today, only a small
percentage of the assets generally getmonitored and controlled,” explains
Chairman, President, and Chief Executive Officer Solomon Trujillo. “The technology hasn’t realistically allowed it,”perhaps “the physics of doing so have precluded this as an option,” and then there
are the “substantial” – even prohibitive –costs involved. But Graviton is changing
all that by providing the technologies andknowledge necessary for “monitoring
and controlling” the assets of “any business that has equipment, processes, andpeople operating its systems” – and it is“leveraging the Internet as part of theprocess,” thereby enabling any businessto lower its operating costs. Trujillo further reveals that, even though “the wholefinancial marketplace has been in afunk for 18 months,” his company’s “terrific business model” has been attracting“even more money than originallyplanned” from investors. But “the reason
for that is simple,” he logically suggests:“If you have lots of assets around theworld, you want to be able to monitor
and control them” to continually improve profitability.
Previously chairman, president,
and chief executive officer of U S West,
Trujillo spent 26 years with that company
and its predecessor, Mountain Bell. With

COMPANY BRIEF Founded in 1999 andbased in La Jolla, California, Graviton,
Inc., provides information-management
solutions in many vertical markets
through wireless, self-organizing sensor
networks. It is able to take generated
data from any system – through either its
own sensors or others’ – and supply critical information back to customers inwhatever format suits them. With investors that include Siemens, Sun Microsystems, Qualcomm, Omron, Mitsui,
Motorola, Royal Dutch/Shell, Merrill
Lynch, Global Crossing, and its primaryventure-capital group, Kleiner Perkins
Caufield & Byers, the company is privately held.
What kinds of products and services
does Graviton offer? And what about
those products and services excited
you enough to join the company?
I was at the point in my life when –despite all the calls from headhunters – I
fully intended to take it easy: serve onsome boards and do some other things.
During this time this small company,
Kleiner Perkins, called me several times,
saying they had a big idea about marrying
sensor technology, wireless technology,
and new Web services-based technologies
to deliver what we might call, within aclassic context, “monitoring and control
solutions” to businesses. However, theywanted to change the paradigm by which
that’s done.
So, Graviton is not just about monitoring and controlling solutions, but delivering those solutions in new ways thatprovide greater functionality at much
lower costs. At most businesses today,
only a small percentage of the assets generally get monitored and controlled, andthose tend to be only the very expensive,very highly valued assets. The reason why
the remaining assets aren’t monitored andcontrolled is the substantial cost of doing

January, February, March 2002 • Volume 25, Number 1

so. The technology hasn’t realisticallyallowed it, or in some cases, the physics of
doing so have precluded this as an option.
Graviton is breaking those archetypes:
We’re deploying integrated, highly scalable systems that include new technologies in sensors, wireless data communications, systems networking, and distributed
software applications to enable a newmodel, leveraging the Internet as part ofthe process.
Are you doing this for businessesof all sizes?
No, today we work primarily withlarger businesses because, obviously, theeconomics, delivery, and solutions aremuch better with larger entities. But ultimately, we’ll be working across all
businesses. Any companies that want
to improve the productivity of their businesses, take costs out of operations, andimprove their customer relationships will
be targets for us.
Do you see your offerings crossing all industries?
Absolutely. Graviton’s solutions apply
to virtually any business that has equipment, processes, and people operating its
systems. Every business wants to monitor
and control those elements because, ifthey do, they can manage costs, quality,and productivity much more effectively.
And the people who previously tried to do
all of those things themselves can spend
their time doing meaningful work, as
opposed to more tedious, boring kinds ofthings. They can leave those to us.
Are you satisfied with Graviton’sbrand-name awareness to date?
Graviton is at an interesting point in
its life cycle right now, in the sense thatthe company essentially has no brandawareness. It’s my job – and that of ourpeople – to establish a brand for this newcompany. We’re at the stage where, in
essence, we get to write the book. And myintention is to write it within a relatively
short period of time, as opposed to the
15-to-20-year period that many wellknown companies have required. My
objective is to build a brand for Graviton
within the next five years and make it ahousehold name within the business envi-

Copyright © 2002

Magazine. Reprinted with permission.

ronment. We have applications and services that should enhance our brandawareness because they’re relevant to virtually any business that operates systems
today.
With so many players out there
today, how do you define whatmakes the company different?
There are several things that differentiate us. First, keep in mind that we’re
about helping companies change the way
they operate. We can help them move to amuch more productive and cost-effectivemodel. And we do it several ways. For
example, we provide multiple monitoring
and control services for customers on acommon platform, as opposed to the fragmented, single application solutions thatmost other providers offer. Through our
distributed software applications, wetranslate raw data into very crisp, usable
operating information that customers canintegrate into their decision-support systems. Companies don’t need more data;
they need distilled information that helps
them improve efficiency and reduce operating costs. That’s what we provide. There
are lots of things that differentiate us,
including our lower costs, the robustness
and greater functionality of our solutions,
our ability to help companies move fromreactive to proactive business operations
like predictive maintenance, and our ability to help them improve their supplychain management. Rounding out all of
this is a first-class management team and astellar group of investors.
Is the CEO generally involved in
the decision to bring in Graviton?
I’d call it a real top-down, bottom-up
approach. Fortunately, given my priorbusiness experience, I know lots of senior
executives in various industries all over
the world. CEOs are always looking forways to take costs out of their businesses
and to improve productivity and customer
service. But sometimes they aren’t awareof what technology can enable them to
do. And unfortunately, with what happened on September 11, security has
become another issue. Monitoring yourassets remotely has become even more
important. So if a CEO can grasp what’s
now possible versus what formerly wasn’t
possible because of physical and technological limitations, there’s a good chance
we’ll be brought in. At the same time,
though, the people who operate theassets and make the day-to-day operating
decisions need to understand what weoffer as well.
From a geographic point of view,is the U.S. market your primary
focus?
We’re focusing the majority of ourefforts on the U.S. market, but the kindsof customers we’re targeting are global
companies. The reason for that is simple:
If you have lots of assets around theworld, you want to be able to monitor andcontrol them. I think of beverage compaCopyright © 2002

nies and how their fountain products
often taste different from country to country. The reason for that is that their technology hasn’t enabled a flow valve toensure consistent brand quality. But that’s
precisely the kind of thing that our technology can do. And at the fountain level, if
you’re a soft-drink provider, you can now
monitor your delivery systems in New
York, London, or Tokyo. You can alsomeasure volume, which goes back to supply-chain management for the manufacturer, because if one store is selling the
product at a faster rate, you’ll know it inreal time. There are so many kinds of costbenefits that can be gleaned from what
we’re trying to do in the marketplace.
You’re also taking out a tremendous amount of waste for companies.
Absolutely. If you think about mostbusinesses today in consumable productenvironments, most of them load and dispatch based on traditional routes andschedules. However, if I operate my delivery schedules and amounts based on how
inventory is consumed, my supplier canmore accurately and effectively manage
inventory. I can literally do real-timeinventory production, delivery, or almost
anything else if I have the necessary information and access to that information.
That’s the capability we’re building anddeploying.
What’s the rationale behind yourcorporate partnerships? How are theyhelping to further your business?
One of the things we’re trying to do
is build a business model that will enable
us to scale and grow very rapidly. We havethe technology and intellectual property,
and we have the people to help drive it.
However, to build a far-reaching business,
we need some very well-known technology partners to help us build some of thiseven faster. We may have 20 engineers,
for instance, but we’d like to take advantage of, say, the 2,000 engineers at Motorola to deploy some of the ideas wehave. And that’s essentially what we’re
doing. We have a very strong partnershipright now with Motorola to develop our
next-generation radio for low-data-rate
sensor applications. With that, we’ll beable to monitor and send information at avery low cost from all the billions of devices out there.
Many executives talk about thechallenges of financing in today’ssluggish economy, but Graviton has
been able to raise the funds it needs.
How much of a challenge has thatbeen for you?
When I joined Graviton last January,
those who were recruiting me said that it
wouldn’t be that difficult to raise money.
Unfortunately, the whole financial marketplace has been in a funk for 18 months, andraising money has been difficult for everybody. Fortunately, we’ve been able to raiseeven more money than originally planned.
Especially at start-up companies,

Magazine. Reprinted with permission.

the employees are a key element ofgrowing the business. Have you been
happy with Graviton’s ability to attract talent?
I’ve been very happy. Kleiner Perkins
Caufield & Byers was one of the principal
initial investors in Graviton, and Brook
Byers, one of the principals there, personally recruited me. Part of what we talked
about from the very beginning was thefact that this business needed talent. They
believed that, if I came aboard, I could
attract other talent, even given today’s difficult marketplace. In the past it was stock
options and all kinds of extras, but that
era has gone. Now it comes back to fundamentals – leadership, a good businessmodel, etc. – and I truly believe that I’ve
been able to recruit a world-class team.
The management team I have here could
easily run almost any big company. I havepeople from GE, Honeywell, Allied Signal,
AT&T, Hewlett-Packard – all kinds of companies. It’s an interesting mix of people,
but they’re all very talented. They know
how to come up with innovative newideas, and they know how to generatecash flow and serve customers.
CEOs today in all industries
seem to be as large a part of the company as the brand. Is that the case atGraviton?
That can happen, but it’s not my intention for this company to be so closely
tied to me, which is why we recruit worldclass talent. Over time, people will understand that my objective is to build a business that isn’t dependent on one person.
It shouldn’t matter who’s at the helm. Any
CEO who’s worth his salt needs to thinkof his company in terms of, when hewalks away from it, its getting even better,
faster, and stronger than before.
Is the Internet strictly an informational tool for Graviton, or will
you actually be conducting businessover the Net?
For our business the Internet is a key
part of our solution. It’s part of the value
proposition we’re going to offer customers. We’re not looking to create big
new investment costs for our customers.
In the old environment, those of us who
operated big businesses had to invest in
new hardware and new software, whichcost millions of dollars to deploy. We’retalking about leveraging the Internet as away to access your information and thendistribute that information with all theproper security measures. The Internet isa major tool for us, enabling us to lower
the traditional costs of monitoring andcontrolling.
It sounds as though you expect
to change the way companies andpeople live and work.
That’s the objective we’ll be pursuingover the next five or 10 years. It’s a big
one, but we have a lot of talented people,
a lot of great intellectual property, and aterrific business model.

Graviton, Inc.
9820 Towne Centre Drive
San Diego, CA 92121
Tel: (858) 646-0774
Fax: (858) 646-0775
www.graviton.com•

January, February, March 2002 • Volume 25, Number 1

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