In 2006, Blake Mycoskie first learned of the Alpargata shoe worn in Argentina since the 14th century. Inspired by its story, he created his first product – a commercial variation of the rope-soled, canvas-topped original.
According to Mycoskie, “business and philanthropy are no longer mutually exclusive… There are no formulas or percentages… You buy something today and help someone tomorrow”; and because Mycoskie visibly executed this initial mission statement, a sufficient amount of investors scaled his business model thus expanding the reach of his vision and venture.
TOMS Corporate Social Responsibility
Philanthrocapitalism, as pioneered by TOMS, gives more than just shoes. TOMS has also sponsored initiatives to provide clean water in six countries, community-based eye-care programs (and eyeglasses), improved medical treatments and surgeries, enhanced childbirth services, and several anti-bullying campaigns.
According to Mycoskie, TOMS’ overarching mission to use business to improve lives is its competitive advantage. Additionally, Mycoskie sought a way to use business as a means to transcend traditional philanthropic models and trends (i.e., identify a cause and initiate a perpetual hunt for donors); so he pioneered the One for One concept – sell a pair of shoes today; give a pair of shoes TOMorrow, hence TOMS.
TOMS’ mass appeal and major ad campaign integration (e.g., Microsoft & AOL) allowed the company to abandon traditional ad spend for social media “marketing” – relying on their 5 million-plus social media followers to generate word-of-mouth or “buzz”; thus, by 2011 one third of their revenue sourced from direct business-to-consumer sales via the TOMS website.
TOMS 1st Fall
Mycoskie, a former philosophy and business major, is a natural rulebreaker who considers Platonic, Socratic, and Kierkegaardian existentialism in his personal and professional development:
“When you don’t know the rules, you break them all… It’s hard to take big risks when you know the history of an industry and what has worked and what didn’t.”
In breaking many “rules” of business, Mycoskie ultimately began to create them which led to several unprojected challenges.
By 2011, TOMS had given away its millionth pair of shoes, yet had deterred from its founding mission. The company had focused so much on scaling that it lost sight of its original vision – to improve lives. Unfortunately, TOMS got greedy and hired people who were not personally invested in its mission. This led to the departure of its founding members and a deterioration of TOMS’ purpose-driven culture.
Mycoskie subsequently stepped away to contemplate himself and the future direction of TOMS. He was humble enough to seek counsel from other business leaders and soon realized that TOMS was no different from any other corporation – it was a product-focused, profit-driven enterprise.
TOMS Resurrection (& 2nd Fall)
Reminded of his purpose by Westrock Coffee, Mycoskie re-booted the TOMS One-For-One model in the coffee industry. Unfortunately, Mycoskie did not have a plan in place and realized that branding and marketing was not his forte. However, in spite of his initial missteps, TOMS’ existing brand strength granted the coffee venture market success; which led to an equity partnership with Bain Capital in 2014.
By 2017, TOMS’ bond credit rating was downgraded by Moody’s Investors Service due to weakened footwear and apparel industry conditions. Moody’s analysts indicate TOMS’ biggest mistake was its inability to stylistically evolve – the Alpargata generates half of TOMS’ revenue and 96% of sales derive from footwear overall. Meanwhile, S&P Global Ratings analyst Diane Shand considers TOMS a “one product company.”
TOMS’ initial misstep was Blake Mycoskie’s insincere intentions. In 2012 he wrote that his original aim was to become a “rock-star” business leader or “cult CEO.” The idea of a company is not to develop cults of personality, but products and services; so Mycoskie essentially set the company upon a deteriorating course of debt.
Secondly, selling half of his shares to Bain Capital has not helped Mycoskie get TOMS back on track. If anything, it intensified competition as imitators like Payless & Skechers continue to scale cheaper products through the market TOMS created, thus pushing the TOMS business model toward irrelevancy.
Thirdly, TOMS went wrong by manufacturing shoes in China. Mycoskie should have remained true to the heritage of the Alpargata, and exclusively manufactured TOMS shoe products in Argentina. The soul of a product (and business) is the hands from which it stems; so by betraying centuries of Argentinean heritage for foreign gain, Mycoskie proved he was not a responsible steward of Argentinean heritage.
TOMS has run its course. Most of the young idealists who helped shape TOMS identity have moved on to other ventures, while Mycoskie has continued to develop the TOMS mission through his social entrepreneurship fund. The dream of one man’s youth has grown up (and out).