This is the case reaction for "How Clinique was Created, and How It Nearly Killed Estée Lauder". If you're listening to this as part of the case sense-making experiment, you're supposed to consume it alongside the Ample Hills Creamery case and the FoodXervices case. Together, they make for a very nice juxtaposition, because those two cases are stories of failure where the business eventually goes bankrupt, whereas this is a story of near failure but ultimate success. Leonard Lauder recovers from near-bankruptcy, learns from his experience launching Clinique, and never makes the same mistake again with any of the brands he subsequently launches or acquires.
If you read this case, you should notice that it's a very rich one with many concepts available to explore: business expansion, counter-positioning, the idea maze — because there's a bit of a search for product-market fit with Clinique — and finally, branding. Obviously branding, because Estée Lauder is built around creating or building strong brands. This comes across very clearly in any of the Estée Lauder cases in the Commoncog Case Library, and it also threads throughout Leonard Lauder's memoir, "The Company I Keep."
To set the stage: why is it necessary for Leonard Lauder to pursue growth? The answer is simple. There's an old saying in business that if 'you're not growing, you're dying'. The nuance, as I've pointed out before in this sequence of cases, is that this is more true if you're in a dynamic, fast-moving industry with lots of competitors, and less true if you're in a more boring, less dynamic industry where you have barriers to entry, or perhaps it's a backwater that nobody wants to enter. Estée Lauder is certainly in a dynamic, fast-moving industry — it's basically adjacent to fashion.
By the time Leonard takes over, and by the time the events of this case roll around, he had noticed that Estée Lauder was starting to age as a brand. Its perfumes, skincare products, and makeup were the kind of thing "your mum used, not you." And there was nothing he could do about that — his mother was still around, she was the face of the brand, and you can't just reposition on the fly, especially when the brand bears your mother's name. His eventual strategy was to create new brands, and later to acquire other skincare brands, so that the entire group stays healthy because each brand appeals to different demographics, and the overall business is protected against obsolescence.
So he pursues growth, and this case documents the very first time he tries to launch a new skincare brand from scratch. It's revealing, because before this, Estée Lauder had grown piecemeal — product by product, product line by product line. At the time of this case, Estée Lauder had only three major product categories: perfume, makeup, and skincare. His mother had grown the brand incrementally since he was a young child. It was never a large bet in the way that Clinique was.
Leonard talks about how he saw this strategy as important to try, and the case documents the mistakes he makes along the way. He is, however, in a very good position to notice when Clinique is about to kill the company. This is actually covered in a different Commoncog case titled "Estée Lauder: Surviving Retail Disruption," but in his memoir and in that other case, Lauder talks about how, when he started at the company, he worked in the back office. That meant he was constantly routing cheques and factory orders, and at night he would take home sales reports from various regions to keep an eye on which products were selling where. As a result, he develops a very good intuition for the company's finances, as well as which products were selling well in which markets.
So when Clinique starts consuming cash at an alarming rate — he mentions in the case that at Christmas he realises they're holding a fraction of the cash they'd normally have in the bank after the Christmas shopping season — he notices the danger and immediately has a strategy at his fingertips, because he understands how the business actually works. His eventual strategy, beyond the obvious step of doing layoffs, is to focus on high-volume sales products — like the Estée Lauder Swiss Performing Extract — to generate the cash needed to support Clinique while they figure out how to make it work. He talks about how if you need to generate a lot of cash quickly, you can't rely solely on high-price, high-margin products, because those don't sell in sufficient volume. Which implies that he had, at his fingertips, exactly which products could be leaned on to tide them over while they got the secondary Clinique production factory online. You might imagine that this was quite a number of stressful, struggling years managing the tension between Clinique and the main brand.
The second thing worth calling out is that reality has a lot of detail. A year after they launch Clinique, Revlon launches a competing hypoallergenic skincare brand, which creates even more problems because they still haven't figured out who Clinique actually appeals to.
One of the key concepts in this case is counter-positioning. It's very clear that Lauder and his team launched Clinique around a well-defined differentiation — the hypoallergenic concept, which was genuinely new at the time. It's also a bit wild that Clinique was the brand that introduced the three-step cleansing programme: cleanse, exfoliate, and then moisturise. This is considered completely normal skincare practice today, which makes it all the more remarkable that Clinique invented it. That's a clear product differentiation right from the gate, and they built the entire product line around this concept. What wasn't clear was who it appealed to — who would buy it? How do you advertise it? Which markets to target? It takes years before they work out that Clinique appeals to pragmatic women in non-fashion-forward cities like in Germany and Canada, whereas Estée Lauder does well in fashion-forward cities like New York or Los Angeles.
To quote from the case: "Clinique for the first time ever, introduced the concept of different skin types and offered different products to care for them. Clinique's beauty advisors would first help the customer discover which skin type they had and then guide them to the Clinique products best suited to said type." But he couldn't link that to a customer segmentation strategy focused on younger women with everyday pragmatism — his own words from later in the case.
Also worth noting: this is a man who would go on to become famous for building and acquiring skincare brands like Jo Malone and La Mer, growing each of them — which takes real skill. But at the point of this case, he's still learning the ropes. Listen to this: "Despite our insistence that Clinique wasn't an Estée Lauder brand, we'd still been thinking of it as an offshoot of Estée Lauder. Now we realise there were two completely different groups of customers who embraced these two lines in completely different ways. It was as if we'd been speaking Finnish to a group of French women. No wonder there was confusion."
It's one thing to say that you're not going to rely on the Estée Lauder brand and that Clinique must stand on its own. But if your company has spent decades only knowing how to grow one brand, the habits and culture that come with that can't be overridden at the snap of a finger. Leonard was not the only one who had to go through this entire learning process. The company had to go through it as well.
He never makes this mistake again. He makes different mistakes, sure — there's another brand he launches after Clinique called Prescriptives, which eventually dies a long, slow death through the eighties and nineties for different reasons. But he never again launches a product line in a way that risks the company going bankrupt, even when acquiring other brands. In many ways, Clinique was his trial by fire.
In a previous case reaction — I think it was the Ample Hills one — I pointed out that most people learn how to manage the financials of a business either from a really good business mentor or through a trial by fire. Leonard Lauder learned through a trial by fire, but I think he was well-positioned to survive that lesson because of how he'd been brought up in the company. He happened to work in the back office, and he happened to be obsessive enough to build a fingertip feel for the finances and sales performance of every product in the business.
At the end of the day, this is a very happy story. But I can totally imagine an alternate universe in which Leonard Lauder doesn't learn the lesson in time and Clinique tanks the company. It's a number of very stressful years — managing the finances, finding cash to support Clinique, simultaneously searching for product-market fit, and then changing the DNA of the company so that each brand lives separately and is grown according to its own distinct logic. All of this eventually allows him to execute his overarching strategy: a constellation of brands that protects the overall business, so the company is never overly dependent on any one brand performing well.
I find this a very inspiring case. I also find it interesting because I don't fully understand how brands are built, or how you construct a business whose competitive advantage is brand. I really like Leonard Lauder's biography, and most of the Estée Lauder cases, because in many ways he not only invents the playbook for prestige skincare brands, he also invents the constellation approach to building a strong business in a fast-moving, trend-driven industry. If you look at all the major skincare companies today, most of them are constellations of brands rather than a single brand. Leonard Lauder was at the forefront of that strategy, and Clinique is where you first see him finding his feet and learning it for the very first time.
This is the case reaction for how Clinique was created and how it nearly killed Estee Lauder. Um, and this case, uh, if you're listening to this, this is part of a business-- an experiment, sorry, uh, in case sense-making. Um, and if you consume it as part of the experiment, you're supposed to consume it alongside the Ample Hills Creamery case, as well as the food services case. And if you do so, that makes for a very nice juxtaposition because those two cases are stories of failures where the business eventually goes bankrupt. But this, uh, story is a story of near failure but ultimate success. Uh, Leonard Lauder recovers from, um, near bankruptcy, uh, and he learns, uh, from his experience launching Clinique, and he never makes the same mistake ever again with any of the other brands that he launches or the other brands that he acquires. And if you read this case, however, you should notice that it's a very rich case with many other concepts. So the number of concepts that are available here include business expansion, um, counter-positioning, the idea maze, because there's a bit of a, uh, search for product market fit with Clinique, um, and finally branding. Ob-obviously branding because, uh, Estee Lauder is, is, is built around, uh, constructing and creating, uh, strong brands, uh, which is something that comes very, uh, comes across very clearly in any of the cases about Estee Lauder, really, in the Common Court Case Library, but it also treads throughout, um, Leonard Lauder's memoirs, "The Company I Keep." Um, but just to set the stage here, so I'm, I'm gonna talk about each of these concepts, but to set the stage here, why is it necessary that, uh, Leonard Lauder, uh, pursues growth? And the answer is simple, right? There's this old saying in business that if you're not growing, you're dying. Uh, but of course, the, the nuance there, uh, as I've pointed out before, uh, in, in this sequence of cases, um, that it's more true if you are in a dynamic, fast-moving, uh, industry with lots of competitors. Uh, it's less true if you're in a more boring, less dynamic industry where, uh, you have a barrier to entry or perhaps it's a boring, uh, uh, backwater of a business that nobody wants to enter. And it's certainly the case that Estee Lauder is in a dynamic, fast-moving industry, right? It's, it's basically adjacent to fashion. Um, by the time Leonard takes over and by the time of the events of this case rolls around, Leonard had noticed that Estee Lauder was starting to age as a brand, right? Uh, uh, it's the perfumes and skincare products and makeup products of Estee Lauder was the kind of product that your mom used, not you used. And there was nothing he could do about that, right? Estee Lauder, his mom was still around. Uh, she, she was the face of the brand. You can't just reposition on the fly, especially if your mother's still around and the brand is her name, for goodness sakes. Um, but his strategy eventually is to, uh, uh, s- create new brands or, and eventually acquire other skincare brands so that the entire group is healthy because each brand appeals to different demographics, and overall, the business is protected against, uh, abolitions. So, uh, he pursues growth, and you can sort of see that this is the very first time that he's tried to launch a new skincare brand from scratch, and it's revealing in the case, right? Because before this, Estee Lauder had grown, uh, uh, s- piecemeal, product by product, um, uh, product line by product line. At the time of this case, Estee Lauder had only three major product categories: perfume, uh, makeup, which is the original product line, and skincare. Um, and, uh, his mother had grown Estee Lauder, uh, the brand, um, when he, since when he was a young child, and they had grown step by step, so it was n- it was all very incremental. It was never sort of, uh, a large bet the way that they were making with Clinique. Um, and in this particular, uh, uh, case, right, uh, Leonard sort of talks about how, um, he sees that this strategy is important to try, um, and he, and, and the, the case documents the mistakes he makes. But he's actually in a very good position to notice that he's about to die from Clinique. Um, it's not in this case. It's, in fact, it's in a different Common Court case titled, um, Estee Lauder Surviving Retail Disruption. Um, but in his memoirs and in that other case, uh, Lauder talks about how when he started at the company, he worked the back room and, uh, the back, the back office operations of the business meant that he was constantly routing checks, uh, and he was constantly, uh, routing, um, factory orders. And at, at night, he would take home, home sales reports from various, uh, regions, v-various sales regions of the company, um, to keep an eye on what products were selling in which region. And as a result, right, he develops this very good intuition for the finances of the company, but also which products were selling well in which markets. And so when Clinique starts consuming so much cash, and, you know, he's, he sort of, he mentions in the case that at Christmas, he realizes that, "Oh, you know, we're, we're in trouble here. We're, you know, at a, we're a tenth of, uh, the, uh, a fraction of the cash that we normally have in the bank account during the Christmas shopping season. We're gonna be in trouble." Um, he notices and immediately has a strategy at his fingertips because he understands how the business actually works. He has a, he, he has a strategy at his fingertips for how to fix it. Of cour- his eventual strategy, I mean, uh, first of all, is doing layoffs, but any, you know, any idiot can do layoffs. But the way that he generates cash to support Clinique as they're trying to figure out how to get Clinique to work is that he focuses on high volume sales products, which is the Estee Lauder Swiss Performing Ex-Extract, umHe talks about how, uh, if you need to generate cash a lot, you can't just rely on incredibly high price, high margin products because those don't sell as well. So he had at the t- uh, you know, at, at the tip of his fingers, um, which products could be used and could be leaned on to generate cash to tide them over, uh, while they get the Clinique factory, the secondary production factory online. Um, so that's a n- quite, quite a number of years where they are stressful and struggling, uh, between Clinique and the main brand. Um, the second thing I want to call out here is that, uh, reality, you know, reality has a lot of detail. Uh, a year later after they launch Clinique, Revlon launches a competitor, um, the, uh, another hypoallergenic, uh, skincare brand, and he has... And this produces even more problems for the brand because they haven't figured out, uh, who Clinique appeals to. Um, so one of the concepts in this case is counter-positioning. It's very clear that Lauder and team, and his team launched Clinique around a very clear differentiation, uh, the hypoallergenic concept, which at the time was new. I think it's also a bit wild that Clinique was the skincare brand that introduced the three-step cleaning program, which is, uh, you cleanse your face and then, uh, which is exfoliate, and then you, um, you, uh, put on a toner, and then you rehydrate. Uh, it, it's very wild because this is sort of considered, uh, normal practice today with skincare, uh, but it's, it's pretty crazy that this was the brand that introduced, uh, the three-step system of, uh, skincare. Um, so cleaning, moisture, exfoliating, and moisturizing. Ah, goodness. So that, that is a clear product differentiation right from the gate, right? And they clearly built this entire product line around this concept. But it was not clear who to, who this appealed to. It was not clear who would buy this, how you advertise it, in what markets should you target, and it takes years until they figure out that, oh, okay, uh, Clinique is actually, uh, appealing to pragmatic women in non-fashion-forward cities, whereas Estée Lauder does well in fashion-forward cities like New York or LA. Um, Clinique is more pragmatic, so it does well in Germany and Canada. Um, and you know, uh, I, I, I'm gonna quote from the case here, right? Like, "For the first time, uh, ever introduced the concept of different skin types and offered different products to care for them. Um, Clinique's beauty advisors would first help the customer discover which skin type they had and then guide them to the Clinique products best suited to said type." But they-- he couldn't then link that to a, uh, uh, customer segmentation strategy that focused on, um, uh, uh, uh, younger women with everyday pragmatism. That these are his words that, you know, later on in the case. Um, also notice in the middle of the case, you know, this is a man that is famous for building a skincare brand and acquiring many skincare products, uh, skincare brands like, you know, Jo Malone or La Mer, and growing these brands. So he has real, real skill in brand creation and brand growth, right? But at the point of Clinique, at the events of this case, he's still learning the ropes, right? Listen to this, right? "Despite our insistence that Clinique wasn't an Estée Lauder brand, we'd still been thinking of it as an offshoot of Estée Lauder. Now we realize, uh, there were two completely different groups of customers who embrace these two lines in completely different ways. It was as if we'd been speaking Finnish to a group of French women. No wonder there was confusion." And so it's one thing to, uh, say that, "Oh, you know, we're, we're not going to rely on the Estée Lauder brand at all, and this is a new brand that has to stand on its own." But in, in execution, if your company has been around for decades and it's only known, uh, how to grow the Estée Lauder brand, these are habits and, and, um, which, which we'll call it culture, uh, in the company that you can't easily override at a snap of a finger. So Leonard not only has to go through this learning process, but the company has to go through this learning process as well. Um, so, uh, he couldn't actually rely on any of the benefits of the main Estée Lauder brand, but... And he says this, right? But it's one thing to know this, to say this, and it's another thing to actually internalize this and execute on it. And Clinique is where you sort of see him learn this. Uh, so he never makes this mistake again, right? He, he makes different mistakes, sure. There's, uh, another brand that he launches after Clinique called Prescriptives, and Prescriptives eventually dies a long, slow death over the '80s and the '90s for different reasons. But he never makes the mistake of launching, um, a, a, a product line and risking the company going bankrupt, even when he acquires other, other brands. Um, so in many ways, Clinique was the trial by fire. Uh, in a previous case, I think it was the Ample Hills case, I sort of pointed out that most people learn how to manage the financials of the business, and they have processes and mechanisms to keep track of how well they're doing financially and the financial impacts of their decisions, right? And they learn this either from a business mentor who's really good, um, or they learn this through a trial by fire. And, uh, uh, Leonard Lauder learned this through a trial by fire, but I think he had a good shot of learning this lesson because of the way that he was brought up in the company. He just so happened to work in the back office, and it just so happened he was obsessive enough to build this fingertip feel for the finances and the sales performance of various products in the company. Um, so, you know, at the end of the day, this is a very happy story. Um, but, uh, y- I can totally imagine an alternate universe in which Leonard Lauder doesn't learn this lesson in time and Clinique tanks the company. Uh, it's a number of very stressful years as he's managing the finances, making, finding cash to support Clinique, while at the same time figuring out the product market fit for Clinique, which isn't very clear, uh, at the time, right? And then eventually changing the DNA of the company such that he understands that, oh, A, these brands must live separately, and we have to figure out, like, how to grow these brands. S- uh, intru- each of them requires different approaches to grow the brand. And this then allows him to execute his, uh, overarching strategy of having a constellation of brands that can protect, um, the overall business of the company, where they're not overly dependent on any one brand doing well. Um, so yeah, I, I find this a very inspiring case. I find it also very interesting because I don't fully understand how brands are built, and I don't fully understand how you build a, uh, company where your competitive advantage is brand. Um, and I really like, uh, Leonard Lauder's, um, biography, and I like most of the cases actually, uh, uh, around Estée Lauder, um, because he, in many ways, not only invents the playbook for these prestige skincare brands, he also invents the constellation approach to, uh, um, um, building a, a good business in a fast fashion, well, fast-moving, more d- dynamic industry, right, that has fads and trends. Uh, and if you look at all the major skincare brands today, most of them are conglomerate styles, right? Constellations of brands, not just one brand. And I think Leonard Lauder was at the forefront of this strategy. So I find this very cool, and I think Clinique is a good example of, uh, this person finding his feet and learning these strategies, uh, f- for the first time.