Matt Wilson: When you started Hurley you were 26. Can you tell us a story from the early days living the surf entrepreneur lifestyle?
Joe K: 1980, 26 years old, happily married with Cindy and our young son Joel, teaching Junior High 4 years, waiting tables, exporting surfboards to Japan and managing Hurley Surfboards. And, I was still able to surf just about every day; albeit in an exhausted state. Fast forward 4 more years, now we have a daughter; an ex-hoarder’s home we bought in Costa Mesa, CA — and out of many, many prospective candidates approaching Gordon & Rena Merchant (founder and owners of Billabong in Australia) — we picked up the license for Billabong USA.
All the partners were approximately the same age; and we all were doing what we needed to do to provide for our families. Bob Hurley was shaping boards under his own label, Hurley Surfboards – which I was exporting to Japan; also for Wind-an-Sea and Lightning Bolt; Mike Ochsner was a senior cost accountant at Hughes Aircraft, Bob Rowland a pastor at Calvary Chapel Huntington Beach…. and Billabong USA was starting to really catch fire.
My main focus was product. Many days I’d be running out of my classroom at 3PM in south Orange County along with my students; jump in my little 1300cc Blue Honda Civic hatchback; blast up to downtown LA to push and shove my sewing contractors and load the back of my car up with boardshorts, jackets, walkshorts, whatever I had in production at the time. I was the first partner to quit all my jobs and focus on Billabong USA.
The day before one of my first of many trips to Australia; I picked up a load of 2,000 walkshorts; the snaps were not set properly and I had to drill through the posts, remove the snaps and take them all up the sewing contractor for repair, jumped on the plane; slept, got off the plane; surfed Burleigh Heads, met up for dinner with the Billabong crew at the owner’s home down the way from Burleigh; famous pro surfers Occy and Pottz were there, take away Chinese food was ordered, and I promptly passed out; face forward into my plate of food. Embarrassing…
MW: In the early days, what was the biggest challenge building Hurley into a sustainable business?
Joe K: In 1998, we notified Billabong that after 15 years we were not going to renew the USA license agreement due to business and creative differences. All our employees stayed with us. However, sales reps were outside independent contractors. The sales reps all pretty much elected to stay with Billabong. We had to hire new sales people; this was a huge challenge. We (Billabong & Hurley) agreed to a one year transition in 199 where our Costa Mesa team would do double duty and run both businesses. This was extremely tricky and essentially doubled our workload; but we had a wonderfully committed and talented crew of approximately 150 employees; and by the grace of God we pulled it off.
Another big challenge was from a business planning vantage – how to budget for year one at Hurley International? We created three 1999 budgets, worse case ($5M in revenue); mid ($9M) and best case ($15M). In 1998, we were at $70M in annual revenue with Billabong. Stating the obvious, all plans had attendant staff reductions and radical expense cutting. Again, by the grace of God, our first year of Hurley saw $25M in revenue with no staff reductions or radical expense cutting; and we were off and running…
MW: Hurley went from surfboards to licensing the Australian surf brand Billabong. How did you know you could build this new business arm successfully?
Joe K: We certainly did not know we could build this new business arm successfully. What we did have; all of the partners, was an extreme passion for surfing; for truly living the life. All partners brought a unique skill set to the table. Bob Hurley was legit in building surfboards; a good surfer, and a natural salesman. Mike Ochsner was great with numbers, accounting, business planning and computer literate. I was organized, good at calendar creation and able to execute on the vision we all shared. We also were able to leverage Billabong’s 10 year track record in Australia; and they lent a helping hand to the tune of financing our $1M in orders we rec’d from our first USA trade show. We all knew how to work hard, and work hard we did.
From a production perspective (my responsibility); I knew nothing about fabrics, patterning, sewing, costings. But, my wife’s auntie ran a floor at a Los Angeles sewing contractor. I asked her for help; she made an introduction to an old N.Y. Jewish garmento, Harold Koenig who mentored me. Harold did not suffer the fool and I had to be a quick study. I asked many a dumb question and Harold patiently answered – but only one time. Harold gave me a huge leg up when it came to navigating the nutty, crazy rag trade world. Lastly, a man’s tallest when he is on his knees, and we all prayed.
MW: Surfing is a sexy business. What are some of the marketing strategies / campaigns you are most proud of?
Joe K: Well, I suppose being so close to surfing as a way of life, I’ve never thought of surfing as sexy..?! More of an art form; arguably a form of worship IF placed in the right context; i.e. worshiping the Creator rather than the creation. To your question:
Filthy Habits: Australian slang is wonderfully descriptive. “Filthy” is Oz slang for bitchen, cool. “That wave was just pure filth, mate!”…… From early on, we made surf videos as a marketing tool. In 1989, while trying to come up with a title for our latest movie, I came up with the title Filthy Habits during a license meeting. The name stuck; we made graphics, built an entire campaign around the slogan; which even as of last year (2012) – was still being used.
Quiet Riot Art Show (1999): This was the 1st promo and marketing event for Hurley after we transitioned from Billabong USA. My son Joel; who worked at the company since he was a wee tyke — pulled this one off for under $5K. Joel bought 30 police plexi-glass riot shields and got them into the hands of artists with lots and lots of street cred (Shepard Fairey, Haze, Stash, Sam Flores, Andy Jenkins, Bigfoot, David Cho… ), All artists painted the shields as a canvas; an abandoned building in downtown Long Beach was rented for the night — party ensued and we stopped counting at the door at 1800 guests. It was an amazing evening; the shields were auctioned off to the highest bidder and proceeds went to the SurfRider Foundation. Nike was more than a bit concerned with the renting of an abandoned building (liability); but — they green lighted it. And after, Nike claimed it was one of the most successful event/party they ever threw, ever – for any amount of money.
MW: Can you walk us through the decision to sell Hurley to Nike?
Joe K: We realized that our skill sets and resources were perfect for a start-up — up to $100M in revenue; but after that, we were surfing in waters we were unfamiliar with. The way Hurley caught fire so fast to us was evidence we were on to something way bigger and the opportunity called for a strategic alliance. Billabong was all about surf. Hurley represented youth culture (skate, surf, art, music); we soon came to the conclusion that the playing field was BIG; and we sought out NIKE to help execute on the vision. MOSS ADAMS accounting had done our books since the early days of Billabong; they had contacts at NIKE – and they arranged for a face to face meeting September 10, 2001. We met with Phil Knight (Nike founder), Mark Parker (Nike President), there was great chemistry, but we all know what happened the day after. We thought that was that; game over, but September 12th we got a call from Nike and it was game on. Within six months the deal was done.
MW: You built a business doing what you love. What advice do you have to young entrepreneurs wanting to do the same?
Joe K: Being passionate is great. But. Not enough. You have to be able to work insanely long hours; but because of the passion, time seems suspended. Don’t quit your day job until the business can afford to pay you. Take small, acceptable risks, step by step. Assemble a team where there’s alignment; not only in skill sets, but values. All bases need to be covered, from creative design, production/supply chain/logistics, finance/operations, sales and promotion and marketing. There cannot be ANY holes. Acknowledge your weaknesses; find (and reward) mentors. Also, as much as your business is design driven (and it must be); admit from a finance vantage you are sales driven and revenue forecasts must be made and met – all business plans start with a sales forecast.
MW: You’ve traveled all around the world for business and pleasure. How has this inspired you to be creative and build Hurley?
Joe K: Perhaps it’s not as insular now as it was for us starting Billabong USA (pre-fax, internet, e-mail) – but – there is a tendency to think the world revolves around us. The world is a huge place with many, many creative facets. It’s quite humbling. Travel opened my eyes in the extreme. The surf industry ground zero is south Orange County, CA. This was, and is, terribly limiting and arrogant. I think the current state of the surf industry is suffering from these self-imposed guardrails. The first time I saw aboriginal (dreamtime) art in Australia and how Billabong was using aboriginal graphics was eye opening to me; I loved it.
International opportunities are really the mainstay for any business plan today. The internet has broken all boundaries. However, there’s also a tendency to homogenize the creative process; the blender is whirring and what comes out can be fairly boring and not unique from a “point of view” vantage. The first question I ask an entrepreneur after they’ve pitched their idea is, “just what do you think will make people take their wallet out and buy your service/product over what’s out there in the marketplace now?”.
Global business and environmental issues as well just cannot, must not – be ignored. The mantra, “think globally, act locally” is still very much in force.
MW: If you could do it all over again, what would you do differently?
Joe K: Hindsight is 20/20 and this a patently unfair question – but the most important and vexing question you posed. When you are young (under 30) and it’s all coming at you so very, very fast with hardly a moment to catch your breath – it’s quite hard to be reflective and think clearly. There’s a tendency to “go along to get along”. Certain core values have been sacrificed in the surfing universe I helped create. I retired from Hurley in 2004; but I had opportunities to speak up, cross swords with the powers that be; yet – I sometimes did not. “Going along to get along”. For example, in the early 1990’s I wanted to start a recycling program at Billabong, was denied by one of our partners who signed off with a cheeky “yours in ecology”; and I could have/should have drawn a line in the sand, but did not. It’s good to be flexible, good to be a team player, but, it’s also important to stand on principle and not surrender core values. Ecology to me was and is much more than “just” the environmental box the word usually resides in, but the big picture interwoven interactions from a social, spiritual and business milieu. When the line’s been crossed and your core values are compromised – looking back – – I would most assuredly be more assertive and uncompromising….. for better or for worse.
I also say this in light of the current debacle over at Billabong; with the stock today @ $.18 (from a height of $14). Surfing and the lifestyle can be so pure, so true, so real, so artful and soulful, yet — its descended into a worship of profits at all costs; a complete disrespect of the soul — and heavy is the cost being paid at this time. Not my original intention of the use of “Filthy Habits” as a marketing campaign, sort of a double entendre with a self-fulfilling prophetic ending. Hmmm….
To end on a positive note — there’s great opportunity now; not just in the surf world, but in all business niches, for realness and purity of purpose. What would I do differently? Well, B-corps are a recent legal creation – I’d certainly strongly consider organizing under that legal designation. Of course a business must and has to be profitable, yet there’s a lot more at stake than just profits. It doesn’t have to be, “what profit a man if he gains the whole world but loses his soul in the end”. It should be, “…and gains his soul in the end…”
My title of this interview would be: No to “Filthy Habits”, Yes to “Yours in Ecology”.