Remarks by Farooq Kathwari, Chairman and CEO Ethan Allen Interiors @ Center for Strategic and International Studies. Subject: “United States Reinvents Itself as a Preferred Brand September 12, 2007

I want to thank Dr. John Hamre for inviting me to share my thoughts on the important issue of the role of the United States as a respected leader and inspiring power around the world.

I would like to begin, if I may, by telling you the story of Ethan Allen, which I see as a useful metaphor for shedding some light on the topic at hand. We are celebrating our 75th anniversary this year, and I have had the privilege of leading the company for more than twenty years. 

When I took the helm, in the mid-1980s, Ethan Allen had progressed far beyond its simple beginnings as a furniture manufacturer supplying independent dealers who operated Ethan Allen stores around the country. Over the years, Ethan Allen had evolved into a classic American brand defined by its high-quality Early American and Colonial furniture designs. It was well respected and had 90% brand recognition.

However, by the 1980s, people’s tastes had changed.  Colonial and Early American furniture was no longer the most popular style category in the country.

Moreover, company leadership was too comfortable, and vested interests had developed; the U.S. manufacturing base -- mostly acquired during the Depression years – was not competitive with growing global sourcing; the dealer network had stopped growing; few stores were located in premier locations; and the company lacked a cohesive internal and external message. As a result, the company was in desperate need of reinvention.

The challenge would be to reinvent Ethan Allen without sacrificing its strong brand attributes of quality and integrity or its valuable brand recognition.  Clearly, being well-recognized was no longer enough. We needed to become a preferred or a desirable brand. 

Our first challenge was to get the messages across internally 1., that reinvention was necessary;  and 2., that change creates opportunity. 

We launched an intensive internal marketing campaign that advocated taking a fresh look at the issues and challenging the assumptions of the past. We created the understanding that generally new ideas are first rejected, then tolerated, and finally there is an opportunity for acceptance.  We also emphasized that reinvention is a key to the continued vitality of any organization. Most of the time, reinvention takes place unconsciously and passively. Or it happens consciously and proactively; and that’s obviously the preferred method. 

It was the responsibility of our leadership to reinvent the corporate culture and establish the new guidelines under which our enterprise would operate. As you well know, leaders shape debates and clarify priorities. If leadership fails to take this opportunity and responsibility, the vacuum gets filled by people with louder voices and often with extreme agendas.

Once the internal marketing campaign for reinvention was underway, we made other changes, namely:

  • We established a set of core values to guide us. We call them our Leadership Principles, and I will discuss them in greater detail in a few minutes.
  • We developed a strong, diverse leadership team.
  • We molded our business to cater to the needs of the busy American consumer by becoming a company that specializes in interior design, not just in making and selling home furnishings.  Our design centers are staffed by 3,000 professional design consultants with the design know-how, resources, and service ethic to help clients make solid and timely decisions.
  • We redesigned our product lines to reflect the changing tastes of our customers.  So, for example, today you will go to an Ethan Allen design center and find sleek modern furniture, if you want it, or Art Déco, or the English Country House style, and much, much more.
  • We consolidated our United States manufacturing operation to nine strong locations, down from 29.  We also now have manufacturing operations in several overseas locations. Today 60% of our products are made in our United States plants.
  • We now directly operate 60% of our 300 design centers through corporate headquarters; the rest are run by independent dealers.
  • We relocated 200 design centers to better retail sites.
  • We maintain strong internal and external marketing and communications programs.  There is a consistency in our message.

Today I am gratified to say that Ethan Allen as a brand is not only recognized but also preferred by our millions of clients in North America and other countries. 

Going forward, I strongly believe that to create long-term brand preference with our clients, our own people must continue to feel very good about our brand.  In my view, the development of our ten Leadership Principles has been integral to our success. And I believe that our future growth depends in no small part on continuing to follow these principles.

 My inspiration for the Leadership Principles was twofold: I have long been impressed by the universal principles of ethics that are part of all religions of the world and that are also enshrined in the principles that founded this great country. In college in Kashmir, I was a political science student and focused on studying the American Constitution and history.  I was particularly moved by the inspiring message, “We the people….” 

During the last twenty years at Ethan Allen, we have made a point of discussing our ten Leadership Principles throughout the year. Periodically, our senior managers evaluate themselves on their implementation of the principles. Compensation for senior management is based on their adherence to these principles.

Today I would like to focus on a handful of these principles. All ten can be found on our website,  www.ethanallen.com.   

First, Justice.  Justice is not a word often used in business.  Yet  we know that injustice results in conflicts and lack of motivation, which hinder growth for an enterprise as well as  a nation. 

Second, leaders have to set an example by working hard, innovating, and most important, conducting themselves with humility. Arrogance is often the cause of failure in leaders and enterprises. We must have the self-confidence to empower others to do their best.

Third, we must understand that change means opportunity and that it is to be managed, not feared. I lived in the mountains of Kashmir in my youth, and hiking is still a hobby of mine. The mountains teach us that reaching the summit requires an appropriate pace.  Climbing too fast often results in altitude sickness, which can be fatal.  The solution is:  If you climb too high and can’t breathe, come down a little, stabilize yourself, and then climb again – or not. Unfortunately, most people don’t like to accept that they have gone too far, and do not want to climb down. They end with a disaster.

Bottom line, in my experience good governance is good for profitability.  At Ethan Allen, during the last fifteen years, we have consistently performed at the highest levels of profitability for our industry and, in fact, for most industries.

Like Ethan Allen twenty years ago, the United States today needs, so to speak, to reinvent its brand.  Also, like Ethan Allen, “Brand America," in my view, has great attributes to build on.

  • First, the most inspiring message that America has communicated during the last two hundred years is that contained in the Declaration of Independence and the Constitution.  “We the people...” inspired the freedom and independence movements of the twentieth century.  Our core values of liberty, democracy, freedom of religion, and separation of Church and State, and the checks and balances of an independent judiciary have inspired people everywhere.
  •  Second, the United States provides unmatched opportunities for success.  With hard work and luck, one can attain high levels of accomplishment.  I, myself, am but one example of a so-called outsider who has benefited from American opportunity.
  • Third, the United States projects quality.  People come here from the corners of the earth to pursue higher education, and we have developed and exported technology all over the world.
  •  Fourth, the United States is generous. It has welcomed and absorbed people from all over the world.  America, in total dollar terms, has provided more foreign assistance than any other nation.
  • And, finally, the United States represents, in its ethnic, racial, and religious diversity,  a microcosm of the world. The United States is the first globalized state.

During the last few years, however, some of our policies have created negative perceptions of the United States in the international community.  In my opinion, to strengthen Brand America, we must create a strong brand preference internally by improving many areas of life within our own borders, by taking the following steps:

  • We must reinvigorate our leadership. It has become all too satisfied with the status quo and has developed too many vested interests.
  • We must reverse the extremely low ratings of the President, the even lower ratings of the Congress, and the low opinion Americans hold of many corporate leaders.
  • We must invest in infrastructure, in health care, in education,  and in improving the condition of people living in poverty. 
  • We must take steps to help make America become competitive.
  • We must recommit to the core values of the free society.  We must  -- and can -- maintain a balance between our security and our values of fairness and justice.

In addition, we need to reinvent ourselves abroad – in ways that build on our core Brand America strengths:

  • We must restore the best American values in our dealings with the rest of the world.  We must insist on free societies, freedom of speech, rule of law, and protection of minorities. We must  accept the outcome of local elections.  Changing our core values for short-term perceived gains has a blistering impact on our credibility both at home and abroad.
  • We must create the right expectations.  We are judged by the expectations we create.  We need to convey the message that while we are interested in helping others, we need to prioritize our efforts.  We cannot be in all places at the same time. We have to clarify and look after our legitimate interests
  • We must have the self-confidence to empower others to do their best. We should not be arrogant or unilateral.  We must take an active part in international organizations.
  • We must help solve problems and conflicts; we mustn’t be perceived to create them.  We have a great opportunity to help bring peace and prosperity to many regions.  In my view, our peace-making potential can be our greatest role in the world, and the future basis of our ‘public diplomacy’ initiatives.
  • Finally, we must be proactive in changing the perception in the Muslim world, and also to some extent in the Western countries, that the United States and the West are in a desperate fight with the religion of Islam.

It is incumbent upon us to dispel the myths that destructively feed the perception that the West is at war with Islam. These myths include:

  • The fallacy that Islam is a monolithic religion, and that almost all Muslims think alike. This a wrong and dangerous assumption. We must get the truth out:  Muslims are diverse in how they think, in where they live, and in culture, language, and ethnicity.
  • Another myth is that the Judeo-Christian and Islamic value systems are violently opposed to each other.  It is important to note that this belief is erroneously held by vociferous sections of the Muslim and non-Muslim populations.  In fact, Islam is the third religion following the Abrahamic tradition.
  • Myth Number Three:  Extremist violence and terrorism are mostly directed at the West.  The fact is that countries with Muslim populations are the primary targets of extremism and violence.  All peoples of the world, regardless of religion, must unite in partnership to eradicate violence, whatever the source.
  • The final myth I’m going to talk about today is that the Muslim population in the West is a security threat.  While there are obviously pockets of extremism, the vast majority of Muslims are integrated and strongly oppose violence and extremism in the name of their religion.  Integration in the United States is strong, while the disparities of economic conditions of many Muslim populations in Europe has led to concerns of alienation.

In my view, it is extremely important that strong communication programs be developed to help dispel these dangerous myths. These myths inhibit and prevent the development of the strong partnerships we need in the long-term struggle against violence, terrorism, extremism, and poverty,  and as we seek to address global environmental issues, as well as the problem of refugees and internally displaced people.  Without these strong partnerships we will be weaker when it comes time to assist in the major natural disasters, like the tsunami or the South Asian earthquakes, that affect us all.

I believe that despite the current challenges, the United States is in a unique position to take our leadership to the next level in world affairs.  The United States not only wields major military and economic power, but also increasingly reflects the diversity of the world. We should never forget that in its diversity the United States is a microcosm of the world community. As such, we possess unparalleled resources for leading the world toward respectful co-existence.

Thank you for the opportunity to share my thoughts with you today on this important subject.



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