Chief Future Officer, S3 EP5: Martin Hoffmann, On

The shape of the on Athletic shoe is unique. It can't be mistaken for any other brand. This is a cloud. It's the key to unlocking your running potential and.

If you look at it, it truly stands out.

The structure of on C suite is just as distinctive. Starting at the top with a pair of CEOs.

Well, we realized very early on is if you're adding different capabilities to each other and you do that as equals, then this leads to better outcomes.

Mark Maurer joined on as Chief operating Officer in March twenty thirteen. Martin Hoffman arrived as CFO that July. In twenty twenty one, they jointly assumed the CEO role.

We are a friend that needs to be excellent in designing product, in innovating product, but also in shipping millions of parcels from A to B in the most efficient way. So we need to have very different mindsets and very diverse people. Marcus different strengths. I have different strengths, and if you take us together, you.

Just get more.

Have you had have there been areas of the business where you've had disagreements as co CEOs? Have you always been of one mind or have you wanted to take things in different directions?

Yeah, I mean absolutely. I think it's that's the strength that we're basically able to problem solve and also disagree on topics. I think what we have with each other is just a lot of trust.

Sometimes we really argue in a meeting with a lot of other people present, so they actually see it's part of our culture. We're also spending a lot of time outside of work together and that that really helps to purely talk about the things that that matters. And in the end, we both want to do the same right. We want to build a company for the future, and so that goal is what unites us.

Companies with co CEOs are rare, but configuration is even more unusual. Martin Hoffman also holds the CFO position. He says his two jobs complement each other.

I actually feel the CFO makes you a better CEO, and the CEO makes you a better CFO. Understanding what you build as a CEO helps you to understand your numbers, and understanding the numbers helps you what are the right things to build.

On's emphasis on mind share, as much as market share, has driven a decade of explosive growth. Hoffman has On's finances in focus, but he also sees himself as the steward of a story.

In the end, there is.

A strong psychology behind numbers, and you can make a lot happen with numbers and the way you communicate and you speak about numbers. So they can be very motivating, they can be demotivating. They can keep a lot of pressures away from the company, or they can put a lot of pressure.

On the company.

Actually within the company, we're not talking so much about financials. Talk to a highly creative people. They don't only hear you talk about the numbers all the time. They want to hear you talk about as a as a leader, as a human, as someone who also loves the products. And I also see this as my shop of giving a clear, consistent story to the outside world, but then at the same time having a story that is actually building our culture internally.

On has come a long distance in a short time. It was launched in twenty ten by a trio of Swiss founders, including a former World Iron Man champion. A caught on quickly as a brand for serious runners. By twenty fourteen, the company had reached ten million dollars in revenue and began to sell in the United States. From there on, picked up the pace, developing new footwear lines and diversifying into apparel. Swiss tennis legend Roger Federer took notice.

The athletic industry has always been one of the best industries within retail that only got better during COVID.

The barrier to entry for newer brands and disruptor brands are lower than ever. What we're seeing from some of the newer players is just more innovation. I think that we're seeing it's a good time for some of these brands to grow.

With just over a billion dollars in sales last year, On's a relatively small player in a crowded category. Still going public has made a difference.

I think it made us a better company, so it challenged us, and you know, we decided to play in the Champions League. We decided we wanted that scrutiny. It brought huge opportunities obviously in terms of brand awareness as well.

Wall Street is certainly aware on and investors seem to like what they see.

We want to build a company that is here to stay this positive emotion of growing, but growing in a meaningful way, from social impact, sustainability, how your product's resonating with your customers. That's very important, and setting up that framework is basically a core.

Of my work.

It sounds like you have to take shareholder demands and sort of translate them into something that's going to be motivating for the people who work for you. Is that how it works?

Yeah, definitely.

The number is never the goal, and the growth should allow us to do that in a sustainable way.

And so it can growth sometimes be too fast, yes.

It can. Well for us, it's important that we're kind of bringing that exponential and huge growth of over sixty percent year of year slowly down into what we call a more durable growth going going forward over the next years.

On is setting its pace for a marathon, not a sprint. It's confident in the strength of its technology, the cloud tech cushioning system, invented and patented by its founders. In many ways, On likes to identify as a tech company.

We create products, we create a brand, but everything else that we do is actually technology and data. So from product development, supply chain, to customer interaction to our own eCOM environment, you really have the analytical depths and the complexity of a tech company, but at the same time you have the emotional highest of a consumer brant.

And I actually think this is a really nice combination.

Whatever else it is. On is a premium brand that's had an impact on its sales strategy. Direct to consumer channels have been bolstered by the opening of flagship stores around the world, and while wholesale revenue remains robust, the company is taking a selective approach to distribution. Have you had to say no to some pointner, how do you think about the wholesale Now.

We're trying to allocate resources to where it has the biggest impact, and with that comes a lot of saying no. We're working with the partners that are reaching the communities that we want to reach, and so this has led to the distribution that we have, which very much started We front specialty accounts like fleet feed in the US, but then evolved into more channel sporting goods, but then also counts that or reaching an even younger audience like JD.

Or foot locker.

We're rooted in running, we are rooted in performance, and there's still a lot of room that for us to grow, a lot of market shed to gain. At the same time, it gives you, it gives you credibility, and then the shoes are also born in an everyday environment.

As On moves beyond its performance running niche to become an everyday footwear choice. The company's betting that apparel will broaden its reach in similar fashion. Why did they move into apparel come.

The mission is that that you move and you enjoy and move, and the parallel is an important part of that.

It's growing. It's still relatively small.

But we feel it will be an important part of the future business.

Apparel.

We want to grow it over proportionally. Percentage you know what it is in Percentage is actually not so important for us. For us, it's important that we're building it in a premium way and it's a multi year journey.

Another area with upside for On is tennis.

For US.

Tennis has two elements, right. I think one is it's a huge opportunity from a brand awareness perspective beyond tennis, just how can we showcase ON as a sports for company. And then we feel there's an opportunity to make tennis more inclusive in many countries. It's still a very exclusive sport, so how can we bring it to the masses and how can the tennis look be transponded to an everyday look? And that's definitely a big opportunity.

On has already established a strong presence globally and it has plans to enlarge that footprint.

When you start a company in Switzerland, the first thing you need to do is really leaving the country. So we actually build a global company right from the beginning. We still have significant room to grow in parts of Europe. We are quite strong in Japan already, but just started in Latin America. Big market China of course a big focus for US and in the next years.

China is a country that everyone wants to be in, but you have to do it right right, You actually have to put significant investment forth to actually get it right. If you kind of take a halfway strategy, you're not going to be successful there.

Historically, but China has been both a great opportunity to drive revenues, but critically it's also been better margin. People will pay more for the same good abroad, and therefore China has been not just the avenue of growth, has been the best.

Avenue of growth.

The questions of whether that is tapering now are centered around whether that's structural or is it sickly?

What does the path to success in China look like now? Is it sort of back to some situation like normal? How does it feel in China right now?

In China, it feels like we're still a very small brand with a lot of potential. There's a lot of macroeconomic uncertainty. We feel we're still so small as a brand that the macroeconomic element is a bit less important because we have so.

Much room to just grow market share.

We're really at the point where I think we've proven product market fit and now it's about scaling it.

Back in twenty nineteen, they were about fifteen people working in China.

Today it's a team of one.

Hundred and fifty. There is not really a wholesale partnership network in China, so it's all about building our own stores, our own monoparant destinations, and this will take time, but it's a great thing to have so we can really engineer to cross over the next.

Years as CFO and co CEO with the Swiss Footwear and the Parrel company on Martin and Hoffman has the kind of job that keeps him on his choes. His professional path has taken some unconventional turns.

I am an engineer from a background so called an engineering, computer science and business management, so not really a finance background. Then I ended up in consulting and I've worked with many amazing CFOs all around the world of bigger and smaller companies, and I think this ignited.

My love for that shop and that role.

And then I transitioned into a CFO role myself at a retail company here in Switzerland.

That's where I connected with Mark.

I asked him how he acquired CFO skills without formal training in finance and accounting.

First, you need to have a love for mass and that's also the same in computer science, it's the same background. I think you need to lift the values off a CFO, which is which is very important, and I think I do this and try to be really a role model in this as well. And last, but not least, it's it's it's understanding the psychology of the numbers and this is something that I learned from working with so many different great CFOs all around the world.

For Hoffman and co CEO Mark Maura, building on this business will be a mix of science and art. The two principles meet in On's growing portfolio of retail stores across the US, Europe and Asia.

Stores are magical, so much of the storytelling sure is commercials or being targeted by your social media account, but the best way to tell that story is to show that product in environment that you control.

Flagships have to be thought of not just as stores, but also as marketing vehicles. So you have to think about what it does in terms of new customer acquisition, what it does in terms of the halo that we often see when a flagship opens in a market, all of a sudden, the e commerce business gets a big left.

On has opened stores in some of the world's trendiest shopping areas, Region Street in London, NoHo in New York, Tokyo's fashionable Harajuku district. Martin Hoffman showed me around the store located below On's global headquarters in Zeerich.

What's super important for us that.

The store really screams the premininess of the print, and so the stands for performance and design and this should be reflected in the in the store as well. And then we want to connect to the local communities as well, so many of our stores have a space in the area you can actually meet for a run.

Each outlet also offers opportunities for consumers to learn about On's history and it's constantly evolving technology.

In the traditional running shoel, you only have the material that you can play with. You can make the film software, you can make the film harder, and we come up with a technology where you also have an engineering part in it's a real technology part. The idea is always the same. So you have a soft landing and a firm push off. So the soft landing is generated by the elements collapsing when you land and then they become firm, and so you have this nice push off when you basically need the speed.

Alongside technology that boosts performance, there's innovation that advances sustainability. Cyclon On's Circular Product subscription program centers on recyclable shoes and a parrel made from caster beans and caster oil.

Out of the.

Cast bean, we generate in oil, and out of the oil we basically generate palets, and from the palants we can make the outsol of the shoe, but we also make yarn for the upper so the whole shoe is basically the same material out of that bean. And the advantage is that this product can be fully recycled. And because we felt this is a product that you shouldn't own, you can only subscribe for it, so you can only rend it and only when you send your old product back you get a new product.

This sounds like good business because you with a subscription model, you get loyalty from your customers. How do the financials work around that kind of product?

So for us, the most important thing is that the product comes back, so that really the customer engages in that circularity, and of course it gives us a nice interaction. VI is the customer at that important moment of repurchasing and also offering more products.

That we have in that in that program.

At the moment, it's still a pilot phase, but we already have thirty thousand subscribers, so it's growing quickly.

On's workforce is growing quickly as well. For Vmann, it's a challenge to scale up while preserving the culture. Over startup.

We invest a lot in the offices that you feel home, that you can actually be at your best yourself and people work very differently, and we take a lot of input from the sports world, actually the athlete spirit right building a sports team that can perform at the best, but also talking a lot about the explorer spirit, how can we really tap into new things, continue being disruptive.

And On has been spreading that spirit across the world.

We have a big office in Portland, in Shanghai, in Berlin, South Paolo, Melbourne. We have eighty different nationalities head On. It's very important to have a diverse team because we have a very diverse landscape of customers and in order to understand that it's important to have all the different backgrounds mindsets here in the team as well.

Do you find it difficult in some markets to find enough of the right people.

We are very fortunate.

We got forty thousand applications last year for four hundred hires, so he can be very selective and really build a high performing team.

The Swiss footwear and apparel firm On began with an athlete's imagination. Retired world champion ironman Olivier Baiernhardt dreamed up the prototype for a revolutionary new running shoe. A decade later, another Swiss athletic champion entered On's orbit, Roger Federer, winner of twenty Grand Slam tennis titles. He joined the company as an investor and an entrepreneur, bringing much more than his name to the relationship.

We're very lucky that that he loves to engage, especially on the product, and I think this is also where with his expertise and his cultural understanding of tennis, where he can add a lot of values. It's great to also have with him, you know, very strategic discussions around, for example, how do we want to shape tennis as part of On and Watch be our ole world strategy.

Sports endorsements and celebrity partnerships can have a major impact on credibility and boost market share. They can also backfire disastrously, as with the ugly controversies that led added As to end its relationship with Kanye West.

Tying yourself to a celebrity can certainly be a driver brand awareness, but it can also be a liability and you have to be really careful.

You find the right person to wrap your brand at the right time, and there is nothing better. You find the right person to wrap your brand at the wrong time and you're in trouble. You find the wrong person at the wrong time and throw your hands up in the air.

On leadership, Team takes the process of recruiting and working with its brand representatives very seriously.

I think it's a lot about the conversations that you need to have before you actually engage with Roger was creats that all started. He was here in the lap and afterwards we went out for dinner, so we really had a lot of time to get to know each other.

And similar to hiring a new team member.

We can never rely from a profitability perspective or from a revenue perspective or growth perspective just on one athlete or area of business. Are trying to create the balanced portfolio that reaches into many different communities and that shows kind of who On is from all different aspects. So take Ben Shelton in tennis and Legoschriantek in tennis, very different characters, but ultimately both are very, very strongly aligned with who we are.

Ben Shelton's run to the semi finals of the twenty twenty three US Open brought on priceless exposure. The upcoming Paris Olympics represent an even bigger opportunity.

A very large luxury all the image is sponsoring. We are guaranteed this is going to be a beautiful Olympics that becomes a spectacle around luxury, around spending, and so it's going to be an interesting branding exercise that we're going to see in a very unique way.

Switzerland's delegation well, once again we're on gear at the opening Serah and the company will put significant resources into every aspect. If it's Olympic participation.

It's going to be an important Olympics for us because Parison's in the heart of Europe. It's in the heart of where we are, so we really want to be present in Paris. We want to talk to the community there, We want to show up with innovation, with sustainability.

A lot of the product developments that we're doing and how we're empowering and enabling athletes to win is going to come together around Paris. So that's a very very important internal element and it significantly helped us to accelerate product innovation.

This will be the.

First Olympics where On truly is a global premium sportsware brand.

And what kind of bump would you expect to see from the Olympics? Are you watching? Are you waiting for this to have a noticeable impact on the numbers?

It's all about credibility, and so you see On. You see On competing at the highest level, really winning there, and this gives the prend credibility. I don't need the same shoe that the best runners in the WoT need, but I get really excited by being able to wear the same technology like the best runners.

Over the last ten years, Martin Hoffman has helped guide On from a scrappy ten million dollar upstart to a billion dollar publicly listed power player. I want you to know what he sees coming in the next decade. What's the opportunity that excites you the most over the next five to ten years On.

I think we have so many opportunities to grow, and it's so much fun to work in a growing environment, to work with emotional products, to work on a global scale. Mentioned going from running to tennis to outdoor into training, from shoes to apparel, and we can continue that dream in many different dimensions, and that's what we do.

I like to think there are not challenges that keep you up at night, but are there things that over the next five to ten years you can see looming on the horizon that worry you about challenges that the business will face.

For me, it's all about finding that right level of speed for the company to grow, because if you grow too fast, then maybe it's over soon. And I really want to maintain that positive positivity of growing but growing in a profitable way. So there are a lot of elements in there that are super important for me and where my focus is. And at the same time, I think I talk more about culture today than I talk about numbers. How can we maintain the entrepreneurs spirit, the athlete spirit.

That we have in the company, even so we are growing and growing.

If a friend called you tomorrow and said they've been promoted to CFO, maybe you have lots of friends who've been promoted to CFO. And this is not a fictitious question. What's the advice that you give somebody who's just been given this role, just given this responsibility how should they handle it?

So you will find yourself many times spending hours and days and nights in diving into your extra sheets, into your PowerPoint presentations, and then just an hour before you present that whole THNK to someone, you figure out, while I was thinking, far too complex and no one will understand this, no one will be interested. So actually go back, you write everything down in just a page or a few words, and and I think that's in the ends essence what we do. We take some very high level

I'm Anna Edwards. This is blowing back. M