The current public dispute between Lululemon founder and significant shareholder Chip Wilson and the Lululemon board raises interesting questions that board members in all industries may want to consider: Can mission, vision and innovation ever create more value for a company than replicating marketing, cost-cutting and financial strategies that have proven effective in the past?

Wilson, who holds about 9 percent of Lululemon stock, launched a public campaign proposing three independent directors be added to the Lululemon board in an effort to improve the company’s long-term profitability and “shake up the status quo.” He has also criticized the board’s recent hiring of former Nike executive Heidi O’Neill as CEO (who takes over in September) after financial market reaction to the news was muted.

In a scathing letter criticizing Lululemon’s board, Wilson highlighted his views on why he believes the company has lost an estimated 69.5 percent of shareholder value over the last 18 months. He accused the board of being unable to understand what made the brand popular and incapable of connecting with the core customer that gave Lululemon its premium position in the marketplace. Highlights from his letter include:

• The core values of the Lululemon brand have always been its premium positioning and commitment to the muse: the woman who inspires culture, not just follows it. This drove consumer passion, leading to sales growth, margin power, a competitive moat and, ultimately, a premium share price. Several years ago, the company began making decisions that would, seemingly intentionally, unwind this premium position through “brand harvesting.” These types of decisions can create a “sugar high” of sorts in financial reporting, but, in the long-run, they erode the brand’s high-end reputation.
• Shareholders can also see the degradation of Lululemon’s premium brand positioning in the company’s many failed new product ventures. The unveiling of footwear. The Selfcare beauty line. Smaller accessories and Disney-themed trinkets. All of these were chasing the coattails of trends well after their lifecycles ended. They were poorly executed through flawed decision-making and weak product planning. The company has also resorted to promotional credit card discounts, essentially paying customers to shop its products and further eroding the brand’s premium position. Each of these strategic decisions by the board has drawn the brand away from what originally attracted the core customer to Lululemon.
• Expanding into mass product lines has made the product presentation messy and customers are confused as to what Lululemon is, resulting in them buying apparel from competitors with a clearer vision.  Expanding the product into more countries and further brand destructive collaborations are at best merely attempts for short-term gains to mask underlying problems.

Wilson claims that his three proposed board nominees—Marc Maurer, Laura Gentile and Eric Hirshberg—“can restore the creative and brand product focus that has long been missing” from the Lululemon board.

To be fair, the Lululemon board has made recent changes to its makeup, but nearly two years of company underperformance can shake the confidence of any company’s shareholders. There is a higher level of scrutiny of board performance than in the past, so corporate board members shouldn’t be surprised if calls for board refreshment increase.

The situation at Lululemon raises the following questions that corporate boards may want to consider:

Does the board and management ever strategize about how emphasizing and expanding on the company’s mission, purpose and values can create opportunities that increase customer loyalty that will grow future revenues? If you create a culture that your customers can’t live without, they will be customers for life, which should lead to revenue growth over time.

Does the board have members who are innovation advocates and have experience developing innovative solutions to complex problems? Do the board and the company have a process that values “outside-the-box” thinking that can lead to developing the industry’s “next big thing?” All companies should prioritize developing ways that innovation can factor into improving their industry leadership.

Is the board mindful enough to understand that making decisively fast adjustments is now a requirement that may shorten the tenure of any individual board member based on the new needs that changing market conditions dictate? When new technology becomes available, companies adjust and find a way to use it. When new thinking is demanded, boards must find a way to bring people with those skills into the fold.