When Henry Juszkiewicz and his business partner Dave Berryman bought the ailing Gibson guitar company in 1986, it's fair to say that they received a sceptical reception from some MI industry insiders. What did these two know about musical instruments? Hadn't Gibson already suffered enough at the hands of money men? As it turned out, the iconic guitar company had fallen on its feet. Though at times controversial, Juszkiewicz (the more forthright of the duo) has confounded most of his critics and turned the business around. This interview was done just after Winter NAMM 2007. It appeared in the March issue of Music Trade News.
 

INTERVIEW: HENRY JUSZKIEWICZ

For a company that is very much headed by one man, Gibson seems oddly self-effacing about Henry Juszkiewicz, its CEO and undoubted saviour. Asked for photographs and a biographical "backgrounder" - the stock in trade of corporate communications people the world over, but most notably in the USA - the best it can come up with is an out of date "official" portrait and a lot of shots taken at shows, depicting the CEO with various stars, waving the company flag.

It's not that Gibson is disorganised (clearly it isn't - it has a significant and increasingly effective PR presence) nor is Mr Juszkiewicz a shrinking violet, but it's a curious omission because, without he and his business partner, Dave Berryman, having taken over the near-moribund business in 1986, it's hard to imagine what would be left of Gibson today, other than a brand name and a fondly remembered history.

The precise depth of the hole Gibson was in during the mid-1980s is probably only known to Messrs Juszkiewicz and Berryman, but reliable estimates suggest that its losses under former owner, Norlin, amounted to $12.6 million in 1985, alone. Gibson, as a money-making business, was undergoing near-death experiences and its reputation as a guitar maker had a similarly ghostly quality. Indeed, there were many who firmly believed the company was beyond rescue: that decades of wrong turnings and the dead hand of an indifferent corporation had finally done for the legendary guitar business, founded by Orville Gibson in Kalamazoo, Michigan in 1902.

What is more, some of those experts said, there was simply no way that this outsider - Henry Juszkiewicz, a man from the automobile industry, for all his Harvard background - could come into the music industry and turn around a heritage business like Gibson. They were wrong about that, too.

Henry Juszkiewicz, to be fair, doesn't come across like a superstar. He hasn't the rhetorical, almost preacher-like, turns of phrase that make Hartley Peavey so charismatic, neither is he slick and glib with his answers to awkward questions, like a few others that spring to mind. But when you take the trouble to listen to what Juszkiewicz says, rather than how he says it, the penny begins to drop. This man is seriously smart and those who sneered at him when he bought Gibson and vowed to turn it around were guilty of considerable misjudgement.

But where had he come from? And why did a man who cut his teeth well outside the music industry decide to rescue a guitar business?

'I actually have a mechanical and electrical engineering degree, and I worked for General Motors for a number of years, then got a fellowship to Harvard Business School.' he says. 'After graduating, I went into investment banking in the area of mergers and acquisitions and after several years I decided to acquire a company in Oklahoma City that made high-technology electronic products. I did that successfully for a number of years, at which point I looked for something bigger that had more growth potential and that is when I discovered Gibson.'

It should be said at this point that it wasn't as if Juszkiewicz had never heard of Gibson - he had been a guitarist, regularly gigging when he was at Harvard, and says that one of the reasons he heard Gibson was up for sale was through an investment banking friend who knew he was a guitar player and so might be interested. So had he bought the business with his heart as much as his head?

'Well, it absolutely met my business criteria, but at the same time it was my passion and in addition to the fact that I enjoyed it and respected the Gibson name, I also felt I understood the guitar consumer, because I was one. I think passion is absolutely essential to keep one going. Business is always challenging. It's challenging in a different way in the good times and it's challenging in the bad times and anyone who faces challenge continually has to have a very strong motivation - and money, I don't think, is enough in most cases. You have to have something beyond that.'

How bad had things at Gibson been? From this side of the Atlantic, rumour had it that the company was on the verge of collapse. Was it really that bad?

'Yes, it was,' he laughs. 'Gibson, as part of Norlin, was immaterial at that point. The history behind Norlin is that they were taken over by a penny stock manipulator several years before I happened on Gibson and they had just completed the purchase of a very large financial printing enterprise. So Gibson was the very last business segment in the music industry that they owned and it was less than five per cent of their total turnover. They were not that interested and they were not doing well in the financial printing business. I would say it had been a really dumb move to do that, for a variety of reasons, but they were still classed as a musical instrument company and Gibson was losing money - 20 per cent of sales at that time, which was not only colouring the stock market perception of the company, but costing cash in a company that was already cash-strained.

'So, prior to our buying them, they actually officially put out a press release saying that they were considering filing for bankruptcy.'

What was it that had convinced him that Gibson even could be saved?

'I believe inherently in the market and the name. I believe it's a really valuable brand that consumers continue to be passionate about - but, yes, the execution was not trivial. One of the things I was looking for in another acquisition was a turnaround and turnarounds are really hard to do and it takes a lot of internal fortitude to go through that process - it's very emotionally challenging. I had done one or two and it was something I was comfortable trying to do. I had confidence in myself that I could do those things that needed to be done.'

Had there been one single thing that Norlin had done wrong - or was the sad state of Gibson the consequence of many factors?

'In a turnaround situation, everything is wrong and more so, there are things wrong that you can't see, so its kind of like restoring a very old building. You know it's going to be difficult, but once you get in there you find all kinds of things you never expected, so ultimately it's a lot easier to put up a new building. Dealing with a living company is very, very similar. We had to essentially rebuild the company from scratch. We had a tremendous legacy in the band name, but in reality we had to build a whole new structure. Everything had to be done - and in a turnaround you don't have the benefit of a lot of cash, so you have to rebuild the whole structure and sort of collect rent before it's built - that's the challenge!' he laughs.

Again, from a UK perspective, whatever had been wrong with Gibson as a business, had clearly being reflected in its products at times. During the 1970s, even some review samples sent out to left a lot to be desired and that lack of attention to manufacturing quality was a major irritation to retailers. Those days seem long gone, but what did he have to do to get the people on the production line to start caring again?

'Very early on, even before I acquired the company, it was very noticeable that the spirit in the workforce was not there. They felt they were owned by some big conglomerate in New York that must have been independently wealthy, and they didn't matter, the Gibson product didn't matter and consequently there was a lack of concern. To turn that around very quickly, I discontinued the practice of selling seconds, which had been a very abused practice, because very often the consumer would know - and that's demeaning to any brand. I said, the Gibson name is not known for shoddy goods and we will not build any and if I find shoddy goods in the factory, I'm going to destroy them. I made a point of going to the assembly line and I broke a guitar that was defective. We then built a big pile of instruments that didn't meet quality standards and we would destroy them, every week. - and we have done since then. That made a dramatic impact on the workforce and quality turn around quickly.

'I get a report on every single instrument that is returned and we track them. We track customer comments and we're anal about improving and eliminating any error. Everybody knows I'm looking at that, because I care and that translates all the way down the organisation.'

Because of the curious nature of the MI market, older products tend to be looked on with something approaching ancestor worship: "It must be good - it's old!". Does that ever make him feel that the guitars he produces today are being judged against a mythical standard?

'It doesn't bother me at all. Art is not about having the perfect machine. There are all kinds of aspects to art that have historical significance - rarity, for example - and I think there's a very good place for that and Gibson has a good part of that in the guitar world. But there is absolutely no doubt in my mind that, today, we produce an enormously better instrument. In the old days, the technology just wasn't able to maintain dimensions and other things consistently - like the number of windings n a pickup. The machines in the 1950s had a plus or minus ten per cent tolerance, which is a huge total variation, while a modern machine will do it to the individual winding, and there are lots of things like that which the benefit of technology has given us. The instruments are superior, there's no doubt in my mind about that.

'There's another aspect too. In my day, you couldn't buy a good guitar at a low price, but we manufacture some smokingly good instruments at quite affordable prices and so I think modern technology and our dedication, not only offer much better instruments, but at different price points.'

While to the guitar buyer, the cardinal differences between Fender and Gibson come to down to things like bolt-on versus glued necks and differing scale lengths, to a student of marketing, perhaps the greatest difference between the two brands was their reaction to Japanese cloning, during the late 1970s and early '80s. While Fender adopted a typically pragmatic "If you can't beat 'em" approach and diversified production of its main brand name to the very cloning plants that had been making the copies, Gibson decided not to risk tarnishing its brand, and used Epiphone as its Tokai-basher. Both routes seem to have been highly successful, but at the time, which would prove the better approach was far from clear. What had led Henry Juszkiewicz to decide to use Epiphone as his clone-busting brand?

'What I consider myself really good at is marketing,' he says. 'Without trying to sound too pretentious, real marketing is a very rare skill, and one of the tenants of marketing is what is called segmentation and what that means is giving the buyer what they need. Now there are lots of different kinds of buyers, so you have to deliver to each buyer grouping something specifically targeted and optimised for their needs. The feller who pays a million dollars for something isn't happy if the feller who paid ten dollars has something similar, so consumer product markets have great variety, as a consequence.

'An example I often use is laundry detergent. If you go into a supermarket and look at the aisle of laundry detergent, you'll see thirty or so detergents, and what most consumers don't realise is that 22 of them are made by Procter and Gamble. Really, that's a highly segmented, very scientifically researched way of getting into consumer needs and the way it works is that they aren't all sold as Procter and Gamble - they are sold as specific brands, because the brands have emotional and functional identities - it's classic marketing and that's what we do quite a lot of.'

A twist to this has developed in recent years, however, as Epiphone has started to emerge as a distinct brand. If, 10 years ago, it was just Gibson's baby brother, it is increasingly starting to attempt things that were once out of its reach. Does this still fit the model?

'It's more and more that Epiphone has its own position and feeling - we call it our "value brand" because you get a substantial amount of value in the product, but, yes, it also has an emotional context, so whereas Gibson tends to be more conservative and historical, Epiphone plays: it goes out and takes chances and has a much younger profile. In fact it has a certain feeling to it that could be seen as spreading all the way back to Mr Epi Stahopoulu, who popularised the brand in the 1930s and who was one wild guy!'

But as Epiphone has got better and better, isn't there a sense that the two, once complementary, brands are now starting to compete?

'Absolutely! We have individual divisions that look at certain market segments and they compete with one another and they are not happy! Our Gibson guys aren't happy about Epiphone's success but, again, that's a consumer marketing philosophy - that you have to face competition and competition inside the company is better than competition outside the company, so it optimises what we, as a bigger group, offer to the consumer.'

The competition between Epiphone and Gibson might be enjoyable, but since he took over the company, Juszkiewicz has been a serial acquirer of other brands that, if we are being honest, haven't exactly leapt back to prominence. Steinberger - as a stylistic leader - and Kramer, once proudly boasting it was the US's best-selling guitar brand, come to mind. Why have these once highly successful names more or less vanished?

'Steinberger has traditionally been a boutique brand and it continues to be quite successful. It had never sold broadly, but it was known broadly and they sell in more stores today and are played more broadly worldwide today than they were back in the '80s - maybe double or triple. However, that's still a very small part of the market.

'Kramer, of course, was purported to be the No 1 guitar brand at one point. I'm not absolutely sure that was true, but they were a large seller of instruments and we just haven't turned on to promote that brand at this point. We still sell it in good numbers and we're quite happy with Kramer sales, but we really haven't found the product positioning yet. Also, frankly, we have enough problems producing enough Epiphones so, till that problem is completely solved, we have a hard time stretching to other sourcing. When we put our shoulder to a brand wheel, it's a major effort with a major financial commitment and it just hasn't been the right moment yet to do that with Kramer.'

None of which has dulled the Juszkiewicz appetite for acquiring brands - the most recent of which has been the venerable Wurltizer. What was the story there?

'We acquired it twice in a sense. We acquired the Wurlitzer brand along with the Baldwin piano company, but there was also a license outstanding - and it was arguable how good that licence was - with a company in Germany that was making the juke boxes. Baldwin had been making Wurltizer pianos, but had licensed the coin-operated equipment to this company and we had a big argument with them. Eventually we ended-up buying them to resolve the dispute - and that ended-up putting us in the coin-operated and juke box business, which we're pretty excited about.'

So why buy Baldwin? Like Gibson, another of the great behemoths of US MI brands that had fallen far from grace, while its presence in the US piano market might have been historically important, what was its attraction today?

'You know, we're committed to the musical instrument market and our goal is to be the number one music and lifestyle company and the number one category in musical instruments in dollar revenue basis was pianos - for years and years and years. That has changed over the past five years and now guitars are the number one revenue instrument, but pianos are still number two, so if you are going to be in the MI market, you have to be a player in all the segments - and Yamaha is the example of that. And we consider ourselves not competing with Fender or other brand names - we're competing for the MI market: and Yamaha is the target.'

There is a pause for a momentary intake of breath as the scale of Henry Juszkiewicz's ambition for Gibson is stated, as matter of factly as if discussing the turn of the tides. Then the obvious question: but doesn't that entail competing with their electronic keyboard instruments as well?'

'Yes, it does.'

So what about the synthesiser market? Did any of those manufacturers come along as part of the Baldwin package?

'We had already purchased Oberheim, don't forget, so we're in that market, though we haven't chosen to do anything in it yet. Again, it's a question of how much you can do at any one time.

'Acquisitions of going, profitable concerns are definitely the way to go. Most of our acquisitions in the past were train wrecks - they're very time consuming and we've reversed the fortunes of some, but we have so many great opportunities that, so far, we have just picked the lower hanging fruit, so to speak.'

One acquisition that clearly doesn't qualify as a train wreck is China's Dongbei Piano Group, which Gibson purchased in December 2006. Dongbei already makes some Baldwin pianos and is the second Chinese piano manufacturer the company has acquired, the first having been bought in 2004. How big does that make Gibson in the piano world?

'It makes us the third largest piano manufacturer in China,' he says. 'So that's probably one of the top five in the world and we continue to expand our presence in that market and we aim to be number one.'

Leaving aside the Chinese market, in which Dongbei is already a primary supplier, what will that mean for the rest of the world. What is Dongbei's current export profile, for example?

'Dongbei already is a significant exporter to both the US and Europe, under the Nordiska brand in Europe.'

So what about Baldwin, which currently has no UK presence. Is that going to change in the foreseeable future?

'At this point, no, although it will most certainly be coming. It's too early to say how Baldwin will be distributed in the UK. We will preserve the distribution relationships we have with Dongbei and so, most likely, the only change will be that we will be a little more aggressive, but eventually we will be introducing new brands and expanding distribution'

Speculation persists that Baldwin is, however, on its way "over here". Watch this space for news.

Given his background in electrical and mechanical engineering. it is no surprise that Henry Juszkiewicz has been a champion of high-tech - notably by personally driving ahead the digital Les Paul, which was officially unveiled, as the HD.6X-Pro, at last month's NAMM show.

It's hard, though, not to wonder if he might be following Gibson tradition a little more closely than he might relish. The company was once famed (or notorious, take your pick) for launching ideas way ahead of its time - think of Firebirds and Flying-Vs, doomed to insignificance in their day, only to be hailed, years later, as triumphs. At NAMM, the attention battle was won by Fender with its far less adventurous VG Stratocaster - a conventional, jack-socket equipped US Strat with onboard Roland-designed modelling. Gibson, meanwhile, had gone the full distance with its HD.6X-Pro - offering a Nashville-made Les Paul with hexaphonic pickups, a USB output and Cakewalk software. This was a guitar to plug into a computer - but has Juszkiewicz under-estimated the innate conservatism of electric guitarists? Given his background, it's no surprise that he is attracted by high-tech, but has he taken a step too far?

'I'm definitely a partial geek, but I'm also a great believer in progress, and I believe very strongly from a marketing perspective, that if you don't offer consumers new and better products, the company and the industry will languish. It is silly in this world that has a cornucopia of new technology, that you can't offer something superior and significantly better. That's true of any market and the guitar market is no different.

'What is different is that musical instrument makers haven't really invested in what is new and better. The acoustic piano hasn't really changed since 1920 and the last significant change was in the 1800s, so it's virtually a commodity now. If you're not in the industry, they all look pretty much the same - they're black...' he laughs. 'That's a lack of sensitivity to the consumers. They need something better - something to dream about. Technology is one way, there are others to get the consumer pulse going, but technology is one I feel very comfortable using.'

So what was the reaction at NAMM? What had Gibson's retailer customers made of the first Les Paul for the 21st Century?

'Well... I think it was modest. The reaction where it counts will be with musicians starting to use it. To me, what is more important is consumer reaction and the reaction of professionals - and that reaction has been pretty stellar. The industry tends to be very conservative to new things and this is very new and very different - and the new functionality it offers is looked at very cynically - but that's the history of the industry. The Les Paul didn't take off for twelve years, after all.

'I didn't expect a great rush of enthusiasm, it will require creative minds to appreciate its potential, to access its functionality and tame it. You get a hit song where the only way you can get those sounds is by buying this guitar and that'll be the catalytic moment - kinda like what helicopter sounds did for Korg - it sold a lot of keyboards.'

Given all the potential advantages of a truly digital guitar in terms of the processing that can be done, presumably it is only a matter of time before the increasingly interesting range of amps sold as Gibsons and Epiphones come with Ethernet sockets and digital processing?

'I will guarantee we're going to do that. There are some very interesting things happening with modelling - and it all comes under the heading of digital signal processing. Most things that guitar players do tonally, once the signal leaves the guitar, is with DSP, or a tube. All your stomp boxes are actually little processors with little programmes in them - modelling stuff is digital, there are powerful digital signal processing algorithms and once something is already digital, you can apply those algorithms multiple times, in really dramatic ways to get a very different musical composition.

'I like to draw this analogy: last year, we were mono and this year we're surround. Last year we had 16 colours, this year we have 16 million. It's happening in all areas and it's time for the music world to catch up. It's hard and it's different but there's a big payoff. Look at the way digital cameras are selling today. This is the first step in that direction in the music world and, just like the first digital cameras, where it wasn't immediately clear that anybody would want them, it will be the way forward.'

Is there not a sense, though, that we have been here before, with digital keyboards? And hasn't music fashion shown that people actually preferred to go back to electric guitars and tube amplifiers, effectively abandoning technology? Alternatively, what is to stop fashion switching right round again and heading back to keyboard-dominated music?

'What happened with keyboards was that this wonderful new technology was introduced, called MIDI and what MIDI did was it removed the controller from the tone generator and basically what that meant was you could have one keyboard and thousands of different sounds. It used to be you had a keyboard and you had one sound. MIDI, plus some new synthesis technology, started introducing musically relevant options to the keyboard player and virtually every three months a new keyboard would come out that had better something. During that period, the industry grew at better than 30 per cent. I remember in 1986, the saying was that everything would be electronic - the guitar was a Dodo - remember that? Let's just say the talk of death was a little premature.

'What was happening was that the technology was able to offer better relevant stuff, like polyphony - but eventually what happened as that technology continued to progress, but there was nothing in that technology that really benefited the players - you only have ten fingers, after all! Once you're able to play 16 sounds simultaneously, having 20 sounds doesn't do much for you. Technology as the provider of musically relevant innovations topped-out. The next model keyboard wasn't really that much better and you have to deliver something tangible and usable to musicians - not just smaller circuits, or lower power use or things like that. Technology gave its all and now there's nothing new, so people went back to the old. For that to come back in the market, you have to give the user something they need, not just a catalogue bullet point - something real with musical validity.'

It's easy to forget, amid the excitement surrounding the digital Les Paul and what it might mean for players, to momentarily forget that Gibson is still one of the primary manufacturers of acoustic guitars, so it is just as relevant to ask Henry Juszkiewicz how he plans to handle shrinking supplies of tonewoods, as it to ask rivals like Bob Taylor and Chris Martin.

'Well, we can carry on making acoustic guitars forever - but it's how we carry on that needs planning and foresight. We've been very aggressive in supporting environmental causes and we believe as a business one should be part of the solution, so, yes, there is scarcity and a lot of it was needless. We need to be good stewards and if we do so, we will perpetuate the resources, so we are working with the Rainforest Alliance and Greenpeace and other people in attempting to introduce sustainability and good stewardship practices. Ultimately, the more people there are and the more instruments are made, the more they will strain the resources, so there is a limit but there are so many things that can be done that aren't traditional, but still make a great guitar - different fast-growth woods and manmade materials, for example. So there's no doubt in my mind we can produce a superior instrument forever - the issue is a marketing issue, because some people have a fixation with Brazilian rosewood, for example. But it's not the only wood and we have to work with our customers and show them the alternative materials and technologies that can be utilised.'

As Gibson continues to expand and grow, inevitably, the question arises of the way it distributes its diverging brands in Europe. As yet, Baldwin, and the newly acquired Wurlitzer, aren't sold here - but that is going to change. So, eventually, will the company follow the Japanese giant it is chasing and take control of its own distribution?

'I think times have changed and we have already integrated in some countries. Europe once had very serious borders. To go across the French border to Switzerland or Germany in a car was quite an ordeal and you could ship a truck from France to Germany and it could stay there for three weeks. There were different duties, currencies and so on and the old model of distribution was really optimised for these nation states, but things have changed. You now sail across the borders at good speed. The world has changed and cost is a burden that people avoid. Europe, ultimately, is a very small place and while, in the old model, you would have a sales force in every country, a warehouse in every country, a buyer in every country - all these are administrative burdens. If you eliminate 20 or 30 warehouses and can still deliver within 24 hours, then that's what is going to happen, regardless of our policy or strategy. No one is going to bear a cost that does not have to be borne. It doe
sn't add value to the consumer, so while we still work with distributors, I've told them: the way the world is going, you guys have got to look at your value added proposition, because you're clearly an added cost and that cost in many cases will not be justified.'

So one day in the future we might see Gibson distributing directly across Europe?

'That's very possible. You can see it now in France and Italy and Spain and a couple of other countries, It has to happen and it's a question of when, with a lot of individual issues to be tackled, but you can't stop the wheel of progress.'

Given the problems facing many retail businesses in the UK, and particularly given Henry Juszkiewicz's undoubted gifts as a business turnaround specialist, can he offer any advice to readers who might currently be finding the going a bit tough?

'The number one golden rule is to focus on your consumer and concentrate on that consumer's experience - that always works and rarely is it done. You have to be 100 per cent objective in
servicing what that consumer wants and sometimes they don't tell you in words. They may say they want a less expensive guitar - they a say a lot of things - but in practice they have a value system and meeting their inside needs always results in a successful business.

'The second thing is to always reinvent yourself. The day when you can do the same thing and die doing it is over. It's over. The competitive climate changes, the regulatory climate changes, technology changes. You should wake up every day and say "how am I going to be better and improve and make more money?" Those people that do that will always succeed.'

And finally, who better to ask than a business visionary, where his business will be in five years time? What will UK retailers' experience of Gibson be like in 2013?

'We're going to be much bigger. We're going to be exciting more consumers and because we excite consumers about our brand, I think we energise our competitors to match our efforts and through that, the excitement level of the marketplace improves. Ultimately, what we in the music business do is compete for leisure time. We're not competing with Fender and Martin, we're competing with Nike and football and skiing or concerts - and if we don't offer more exciting propositions, our industry is going to suffer.'

And with that, he was gone. In the end, it became clear why Gibson had so few carefully posed corporate-blah style pictures to offer us. Henry Juszkiewicz simply doesn't stand still for long enough.

Ends.

2007 Gary Cooper