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- [00:01]
Hannah Bates
Asana is the number one AI work management platform. It's where work connects to company goals so your entire organization can move forward faster. Try for free today@asana.com welcome to HBR on leadership, case studies and conversations with the world's top business and management experts hand selected to help you unlock the best in those around you. You. In the early 20th century, Helena Rubinstein defied gender, class and cultural expectations to become one of the first pioneers of the modern beauty industry. Today, her namesake luxury cosmetics brand is worth more than $1 billion. Harvard Business School professor Jeff Jones wrote a case study about the visionary leader titled Helena Rubinstein Making up the Modern Woman. He explored her journey and the lasting impact she made on global beauty standards. On cold call in 2019 with host Brian Kenny.
- [01:09]
Brian Kenny
I thought this was a very interesting case. I think the business history part of what we do here at Harvard Business School probably doesn't get enough visibility and it is always some of the most interesting content we come across here because it seems like the more things change, the more they stay the same. And these lessons that you and other business historians here are writing about are still highly relevant today. So I think people enjoy hearing about Helena. Let me ask you to start just by telling us what led you to write this case.
- [01:35]
Jeff Jones
Well, as you mentioned, I teach and write about the history and impact of global capitalism. And Helena Rubinstein is a perfect case in that story for a couple of reasons. First of all, she is a remarkably global person who moves from Europe to Australia, back to Europe to the United States. And she's a remarkable entrepreneur. She's on many people's lists of probably the best female American entrepreneur of the 20th century. So she's an amazing person. And the industry she's in is really an amazing lens to view the impact of globalization. If you go back to the early 19th century, what people thought was beautiful or good looking varied enormously across the world. By the 20th century, what people consider as beautiful has been incredibly homogenized. And people like Helena Rubinstein are central actors in that transformation of the concept of beauty.
- [02:42]
Brian Kenny
Yeah, she was very, very interesting. Tell us about her background. What was her childhood like?
- [02:46]
Jeff Jones
Her childhood is in a Jewish ghetto in Poland. She was born Shadja Rubinstein. Poland then is part of the Russian Empire. It was poor and Jewish ghettos were even poorer. And she doesn't stay there very long. She emigrates first of all to slightly more prosperous Vienna in Austria, then to Australia where she builds a business. Then she moves to London and Paris and then in the middle of World War I, she moves to the United States where she creates one of the very first US based luxury beauty brands.
- [03:26]
Brian Kenny
Coming from her family background, you probably wouldn't have expected this. She was an Orthodox Jew.
- [03:32]
Jeff Jones
She was an Orthodox Jew, but from the very beginning she was a very rebellious Orthodox Jew. She's one of eight sisters, but she was the one who really declined to assume her expected role. She avoided domestic chores, she wouldn't do what she was told. And then when her mother tried to fix her up to marry an older Orthodox man, she just had enough and she refuses. And she went to Australia, which was just about the opposite of the world where she could go. She was a woman who wanted to decide her own destiny, which was unusual for those times.
- [04:10]
Brian Kenny
Obviously women were in a very different place back then than they are today. Right.
- [04:15]
Jeff Jones
Well, nowhere could women even vote, even in the most developed industrialized countries. And she's coming from a highly socially conservative background where the voting was the least of the restrictions on her.
- [04:30]
Brian Kenny
Going to Australia turned out to be a pretty pivotal thing for her. That's where she first dipped her toe in the water of beauty and the cosmetics industry. Can you describe how that came to be?
- [04:39]
Jeff Jones
Well, Helena Rubinstein, after a very long ocean voyage, ends up in this tiny rural village in Australia and she can't even speak English. And the place was, funnily enough, not a bad place to start in cosmetics. Firstly, it's very hot, with very hot suns, so you can imagine that women in that town will have had quite parched skins. Secondly, one of the basic ingredients of skin cream, lanolin, is naturally the oil of sheep that they automatically make. So she was in a place full of sheep, so you have a perfect supply of raw material. And then she had the most amazing capacity for imagination. Quite soon after she arrives, she has started to to spin a story that she brought with her 12 bottles of cream made by her mother, which is most unlikely because it couldn't have survived the sea journey. Then she spun a story about the nature of that cream. She called it Vousez, which she described as a Hungarian word for gift from heaven. Actually no such word exists in Hungarian, but it sounded very good. And if you were like a rural person in Australia, it would sound exotic and good. And that's what the beauty industry is going to spend the next 150 years doing. Coming up with exotic sounding creams with secret ingredients which keep you young. So she hit very quickly on the formula for success.
- [06:19]
Brian Kenny
Yeah, and her marketing instincts obviously were innate because she started to think about things like packaging and how things looked and even the notion of creating a word that had an exotic sound to it. That's all the roots of marketing.
- [06:31]
Jeff Jones
Absolutely, the roots of marketing. But the time she was doing it, there was no textbook saying, that's what you do. So she is actually making the rules up, which are now sort of ritualized, institutionalized in the cosmetics industry. But people forget that it all began with her.
- [06:48]
Brian Kenny
So this was in the early 1900s. I think it was around 1905, when she went to Australia. I might be a little off on that, but can you describe, was there a beauty industry at that time?
- [06:58]
Jeff Jones
Yes and no. What we know is that people had been using adornments of one kind or another to make themselves attractive for thousands of years. At least. The rich people, most people can't afford that. It was essentially a craft, like cooking. People made things in their kitchen, maybe like Helena Rubinstein's mother, or they had their servants make them. What happens with modern industrialization getting going in the 19th century is that it starts slowly to turn into an industry with brands, an industry where specialists actually make these things and sell them. It's still very slow. And one of the problems which you mentioned is that the use of cosmetics by the 19th century was rather closely associated with gray areas of life, whether actresses or prostitutes. Wasn't really very respectable.
- [07:58]
Brian Kenny
What gave her the insight to sort of, you know, I guess the courage, even for a better word, to take this to Europe?
- [08:06]
Jeff Jones
Well, I think she kind of seen the future in Australia, and she's a very fast learner. So when she leaves the village, she moves to the biggest city in Australia, then Melbourne, and quickly recognizes there's a lot of money to be made in services as well as in products themselves. So she sets up a salon. She realizes very quickly she can make a great deal of money. As I think the case mentions, she sold products at eight times their cost, and she's already made a great deal of money in Australia. But Melbourne, by global standards, is small. London, the financial capital of the world, Paris, the fashion capital of the world, are the big time. So this I go back to saying she's an ambitious person who's not going to be constrained by her circumstances. So I think having proved in Australia that she could do it, she's off for the big time.
- [09:06]
Hannah Bates
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- [10:16]
Brian Kenny
How did she scale the organization back then? I know she brought her sisters in. She was loyal to them.
- [10:22]
Jeff Jones
This is an industry where you need control and you need trust. And so using the family was very good. She also met a guy, Titus, who she marries and he's actually a marketing genius in many ways. And he comes up with lots of ideas like she should call herself Madame. So she is able to rely on other people who are close to her anyway, both her husband and her sisters, to expand more than she can. But she is a woman of enormous energy. As two, she has a couple of kids in Europe, but she doesn't apparently spend much time with them at all because she's working and traveling all the time. Before she moves permanently to Europe, she travels there from Australia. She looks at some work of scientists or dermatologists we would call them now. So she's a bundle of energy, always.
- [11:17]
Brian Kenny
Always active, and she starts to develop her own personal brand around this. You mentioned the Madame thing. She demanded to be called that. I think the case said that she went by that name.
- [11:26]
Jeff Jones
Madame is very important because at this time the only luxury brands in the global beauty industry came from France. So by the middle of the 19th century, some of the perfume companies, which was already a luxury industry, have gone into cosmetics and other beauty products. It was the cachet of Paris that made these products luxury products. So giving herself a name, first of all called Helena and then Madame was part of the key of creating a product associated with luxury, not associated with actresses, for example. So it's quite a carefully executed strategy. She's in the business all the way through building aspirations, right from Australia. She links with journalists, she links with opinion makers. And by the time she is in Europe and later in the United States, she's linking with the leading artists, Pablo Picasso and whatever. So she's always building aspirations. But she's interesting because other people build aspirations. But another plank of her strategy was to build the so called scientific basis of her brand. So she comes up extremely early with the idea or the phrase beauty as science, and is increasingly claiming that she's engaged in deep scientific research to make you beautiful as well.
- [12:55]
Brian Kenny
And again, she was to some extent spinning the scientific side of things. The case alludes to the fact that she didn't actually study this in the way a scientist would.
- [13:05]
Jeff Jones
Absolutely not. And this is something that increases over time. By the 1920s, we have a bunch of photographs of her in a laboratory with a white coat. I mean, this is many of the ways in which she pioneers the modern beauty industry, because a whole stream of subsequent brands are going to go exactly down that route, that they're scientifically based.
- [13:27]
Brian Kenny
So in a number of ways, she was really ahead of the curve. If you think about the influencer strategy that she had or the sort of celebrity strategy that she used by aligning herself with public figures, then she goes to the United States and really that's when things start to take off in a big way. Can you talk about her experience arriving.
- [13:43]
Jeff Jones
In the U.S. she arrives in 1915 or 1916, that's before the United States entered the war, and immediately starts building a story that she was this famous European beauty entrepreneur. And now she's taking all this story of what she'd done to the United States. New York, where she sets up, is well down the curve of people using beauty products. And it's very affluent. You have a good making of a good market there. The, the challenge is that up to then, Americans primarily considered domestic brands as mass cheaper brands. When they bought a luxury brand, they bought something that had been imported from France. Her challenge or her opportunity was to build an American brand that was a luxury brand equivalent to French brands. And she sets off very soon doing precisely that. Again, she's very focused initially on salons because first of all, building salons gave her a distribution channel so she didn't have to sell through other means. Secondly, she could create the environment in which people purchased her products. So she started filling these salons with avant garde art and other things, and all designed to make the Tokel experience one of affluence and aspiration. And she does that very well. Thirty years before, beauty salons were places of ill moral repute. By the 1920s, they are these like luxury places where affluent women are proud to see going and spending hours there. And they paid enormously for all the services that she provided, which were increasingly sophisticated and they brought her products. So she really uses the salon to shape the brand and to give it the signals of affluence and luxury that she was trying to create.
- [15:50]
Brian Kenny
Now, she wasn't the only one in town doing this, though, in New York. Right. She had somebody that she had to compete with. And you talk about the powder wars in the case. Can you talk about that?
- [15:59]
Jeff Jones
A few years before, Helena Rubinstein had turned up. A lady called Elizabeth Arden had turned up. Elizabeth Arden, like Helena Rubinstein was not born Elizabeth Arden. She was born Florence Nightingale Graham on a farm in Canada outside Toronto. Not affluent at all. She moves to New York, works in somebody else's beauty salons, quickly realizes the potential of the market. 1909, changes her name to Elizabeth Arden, and she starts down the path of also building a luxury brand. She also starts to build salons. She had quite a different concept of luxury. So they have two different views on life and they come to hate each other. Oddly, although their salons and actually their homes were very close to each other in New York City, they never actually meet, but they do say horrible things about each other and indeed becomes known as the Powder Wars. Both of them, you could say, are equally influential in creating American luxury brands. That's where it begins with these two women who hate each other, compete with each other, and just have different visions of. Of beauty, just different personalities. Yeah.
- [17:21]
Brian Kenny
That's remarkable that they never met. I think that's amazing.
- [17:24]
Jeff Jones
Yeah. Yeah.
- [17:25]
Brian Kenny
We're now getting up to the period of the 1920s, in fact, leading up to the stock market crash. But prior to that, she strikes a deal with Lehman Brothers. Can you talk about what happens from there?
- [17:35]
Jeff Jones
Our case is actually interesting because we were able to find archives in Baker Library here at Harvard Business School, which showed for the first time what really did happen at some stage. 1928, she decides to sell part of her stock to Lehman Brothers. Lehman Brothers at this time is building up a consumer products business. It's often described as her selling the whole business. Actually, she didn't sell the whole business. She sold part of the American business. She kept her other businesses. And it remains unclear why she did that. She wrote that she was trying to keep her marriage. Other people believe that she sensed the US economy was in a bubble, and this was a really good time to cash out. And cash out she did. She makes a great deal of money selling to Lehman Brothers, and within nine months, the stock market crash had occurred. Lehman Brothers didn't really understand the beauty industry, so in the meantime, they'd managed to roll out her brand in all sorts of places. And when the stock market crash occurred, that turned out to be a problem, because although industry sales went down a bit, what did happen was a massive flight to quality. And he Lena Rubinstein brand sales shot down. Famous, often told story. She starts buying back her shares at a dramatically reduced price. She basically, by 32, 33, has got control of the company again, has probably made a profit in our terms of about $100 million from that business.
- [19:20]
Brian Kenny
Wow. Does her influence carry over to the industry today because you continue to study the industry?
- [19:27]
Jeff Jones
I think she created some of the most basic fundamentals of the skincare industry today, which is so amazing about her. We've already talked about the medical claims. She already comes up in Australia with the idea that human beings have different skin types. Oily, dry and everything else. And that's still a feature of the skincare industry now, even though it's not particularly true in any useful sense of the word, she is also the one who really builds into the industry. Fear of aging. As a selling point, she consistently lies about her age when she emigrates to Australia. She already claims she's 20 when she's 24. And from then on she lies consistently. She's obsessed with age and she's convinced fear of aging is the way to sell her products. And absolutely, that's still a dominant theme in the beauty industry. So yeah, I mean, she is, I think it's fair to say, the founder of the modern skincare industry. And the principles she established are still with us now.
- [20:35]
Brian Kenny
I think about every time I walk into a department store and I see the clerks behind the cosmetics counters with the white robes on. I mean, that was something that she influenced back in the early 1900s.
- [20:45]
Jeff Jones
Absolutely. I mean, she also invested very heavily in training salespeople in department stores. That's one of the things she realized that each one of those were brand ambassadors for what she was selling. So they all told the same story and they all looked the same control. She always made sure she controlled her brand, which we know is also the key to luxury branding now.
- [21:07]
Brian Kenny
Yeah, yeah, she was really ahead of her time on all those things. You've discussed this case in class. Any interesting insights, particularly from this generation of students who have grown up wearing makeup?
- [21:16]
Jeff Jones
I think it's fair to say in the MBA classroom, she's a very contested figure. Some MBAs will emphasize that she is an absolutely brilliant female entrepreneur. She's rags to riches story. She's the founder of modern skincare industry. She creates an industry which employs hundreds of thousands of women people working for her in salons, department stores, all the rest of that. Some people will argue too that the products she created are big pluses for female consumers. And the reason is that they give women choice and they provide confidence. And confidence is something that's very hard to find and something we want to give. That's what she's doing. That's a very compelling case. But at some point in the discussion, people will start noticing what also she's doing. As I said, she is the pioneer of fear of aging. She is basically saying that a woman in particular, although she was interested in the male market, she mainly sells to women by about 30, has to spend the rest of her life fighting against aging and disguising it. And that's an extremely distorted view of what beauty is. She is a source of pressure that have been put on women because of the cosmetics industry. And then of course, Helena Rubinstein builds her career by lying. She lies about her mother's cream. She lies about her medical qualifications. She lies about her age. And you know, the more cynical students, including someone who worked in the beauty industry, say that it's an industry which is very casual with the truth and its claims. So I think it's very contested and that's true of the beauty industry on the whole. It is an industry which has given people a lot more choice how they look. It's an industry which when you put skin cream on, you can face the day in a more confident way. But it's also an industry that takes confidence away, away from people if it's too restrictive about how it defines beauty. And Helena Rumstein was restrictive about how she defines beauty. She's not saying some 60 or 70 year old woman is beautiful. She's saying you've got a problem and you've got to fix it. I think that's why she rages a lot of discussion in the classroom and it's not an easy, it's not a black and white situation. Which way you fall about her.
- [24:02]
Brian Kenny
Yeah, like so many of our cases, really interesting insights. Thank you, Jeff, for joining us today.
- [24:07]
Jeff Jones
Great pleasure. Thank you.
- [24:13]
Hannah Bates
That was Harvard Business School professor Jeff Jones in conversation with Brian Kenny on Cold Call. We'll be back next Wednesday with another handpicked conversation about leadership from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify or wherever you get your podcasts. While you're there, be sure to leave us a review. And when you're ready for more podcasts, articles, case studies, books and videos with the world's top business and management experts, you'll find it all@hbr.org. this episode was produced by me, Hannah Bates. Kurt Nickish is our editor. Special thanks to Ian Fox, Maureen Hoch, Erica Truxler, Ramsey Kabaz, Nicole Smith, Anne Bartholomew and you, our listener. See you next week.