Warby Parker’s co-CEOs explain how they manage their successful partnership

But before her conversation with Gilboa and Blumenthal begins, Lev-Ram takes a few minutes to introduce the podcast’s next host, Diane Brady. A longtime business journalist, Brady is the senior editorial director of the Fortune CEO Initiative and the executive director of Fortune Live Media.

Listen to the episode or read the transcript below.

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Transcript

Diane Brady: Leadership Next is powered by the folks at Deloitte who, like me, are exploring the changing roles of business leadership and how CEOs are navigating this change.

Michal Lev-Ram: Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Michal Lev-Ram.

Brady: And I’m Diane Brady.

Lev-Ram: I’m very excited to say that Diane is going to be taking over Leadership Next in a few weeks. So welcome, Diane.

Brady: Thanks, Michal. It is a joy to work with you and you are an extremely hard act to follow as well.

Lev-Ram: I thought it would be a good opportunity for you to come and introduce yourself and tell us, what do we need to know about you?

Brady: Well, I am new to Fortune. I am the executive editorial director of the Fortune CEO Initiative and Fortune Live Media. But I’ve been a journalist my whole life, Michal, since the age of 15, and the greatest joy is interviewing people. So I’ve interviewed a lot of leaders, a lot of newsmakers, and it’s very exciting to me to have this incredible platform that you and Alan have both done a terrific job with.

Lev-Ram: Well, I am super excited to listen to future episodes and hear you continue to ask questions to some of the world’s most impactful leaders. So, speaking of which, our guests today are the two co-founders and co-CEOs of Warby Parker, Dave Gilboa and Neil Blumenthal.

Brady: I want to interject with one quick thing. I’ve always been fascinated with co-CEOs because to me, leadership, it’s often like Highlander, there can be only one. And I have vivid memories of the Research in Motion [now called BlackBerry] guys, Jim Balsillie and Mike Lazaridis, who were co-CEOs, talking to them saying, How do you divide your duties? [They were] like, Yeah, whatever he doesn’t want to take, I take. And I think we know what happened to BlackBerry and yet Warby Parker, they’re still at it.

Lev-Ram: We definitely addressed it and I agree with you. You know, in most cases that we’ve seen in the corporate world, the co-CEO model has not worked. SAP used to do this as well. No longer.

Brady: Oracle.

Lev-Ram: Yeah. And a lot of them end up kind of walking away from that model. So, you know, it works for Warby Parker. So people will have to keep listening to hear why. But just a little bit more on the company. I know everybody’s familiar with the brand today, but this started as a business school project. These guys have two other co-founders. They were just fed up with what they say were overpriced glasses and they tried to modernize by cutting out the traditional middleman in the process. And by doing so, they’re able to offer glasses for around $100, which is a big savings for a lot of people. Although this business started as a purely online play, they now have some 250 retail stores and growing. And so this, what started as a tiny startup and an online only play has in some ways become like the incumbents today. So, without further ado, here is our conversation with Dave and Neil.

[Interview begins.]

Thank you so much, both of you, for joining us. This is a treat. I want to start by asking you just a little bit about the evolution of Warby Parker. It started mainly as an online retailer and you have, I understand it, 250 stores now, 250 locations. Neil, I’m going to start with you and get both of you to chime in on this, but explain the strategy and how it’s evolved over time.

Neil Blumenthal: Sure. So Dave and I and our two co-founders, Jeff [Raider] and Andy [Hunt], we started Warby Parker back in 2010. We were all full-time MBA students at Wharton and were frustrated by how expensive glasses were and the fact that the shopping experience was pretty subpar too, to be frank. And we thought that we could launch a brand that had big impact, that could be beloved, and that could sell glasses for a fraction of the cost. And we thought that the best way to do that was to launch a website and sell directly to consumers online. Back in 2010, this was a period where a lot of ecommerce was just getting started. People started to sell engagement rings and sneakers through like Zappos and Blue Nile, categories we take for granted that are sold online. But back then it was very novel. We thought people were going to make a lot of money selling glasses online. Why couldn’t it be us?

And so we launched the company. We got featured in Vogue and GQ. The company took off like a rocket ship. We hit our first-year sales targets in two weeks, sold out of our top 15 styles in four weeks, had a waitlist of thousands of customers. And one of the things that we had was this home try-on program where we shipped people five pairs of glasses [and] they had five days to try it on at home. Well, within 48 hours we ran out of inventory for that home try-on program. So people start calling up and saying, Hey, can we come in to your office to try on glasses? And we weren’t working out of an office because we literally had just started the company. We were working out of our apartments. We invited some people to come in. We laid the glasses on the dining room table. We moved a mirror close by. We had Dave’s laptop out so people could check out using our website, and we sold a bunch of glasses out of our apartment.

And then we when we moved into an office, we set aside a portion to it to be a showroom. Suddenly we were selling $3 million worth of glasses out of our office and we’re like, Oh, maybe we should open a store. We opened a pop-up store. That did super well. We opened a permanent store. That did super well. Suddenly we were like, Oh, maybe we should open a few of these, maybe in key cities, and that will help raise awareness, build the brand, help grow the ecommerce business. Suddenly we had 25 stores. The stores kept doing incredibly well and we just kept opening and opening and now we have 250 stores across the U.S. and Canada.

Lev-Ram: Crazy. Dave, do you miss those days or you do get nostalgic talking about the early days?

Dave Gilboa: Yeah, those early days were incredibly exciting, scary. It’s kind of the, every day had a roller coaster of emotions, but there was this really exciting, frenetic energy. And we knew that we had the opportunity to create something really special and to get that early validation and feedback from customers who were really excited by what we were building was very encouraging. And I remember falling asleep every night with a laptop on my chest, just responding to customer emails, trying to process orders, trying to just kind of keep up with volume. And having our wives or a girlfriend at the time, our cousins, brothers and sisters, anyone that had a free moment to help us keep up with demand and try to serve these early customers that were really taking a bet on us as a brand new company and a brand new brand. And yeah, we probably get a little more sleep these days, but it was, yeah, a really exhilarating way to kind of launch a company.

Lev-Ram: I can only imagine and this was definitely a brand that just kind of seemed to come out of nowhere and totally just explode. So I can only imagine what it was like on the inside. But it sounds like this kind of hybrid strategy of both online and brick and mortar was kind of baked in from the beginning, but evolved over time, right?

Blumenthal: Absolutely. The basic premise was that glasses shouldn’t cost four or $500. So we thought that by selling directly to customers, we could cut out the middleman. So right, typically an optical shop or an optometric practice, right, is buying frames and lenses wholesale and then marking them up three to five times. So we thought if we designed the frames we loved, we produced them, and then sold them directly to customers, that’s just one less hand in the cookie jar. And we could sell the same quality but at a fraction of the price. So, $95 instead of $400 or $500 and that clearly sort of really resonated. And we always kind of used ourselves as a litmus test as, Hey, is this what we would want as consumers? And that was sort of the guiding principle in building the business.

Lev-Ram: Yes. And I should note that you are both wearing glasses. So clearly, both still customers.

Blumenthal: Absolutely.

Lev-Ram: So, do you consider yourself, do you consider Warby Parker a low-cost brand? How did you think of it and of the messaging from the get-go?

Gilboa: Yes, we’ve always thought of ourselves as a lifestyle brand that stands for fun, creativity and doing good in the world. And we wanted to set out to design products that we would want to wear as consumers but offer a fair price point and convenient shopping experience whether that was online or offline and give customers choice. And [we] found that it’s a category that most people need, so a majority of Americans need glasses, but it’s a product that historically hasn’t had much transparency around it. The vast majority of glasses are sold at the same place that someone gets an eye exam, where a patient gets an exam and then they are forced to exit through the gift shop. And there’s a lot of handholding around the purchase process for glasses. They typically don’t have prices on them. Customers are sort of upsold on different lenses and coatings. They don’t really know what they’re buying and all of a sudden they have a bill for $500 or $600. And we think that glasses, they clearly need to serve a health need, but we think that they should be a great fashion accessory as well. It’s one of the only things that people wear on their face. And our thesis was that if you could dramatically bring down the price of glasses and make the shopping experience fun, that people could think of glasses the same way that they think of other consumer products like sneakers or handbags and use glasses as a form of self-expression. And so we really set out to engage our customers in a different way than the rest of the category and really thought from first principles around how we could serve consumers in better ways than they were being served with existing options.

Lev-Ram: And Neil, what other insights did you guys have earlier on, on creating like you said a lifestyle brand? So there’s the cost piece, which obviously was very, very attractive to consumers, especially because this was just an industry ripe for disruption, given everything you guys said and kind of the opaque nature of some of the economics and the need for disintermediation here. But when it comes to creating like a brand around it, and I know it was a lot of word of mouth initially, did you start out with some insights of how to help build that?

Blumenthal: Yeah, you know, building a brand is super time consuming, right? Especially an authentic brand, an authentic brand needs to have a lot of details associated with it because in the age of the internet, you can’t hide, and people are curious and they ask why, why, why? So you need a reason for everything that you do. So we spent a lot of time sort of thinking through what is it that we’re trying to accomplish? What is our vision and mission? How are we going to achieve that? What are our values? What is our sort of voice? What do we, what do we want to convey to the world visually? How would we represent ourselves? And, right, the way that you do that is you sit in a room and you start doing different exercises. If we were a car brand, what brand of cars we would be? If we were a denim brand, what denim brand would we be? And sort of talking that through. What are adjectives that describe who we are? These are what led to sort of a rather robust brand architecture and that then enabled us to sort of come up with a proper visual identity.

And then a name. Naming is actually one of the hardest things that we did. We actually came up with 2,000 different names. But one of the things that we sort of went through in crafting a brand architecture is there’s a literary heritage to Warby Parker, because there is the tie between vision and glasses and reading and writing, right? What do you think of when you see somebody wearing glasses? Right? It’s often that stereotype of, right, somebody reading or writing or somebody with a book. We were very inspired by the eyewear that our grandparents wore in the forties and fifties. That inspired our first collection. We were inspired by the social ethos of our parents who came of age in the sixties and were influenced by the Beat Generation writers like Allen Ginsberg and Jack Kerouac. So one day while we were working on our brand architecture, Dave happened to go into the New York Public Library, the main branch on 42nd Street and Fifth Avenue in New York, and there was an exhibit on Kerouac. And they had all these unpublished journals of his, and there are these two characters, Warby Pepper and Zagg Parker. There was like a light bulb went off that these are sort of like interesting names that, you know, could encapsulate what it is that we’re trying to do.

Lev-Ram: Neil and Dave was not a runner up?

[Laughter.]

No? So do you guys remember and can you share, not all, but just maybe a few of the 2,000 names that didn’t make the cut?

Gilboa: Yeah, we often joke, but there’s a lot of truth to it that kind of finding a name that we all like, between the four founders, was the hardest thing about starting a business. It took us about six months, went through 2,000 names, including whole categories of mythological creatures from different cultures to, you know, different types of animals, and I remember, yeah, we kind of went down a rabbit hole and kind of, a bunch of different dolphins at one point. I’m Swedish and there’s a word, lagom, that doesn’t have a direct translation to English but kind of means not too big or not too small. It’s kind of just right. It’s kind of, we talked about that concept for a while, but yeah, nothing kind of landed until we came across these Jack Kerouac journals and then it was a pretty quick decision from there and the URL was also available for $10 which was…

Lev-Ram: That always helps.

Gilboa: A nice plus.

[Music begins.]

Alan Murray: I’m here with Jason Girzadas, the CEO of Deloitte US, the sponsor of this podcast. Thanks for sponsoring it. Thanks for joining me, Jason.

Jason Girzadas: It’s a pleasure to be with you, Alan, and our privilege to sponsor this important podcast.

Murray: Well, it’s great to have you. This whole notion of generative AI has really exploded onto the scene and into our consciousness in the last year. It’s the fastest introduction of a new technology in history. How do business leaders deal with that and how do they separate the hype from the opportunity?

Girzadas: It’s a great question, Alan. The hype is real, but we also think the opportunity is more real and in fact an imperative for all businesses. The opportunity right now for businesses is around taking advantage of generative AI in other digital technologies for efficiency and productivity gains, with the belief they will continue to evolve and mature, such that there’s other opportunities for value creation in new disruptions and innovations that we haven’t even seen the possibilities of. The challenge is to balance this opportunity. As a result, businesses have to diversify their approaches. It’s a CEO-level priority, an understanding of where and how these models are being put to use in your business operations. What are the controls put around data and data quality? As well as ensuring that the models are tested and actually validated like you would do any other customer-facing or highly sensitive system in an enterprise environment.

Murray: Jason, thanks for your perspective and thanks for sponsoring Leadership Next.

Girzadas: Thank you.

[Music ends.]

Lev-Ram: I’m curious to hear, one of the other things you guys really innovated on is the tech side, obviously, and just want to know more about what your strategy or approach has been there. Like how have you decided over the years this is what we’re going to build, this is what we’re going to buy or partner on, like when it comes to point of sale or at home testing, online testing the app like just various things? What’s been your approach?

Blumenthal: Yeah, so when we were actually working on the brand architecture, we thought a lot about what type of company are we building and what communities are we part of? And we thought we were sort of part of the sort of fashion design retail world, right? We were making fashion product and accessory eyewear. We thought that we were part of the health care world because eyewear is also a health product, right? It enables you to see. You need a prescription to get eyewear, prescription glasses. And we thought we were part of the sort of tech sector because we were going to use technology to just make the process of buying glasses as easy as possible, right? Primarily selling them online so you could buy them from the comfort of your home. We also, from day one, had committed to providing a pair of glasses to someone in need for every pair that we sold through our buy-a-pair-give-a-pair program. So, we also viewed that we were part of the social enterprise world.

From sort of considering ourselves as a tech company was always, Hey, is there technology that we can build or buy that will make sort of the shopping experience better? And what we found was that often when we would build stuff ourselves, we would do it better, faster, cheaper. Now, you know, fast forward 10-plus years later, you know, some of our thinking has evolved and we generally, when we’re making capital allocation decisions, build verse buy, it’s, hey, is there something out there that already exists? And you know, which is cheaper, either buying or building and is this actually differentiated? So we built our whole ERP from scratch, our e-commerce platform, from scratch. Now, Shopify wasn’t really available back then and we had some complexities in our business. We take prescriptions. Every order is custom. We have this home try-on program. So we had to build our platform from scratch. Similarly, when we started opening up stores, there really weren’t any great point of sales that could help us serve customers the way that we wanted to, to make sure that all of their information was available at the sales associates hands, so that way they could have a great experience. So we built that completely from scratch. When we were sort of looking in the market to help people find the right pair of glasses online, right, there was no good virtual try-on and so we built the first true-to-scale virtual try-on to enable people to see themselves wearing a pair of glasses and then buying them. In fact, when we sort of tested out what technology was available, you had to hold a credit card to your face in order to get a reference point to put glasses on. It was a really cumbersome experience. People actually didn’t look great with these like digital sort of V1 versions of glasses so it hurt conversion. So when we think about when we’re going to deploy capital to sort of build these tools, it really comes from a customer need. So there was a customer need to try on glasses online. There was a customer need to easily renew their prescription so we developed our virtual vision test that enabled people to download an app and do a simple vision test from their home.

Lev-Ram: Wow. So have you employed developers, engineers kind of from the get-go? And has that grown over time?

Gilboa: Yeah. One of the most powerful aspects of our business model being direct-to-consumer is we get so much data and so much feedback from our customers where we can understand where we’re really exceeding their expectations and serving them incredibly well, and where there’s friction in the customer journey and in the process. And, then we think about, okay, we’re, you know, hearing frustration from certain customers. And that often historically has come from services that we haven’t offered. So when we launched selling glasses online and didn’t have a way for people to update their prescriptions, we heard that from our customers that they loved the Warby Parker experience but what was really frustrating is having to make an appointment to see an eye doctor, even if they knew that they could see perfectly well out of their existing pair of glasses and when we kind of hear that consistently, it causes us to think, you know, are there ways that we can help solve that for customers? And over the years we’ve solved that particular problem in a couple of ways. One, we’ve opened stores and hired doctors that are conveniently located. But we also are always asking ourselves, is there technology that can help solve this problem in efficient ways? And if you think about what an eye exam is, a refraction visual acuity test, you walk into a room where there’s a chair that is a fixed distance away from a screen. Letters are displayed on that screen and you kind of indicate what you can see well and what you can’t. We said, Well, everyone has a screen in their pocket. If we can ask people to kind of place that screen somewhere and determine the exact distance and tell them exactly where to stand and display letters on that screen and ask them to kind of read out what they can see well and what they can’t and send those results to a doctor, they can review those results and write a prescription remotely. And so that was kind of an insight that enabled us to think about a completely new way for customers and patients to solve problems. And over the years, we’ve built a very capable in-house technology team, ranging from product managers to engineers to computer vision PhDs that we can deploy to improve the customer experience, to solve customer problems, to build novel technology that may not exist yet. And, in addition to that, integrate existing software tools that may be available. And increasingly we are focusing our internal resources on real innovation that is core to our customer experience and then working with a variety of other software platforms that can solve business needs that are not unique to us at Warby Parker.

Lev-Ram: So as someone who has been doing these vision tests that you just described since literally before I could read, have done many, many of them, the idea of doing this online and at home is amazing. But I want to ask you about just like how good have these gotten? And I know that in some states there have been issues, like in Kentucky where there was some kind of a settlement. What is that about? And tell us about just the state of how good that technology is and what’s still lacking.

Blumenthal: One of the things that you find with breakthrough technology is that there are those that embrace it and at times those that feel threatened by it. And we have found that in certain jurisdictions and certain states, there have been groups that have moved to limit telehealth and telemedicine that is proven to be safe and just more convenient for patients or customers, but maybe not in the financial interests of some incumbents. So, one of the things that attracted us to this industry was just how it operated and the fact that there was frankly, it was flush with opportunity. And if you look at the field of optometry, in particular, most of the income comes through the sale of glasses. And if you look at the optical industry, 80% of people buy glasses where they have their eye exam. And what customers would describe to us is going to get an eye exam and then exiting through the gift shop, right, and then spending hundreds of dollars for a pair of glasses. So the idea that someone might be able to more easily get a prescription and then be able to shop for that anywhere is quite threatening to lots of folks. So there has been resistance in certain areas where the belief that technology can help bring down costs, can increase access, can just make, frankly, most sort of industries, including those within health care, more competitive and lead to better outcomes for consumers and patients alike.

So we’ve kind of been viewed as a disruptor. You know, now I think people look at us and they might view as more as like an incumbent. And certainly we have lots of stores. We now sell contact lenses. We now have hundreds of doctors on our team. And we probably look a little bit more like the industry, except much lower price and better customer experiences. And just with scale that enables us to have more flexibility and provide more options to our customers and to continue to invest in sort of groundbreaking technologies.

Lev-Ram: I want to ask you guys just a couple of questions here on leadership and the fact that you’re co-CEOs, which hasn’t worked for some companies that have tried it, is still a relatively rare structure. I mean, we see it a little bit more and more here and there, but what do you think it is about your partnership that’s made it work and how do you kind of divide and conquer? Let’s see who answers it first.

Gilboa: I could start, but please feel free to chime in. Yeah, so we’ve had a co-CEO structure really since we launched the company. Even going back in time before that, while we were in school and kind of building the foundation that led to Warby Parker, there were four of us. We started off as close friends at school and we got really excited about this idea and we were all involved kind of as equal partners. We didn’t have titles, we didn’t have hierarchy between us, and then when we graduated from business school decided that it kind of made the most sense for me and Neil to stay on in day-to-day operating roles. And we thought, we talked about kind of different ways that we could set up structures and we knew that it’s unusual to have co-leadership in most startups but we had been operating as partners for a year and a half before we launched the business and before we graduated from business school, and that had been working really well. And we said why don’t we continue operating in this way until there are signs that it doesn’t work or that it’s frustrating for one or both of us. And let’s have titles that reflect that leadership structure, both for internal and external reasons, but let’s make sure that there’s no confusion for our internal team around who’s leading certain areas and kind of spending more time in those areas so if a decision needs to be made, we don’t have the issue where if mom says no, someone goes and asks dad and just provide some clarity in terms of organizational design.

And so each of us have our own direct reports and spend more time with different parts of the organization. But we both feel responsible and accountable for the brand, the business results, the impact that we’re having. And we update each other dozens of times a day about meetings that one of us may not have been in. So we’re both fully informed around everything that’s happening in the business. And frequently we’ll also join each other’s meetings with the other person’s direct reports so that we can be providing input. And if one of us is at a conference or visiting stores or on vacation, the other person can jump in and we can substitute for one another when needed. And so really kind of view ourselves as partners.

Lev-Ram: Just a couple more questions for you guys real quick. One is it’s really striking, you both definitely have such an eye for detail as you’ve gone about founding and scaling the company for the brand, for the naming, for obviously some of the mechanics, the logistics of design and supply chain and things that you’ve had to really think from the ground up because you disrupted this industry. And you see a lot of tech companies, and I understand tech is a component of what you do, who have been more inclined to throw spaghetti at the wall. Do you think that this level of detail that the two of you have had, the four of you, I guess, at the beginning is something that’s really needed for the kind of company you started, or do you think it’s just like the right approach?

Blumenthal: I think there’s different tolerances in different industries, and it depends also on who you’re serving. So when I say industries, if you’re doing something for aerospace or for health care, right, the margin of error is a lot smaller than if it’s something that doesn’t impact sort of life and death, for example. And that sort of holds true sort of with branding and business strategy in moments where capital is really cheap, you can expend it, throw a lot of stuff on the wall and see what sticks. And I think we were in a moment of that in the 2010s. You know, now since the pandemic, interest rates have gone up, I think you’ve seen that mentality sort of dissipate even in the tech sector as well, where there’s a little more controls in place before you just throw spaghetti on the wall. You know, we being sort of a consumer-led business and one that’s engaging with customers constantly, stuff needs to be great. And we are always speaking to our team about how do we deliver exceptional customer services, exceptional customer experiences, exceptional customer value, exceptional customer products. And that doesn’t mean that we can’t test and iterate, but it means that when we take risks they should be calculated.

Lev-Ram: So last very important question for the two of you. What was up with the monocle that Warby Parker sold? [Laughter.] Where did the idea come from? Was it a real trend? Did they sell? You’re not selling them anymore, right?

Gilboa: Yeah, we don’t offer them anymore.

Lev-Ram: For some customers. You have to ask in the back or something, right?

Blumenthal: We might still have a few.

Gilboa: We can find you one if you really want one. When we launched, we thought it’d be kind of a fun, whimsical opportunity to offer a monocle. We weren’t expecting it to be a top seller. I think we sold a lot more than we were anticipating. Generally around Halloween, we saw a massive spike in demand, but it was just a fun opportunity to kind of showcase some of the values of the brand and signify that we weren’t taking ourselves too seriously with the way that we engage with our customers.

Lev-Ram: Did either of you ever rock one or no?

Blumenthal: Dave is actually the one of the best monocle wearers possible and that he was able to keep it in his eye without his hands for quite a long period of time.

Gilboa: Surprisingly difficult.

Lev-Ram: Amazing. Well, Neil, Dave, thank you so much for joining us and taking time to do this interview. Appreciate it.

Blumenthal: Thank you.

Gilboa: Thanks so much.

Brady: Leadership Next is edited by Nicole Vergalla.

Lev-Ram: Our executive producer is Chris Joslin.

Brady: Our producer is Mason Cohn.

Lev-Ram: Our theme is by Jason Snell.

Brady: Leadership Next is a production of Fortune Media

Leadership Next episodes are produced by Fortune’s editorial team. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.