Sealy goes to the mattresses

September 17, 2012, 9:00 AM UTC

Marketing a mattress is, perhaps paradoxically, rather unsexy.

Typically, the mattress business is consistent — consumers always need to buy new ones or replacements — which explains why private equity firms are drawn to it. But a few years ago, amid the financial downturn and slowdown in housing sales, Sealy’s high-end Stearns & Foster line began to see its sales markedly decline. So in 2008 management decided it needed to find a way to spice up the stalwart brand. The turnaround required Sealy (ZZ) executives to do something they’d never done before: get in bed together (figuratively, of course).

With the help of IDEO, a high-profile design consultancy known for its work on Apple’s first mouse, Sealy management pushed previously independent teams to communicate and collaborate. Engineers from Sealy headquarters in Trinity, N.C., joined sales and marketing people on visits to retailers in New York, Atlanta, and Chicago. A Sealy marketing manager and engineer embedded themselves in IDEO’s Boston offices for eight weeks for a deep dive into revamping the product.

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The upshot: Sealy learned that customers see a mattress as more than just a slab to sleep on. “They want it to reflect who they are,” says Dave Moret, who heads up research and development. A newly created core team, which tapped employees from throughout the company, worked with IDEO’s designers to, among other things, add a fleur-de-lis to the top quilt. It is more than just a pretty flourish: The motif reflects the heritage of Stearns & Foster, which began as a maker of horse-drawn carriage upholstery in the mid-1800s; the fleur-de-lis treatment was often used in carriage design.

And as other manufacturers were removing handles to cut costs, Sealy added more, for a total of eight, all intended to look like the ones people used to pull themselves up and into a carriage. Allen Platek, VP of new-product development, who has been with Sealy 16 years, says the revamp “was one of the most fun times of my career.”

You’d think such cross-functional work would be commonplace in corporations these days — it’s why we have jargon like “cross-functional,” right? — and Fortune certainly has found a growing number of C-suite collaborations as part of our Executive Dream Team series. But Platek says, “Prior to this, what we did was in silos. Sales did their thing, marketing did their promotions and ads, R&D developed innovation, and then it was all thrown to operations. We had a disjointed effort.” The divisions didn’t always trust one another or feel comfortable sharing ideas. In Sealy’s case, it took some hired help from outside to force the kumbaya moment. And it worked: Once Sealy put the post-makeover mattresses in stores, CMO Jodi Allen says, “consumers really gravitated toward them. Even though they were obviously going to put a sheet on the bed, the aesthetics were critical in the showroom.”

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The Stearns & Foster reboot didn’t come cheap: For the 2009 relaunch, labor costs climbed 50%, and pricier coils pushed materials expenses up 20%.

The entry price of a Stearns was previously $1,000; after the relaunch it was $1,200. Today it’s at $1,400. Sticker shock hasn’t proved to be a problem for Sealy: Stearns mattresses, which went through another round of improvements last year, broke sales records for the line in the first two quarters of 2012.

But Sealy can’t rest on the success of its premium brand. Last year rival Serta became the market-share leader in the business for the first time in 30 years, grabbing 18.3% of sales (compared with Sealy’s 17.8%). Serta has had success with iComfort, its take on the trendy “gel memory foam” category that purports to improve spinal alignment.

Sealy’s solution? More relaunches — and more collaboration. Only this time Sealy executives don’t need prodding. “Everyone is very familiar with each other and willing to be very honest, to the point of having a public disagreement and working it out right there,” says Michael Hendrix, who leads IDEO’s Boston offices. Sounds like a winning formula for a good night’s sleep.

This story is from the September 24, 2012 issue of Fortune.