By Ashok Som
Leadership style and strategy that luxury brands should keep an eye on in order for them to ensure that their business philosophies and brand proposition are effectively conveyed and their brand is well presented to their target market. In this article Prof. Ashok Som weighs up the changes and challenges ahead for the luxury industry as it moves into a global mode and sets out the skill sets luxury brands will require of its employees both onboard and onboarding.
Luxury has changed: bring on the Hydra
There was once a time when luxury had a single head. The head belonged to a creator-designer-craftsman all rolled into one, initially producing excellence that was commissioned by local monarchs and local aristocracy. In France and Italy names were made and shops opened, still local, sometimes regional. And then, with the industrial revolution, legends grew. With greater wealth among greater numbers of people, those seeking the unique and rare and willing to pay a high price for exceptional quality travelled to the outlets to buy on site. This all belonged to the pre-1950s: small, family run businesses with the founder-creator as head.
Today, if we stop to gaze at the luxury sector, the first observation is that the business of luxury is no longer a local business. It has become global, faceted by digitalisation, instant communication mobility, nomadism and a new breed of consumer from the emerging BRICS countries – educated, digitally savvy, and abreast of the changing ways in which the products and services are designed, marketed, distributed, and consumed. And although the traditional core values and heritage of the industry remain true and spark the motivation to purchase luxury, they are no longer enough to cater for the hydra that the industry has become.
While many other sectors have traversed the same revolution, the luxury industry is as unique as the products it creates: the industry is small, with a total of about 110 brands (excluding cars, hotels, yachts and other heavy-duty luxury products and services) and the people working there traditionally move from one brand to another. An “Up-or-out” syndrome has been prevalent as employees had to continuously reinvent themselves, renew their creativity, be agile, and perform. The local-to-global scenario is changing this too. In order to thrive in the transformation of local sales and local business model to global perspective and initiatives, the industry needs talents with specific and versatile skill sets that are entirely new to luxury while enabling the existing talent pool to adapt and change with the times. In short, the luxury brands need to be run by skilled professionals who not only understand the intricacies of the business but also can operate on a global scale.
Brahma sees four
Luxury brand creations have seen phenomenal growth in their reach and sales over the last twenty years thanks to wider marketing, organic growth, greater presence in outlets and new luxury consumer segments. Family-run businesses are rivalled by the conglomerates such as LVMH and Kering some of which – in order to cope with the demand and to increase profitability – have outsourced some of their activities to skilled labor in various countries. However, luxury customers still, above-all, crave “Made in France,” “Made in Italy,” or “Swiss” watches. This raises the challenge of how to manage largescale growth and scale up the production of goods, while keeping the brand DNA intact and produce in a home country where skilled workers are fewer and harder to find. Indeed, it could be said that the scarcity of these skills at home render them almost a luxury in themselves. The challenge is fourfold in terms of skill sets required along the chain of luxury:
• Craftsmen and women who possess tacit knowledge of the brand DNA
• Designers who deeply understand this DNA and who create innovations around it
• Salespeople who translate the story of the brand into unforgettable consumer experience to the diverse and increasing numbers of consumers across different cultures and continents
• Managers able to run the business not as an SME but as a global corporation.
About the Author
Ashok Som is Professor of Management Department at ESSEC Business School. Professor Som is one of the pioneering thought leaders in designing organisations and an expert in global strategy. At ESSEC, he is currently the Co-Director of ESSEC-Bocconi Executive Masters in Luxury (EMiLUX) Business. He was the Founding Associate Dean of the full-time, one-year post experience Global MBA program of ESSEC Group, the founder of the India Research Centre and the founder Director of the Global Management Programs on Luxury and Retail Management (in partnership with Indian Institute of Management (IIM) Ahmedabad).