This Harvard Business Review post, “Luxury’s Talent Factories,” discusses how large luxury conglomerates such as LVMH, Kering and Richemont actually drive talent performance. Most management research would argue the opposite. It’s generally accepted that companies can increase their financial returns by focusing on core lines of business. Contrary to this evidence, the article states: “Diversification generally does not add value unless there are significant cost savings and operational synergies across units—which isn’t necessarily the case with all luxury groups.”
Diversification generally does not add value unless there are significant cost savings and operational synergies across units—which isn’t necessarily the case with all luxury groups.
According to the article, here are some of the reasons the “Big 3” are able to use their size to their business advantage in developing luxury talent:
Mobility – Diversification of internal brands means that employees who move from subsidiary to subsidiary bring a core set of brand values and skills. They are also better able to build their personal networks across multiple internal brands. The advantage to the enterprise is that they’re able to leverage talent when and where they need it.
Best practices – The organization can identify and transfer best practices across products, and gain the benefit of new perspectives at the same time. In one case, CRM talent from a fashion group was brought in to help build a CRM function for a watch brand.
International Experience – Cross-cultural exposure inspires creativity and provides exposure to a larger pool of manufacturers and suppliers.
Understanding the Global Customer – As technology and social media create a growing international marketplace, it’s imperative that brands understand how luxury customer expectations vary from country to country.
Although Europeans can explain to customers what luxury means, they also must have experience in foreign markets to understand which aspects of luxury the customers there actually care about. For example, in America consumers will buy watches for their functionality or performance, whereas in Asia it’s more about the prestige of the brand.
The three large luxury groups are able to leverage these advantages for the individual as well as for the enterprise. It only works, however, when the group is able to keep its brands relevant and continuously invests in developing premium talent.
