Friday, August 31, 2007

Your Business as Fashion

Last week I was interviewed in Sydney by the Australian Financial Review BOSS magazine.. One of the issues that interviewer Brad Hatch and I discussed was the fact that many leaders talk a good game about innovation, but in practice they do little to walk their talk. How can this problem be ameliorated? I pointed out that executives might do themselves a big favor by imagining their businesses as “fashion” businesses. I’m serious. Stay with me for a moment. The basic premises that any successful competitor in the fashion industry must hold are these: 1. Nothing lasts (including our products, even if they’re current hits; competition is relentless)2. Nothing is supposed to last (we don’t expect long product life cycles; that’s the reality in business today)3. It’s good that nothing lasts (because if it did last, we—i.e. everyone in the business—would copy each other blatantly and we’d all look the same and we’d all become complacent and we’d all lose our customers’ interest and our margins would go to hell)4. We’re making darn sure that nothing lasts (we’re always obsessively putting our time and talent into creating the next wave of new exciting products in order to build our brand, our market share and our income stream)Couldn't those four premises apply to your business? I would argue that whether you sell cosmetics, clothing, insurance, auto parts, telecom services, or whatever—thinking of your business as a “fashion” business is a very good practice. And let me reassure you, to be successful in the fashion business, you have to be scrupulously disciplined as well as continuously creative. Recently, the Australian Financial Review magazine also interviewed Yves Carcelle, the President of Louis Vuitton. As I’ve pointed out in my last book, Louis Vuitton is a remarkably profitable luxury products engine; the Review’s estimate is an impressive 45%, which means that while Louis Vuitton generates less than 20% of the sales of LVMH (the corporation it’s part of), it generates more than 60% of its profit. Here’s what Carcelle told the Review: “When you are in a business where creativity is key (my comment: and which business isn’t?) the process is very irrational at the beginning but if you don’t trust the people with the gut feelings—if you put in too many constraints—then you don’t get that creativity. But then you have to apply the principles of reality and profitability. I call it the ‘rationalised irrational’, the balance between being too logical—in which case, where’s the dream?—against being too dreamy, in which case, where’s the physicality of that dream and the profits?” Think about it. Couldn’t you do some wonderful things in your business if you approached it as a fashion business?


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