Luxury Institute: “No Matter Who You Are, Most of the Smartest People Work for Someone Else”

Tuesday, 04. June 2019 14:00

NEW YORK, June 04, 2019 (GLOBE NEWSWIRE) -- The title of this white paper, a quote known as Joy’s Law, is attributed to Sun Microsystems co-founder Bill Joy. It was inspired by Bill Gates’ claim that Microsoft was an IQ monopolist. Joy saw arrogance and foolishness in Gates’ assertion that all the best talent in tech worked for Microsoft. Joy prefers to succeed via a vibrant ecosystem that collaborates with the world’s top talent, wherever it may reside. As Joy put it, “it’s better to create an ecology that gets all the world’s smartest people to toil in your garden for your goals.” Gates eventually learned his lesson the hard way, changed CEOs, and Microsoft painfully transformed itself into a platform business model comprised of several major collaborative platforms, including the brilliant acquisition of LinkedIn. As a result, Microsoft is again one of the world’s most successful companies. Today, Joy’s law of open innovation is the platinum standard for high-performance companies.

Unfortunately, only a small minority of brands applies open innovation across the luxury landscape. Frequently, luxury goods and services brands are insular and isolated from the best available external talent. They behave like command-and-control fortresses, protecting themselves from expired threats, while failing to address the real opportunities to serve clients through open innovation. Many fail to achieve their full potential; some just fail. Luxury executives often proclaim that they hire only best-in-class talent, strictly within their industry, and have no use for collaboration with external experts. One Italian brand, whose founder was particularly assertive in previous interviews about possessing the best in-house talent in luxury, and doing it all themselves, is now suffering badly, due to its isolationist policies. One safe bet is that this brand, if it survives, will be acquired for a sum far below its peak valuation of 2007, when the world was a much safer and simpler place for isolationists.

According to David Leadbetter, one of the world’s leading experts on innovation, the traditional view is that creativity is the purview of a few special people, in special places, who think up special ideas; then a pipeline takes the ideas down to the waiting consumers. Executives like to think that invention is a sort of moment of creation; there is a moment of birth when a genius comes up with a great idea. This view of the sole creative genius is prevalent in the luxury industry. Leadbetter asserts that this view is completely wrong because creativity has always been largely interactive, highly collaborative, and cumulative. Innovation is also stifled inside corporations because leaders have built-in tendencies to reinforce past success. They have so much invested in the past that it's very difficult for them to spot and support new opportunities. Leadbetter cites rap music’s grass roots origins as an example of a genre created by its users that evolved into the dominant musical form of popular culture, all while digital innovation was devouring the traditional music industry model. Leadbetter is optimistic that despite insider efforts to prevent them from taking hold, open innovation models will continue to emerge with tremendous force, because they multiply our productive resources and results.

In a Leadbetter moment, Luxury Institute CEO Milton Pedraza hacked his business model into an open innovation platform at Stanford Business School. For several years, believing that the quality of the Institute’s work would suffer if not conducted by internal luxury specialists, Pedraza required that most of the work be sourced internally. That made for a respected luxury boutique business, but lacked the scalability to help many more brands. In 2015, Pedraza was invited by Stanford Business School to participate in a program on scaling excellence. At Stanford, Pedraza was challenged to find a way to radically outcompete the world’s top research and consulting firms by using a scalable platform business model. Today, Luxury Institute is a research and consulting platform fueled by a talent network of hundreds of external, elite global luxury experts. This open innovation business model enables Luxury Institute to staff client projects on demand, with the absolute best-fit global luxury talent, and deliver real solutions in a fraction of the time and at a fraction of the cost.

For luxury brands that are over the isolationist era, and want to thrive in the modern luxury goods and services world, below are seven key ways to master open innovation.

1. Tap into elite expert networks

There is a growing trend in the use of individual on-demand external experts and rapid response SWAT teams to solve problems and take advantage of opportunities. Recently, a team from the Global Luxury Expert Network (GLEN), comprised of top executives as well as elite consumers, developed a go-to-market plan for a Silicon Valley brand in record time. Another company received the answer to an impossible to find market share question in a matter of hours. One luxury conglomerate received short-term and long-term recommendations as to how to fix a faltering brand in a matter of days. The expertise of the luxury world is widely distributed in individuals, and in teams, yet can be tapped to deliver concrete solutions, in real time, through elite expert networks.

2. Partner with complementary luxury brands

Private Medical is the brainchild of Dr. Jordan Shlain, M.D., who for over 20 years has served wealthy families in Silicon Valley and other wealth enclaves as if they were his own. Dr. Shlain and his team of elite doctors serve only 50 families per doctor. Private Medical is the complete opposite of the assembly-line approach to medicine that is the norm, even for affluent patients. In order to serve patients better, and across geographies, Private Medical has developed a network of access with the best medical specialists, hospitals and clinics in the world. Dr. Shlain is creating the effective model of health care for others to follow. In order to serve patients even better, Private Medical also has created strong alliances with the top private security companies in the world such as Gavin de Becker and Associates, and private jet leaders such as XOJET, which is owned by VistaJet. It takes a team of elite service providers to take care of the wealthiest clients, so Private Medical partners with other best-in-class brands to maximize the patient experience and outcomes.

3. Co-create with customers

Customers often have great insights and are super-creative in building optimal solutions for products companies. For years, BMW has used customer co-creation to drive innovation. The BMW Group Co-Creation Lab is an online community where consumers share opinions on automobile designs, submit their ideas, and engage in the creative process. By engaging in co-creation, BMW customers are invested in the design process and its outcomes. This hyper-efficient collaboration process delivers deeply relevant customer benefits and inspires brand loyalty.

4. Collaborate with external creative talent

Gucci recently co-created a line with its former nemesis, Dapper Dan, and also collaborated with Gucci Ghost. Gucci and Louis Vuitton are high-performance brands partly because they continuously collaborate with creative external talent from many genres. Now LVMH is taking collaboration to new heights by developing a luxury brand from scratch with music sensation, top influencer, and emotionally intelligent entrepreneur Rihanna. It’s today’s version of Michael Jordan and Nike, only better. While the products are very important, the true brilliance of this model is that it seeks to develop a brand that taps into Rihanna’s deep human connection with her millions of constituents. This innovation may have surprised many traditional luxury executives, but Bernard Arnault has always been open to brilliant collaborative paradoxes that strike gold.

5. Invest in start-ups

Luxury marketplace Farfetch has been an innovator since its origin. José Neves, its creative founder, understood early on that open innovation drives longevity and high performance. Farfetch runs Dream Assembly, a 10-week accelerator program for seed-stage start-ups twice a year. The company selects a small group for each cohort. Selected candidates receive seed funding, mentorship from Farfetch’s leadership and internal team, and access to its network of expertise. Dream Assembly’s objective is to support the best technology-focused startups that are shaping the future of commerce and share José’s vision of building the next generation of commerce. One brand that is thriving in the growing trusted expert advisor space that is set to grow exponentially is Wishi, an online platform for stylists and clients. This investment may transform Farfetch itself. Every major luxury brand should follow this lead and invest in promising start-ups.

6. Tap into crowdsourcing
NASA has always been considered a leading-edge innovator. However, even NASA recognizes that most of the world’s top space experts don’t work for them. Since 2011, NASA has been using crowdsourcing platforms to solve major problems that arise on the International Space Station. These include solutions to enable astronauts to exercise in space, create better living conditions, and help in the search for new planets. All these crowdsourcing initiatives, framed as challenges, engage external experts globally. Over a dozen platforms exist to host competitions. The main reason crowdsourcing works is that solutions are often found by people who do not have the same area of expertise as the problem. Crowdsourcing can leverage vast wisdom and expertise, and speed up results, all at a fraction of the cost of traditional methods.

7. Acquire complementary businesses and drive synergies

Since 1987, LVMH has been the consummate luxury products acquirer, evolving into the world’s leading luxury products group, with 70 prestigious brands, and a highly profitable 46.8 billion euros in revenue. But LVMH is far more than a holding company or conglomerate. It is a company that has mastered the ability to inspire its businesses to collaborate with one another. Take Sephora, the world’s beauty products retail and e-commerce juggernaut. Approximately half of Sephora’s shelf space is dedicated to 15 of its sister brands such as Fresh, Dior and Benefit Cosmetics. This may not make competitors happy, but it is a masterful and highly synergistic strategy. Now, realizing that experiences and travel are the fastest growing segments, LVMH has acquired Belmond, a top-tier luxury hotel company. Don't be surprised if Belmond eventually stocks primarily Moët Hennessy’s vast portfolio of wines and spirits, including the world’s best champagnes, in its rooms, bars and restaurants. This is the collaborative way to make acquisitions reach full potential.

“The use of open innovation projects will accelerate because they generate huge network effects in creativity and performance that insular employee-only efforts can never match. It’s not even a fair contest,” said Milton Pedraza Luxury Institute CEO. “The more types of open innovation techniques a company uses, the better its chances of thriving as a complex adaptive system in an unforgiving luxury landscape. Insular brands are beginning to disappear, one by one. Unfortunately, their ill-advised leaders will remain clueless as to why their brands perished.”  

About Luxury Institute and the Global Luxury Expert Network (GLEN)

Today, we are the world's most trusted luxury and premium research, training, and elite business solutions platform with the largest global network of luxury experts. Uniquely, Luxury Institute’s network of hundreds of elite experts includes current luxury brand C-Level, VP and Director executives, former executives, and independent experts. We have conducted more quantitative and qualitative research on affluent consumers than any other entity. This knowledge has led to the development of our scientifically proven high-performance, emotional intelligence-based education system that dramatically improves brand culture and financial performance. Over the last 16 years, we have served over 1,000 luxury and premium goods and services brands.

The Global Luxury Expert Network (GLEN) is comprised of hundreds of global luxury experts. Luxury Institute’s elite experts have a minimum of 12-years of operating experience with top-tier brands, most with over 20-years of experience, and are current and/or former C-level, VP or Director executives with proven track records of high-performance. The Global Luxury Expert Network offers members the ability to participate in remote or live on-demand, short-term, high-value projects and earn supplemental income, be the requesting client and have other GLEN members participate in their project or refer projects to the network. All members receive supplemental income for the projects in which they participate or refer. To become a member or learn more about the Global Luxury Expert Network (GLEN), please visit Luxury Institute.


Milton Pedraza
mpedraza@luxuryinstitute.com 

luxury_inst_logo.png

Related Links: 
Author:
Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.