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Why Luxury Companies Are Best Run by Peasants (and Europeans)

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By JOHN REVILL at TheWallStreetJournal

Luxury companies are best run by peasants, with a more than a little help from poets and craftsmen, former L’Oreal executive Professor Charles De Brabant told a Swiss business seminar last week. What LVMH chief executive and chairman Bernard Arnault, who is the world’s fourth richest person is thought to be worth $41 billion, would think about being described as a peasant is unknown.

But getting the right balance of the qualities from all three is the reason why Europeans are much more successful at luxury than Americans, Prof. de Brabant controversially suggested. To be successful in the €168 billion euro global luxury industry, companies need people with peasant-like attributes on the board. This means analyzing situations using proven facts, and focusing on the bottom line and shareholder value.

“Peasants is not meant a derogatory way, but means people who keep their feet on their ground, understand that a penny is a penny, while the designers are up in the clouds,” said Prof. de Brabant, the former head of marketing and sales learning at L’Oreal, at the Lorange Institute of Business in Zurich. Not bad qualities for a CEO, but not enough to succeed in the fantasy world of luxury, Prof. de Brabant said. Instead what is needed is a balance between business leadership (the peasants), creativity (the poets), and enablers in between (the craftsmen). He also posed the thorny question: “Why is it French, Northern Italians, Swiss and Southern Germans dominate luxury and not Americans?”

“If you look at it factually, the Europeans are clearly better,” said Prof. de Brabant.

A 2010 league table of the 15 world’s most valuable luxury brands, complied by brand consultancy Millward Brown, was topped by Bavarian car maker BMW, French luxury group Moet Hennessey Louis Vuitton LVMH. The only non-European entrant was Ralph Lauren which crept into the list at number 15.

bonus video : A Review of European Luxury-Goods Makers Stocks

History may also play a part in the success of European firms and explain why Southern Germans (cars), the Swiss (watches), north Italians and the French dominate had the other 14 top positions on the list.

But heritage and a link to royalty are not enough on their own, said Prof. de Brabant, who is the founder and CEO of Saint Pierre, Brabant, Li & Associes, a China-based HR specialist focused on luxury companies.

Firms also need creative designers (the poets) who have the vision needed to create the necessary fantasy for luxury products.

“To be good in luxury you need the Gallianos,” added Prof. de Brabant.

But that too is not enough. What happens when they implode like Dior’s John Galliano, who was sacked earlier this year after allegedly making anti-Semitic remarks?

Companies also need the craftsmen, the people in between the managers and the creatives who have the intuition to make it all happen, whether this is the production staff, marketing teams, or retailers,

“You need the ones who kept the show on the road after Galliano, as well the Arnaults who can drive the business,” said Prof. de Brabant.

Companies need to have both analytical and creative managers, for example Christian Dior CEO Sidney Toledano who worked with Mr. Galliano, he said, something often lacking in their U.S. counterparts.

“American companies have hero managers, who are good at strategic and analytical skills, these are people who can go from one industry to another because they have transferable skills,” added Prof. de Brabant.

But to be good at luxury, you need a broad range of interests and experiences, something Prof. de Brabant (himself a Canadian) said many American executives lack.

“In general,  most Europeans tend to have broader pursuits, cultural sports or otherwise, which allows them to be rounder mangers in line with requirements of the luxury industry than Americans.”

Business schools though are not going to make up the shortfall.

Most business school teaching is based on managerial science, about the need to raise the share price up, but to run a successful luxury business you need all three elements, poets, peasants and craftsmen” said Prof. de Brabant.

So the next time you are buying a luxury watch, bag or pair of shoes, don’t forget to thank the peasants, poets and craftsmen.

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2 Comments to “Why Luxury Companies Are Best Run by Peasants (and Europeans)”

  1. Craftsmanship, creativity, hard work all are required but more important is organizational skills and foresight. Metaphorically, Luxury companies are not best run by peasants but adept sailors.

  2. Speaking as someone who is designer, manager and artisan for my company, I find myself agreeing with many portions of this article. However, the presumption that European companies are run better due to superior cultural awarenesses is, I believe, wrong.

    As an American raised in a highly cultural family, and someone who revels in luxury, I believe that the reason is more due to America’s innate distrust of luxury. The vast majority of people here seem to believe that luxury is at the very least inherently wrong, and at most decadently evil. Europeans have a longer history of embracing luxury and luxurious brands. Once the majority of Americans come to understand that luxury and luxury brands need not be overtly selfish or “sinful” by nature, I believe the world will see more American brands moving into the luxury arena.

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