LVMH of Real Estate
A lesson from LVMH on the critical importance of Creative Directors and the need for a similar role in real estate.'
Even if you don’t follow fashion, you’ve likely heard by now that Bernard Arnault, CEO of LVMH, has just replaced Elon Musk as the richest person on Earth. I’ve been long fascinated by Arnault’s ability to create a financial powerhouse while delegating huge amounts of power to creative directors. Therein lies an important lesson that I hope more real estate developers learn and embrace.
While the public is commonly aware of fashion brand names like Prada, Bottega Venetta, Chanel, Calvin Klein, Loewe, enthusiasts and industry insiders care more a particular creative director at the helm of a brand at a given time. You may hear folks talking of brands in terms of their eras: Margiela’s Hermès, Phoebe Philo’s Celine, et cetera. While the finance and operations folks stay in the background, creative directors drive the product vision.
I had a chance to witness a vivid illustration of creative change at the Christian Dior: Designer of Dreams exhibition at the Brooklyn Museum. Passing from one room to another, you could see the evolution of the house since its inception and the interpretations of creative directors who followed: Yves Saint Laurent, Marc Bohan, Gianfranco Ferré, John Galliano, Raf Simons, and Maria Grazia Chiuri. All standing side by side.
Bernard Arnault has championed the modern fashion conglomerate approach where the “suits” give up the creative control to the artistic directors. In a 2001 interview with Harvard Business Review, he explains his method:
“Our philosophy is quite simple, really. If you look over a creative person’s shoulder, he will stop doing great work. Wouldn’t you, if some manager were watching your every move, clutching a calculator in his hand? So that is why LVMH is, as a company, so decentralized. Each brand very much runs itself, headed by its own artistic director.”
In his brilliant profile of Arnault, Mario Gabrielle adds that “each [business] unit can act according to its own culture while still benefiting from the distribution and resources of the parent company.”
A lesson for real estate
The idea of drawing parallels between fashion and real estate may seem preposterous at first. The fashion industry may be able to introduce new collections every six months, while real estate development often takes a similar number of years. The fashion industry may thrive in chaos and provocation, while real estate is a notoriously conservative industry focused on minimizing risks.
And yet, I think there’s a core similarity and need. Real estate, just like fashion, could benefit from a coherent and opinionated product vision. Instead of creating clones of a neighboring properties, developers could prosper by creating new products with specific audiences in mind. Instead of a bland commodity, building products that some people would passionately love.
Occasionally, boutique developers create such exciting projects. At the same time, large multinational developers are painfully similar across their product lines. Would you really know any difference between Mill Creek, Toll Brothers, and Tishman Speyer without checking? Even hospitality brands are getting harder and harder to distinguish.
I believe that real estate firms are missing out on a great opportunity. By hiring and empowering dedicated leaders to define product vision, they can lead the market by quality and, in turn, by sales volume as well.
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