Wednesday, June 01, 2022

Lessons from the House of Gucci

I just finished reading Sara Gay Forden's terrific book: House of Gucci: A Sensational Story of Murder, Madness, Glamour, and Greed.   Forden wrote the book two decades ago, but it has recently received a great deal of renewed attention due to the release of the movie starring Lady Gaga.  The book is filled with family intrigue, squabbles, and of course, a murder plot.  However, the book also provides a compelling examination of the rise, fall, and rebirth of the Gucci enterprise over the years.   As such, it offers a number of important management lessons.  
For me, one intriguing lesson centers on the attempt by Maurizio Gucci to restore and enhance the Gucci brand when he tooks over from the prior generation.  His instincts were solid in that he was quite worried about the dilution of the brand that had occurred over the years.  The desire to drive top line growth had led the company to develop and sell less expensive products for the masses.  The problem, of course, is that such efforts often make it much more difficult to remain highly attractive to the luxury consumer willing to pay top dollar for a quality product, but only as long as it retains a high degree of exclusivity.  This growth trap ensnares many companies pursuing niche differentiation strategies. 

Recapturing the premium positioning after a brand has been diluted can be very difficult.  The reason is that it takes time to change consumers' minds about a brand.  Moreover, trimming the product portfolio can be challenging to execute.  The company has to essentially retrench to restore the brand, but that can be very painful to do.   Maurizio tried to execute a "cold turkey" approach to restoring the brand.  His efforts to quickly eliminate lower-priced, lower-quality products led to a precipitous drop in revenues.  At that point, he had not yet done the groundwork required to transition the product line.  He failed on the execution of what is admittedly a tricky repositioning exercise.  Over time, new professional management managed to implement the repositioning very successfully, restoring the brand's luxury image.  In the end, strategy and vision are important, but execution often proves to be the difference between success and failure for a brand repositioning effort.  

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