The Power of Culture in Driving Business Growth
While luxury fashion brands struggled to evolve with the times, Gucci delivered exceptional growth in 2018. Gucci’s CEO attributes their success to a focus on customers and culture.
In a Nutshell
As luxury fashion brands have struggled to evolve with the times, Gucci achieved enviable business growth
A focus on customers and culture were key business performance drivers for Gucci
A culture of innovation, empowerment, and trust enabled Gucci to overcome a challenging business climate
Luxury fashion brands are being put to the test. Juicy Couture and Pierre Cardin were listed among “10 luxury brands no one wants anymore” by an online fashion watch in 2018.
Clinging tightly to traditions that have shaped their past successes, many of these brands have struggled to evolve with the times. “Luxury fashion brands are failing to adapt to a digital future.”
But Gucci, under new leadership, has embraced the future, and escaped the fate of its contemporaries. Deeply rooted in heritage and tradition, Gucci has achieved the subtle balance of being digitally savvy yet faithful to one’s past. In doing so, the timeless brand has achieved enviable business growth.
Under the leadership of CEO Marco Bizzarri, Gucci currently ranks on the Gartner L2 Digital IQ Index as the number one luxury brand with the highest digital IQ score, followed by Louis Vuitton in second place.
A remarkable turnaround
In 2013, Gucci reported its weakest sales growth. Reuters reported that “The declining sales trends at Gucci and Louis Vuitton are more a reflection of consumers’ weaker appetite for mega brands than a sign of a general slowdown in the luxury goods market, analysts said.”
In five years the brand made a remarkable turnaround. In 2018, Gucci continued to deliver “exceptional growth—up 36.9%,” BusinessWire reported in 2018. “Gucci’s revenue topped €8 billion in 2018.”
Gucci’s business performance drivers
1. The Customer Connection
“Francois-Henri Pinault, CEO and Chairman of parent firm Kering, noted that about 50% of Gucci’s sales now come from millennials - a demographic of 35-year-olds and younger, which many luxury brands are struggling to capture.” Gigabit Magazine says.
Gucci has developed a deep and enviable connection with its market—going where the market is, speaking their language, and knowing what they value and aspire to. Gucci has 22M followers on Instagram, a platform dominated by Millennials. Gucci clothed Lady Gaga for her 2016 Super Bowl Performance, and collaborated with Beyonce in a music video in 2018.
Gigabit Magazine points out that “to drive customer satisfaction, the Italian retailer has built a Facebook-integrated chat bot and it also launched scannable adverts. Elsewhere, for its spring 2018 campaign, Gucci developed in-store augmented reality (AR) and virtual reality (VR) installations, which allowed consumers to become a part of the campaign. So far, this digital transformation has proven to be a roaring success.”
Forbes has cited Gucci as a shining example of what luxury brands can learn about on how to connect with millennials. “There's more to Gucci’s success with millennials than simply knowing what’s ‘cool.’ To win with millennial consumers, brands need to understand what millennials value: personal satisfaction and purpose.”
2. Culture Change
Gucci’s revived brand positioning was bolstered by a refreshed people strategy. “The most important thing, after identifying the positioning of the brand, is attracting the right people. People are at the centre of everything in the fashion industry, not just in terms of product, but in terms of creativity and business,” Marco Bizzarri says.
“What I try to do is make sure that people foster a culture of respect that includes everybody. They are placed for more talents. They are placed to work together. They are placed to be transparent.”
People are at the centre of everything.
Culture: a key factor in Gucci’s business performance turnaround
1. A Culture of Innovation
Digital transitions are an uneasy season for organisations, and they need a safe environment to challenge the status quo and explore bold solutions. Gucci’s ability to redefine luxury and reinvent itself as a brand can only come from an innovative team, working in a safe environment.
"I try to push everybody to take risks and make mistakes—and not kill them if they make mistakes. Of course, if they make the same mistake twice it is a problem. That is something that comes from your past, your experience as a person. It is not something you can write in an email. You need to show on a daily basis that you really believe in these values," Bizzarri says.
In The Business Case for a High Trust Culture, the Great Place to Work® Innovation Index supports the link between high trust and innovation.
“According to the Great Place to Work® Innovation Index, organizations with higher levels of trust offer a workplace environment that is more likely to support innovation through:
Forgiving honest mistakes
Involving and including employees in decisions
Showing appreciation for extra effort”
2. A Culture of Empowerment
European CEO says, “Gucci’s stock among luxury consumers, it seems, is at a new high. ‘It is the only brand that has people in the shops’, said Bizzarri in a recent interview with Bloomberg. ‘Today, if you want to grow you need to steal market share. The only way is through creativity.’”
Creativity is nurtured through empowerment, not fear.
While his team was busy bringing the brand positioning and digital strategy to life, Marco Bizzarri kept his eye on the culture.
“The culture is the most difficult thing to create, because you are talking about people; human beings who change every day in their behaviour, attitudes and perceptions. You need to make it an ongoing activity and that means leading by example,” Forbes says, in a classic piece entitled “Corporate Culture: Whose Job Is It?”
Gucci’s story is a testament to the power of vision and culture—both of these are the territory of the CEO. A CEO committed to both people and results enables business transformation.
3. A Culture of Trust
Bizzarri leads by example: Quartz reports on a four-minute video message Bizzarri recorded to “keep the company’s retail workers aware of what’s happening with Gucci’s business.”
“Transparency within a company is linked to employee trust and happiness—which, incidentally, has been linked to higher productivity,” Quartz says.
“We need to recognize the fact that at a certain point we’re going to slow down, we cannot keep on growing 50, 60 percent per month, it’s impossible,” Bizzarri said in the video. He added that employees should “enjoy the ride.”
“Business details like these are usually things a company discusses with investors, not store employees, but the move shows how Gucci recognizes the importance of its in-store staff.”
Great Place to Work’s The Business Case For a High Trust Culture says that “Great Place to Work® has consistently found that companies with the highest levels of trust outperform industry peers on metrics including employee cooperation, productivity, retention and growth.”
Growth amidst Disruption: Culture is Key
Businesses today cannot be successful unless people are at the centre.
Culture empowers strategy
Culture and strategy work hand in hand. “You can have the best strategy ever, but you will lose it if the culture does not sustain the strategy,” Bizzarri says.
“If I can create this kind of culture in the company—and I think we are doing it—then the talent will come. Our industry is very small, everybody talks; so the best talents now send their CVs to Gucci all the time,” Bizzarri says.
“They know that, despite the success of the brand, the way that we work is a good way to work…if you stand back and look at it, all these people—young people—proudly dressed in Gucci, all smiling. Being able to create this sort of energy and creativity, both in terms of product and business, is fostering success.”
“Other companies can do the right product for the season, but they cannot copy our people. That is the difference.”