Luxury Institute: Global Luxury Experts Share Myths and Realities of Digital Transformation

Digital Transformation (DT) is a term that inspires awe as well as fear in the hearts and minds of premium and luxury goods and services brand executives. On one hand, executives have a fear of being left behind. On the other, they are so often bombarded with mixed messages and content about what DT is and isn't, especially in an industry that uniquely values customer relationships and human touch, that it is easy to be awed and confused as to how to move forward.

To help brands navigate and scale an effective journey with the highest probability of success, Luxury Institute conducted its own primary and secondary research. First, the Institute conducted an in-depth online survey with its Global Luxury Expert Network (GLEN) members. These individuals run, or have recently run, some of the top brands in the premium and luxury industry. Then, the Institute supplemented the GLEN member insights with secondary research insights from trusted, unbiased sources. Luxury Institute's goal is to deliver timely, fresh, objective perspectives and realities in implementing DT initiatives successfully. Below are the key findings:

Defining Digital Transformation

Digital Transformation, first and foremost, is about brand imagination and creativity that creates much greater emotional and economic value for customers and associates through enhanced communications, interactions, experiences, and journeys. DT is powered by an optimization of human and digital resources. It is, at its best, about building, empowering, and enhancing internal and external human relationships. DT is not something you do to, or force upon, employees and customers. It is not manipulative, coercive, or exploitative. It requires education, inspiration, collaboration, and constant nurturing.

Second, DT is not a project or a process. Technology, data, and analytics are part of the toolset, not the end game. DT has elements of revolutionary change, as well as never-ending, agile evolution. It stabilizes over certain parts of the organization and/or timeframes, yet it never ends. You may need to control it with projects and processes, but you must be able to focus on the big picture, including customer objectives and strategies, as well as the minutest tactical details, simultaneously.

Finally, DT requires a change in the organizational structure because it commands seamless, friction-free execution, not self-serving, disconnected, or dysfunctional activities. Organizing around customers, or customer segments, beyond products, functions, and channels, is required. Domain expertise is the key organizing resource. The appropriate experts must organize, reorganize, and coalesce around customer-centric objectives. It requires agile teams whose members are accountable to each other for measurable contributions and results first, then to the organization.

Over time, executing the three definition themes with purity and accuracy will evolve the business model successfully, without fear or confusion.

Success Factors of Digital Transformation

GLEN members and research point to several key success, as well as avoidable, factors in executing DT. First, top-tier leadership must be sufficiently adept and skilled in DT principles. Leaders cannot delegate DT to consultants and tech companies and wait for success to happen. GLEN members say it's because leaders at the highest levels must create and propagate the humanistic cultural context for the DT evolution. Only truly customer-centric brands that see their employees and customers as human beings, not as pieces on a chessboard, will succeed. Empathic, emotionally intelligent communication skills are required.

GLEN members tell us that too many DT projects are assigned to internal and external technocrats whose Industrial Age mindsets are focused on tech stacks, platforms, software, data, and processes. The experts realize that their skills in technology are very important, but they must not be allowed to hijack the culture or the customer and associate experiences and journeys into factory-efficient yet ineffective, soulless, disconnected, stand-alone pipeline projects that create dysfunctional experiences. They blame the tech orientation for many brands having to play catch up on e-commerce, disconnected channels, and the inability to determine which tasks to automate and which to optimize with human interaction. The fact that the same solutions are offered to all brands destroys the creativity and uniqueness of the brand DNA, especially in premium and luxury goods and services categories.

Experts also warn that many of the tech teams are often comprised of people of certain backgrounds who have zero empathy for customers and associates and define them as subjects (a highly derogatory term), instead of humans. This lack of empathy biases and damages the design of customer experiences and journeys. It affects the way that data is collected, skirting privacy laws, or operating barely inside the legal lines, while trampling on the ethical lines, putting the brand in legal risk and destroying consumer trust. It also means that the organization is developing biased, soulless, often manipulative, and exploitative algorithms. For example, when prices are overcharged for affluent, or less-affluent, price insensitive customers. GLEN experts tell us that often DT projects are merely band-aid tactical projects that solve one immediate direct challenge, while creating five others, simply because there was a failure to understand the complex, organic, holistic nature of the DT evolution in advance. Finally, experts warn that while we cannot predict the future, understanding the direction of customer needs and desires, and thinking for yourself vs. blindly copying DT solutions that are one-size-fits-all, are essential to brand longevity.

GLEN members state that while some may describe DT as easy, and others describe it is as extremely difficult, it is important to see that "degree of difficulty" is often on a DT element-by-element basis. Sometimes the mindset transformation is the hard part; other times, it's digitalization. For example, an organization comprised of disconnected channel silos with different objectives and incentives cannot align behind designing and delivering a seamless customer experience. However, no matter how mentally ready and creative a customer-centric team is, it cannot optimize the DT project without legal, ethical access to rich, relevant, timely data. How the data is accessed, given privacy laws and consumer concerns, is becoming critical to brand risk and reputation. This cannot be delegated to outside parties any longer. The brand must take control in procuring what has become the lifeblood of every enterprise.  

Most Common Digital Transformation Mistakes

GLEN members mention some common mistakes that luxury brands make in DT efforts. First, many brands mistakenly define DT in luxury as a project for replacing humans. They recommend brands see it as enhancing humans. They also express concern that some brands may allow technology to erode or replace the rich, powerful human relationships they have cultivated over time. They warn that the precious creation of desire, the curation of products and services, and joyous emotional intelligence of luxury brands' ambassadors must always prevail. Technology will always deliver some better solution for some isolated tasks in the business model, but the rich human connective tissue that defines the luxury industry must never be ripped apart, or the industry becomes another soulless commodity category defined by price.  

Luxury Institute asked its GLEN members for examples of brands that are doing DT successfully. The experts recognize that since DT is an endless journey, no brand can achieve DT optimization at any point in time. However, there was mention of Sephora, Gucci, Amazon, Nike, and Tesla as DT premium and luxury leaders that are differentiating themselves vs. competitors. More established brands such as Hermès, Chanel and Rolls-Royce are also mentioned as continuing to evolve rapidly and successfully in DT to remain highly relevant to their customers. As an industry, GLEN members rated the entire industry as mediocre with most experts rating the industry between 5 and 6, on a scale of 1 to 10 (worst to best).

However, Luxury Institute Global Luxury Expert Network (GLEN) members are highly optimistic that the luxury industry will prevail, as it has since the beginning of humanity. They believe most iconic brands will make the digital transformation safely, if not easily. They strongly believe that this digital journey can be optimized, not compromised, to serve the human beings who are valued members and constituents of an enduring industry.

About Luxury Institute and Global Luxury Expert Network

Luxury Institute is the world's most trusted research, training, and elite business solutions partner for luxury and premium goods and services brands. With the largest global network of luxury executives and experts, Luxury Institute has the ability to provide its clients with high-performance, leading-edge solutions developed by the best, most successful minds in the industry. Over the last 18 years, Luxury Institute has served over 1,100 luxury and premium goods and services brands. Luxury Institute has conducted more quantitative and qualitative research with affluent, wealthy and uber-wealthy consumers than any other entity. This knowledge has led to the development of its scientifically proven high-performance, emotional intelligence-based education system, Luxcelerate, that dramatically improves brand culture and financial performance. Luxury Institute has also innovated the Advanced Personalization Xchange (APX), powered by DataLucent, to empower affluent consumers to license their digital platform data to premium and luxury brands they trust legally, securely and privately in exchange for fair value rewards and benefits.

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Source: Luxury Institute

About Luxury Institute

Luxury Institute is the world's most trusted research, training, and elite business and personal data technology solutions partner for luxury and premium goods and services brands.

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