According to the September 2015 edition of the Harvard Business Review, the luxury goods market is undergoing significant disruption. Many of the players have seen this coming and so have extended their brands to appeal, not just to millionaires, but to the thousandaires as well. It feels like the luxury brands, in some cases, are trading margin for volume. Possibly this is an attempt to squeeze as much return as possible from their brand before the minimalists, social capitalists and the inconspicuous consumers reach critical mass.
Smart luxury brands are looking beyond labels and logos as a social status signals and are moving towards what might be called understated experiences.
If your organisation operates at the top end of the market, then it looks like it will have to work harder to maintain profitability. For the rest of us, this presents an opportunity to enter the inconspicuous consumption 'luxury' market.
This could be the perfect theme to reposition yourself as your organisation’s digital transformation leader. If they don't buy it, find somewhere that will. All organisations need to make the transition and many are oblivious as to what awaits them economically.
What are the implications of this new post-labels market? As mentioned, the customer is looking for distinctive experiences rather than flashy 'look at me' (or even 'rob me') adornments and chattels. Increasingly this is going to be digital, in whole or in part. One extreme being total immersion virtual reality. The need for personalisation will require next generation customer management/demand change management type technologies.
While the iWatch is not quite a discrete adornment, it is allowing Apple to enter the luxury watch space, using its app store to highlight its practicality over the other perhaps more functionally frivolous luxury options. Utility is a hallmark of the 'new luxury'.
Personalisation requires a degree of artistry. As robots replace process workers, your users will increasingly be artisans. The provenance of the services your organisation provides will be a key part of the experience. The role of the IT function will be to provide the tools to allow the company’s 'artists' to do great work. This is a little different to ensuring, as much as possible, that they stick to the operations manual and don't steal anything.
The tools needed by artists can only be provided by those that are similarly creative. Your IT function will likely have a much reduced headcount thanks to automation and the cloud. It will likely comprise technologists who can engage and support 'creatives'. Not easy, unless your people have high EQs to match their high IQs.
Your suppliers, who have worked hard to build reputations around the reliability of their kit and software, will similarly have to trade margin for volume as the tide of utility sweeps the technology market. This opens the door to upstart providers who position themselves as creative, utility-minded and value focused. Complex system integration doesn't just evaporate, but over time that will be an issue for the providers rather than the end-user IT function.
And what about you? Does your boardroom see you as something of a Liberace; a flamboyant spender focused on acquiring stuff (technology and headcount) despite there being no obvious rationale for it? Is there a sense that you want your Big Data to be bigger than your competitors, much like billionaires compare yacht sizes?
Of course, I am not implying that you are a reckless spender. But in the absence of articulating your value proposition, then all boardroom eyes will be on your spending habits. In keeping with the 'new luxury', you need to brand yourself accordingly. This means that you make the experiences of your customers, users and boardroom very positive. In an understated manner, you make all parties aware that the underlying technologies and services were from sustainable sources and 'lovingly carved' by passionate artists. What's more, the business value, through the practicality and relevance of the services you provide, is very clear.
The generation of CIOs who do not get this will come to be known over time as the 'last of the big tech spenders'. Perhaps 'frugal opulence' is the new IT function mantra?