By Polina Rodygina.
CEO Estée Lauder on the importance of thinking strategically for both companies and people
At some point in life we ask ourselves the trickiest question of all: what’s next? It comes to mind on one of those uneventful weekends, when an unoccupied brain cannot resist heavy thoughts. You are daydreaming of a successful life, but are you actually getting there? Are you doing what you should really be doing? Is this enough?
This is an issue even for a single person, but what if you are the biggest company in one of the fastest changing industries in the world, asking the exact same question and making decisions for 40.000 employees? As it turns out, the solutions are logically similar in both cases. On Thursday, September 24th, during his visit to Bocconi University Fabrizio Freda shared a universal mindset for strategic decisions that boosted his company’s market capitalization from 7 to 28 billion US dollars in 6 years. Now, that must be something to take a closer look at:
Diversify your efforts. Have you ever used a Jo Malone perfume, a MAC eyeliner or a Clinique face cream? Even if you are familiar with the brands, it would not be obvious that they do belong to the same company. Although all of the 30 brands owned by Estée Lauder operate in one segment of prestige beauty, each of them has a unique concept, a specific audience and a customized marketing strategy. In an industry with annual double digit growth it is vital to manage uncertainty this way, so that if some of your efforts fail to hit the target, you and your shareholders could still reap profits.
Dedicate yourself to what you are doing. As Mr. Freda puts it, all of his brands have ‘strong points of view’. A name is important, but it is nothing without a story, a person behind it, who had enough courage and ‘sparkle’ to turn an idea into a multinational company. These outstanding personalities, like Bobbi Brown or Estée Lauder herself, didn’t give up on their strategic vision even if starting the business meant cooking up face creams on gas burners in old restaurants. They began from a single product, but truly believed in its global success.
Create value. If you didn’t sleep through that management course your freshman year, you probably know that the higher the value you create the higher the margin/demand. In the modern world of luxury cosmetics creating value is selling not only products, but ‘looks’, showing customers how to use cosmetics they buy to enhance their social image the most. This is why Estée Lauder, your grandma’s number one favorite brand, appointed Kendall Jenner, a 19-year-old, as the brand’s new face. Why? Maybe because one million people like each of her Instagram selfies.
Envision the future. In everyday life, when you plan something, chances are that the reality will not match the plan. In a highly volatile environment it is a success when you can strategize for 3 years — and most stop right there. What we should really do is get a bird’s-eye view of where we and our competitors will be in 10 years’ time and try to evaluate whether what we are doing today will still matter. That is why, when many stop investing into operations in China once they hear the latest news, Estée Lauder executives keep in mind that nothing will stop the Chinese from becoming the world’s most important consumers, it will only take some more time.
Reverse engineer your strategy. Now that you have a clear perspective, or strategy, ask yourself what has to be done in order to hit each of your strategic targets? What will be your focus right now? In this, you may need someone to learn from, just as Mr. Freda is involving 20-year-olds into senior decision-making: ‘Millennials have revolutionized the global consumption, they are our most innovative and demanding consumers, and we can’t afford to neglect their opinion’. On a weekly basis young people give insights into areas that are crucial for sustainable growth and of which older top managers may have a biased view because of the generation gap. These areas are mainly millennials’ consumer behavior and social media activity.
Embrace the ever-changing world. Sometimes all it takes is an attitude. They say if your reaction to an unexpected event is ‘amazing, that’s exactly what I needed’ rather than ‘again, seriously?’, your brain will automatically find a way to use change to your benefit. In cosmetics, one of such surprises was travel retail – who would have known a decade ago that a single Shanghai airport would account for higher sales than all Benelux countries combined?
Of course, we are not all CEOs, but in Mark Twain’s words, “The secret to getting ahead is getting started.” So let’s start small and try to apply Mr Freda’s advice to our personal and professional lives. We can put real effort into work and create value for our first employer, take time to prioritize what will still matter in our 30s and — who knows — maybe we won’t even notice starting to approach the goals that recently seemed impossible to achieve.