SOURCE: Luxury Institute, LLC

Luxury Institute, LLC

SOURCE: Retail Performance Academy

Retail Performance Academy

January 09, 2017 09:11 ET

The Most Critical Skill for Luxury and Retail in the Twenty-First Century

NEW YORK, NY--(Marketwired - January 09, 2017) - Most retail and luxury executives believe the battle of the twenty-first century in luxury and retail is between technology and humans. In fact, the battle is between uncurious executives with decades of expired experience, chasing to keep up, versus dynamic, inquisitive executives searching for what's next while building hotbeds of expertise that drive true innovation.

Luxury Institute CEO Milton Pedraza recently attended an invitation-only executive education program at the Stanford Graduate School of Business. One of the key insights from venture capital insiders was that what makes Silicon Valley a hotbed of innovation is the strength of human relationships. Ironically, while many luxury and retail executives see technology as the major solution in this retail revolution, entrepreneurs and venture capital insiders understand that what fuels the entrepreneurial dynamism in the Valley today is not high-tech. According to insiders, technology is a fantastic byproduct, an outcome, and a rich enabler of disruptive business models, but business success in Palo Alto, and at companies such as Google, Apple, LinkedIn and Facebook, is more about people, shared values, community, and deep, trusting relationships that drive innovation and profits.

In order to achieve such levels of high performance, Silicon Valley's top-tier brands now select talent as much, or more, for emotional intelligence as they do for STEM (science, tech, engineering, math) skills. In fact, experts in the Valley predict that a vast number of coders will be replaced by artificial intelligence by 2030. Marc Andreessen, who once professed that software and robots would eat all the jobs, now gets that "when automation becomes abundant and cheap (i.e. a commodity), human experiences (i.e. relationships) become more rare and valuable." Geoff Colvin, author of Humans are Underrated, uses empirical evidence to make the case that the nature of work has already shifted toward relationships skills. According to Colvin, "It used to be that you had to be good at being machine-like. Now, increasingly, you have to be good at being a person. Great performance requires us to be intensely human beings."

Tony Spring, CEO of Bloomingdale's, sees the confluence of technology and the human reshaping the shopping experience. "Given the new and rapid innovations in technology, in the near future, offline retail will provide two types of client experiences," says Spring. "In one, consumers will prefer an efficient and easy self-service, enabled by technology. In the other, consumers will engage with trusted experts, enhanced by technology, with whom they build long-term trusted relationships. For the human experience to be highly effective, sales associates will have to develop expertise in product knowledge, and more importantly, master emotional intelligence skills."

Pedraza was inspired at Stanford to develop, plan and launch his new start-up, the Retail Performance Academy, an alternative vocational education program that teaches high-performance relationship building, driven by emotional intelligence skills. The program addresses the twenty-first century requirement to properly select, train, measure, coach and mentor the next generation of top specialty retail and luxury sales associates. Retail Performance Academy will scale slowly, as it aspires to become the Stanford Business School of front-line luxury and retail.

Business expects that America's higher education system should prepare a student to become a successful professional. The grim reality is that college fails to graduate half of those who enroll, even after six years. Even more disheartening, half of those who do graduate are unemployed or under-employed. Despite its failure to educate young people for productive careers, college has saddled millennials with $1.4 trillion in debt, forcing them to postpone marriage, home purchases, and other essential and luxury spending. The grim financial situation for many younger Americans is, in fact, a root cause of current lower demand in retail and luxury. Successful entrepreneurs and venture capitalists like Peter Thiel and Mark Cuban rightly argue that the U.S. higher education system is a giant bubble waiting to burst, and that it is ripe for disruption. "There's been a tremendous amount of weight that has been given to four-year university degrees…and not nearly enough weight is given to vocational training certifications," LinkedIn CEO Jeff Wiener recently said.

Pedraza's involvement with hundreds of luxury and retail brands led him to conclude that the people selection and training and coaching programs at most companies around the world are extremely ripe for disruption. Brands that want to survive and thrive through this retail and luxury revolution will have to make up for the failure of higher education, and for their own failure, to prepare the next generation of highly skilled front-line associates. Luxury Institute and Retail Performance Academy have researched, developed and field-tested three key action steps that every brand must embrace:

1: Confront The Brutal Facts Of The Marketplace And Your Performance

It's no accident that two of the defining business books on achieving high performance, Good to Great and Scaling Up Excellence, both with roots in Stanford Business School, address the critical need to have the courage and conviction to confront the reality of the marketplace and your team's own performance. Jim Collins' Good to Great encourages executives to lead with questions, not answers; to engage in dialogue and debate, not coercion; to conduct autopsies without blame; and to build red-flag mechanisms that cannot be ignored. In Scaling Up Excellence, Robert Sutton and Huggy Rao warn executives to avoid the three "clusterfugs" of scaling excellence: illusion, impatience and incompetence, Managers fool themselves into believing that scaling high-performance will be easy, that it should be a rush-job, and they fail to recognize that the organization currently lacks the proper skills for successful execution.

One of the greatest profiles in courage for confronting reality in recent times is CEO Marco Bizzarri, who took over Gucci early in 2015. Marco immediately set about working with his teams across the world to transform Gucci. Working with Luxury Institute as the objective facilitator, Marco inspired his people to confront fearlessly the reality of the market, and the reality of his brand's performance. Marco then empowered his team, including the best of the front-line, to define, plan, and execute the future of Gucci. Gucci's recent early financial results speak for themselves. Mr. Bizzarri's leadership is a textbook case of confronting brutal facts while fostering deep, effective internal human relationships to achieve amazing results. Confronting reality is neither fun nor easy, but when done with humanity and humility, as Marco Bizzarri proves, you can achieve high-performance surprisingly quickly.

2: Commit To Transforming The Brand Into A Hotbed Of High-Performance Client Relationships

Once you embrace the brutal facts regarding your performance, you must act. Dan Coyle, author of The Talent Code, has studied and analyzed the success factors of the world's current hotbeds of high-performance in fields such as Olympic diving in China, soccer in Brazil, and women's tennis in Russia. Coyle states, "Going through life thinking you can create great performance by combining natural gifts, hard work, and passion, (which are three of the greatest myths of high performance), is exactly like going through life thinking you can create a Ferrari by combining steel, red paint and Italians." Coyle's critical insight is that all hotbeds around the world share the same overlooked and ignored skill acquisition foundations, including deep, deliberate, measurable practice, and world-class coaching. It's difficult to master these, but the rewards of doing so are accelerated learning and surprisingly fantastic results.

In the case of mastering high-performance client relationship building, Luxury Institute's Luxcelerate system, which has significantly improved the performance of dozens of companies, delivers on Coyle's principles. Luxcelerate includes a people selection process based on character; a compensation system that incentivizes relationship-building behaviors; a set of relationship values and standards that invoke high emotional intelligence; a highly interactive training system; innovative practice methods; custom behavioral data and metrics; and a scientific coaching system that leads associates to own their results and develop personal solutions. These modules, learned from the military, emergency surgery units, education, aviation, sports, cognitive and positive psychology, and other sources far beyond the mediocrity of retail, create a pathway of accelerated learning that leads front-line associates at all levels to become expert performers.

3: Embrace Analytics-Driven Performance Improvement

Two ingredients required for building a hotbed of high performance in the twenty-first century are data and analytics. Tremendous hype surrounds these topics, and many efforts at using them fail to deliver value. Michael Lewis' book Moneyball, which inspired the popular movie starring Brad Pitt, tells the story of Billy Beane, general manager of the Oakland Athletics, who bravely overcomes naysayers by using data and analytics to identify undervalued players. Despite having one of the lowest payrolls in Major League Baseball, Beane's success at using data to spot talent helped him field the best team of hidden gems his limited budget can buy. Beane transformed the A's from long-term losers into high-performance competitors, leading his team to the playoffs four years straight within two years of taking charge of the franchise.

Nearly two decades into his tenure, Beane continues to use analytics and his teams have continued to enjoy success, making the playoffs three times since 2012, but they have not appeared in the World Series. Beane's analytical process that helped him identify and trade for the best players he could afford was a breakthrough concept at the turn of the century, but now nearly every team in baseball has copied the strategy, and it no longer delivers sustainable competitive advantage. This is why benchmarking can be a diminishing-returns strategy over time.

One baseball innovator who stood on Beane's shoulders, and whose advanced Big Data and analytics strategy has produced three World Series championships, two with the Boston Red Sox and one with the Chicago Cubs in 2016, is Theo Epstein. His teams each had decades-long histories of being losers. The difference in strategy between Beane and Epstein provides a massive, critical learning opportunity for luxury and retail.

Unlike Beane, who is a talent trader, Epstein is a talent builder. Like Beane, Epstein uses data and analytics to identify and select talent, but that has become table-stakes in Major League Baseball. Epstein goes much further. First, he uses data and analytics to identify talent. Then, he sets out to analyze character. He spends half his interview time talking to the person rather than the player. Epstein goes even further. He uses the data and analytical methods to evaluate each player, and then develops individualized training and development circuits. He breaks down high-performance skills into small, detailed chunks of behaviors, and he develops innovative training and coaching methods to build skills that win. It takes much longer, and requires far more practice and coaching skill, to improve the performance of all the players, but that is what wins championships today in the major leagues.

Just like Epstein, the Luxcelerate system chunks high-performance client relationship building into behaviors that a sales associate can learn and master through scientific, data and analytics-based practice and coaching. One luxury and retail executive who has adopted the Luxcelerate system is John Ballay, CEO of men's bespoke custom-retailer, Knot Standard. John and his team have embraced the Luxcelerate system, which is similar to Theo Epstein's system, and they have achieved a 64% increase in sales, and a 14% increase in average order value across seven showrooms in the past four months. "The Luxcelerate system provided not only an increase in sales performance, but also provided us a consistent management platform to facilitate expansion into new markets," Ballay stated in a recent interview. "Creating consistent practice, measurement, coaching methodology and language for managers and sales associates is a massive improvement as we scale our business."

The next decade in luxury and retail, and business in general, will be a fantastic tournament to see who can build the most effective, humanistic customer relationship systems, enhanced by technology. The winners will be those who unflinchingly confront the brutal facts of their performance, build hotbeds of relationship-building expertise, and leverage data and analytics to select and develop talent. Yes, it's extremely difficult to master and execute all three, but that is exactly why you must do it.

For more information and additional insights from Luxury Institute, visit For information regarding Retail Performance Academy, visit To contact Luxury Institute CEO, Milton Pedraza directly with questions, please reach him:

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