Do it well

In whatever you do, do it well. When you make the effort, give your best to it.
You cannot cheat life, so don't bother trying. If you compromise your integrity, it will quickly drain away and you'll always regret the loss.

When you do what you do, do what is right. Even though you think no one will ever know, you will always know.

You will know, and that makes all the difference. For real confidence comes from a job well done, and confidence is worth more than gold.

It doesn't have to be perfect, though the closer you can get, the better. What you must always do, in whatever you do, is your best.

The quality of what you experience in life depends on the quality of what you give to life. Make it good, make it right, make it honest, and add real, lasting value to your world.

THE ULTIMATE GUIDE TO 2010 INVESTMENT PREDICTIONS AND OUTLOOKS

http://pragcap.com/the-ultimate-guide-to-2010-investment-predictions-and-outlooks

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Thank you for your trust in referring me to your [friend/relative/colleague] [referral name here]. I look forward to providing [referral name here] with the same high level of service that I strive to deliver to you.

Thanks once again for everything, [client name here] – I look forward to our next meeting sometime soon.

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Don't Let Your Strength Become Your Weakness - Harvard Business Review

One of the first things I ask my new clients to do is write down three of their key strengths and three of their flaws. Typically, strengths might be attention to detail, focus, and drive; flaws can be delegation, lack of creativity, and people-management skills. I then ask clients to look carefully at what they have written. Often, they will stare at the paper and then at me. They will ask me to explain. Rarely do they see the connection.

The fact is that our flaws are often the mirror image of our strengths, and it's important to realize that we should not over-develop our strengths, causing them to turn into flaws. There is always an optimal point: confidence that doesn't border on arrogance, wit that doesn't slide into sarcasm, and diligence that doesn't become perfectionism. I have observed many leaders who have fallen into the strengths/weaknesses trap. Having been praised and rewarded for demonstrating particular strengths throughout their careers, they become blind to the shadow sides of these strengths. Often, this blind spot can derail a career.

I was therefore very interested to read about some new research that delves into leaders' dark sides. The researchers interviewed 18,000 U.K. leaders over a decade (1999 to 2009) to discover what derailed them under pressure. They identified 11 derailers — strengths which turned into flaws under pressure. These include shrewd-mistrustful; charming-manipulative; vivacious-dramatic; and diligent-perfectionist. These "Dark Side Characteristics" were present in 85 percent of the leaders surveyed, with 16 percent having three dark-side characteristics.

Interestingly, the most common dark side characteristic in the U.K. is dutiful-dependent, that is being too appeasing and accommodating when under pressure. Additionally, a quarter of U.K. leaders also tended to withdraw from difficult situations and become remote.

The implications of these findings are significant for companies battling with the uncertainties of the new economic era. Consider, for example, a company whose senior executive team is uniformly dutiful: what happens when they encounter a crisis or an all-powerful CEO drives their strategy in the wrong direction? Common sense dictates that they should meet the crisis head on or challenge the CEO, yet the research suggests they are more likely to jointly keep their heads down. This behaviour was revealed at the Royal Bank of Scotland as it came under severe pressure last year: it became apparent that the senior team had not properly challenged the strategy or called the CEO to account.

I am sure that we can all come up with examples of managers and leaders who are unaware of the shadow side of their enthusiasm (volatility), charm (manipulativeness) or focus, (passive aggression). All too often they are aware only of the positive effects of their personalities, screening out the negative impact on those surrounding them. If they remain impervious to feedback — or the organizational culture doesn't support individual feedback — then senior leaders can be in serious danger of sabotaging their careers as well as their companies. A leader embarking on a senior role should remember that there are many things beyond his or her control that can derail them: they should not add their own blind spot to that list.

So what can organizations and individuals do?

1. Look out for potential derailers at the recruitment stage. Don't be dazzled by outstanding performance in one area only to overlook a lack of basic competences in other areas. Tough, results-focused executives might be desirable, but these traits must be balanced with some understanding of how to manage people. Similarly, recognize that success in one company does not necessarily mean guaranteed success in another organizational culture.

2. Ensure that careers are managed in a sustainable way. Many organizations fast-track high fliers beyond their real capabilities, ignoring their limitations and flaws until they emerge in times of pressure. This can be highly damaging to the individual, team, and organization.

3. Use feedback and psychometric tests to raise awareness. Regular 360 feedback surveys can help executives and top teams (including the CEO) identify, understand, and analyze the real impact of their flaws. Psychometric tests such as the HDS can also help executives understand where the fault lines lie in their personalities. Using this information, they should work on a personal strategy to manage these flaws, either through coaching or training programmes.

4. Understand how traits vary across generations. The research found, for example, that members of Generation Y are more compliant and dutiful than other generations, which could make them reluctant to take decisions or challenge the status quo. Generation Xers, meanwhile, have more social skills, but can be perceived as being superficial or manipulative if they overplay their hands.

What are your thoughts on the dark side of leaders? Have you any further evidence or experiences of how strengths can turn into weaknesses? Do you have any experiences to share of derailers — your own or those of others? And have you come across any interesting ways to ensure that strengths are not overplayed?

Savor the challenge

Are you waiting for things to get better before taking action? The fact is that things will not get better until you go ahead and get yourself moving forward.
The best time to start is always now. For no matter what the outside circumstances may be, the most effective strategy is to get your inner strength revved up and rolling right away.

If you're waiting for things to be perfect, you'll wait forever. Instead, grab hold of what is here and now and find a way to make positive use of it.

Though your excuses for delaying may be very reasonable and impressive, those excuses won't move you forward. Circumstances will improve when you make the effort to improve them.

Even the smallest effort is much better than doing nothing. And small efforts that bring results will motivate you to take bigger, more effective steps.

You know from experience that you can do what you set your mind to do. Set your mind on the best of what can be, and savor the challenge of making it happen.

Consistent effort - Daily Motivator

If you make more progress than you thought you would, don't compensate by slowing down. You're doing great, so raise your expectations even higher and keep going strong.

If you fail to make as much progress as you had planned, don't get discouraged. Remind yourself of why you're making the effort, and re-commit to getting it done.

Consistent, purposeful effort will reliably bring the results you seek. On some days you'll move faster than on other days, yet every day you'll keep going forward.

Never forget that there is great power in small actions that are repeated again and again. Though the path may be long and winding and uneven, by continuing to put one foot in front of the other, you'll reach your destination.

Celebrate the small victories and learn from the small defeats. Then, keep on moving steadily toward the goal you've chosen.

Put the power of consistent effort to work. And each day, you'll bring new value to life.

The substance of style - The Economist

“THERE are four main elements to our business model—product, distribution, communication and price,” explains an executive at LVMH, the world’s largest luxury-goods group. “Our job is to do such a fantastic job on the first three that people forget all about the fourth.” For decades LVMH’s formula has worked like a spell: seduced by beautiful status-symbols, perfect shops and clever advertising, millions of people have swooned forgetfully towards the firm’s cash registers. At Louis Vuitton, LVMH’s star company, the model’s pricing power has yielded consistent profit margins of around 40-45%, the highest of any luxury-goods brand.

These days customers are finding it far harder to forget about price. The seriously rich, of course, are still spending freely. But much of the industry’s rapid growth in the past decade came from middle-class people, often buying on credit or on the back of rising house prices. According to Luca Solca of Bernstein Research, 60% of the luxury market is now based on demand from “aspirational” customers rather than from the wealthy elite. The recession has quickly reversed the trend to trade up, and people are delaying expensive purchases. Bain & Company, a consulting firm, expects the industry’s sales to fall by a tenth in 2009, to €153 billion ($225 billion).

Some executives even expect a lasting shift in customers’ preferences, towards discretion and value. Bernard Arnault, chairman and chief executive of LVMH, believes that the whole industry needs to rebrand itself. “The word luxury suggests triviality and showing off, and the time for all that has gone,” he says. Brands which sold “blingy” easy-to-sell products, milking old names, he says, will fare particularly badly in the new environment. LVMH, by contrast, has never taken such an approach, he says, instead emphasising quality, innovation and creativity.

To underline these values, the group is going back to basics in its daily operations. “Before the crisis, we were putting a lot of energy into beautiful stores, but now we care a bit less about expanding our network and even more about design and price,” says an executive. A few years ago, for instance, at the height of the boom, one LVMH brand was putting diamonds all over its watches, so that it was almost difficult to tell the time. “Now we are getting back to what really matters, which is nice movements and design,” he says.

For some luxury firms, the recession’s effects have already been brutal. Private-equity firms and other outside investors which rushed into the industry at its peak have suffered most. “At the top of the market this industry was perceived as easy by outsiders,” says Mr Arnault. “You borrowed 80% of a target’s asking price and hired a good designer, but the strategy has not been successful in several cases.”

Lenders to Valentino, an Italian fashion house, are reportedly trying to renegotiate its debt. Permira, a private-equity group, bought the firm in 2007 in a deal valuing it at €5.3 billion. Permira has since written down its equity investment of about €900m by more than half. Prada Holding, through which Miuccia Prada and her husband control Prada Group, another Italian house, recently restructured its loans in order to defer payment to banks. Prada Group has denied that there are talks to bring in a minority shareholder. Two particularly weak firms, Christian Lacroix, a Paris-based ready-to-wear and haute couture label which used to be part of LVMH, and Escada, a German maker of luxury womenswear, filed for bankruptcy earlier this year.

Amid this turmoil, LVMH is performing relatively well (see chart 1). It has benefited from an established pattern in the luxury industry: when people have less, they spend what they do have on the best quality. Shoppers are going for fewer, classic items—one Burberry raincoat, rather than three designer dresses, or a single Kelly bag by Hermès, a French luxury-goods group, instead of four bags from various lesser designers. For this reason, says Yves Carcelle, chief executive of Louis Vuitton and president of fashion and leather goods for LVMH, “Vuitton always gains market share in crises.”

As reliable and sturdy as one of its own handbags, therefore, Vuitton is carrying LVMH fairly comfortably through the recession. In the first half of 2009 the group’s revenues were about the same as a year before, though profits were 12% lower. Two divisions—wine and spirits, and watches and jewellery—were the worst affected: their revenues each fell by 17% and their profits by 41% and 73% respectively (see chart 2). Rapid de-stocking by retailers exacerbated the effect of falling demand. But the falls were offset by Vuitton, where revenue rose by a double-digit percentage, registering gains in every market. “It is incredible that in a downturn the consumer still buys so many Louis Vuitton bags, but she or he does,” says Melanie Flouquet, luxury-goods analyst at JPMorgan in Paris.

Vuitton’s performance, and the overall robustness of LVMH, a global conglomerate with more than 50 brands and revenues of €17.2 billion in 2008, should allow it to take advantage of its competitors’ weakness in the recession. “In the next few years we expect several failures in the industry and good opportunities to acquire assets at attractive prices,” says Mr Arnault. Shareholders in the firm are particularly preoccupied by what he might buy and sell in the next few years.

What explains Vuitton’s resilience? Beneath the gloss of advertising campaigns, catwalk shows and each season’s fleeting trends, Vuitton brings a machine-like discipline to the selling of fancy leather goods and fashion. It is the only leather-goods firm, for instance, which never puts its products on sale at a discount. It destroys stock instead, keeping a close eye on the proportion it ends up scrapping (which it calls the “destruction margin”). In 2005, when Maurizio Borletti, owner of several prominent department stores in Italy and France, was preparing for the opening of a refurbished La Rinascente department store in Milan, he recalls, the Vuitton people built a scale model of the building in their offices to understand customer flows and get the best positioning. “In this they’re the most professional in the industry,” he says.

Unlike most other luxury marques, Vuitton never gives licences to outside firms, to avoid brand degradation. Its factories use techniques from other industries, notably carmaking, to push costs down ruthlessly and to allow teams of workers to be switched from one product to another as demand dictates. It has adopted methods of quality control, too: one quality supervisor came from Valeo, a French auto-parts supplier. The result is long-lasting utility, beyond show, which is valuable in difficult times.

Owning shops gives Vuitton control over levels of stock, presentation and pricing. It was not therefore affected by the panicked price-slashing of up to 80% by American luxury department stores in the run-up to Christmas last year—a “catastrophe” for others in the industry, according to Mr Arnault. Although other LVMH divisions have been hit by outside retailers de-stocking during the crisis, Vuitton has managed its own inventory, with no competition for space from other brands. With a global network, says Mr Carcelle, the firm can move poorly selling stock to shops where it has performed better.

The luxury of diversity
Vuitton’s ability to offset the steep falls in other divisions shows the value of the diversified conglomerate model in luxury goods. Richemont, the industry’s second-largest company, has a less varied portfolio and greater exposure to watches and jewellery, demand for which has been especially weak. According to a recent trading statement, its sales fell by 16% in the five months to the end of August.

A group structure also yields savings when negotiating deals for advertising space, property and credit-card fees. It helps to have a specialist beauty retailer, Sephora, and a chain of airport shops, DFS, to sell perfumes and cosmetics. When Vuitton develops watches, say, it can call on the talents of TAG Heuer. But LVMH’s breadth also comes in for criticism. Although there is undoubtedly value in some diversification, some people ask whether 50-odd brands under one roof are too many. Vuitton, for instance, would doubtless like to see disposals of weaker brands as a result of the crisis, and a greater concentration of resources on the group’s key businesses.

The group’s executives devote the bulk of their attention to the most important of these: Louis Vuitton, Moët Hennessy in drinks, TAG Heuer in watches, Christian Dior in perfumes and cosmetics, Sephora and DFS. The group has many smaller businesses, and these get much less attention in such a big group. LVMH does not disclose financial figures for individual brands, but at its presentation of first-half results the group’s finance director replied to an analyst asking about fashion and leather-goods that a “handful” had lost money “somewhere”. There is speculation that Celine, a ready-to-wear clothing and accessories label, Kenzo, a fashion brand which analysts have long suggested LVMH dispose of, or Loewe, a Spanish leather-goods brand which has so far failed to win much of a following outside Spain and Japan, are among the less profitable.

Nevertheless, the group can use the might of Vuitton to support its smaller, upcoming brands. A department store, for instance, may be asked to take Loewe or Celine in order to get Vuitton. That often frustrates people at Vuitton, however, who would prefer to use the power of the brand for its own benefit, says a person who knows the company well. “They’ve never heard of another of LVMH’s brands saying, ‘Either give this to Vuitton or I won’t come’,” he says. Apart from the synergy in watch design, Vuitton does not find that it benefits much from the rest of the group.

The reason why LVMH has many small brands which aren’t quite making it, says another person familiar with the company, is that Mr Arnault is an optimist who believes that every property can at some point be turned around. That can pay off: some years ago Mr Arnault halted the imminent sale of a make-up line. Thanks to the distribution muscle of Sephora, it has since turned into a bestseller in America. Investors, however, are nevertheless wary of what they see as Mr Arnault’s tendency to collect brands.

The crisis has also underlined the fact that Vuitton dominates the group’s results. Were it not for Vuitton, estimates one analyst, LVMH’s sales would have fallen by 3% in the first half of 2009 and profits would have plunged by 40%. In normal times Vuitton contributes about half of the group’s profits, and most of the rest comes from Moët Hennessy. In the first half of this year, however, Vuitton contributed an estimated 70% of profit. That leads some people to question whether LVMH is overly dependent on the leather-goods firm.

“You can argue that there’s nothing as good as Vuitton in LVMH’s portfolio,” says Pierre Mallevays of Savigny Partners, who was formerly director of acquisitions at LVMH, “but that simply states the fact that LV’s business model is the gold standard of luxury brands; no other brand in the world compares to it.” The biggest risk to LVMH is Vuitton, argues Ms Flouquet, since it accounts for such a big proportion of profits; the company depends on it, she says. The risk to Vuitton, in turn, is that it could fall out of fashion or lose its exclusivity in the eyes of consumers.

So far there is no sign of fatigue with the brand. LVMH’s senior managers have devised ways to refresh it. In the late 1990s, for example, Mr Arnault saw that there was a risk that as a maker of leather goods alone, Vuitton could be perceived as boring. In 1997 he hired Marc Jacobs, then a relatively unknown designer, to design a fashion line. The aim was to generate seasonal buzz and press coverage. Vuitton’s senior executives at the time were against the idea, fearing that adding fashion could undermine a timeless image, but Mr Arnault’s move proved successful.

To avoid overexposure of its signature “Monogram” print, Vuitton has taken care to develop a wide range of products and other patterns. “We increase the number of product lines and we are careful to have several different colours and shapes,” says Mr Arnault. Thus Vuitton sells reasonably priced handbags—the smallest Speedy Bag costs €430 in Paris—but also wildly expensive custom-made luggage, reinforcing its exclusive image. Another effective tactic is to make limited-edition handbags which are hard to get hold of.

Five or so years ago Vuitton depended to a large degree on one market, Japan. Most Japanese women owned at least one Vuitton product—and hence provided a large proportion of Vuitton’s profits, which worried analysts at the time. Yet the Japanese market for luxury goods was souring. Spending on such items in Japan has fallen sharply since the end of 2005, according to a recent report by McKinsey, a consulting firm. Young women are more individualistic than their mothers, and are seeking out lesser-known brands. “You used to see thousands of Vuitton bags coming at you in the Ginza shopping district but far fewer now,” says Radha Chadha, author of a book, “The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury”.

That reliance on one country is no longer so marked (see chart 3). Fortunately, Vuitton has since rapidly established a strong position in what it hopes will become another Japan: China. “The Chinese consumer is in a love affair with the Vuitton brand,” says Ms Flouquet. According to LVMH, in the first half of 2009 sales to Chinese people (at home and travelling) made up 18% of Vuitton’s revenue. Despite widespread concerns about counterfeiting in the country, the Chinese are now Vuitton’s biggest customer base after the Japanese. The key to the firm’s success, says Mr Arnault, has been approaching the market exactly as if it were a developed market. “We treat the Chinese customer as being very sophisticated.” Many competitors, by contrast, have at times lowered their standards for shops in China, he says, using inferior furniture or positioning their stores poorly.

Going into new markets and developing new product lines will enable Vuitton to continue producing double-digit growth for years to come, says Mr Carcelle. On every trip to mainland China—he makes five or six a year—he tries to discover a new city and meet its mayor. Mr Carcelle is also tackling other new frontiers: in October he will open a shop in Sukhbaatar Square in Ulan Bator. “Already if you go to an upmarket disco in Ulan Bator you will see a significant number of our bags,” he says.

Vuitton’s expansion into China, Mongolia and new product lines such as watches and shoes, suggest that the leather-goods firm will continue to be LVMH’s main source of growth. However, it also means that the group may become more rather than less reliant on Vuitton. In theory, the answer could lie in strengthening some of LVMH’s smaller names, such as Fendi, a fashion and leather-goods brand. But buying a big, established, global brand with potential for growth could be both a quicker and a surer route.

A new collection?
Analysts and bankers are convinced that Mr Arnault wants to buy the Hermès Group, a producer of leather goods and fashion which matches Vuitton for quality and design. Because Hermès is run so conservatively, says an investment banker who knows LVMH well, it is only a quarter of the size that it could be. “Mr Arnault would grow it while preserving its values,” he says. Earlier this year, there were rumours that LVMH would sell Moët Hennessy to Diageo, the world’s biggest spirits group, which already owns 34% of the business. Such a sale could raise money to buy Hermès. Mr Arnault, however, refuses to be drawn into commenting.

For the moment, such an acquisition is impossible, since the family which controls Hermès does not want to sell, and the firm is strongly defended against takeover. Nevertheless, says the banker, the family which controls it has several branches, all with different views. “It’s a pressure cooker and some day it will blow up,” he says. Chanel, another closely held global luxury brand, could also make a desirable target for LVMH. Some people recommend a merger with Richemont, which, Mr Solca argues, would address LVMH’s relative weakness in watches and jewellery.

Any such deals, or selling Moët Hennessy, would radically change the balance of the group. “I would be surprised if LVMH sold Moët Hennessy. The business has high margins, high cashflow and it is well managed,” says Ms Flouquet. “They would probably only sell it if they had a large deal ahead.” Shareholders are nervous that LVMH will pay too high a price for a large acquisition. For this reason the group’s valuation may not fully reflect its performance during the crisis. Such concerns are not likely to deter Mr Arnault, who has demonstrated his confidence in LVMH’s prospects in luxury by raising his stake in the group over time: he owns 47%. If LVMH does go shopping, it will probably behave like one of its best customers: with price in mind, but willing to spend on enduring prestige.

http://www.economist.com/displaystory.cfm?story_id=14447276