Insights from LVMH: Traits that make it's architect Bernard Arnault successful

As the co-founder of an early-stage startup ( The Folclore Company ) , I find myself constantly focused on building the right team, seizing opportunities, and scaling our company. While it's crucial to maintain a sense of urgency, it's also essential to remember that building a successful brand and achieving widespread recognition is a marathon, not a sprint.

Inspired by the Acquired podcast episode on LVMH (a glorious 3.5hr listen) and the book "Bernard Arnault, ou, Le go?t du pouvoir" this series of post, of which this is Post No1, I will dive into the strategies that I believe have contributed to the phenomenal success of LVMH and its architect, Bernard Arnault. Not only am I dissecting the key philosophies and approaches that have propelled LVMH to the pinnacle of the luxury industry, we can glean valuable insights and inspiration for our own entrepreneurial endeavors, I will also be leveraging some of the learnings from the Postgraduate Diploma I'm currently doing at Sa?d Business School, University of Oxford .

Today, we kick off our very first post by taking a closer look at the man who makes it all happen: Bernard Arnault himself. (P.S. I know this might sound a tad academic, but hang in there; I promise it’ll be insightful!) Bernard, the French billionaire and CEO of 酩悦·轩尼诗-路易·威登集团 , the world’s largest luxury-goods company, has not only transformed the luxury industry but also solidified his position as one of the world’s wealthiest and most influential people. He’s achieved this through ruthless acquisition of companies, leveraging financial engineering of his publicly listed companies to extend his capital capabilities (not too dissimilar from Warren Buffet), and invested in incredibly talented people by his side.

This latter point is a key element of Bernard’s strategy where he sees success is his commitment to investing in talent. He firmly believes in surrounding himself with the brightest and most capable individuals, even if their specific roles or responsibilities within the company have not yet been defined. Arnault’s approach is rooted in the conviction that it is better to have talented people by his side than to risk them joining a competitor. This strategy has enabled him to build a formidable team of professionals across various disciplines, contributing to LVMH’s ongoing growth and innovation. By placing his trust in the potential of individuals and empowering them to excel within the organization, Arnault has fostered a culture of excellence and collaboration that has become a competitive advantage for LVMH in the luxury industry.

A key aspect of Arnault’s philosophy is that, as he’s said “he may lose once, but never twice”. This unique approach highlights his tenacity, resilience, and learning mentality. Arnault believes that setbacks and failures are inevitable in any successful venture, but it is how one learns from these experiences and adapts that sets them apart from the competition. This philosophy has helped him navigate LVMH through turbulent times and emerge stronger than ever.

One example of Arnault’s determination and adaptability is his battle for control of Gucci in the late 1990s. Although he ultimately lost the fight to Pinault-Printemps-Redoute (PPR), Arnault displayed a sharp learning curve and quickly moved on from the defeat. His acquisition of Fendi in 2001 and other strategic moves since then have been instrumental in expanding LVMH’s portfolio and dominance in the luxury sector.

Bernard Arnault’s large-scale ambition is another defining characteristic of his business approach. As the head of LVMH, he has demonstrated a relentless pursuit of growth and expansion. Arnault’s leadership and strategic vision have taken LVMH to unprecedented heights, with the company’s portfolio now spanning over 75 brands under one roof, only 6 of these are younger than 5 years old. There are 4 similar business segments: Wines & Spirits, Fashion & Leather Goods, Perfumes and Cosmetics, and Watches & Jewelry, and 2 completely different ones: Selective Retail (Sephora & Duty Free) and Other which represent entities with their own distinct operations like Belmond Hotels, Print Media like Connaissance des Arts, and Royal Van Lent yacht Manufacturer. Wines & Spirits is the largest segment with 26 Brands and has displayed slow & steady top-line growth of 4.6%/year in the last decade. LVMH Champagne captured 22% of?all champagne sales?and LVMH-owned cognac 46% of all cognac sales (which is seriously down due to Chinese lockdowns) — incredible.

This appetite for expansion and domination is driven by Arnault’s belief that a strong and diversified portfolio is essential to weathering economic downturns and remaining ahead of the competition. As he once said, “I have always thought that the more you diversify the group, the less it will be sensitive to the economic cycle.” This mindset has allowed LVMH to thrive, even during challenging periods, and maintain its position as the world’s leading luxury conglomerate.

Arnault’s perspective on problems and workloads further cements his reputation as a pragmatic and resourceful leader. He believes that problems are just opportunities in disguise, and tackling them with the right mindset can lead to new solutions, growth, and success. This optimistic outlook has enabled him to seize opportunities and transform challenges into advantages for LVMH.

A case in point is the global financial crisis of 2008. While many luxury companies struggled to maintain their footing, Arnault took the opportunity to strengthen LVMH’s position. He acquired new brands, such as Italian jeweler Bulgari, and invested in existing ones to ensure their continued growth and profitability. This bold approach during a difficult time paid off, with LVMH emerging as an even more powerful force in the luxury industry. Crisis is just another word for opportunity.

Furthermore, Arnault views workloads as a necessary aspect of success. He is known for his tireless work ethic and expects the same level of commitment from his employees. In an industry where attention to detail, creativity, and quality are paramount, Arnault’s emphasis on hard work and dedication has been instrumental in building the LVMH empire.

In short, we can summarize Arnault as:

1. Great at spotting, surrounding, and investing in talent, even if he doesn't have a 'box' for them yet.
2. Disciplined and pragmatic, with an extraordinary eye for detail, hard work, and quality.
3. Doesn't let setbacks and failures demotivate him, but rather as fuel to adapt and emerge stronger.
4. A clever and resourceful financier, where the above is also applied to his financial engineering.

If you enjoyed this, I highly recommend taking a read of Nadege Forestier and Nazanine Ravai’s book, “Bernard Arnault ou le Gout du Pouvoir” (French book?here, or english book Bernard Arnault the Taste of Luxury?here), it provides an insightful account of Arnault’s life, career, and business philosophy — and was the primary resource to much of my insights here.