How The Possible LVMH Purchase of AC Milan Changes The Formula Of Sports
AC Milan, a historically significant soccer/football team in Italy, has been reportedly negotiating with, and may soon be owned by the most significant luxury conglomerate in the world, LVMH. I love football / soccer, and I am a huge fan of how LVMH has built the globe's most dominant multi-dimensional luxury brand from the highly affordable Tiffany acquisition to travel trunks that cost more than a family vehicle.
Their much publicized and highly possible purchase of AC Milan is unlike any other acquisition of a sports team that we have seen. Purchasing any team could historically be described as the ultimate vanity exercise. Look at this page for the list of owners of over 300 sports franchises across the globe on this list on Wikipedia. Just look at page one and count how many times you can’t see where real economic value or growth can come from.
CEO of LVMH Bernard Arnault presents the group's 2019 results during a press conference, in Paris, Tuesday, Jan. 28, 2020. (AP Photo/Thibault Camus)
This purchase by LVMH is fundamentally different (in a digital age) in terms of teaching leadership to think towards what I call adjacent boxes with incredible economic and brand upsides. Adjacencies are all around us. Some good, some illogical
Take two simple examples. Cars and tyres for vehicles share a very similar ecosystem. However, would you buy a Toyota tire? The answer is mostly no from a label standpoint. Take breakfast cereal and an in-store brand of breakfast cereal. The answer is mostly yes, you would buy the store brand, even although the food retail store is white labeling the breakfast cereal from somebody else. Near adjacencies are about logical products, services, or experiences that fit together or are super easy to make based on a simple trade-off (price, availability, low threshold for error).
In a digital-age, adjacencies are absolutely everywhere if the platform (Amazon) or the brand (in this case, LVMH) makes that decision easy. In a digital age, the barriers to entry still exist, but they are far more fluid than ever before. Leaders need to abandon traditional blinkers and open their eyes to the new digital society possibilities.
Affordable extensions of your product services can tilt traditional markets owned by Nike, Puma, etc.
No offense to Nike or Puma, but an LVMH designed football shirt should win hands down against these other brands in terms of affordable luxury. While sports and a fashion sense can generate oxytocin almost at will, the world's leading luxury brand should be able to out-think a sports-wear company in terms of bringing luxury wear down to a daily basis.
Sports brands do a great job of making sport's clothing more than just stadium wear. However, a luxury brand that can make itself affordable and relevant is the golden in a digital world. Sports clothing should be placed where affordable luxury naturally extends itself. Just imagine Manchester City blue becoming Tiffany blue and how many more people would buy into the brand.
Milan's Zlatan Ibrahimovic, foreground, controls the ball, during a Serie A soccer match between Brescia and AC Milan, in Brescia, Italy, Friday, Jan. 24, 2020. (Spada/LaPresse via AP)
Not just in shirts but jackets, pants/trousers, even underwear. Imagine the economic upside of not only owning a global soccer/football brand but also being able to show all the clothes and products across all the social channels, week in and week out. Example: replacing the iconic Puma logo above with an LV monogram. This logic makes LVMH's upside outside their acquisition a little cost relative to the global upside outside football/soccer and the Italian market.
The old models that defined economic opportunity no longer prevail. The positive multipliers from building a real platform (brand or technology-based) stretch far past the traditional Michael Porter five forces. Consumers converge ideas now more than ever before (Tiffany and Manchester City, AC Milan, and LVMH). The upsides are almost incalculable given the fluid nature of modern digital consumers and how they fluidly think across traditional boundaries if the brands they work with are either digital platforms or digitally adroit luxury brands like LVMH
As a leader, you may well have to handle new competitors who can change the shape of your traditional markets because consumers, millennials and digital natives are far more open to transitioning and mixing ideas than ever before.
A world of constant change encourages us all to review tradition
The same is true for Business to Business market sectors you might be serving. Imagine selling a perpetual license in software, and a new company offers a SaaS license model that encourages customers to think about the value of continuing the way they used to work in a world of constant change. 75% of significant corporations we interviewed accept that we live in a world of continuous change. Yet only 25% of all companies actually think about leveraging that idea.
LVMH teaches us
A new world needs to think about new currencies for brand and leadership extension.
LVMH is the global leader in luxury, but they see the potential for logical adjacencies. As leaders, we cannot afford to apply old world paradigms to new world orders. If you can make yourself a digital platform (Amazon) or a digital age brand (LVMH), then the world should be your oyster.