Culture Influence Organizational Behavior

Disruptions hurt. But occasionally, a few players reorient themselves to new trends ahead of time. They become future-ready. And during troubled times, like the Covid-19 pandemic, they grow even further and become top dogs.

At IMD’s Center for Future Readiness, we track how ready companies are for a changing future. We like taking a quantitative approach, using only hard market data, to arrive at a composite score. We focus on measures that have been shown to fuel innovation. We look at the financial health of a company and its growth prospects. But we also include employee diversity, brand value, and degree of internationalization. You can read here for the details of our methodology.

Here is our 2021 ranking for luxury fashion and sportswear brands.

Chart 1: Future Readiness among Fashion Brands. Compiled by the Center for Future Readiness at IMD
Chart 1: Future Readiness among Fashion Brands. Compiled by the Center for Future Readiness at IMD
Now you may ask, what exactly do those top-ranking brands do to stay on top? The short answer is: leverage digitalization and embrace learning.
How the Leading Companies Leverage Digitalization

 

Digitalization is not merely about the front-end consumer experience. A sleek website and a sticky mobile app are the starting points. But there are a lot of make-or-break technologies to master behind the scenes. Consumers may want to personalize their sneakers online and have them shipped in weeks. To make this happen, and to do it profitably at scale, Nike has digitalized its entire supply chain. It automates all tracking and coordination with external partners. It also leverages advanced data analytics to gather insights around the clock. So it can make markdown and promotion decisions instantly and to move inventory across a country. Doing so would then help locate and ship specific products to the individual stores where they need them most. Such is a digital-first consumer brand. All these requires new learning.

You can see the different level of digitalization in the chart below. We’ve arrived at this conclusion big-data style, with a little help from artificial intelligence. We first downloaded every report published in the last 10 years by the standard-bearers of business news. You can read up the details of our algorithm here.

 

Sportswear and Fashion Brands: Digital vs.TSR
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The Y-axis shows how digitally competent each of these brands is. The X-axis shows the total return of the company’s share price over the last ten years. What you can see here is that for sportwear brands, it is important to be highly digital. But for high-end fashion, not so much. Such an outcome is understandable. But does it mean high-end fashion brands doesn’t need to learn new things? Not at all.

 
How Learning Is Key for Both Luxury Fashion and Sportwear Brands
 

Learning is important for everyone. A handbag maker may not need to experiment with advanced materials other than leather. But it still needs to learn how changing consumer tastes might redefine the meaning of “exclusivity.” That’s what you can see in this final chart.

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Here, we’ve replaced learning orientation of a company on the X axis. The correlation between Chart 3 and Chart 2 is unmistakable. It’s not an accident. High-learning organizations generate outsized returns over the long run, whether they focus on becoming digital or not. There is always something new and critical for them to master. In other words, learning pays off for everyone all the time.