Over the course of the day, three important themes emerged: the power of disruptive thinking, the power of listening and the power of iterative development.

The Power of Disruptive Thinking

“Disruptive Thinking” was the title of a talk by Luke Williams, a fellow at global innovation firm Frog Design, author of Disrupt, and one of the event’s most interesting speakers. Beginning his talk by tracing the origin of the word “competition” to the Latin word competere, meaning to “sit together,” Mr. Williams implied that competitors are a group that’s agreed to appear at the same time and play by the same rules. Competition leads to incremental change, while real innovation is about “disruptive thinking” that breaks previous patterns of thought, he said, identifying Red Bull, Zipcar and Seinfeld as examples of innovative products that challenged fundamental assumptions in their respective markets — soft drinks, rental cars and sitcoms — and earned tremendous success.

The Power of Listening

Tavi Gevinson, Imran Amed and Christene Barberich | Photo: Mike Matas

A panel of fashion bloggers including Tavi Gevinson, Lauren Sherman of Fashionista, Christene Barberich of Refinery 29, and BoF’s own founder and editor-in-chief Imran Amed — a group that instinctively understands the conversational nature of digital media — first raised the importance of having immediate feedback from the consumers of their content. “I know within minutes if a story is successful,” noted Ms. Barberich. “You have to listen.”

For luxury and fashion brands, consumer feedback gathered on the social web is something C-level executives must personally monitor, Mr. Amed advised. “Don’t delegate social media,” he said. “CEOs and CMOs also need to listen and respond.”

The ability to digitally listen, respond and nurture a one-to-one relationship with the consumer is going to transform the way companies do business, ushering in a “thank you economy,” said Greg Vaynerchuk, a self-trained wine expert and social media consultant to companies like Google and Disney, who gave one of the most compelling presentations of the conference. “The next battleground is caring,” said Mr. Vaynerchuk, who has earned over 850,000 followers on Twitter (@garyvee) and attracts over 90,000 viewers per day to his wine-focused webcast, “simply by responding to Twitter queries.”

Indeed, Mr. Vaynerchuk declared search.twitter.com to be “the most important site on the internet today” because it enables anyone to monitor and respond to what millions of real people are saying in realtime about a particular brand, business, category or topic. It’s about the “humanisation of business,” he emphasised. Success will come through “outcaring everyone.”

But listening is not just about gathering tactical feedback and cultivating more caring relationships with consumers. Carefully monitoring and engaging in conversations with and amongst consumers is essential to implementing the kind of iterative innovation strategies that, paired with disruptive thinking, are most likely to succeed in today’s increasingly unpredictable market.

The Power of Iterative Development

“Predictability is at an all time low,” said Frans Johansson, an entrepreneur, author of The Medici Effect and another of the day’s most dynamic speakers. “A predictable path to success does not exist,” he said. Rather, a more reliable way to innovate is to look for new ideas in unpredictable places, then take an iterative approach to developing them, advised Mr. Johansson. That means being flexible enough to take the “smallest executable step” towards a goal, then test, learn and repeat — an approach that’s largely inspired by Agile software development, an adaptive process that emphasises customer collaboration and responsiveness over strict road maps and plans.

Mr. Johansson illustrated the principle with the example of the Ice Hotel in his native Sweden. Interestingly, he explained, the world’s first ice hotel was initially conceived as an “ice exhibit” and later became an event and exhibition hall for artists. It was only when visiting backpackers could not find a room in the local town and asked permission to spend the night in the exhibition hall, placing their sleeping bags on top of reindeer skins, that the idea for the ice hotel was born.

Innovation in Practice

Later in the day, a panel entitled “The Elevator Pitch” highlighted a group of bright young entrepreneurs who were putting the power of disruptive thinking, listening and iterative development into practice.

Jenn Hyman, co-founder and CEO of Rent the Runway, presented her event-focused, “Netflix for fashion” service that’s notable for selling fashion as an experience, not a product. Interestingly, as the startup grew, Ms. Hyman realized that her service was proving to be a great way for consumers to sample brands they might later buy and, consequently, a powerful customer acquisition channel for traditional online retailers like Neiman Marcus, an area of the business she is planning to expand.

Katia Beauchamp and Hayley Barna, co-founders of BirchBox, presented their subscription sampling service for beauty products. The company delivers a box of beauty samples to paying members once a month, a concept based on the insight that, in the beauty business, there is a strong correlation between sampling and sales, especially if the samples are well curated and accompanied by compelling content.

The last “pitch” was from Vivian Weng, co-founder of FashionStake, a company whose startup diaries have appeared on BoF over the last few months. Since launch, the company has embraced change and learnt to iterate, significantly revising their original business model based on consumer feedback. Their new concept flips the traditional flash sale model on its head, allowing consumers to pre-order fashion for a substantial discount, while helping the emerging designers they carry to cut inventory and storage costs, fund production and better optimise supply and demand. But whether they can make this new model work remains to be seen.

The current explosion of digital fashion innovation is driving the continuous creation of exciting new businesses, but according to Mr. Johansson, “the average lifespan of a company is getting shorter and shorter.” No matter how compelling the initial concept may seem, the most successful startups will be the ones that measure everything they do and are agile and lean enough to evolve quickly as fresh evidence emerges.

Thanks to Mike Matas for the insipring images and video of the day. Vikram Alexei Kansara is Managing Editor of The Business of Fashion

Digital IQ Ranking 2010 | Source: LuxuryLab

NEW YORK, United States — Last year BoF reported on the first ever ranking of luxury brands’ digital competence, and today the second ranking, published by New York-based LuxuryLab, was released first to a small number of global media outlets, including BoF.

The adoption of digital media has been explosive. Longtime readers from the very beginnings of BoF may recall our first ever post on Fashion 2.0 back in April 2007 when CEOs, Creative Directors and Managing Directors insisted to me that they would never use such tools as Facebook to engage their fans and customers. How things have changed in three short years!

According to Scott Galloway, founder of Luxury Lab, the “combination of the economic crisis, the emergence of a more digitally native Gen Y consumer, and several brands  getting huge ROI — sales and press — due to digital leadership, inspired a massive investment in both human and financial capital in digital in 2010.”

Fashion and leather goods brands dominate the top 10 and have seen the most progress. The 16 fashion and leather goods brands ranked in both 2009 and 2010 increased their Digital IQ by by an average of 24 points. Watches and jewellery companies did not fare as well, on average losing 9 points, with Rolex, Cartier and Chopard falling more than two IQ classes.

Skyrocketing to the very top of the heap of the 72 luxury brands ranked is Coach, which scored “an increase in Digital IQ of 63 points, jumping from the middle of the pack last year to claim the top spot,” this year.  Also scoring high were Ralph Lauren, Louis Vuitton, Gucci, Burberry and Dolce & Gabbana, all deemed as ‘Genius’ by the ranking, which assesses brand websites, digital marketing, social media and mobile presence.

Other fashion brands are lagging. Says Galloway, they “are sitting on their hands…hoping this whole ‘internet’ thing will go away.” Ermenegildo Zegna, Bally, Balenciaga, Chloe, Versace and Alexander McQueen are all ranked as ‘Challenged’, while Dunhill, Catherine Malandrino, Ferragamo, Zac Posen, Tods and Manolo Blahnik are ranked as ‘Feeble.’

The Digital IQ index has done an excellent job of drawing more attention to the digital revolution in luxury. I do, however, have a few gripes with the methodology and some of the rankings. Is Chanel, which has absolutely no e-commerce, really digitally ‘Gifted’? Even if they do have over 1 million fans on Facebook, e-commerce should form an essential part of every luxury brand’s business model.

That said, Facebook is certainly an essential part of a genius digital media strategy. According to the survey, 90 percent of luxury brands in the survey are present on Facebook, up from 79 percent in 2009, and the percentage of traffic luxury brands are receiving from Facebook has more than doubled in last 12 months, growing from 3.4 percent to 7.1 percent. But just having a Facebook presence isn’t enough. Now, it is how these brands use their Facebook presence that will really count the most. For example, the report concludes that brands which use  social sharing tools — for instance, the Facebook “like” feature on their site — registered annual traffic growth of 42 percent vs. 18 percent for brands that did not.

On the other hand, I don’t think every brand needs to have a Twitter account or YouTube page. The Twitter presence of luxury fashion brands has jumped from 17 to 48 percent, with an overall growth of Twitter followers of almost 1,500 percent. YouTube presence has also skyrocketed from 26 to 55 percent. However, despite these increases, the report says that traffic from Twitter and YouTube has actually decreased over the past 12 months.

Should brands really be penalised if they have made the strategic decision to hold off on certain social media tools like Twitter? The truly genius brands are those that are developing a digital media strategy that is embedded in their business strategy, and taking on specific digital initiatives that help them to get there.

Which brands do you think are digital geniuses?

Imran Amed is Founder and Editor of The Business of Fashion

If you’d like to learn more about the Digital IQ Index, join me in New York on 5 November 2010 where I will be participating in Luxury Lab’s Innovation Forum, billed as the largest gathering of prestige executives in North America, where the results will be presented in further detail. Readers of The Business of Fashion are entitled to a 20 percent discount if they use this link.

NEW YORK, United States — Making economic predictions isn’t easy these days, what with key indicators slumping one day and then bouncing back the next. But even as the global economy keeps market observers and analysts on their toes, there is one thing that everyone seems to agree on: the pre-eminence of the Chinese economy.

Last month, the Chinese government announced that it was depegging its currency from the US dollar, allowing the Yuan to appreciate within a defined band, slowly abandoning the exports-led growth strategy which has made Chinese goods cheaper in the global market in recent years. But now, as Western economies stop and start, the Chinese government is looking to sustain its growth by stimulating demand at home. Last week the IMF made projections that China’s growth rate will slow somewhat next year from over 9.9 percent in 2010, to 9.6 percent in 2011.

But still, for luxury goods companies, China offers the biggest opportunity for luxury brands in a generation.

According to the latest research from luxury thinktank L2, based at New York University, founder Scott Galloway said in an interview with Bloomberg TV, “when you look at the sheer size of incremental revenue that the Chinese market offers, especially online, you could hit singles in every market, but as long as you connect with the ball in China, your shareholders are going to be just fine.”

Percent of Luxury Consumers under 45 | Source: NYU Stern

The numbers are staggering. Galloway and his team report that 840 million people will be online in China three years from now, which means there will be more people online in China than the US, Europe and Japan combined. More than 80 percent of Chinese luxury consumers will be under the age of 45, a digitally savvy, voracious online consumer.

“You couple that kind of growth online with the fact that you have a younger more digitally native consumer, and you have the largest channel anywhere…for luxury goods, the online channel in China might be the biggest market worldwide in five to ten years,” says Galloway, with a luxury market growing at 15 percent per year.

For further information on L2′s China Digital IQ research, you can download the full report or register a free webinar from L2 to be held this Wednesday, 14 July at 10am Eastern time, 3pm London time.

Mobile Internet Adoption | Source: Morgan Stanley

NEW YORK, United States — Now that most luxury brands have come to accept that the internet is a powerful tool for commerce and that social media provides an opportunity for a new kind of brand engagement, along comes another technological wave that will feed the ongoing digital revolution in fashion — and take it mobile.

Indeed, according to Internet analyst Mary Meeker of Morgan Stanley, “more users will likely connect to the Internet via mobile devices than desktop PCs within 5 years.” What does this mean for luxury and fashion brands? And, as consumers continue to migrate to smart mobile devices, how does this change the dynamics for operating fashion commerce and communication in the mobile space, and the wider social web?

To provide the answers, I turned to Dinesh Moorjani, Senior Vice President of Mobile at IAC — the company that owns The Daily Beast, Evite, Urbanspoon and more than 40 other internet properties — and a speaker at the upcoming Luxury Lab Mobile Clinic to be held on 23 June in New York City.

BoF: Today many luxury brands do more sales via their e-commerce sites than at their biggest single flagship bricks and mortar stores. Do you expect to see a similar boom in mobile commerce?

DM: I do expect sales via mobile commerce to grow rapidly, in comparison to bricks and mortar stores, largely due to enabling and consumption conditions being met, i.e. app user interfaces improve, mobile payments beyond micro-transactions become commonplace, and smartphone adoption eclipses feature phones installed base.

Mobile commerce unlocks impromptu purchase decision and even retail therapy. We cannot dismiss the behaviours accelerating this change. In the near term, I expect e-commerce sales to dwarf mobile sales, but that equilibrium will shift in the coming years as one-touch, frictionless payment becomes the norm.

Flagship stores are just as much a branding tool as they are a sales channel so they are certainly necessary even when digital sales eclipse brick & mortar stores. Mobile devices will serve as lead gen (generation) for brick & mortar store foot traffic through exclusive, time-sensitive, and geo-relevant offers. Growth in commerce over mobile devices unlocks discovery opportunity to these physical locations as much as they enable convenient engagement in the products and content associated with these brands.

BoF: Location-based services allow brands to deliver more relevant and intelligent information and experiences to mobile consumers. Are any luxury brands doing this well? If not, what can luxury brands learn from others?

DM: Many luxury brands have introduced mobile applications from Gucci and Ralph Lauren to Mercedes and premium watch companies. Most of the location-based services (LBS) features have been limited to store locaters and multimedia brochureware & product catalogues. Multi-brand retailers like Gilt Groupe seem to be providing a compelling m-commerce experience across device types by offering seamless, in-app purchases and simple, intuitive user interface. Brands have just begun to explore the concept of sending geo-cached offers to targeted consumers nearby based on opt-in preferences and notifications. This will certainly grow.

BoF: For now, “mobile” mostly means phones. But with products like Nike+, we’re seeing the integration of mobile digital technology into footwear and apparel. In the near future, do you think luxury goods like handbags will be connected to the network and behave like mobile devices?

DM: Yes, depending on the definition of “near future”. The time horizon is probably beyond three years for any mass affluent market adoption largely because the integration of fashion apparel and technology needs to overcome a stigma of being geeky/nerdy and requires seamless execution. Wearable computing is a growing area within the wireless space, although adoption will largely depend on the simplicity of the use case.

Nike+ is certainly one of the best examples, but solar tech to wireless handsfree incorporation into fabrics are considerations for known brands, most of whom focus on athletic apparel or their outdoors lines. Clothing, like a smartphone, remains with us and serves as an extension of our identity. This introduces the opportunity for clothes to embrace ‘computer vision’ – the idea that devices can interpret information – see, hear, communicate and replicate targeted senses to reduce the legwork or decisions that we have to take.

Think about a purse that has a RFID integration, so when a consumer walks into a shop, the retailer knows that the consumer is a potential buyer or has preferences that need to be addressed. Of course, there’s a robust layer of intelligence and web services that have to support wearable, mobile computing products, just like for intelligent apps on a smartphone or tablet device, but it’s not inconceivable that these services become more commonplace, once luxury early adopters are saturated.

BoF: Speaking of smartphones, what makes a good iPhone or mobile app? Should these be a priority for luxury brands?

DM: Good smartphone apps offer an intuitive User Interface (UI) where design is critical, useful features that address the mobile use cases and don’t simply replicate what a website might do in a stationary computing environment, and are fun to use, whether they’re a utility or a game.

Yes, they should be a priority for luxury brands. It’s a relatively low-cost user engagement channel for brands to communicate new offers, products & services, events and news, and most importantly, engage users with features that drive m-commerce and in-store foot traffic. Imagine, digital media consists of some material percentage of a very large marketing spend for luxury brands across ad vehicles.  If a portion of that marketing spend, let’s say $200k, was dedicated to a compelling mobile app,  maintenance, and new web services, the brand would maintain personal presence in the pocket of a loyal user with updates, notifications, and a 1:1 marketing channel to that consumer. If that user also shared a product or in-app content with other users via integrated social media tools in the app, this behavior alone results in a powerful segment expansion channel for the brand.

BoF. Finally, what are the three most important lessons luxury brands must keep in mind as they pursue their mobile commerce and communication strategies?

DM: First, embracing innovation and preserving a heritage brand are not mutually exclusive. Think about how to disrupt yourself before somebody else does. All mature businesses want to protect their cash cows, but the product roadmap of any organization needs to identify where it wants to take controlled risk. Determine what that risk appetite is and how you want to execute on it.

Second, determine the specific goals of your mobile strategy and lay out a set of digital services that the mobile apps will help deliver to achieve those goals. Incorporate mobile metrics and an analytics package into the app to make informed decisions around app improvements and future releases. Don’t run product management blind.

And third, apps can utilise device hardware components that enable a phone to do far more than just serve as mobile brochureware. This may include using the device’s camera/video capture, location-detection capabilities, accelerometer, or mobile screen itself. Use the app as an engagement channel with social media tools, location-based search, and commerce, if appropriate, to expand the market and build a digital dialogue with consumers.

The Business of Fashion is an official media partner of the Luxury Lab Mobile Clinic. Please consider using this special BoF link to register and you will also help us to earn a commission on ticket sales to support the ongoing development of BoF.

Tavi Gevinson at Generation Next | Source: Luxury Lab

NEW YORK, United States — With speakers including teenage blogging sensation, Tavi Gevinson and Teen Vogue publisher Laura McEwen, last Friday’s “Generation Next Forum,” organized by New York-based thinktank LuxuryLab, examined the unique characteristics and growing influence of a young generation of consumers that’s set to impact the luxury goods industry like no other generation since the Baby Boomers: Generation Y.

Wired and Influential

Opening the event, New York University professor and LuxuryLab founder Scott Galloway, underscored the importance of Generation Y with some simple, but astounding numbers. Born between 1977 and 1994, Gen Y currently spends $150 billion a year on consumer goods. That’s five times more than their parents did at their age. They also influence another $50 billion in purchases made by others. Indeed, according to a recent report by Harris Interactive, one in every three consumer dollars spent in the United States today is influenced by someone under the age of 18.

Laura McEwen of Teen Vogue reiterated this point in a presentation entitled “Gen Y and the Dynamics of Influence,” noting that teenage women increasingly influence fashion and beauty trends and drive purchasing decisions amongst older consumers.

Gen Y’s profound influence in the marketplace is directly linked to their familiarity with digital media, said Jane Buckingham, an expert on youth trends and founder of trend marketing and consulting company Trendera. Indeed, 96% percent of Generation Y is active on at least one social networking site.

A New Definition of Luxury

But for this wired and influential generation, luxury means something different than it did to their parents. They are uninterested in conspicuous consumption and showing off status, and more interested in social engagement and experience, said Sterling Lanier, a branding expert and president of research consultancy Chatter.

“Teachers, parents and TV shows are always telling us to be ourselves,” said Tavi Gevinson, the precocious teenager behind the now widely-known fashion blog The Style Rookie. “But what we want more than anything is to belong, to feel like we’re in a clique.” For Tavi, luxury products should be like a secret society that connects you to like-minded individuals and not a mainstream, homogenised stamp of status. Brand markings should be secret emblems that only certain people recognize, she said.

When a company offers them a unique point of view, an authentic experience and meaningful connections to a community, today’s teenagers are happy to evangelise the brand. But if not, this influential, internet-empowered generation will go out and find somebody else who does — and if that doesn’t exist yet, they’ll create it themselves.

Agata Seidel is a writer and consultant based in New York. The Business of Fashion was an official media partner of the Generation Next conference.

NEW YORK, United States — Catching a rare bit of television last week in between updates on the Icelandic volcano and the first ever televised British Election debate, I stumbled upon an episode of Electric Dreams on the BBC, which takes an average British family from 2010 right back to the 1970’s, stripping away every bit of modern technology in their home. Then, slowly, episode by episode, decade by decade, the family gets all of its technology back, like they are experiencing it for the first time. The key difference now, of course, is that they have the hindsight of knowing what’s to come in the years ahead.

In the 1970’s the family gets central heating, and the 1980’s sees the arrival of the first home computer, but it wasn’t until the 1990’s rolled around that one sees the huge impact of consumer technology on their daily lives. From fax machines, brick-sized mobile phones and pagers, the family rapidly integrates the gadgets into their lives, and then disposes of them just as quickly as soon as the next great thing comes along.

Growing up during this technological and communication revolution has been the so-called Generation Y, born between 1977-1994. They are notoriously difficult to reach using traditional media channels, having rapidly adopted new media and digital technologies. They rely on the Internet for absolutely everything. Indeed, no matter what new technologies were given to the Electric Dreams family, the younger generation was ultimately dissatisfied. It was too slow,too disconnected and a far cry from the always-on, always-connected, endless options of the Internet in 2010.

But how much does the luxury industry know about Generation Y? The Financial Times recently reported that Mercedes-Benz, one of the most prestigious luxury brands, has sought to actively understand and engage Gen Y consumers.

“Co-opting Gen Y will help us understand them,” said Stephen Cannon, vice-president of marketing at Mercedes-Benz USA to the Financial Times. “They are the group we need to embrace and learn more about. We took elite students from elite institutions and immersed them in our business issues. Give us your impression of the Mercedes-Benz brand. How is our brand resonating with your group? What do we need to do with the brand?”

For those of you a little more behind the curve and looking to catch-up on everything Gen Y, Luxury Lab is planning The Generation Next Forum, to be held on 14 May in New York City, dissecting “the characteristics, influence, and brand affinities of tomorrow’s affluent consumers.” 

Scott Galloway, Founder of Luxury Lab, says the forum will provide ”insight into the most important economic force since the boomers.  We know brands will need to build a competence in digital, however there’s more than that.  Gen Y’s values, shopping patterns and media consumption are dramatically different.”

Indeed, says Galloway, “the luxury brands that dramatically increase stakeholder value over the next 10 years will be the brands that resonate with Gen Y.  There will be a transition in spending power from boomers to Gen Y over the next 2 decades that will be the most dramatic economic transfer in history.”

For a limited time, BoF readers get 50% off of the ticket price for The LuxuryLab Generation Next Forum by using the code BOFREADER. Tickets and further information can be found here.

The Social Graph Clinic | Source: LuxuryLab

NEW YORK, United States — The Business of Fashion is pleased to announce our second media partnership with LuxuryLab, following the much talked-about Luxury Lab Innovation Forum held last Autumn.

On January 29th, the New York University-based think tank will hold its first Social Graph Clinic, “a one-day intensive workshop that takes an adroit and sober examination of social media’s underpinnings, platforms, and best practices. The objective is to enhance participants’ fluency in brand-driven social media efforts.”

Confirmed speakers include:

• Erik Qualman, author of Socialnomics who will speak on How Social Media Transforms the Way We Live and Do Business

• Shenan Reid, Co-Founder and Managing Director of Morpheus Media on Finding your Social Voice

• Fabio Freyre, Regional Vice-President of Facebook on Facebook, the Marketing OS

I will be speaking to brands on how best to engage bloggers. On that note, bloggers, let us know your pet peeves and top tips on how brands should engage with you. You can comment on this post, send a direct message on Twitter or send an email, and I will do my best to reflect your feedback in my presentation. Now’s your chance to have a say what you always wanted to say about those generic press releases, untargeted emails and unreasonable requests from fashion PRs. But please don’t just focus on the negative. What is the best relationship you have with a fashion brand and why?

Already, representatives from an impressive array of brands — including Brooks Brothers, Chanel, Coach, Dunhill, Gucci, J. Crew, Maxmara, Michael Kors, and Neiman Marcus — have confirmed their attendance. If you too would like to attend, please consider using this special BoF link to register and you will also help us to earn a commission on ticket sales to support the development of our content in the coming year and defray the growing costs of maintaining BoF. A portion of the proceeds will also be donated to the much-needed ongoing aid relief in Haiti.

A complete agenda and list of speakers is available here.

I look forward to meeting many BoF readers there!