One strength of L’Oreal is a focus on cosmetics. Rather than a breadth of products like their competitor Unilever, L’Oreal has a tighter focus. That’s not all they do well according to Aoris Stephen Arnold:
“Another part is how they have organized internally, the company works very hard to have a decentralized model. The people running the Lancome brand in Australia or the people running the Redken brand in Brazil own it and are in control of it. They’re trying to get the benefits of their size and scale but have the flexibility, agility, and entrepreneurial feel of a small company and it is hardwired into their DNA, it is how they have operated for a long time. It has benefitted them as markets change, as they have in the last year, because they aren’t waiting for a phone call from Paris to tell people what to do.” – Aoris Stephen Arnold, Australian Investors Podcast, July 2021
Decentralized command is the idea that problems should be solved by the person closest to them. Sometimes Penn Jillette and his partner Teller are hired for private events. These events are good, but Jillette writes, his agent will warn the group ahead of time. “They’ll get a better show if they let us make all those decisions (what jokes, what volunteers, etc.), which is true and they usually understand that. But if they insist, we give them what they ask for, and they’re happy with that, too…but we know we weren’t as good as we could have been if they had just let us do our jobs.”
Hire people, advised James Mattis, who can “unleash their initiative”.
The decentralized command is not a complicated idea but to see it in an organization as far-ranging as L’Oreal can inspire other organizations. It’s worked on Seinfeld and The Simpsons. It worked for Alice Waters at farm-to-table Chez Panisse and for every-meal-is-the-same-at-McDs founder Ray Kroc. Spotify’s discover weekly came from a decentralized command. So did the iPad keyboard.
The decentralized command approach isn’t a panacea, but for organizations pointed in the right direction it can sure make them better.
A couple other L’Oreal figures. The company accounts for 12% of the beauty market globally, and turns up in 50% of the beauty queries on YouTube. L’Oreal also spends 60% of its advertising dollars online.