Uncertainty, strategic sensemaking and organisational failure in the art market: What went wrong with LVMH's investment in Phillips auctioneers?

Abstract

Strategic decision-making in the volatile and uncertain art market is not only instigated by rational interpretation of the external environment, but also by expert-based intuition. This paper investigates organisational failure at Phillips auctioneers between 1999 and 2002, a period in which it was owned by the multinational luxury goods conglomerate Louis Vuitton Moët Hennessy (LVMH). To analyse this case, we develop a conceptual framework for strategic sensemaking in art organisations that includes the processes of scanning, interpreting, strategising, acting and adjusting, which take place in non-linear and recursive patterns in supporting continuous loops of improvement. Our analysis identifies the merits of intuitive decision-making when realising a novel artistic and entrepreneurial vision which established Phillips as a boutique auction house. However, it also highlights the limitations of emotional and opportunistic decision-making which could lead to blinded management if any of the processes of strategic sensemaking is ignored.

Sociability and interdependent self‐construal on consumer choice for group: A moderated mediation model

“…Sensemaking is a critical organizational activity that influences an individual's identity, organizational decisions, and strategic changes (Pratt, 2000; Samdanis & Lee, 2019). It allows individuals to deal with uncertainty and ambiguity by creating rational accounts that feed decision making (Maitlis, 2005).…”

A round of dancing and then one more: embedding intuition in the ballet of entrepreneurial decision making

“…Inciting entrepreneurs to embrace a substantial rationality in making decisions, which recognizes that many "…acts or thoughts are driven by impulses, wishes and/or feelings", intuition boosts the entrepreneurs' responsiveness to take timely choices in hardship produced by managerial crisis (Vershinina et al, 2017: p. 159). Intuitive thinking tacitly adds non-linear and recursive paths in the strategic sensemaking process enacted by entrepreneurs, contributing to the improvement of their effectiveness to rapidly scan and interpret the external environment (Samdanis & Lee, 2019). In addition, intuition nourishes the entrepreneurs' perspicacity, which is crucial to thrive when consolidated protocols and rules in managing the entrepreneurial venture are broken by unpredictable challenges (Pellegrini & Ciappei, 2015).…”

“…Moreover, intuitive thinking tacitly adds non-linear and recursive paths in the strategic sensemaking process enacted by entrepreneurs, contributing to the improvement of their capability to rapidly scan and interpret the environment. Lastly, intuition nurtures the entrepreneurs' perspicacity Samdanis & Lee, 2019;Berends et al, 2014;McKelvie et al, 2011 Intuition fosters a reactive approach to decision making, inciting entrepreneurs to emotionally reply to external stimuli. Moreover, it feds the natural overconfidence of entrepreneurs in undertaking strategic and managerial choices, preventing a careful appraisal of risks and limits of individual knowledge.…”

Information behavior in crisis situations

“…It refers to any situation with an emotional charge, characterized by complexity and uncertainty (Maitland & Sammartino, 2015). Cognitive processes, accumulation of knowledge, skills and experience are crucial to understand a crisis and to respond with appropriate and strategic and decisions (Combe et al, 2012;Samdanis & Lee, 2019). Crisis, when defined as a process, is characterized by an accumulation of problems, variance across different stages, and cyclicality.…”