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

Strategic decision-making in volatile and uncertain environments, such as the 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). We developed a framework for strategic sensemaking in art organisations that includes the processes of scanning, interpreting, strategising, acting and adjusting, which can take place in non-linear and recursive patterns in order to support continuous loops of improvement. Our analysis identifies the merits of intuitive decisionmaking when realising a novel artistic and entrepreneurial vision, such as that which established Phillips as a boutique auction house. However, it also highlights the limitations of emotional and opportunistic decision-making which leads to blinded management if one or more of the processes of strategic sensemaking are ignored.