Hundreds of years ago, Hermes and Louis Vuitton started out as luxury makers of tools. If you needed a saddle or a suitcase, they offered an extraordinary option, both elite and useful.
Over time, they shifted gears, no longer competing on whether or not their luggage was the most useful, or their saddles the most efficient. They competed on luxury, which is a fundamentally different promise than the optimal design of a tool.
Patagonia is still a luxury tools company. The coats they sell cost more, but some professionals choose them regardless of brand, because in addition to tribal affiliation and the placebo that comes from buying a luxury good, they're still extraordinarily functional.
High end consulting and design firms also sell luxury goods. So do many conferences and elite restaurants and travel destinations. A big part of what you pay for is the story, the experience and the process, not the advice or the logotype or the learning you end up with…
Over the last year, Apple has heavily invested in the luxury component of their future. They've hired executives from Burberry and the Swiss watch industry and re-committed to their luxury-structured retail stores as well.
The challenge they face, the challenge you'll face if you choose to try to combine function with the top of the market, is that eventually, these two paths diverge. When Apple dumbs down Pages or Keynote or allows open bugs to fester for months or years, they're taking the luxury path at the expense of the tools path. Compounding the impact, when systems are upgraded, they often choose to break some of the utility and UI that their tool-using customers rely on. (When tools evolve and get more complicated, the cost of keeping the bugs out goes up. You must either choose to invest in improving the efficacy of the tool or in making it prettier/more luxurious/more popular. It's hard to do both.)
Do we change this system font because it matches our look or because it's more efficient? Do we sell these headphones because they sound better or because they carry a powerful tribal effect? Do we fix these bugs or build something new?
The tension of tools/luxury sounds like this: On one hand, you might hear, "you've lost your cachet," or, "the fit and finish isn't there," or, "I'm seeing the hoi polloi buying the brand at H&M and on the street, it's peaked." This is what happened to Uggs and to countless other brands before them. On the other hand, the tool maker fears hearing, "your analysis isn't crisp," or, "the food isn't as good as it used to be," or, worst of all, "there's a new guy making something that works better."
The luxury maker doesn't really fear hearing that her food isn't cutting edge. On the other hand, she lives in fear that she won't be seen as an essential choice by the fashionable elite. And the tool maker works to avoid the opposite problem.
Those tensions have undermined many large ad agencies recently, as they wrestle with how to help their clients do authentic social media at the same time they have to support the overhead and corporate-luxury positioning that TV enabled.
Honda cars are tools that have been painstakingly evolved over the years to function exactly as promised. But the brand is boring and profits aren't commensurate with how well they've solved the problem they set out to solve. On the other hand, few Jimmy Choo customers complain about their inability to run a marathon in profitable high heels.
It's possible (but unlikely) that Apple will become the first long-term cutting-edge tool maker that simultaneously exists as a profitable luxury brand. It's unlikely that your firm will pull that off as well.
At some point in the evolution of every luxury brand, the users who care more about tools than about luxury begrudgingly shift away to more functional options. Not all at once, but it has always happened (so far).