By the way, this is true only for quartz watches. We own Piquet. All these reforms were important. The main story is the message and the discipline the message imposes.
We immediately reduced the number of models from 2, to 1, We have since cut back to We stopped making Omegas with gold plating. We make smart watches out of real metal: platinum, titanium, gold, special steel alloys. Omega started making sense again. This is what an Omega looks like. This is what Omega stands for. We gave Omega back its message. Swatch and Omega have completely different messages. Why does it matter strategically that SMH owns both brands?
How does the success of Swatch help Omega? Swatch has helped the entire Swiss industry. It has restored our credibility with the public. It has restored our credibility with the trade. The perception of Swiss watches today is so different from ten years ago. Jewelers and department stores beg us to carry Swatch. They leave disappointed. This has a big psychological spillover to all of our brands—including Omega.
We have reestablished our technical superiority over the Japanese watchmakers. This is the age of the lean corporation. Why is SMH so vertically integrated? We are vertically integrated because it is the only way to maintain our strategic independence and freedom to maneuver in the market.
Here is the strategic reality we face. There are three centers of watchmaking in the world: Switzerland, Japan, and Hong Kong. To build electronic movements, you have to master semiconductor technology, quartz, batteries, miniaturization. For mechanical movements, you have to master intricate micro-mechanics and the old art of watchmaking in the luxury segment.
You either commit fully to the business or get out. We have some advantages here in Switzerland. We have hundreds of years of experience in the technologies and techniques of watchmaking.
Families have spent generations in our factories. They have a feel for this business, a special touch. They are masters at working with parts so small you need a microscope to see them. Not to mention the tooling to build these parts. There are plenty of toolmakers around the world, but not for parts with these dimensions. When we designed the Swatch factory, we built special machines for injection molding, automated assembly—virtually everything.
There were only a handful of people in the world with the know-how to build those machines. They all lived in this part of Switzerland.
We spent much of the s reinventing our production systems to leverage our expertise. So we made massive reorganizations. Brands no longer build their watches. Our production divisions have full responsibility for manufacturing and assembly.
We standardized as many parts as we could among the brands: quartz resonators, stepping motors, and so on. We standardized much of the tooling for these parts. We made huge investments in high-tech operations like semiconductors and batteries. We made huge commitments to automating our assembly lines.
Our cost structure today is completely different from when we created SMH. It is not merely because we are more productive. It is because we have totally changed the logic of our business system. We have radically decentralized marketing and thoroughly centralized manufacturing. It is also a company of staggering complexity. SMH employs 15, people. It sold million finished watches and movements in With an average of to parts for each watch or movement, this sales volume translates into 15 billion to 20 billion parts.
There are other companies in other industries that cover every market segment and make and assemble most of their own parts: General Motors in automobiles, IBM in computers, Philips in consumer electronics. What these companies have in common is that they are struggling to reinvent themselves in a world in which the power of integration gives way to the nimble flexibility of innovation.
Increasingly, scale and success seem to be at odds. But this is not true at SMH. Because the company has resolved a set of tensions that would cripple most organizations. Think of the opportunities for misunderstanding and conflict within SMH. But no unit can do its job without interacting and negotiating with others. In this respect, SMH looks more like a self-contained industry than a single company.
The goal is to surface and resolve differences quickly and without bureaucratic rancor. For example, Hayek has radically decentralized marketing. Each brand has its own organization, its own management, even its own building.
Brands have total authority over design, marketing, and communications. But they play a sharply limited role in manufacturing or assembly. ETA, which is based in Grenchen, 20 minutes south of SMH headquarters in Biel, is responsible for all electronic-movement research, manufacturing, and assembly.
ETA is a production empire. It runs giant factories that build movements for most of the Swiss watchmakers. It operates highly automated assembly plants throughout the country as well as in Thailand. So there are ongoing negotiations over style versus quality, design versus manufacturability, speed versus cost.
These strict boundaries and tough negotiations allow SMH to minimize overhead. The company has remarkably few bureaucratic monitors or headquarters referees. A seven-member Restricted Group Management Board, whose members are drawn from the larger group, is the highest SMH management council.
In other words, there are minimal delays between decision and action. Finally, there is Nicolas Hayek. He receives almost daily briefings and progress reports on new products—watches, pagers, telephones, and others—and constantly works with and pressures managers and engineers to cut through red tape. He even has final signature approval over every design in every Swatch collection. SMH has invested more than SFr1 billion in technology and factories. Why such enormous investments? We have been making up lost ground.
Throughout the s, as companies in Hong Kong assembled hundreds of millions of cheap watches, Japan made investments to supply them with movements. They built big factories and slashed prices. We sold movements only to very special people in Hong Kong—companies building watches for brands like Timex, who wanted to market to customers in the United States that their watches had Swiss movements.
We were uncompetitive on cost. So we decided to get much more aggressive. We had to confront the Japanese in Hong Kong. We seized every opportunity we could.
One day, for example, I was seated with an entrepreneur from Hong Kong who sold finished watches. He bought all his movements from one of the giant Japanese companies. He was begging me for an Omega agency in Asia. I agreed to the order on the spot because the price was profitable for us. ETA worked night and day to produce those movements.
But it was an important opportunity for us. We could not allow the Japanese to control movements in Hong Kong. They would have developed enormous leverage over us. Imagine if we got so uncompetitive in movements that we had to get out of the business altogether.
And imagine if, like so many companies in other industries, we then focused on design and marketing and final assembly. And then imagine if we designed a great new model for Tissot, a watch that was going to be a big hit in the United States and hurt our rivals. Now, what if our Japanese supplier recognized the appeal of that new model? But we prefer to deal with partners rather than customers. That sounds conspiratorial. We heard that argument about Japanese leverage in computers because they dominate flat-panel displays and power supplies.
The Japanese compete fiercely among themselves, why should they conspire against European companies? Let me correct myself. In movements, there are only two Japanese companies that really matter—Citizen and Seiko. The moment you get five or ten Japanese companies in the same industry, they do fight like hell.
But there are plenty of industries where that is not the case, and ours is one. By the way, I am not suggesting that movement suppliers would single out Europeans or Americans. We sell lots of movements to watch companies in Japan. We sold movements to Casio when it started making watches. You also invested hundreds of millions of Swiss francs to make semiconductor chips. But the world is flooded with chips. The world is flooded with five-volt and three-volt circuits—the chips used in computers, televisions, and VCRs.
But watches use 1. There are three companies in the world that dominate production of 1. One is SMH. The other two are in Japan. We must make our own chips to maintain our independence. We considered all the options before we made this investment.
Some of our people wanted to close down the operation and find other companies to build chips for us. We visited companies from Norway to the United States. We showed them our designs and said we would cooperate with them. The best quotes were three times our costs. Some of our people wanted us to diversify into computer chips as well, but that was crazy. How would competing in memories or microprocessors help us in watches? And how were we going to go up against companies such as Intel or Motorola or Toshiba?
So we decided to make our own chips and to make them in huge volumes. That meant mass markets—Swatch. It meant pushing harder on movement sales—Hong Kong. It also meant creating new markets for 1. Today you can find our chips in hearing aids, pacemakers, cellular telephones, even the monitor switch for antilock brakes. Those revenues and profits help us keep investing.
For example, while ETA movements like the common are used across the watch industry, it's mostly been Swatch Group companies that have benefited from a new generation that's been improved in various ways, including by the addition of extended power reserves. The image of an old watchmaker patiently assembling watches by hand with a snowy Alpine backdrop is only partially accurate. It's part of a larger picture in which watch companies need to survive and compete, in some cases leading to products you like and in other cases, perhaps not.
In the end, the group structures are a major perhaps necessary force in the ever-evolving watch industry, and understanding their influence might help you appreciate your favorite brand more. First, don't be confused, as the maker of affordable plastic watches called Swatch is but one brand under the umbrella of the larger Swatch Group. The Swatch Group consists of many entities, from its consumer-facing watch brands to the companies that support them in various ways.
As of , there are about 17 active brands under the Swatch Group producing watches and jewelry, and they span everything from affordable fashion accessories to esoteric, high-end horology. These companies develop and build many of their own components, including movements.
Their products range from luxury tool watches like Omega's Speedmaster to complicated and expensive artistic creations with the likes of tourbillons from Breguet. Entry-level luxury is represented by Hamilton , Tissot, Mido and Certina, using ETA movements, luxury materials like sapphire crystal and solid construction, all while staying reasonably affordable.
Finally, the brands Swatch, Flik Flak and Calvin Klein can be considered makers of inexpensive "fashion watches. In addition to the names above which you will find proudly emblazoned on watch dials, there are even more companies involved in various aspects of production behind the scenes.
The most recognizable for watch nerds, at least are ETA, the prolific maker of movements found in watches from the Swatch Group brands and many more, and Nivarox, a company that specializes in producing escapement parts including hairsprings. There are then many more companies that even hardcore watch enthusiasts haven't heard of producing the likes of cases, dials and hands, as well as companies that specialize in materials or specific parts such as crowns and pushers. Finally, there are segments for corporate management, distribution companies and even museums — it's a massive organization.
In the mid-eighties, he founded his own production company, Sesame Films in Paris, and worked in Switzerland and abroad. His involvement in a number of film productions e. Mr Nicollier has been a member of the Board of Directors since As an astronaut he was particularly active in the space missions Atlantis , Endeavour , Columbia and Discovery The aim of the Endeavour and Discovery missions was the execution of reparation works on the Hubble Space Telescope which were a complete success.
Mr Nicollier is involved in the «Solar Impulse»-Project and was responsible for the test flights. Mr Nicollier does not exercise any operative functions at Swatch Group, does not have any business relationship with Swatch Group and holds no political office. Hayek's visionary thinking and entrepreneurial mindset earned him many prestigious awards, including France's Officer of the Legion of Honour in and Commander of the Order of Arts and Letters in A good entrepreneur is like an artist who is always creating something new — products, wealth and jobs — and overcoming obstacles.
In the early s Nicolas Hayek introduced a new type of quartz watch: made of plastic, it was colourful, lightweight, inexpensive and cheap to manufacture. This was the 'Swatch' — a portmanteau of 'Swiss' and 'watch' — which today symbolises the resurgence of the Swiss watch industry. It was a huge commercial success, with almost million Swatches sold by the early s. But it was also an industrial success, mass-producing a high-quality, precise and reliable timepiece on a fully automated production line.
With the arrival of the Swatch, the existing rules and conventions in Swiss watchmaking were thrown out.
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