How the Swiss became the best watchmakers is based on a series of choices and fateful shifts. What could reshape the watch industry again? We look to the history of the watch industry to find out.
How the Swiss became the best watchmakers is based on a series of choices and fateful shifts. “Swiss Made” is synonymous with quality in watches. Many other countries have developed reputations for inherent quality such as Made in Germany, America, France, England, the Netherlands, and the list goes on. When it comes to watches, no country holds such prestige as Switzerland and the marque of quality. However, the Swiss have not always been the marque of quality; in fact, up until about 120 years ago, many other countries had produced watches that rivaled or surpassed the Swiss in quality and reputation at one point or another. Today, many countries have laws that dictate what one must do to earn the “Made in” stamp. For the U.S., that standard is essentially 100% made in America. For Switzerland, that is currently increasing from 50% to 60%.
Fate: “The supposed force, principle, or power that predetermines events. The inevitable event or events predestined by this force.”
In January 2017, the Swiss government will implement a new standard (see here for an article for ABTW that I wrote on this topic), one that requires watch producers to meet a 60% Made-in-Switzerland standard. This is a choice, a choice in an industry that has been shaped by a series of choices throughout the 500 years of watchmaking. The Swiss were not always the leaders. Other countries either dominated the industry or appeared to be taking the helm on numerous occasions since the year 1500: Britain, Germany, the United States. Switzerland became the epicenter of watchmaking through a series of fateful events and series of choices. I will walk you through 6 choices and 4 fateful turns of events that led to the Swiss becoming the epicenter of watchmaking. As you read, ask yourself, what choices could be made or fateful events happen today that could reshape the watch industry again?
Read Here for my assessment of the current choices and potential turns of fate for the luxury watch industry in 2017
Watches were invented in part around 1500 once people figured out how to replace the weights and counterweights of a clock with a much smaller spring. Most histories give credit to Peter Henlein of Nuremberg with inventing the first watch. Switzerland has had a watch industry since the late middle ages due to its history of metallurgy. However, their rise to the top by the late nineteenth century was a result of a series of fateful events and choices. Here they are:
Fateful Turn 1
Germany was late to join the ranks of statehood as we know Germany today. We view Germany as a sovereign country, but in the 1600’s, Germany was a collection of principalities within the Holy Roman Empire. As a result of these many principalities, it created a number of wealthy princes who sought after the latest in technology at the time: the watch. As such, Nuremberg and Augsburg rose as early watch producing epicenters. There are potentially some cultural factors in play; Germans are known for their precision and punctuality, which it is suggested may have been the case in the late middle ages as well, leading to their rise in watch manufacturing over similar principalities such as Italy. Geographically, Nuremberg and Augsburg lay on major trade routes north of the Alps, making them financial hubs of activity (David Landes, page 3). Lastly, the people of the Bavarian and Franconian regions were also well skilled in metallurgy, making some of the finest arms and armor of the day (which you can see many surviving sets at the New York Metropolitan Museum of Art). Author David Landes of Harvard suggests, watchmaking migrated from this region about 1625 (pg 3).
As fate would have it, the 30-Years War (1618-1648) devastated Germany, particularly Bavaria and Franconia as Sweden’s Gustavus Adolphus wreaked havoc across southern Germany. The war sent much of the region into economic depression as most of Europe maneuvered around German soil fighting each other. The depression was so deep that while the rest of the world modernized and tore down their walled cities around 1870, many German cities couldn’t afford to do so, hence they still have romantic walled cities that we love today such as Nuremberg, Rothenburg ob der Tauber, Dinkelsbühl, Fussen, and the list goes on. As a result, the fateful war and following depression were the catalyst for migration of the watch industry away from its early epicenter in Germany to its new home in France.
In 1685, the French king revoked the Edict of Nantes which led to the systematic persecution of French protestant Christians, also known as Huguenots. While persecutions of French Huguenots had been ongoing prior to this, the revocation of the edict served as a catalyst for a mass exodus. Many protestants were also watchmakers, attributed to the protestant work ethic, or the idea that Jesus called believers to be hardworking, therefore industrious, therefore punctual, at which point time becomes a symbol of holiness. With the revocation of the edict, hundreds of thousands of skilled craftsmen fled France for England, Switzerland, and many other locations. With this choice by the French king, watchmaking migrated once again as “French horology probably lost more than half of its best and most innovative artists” (Landes pg 8).
Fateful Turn 2
In 1675, just prior to the mass exodus of Huguenot watchmakers from France, the English invented a crude form of the balance spring, which made watches accurate enough to make it worthwhile to show minutes as well as hours for the first time. The Brits then had a revolution in watchmaking by inventing in quick succession the horizontal escapement, the repeater, and jeweled movements to reduce wear on parts (invented by a Swiss immigrant), which no other center of manufacture figured out until at least 1820, giving the British an inherent edge. While important, these weren’t near as important as the invention of the lever escapement and chronometer in Britain, which followed in the mid-1700’s. British watches became so well respected that no one wanted anything other (Landes pg 4-6). The fate of innovative genius played in Britain’s favor.
In 1714, the royal British government offered a contest for £20,000 (now worth over $20M) for anyone who could figure out how to precisely measure longitude within a half degree. This required an accuracy in timekeeping that did not yet exist. This spurred a watchmaking innovation race which resulted in the invention of the chronometer in 1764. “From that point on, the British had another quasi-monopoly – this time in precision timepieces that were accurate within a second or even half-second a day” (Landes pg 10). The British continued to refine their craft by specialization of labor: one factory made springs, another made cases, until each became very good at their part, allowing them to economically produce large quantities of superior watches (pg 11).
Fateful Turn 3
In the later 1700’s, a seemingly harmless practice began in England of importing watches and putting on a “Made in England” stamp. This unknowingly began a relationship with Switzerland and other countries that would ultimately lead to Britain’s downfall as the leading watch producer in the world. At the time, British labor was expensive. While producing inferior pieces, Swiss labor was a third as cheap and could provide acceptable watches for English companies to sell. The fate of economic conditions that differed between England and Switzerland set the stage for a future turn of fortunes.
Clothing styles of the late 1700’s forced a choice. Prior to this, it was very stylish to wear your watch hanging on the outside of your clothes. However, styles shifted and it became in vogue to wear your watch in your pockets. With tighter fitting clothes, thinner watches invented by the frenchman L’Epine were more stylish. The Swiss-in-France watchmaker Abraham-Louis Breguet (name sound familiar?) figured out how to modify L’Epine’s innovations to make a much flatter and stylish in movement. Even President George Washington wrote in a letter to a friend asking him to secure one of these latest “large and flat” watches that Thomas Jefferson had bought (he ultimately ended up with a L’Epine watch) (see Landes for the story). For the sake of pride in accuracy and a desire for profits, the British didn’t care about this change in style and continued to produce large watches that valued accuracy over style in England, and then turned around and ordered shoddy watches from Switzerland and called them English made.
While the Swiss were copying British designs, new inventions to make watches thinner in watch region of France and Switzerland led to a thinner Swiss model by 1790 (see Harvard Bus. School Case study “Hans Wilsdorf and Rolex”). The British methods & scheme seemed like a path to riches at the time, until about 1815 when the watchmakers petitioned Parliament when they realized they were being left behind while supporting and strengthening their rival, the Swiss who were beginning to emerge as a distinct industry with a distinct style. The Swiss made a choice to pursue thinner watches while the British made a choice to continue to produce watches that were more accurate and met the goals and requirements of the Royal Navy. From the historical records, it’s obvious that the British misread the situation and were confident their system of more accurate watches were superior to the cheaper, less accurate Swiss watches, while supporting the Swiss through outsourcing much of their cheaper models to the Swiss (Landes 16-21). As a side note to ponder: is this much different than what we see from the industry today? The superior pieces are made entirely in Switzerland, while the cheaper pieces are partially produced in China and assembled in Europe or the U.S.
Fateful Turn 4
American ingenuity enters watchmaking history in the 1850’s. Up until this point, the Swiss had firmly taken over the industry, both in Europe and America. In 1855, the Journal of Mining and Manufacturers noted “the United States of America consume the largest quantity of those watches.” But the Journal also notes a level of disdain in America for Swiss watches by 1855: “materials for the construction of the works or mechanism of the Neuchâtell watches are of little value, consisting merely of a little brass or steel.The steel is imported from England and is reckoned the best that can be procured; the brass is furnished by France” (in “The Manufacture of Watches,” Journal of Mining & Manufacturing (1855), pg 499). In other words, the Journal was saying Americans buy a lot of Swiss watches that aren’t that good. This point is reinforced by the eventual founder of Waltham Watch Co who wrote “lower foreign grade watches are hardly as mechanically correct in their construction as a common wheelbarrow.” This was the sentiment in the U.S. at the time, where American ingenuity led entrepreneurs to assume they could do anything better through innovation.
Historian Richard Watkins points out that America had very little skilled artisanal labor, so Americans had to come up with methods to produce guns, watches, clocks, etc that minimized skilled labor. And they did just that. The Waltham Watch Co figured out how to mass produce generally good watches in quantities that dwarfed the Swiss. The fateful American Civil War that struck in 1861 led to further improvements in mass production and the emergence of new companies such as Elgin. In the ¾ century to follow, Elgin would make over 50M watches and Waltham over 40M. This had such an impact on the Swiss industry that they sent an emissary to the U.S. Philadelphia Exposition in 1876 to find out what was going on? The reports from that trip are quite fascinating from a business perspective, as they turned into a journey of discovery for the Swiss. As emissary Favre-Perret noted: “America put on foot a million soldiers, and as everyone wanted his watch, there was great animation in the watch business. At this juncture, which might have been a lucky one for [the Swiss] industry, we failed to comprehend our interests. Instead of sending good watches to the Americans, the worst trash was sent…[Waltham] increased their plant and turned out a better ordinary watch than the Swiss watch.” The final Swiss report of watchmaking in America notes (also translated by Watkins):
“What distinguishes the American method of work in their watch factories, as in their other establishments, is their eagerness to make progress. Underpinning everything they organise is a comprehensive method of studying improvements in machines, simplifications in work, reductions in labour, and even organisation; in effect everything concerning the administration of their establishments in detail from a theoretical point of view. No detail is ignored, and the roles of all the employees are clearly defined and even more exactly controlled.”
The Swiss faced a crossroads; they had a choice to make: do they hold their course or adapt to modern product methods being pioneered by the Americans? The Swiss decided to embrace and innovate as they had done before. They made a choice. The Swiss documented exactly and precisely how the Americans produced watches, including describing the factories, employees, management techniques, machines, and schematics. The report goes as far as to estimate the salary of the factory’s night watchman to how much they spend on gas lighting when trying to determine the American watch companies’ cost structures. It is a level of detail that any modern company would love to know about their competitor when doing an analysis of common performance vs. competitive advantage. The Swiss choice to embrace modern production methods was very deliberate and methodical. The conclusion to the report was a call to action:
“Let us put to one side the bad council of our offended self-esteem and engage in the fight, benefiting from all the advantages which we still have and from the methods that our competitors have discovered. Let us take their tools, imitate their workmen and their methods, but especially let us group together to obtain the kind of progress that the individual industrialist, in his tiny room with his own efforts, cannot achieve.”
Switzerland made a choice that ended up solidifying their position as the epicenter of watch production well into modern days. The last choice we look at is not Swiss, rather German. The Germans still have a small but very successful watch industry in Glashutte, home to companies such as A. Lange & Sohne and Nomos. This industry has managed to survive (in part) to modern day. However the choice Germany made was in the later part of the nineteenth century. That choice was to impose high tariffs on Swiss watches. As a result, the cheaper Swiss watches cost Germans too much to buy, so they bought German watches instead. Were it not for this choice to impose a tariff, the German watch industry would likely not have survived the revolution in Swiss watchmaking that took place following the “1876 realization” (Landes, pg 30).
Read Here for my assessment of the current choices and potential turns of fate for the luxury watch industry in 2017
Fate and Choices have shaped the industry as we know it. Many scholars give varying and disagreeing theories as to how the industry emerged and centered on Switzerland. These series of fateful events and deliberate choices are my perspective, but highlight how much the industry can shift due to seemingly innocent choices and unforeseen fateful events. In 2016, the luxury watch industry finds itself in another crossroads with oncoming traffic coming from all sides. The big question is what choices will be made and how will fateful events shape how the industry emerges? It has not always been a Swiss dominated industry; will it emerge from the present as a Swiss dominated industry? Fate will get a vote, the Swiss will get a vote with their choices, and all the other non-Swiss players will get a vote with their choices. The casting and results of the vote are to be seen, but the following articles will focus on those actors who are “voting” and what choices they are making to shape the future of the industry.