Tilting at Windmills: the Swiss Watch Industry & Innovation

This is Article 2 of a 4-part series on Design & Innovation. Design is the last meaningful frontier for watch innovation. The rest of the moves towards in-house movements, new materials, and new movements are all tilting at windmills and are being propped up by marketing. In this article, I will explain why most of the luxury watch industry is ’tilting at windmills’ with in-house movements or new material research and surviving off a marketing machine that isn’t sustainable. In the follow-up article I will cover some of the iconic and bold watch designs of history, and explain why design is literally the last frontier. You can read the first article of this series here where I introduced the concept of bold design being a chance to shift consumer preferences. 

Tilting at Windmills (Wikipedia): “The phrase is sometimes used to describe confrontations where adversaries are incorrectly perceived, or courses of action that are based on misinterpreted or misapplied heroic, romantic, or idealistic justifications. It may also connote an importune, unfounded, and vain effort against adversaries real or imagined for a vain goal.”

Header artwork watermark image by G.A. Harker, Public Domain


Source: Artist H. Pisan, Public Domain

Risk Adverse: Playing it Safe

Design in watches has always been important and many iconic designs continue to sell for years and years. Yet many luxury watch companies made a bold move at one point in time and designed an iconic watch. Historical examples of bold design (at the time) that shifted consumer preferences are: Rolex Submariner, Heuer Monaco, Omega Speedmaster, the Patek Philippe Nautilus, and the Hublot Big Bang. Once these watches became iconic, the companies became safe and wanted to stick with what they knew would sell. They would make small variations to the iconic designs but never rocked the boat with any bold new moves. Most of the companies play it safe by producing designs that are more of the same modifications of what’s already out there. Instead, they focus on safe innovations that are essentially marketing ploys to include innovations to watch movements and materials.

I wrote in the previous article why bold design changes in watches, such as uses of Art Deco have the chance to revolutionize and shift consumer preferences once again. However, few companies are willing to make any bold moves in design; instead, they stick to what’s safe — safe design, but modify the mechanical movement, or start making an inferior movement in-house, or just change the materials of the watch. As Ariel Adams of aBlogToWatch wrote “Most modern big-name luxury watch brands operate like a huge boat without a rudder. Their mission is to boldly go forward in doing the same thing without ever appreciably straying from the course…Other brands reject natural evolutionary design or technical changes as a breach of their duty to “preserve” the status of the brand as much as possible.” They innovate, but it’s safe innovation.

Innovation implies some type of evolutionary step or improvement in design and functionality as well as technical performance…The real hypocrisy with the notion of using the term “innovation” all the time is that, in actuality, most watch brands want nothing to do with innovation. -Ariel Adams, Editor of aBlogToWatch

Time22 Robusto Grade 5 titanium watch

TiMe22 actually innovated new methods to produce a watch in Grade 5 titanium for less than $1,000 and made a bold new design. They won the 2016 Micro Brand Award for Most Innovative (Company photo)

In-House Movements: It’s All a Farce

The whole in-house movement craze is a farce. It’s not actually a revolution in the watch industry. It’s literally a marketing gimmick to sell you an inferior product. We live in a market specialization economy where the person that makes gears is really good at that, and the guy that makes chains is really good at that. The in-house movement craze started out when ETA made movements for almost the whole luxury watch industry. The majority of companies used ETA movements but made their own case and then maybe made some small modifications and finishing to the movement. Swatch Group, who owns ETA, realized this was not the best strategic move for them to supply all of the competition and gave companies notice they would stop selling movement blanks to other companies in 2006 (and then extended a few times, now to 2019). ETA has a dominant market share, but there are other companies making movements, and where there is demand, other companies will figure out how to supply the demand. (If you are interested in this history, read chapter 7 of this book).

Breitling has made a big move into in-house movements

Breitling has made a big move towards in-house movement production (author’s photo)

In response, all of the watch companies started to look for new alternatives and the in-house movement was born. The companies started to make their own movements but they discovered a marketing opportunity — it was like company internal bedrock manufacturing where they could say “this watch was made in house at Breitling with an in-house movement” and they started charging more for the in-house version — and consumers irrationally started paying more! Let’s break this down for a minute:

First, very few of these companies have developed new methods for making a movement that actually makes it better. They are using the same basic concepts and movement designs that have been in use for at least 70 years, much longer in some cases. ETA, Eterna, and other movement companies make great movements (after all, they’ve been doing so for a century), so you are usually paying more for an inferior in-house movement by a newcomer. aBlogToWatch wrote an article last year in which Ariel Adams summed up this perspective: “I would prefer a sourced movement [such as ETA] unless an in-house-made movement has clear advantages over sourced ones.”

Second, many of the manufacturers don’t have the ability to make all the parts in house, so they get those parts from other factories, sometimes in China. So really what we are talking about is some in-house manufacturing, but mostly in-house assembly. (Jack Forster of Hodinkee suggests that the term in-house is usually deceptive).

Lastly, consider this — if you needed a wedding photographer, would you pay more for the photographer with 40+ years of experience? Or the photographer that just started (2-3 years in business) but claims to have bought a lot of hi-tech photography equipment? Most people would overwhelmingly pay more for experience, or hire the new photographer if they needed to save some money and were looking for value. So why do consumers pay MORE for an in-house movement from the company that is just learning to make movements?

Audemars Piguet Royal Oak Movement In House

Audemars Piguet has always made their movements in-house (author’s photo)

Many consumers only consider the in-house movement incidentally cool but don’t actually care about it in itself. In other words, they don’t want to pay more for it, yet the producers have to charge more because the in-house movement manufacturing required a large investment of people and equipment. So why do people end up buying the in-house version for more? I argue one of the main factors is the rise in exposition backs, but this is strictly an opinion (and one shared with me by watch designer Mark Carson). Many in-house movements feature exposition backs and consumers like to see the movement, so they pay the price which incidentally includes an in-house movement.

The conclusion of the in-house movement discussion is that it’s not really a revolution in watchmaking nor will it ultimately shift consumer preferences. The overall concept of paying more for an in-house movement boils down to marketing. The current industry is surviving off the aura marketing creates, but this is like propping up a weak person — the majority of what the industry produces wouldn’t stand on its own.

You’re Going to Have to Come Up With Something Better Than That

There has been a recent move by many of the watch companies to be perceived as innovative. The problem is that many of them are not innovative and their attempts to sound innovative almost leave people scratching their heads. Most of the recent innovation has been towards mechanical movements and new material exploration. Both of these are relatively ineffective and have little effect on consumer preferences.

This 1903-produced Waltham Watch Movement still keeps time within 7 seconds/day.

This 1903-produced Waltham Watch Movement still keeps time within 7 seconds/day. (Author’s photo)

Movements – the mechanical winding movement has not changed significantly in over 140 years. The automatic movement has not changed significantly in over 60 years. There is nothing the luxury watch industry could invent within the mechanical movement that will drastically shift consumer preferences towards a new movement like the automatic movement did when it was introduced. Some companies like Audemars Piguet have been making a full court press towards portraying themselves as designing and making better movements (check out their Instagram page). This is tilting at windmills.

The winning Waltham watch from the 1876 time trials owned by collector Tom McIntyre

This Waltham movement owned by collector Tom McIntyre won the 1876 timekeeping contest and keeps time with 1 second/day (Photo: Tom McIntyre)

Even a 1903 Waltham pocket watch I own keeps time within 7 seconds a day, which is equally as good as a 2004 Patek Philippe I tested; both are manual wind watches. While I’m sure there have been many improvements to movement designs over the 101 years in between their constructions, my point is that none of those improvements are meaningful enough to look at the difference and say “that’s amazing!” The only difference is that one was made by Patek Philippe and commands a premium, the other was made by Waltham and is worth about $50 today — it is Patek’s signature quality and marketing that makes it superior in timekeeping, not any invention they have added to their movement.

omega seamaster co-axial escapement

(Author’s photo)

Even consider the double barrel co-axial escapement, a patent owned by Omega. It is a huge advance in watchmaking if you know anything about how it works, but unfortunately, the average consumer doesn’t care because they have no basis for why it matters. Omega has done a good job using it as a point of differentiation in marketing, but again, we’re back to marketing and not actual meaningful gains that shift the consumer’s preferences. Omega has done very well with sales over the last 10 years, but their double barrel escapement doesn’t have people lining up and saying “I need one of those”.

Materials – New materials such as ceramic for bezels or stronger steel are better points of differentiation than movement research but still don’t do much for shifting preferences. Rather, they become good sales differentiators to re-enforce a decision, but no customer comes into a store and says “I saw my friend’s watch made with different steel and I want that watch.”

rolex submariner green ceramic bezel

(Author’s photo)

Rolex is the one making most of the improvements in materials development, but people already want a Rolex even without these materials. The improvements to steel and ceramics just make the watches an even better value. The problem is it doesn’t take long before all the other competitors are using similar materials with different fancy names. In fact, materials are really tough to become known for because someone always copies it; even with patents, competitors still create a close-enough copy. For example, black ceramic cases used to be unique, now many brands are using them. Ceramic bezels used to be unique to Rolex (who calls it “Cerachrom”), now many brands are using them including Omega who has their own approach and calls it “Liquidmetal” or “Ceragold” enhanced ceramic. Materials provide a competitive advantage for about 2 years until competitors integrate them into their production and they become expected of the whole industry.

Here is the web description of the new Omega Seamaster Planet Ocean collection. Note the emphasis on proprietary or trademarked materials:

“The cases of the 39.5mm and 43.5mm models, as well as the 45.5mm chronographs, are made from stainless steel or 18K Sedna™ gold. Most impressively, the dials and bezels have been created from ceramic, a sleek effect that is enhanced by Liquidmetal® or Ceragold™ numbers and scaling.”

Because a ceramic bezel is more or less a norm in the industry now (just a few short years after it’s market introduction), fancy names have become the point of distinction for a final product that is more or less the same to the average consumer. In many cases, consumers are drawn to the elaborate names of the materials such as “Liquidmetal,” “Ceragold,” “cerachrom” (Rolex) or “Breitlight” (Breitling), and here enters MARKETING again. The consumer is convinced to care about the materials because the companies make a big deal about them with a fancy name. The problem is that consumers can’t really experience new materials, they have to believe the marketers to gain the experience of owning the new material. It’s very similar to an improvement to a mechanical movement — you can only like it because you know its there, but you can’t actually experience the difference — it tells time the same way your old mechanical watch did for the last 140 years.

In Conclusion

The watch industry of today boils down to marketing; it is being propped up through marketing and messaging more than it is by bold new products entering the market and shifting consumer preferences. When I say bold design move, I am talking about the introduction of the Audemars Piguet Royal Oak, which when it was introduced in 1972, it was so different that it didn’t catch on as a mainstream watch. As timeandwatches.com explains:

There was no immediate take-off for this line. The Royal Oak was the target of fierce initial criticism. Disruptive design, visible gasket and screws, integrated bracelet, exorbitant price tag: there was enough for many detractors to say that Audemars Piguet was going to be bankrupt in few months.

Today the Royal Oak is known as one of the most desired icons. This is what I mean by “bold move.” Making changes to mechanical movements, or in-house movement production, or new materials will never create an icon, only temporary marketing fads. Design is literally the last frontier that has a chance to once again shift consumer preferences in the mechanical watch industry.

Audemars Piguet Royal Oak

(Author’s photo)

Thank you to watch designer Mark Carson for his contribution of ideas to this article. 

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I have a passion for watches and am a collector of luxury watches. I write opinion-based articles that try to bring the business lens to my writing to provide readers with a view of the business, marketing, and strategies of the watch industry companies I look into. In addition to Watch Ponder, I do speaking, freelance writing, and publish in other watch blogs and magazines. I do this as a hobby and because of my passion for watches. I am also a member of the National Association of Watch and Clock Collectors.

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