The Outsiders Who Saved Omega and the Swiss Watch Industry

In 1982, there weren’t many vital signs of life remaining in the emaciated body of the Swiss watch industry. In one year alone, the sales of Swiss watches dropped by 25 per cent. The giant of Swiss Watch Manufacturing, Allgemeine Schweizer Uhrenindustrie AG - Société Suisse pour I'Industrie Horlogére (ASUAG-SSIH), owner of a number of memorable Swiss brands including Omega, was hemorrhaging money so badly that its bankers intervened to ensure that at least something remained of their investment.

The somewhat smug and superior Swiss horological establishment was in the depths of an horror-logical nightmare from which it couldn’t awaken. End of Days was in sight, and Switzerland’s rich watchmaking tradition and splendid history of innovation were in danger of being swept aside by some piddling piezoelectric material that vibrated at a particular frequency when captured within an electric field, namely quartz technology.

The Japanese quartz invasion, and, to a lesser extent, the emergence of the American jewel-free, throw-away watch company Timex, delivered a blow of atomic proportions to the Swiss. So many solid and cherished brands were vaporised overnight.

Like many manufacturers at the time, the doyens of ASUAG-SSIH were in a state of suspended shock at the devastation caused by the quartz onslaught. When the bankers stepped in and took control of the conglomerate, one of the first things they did was employ ‘outsiders’ to lead the rescue attempt, believing, with some justification, that the job couldn’t be done by industry insiders. This, as you can imagine, went down about as badly as would serving a plate of squid rings for lunch after a brit milah ceremony!

One of the great champions to right the wrongs of the Swiss watch manufacturing industry was an individual who knew precious little about horology and mass production of timepieces. Nicholas Heyek was engaged to develop a turn-around plan for ASSUAG-SSIH, a plan that ultimately led the Swiss out of the dark winter of despair into the sweetness and light enjoyed by the industry today.

Lebanese-born entrepreneur Hayek was the owner of a business consulting firm - Hayek Engineering Ltd. of Zurich. He carved the moribund conglomerate into three separate divisions covering the manufacture of movements and watch parts, finished timepieces, and manufactured products that leveraged the organisation’s key capabilities.

Another outsider, Pierre Arnold was chosen to head the organisation. Arnold’s only experience of mechanical timepieces was that of wearing one on his wrist. Before he joined the organisation he headed the Federation of Migros Cooperatives, a multi-billion dollar flagship of Swiss retailing.

Perhaps the most galling choice of all was the appointment of a medical doctor to run the watch division of ASSUAG-SIH. Radical surgery was necessary if the patient was indeed going to survive, and, apart from cutting deeper into the fat of the organisation, one of the most significant medicaments Ernst Thomke prescribed was to sell ‘ebauches (watch movements) on the international market. This hitherto unheard of practice was greeted by some of the more conservative insiders as tantamount to treason.

But, by far the most important decision made by this farsighted medico was to wage the horological equivalent of the Battle of Midway against the Japanese to recapture territory owned traditionally by the Swiss. Thomke established five rules of engagement for the coming hostilities. In creating a watch for the lower end of the market he decreed that the watch:
1. must have style
2. must be cheap to make
3. must be priced competitively
4. be durable, and
5. establish a technological lead.

Thomke’s vision lead to the ultimate creation of the Swatch in 1983, a brand that clawed back much of the ground lost to the Japanese. The Swatch was a brilliant fusion of style and technology. It mirrored the fashion preferences of the day and offered a quartz movement under an analogue dial. The number of parts used to produce the watch were reduced to around 60 percent of those employed in similar models. Great economies were achieved by robotics and single assembly lines.

Swatch has been the dominant lower-end brand of the last two decades releasing literally hundreds of designs, creating ersatz exclusivity and collectiblility by producing limited editions, and branching out into merchandising a range of fashion accessories marketed through Swatch stores.

In 1985, ASUAG-SSIH underwent a name change to SMH and Nicholas Hayek was chosen to lead the new entity. His appointment was greeted with the now-customary hauteur by the Swiss horological establishment who couldn’t quite get it into its head that outsiders offered a freshness of vision that was in very short supply within the industry.

Perhaps taking heed of Thomke’s surgical approach, Hayek excised nearly fifty percent of the company’s workforce and rationalised the number of brands produced by SMH. This allowed him to target the organisation’s energies into building up the brand power of important marques like Omega, Rado, Longines, Hamilton, Certina, Tissot, and Mido while milking the Swatch cash cow for all it was worth.

Swatch bankrolled the renaissance of many of SMH’s best known brands including our beloved Omega, and certainly has earned the right of a rename of SMH to the Swatch Group. Hayek’s claim that what rescued the Swiss watch industry was the very un-Swiss concept of the Swatch stands up well to scrutiny. Swatch signalled that functionality and time-telling were no longer the primary selling points in a watch.

Swatch was not so much marketing time-telling as it was fun, fashion and accessories. Heyek said, 'We were convinced that if we could add our fantasy and culture to an emotional product, we could beat anybody. Emotions are something nobody can copy.' Heyek went on to invent the Smart Car for the Mercedes group, known affectionately as the Swatchmobile. The same combination of fantasy, culture and emotion has made the Smart Car ubiquitous in Europe.

What is also indisputable is that without the vision, insight and vigor of three industry outsiders – an engineer, a retailer and a doctor - the mass production of Swiss mechanical timepieces and Switzerland’s role as the somewhat conceited high priestess of horology may have been but a fading memory of the past.

by Desmond Guilfoyle 2006