HBR: Why the Apple Watch Is a Gift to the Swiss Watch Industry

[Don Plumley]

I thought this was an insightful view of the probable long-run impact of smartwatches - just as Kindles and Swatch watches had a positive effect on their traditional industries.

Why the Apple Watch Is a Gift to the Swiss Watch Industry

The launch of the Apple Watch this week has raised questions about its impact on the Swiss watch industry. Contrary to Apple designer Jony Ive’s remarks that the Swiss watch could be in trouble, there are several reasons why the Swiss have nothing to fear from Apple’s success.

First, the Apple Watch makes wearing a watch relevant to a new generation of future watch collectors. I often ask other professors around the world how many of their students wear watches. The answer is always the same: “very few.” For many young adults who have grown up using their cell phone to tell time, the idea of wearing a watch is the equivalent of sending a telegraph or storing data on a floppy disk.

The Apple Watch introduces the concept of wearing a watch to many of Apple’s 18 to 35 target market. If it takes off, it is likely that these buyers will eventually consider purchasing other types of watches for events later in life. Talk to any Swiss watch executive today and they will tell you many of their best clients started out collecting Swatches in the 1980s, but eventually started purchasing more expensive brands such as Rolex, Blancpain, Breguet, or Audemars Piguet later in life. Like the Swatch, it is quite possible that the Apple Watch could spark a new generation of watch aficionados and collectors.

A similar phenomenon has recently occurred in the book industry. When Amazon introduced its Kindle eBook reader in 2007, many analysts predicted it marked the end of traditional bookselling. However, over the last five years independent bookstores have seen a resurgence in sales and in the number of stores, all the while selling traditional printed books. One of many reasons for this revival is that booksellers have benefited from continued demand for children’s books, which remain near the top of the fastest growing segments in the publishing industry. When parents and grandparents buy books to read to children at bedtime, they introduce the printed book to a new generation of potential users. As these children have grown up, data show they have been less likely to abandon the printed book in favor of the Kindle. In fact, most readers are happy to read both.

Second, the Apple Watch is likely to be a complement rather than a competitor to the Swiss watch. The Apple Watch is chock full of technological wonders that would be the envy of Dick Tracy, while Swiss watches are primarily luxury goods and status symbols. Apple is confident it will be able to reinvent its core technology every 6 to 12 months before competitors like Samsung attempt to render it obsolete. Swiss watchmakers, on the other hand, see themselves as craftspeople producing wearable art meant to be passed down from generation to generation.

The Swiss stopped competing for technological watchmaking supremacy in the 1980s when Japanese watch manufacturers like Casio and Seiko began producing far cheaper and more accurate quartz watches compared to their handmade mechanical timepieces. Within a decade of inventing the first quartz watch, the Swiss saw their export volume decrease from 45% to 10% of watches produced globally. By 1983, two-thirds of all watch industry jobs in Switzerland had vanished and over half of all watchmaking companies in Switzerland had gone bankrupt.

Thanks to the efforts of individuals like former Swatch Group chairman Nicolas G. Hayek and LVMH watch president Jean-Claude Biver (who oversees Hublot, Tag Heuer and Zenith), the Swiss watch industry cleverly repositioned its mechanical wonders as luxury goods. Unlike the $350 price tag suggested for a new Apple Watch, most of the Swiss watch industry’s meteoric growth over the last two decades has come from watches priced well over $10,000. The Swiss watch industry no longer competes on the same dimensions that will drive Apple Watch sales.

Third, Apple and Swiss watchmakers have this in common: they are deeply committed to connecting their product with the consumer on a personal level. During Tuesday’s launch event, Apple CEO Tim Cook touted the Apple Watch as the “most personal device we’ve ever created.” The beauty of the Apple Watch is that it can track people’s micro-movements and provide instant data to help wearers make sense of how they engage with the world around them. Similarly, while conducting research on the re-emergence of the Swiss watch industry, I interviewed a prominent Swiss watch CEO who said, “Your watch is part of you. The watch is you. It shows the type of personality you have: Are you elegant?, unique?, rich?, arrogant?, sporty?… all these elements are transmitted through your watch.”

The Swiss watch industry can be confident that a sufficient number of well-to-do and tech-savvy Apple Watch wearers will continue to pine for the highest end handmade timepieces.

The Apple Watch may keep perfect time, but it is not timeless.

[Hugh R]

I could see my 1 y/o grandson wearing my Submariner some day. Once in a great while, I will carry my grandfathers 1913 gold hunting case pocket watch.

[jyl]

I think the first point in that article is poorly reasoned. Someone who got into Swatch watches was able to move up to luxury Swiss watches without losing any functionality. Someone who gets used to wearing an Apple Watch or other smartwatch cannot shift to a Swiss luxury watch without losing almost all of the functionality that he has grown accustomed to having.

The second point is questionable. Yes, Apple Watch and Girard-Perregaux do not compete in the same price band, but they do compete for the same real estate. Unless people start wearing multiple watches, these devices will in fact be direct competitors.

The third point is, well, I'm not sure what the point is.

[widebody911]

I haven't worn a watch in years probably since high school. I'm not in any hurry to start again.

How can you tell how much someone's Rolex cost? Don't worry, he'll tell you.

[motion]

Like the other posters, I don't agree with the premise of the article. If everything goes to Apple's plan, the Apple Watch will be a paradigm shift in what we expect from wearing a watch. As Apple adds sensors and more functionality to future versions, the watch will become a "must have" in more ways than just being able to tell the time and date, which is all the traditional Swiss watch makers can offer at the moment.

[nostatic]

Apple watch has nothing to do with time - it has everything to do with money and connecting a person to systems (that involve money one way or another).

[Don Plumley]

Consider this: The number of people I see wearing a watch and a fitbit is non-trivial. Typically they are young CEO's or entrepreneurs. Regardless of how cool an Apple Watch is, I'll still pine for my mechanical movement watch - much in the same way I like my aircooled 911.

When the apple watch functionality becomes a tiny bracelet and no longer looks like half a deck of cards on your wrist - how many people might pine for the elegant and timeless mechanical timepiece, and relegate the connection/payment/etc. to the combination of a "google glass" and ring or other wearable thing?

I love my kindle reader (the app anyway) because it lets me read books wherever I go. But for some books, there is no substitute for paper and binding.

[nostatic]

Originally Posted by Don Plumley

Consider this: The number of people I see wearing a watch and a fitbit is non-trivial. Typically they are young CEO's or entrepreneurs. Regardless of how cool an Apple Watch is, I'll still pine for my mechanical movement watch - much in the same way I like my aircooled 911.

When the apple watch functionality becomes a tiny bracelet and no longer looks like half a deck of cards on your wrist - how many people might pine for the elegant and timeless mechanical timepiece, and relegate the connection/payment/etc. to the combination of a "google glass" and ring or other wearable thing?

I love my kindle reader (the app anyway) because it lets me read books wherever I go. But for some books, there is no substitute for paper and binding.

Yeah, but you're old.

The question is what will your kids think/do in the next 5 years? My son wears a watch oddly enough, and does read paper books. So maybe those things will endure.

Perhaps this is part of a broader question - what paradigms and object will remain relevant over the next 10 years? If you look at the last 100+ years, there are a number of things that have gone by the wayside. I wonder if traditional cars (i.e. requiring a driver) will go the way of the horse and buggy?

[onewhippedpuppy]

Nobody wears a Rolex simply to tell time - a $20 Timex does a far better job of accomplishing that task. A Rolex is a finely crafted status symbol, a piece of male jewelry. An expensive tailored suit, an Aston Martin, a beautiful date, fine dining, and...........an iWatch? I don't think so......

Sincerely the guy that has a $200 suit, likes restaurants with no dress code, and can think of way better things to spend money on than a Rolex or iWatch. Though if I had to choose one, I would choose the crafted piece of mechanical art over the soon forgotten electronic fad.

[jyl]

Thinking a little more about this -

For a small minority of people, call them the sentimentalists, I agree that a traditional watch serves a role that smartwatch cannot possibly fill. A traditional watch is a fascinating mechanical device, has a style steeped in myth and tradition, and often sentimental value. A Breitling that exudes the romance of aviation, a vintage Heuer that smells of petrol and racing, the Rolex your wife gave you at your first anniversary, your father's treasured Omega, even the loyal Seiko that has seen you through thick and thin. If a person falls solidly enough into that group, the Apple Watch won't displace his traditional watch.

To far more people, call them the purposefuls, a traditional watch is worn to serve a purpose - to give them status, to make them stylish, or to give them information (time). The Apple Watch and its successors may well fill those roles, whether it be the $2,000 (price speculated) gold model for status and looks, or the $350 base alumium model for information.

And there are plenty of people who are non-watch wearers, they have no particular interest in traditional watches, but see smartwatches as a very different sort of device that just happens to live on the wrist.

I have a foot in the first, sentimentalist camp, and that part of me is trying to figure out if there is a way to wear my trusty Seiko diver and the Apple Watch on the same band . . . the Seiko facing up and the Apple Watch facing down . . . or hell, maybe I will end up wearing a "watch" on each wrist.

But I think the second and third camps are much larger. And that an awful lot of mechanical Swiss watches are sold to people in the purposeful camp.

[Rot 911]

I used to love watches. Didn't have anything real expensive, but liked having a reliable analog watch. I now have 4 sitting on my dresser and wear none of them. Nowadays, everywhere you look there is a device that gives you the time.

[Don Plumley]

Yes, I am old(er), but I'm probably more connected and like people in their 30's than those in their 60's. (and I'm much closer to the older demographic chronologically).

This is sort of what I mean about envisioning how this might be - dropping the whole watch is for time keeping pov. I just read this over lunch, yes, in a paper newspaper:

WSJ: Don't Underestimate Smartwatches



It's important to understand that like the iPhone before it, the Apple Watch isn't at all what its name would imply. Let's call it what it is: a wrist-top computer.

Just as smartphones have become supercomputers in our pockets, the Apple Watch and its many competitors, including Android-powered devices from Motorola and Samsung Electronics, are poised to become something more. And it is their central place in a larger ecosystem of apps and hardware, rather than any one thing that has been shown off recently, that will make them indispensable.

Many people are excited about Apple's recently unveiled smartwatch, but there are still questions that have been left unanswered. The WSJ takes a look at five of them.

"There's so much [the Apple Watch] can do that we haven't really even talked about," Tim Cook told USA Today on the day of the announcement.

When a company like Google or Apple deliberately creates a place for other companies to sell their own, complementary wares, it is called a platform. Apple, more than Google, has mastered this art, having worked hard to give developers the tools to make apps for its mobile devices, plus a controlled environment in which to profit from them.

Fortunately, we don't have to wait for the Apple Watch and its app store to become available to get a glimpse of where things could be going. We have only to look at what pioneering companies in "wearables" are already working on, and then think about how their products will become a part of—or be absorbed by—the Apple Watch and Android Wear ecosystems.

"The vision of Sensoria is that the garment is the next ultra personal computer," says Sensoria CEO Davide Vigano. To illustrate his point, he rolls up his pants leg to show me a working prototype of the world's first smart sock.

I know, it sounds ridiculous. But, as he explains, with the help of an iPhone app that visualizes wireless signals sent by indiscernibly thin pressure sensors in the sock, it is good for runners who want to reduce their chance of injury. It is also potentially useful for monitoring the health of the elderly, since changes in gait are surprisingly predictive of other health issues. And yes, the smart sock is washable.

Sensoria also makes a smart bra and smart shirt, both of which can measure heart rate. And here's where things get really interesting: For all makers of wearables, which until recently have been dominated by the glorified pedometers known as fitness bands, fitness applications are just the beginning.

Using a few more of the same sensors it already carries, Sensoria's shirt could measure not just the frequency but the pattern of a wearer's heartbeat, Mr. Vigano tells me. Like the fingerprint sensor on new smartphones, the unique shape of the electrical signals generated by our hearts are a biometric. Add in a payment terminal not dissimilar from the ones that will roll out with Apple Pay, and the wearer of a Sensoria undergarment could soon find herself verifying payment for her next coffee via technology in her bra.

One company, Bionym, is already doing something like this. Their Nymi wristband is an ultra-secure means of personal identification. Put it on and touch it for four seconds, and it takes an EKG with a fidelity comparable to what you would get in a hospital. It is then matched with a previous distillation of your heartbeat pattern stored in the cloud. Once you put on a Nymi, until you take it off, it uniquely identifies you. Current applications include unlocking your laptop or smartphone, but Bionym CEO Karl Martin tells me his company is also working on a version that can be used for contactless payments, just like many smartphones (including the iPhone 6) and the Apple Watch.

During Apple's presentation, Apple Vice President Kevin Lynch announced that BMW has developed an app for the Apple Watch that will allow users to lock and unlock their BMW i-series electric vehicles. And Mr. Martin told me that new bluetooth-enabled locks from companies like Lockitron and Kwikset mean that the moment you walk up to a door while sporting a recognized wearable, it can unlock without a touch.

Put all these possibilities together and what you get are a suite of functions that could almost, but not quite, be conveniently accomplished by a smartphone. Just as Uber could in theory work on a PC but didn't really make sense until the dawn of the smartphone, body-wide wireless networks and computers we never take off will create applications that simply don't exist yet. Wearables won't just appeal to fitness nuts and quantified-self geeks. They will appeal to everyone, because they will be the primary, perhaps even the sole way we identify ourselves to a world full of smart objects.

Established makers of wearables have seen this trend and are already getting in front of it. On the same day that Apple announced its watch, Jawbone, maker of the UP wristband, said that it was opening up its quantified-self software so that anyone could connect it with devices other than the UP—including the Apple Watch.

Or in other words, amid the hype about the Apple Watch being a fitness device, or a timepiece, or a status symbol, it is the applications that Apple and others aren't even talking about, the ones that are thought up by countless developers jumping on board the platform, that will make us wonder how we ever got by without them.

"We're at the genesis of the sensing industry," says Mr. Vigano. When smartwatches are cheap enough to be ubiquitous, and if Sensoria becomes, as Mr. Vigano claims, "the Gore-Tex of wearables," and if the Jawbone UP and the Nymi wristband become features of all smartwatches, what then? These devices will be the way we connect ourselves—directly—to all the technology that surrounds us. And opting out simply won't be an option.

[nostatic]

The last paragraph of that article should scare anyone with a pulse. By the time that "vision" hits I may not have one though...time will tell.

[widebody911]

[scottmandue]

I don't this this is an either or situation... I think there is room for both the smart watch and the analog watch.

Smart watch is a gadget, and we all love our gadgets... I would have one if money were no object (and yes I'm so cheap that I won't blow $200 on a toy) but seriously are we so lazy we can't pull our cell phone out of our pocket or hip holster to answer a call or look up the closest coffee shop?

Yes, analog watches only do one thing... actually they do two things, they tell time and they look good as jewelry. Shall we dismiss all jewelry because it only has one purpose? To look good? Do we need smart ear rings?

And yes I will tell you how much my 1950's manual wined Mickey Mouse watch is worth, why... at action it could go as high as $150!

[Rick Lee]

I'm only 43 and just came back from a trip to Germany where I had one of my Sinns serviced. I felt naked without it, but brought another Sinn for those two weeks. When I rotate watches about once a week (Breitling this week), I am almost as excited to go to my winder box in my gun safe as I used to be when going to open presents on Xmas day. Not exaggerating. iWatch means nothing to me.

[rwest]

I have always loved watches and find myself staring at my wrist even if I forget to wear it. Pulling a phone out of my pocket to tell time or put a date on a check or document seems like a hassle. I don't see myself buying an Apple watch just because I won't replace my wristwatch and I'd feel stupid wearing something on both wrists, maybe Apple should make a version with a chain like a pocket watch- easier to carry than a smart phone and honestly you shouldn't need to be constantly looking at a screen.

I agree that the Apple watch will probably have minimal impact on luxury watches.

[aschen]

Originally Posted by onewhippedpuppy

Nobody wears a Rolex simply to tell time - a $20 Timex does a far better job of accomplishing that task. A Rolex is a finely crafted status symbol, a piece of male jewelry. An expensive tailored suit, an Aston Martin, a beautiful date, fine dining, and...........an iWatch? I don't think so......

Sincerely the guy that has a $200 suit, likes restaurants with no dress code, and can think of way better things to spend money on than a Rolex or iWatch. Though if I had to choose one, I would choose the crafted piece of mechanical art over the soon forgotten electronic fad.

nobody wears an iwatch simply for the features. Just as the rolex wearer might want to increase his status on the snobometer, the iwatch guy ensures his position as a techie

aschen buys his clothes at walmart, is not a huge fan of rolex, but likes all things mechanical, espescially if a bit archaic, and would daily wear a patek if he had 20k that just had to be wasted.


I do like run on sentences though

[aschen]

Originally Posted by Rot 911

Nowadays, everywhere you look there is a device that gives you the time.

I use my watch in the shower frequently. I shower in the morning and need to know if im on schedule for meetings or whatever.

[onewhippedpuppy]

I like gadgets, but have no desire to stare at a tiny wrist mounted screen when I can just use my phone. Plus it just screams dork, IMHO.