There is a similar origin story to a lot of successful family owned business. You’ve probably heard it told many times over. A brilliant visionary with a passion for one particular product, service, or innovation toils away in relative anonymity until his or her hard work pays off in a breakthrough in the market, eventually becoming a household name.
And while there are many who fit this description, it’s not the case for everyone. Family-owned empires can begin in the most unlikely places under the most unlikely circumstances. Perhaps nowhere was this more evident than in the case of Swatch Group Founder Nicholas Hayek.
The Ending That Turned Into A Beginning
Nicholas Hayek did not grow up dreaming about creating an internationally recognized Swiss watch brand. In fact, given his background, it might be safe to assume the thought never even crossed his mind. Hayek started working as an actuary in Switzerland before starting his own management consulting firm in 1963.
It was in this capacity he was approached by a couple of Swiss banks to explore how two failing Swiss watch companies, ASAUG and SSIH, could best be positioned for sale. They, alongside a host of others, had lost significant market share to Asian companies like Seiko, which were offering the latest quartz technology in what later became known as the Quartz Crisis, a period that saw a broad decline of the Swiss watch industry. After carefully examining the state of the two companies, Hayek came to believe they could, in fact, be successful again with some major adjustments to their operations and management.
Instead of developing a plan to sell the companies, Hayek arranged for them to be merged under one roof and called the new enterprise Société Suisse de Microélectronique et d’Horlogerie, or SMH, which later became The Swatch Group in 1998. He acquired a majority stake in the new firm himself and became the CEO.
Putting the “S” in Swatch
One in power, Hayek’s primary strategy was to emphasize the fact that their products were Swiss made. He did this by putting the words “Swiss” or “Swiss Made” prominently on the bottom of each timepiece. Hayek believed this was not just a solid business strategy but also his patriotic duty as he explained in a 1993 interview with the Harvard Business Review.
“It’s not just possible to build mass-market products in countries like Switzerland. It’s mandatory. This is a principle I am passionate about—and a principle business leaders in the United States and Europe don’t take seriously enough. We are all global companies competing in global markets. But that does not mean we owe no allegiance to our own societies and cultures. We must build where we live,” Hayek said. “When a country loses the know-how and expertise to manufacture things, it loses its capacity to create wealth—its financial independence. When it loses its financial independence, it starts to lose political sovereignty.”
In the early 1980’s when colorful fashion was in vogue, Hayek wanted to design and build a reliable yet fashionable watch that could be affordable for most people around the world. The result, the Swatch brand of watches, became one of the most iconic accessories of the decade and renowned for manufacturing efficiency and fewer parts.
“Ten years ago, the people on the original Swatch team asked a crazy question: Why can’t we design a striking, low-cost, high-quality watch and build it in Switzerland? The bankers were skeptical. A few suppliers refused to sell us parts. They said we would ruin the industry with this crazy product. But the team overcame the resistance and got the job done,” Hayek said in his HBR interview. “The Swatch is based on radical innovations in design, automation, and assembly, as well as in marketing and communications. One of our plants in Grenchen makes up to 35,000 Swatches and millions of components a day. From midnight until 8 a.m., it runs practically without human intervention. Swatch is a triumph of engineering. But it is really a triumph of imagination. If you combine powerful technology with fantasy, you create something very distinct.”
The Swatch Group Succession
Hayek served as CEO until 2003 when he handed over the reins to his son, Georges Nicolas “Nick” Hayek Jr. Under the second generation of leadership, the Swatch Group continues to dominate the industry. Today, the Swatch Group has expanded its reach by acquiring a host of world-renowned brands including Omega, Harry Winston, and Longines, and the company continues to build on Nicolas senior’s philosophy of creating know-how through its Nicolas G. Hayek Watchmaking School, which passes on the watchmaking tradition through institutions located all around the world.
Unfortunately, the same cannot be said of the Swiss watch industry. The industry is being relentlessly pressed from all sides today, with smartwatches eating into market share and exports falling 10% in 2016, the steepest drop since the Global Financial Crisis. In this time of turmoil, many eyes will be on the Swatch Group and the Hayek family to see if they hold the keys to guide the industry out of the woods once more.