Babies, Bathwater, and Watches
I recently saw a quote written a few years ago in the context of business strategy that says (paraphrasing) “You don’t want to be starting a mechanical watch business when everyone is switching to digital”. The intent of that piece of advice is clear – don’t jump into a dying industry – but as a bit of a watch nerd I found that specific example interesting, in that it refutes itself.
In the early 70s the mechanical watch industry’s future looked very dim, with the new and exciting quartz movements quickly overtaking makers of more complex, labour-intensive and less accurate mechanical movements. Before the late 60s, if you wore a watch, it was mechanical. Quartz changed that.
Most watches on the market today have quartz movements, but they are overwhelmingly gathered at the bottom of the market – commoditized, disposable items for the most part. The irony in this, the part that contradicts that business strategy quote, is that it would now be far worse to launch a quartz watch brand than a mechanical one. In fact, that was already the case at the time that quote was written. Most quartz watches sold today (save for the ultra-cheap Chinese-made ones) have movements made by one of four or five companies – the watch company provides only the watch case and bracelet, and the marketing. The market for low-end watches isn’t what it used to be; people who just want a way to tell the time no longer buy watches, since they can just check their cell phone. People that still buy watches do so as a fashion statement or because they have a strong personal interest in them.
That’s why the mechanical watch industry has undergone such a resurgence. They are now luxury items (save for a few exceptions like the $70 Seiko 5 I’m wearing right now) but what the manufacturers lost in volume, they more than made up for in profits. Check out this chart for reference. Swatch is the world’s largest watch company, and they make mostly quartz watches, but keep going down the list. Richemont (Lange, IWC, JLC, etc.). Rolex. LVMH (Tag Heuer, Zenith, etc.). Patek. Audemars Piguet. And the list goes on… Those companies all make mechanical watches.
Where am I going with this? It’s easy to discard the “old” way of doing things when a shiny new thing comes along. Lots of people in the 70s were sure mechanical watches would die out completely. After all they are objectively “worse” than quartz in every way – more expensive, more finicky, less accurate. But if I had to pick, I would most definitely want to be starting a mechanical watch business, not a digital one.