One of the most memorable classes I had in business school was Strategic Cost Management, which was taught by the inimitable John Shank. Our first case was on the Swiss watch industry, which had been threatened by the introduction of inexpensive Japanese quartz timepieces.
He asked us what we would do to combat this threat. Most of our answers were generic — lower costs, buy Japanese competitors, do better marketing — foolish, or crazy. After ten minutes of putting up with our pablum, Professor Shank pointed to the Rolex on his wrist and asked “What is this?” We spit up a few more answers — a watch, a timepiece, a heirloom — until someone finally got it: jewelry. Indeed, a Rolex is much more like jewelry — decorative objects…that people wear on their body — than a timepiece. This insight pointed to where the Swiss watchmakers needed to go next.
So what about the Apple Watch? Frankly, at first I was skeptical. Perhaps it was because I had seen the Samsung offering and was unimpressed. But once I saw what was on offer at the Apple Watch launch, I realized there was a bit more of a threat here. As this FT article (via CNBC) points out:
Apple is also trying to position Watch as a fashion item as much as a timepiece. The device graced the cover of Vogue in China, the world’s biggest watch market, and was showcased during Paris Fashion Week at boutique Colette.
Apple’s fashion credibility has been boosted by hires such as Angela Ahrendts, former chief executive of Burberry, and Marc Newson, the highly regarded industrial designer.
Lo and behold, Apple is looking at this facet of the business, which is indeed a threat to the Swiss. While the Swiss party line is that the Apple Watch is kein Problem, I believe they have to be a bit worried. Perhaps the Apple Watch isn’t a direct substitute for the Swiss’s bread-and-butter, but as Ariel Adams notes:
“You can’t replace the beauty, the personality, the soul of a high-end mechanical watch,” he says. “But what you can do is crowd the space where it used to be on your body.”