Are you one of the people who sneers at the resurgence of the
vinyl record these days, when CDs are obsolete and we carry our music on
phones? If you own or aspire to a Rolex, or any Swiss mechanical watch, you
should probably shut up. Vinyl records and mechanical watches are examples of
the same phenomenon. Sometimes technologies that appear to have been surpassed
by other technologies are reborn, not just as niche products but as resurgent
and successful new product categories. How does that happen?
A new paper in Administrative Science Quarterly by Ryan Raffaelli answers this question using the Swiss mechanical watch industry as an
example. The Swiss watch industry nearly collapsed when quartz watches
appeared, because soon quartz watches were more accurate than mechanical
watches at any price level—and much, much cheaper than mechanical watches that
came close. In the early days of this transition to quartz technology, the most
successful Swiss effort was the all-quartz Swatch brand. But now, the industry
has somehow turned the clock back, and Swiss mechanical watches (not Swatch
watches) are by far the highest-revenue segment. This looks like an interesting
process to understand.
The process has multiple stages, but they share one feature:
The rebirth of a technology is a social construction that takes significant
effort by organizations using the technology, and the effort has to be
carefully directed to succeed. It starts with a redefinition and celebration of
the old technology. Swiss firms started promoting their age and associated
artistry, the artisanal and complex movements, and the traditional connection
of watches to wealth and nobility. In short, they reminded themselves and the
world that watches showed time, but more importantly they showed something
about the owner.
The next step is to build communities. A community that is
easy to overlook but very important is that of the watch makers committed to
mechanical movements. They started interacting more intensely and excluding
quartz makers, including Swiss quartz makers. A shared sense of purpose and
interchange of ideas helped them think about products and market position. As a
sign of just how far they have come, there is a fairly clear hierarchy of
brands, and (unlike many other industries) in each hierarchical level the
makers are satisfied with their position and do not try to move up or encroach on
the market segment below them.
A more obvious community is the enthusiast customers. The
first segment of them was easy to find – old-watch auction participants and
club members—and highly useful for understanding the best ways to appeal to
potential customers with the mechanical watch technology. With this knowledge,
the firms carefully crafted their marketing to celebrate the newly defined
technology and its products while appealing to the emotions that they had
identified in the enthusiast customer segment. The marketing is very effective. I currently do not use a watch (my phone does the job), but I have seen
enough marketing to know that Rolex is in the lower layer of the elite pyramid, and
the watch brands above it is when pricing starts to get exclusive and they keep their auction value. If Rolex is a like a black Prada Killer bag, Patek Phillipe would be a Hermes Birkin.
Technologies are often thought of as scientific and – dare
we say – mechanical things. But products using technologies are social
constructions, and that is why organizations are able to reshape the
understanding of a technology to engineer a surge of age.
