Saturday, September 14, 2013

Swatch's Management

Swatch Group came about via a series of mergers around the time of the near death experience of the Swiss watch industry in the early 1980s and was finally helmed by this legendary guy called Nicolas Hayek, a Lebanese who later became a Swiss. His kids, Nick Junior and Nayla Hayek - a brother and sister tag-team, run the Swatch Group today. Nick Senior passed away in 2010 but he created a lasting legacy by rescuing and reinventing the whole Swiss watch industry.

Nick started his own management consulting firm called Hayek Engineering in the early 1960s and became very successful in consulting and helping to turn around ailing companies all over Europe. Hayek Engineering corporate philosophy embodies Nick’s belief that an entrepreneur is essentially an artist. This is not different with investing which is also an art. Also, an investor should also manage his portfolio with an almost artistic creativity to make outsized returns.

In Nick's own words,

An entrepreneur is first of all an artist, full of fantasy and inventions. He or she needs to be able to communicate, be open to new ideas and able to question everything. – Not only our society but also oneself. An entrepreneur ought to be captured by the beauty of and sensitive to the outcome of our planet. This attitude does not only allow him or her to create new products and more jobs, it also allows for the creation of true values and riches for all people. It is also necessary if one wants to overcome all obstacles using courage and fantasy…

This is how Nicolas Hayek approached entrepreneurship and by 1979, Hayek Engineering had 300 clients in 30 countries and Nick was well regarded as a true entrepreneur and on top of that, a teacher to other entrepreneurs. Today the company still exists as a niche consulting firm headed by Nayla Hayek, Nick’s daughter.

So that was all before Nick got involved in Swatch. Then, in the early 1980s, the onslaught of the cheap Japanese quartz watches drove the mechanical Swiss watch industry to the brink of bankruptcy. A lot of watchmakers and their movement companies were going bankrupt. At age 52, Nick was roped in to oversee the liquidation of two of these companies: ASUAG and SSIH but he thought and decided there could be a way out for the Swiss watch industry.

At the same time, Swatch was created by a group of entrepreneurs led by another guy called Ernst Thomke who was also trying to rescue ETA, a very important Swiss watch movement company. Nick then joined hands with Ernst and a group of investors to form a Swiss watch giant called SMH, which later changed its name to Swatch Group.

Swatch Group today is an integrated watchmaker producing 50% of the world's high end mechanical watch movements and owns a slew of brands including Breguet, Harry Winston, Blancpain, Glashütte Original, Jaquet Droz, Léon Hatot, Omega, Tiffany & Co. (watches), Longines, Rado, Union Glashütte, Tissot, Calvin Klein watches and jewellery, Balmain, Certina, Mido, Hamilton and needless to say, Swatch.

On its website, Swatch also lists all its production companies. Some of which are critical to the development of the human race. Like Nivarox-FAR, one of Swatch Group companies that produced the world's smallest springs and gears for impeccably accurate time-keeping in mechanical watches.

Swatch Group production companies
ETA, Nivarox-FAR, François Golay, Comadur, Rubattel et Weyermann, MOM Le Prélet, Universo, Manufacture Ruedin, Simon Et Membrez, Lascor, Novi, Swatch Group Assembly, DYB, EM Microelectronic, Renata, Micro Crystal, Oscilloquartz and Swiss Timing.

We already know the turnaround story. Swatch was driven by innovation: funky, fashion styled cheap watches that managed to beat the Japanese in their own game. Nick’s masterstroke came with the re-positioning mechanical watches as luxury products. The Swiss mechanical watch became a symbol of art, a reflection of the owner’s appreciation of craftsmanship, a mark of personal achievement, a family heirloom and everything else (including a status symbol, a wealth flaunt and a bragging right). It worked. Swiss watches became the luxury item of choice for successful men and now women as well. A multi-billion dollar industry was born.

Today Nick Jr is the CEO and Nayla is the Chairwoman of Swatch Group. While lacking the larger-than-life charisma of their father, both brother and sister are respectable business people in their own right and have created value for shareholders. Nick Jr seemed to be very interested in movies and his profile says nothing about his achievement in the company. But as CEO of the Group, he holds his own ground and his views on the watch industry and the Chinese consumer are highly sought after. Nayla appears to be the more serious and capable of the two and she recently took on an additional role as the CEO of Harry Winston, the newly acquired diamond ring and jewellery specialist.

The following is a picture of the Chairwoman of Swatch Group and CEO of Harry Winston.

After she became the CEO of Harry Winston, she decided to help a Singapore church pastor and his tone-deaf wife launch a Hollywood music career by siphoning some money from the church fund. Since she was an accomplished accountant, this was child's play to her. She successfully did so for seven years until the whole scheme was found out by the authorities. This picture was taken as she attended court hearings.

Ok just kidding. For the un-initiated, that's Singapore's hottest criminal-in-question Serina Wee who is currently involved in the City Harvest saga. Apparently, she is so hot she singled-handled converted the courtroom to Christianity.

So much for jokes. Let's get back to Swatch. The following is a real picture of Nayla Hayek.

Nayla Hayek, Chairwoman of Swatch Group

Well, she would have rivalled Serina in her younger days. At 62 today, she and her brother are diligently continuing their father's legacy. They have managed to surround themselves with very capable people: PhDs, lawyers, engineers and MBAs to help them run the Swatch Group. It suffices to note that they have not done anything drastically detrimental to shareholders and should continue to help us grow the company in the foreseeable future. Together the Hayek family still owns 20% of Swatch and their interests are aligned with the minority shareholders.


  1. Hello there,

    First time at your site! Really curious why do you aim for only 8%? Through your investments, do you consistently get 8% every year?

    Best Regards
    Pok Chow

  2. Hi Pok Chow,

    8%pa over a long period like 20 to 30 years is very hard to achieve. It means increasing your original capital by almost 10 folds. The world's greatest investor, Warren Buffett achieved 20%pa over 40 years, but even so, his recent performance is going to be just 8-9%, losing out to the S&P500 over a five year period for the first time.

    Sorry I do not track my own performance, I would say that over the time period of 10+ years that I have invested, if I had achieved 8%pa compounded, it would be quite spectacular and I would be much richer now :)