Over the last two weeks, I introduced the first element of Passion Management (SEE) – Vuja De and Freshness. This is relevant if you want to transform your industry with the introduction of something new; or even if you want to reinvent something old. I was speaking to an executive last week who has a real passion for beautiful watches. He was bemoaning the demise of the ‘classic’ in favour of the ‘smart’. Looking through the rear view mirror, the watch industry does not have to look too far as to a time when they overcame.

It was definitely a week where the answers for the future may have its origins in the past. I conducted a workshop for a beer brand who have strayed so far from what made it great, that a ‘back to the future’ exercise proved fruitful. Whilst a meeting with a really passionate CEO revealed that the major reason why connection with the external market had not taken place, was that the stories of its glorious past remained in the ‘vault’. It is so hard when the market has all gone ‘smart watch’, especially when modern culture clamors for easy answers.

Pundits love to excoriate companies because they don’t have the guts to change. In fact, the problem with many organisations is that all they do is change. They lurch from McKinsey one year, to BSG the next. From last year’s hot market segment to what’s in vogue now. I’m convinced that one of the big reasons for the failure of so many change programs is that by focusing almost solely on what’s wrong with their organisations, and by importing off the shelf strategies devised by outside experts consumed with what’s new, leaders undervalue what’s right with their organisations and overlook homegrown strategies rooted in the wisdom of the past.

Nicolas G Hayek, the outspoken billionaire who was the face of the Swiss watch industry for 25 years, personified this leadership mind-set. His company the Swatch Group have brands that range from the colorful Swatch to the super elite Breguet, whose pieces can sell for hundreds of thousands of dollars. His acclaim came because he engineered one of the most spectacular comebacks in business history – the reinvention of an industry that was thought to be lost to the sands of time.

Hayek recommended that Switzerland’s banks merge the country’s two giant (and insolvent) watchmakers, which had collapsed under the triple whammy of competition from Asia, shifting consumer tastes, and new technologies that the Swiss had invented but ignored. This happens so often. Often the inventor gets usurped by the storyteller. Here’s how one business school case study described the situation: “The rise of quartz technology hastened the decline of the Swiss watch industry. Ironically, the Swiss had pioneered quartz technology; however, Swiss watchmakers had refused to embrace quartz based on the belief that electronic watches were unreliable, unsophisticated and beneath Swiss quality standards…As Japanese watchmakers saturated the global market with quartz watches at rock bottom prices, Switzerland found itself unable to compete.

What’s more amazing than the company’s performance over the last fifteen years is the plan its chairman devised to reverse its slide toward irrelevance. To be sure, Nicolas Hayek was a state of the art product innovator with a keen eye for marketing. The ultra affordable Swatch has been an endless source of sharp looks and funky features the first see through watch, the first scented watch, limited-edition models created by artists and film directors. Even at the high end, Hayek bucked convention, he unveiled a perfect replica of a Breguet pocket watch completed in 1827 to honor Marie Antoinette – the original considered the most valuable time piece of all time. 

Hayek saw Switzerland’s 450-year watchmaking, tradition as a source of strength rather than a burden of history. He didn’t reinvent a crisis-ridden organization by disavowing its legacy and reaching for solutions cooked up by turnaround specialists and finance wizards. Instead, he realized that the way to devise a game plan for the future was to draw on the compelling ideas around which the organization first took shape – ideas that had gotten lost or disfigured through decades of uninspired leadership, me-too growth strategies, and deafening bureaucratic practices. Echoing the sentiments of Bill Clinton, there was nothing wrong with the Swiss watch industry, he concluded, that could not be fixed by what was right with the Swiss watch industry.

Why reject so many of the accepted ideas and familiar strategies that define ‘modern’ management? Because, by insisting that his organization stay rooted in Switzerland, even as it competed everywhere in the world in every segment of the market against everyone in its field, Hayek imposed enormous pressures for breakthroughs in design, manufacturing, and overall performance. One of most simple and transformational demands was that whenever his engineers designed a new product, direct labour had to account for less than 10% of total costs.

Swatch grew out of the limitations the game plan imposed. “The people on the original Swatch team asked a crazy question,” he said. “Why can’t we design a striking, low cost, high quality watch and build it in Switzerland?’

What is amazing is that more companies have not followed this approach. When asked how many other CEO’s had adopted his ideas, Hayek just laughed. “None of the big teachers think of me as a teacher,” he said. “They like me, they respect me, but refuse to accept that we have done better than any of them. The newspapers put me on the front page, but no one tries to copy what we’ve done.”