Thursday, September 10, 2020

As True Today As It Was Nearly Five Years Ago

The Ten Things that can be Learned by Owning a Watch Brand

I originally put this out back in December of 2015. Yes gentle reader, that is nearly 5 years ago!  Things were bad then, and they are clearly worse now.  Interestingly enough, I still don't think that we've reached bottom yet.  So as brand managers, sales reps, and most likely (and fairly) CEOs get ready to check the help wanted section, I thought it might be useful to remember why we got into this crazy business in the first place.  So here, once again in one long post -

What Barry Hearn Could Teach the Watch Industry

I am a fan of Men in Blazers, in one of their most recent pod casts they shared an interview with former Leyton Orient owner Barry Hearn that I found fascinating, informative and a lot of fun. I encourage you to check it out here -

Essentially, Mr. Hearn shares the 10 rules that he learned by owning a football club, but there was a great deal of it that I felt truly applied to the luxury industry as well.  So with full credit extended to Mr. Hearn for putting them into words, and for the Men in Blazers for sharing it, here is my modified set of rules for the watch industry, one rule at a time -

1. Always remember why you bought the company in the first place.
The watch industry is one of those businesses that can stir a great deal of loyalty not just among the fans out there, but the people working for the brand.  From the top to the bottom, there is a personal identification that comes with working for a brand.  With that level of devotion comes a fairly large bundle of emotional baggage.  But whether you own it on paper, or you are a salaried employee, in one way or another you have "bought" the company.

And for many a brand owner/brand manager and (in some painfully obvious instances) CEO, the brand is something that they always wanted to have.  When you were working behind the counter at Tourneau, you sometimes fantasized about what it might be like to be the brand manager on the other side of the counter.  Beautiful suit, flawless manicure, expense account.  It all looked really good.  And when you made the jump to brand rep, and then to brand manager it all did seem exciting at the time.  But, and I will paraphrase what Mr. Hearn said - running a brand can be a lot like having a mistress - It costs you a fortune and you only have 3 good days a year.  

Now when I say that it costs a fortune I don't just mean in terms of money, although the money side of it is very evident to you when you are the brand owner, the CEO or even the rep who is counting on incentive bonuses based on sales.  But there is a bigger "cost" -

  • Time away from family 
  • Your health - in this instance physical owing to constant travel, poor sleep and even poorer diet
  • Your relationships - and no, that is not just with your family
  • Your mental health
So one way or another, you are paying a cost - this is, by the way, just like any other business.  But what makes the watch industry so unique is the amount of passion it stimulates from those who work in, or hope to work in it.  The only similar industries I can think of are automotive and fashion.  Do you think toothpaste, air conditioners or peanut butter fuel this level of enthusiasm?  
So if we stick with the mistress analogy, this makes the watch brand a bit of a cruel mistress.  

But you got into this business for a reason.  Moreover, if you recently joined a different brand in the past months, you did so for a reason.  Whether or not it was the right reason, only time will tell.  

What I think gets lost in the morass of a downturn the likes of which we are experiencing is the fun, the enjoyment - the reason you got into this business in the first place.  The reason why you "bought the company" in the first place.

I got into the business on a full-time basis in 2007 - just before the last big downturn. And it was one hell of a ride! It is safe to say that I was so new to it at the time, that I probably didn't know enough to be worried or unhappy. Every day I was asked to take on new and different challenges and responsibilities. Long days, and a lot of effort went in. There was a real team spirit and we were all pulling together. And we emerged on the other side intact. This was perhaps one of the great benefits of being a smaller operation - you could be nimble. There were many other folks from bigger, richer brands who are now in different industries.

But looking back on it now, we never questioned why we got into the business or "bought the company" in the first 
place ; )

2. Do not leave your brain in the factory parking lot
Many "sensible" people lose their way when they get into the watch business. I get the press releases every day - "years of success and experience in industry X", "excited to join the exciting and glamorous world of Haute Horology"...

Despite what we would like to think, the watch business is in some ways no different than any other. Things do not happen overnight. It takes time for them to develop. But this oftentimes gets lost in the hype.

The watch business is a wasteland of people at every level (retailer, distributor, national brand manager, CEO, owner) who have built up business success in other areas, and managed to squander the company's, or family's money chasing the dream of being the next Tourneau, HublotRolex or Omega. The unshakable belief that the next celebrity partner, the newest boutique, the latest advertising campaign will make it happen. It seldom does.

You have to be sensible - and make sure that you do not leave your brain in the factory parking lot.

3.     Make sure your heart and wallet stay in a different place

Watches do more than tell time, they stir passion. Inevitably, the folks in the PR departments and those signing on the dotted line, and even those at the very top sometimes lose track of the business side. Sometimes, their hearts and the company wallets "merge".

Let me put it even more bluntly - LVMH, Richemont, SWATCH and even the smaller guys have absolutely no problem with be tough negotiators with suppliers, staff, distribution and retail partners.

And frankly that is the way it should be - this is business after all.  

But when it comes to celebrity partnerships, ambassadors and events, they spend like drunken sailors on a 24 hour shore leave. Press junkets to Argentina to watch polo, to Iceland to hike and look at glaciers, Germany for a gala launch, to Hawaii to watch (and not report on) a surfing event... it goes on and on. Put another way, some brand managers and CEOs have clearly never met a celebrity that they wouldn't like to be "closer to".

Millions of dollars thrown at celebrities, and very little measurable return. But every brand PR manager, brand manager, CEO is so terrified of NOT doing the same thing that the big boys are doing that they continue to throw the money around.  

Now I am not saying that friends of the brands or partnerships are inherently bad. But I take more of a "Money Ball" approach to the spending of marketing money. But ultimately, there is the unshakable belief that you must be partnered with the MOST PRESTIGIOUS partner possible. Which, in turn, limits your exposure (fewer "impressions"), and costs you a BOATLOAD of cash.

When your brand is hemorrhaging money, maybe if you spend your marketing money a little more responsibly, you won't have to lay off hardworking staff for the sake of your ego.

But ultimately, brand manager, PR manager and CEO - it is up to you.

4.  Think outside the box – and I do not mean the “watch box”

The watch business is not strictly black and white. As Mr. Hearn shared about the business of football, you don't work just right handed or left handed - you need a bit of "ambidexterity". More often than not, there is an unshakable belief that the business is done by certain people in a certain way to achieve a certain outcome.

And here is where I will borrow from Moneyball -

“Managers tend to pick a strategy that is the least likely to fail, rather than to pick a strategy that is most efficient," Said Palmer. " The pain of looking bad is worse than the gain of making the best move.” 

― Michael LewisMoneyball: The Art of Winning an Unfair Game

Or to put it another way, brand managers and department heads are in some instances so concerned about being reprimanded (or worse), they will inevitably take the safest route to ensure continual employment. 

This is, of course, a recipe for failure in the long term. I will share the abbreviated story that a friend shared with me back in 2009 -
Meeting with the heads of several of the group's brands, they had outlined a plan to cover the needs of the entire group in terms of a pr/marketing proposal that would double their coverage and cut their expense in half.  The brand heads said that they couldn't make that decision, that only Person X could. 

My friend said - "Great! Let's set up a meeting!" 

The brand heads muttered among themselves, and looking extremely uncomfortable said "oh, we couldn't make that recommendation. Maybe you could contact Person X and propose the meeting to present it again..."

The truth was that it wasn't that they couldn't make the recommendation. It was clear that they were too afraid to make the recommendation. Moreover it was abundantly clear that Person X had instilled such a fear of failure, and fear in general that nobody in all of those companies would dare to "break wind" without running it past Person X first. 

It was an opportunity to think outside of the "watch box" and do something different, but the fear of failure was far greater than the possible gain of making a bold, but beneficial decision.

This is not intended as an attack of the brand managers, department heads, or even the CEO pulling the strings. All of these folks are just doing it the same way that they've always done it. And being employed is far better than being unemployed. 

It is an open question to the culture of the industry and how things are done. Perhaps it is time for a little more "outside the watch box" thinking?

Barry Hearn's rule was "If you're old enough, you're good enough".  I have modified it here.
5.     If you’re good enough, you’re qualified to do the job

Which brings me to a question that nobody ever really thinks to ask -

"Where do brand managers and brand leaders really come from?"

There has been an interesting phenomenon in North America and other regions where very qualified, very capable people are never given a second look because they are viewed as "not industry people", and the few people to break into the business from outside and move up the ladder then refuse to consider the possibility of others from "outside" the industry as possible candidates. i.e. they forget where they came from. They forget that at one time they were "outside" the business but someone saw something in them, took a chance and they learned the business.

Now, in fairness, I say this as someone who was inside the industry, and now resides between several sectors - the press, independent consultant, and brand manager/representative. But what never ceases to amaze me is that brands continue to hire the same sort of person who, inevitably, is replaced by another "same sort of person". This is easily understood when you look at it from a greater distance -
Fear. Fear of failure, fear of making a mistake. Fear of perhaps proving that "they" (the people inside the industry who took a chance on you) made a mistake on hiring someone from outside the industry (you). To put it into a sports metaphor - it is playing not to lose, rather than playing to win.

The thing is, everyone needs to start somewhere. And someone who is good at sales is not necessarily someone that is going to be a good manager. Or as is often the case, someone who was at best "safe" at sales.

So watch industry, consider this possibility when reviewing candidates - if they're good enough, they're qualified to do the job.

6.     When it comes to grass roots, make sure you own the grass

This is a reference to when Mr. Hearn had taken over the Leyton Orient Football Club and had to make a decision about whether he should continue to lease the stadium grounds from the council, or if he should purchase the grounds and develop them. In the end he opted to purchase the grounds for approximately $500,000 US. He then developed the surrounding area building four sets of flats at each corner of the football grounds, and used the money from that to build a new stadium and develop local services for the community such as a health center, and an IT center for the local youth among other benefits to the local area. In other words he put the money back into the club and in the process created a sustainable business for the club.

There is the old, dyed in the wool idea of what a manufacturer is and that is subject to a great deal of debate - and it is not my intention to open that particular can of worms. But what is intriguing is the different manner in which brands are going about ensuring their autonomy. I would particularly point out what one brand is doing -

NOMOS has taken steps to become even more "in house" and their NOMOS swing system (their in-house escapement) has helped in their steady progression to become even more self-sufficient. This is an intriguing approach on the part of the folks at NOMOS. What I continue to find intriguing about NOMOS is their steady approach. Slow, steady, consistent growth. Good things, sometimes, take time.

Now in fairness, the big dogs have been doing whatever it takes to ensure their ability to "control the means of production". And that is to be commended. OmegaRolexHublot continue to grow and develop their manufacturing capacities. And when you are as big as they are, that is what you have to do to ensure your forward momentum.

So when it comes to grass roots, make sure you own the grass.

7.  Reality is not such a bad place to live in

This was Mr. Hearn's 6th point, but I've shaken the order up a bit. What rang true for me was the importance of the need to live within your means. All too often the temptation is to borrow money or go into debt (taking on partners and investors) to try and create an instant impact. There is a greatly mistaken belief that the public has regarding some of the "newer" brands. By all outward appearances they seem to have leap-frogged into the public's consciousness and supplanted older, more established brands overnight. A further misconception is that these brands therefore must be incredibly valuable! This is aided and abetted by the posturing of the CEO and/or that horological hero of the earlier part of this century - the watchmaker turned rock star. 

But let's talk a bit about the part you seldom see or hear about - the investors. Yes, the guys and gals who pump more cash into the venture than the GDPs of some countries. Their largesse makes it possible to make watches, buy ads, host extravagant PR junkets, purchase a Lamborghini, and in the process maybe even buy the watch maker's name! All that money flashing around creates a perception (or deception) as to how well the brand is really doing. And when the actuals don't actually match the advertised projections? That same person who's name was on the dial is quietly (and in some instances not so quietly), escorted out of the building.

This is a business that is primarily based upon perception. Many of these perceptions turn out to be misleading, aided by marketing programs designed to convince you that day is night, black is white, and that a loss is actually a gain. Unfortunately, this same sort of false perception is often bought lock, stock and "spring barrel" by the media, and sadly, the potential customer.  

When you see boutiques in New York, Miami and other major destinations, you assume that business must be THROUGH THE ROOF! When you see that watch maker-turned multi-millionaire behind the wheel of a super-charged Italian chariot, you have to assume that business is fantastic! But ask yourself, honestly, how many watches would have to be sold to go from zero to sixty in a 2 - 3 year period? It is a false reality. Sales may be good, but they are not THAT good. Investment is important, but sticking to the fundamentals is even more so. Massive investment can distract you from an actual loss. And massive investment then means that the person who has their name on the dial is no longer necessary at all - they have become surplus to requirements.

Think I'm full of it? Ask the growing number of watch company staff who were laid-off these past weeks. Glossy marketing pieces with expensive cars, press junkets to exotic locations, a watch on a Super Bowl MVP - none of these things are bringing up the sales numbers to the incredible levels that we'd be asked to believe are real.

Then look at the brands who are quietly, steadily moving forward. Meeting modest, and dare I say it - HONEST projections. They are careful about what they spend. They invest in what is important, rather than the ephemeral. Stars, parties, athletes and sports cars are exciting. But they don't pay the milk bill.  

Will the laid-off employees get an invitation to the next red-carpet event? Let's hope so.

Reality - it really is not such a bad place to live in.

8.  Never let the tail wag the dog

Watch companies need customers. That has always been irrefutably true. But as the new century dawned, a new reality emerged which morphed into a bit of reality distortion - it also seemed that watch companies needed FANS.

The unshakable belief being that fans would, inevitably, convert to customers. In the watch business these supporters of the brand are often unkindly referred to as "fan boys", but that is a topic for another day.  

So the brands both big and small have invested A LOT OF MONEY trying to figure out how to get the elusive watch "fan". And this has led to the recruitment of a LOT of millennials who know a LOT about social media, but sadly do not know a lot about the watch business, and in some instances business in general.  

Gee, that sounds pretty harsh doesn't it? Sounds like something a "grumpy old fart" would say? Possibly, but the thing that the watch industry (and a lot of industries for that matter) don't understand is that social media, in many ways works exactly the same way as any other form of media. It is just a faster, (sometimes) more efficient delivery system for your message. And it can cut both ways. Tag Heuer tasted the lows with the "Super Model" and the baby lion, then the highs with the Super Model" auctioning her personal Tag Heuer watch to benefit the research of lions. From the depths of failure to the pinnacle of success!  

The majority of brands have not fully grasped the notion that social media, when used intelligently, can in fact be one of the most powerful research tools in their marketing arsenals. But just as the people who are selling watches need to know a bit about them, the folks promoting them through social media on behalf of the watch brand need to know about the actual product that they are promoting, and they need to have an understanding that a fan does not necessarily convert to a customer. Moreover, while as a brand you ALWAYS want to attract new demographics, you do not want to appear to abandon your previous demographics. Or to put it more bluntly - you don't tend to see a lot of Porsche advertisements in Archie comics. Archie comics sell all over the world, but by and large the typical purchaser and reader of an Archie comic is not in the financial demographic to afford a Porsche. Just as the typical 20-something dance club aficionado is not as likely to be able to afford a $2,500 - $3,500 watch, where as that cranky 45 - 50 year old who falls asleep at 10:00 PM is.

We all want to be loved, and brands do need fans to be sure. But those making the pr and marketing decisions, ask yourself a serious question - 

As the big dog, are you wagging your tail, or is it wagging you?

9.  Never Forget the Good Times - there are too few to forget!

It is really remarkable, there seems to be a phenomenally short-term memory for brands, brand managers and the buying public.

I worked for a brand where, back in 2007 we were probably two or three good decisions away from being the next Panerai. We were that hot. 

But as Barry Hearn has said, the biggest killer in business - and yes, that includes the luxury business is complacency. "The day you think you're the 'nuts', is the day you're disappearing down the toilet. Complacency in business is a killer. When you think you've made it, that's the beginning of the end. You have to drive yourself every day, every hour to be better."

All too often, it is a bit too easy to hit the "cruise control" button. And that is a mistake. How many brands have great products, great initiatives, great fan followings, and then they start ignoring the fans, the customers and they don't follow-up as assertively. And suddenly sales drop, journalists stop returning your calls, emails drop into the void, retail partners stop paying their invoices... you get the idea.

Now there is a BIG difference between "laying up" to reduce the spending on ads, luxury press junkets, etc. and simply ignoring the people who helped you get where you are. When times are tough - as they are now for sure - that is when you have to INCREASE your presence. And that DOES NOT mean spending more money. It means stay active on social media, stay in touch with your contacts, keep sending press releases, keep active. 

Simple truth - life moves forward, doesn't it? Your watch brand might not grow in terms of sales, but it can certainly grow and evolve in terms of influence. 

Barry Hearn's Rule #10 - Know Your Sell-By Date

Barry Hearn's 10th and final rule that he learned in owning a football club - and its watch world application -

Know your sell-by date.

For better or worse, the watch world is led (by and large) by a bunch of latter-middle-age white guys. And if we are all honest with ourselves, in many instances, these are people who are making it difficult, if not impossible for the new generation of leaders, managers, etc. to grow into their positions.

But this is more than an age issue.  This is a troubling, overwhelmingly white, male dominated industry - and I say that as a 47 year old white male.  For those of us who get press releases the only people of color or women we generally see are either the celebrity ambassadors, or the PR representatives.

Here in the US there are (thankfully) a few women are leading brands for North America, but really there should be more.  And in terms of the color line - it is a pretty clear one.  It shouldn't be that way, but it is.

So how do we fix this?  I think brands should stop looking for the "right type" of people, and rather look for the RIGHT people.  As Barry Hearn has said - "It's about ability".  Being white and male are not, and should not be prerequisites, just as being a woman should not navigate you directly to PR or HR.  That is starting to change, but it is a slow movement.

So I will leave you again with a passage from Moneyball -

“The inability to envision a certain kind of person doing a certain kind of thing because you've never seen someone who looks like him do it before is not just a vice. It's a luxury. What begins as a failure of the imagination ends as a market inefficiency: when you rule out an entire class of people from doing a job simply by their appearance, you are less likely to find the best person for the job.” 

― Michael LewisMoneyball: The Art of Winning an Unfair Game

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