Luxury Watch World Ponders Digital Innovation

New York Times, January 20, 2014

LOS ANGELES — In mid-November, the Geneva watchmaker François-Paul Journe paid a rare visit to this city to preside over the official opening of his West Coast flagship boutique, a two-story salon that occupies a fabled Tinseltown location: In the 1930s, the property was home to Cafe Trocadero, a louche playground for the rich and famous.

Speaking through a translator, the French-born Mr. Journe recalled his early years in the Swiss watch business, when he made one-of-a-kind timepieces for private clients. To demonstrate the rarefied nature of his work, he removed a timepiece valued at 650,000 Swiss francs, or $720,000, that was adorning his wrist — the 2005 Sonnerie Souveraine, a grand-strike clockwatch and minute repeater that, for many watch aficionados, represents a pinnacle of mechanical watchmaking — and said that in the eight years since its introduction, his atelier had produced just 30 examples of the model.

“It’s probably the world’s most expensive steel watch,” said the translator, Jean-Louis Bilbault. He said Mr. Journe had chosen the everyday metal to encase the luxurious timepiece because the sound made by the intricate chiming mechanism was much better in steel than in gold or platinum.

At a journalist’s prompting, the conversation turned to smartwatches, the burgeoning category of digital wristwatches that can send emails, snap photos and serve as a platform for third-party apps. There, in the refined upstairs setting of Mr. Journe’s Sunset Boulevard salon, asking one of the kingpins of haute horlogerie whether he thought the newfangled devices posed a threat to traditional Swiss watchmaking might have struck some as the height of impertinence — like asking Luciano Pavarotti if he felt threatened by Justin Bieber.

“The traditional watch industry is very well established now,” Mr. Journe said. “I don’t see it being a problem.”

It would be difficult to argue with him. Swiss watch exports totaled 21.4 billion Swiss francs in 2012, up 10.9 percent from 2011. Once figures for 2013 are complete, that value is expected to increase and set a record. The fact that the secondary market, where rare examples of vintage wristwatches can fetch millions of dollars, is also thriving makes a compelling case for consumers’ enduring fascination with tradition.

So it comes as no surprise that at least on the record, Mr. Journe and most watchmakers of his pedigree are nonchalant about the dawn of the wearable technology era and what it means for their centuries-old analog technology.

Privately, however, they are talking.

“They like to say, ‘I’m not worried at all,”’ said Ariel Adams, founder of aBlogtoWatch, a blog about the industry. “But they are. They have no idea what to do about it.”

There is no denying that wearable devices — whether fitness gadgets like the Nike Fuelband or eye-mounted computers like Google Glass — herald a revolution in personal computing, and that smartwatches are leading the charge.

Consider the buzz surrounding the first examples to hit the market: the Pebble, the $150 device that broke crowdfunding records when it earned more than $10 million on Kickstarter in 2012; the Samsung Galaxy Gear, an Android-compatible smartwatch unveiled in Berlin in September; and, of course, the potential iWatch, rumored to be in development at Apple and widely considered to be a future category-killer.

“It’s an interesting topic and it’s a touchy topic in Switzerland,” said Julien Schaerer, managing director of Antiquorum, a prominent watch auction house. “People do talk about it but very much behind closed doors. My guess is that there is probably some fear.”

The Swiss know all too well the perils of neglecting to keep pace with technology. In the 1970s, the Japanese introduced quartz-powered batteries to the market. Inexpensive and precise, they made mechanical watchmaking nearly obsolete. Across Switzerland, scores of brands assumed that the only way to stay afloat was to emulate the Japanese; their colossal blunder resulted in heaps of clunky digital timepieces that today are perceived as quaint relics of a bygone era.

It took the vision and financial backing of the Swiss-Lebanese businessman Nicolas G. Hayek, who founded Swatch in 1983, to reinvigorate the Swiss industry.

“We nearly died,” said Maximilian Büsser, the founder of the avant-garde watch brand MB&F. “But we came back from the dead with a vengeance.”

Mr. Büsser alluded to the mechanical watchmaking renaissance that began in the late 1980s and blossomed in lockstep with the booming luxury market of the early 2000s, paving the way for esoteric and expensive brands like MB&F to cultivate a collector following.

Today, the mechanical watch business is so robust that any suggestion that smartwatches could represent the second coming of the quartz crisis is met with defiance.

“Panerai is investing in the future of the mechanical watch industry,” said Angelo Bonati, chief executive of Panerai. He said the brand’s new manufacturing complex in Neuchâtel, Switzerland, where a 10,000-square-meter, or 108,000-square-foot, facility housing 290 master watchmakers and skilled artisans, is slated to open early this year.

While no one in Switzerland seriously thinks a $300 plastic smartwatch will directly compete with a luxury timepiece that costs thousands of dollars, those familiar with the market say it boils down to a competition for wrist space.

“You’re all dressed up in your tuxedo and you’re used to your watch that acts as your phone,” said Liz Chatelain, owner of MVI Marketing, a firm based in San Luis Obispo, Calif., that polled about 3,600 consumers in the summer and found that two-thirds of those who regularly wear watches considered themselves likely to switch to iWatches. “You don’t want to have to wear the watch that doesn’t sync.”

For a generation of buyers weaned on digital technology, connectivity is crucial. “The misstep of these watch companies is that they’re not considering who’s going to be buying these watches,” said Dory Carr-Harris, managing editor of PSFK.com, a global trendspotting agency. “Technology is becoming a status symbol — and wearables hit both points: You’re adorning yourself and you’re also demonstrating your ability to be tuned in, affluent, informed and educated.”

One watchmaker in Switzerland isn’t about to give up on the connected generation without a fight. Hyetis, a Geneva-based brand founded by the design engineer Arny Kapshitzer, claims to have produced the first Swiss smartwatch.

Known as the Crossbow, the $1,200 model, introduced late last year, is a hybrid of tradition and technology. Not only does it have a self-winding mechanical movement, it is also outfitted with a Bluetooth-enabled chip that is compatible with Apple or Android devices. At first glance, the timepiece, which comes in a 46-millimeter, or 1.8-inch, grade 5 titanium case, looks conventional. In place of the dial, however, it has a high-resolution color display protected by tactile sapphire glass and a circular touch-sensitive bezel. It’s equipped with a high-definition camera and biosensors that can determine altitude, barometric pressure and temperature, among other readings.

“Initially, I wanted to sell the idea to an established watch brand like Swatch or Tag Heuer,” Mr. Kapshitzer said. “But people didn’t understand why they have to mix technology with old-fashioned tradition.”

In June, after another rejection, Mr. Kapshitzer decided to produce the watch himself. He worked in partnership with Safe Host, a Swiss company that provides Crossbow users with access to secure data storage in the cloud. The model is available for purchase online.

“We want to break some barriers,” Mr. Kapshitzer said. “Instead of thinking about what a watch could be, most companies are just thinking about how to do what they know in a different way.”

It is a common critique of the Swiss watch industry: that all the true innovation in mechanical watchmaking took place between the tail ends of the 18th and 19th centuries, and inventors of the 20th century merely perfected the art of industrialization — and imitation.

But some of the industry’s most avant-garde makers are challenging the received wisdom. For example, Urwerk, a contemporary brand lauded for its genre-bending timepieces, presented in April the EMC, billed as “the first mechanical watch with artificial intelligence.”

The EMC, which stands for Electro Mechanical Control, allows its wearer to gauge the precision of the timekeeping mechanism and fine-tune it as necessary. The model has what its creators describe as an “electronic brain,” an integrated circuit board that monitors the rate of the timepiece to provide a baseline reading. A manual-winding generator manufactured by Maxon, a Swiss company that has developed drives and systems used by NASA’s Mars Rovers, powers the system.

Martin Frei, the co-founder and chief designer of Urwerk, said the quartz crisis of the 1970s established a taboo in Switzerland that “in high-end watches we can’t use technology.” But as dreamers unbound by tradition, he and the Urwerk co-founder Felix Baumgartner wanted to experiment with electronics on their own terms.

Come March, when the 2014 edition of the Baselworld luxury watch fair opens in Switzerland, expect to see more companies embracing the same genre-bending philosophy. Take Tissot, a 161-year-old brand owned by the Swatch Group. The company has been associated with wearable technology since 1999, when it introduced the T-Touch, a watch with touch-sensitive glass and the ability to display altimeter, chronograph, alarm, compass, weather and temperature readings.

Numerous iterations of the model followed — including the High T, the result of a 2004 collaboration with Microsoft, which beamed data to the watch through its MSN Web portal. The collection culminates this year with the forthcoming T-Touch Expert Solar, a solar-powered tactile watch that, once fully charged, can function for 12 months in total darkness.

Tissot, according to its president, François Thiébaud, is also working with its sister brand Swatch on a Bluetooth-enabled timepiece due to make its debut at Baselworld.

But even the self-described “Father of the T-Touch” continues to wax poetic about the allure of classic watchmaking. “To me, the Swiss watch industry has a kind of terroir, like wine,” Mr. Thiébaud said. “When you buy a Swiss watch, you get more than a watch, you get Swiss watchmaking tradition.”

All of which underscores the main reason many people in Switzerland are skeptical that smartwatches will prevail over their “dumbwatch” predecessors.

“They don’t have a very long life span, whereas a mechanical watch has built-in longevity,” said Stephen Forsey, half of the watchmaking team behind the high-end Swiss brand Greubel Forsey.

“How many of those digital watches from 40 years ago are still left?” Mr. Forsey said. “There are some, and they are fantastic artifacts — but can you repair them?”

Stéphane Linder, chief of Tag Heuer, which introduced a luxury mobile phone, the Meridiist, in 2009, said the brand learned how fleeting technological supremacy could be when it saw that its most basic phone sold better than its “smarter” update because the update was becoming obsolete too quickly.

“One of the learnings we had is that as long as technology is not stabilized, it’s anti-luxury,” Mr. Linder said. “If it’s updated every six months, nothing can grow as a luxury product because people expect it to last.”

That takeaway has not stopped Tag Heuer from studying the smartwatch competition. Mr. Linder said he recently instructed a few of his engineers to buy the Samsung Galaxy Gear “to wear it and understand what benefits it can bring to the consumer.”

“We didn’t buy it the first month,” Mr. Linder said. “But after the first month, we said, Why not? We knew there was not so much urgency; the traditional market is not going to collapse tomorrow. But it’s a big change of mind-set. We’re not panicking at all. But we are making reports. If it works and we think it’s good, then we will access the technology.”

Mr. Linder’s inquisitive yet dispassionate approach to the digital competition is a reminder of just how much has changed in 40 years. The luxury watch industry has been challenged by technology in the past, only to grow into a $24 billion market. Why should the smartwatch era be any different?

Put another way: Might wearable technology actually prove beneficial to analog makers? To the industry’s optimists, the answer is an unequivocal yes.

“If young people start to wear information watches like the iWatch,” said Jean-Claude Biver, chief executive of Hublot, “then at least it prepares them for the day when they find an expensive watch with culture and tradition.”