Reference no: EM133095593

How many of you wear a watch on your wrist? Not a "smartwatch" or fitness tracker, but an actual watch. Our guess is not many of you. And that's the problem the Swiss watch industry is facing. It's fighting lagging sales and needs to raise the interest of a young generation that really has never had to use a watch to tell time. Company executives are trying to figure out how to convince young consumers that mechanical timepieces-well-made, expensive, and luxurious timepieces-are worth the money. Some of those watches can cost as much as an automobile! The traditional luxury watch makers are finding their industry being disrupted by "wrist gadgets" that do everything except make dinner. One chief executive of a Swiss watch company said, "It's not only a crisis. We must rethink the existing business model."

Is time running out?

There is one market for traditional luxury timepieces that's booming-Asia. Exports to China, Hong Kong, and Japan are showing the strongest growth in more than five years. But that's about the only piece of good news for the industry. During the latest holiday season (2017), analysts said that more people bought Apple watches than Swiss watches. In addition, many younger consumers who actually do buy watches often look for other than Swiss brands-brands like Shinola and MVMT, both of which are based in the United States.

So, what are Swiss watch makers doing to try and adapt to this industry disruption? One in particular, Jean-Claude Biver, CEO of luxury conglomerate LVMH Moét Hennessy Louis Vuitton's watch division (which includes the TAG Heuer and Hublot brands) is using a strategy of relentlessly targeting younger consumers. He has brought on Jay-Z and various other street artists to design watches, enlisted models in their 20s to be "brand ambassadors," and purchased ads in videogames. And he oversaw the development of the Swiss industry's first smartwatch. The watch made under the TAG Heuer brand was developed so quickly that it couldn't even carry the label "Swiss Made" because non-Swiss suppliers had to be used to meet deadlines. The "connected watch" went on sale just months after Apple's smartwatch.

1. What forces are creating the industry disruption and pushing the Swiss watch industry to change?

2. Would you classify the change environment as more calm waters or white-water rapids? Explain your choice. Can disruptive innovation happen in a calm waters' environment or only in a white-water rapids-type environment? Discuss.

3. Pretend that you've been invited to make a presentation to the executive team at one of these Swiss watch companies on ways you might get younger customers to give these special luxury products a try. Come up with some ideas and discuss the best way to get your point across to this executive team.