THE GEORGE WASHINGTON UNIVERSITY


INNOVATION IN THE WATCH INDUSTRY

ENGINEERING MANAGEMENT 255

MANAGEMENT OF RESEARCH AND DEVELOPMENT

BY

ARAN HEGARTY
TYSONS CORNER, VA

NOVEMBER 1996


“Use time, or time will use you.” – Old Proverb


 


PREFACE


The purpose of this paper is to explore the management of innovation. I will look at the changes in the watch industry from the perspective of the techniques taught in class lectures, case studies, and readings. I was particularly interested to see some of the authors addressing the introduction of the quartz movement in the watch industry. I have had an avid interest in mechanical and electrical watches for many years. I enjoy collecting vintage timepieces and studying the history of the innovations in the industry. Watch collecting is a good hobby for an engineer because of the physics and mechanical engineering involved in mechanical complications and the use of electrical engineering in the use of quartz technology.


I began my research by reviewing my own collection of watch books and manufacturers information. I was also able to find a great deal of information in the business listings on The George Washington University Gelman Library computer system. The course readings were useful and directed me to some interesting sources as well. I was also able to draw on knowledge gained >from participating in Internet forums on watch collecting.


The most difficult part of the process was filtering out the different perspectives of those writing the histories of the industry. The information sponsored by the Swiss industries had a definite “spin” in their favor. Those writing about Japanese success often overemphasized how successful they were as well. Luckily I was able to find a large amount of information from many different sources that helped me come to a middle ground. It was gratifying for me to see so many of the ideas and observations discussed in class actually related to an examination of this single industry.


 


TABLE OF CONTENTS


PREFACE …………………………………………………………………………………………………………………….. ii


ABSTRACT…………………………………………………………………………………………………………………… v


Chapter


1. HOROLOGICAL HISTORY


1850 TO 1900


1900 TO 1950


1950 TO 1970


1970 TO 1996


2. INNOVATIONS


QUARTZ


FASHION


3. COMPANIES


SEIKO


CITIZEN


TIMEX


SOCIÉTÉ SUISSE DE MICROÉLECTRONIQUE ET D’HORLOGERIE (SMH)


4. ANALYSIS


TECHNOLOGICAL DISCONTINUITIES


S-CURVE


CHANGE FROM OUTSIDE THE INDUSTRY


NICHE MARKETS


LONG TIME HORIZON


PRODUCT VERSUS PROCESS


CHAMPION


DOMINANT DESIGN


5. CONCLUSION


FUTURE


SUMMARY


ENDNOTES………………………………………………………………………………………………………………… 25


BIBLIOGRAPHY…………………………………………………………………………………………………………. 31


 


ABSTRACT


This paper investigates the technical and social impacts on the innovation process in the wrist watch industry. Leadership in the industry has shifted from Switzerland to the U.S. to Switzerland to Japan and back to Switzerland over the past one hundred and fifty years. There are a number of key events that have impacted the industry including the introduction of machining and interchangeable parts, assembly line production of
un-jeweled movements, quartz movements, and the use of wrist watches as fashion accessories. The Japanese benefited from the impact of the technical discontinuity caused by the introduction of the quartz movement and subsequent demise of the popularity of the Swiss mechanical movement. The shift from technology to fashion is then examined as a turning point for the reemergence of the Swiss watch manufacturing industry. Both the quartz and fashion examples demonstrate the risks to dominant leaders in an industry when their leadership position in a technology blinds them to technical and sociopolitical threats from industry outsiders. This paper will examine the history of the watch industry, the quartz and fashion discontinuities, leading watch companies, and provide an analysis of the theories of innovation in the context of the watch industry. What becomes clear is that all participants in the industry could stand to learn lessons from the past before they repeat mistakes in the future.


 


CHAPTER 1


HOROLOGICAL HISTORY


In the Nineteenth century accuracy in time keeping was driven by the need for world navies to have a navigation tool to keep track of their geographic longitude. In this century the need for accuracy has been balanced by the consumer’s desire for low costs, this is the classic value engineering paradox1. This paper will examine the technological and social changes that have shifted world production dominance between three continents over the past one hundred and fifty years.


1850 to 1900


The English and Swiss dominated the world time keeping trade up to the middle Nineteenth century. That leadership would be threatened by innovations taking place across the Atlantic. An American machinist named Edward Howard upon examining 1850’s watch movements could not believe the low quality of the machined components used in watch manufacture. The tools used were primitive and produced large variances in each part. This required each watch to made individually by hand with each piece crafted and fitted for a single movement in an artisan’s workshop. Howard, with no background in the watch trade, set out to improve the manufacture of movement components and founded the American Watch Company (later Waltham Watch Co.) in Waltham, Massachusetts in 1859. The Civil War in the United States drove increases for production as the military demanded large numbers of accurate timepieces from industry to fight the rebel insurgents in the south. Wartime output increased production from a total of 14,000 watches in 1858 to 118,000 by 1864. This large increase in production allowed many processing refinements to occur which further lowered costs and improved performance. Other U.S. watch companies founded during this growth period including Howard in 1857, Elgin in 1864, Illinois in 1869, Hampden in 1877, Waterbury in 1879, and Hamilton in 18772. At first, this improvement in the manufacture of machine made watches in the 1860s did not threaten the Swiss. The Europeans did not believe that anyone would want to buy a machine made watch3, especially after the European failures at such attempts in the 1830s and 1840s. This is a classic case of those inside an industry not understanding the threat from outside entrants using new technologies. History would repeat itself nearly a century later when the Swiss failed to realize the significance of quartz technology. The impact to Swiss industry from the U.S. emergence was staggering, exports dropped from a peak of 18.3 million francs in the 1860s to 4.8 million francs in 1876, a decrease of 74%. In response the Swiss sent Edouard Favre-Perret to the U.S. to investigate this new technology4. Upon arriving in the U.S. Mr. Favre-Perret found low cost, easy to repair watches, with interchangeable parts. This was a major shock to the Swiss who did not believe that watches could be anything but hand made, much less have interchangeable parts. Having learned their lesson, the Swiss now set out to modernize their factories and gain back market share with precision machining of their own. Unfortunately for the Swiss, their timepieces now had a very bad reputation for accuracy and quality in the U.S. marketplace. It would take many years for the Swiss to gain back their good name in watch manufacture in the U.S. market. In order to penetrate the U.S. market and confuse consumers of the Swiss origin, the Swiss used fake American company names such as New York Central Watch, the Ohio Watch Co., and the Pennsylvania Watch to sell their watches. This is a humorous anecdote when one considers the meaning of a “Swiss fake” was entirely different from what it means today. The Dingley Tariff Act of 18885 was passed to create truth in origin labeling of watches imported into the U.S. At the end of the century the Swiss were down but not out and were working hard to improve the quality of their products.


1900 to 1950


The turn of the Twentieth century saw a resurgence in Swiss efforts to control the watch industry. The Dingley Tariff Law was circumvented by the introduction of U.S. assemblers. Assemblers were companies such as Bulova, Benrus, Gruen, and Longines-Wittnauer that were formed to assemble watches in the U.S. with Swiss movements. The Swiss established precision machining and factories based on the experience of Mr. Favre-Perret’s visit to the U.S. The Swiss focused on incremental improvements to mechanical movements by introducing “complications” such as calendars, chronographs (stop watches), and self-winding models. Rolex lead the way with the introduction of the first water resistant watch in the 1920s and the first automatic winder in 1931. The Swiss decreased watch sizes, increased reliability, and by the end of World War Two the Swiss had gained back an 80% share of the world market. Even after the war when Allied factories retooled to watch production from war supplies and reentered the market the Swiss share of the world market in the 1950s was still over 50%. By the end of WWII with competition from the Swiss and U.S. assemblers most of the U.S. watch companies founded in the 1860s and 1870s were out of business.


1950 to 1970


The Swiss would again face competition from the U.S. after the arrival in 1942 of Norwegian refugee Joakim Lehmkuhl. Mr. Lehmkuhl took over running Waterbury Clock Company which would later become United States Time Corporation and then Timex. Timex introduced cheap,
un-jeweled movements that were made possible by hardened alloys. Up until this discovery watches used jewels for pivot points to prevent the wear of metal on metal. Mr. Lehmkuhl also introduced innovative distribution channels outside of the traditional jeweler’s network. In 1962 one out of three watches sold in the U.S. was a Timex and by 1973 they controlled 45% of the U.S. market and 86% of domestic production6.


1970 to 1996


The two major events that have had the greatest impact on the watch industry in this half of the Twentieth century are first the quartz movement and second the marketing of watches as fashion accessories rather than just timepieces. The introduction of the quartz movement in 1969 by Seiko lead to market domination by the Japanese, specifically Seiko and Citizen, in the world market and Timex in the U.S. market in the middle 1970s until the mid 1990s. In 1995 the Swiss took over the lead in world watch production with 38 million units shipped versus 30 million for Japan a decrease from 39 million in 19947. It was a very different story in 19848 when Swiss world production of watches dropped to less than 10% from 40% in 1974 before the dominance of the quartz design9. In 1984 the business press observed that “The Swiss watch industry has been in decline ever since it delayed switching over to electronic watches in the early seventies.”10 The Swiss had failed to understand what consumers wanted and had poor distribution channels. The Swiss took over the lead in world watch production after they changed their focus from technology to fashion. The leadership shift back to the Swiss took 13 years starting with the introduction of the Swatch in the early 1980s.

 


CHAPTER 2


INNOVATIONS


A table of major innovations is presented in Figure 1 below. This paper will focus on quartz and fashion as the two most recent major innovations impacting the watch industry.


DATE


INNOVATION


INNOVATOR


1850’s


Precision Machining


Edward Howard -Waltham11


1920s


Water Resistant Watch


Rolex


1931


Self Winding (automatic)


Rolex


1940s


Hardened Alloys12 To Replace Jewels


Timex


1956


Alarm Wrist Watch “Memovox”


Jaeger LeCoultre


1957


Battery Powered Watch “Ventura”


Hamilton


1960


Tuning Fork “Accutron”


Max Hetzel – Bulova


1969


Quartz Movement “Quartz Astron 35SQ”


Seiko Epson Corp


1970


Digital Face – Light Emitting Diode (LED)


Pulsar (Hamilton Watch Co.)


1977


Digital Face – Liquid Crystal Display (LCD)


Texas Instruments


1978


“Double” Quartz


Seiko


1983


Fashion “Swatch”


Nikolas Hayek – SMH


1988


Automatic Generation System13 “Seiko AGS”


Seiko


1990


Radio Controlled Watch “Mega 1″14


Junghans


 


Fig. 1 Innovations


Quartz


Quartz is a piezoelectric material that will vibrate at a resonance frequency in the presence of an electric field. By properly controlling quartz’s use in electrical circuits the rate of oscillation can be closely regulated. The greater the number of oscillations the greater the accuracy that can be obtained by the watch movement. In 1928 the first quartz clock was made in the U.S. by Horton and Marrison and the first quartz clock was used by the Greenwich Observatory in 193915. The problem for wrist watches was miniaturization, it was not until 40 years after Horton and Marrison that the first models were available for sale in 1969. The size of the electrical circuits used for quartz clocks could not be miniaturized for use in wrist watches until the 1960s with the manufacture of small integrated circuits. The cost was high, $3,000 (1994 dollars) and the watches were bulky, ugly, had a low battery life, and were less reliable than mechanical watches. Reliability was a problem because quartz crystals would breakdown and the resonant frequency in the circuit would shift, causing the accuracy to decrease substantially after about one year. Low reliability caused J.C. Penny to have a return rate of 40% on some models16. In 1960 the electronic watch with a tuning fork was introduced in the Bulova Accutron. The idea for this watch actually came from a Swiss engineer named, Max Hetzel, but the Swiss watch industry was not interested in his idea so this product champion came to the U.S. and received support from Bulova. After the market success of the Accutron, in 1965 the Swiss watch industry invested over $2.5M17 in R&D for the “Beta 21″ project sponsored by the major Swiss watch makers to help physicists at the Neuchatel Centre Electronique Horloger (CEH) make a quartz wrist watch movement that operated at 8192 Hertz. A prototype was completed in 1967 and later marketed by Omega in 1970 as the “Electroquartz f 8192 Hz”18.


It is common to read in the innovation literature that those inside an industry do not understand the potential of a new competing technology19. Therefore it is not surprising for Landes to conclude that; “With this new technology, watch making was really a new industry, and it was not altogether surprising to see the field invaded by firms that had never produced timepieces before” 20. The Swiss thought that the quartz watch was a fad after all, “what did electronics companies know about watches”21. How did the U.S. and Japanese respond so quickly to establish market share in this new industry? The answer is that quartz watches were an electronics industry product and the Japanese and U.S. were already the leaders in electronics manufacturing. As EMI experienced with the introduction of the CT Scanner there would soon be stiff competition22. The Japanese and U.S. already had electronics manufacturing operations this was the required complementary asset. Tradition Japanese watchmakers, Seiko and Citizen, were soon followed by new electronics entrants Sharp, Richo, and Casio. Hamilton was the first U.S. maker to go with the quartz movement in the Pulsar digital watch, they were followed by Timex and U.S. electronics firms; Texas Instruments, Optel, Intel, Hughes, and Fairchild. Some watch manufacturers teamed with experts in electronics manufacturing and technologies. Electro-Data was joined with Hamilton and Statek was brought in by Seiko. Statek had developed a photochemical process for quartz crystals that Seiko wanted to incorporate into their manufacturing process. Seiko put their first quartz watch, the Quartz Astron 35SQ, for sale in 1969. There were a number of related technology improvements in the 1970s that contributed to increased production and lower costs. There was a sixty percent decrease in quartz circuit energy consumption and a corresponding increase in battery life from one to five years. Movement width decreased in size from five millimeters to one millimeter. The size decrease was important, because consumers placed a high value on thin watches. Process improvements and sales increases led to an astonishing prices drop of two to three percent of original prices. The Swiss responded as predicted by literature by trying to make the mechanical models better and cheaper. Still, only about two and one half percent of sales went to research and development in Switzerland23, and two thirds of that went to improvement of mechanical technology while only one third went to quartz technologies. This shows that the Swiss were spending most of their funds at the end of the mechanical S-curve. One author noted that “In the mid-1970s the Swiss were shut out of the market for budget-priced watches by a wave of electronic models from the U.S., Japan, and Hong Kong.”24 The control of the world watch market had now shifted from the historic leader to a rising giant in Asia.


Fashion


Just as quartz technology revolutionized the 1970s, fashion changed the face of the watch business in the 1980s. The Swatch started the fashion trend when it was introduced in 1983. Seiko, Citizen, and Timex had captured the low and middle range of the world and U.S. watch markets. Roush warned that “… a dazzling past can be risky if it blinds a company to the present.”25, this appears to be the case with the Japanese and American focus on quartz and technology just as it was true for the Swiss focus on mechanical movements. Many Swiss luxury companies producing watches with mechanical movements such as Vacheron Constantin and Breguet were near bankruptcy. Omega, founded in 1886 and a holding of SMH, was experiencing rapidly declining sales and a debt of $300M26. After the large rate of advance in quartz technology in the 1970s new product innovations started to decrease as the end of the S-curve for quartz was approached. The Japanese were focusing on improving technology to the limits with “double quartz” design and Timex was marketing durability. Consumer trends in the 1980s made the technology focus a poor strategic decision. Watch purchases increased from 240 per 1,000 persons in 1976 to 425 per 1,000 in 1986. The number of styles grew from 300 in 1970 to 1,500 in 1993. By 1993 the average consumer owned 5 watches, up from 1.5 in 196327. In the 1980s watches became lifestyle statements and status symbols rather than just functional timepieces 28. This is the critical marketplace transition that was missed by the Seiko, Citizen, and Timex. Ernst Thomke head of ASUAG-SSIH and maker of Swatch understood this trend and applied the principle of satisficing to watch accuracy. How much more accurate did watches have to be? Thomke decided that most consumers thought that watches were accurate enough. It is ironic that Timex chose to turn down the opportunity to market Swatch because low cost Timex watches were the first to impact fashion with the introduction of their low cost pin-lever movements that allowed consumers to afford more than one style of watch. The growth of Swatch was quickly threatened by the rapid response of their competitors. Mr. Sok, Manager of Advertising at Timex, listed design as Timex’s number one priority in 1988. In 1988, Fahey observed that “The fashion watch, which revolutionized the U.S. watch industry five years ago, shows no signs of winding down.”29 Timex responded by introducing the “Water Color” and “Fun Colors” lines. Casio introduced their “Color Burst” line. Citizen started to enter the fashion market in 1986 with its Elegance line. Seiko also started an emphasis on fashion in 198830. To keep their competitive edge, Swatch employed a number of strategies to protect the appropriability of their fashion market. Styles were released in limited quantities and in seasonal variations. As demand rapidly increased, SMH intentionally did not keep up the supply which further drove consumer demand. Swatch was sold only at upper end department stores in their own specialty displays. In the mid 1990s Swatch has opened stores in malls carrying only Swatch products. Fashion also means analog faces, digital watches have been relegated to the sports niche. Switching to fashion as a the main marketing tool enabled the Swiss to overtake the Japanese in world production in 1995.

 


CHAPTER 3


COMPANIES


Seiko, Citizen, Timex, and SMH are the four companies that have had the largest impact on the watch industry during the last 25 years. Seiko and Citizen rode the quartz wave to world leadership in the 1980s. Timex has been the leader in the U.S. market since the 1950s. SMH (formerly known as ASUAG-SSIH) is the Swiss syndicate that introduced the Swatch fashion watch which eventually allowed Switzerland to return to market leadership in 1995.


Seiko


Seiko has been a major force in the quartz market place since the 1970s. Seiko ended the Swiss dominance of the mid range watch market in the mid 1970s and they now have approximately 450 watch styles. Seiko’s four market styles include; jewelry, status/sport, gentry, and boardroom31. Technological superiority originally gave Seiko an early edge, but now that it is at the end of the S-curve and quartz movements are a commodity and profits have suffered. Competition with its arch rival Citizen caused Seiko to glut the market with watches further hurting its profits.


The company was founded in 1881 by Kintaro Hattori in Tokyo to sell and repair foreign watches. Seiko is a family run empire of five companies with overlapping products. The Seiko companies are run by Hattori’s two grandsons. Reijiro Hattori, 63, runs the two oldest companies, Hattori Seiko and Seikosha, and Ichiro Hattori, 52, runs Seiko Instruments and Electronics, Suwa Seikosha, and Epson Corp. Seiko gained market share by positioning themselves in the mid range of the world watch market. Seiko left the luxury watches to the Swiss and the cheap watches to the Americans. When other Asians flooded the market with cheap watches, Seiko introduced other cheaper watches under the names of Pulsar and Lorus to protect the Seiko brand name. Seiko entered the luxury watch market with the purchase of Jean
Lassale.


Hattori Seiko owns the “Seiko” brand name and markets the group’s watches. Seikosha is a maker of clocks, camera shutters, and printers. Reijiro Hattori recognizes the need to diversify Seiko beyond watches, but believes that watches should still be the main focus. Reijiro’s older brother Kentaro Hattori, 65, Chairman of 4 of Seiko’s 5 companies agrees; “our business is watches”32.


The youngest member of Seiko’s leadership is Ichiro Hattori. Ichiro Hattori is the cousin of Reijiro and Kentaro and runs Seiko’s three newer companies which are twice as profitable as those run by Reijiro Hattori. In 1989, Epson Corp. had revenues of $3B and $154M in profits while Hattori Seiko had $22M in losses on $2.8B sales and $65M in losses in 198833. Seiko Instruments and Electronics makes robots, measuring instruments, and lady’s watches. Suwa Seikosha manufactures optical lenses, semiconductors, and men’s watches. Epson Corp. makes computer printers. Ichiro Hattori wants to diversify into computers and other high technology areas rather than watches34.


Organizational structure problems are hurting Seiko’s competitiveness. Ichiro Hattori wants a centralized management structure, but his youth and desire for more power is not winning him friends or support in a culture that respects its elders and honors the team approach. Seiko’s divisions compete with each other to make watches for Hattori Seiko. Originally this dual competition was successful at spurring innovation and technological developments. Quinn suggests such a method of pursuing multiple approaches as part of an overall strategy to effectively manage innovation35. But, as Hattori Seiko lost market share the confederation approach makes it more difficult to organize development, manufacturing, and marketing strategies. Seiko tried to enter the luxury market without success and they also entered the lower end with Lorus, also with little success. Seiko has diversified into computers and semiconductors using the cash cow watch profits. Seiko made the first alarm clock, successfully introduced the quartz watch, and was an innovator with printer technology, but poor organizational structure and family squabbles make it unable to make quick decisions to respond to changing market conditions. This inflexibility has led to a decrease in watch production and a loss of market share and world sales leadership to its Japanese rival Citizen.


Citizen


Like its major rival Seiko, Citizen is run by a grandson of the company’s founder, Michio Nakajima. The 64 year old Nakajima has a long history of innovation in the watch industry. In the mid 1960’s the Swiss refused to sell Citizen state of the art watch making equipment so they made their own. Citizen has manufacturing and marketing combined. This gives Citizen an edge over the confederation approach used by Seiko and allows them to make quick adjustments to market conditions. When Seiko and Citizen were flooding the world market with watches in the mid 1980s Citizen started selling movements to other manufacturers to keep up peak production and maintain profits while Seiko ran up large losses. Citizen is not as well known as Seiko in the U.S. market and so they spent almost $15M in 1985 to gain brand awareness. Citizen’s advertising focused on the high technology case material titanium used in a select number of their watches. This lead to an emphasis on durability. Citizen became the world production leader and is the number one seller in Germany, Mexico, and near the top in most European markets36. In 1986 Citizen became the number one producer of watches and their sales accounted for two thirds of revenues, but by 1990 their watch sales were just responsible for one half of revenues. This drop was the result of an effort to use the watch profits for diversification. Citizen is applying knowledge of LCD, power saving circuits, and miniaturization in new markets37. Citizen has been a leader in computers peripherals and miniaturized the size of floppy drives, diversification is the strategy for the 1990s.


Timex


Timex is the dominant watch company in the U.S. In 1942 Norwegian refugee Joakin Lehmkuhl took over Waterbury Clock Company, founded in 1857, which was later to become the United Sates Time Corporation, and finally Timex. Waterbury Clock Company made money by introducing “dollar” watches which were low cost but relatively accurate pocket watches. The company was in the fuse business during WWII when Lehmkuhl arrived, but at the end of the war they vigorously re-entered the watch market with the pin-lever movement38. With the pin-lever movement Timex introduced hardened metal alloys to replace jewels. Jewels are used in friction points because they will wear much slower than metal. The use of jewels increased costs because every watch would use an average of fifteen to twenty jewels while the new un-jeweled Timex watches dramatically lowered the cost of a watch. Timex then gained process improvements with simplified designs and automated machining. Next, Timex added all the “complications” that the Swiss were famous for such as sweep second hands, shock proofing, water proofing, calendars, and self-winding movements. Jewelers did not want the watches because of low mark ups and the fact that the watches were not repairable. Consumers did not care about repair, if the watch stopped working they could be sent back to the factory for repair or they could just as easily buy a new one. Jeweler’s reluctance to carry the brand required Timex to be innovative in the discovery of new distribution channels, in areas such as drug stores, supermarkets, and hardware stores. For the first time consumers could afford multiple watches and fashion enters the consumers time keeping decision. Later the Swiss would copy this fashion approach with the introduction of the Swatch.


In 1960, eleven years after the first Timex, eight million units had been manufactured. This was more units than the entire Japanese output and three times the entire U.S. jeweled watch output. In 1962, one out of three watches sold in the U.S. was a Timex. In 1969 USTC changed their name to Timex Corporation and were producing thirty million watches with seventeen thousand employees and two hundred million dollars in revenues. Timex quickly made the switch to quartz movements and in 1973 they controlled forty five percent of the U.S. market and eighty six percent of U.S. production. Current Timex President C. Michael Jacobi does admit to one major blunder. In the early 1980s the company turned down the offer from ASUAG-SSIH to market their new watch called Swatch39. Timex learned their lesson and is now focusing on fashion, patterning their “Watercolors” line after styles of the rival Swatch40.


Timex did not keep up with the transition from function to fashion that transformed the watch industry in the middle 1980s. In 1982 Timex switched its market approach from durability and value to “value, style, and technology”41 and by 1987 had annual sales of six hundred million dollars and a fifty percent share of the U.S. market42. With dominance of the U.S. market, Timex wants to grow in Asia by focusing on Japan, the Philippines, Malaysia, Australia, and New Zealand. Timex had little success in going into Asia in the mid 1970s43. But they have seen growth in Asia go from two hundred thousand units in 1992 to one million two hundred thousand units in 1994. In 1994 while sales grew in Asia Timex had further decline of their U.S. market share to thirty five percent44.


Société Suisse de Microélectronique et d’Horlogerie (SMH)


The Allgemeine Schweizer Uhrenindustrie AG – Société Suisse pour I’Industrie Horlogére (ASUAG-SSIH) is the Swiss watch and electronics syndicate. ASUAG-SSIH was taken over by bankers in 198245 after suffering huge losses with the dominance of the Japanese and Timex in the mid range market segment in the late 1970s. A turnaround plan was developed by Nicholas Hayek of Hayek Engineering Ltd. of Zurich, a business consulting firm. He created three divisions; movements and components, finished watches, and industrial products that focused on ASUAG-SSIH’s core competencies. Pierre Arnold came in to run the conglomerate from the retailing industry46. Mr. Arnold had no watch making experience, but he had been running a four billion dollar a year retailing and distribution company, Federation of Migros Cooperatives. Ernst Thomke, a physician who also held a graduate degree in chemistry, was brought in the run the watch division without a watch making background. Thomke made two important decisions to keep the division profitable. First, Thomke decided to sell Swiss movements outside of Switzerland. This allowed an increase in production and a corresponding decrease in process costs. Next, Thomke decided to try to recapture the low end of the watch market from the Japanese. Thomke set out five requirements for this new watch; it must be inexpensive to manufacture, low cost, durable, technically advanced, and stylish. This lead to the development of the Swatch.


Swatch is the dominant brand of the late 1980s and 1990s and many credit this watch with saving the entire Swiss watch industry. Swatch was launched to counter Japanese dominance of traditional Swiss markets48. Swatch, which is a contraction of Swiss and Watch, entered the market in 1983 with a nineteen dollar and ninety five cent fashion watch49. There were seventy one styles in 1985 and by 1988 the company had over two hundred and forty six styles, all of them analog. The Swatch brand has also launched spin off products such as sunglasses and clothing. For all the acclaim attributed to Swatch and their pursuit of fashion for changing the market, their initial innovation was a technological one. The Swatch design was a cheaper quartz watch that used a waterproof and shockproof case with fewer parts that are welded together by robots on a single assembly line50. The number of components in a Swatch was reduced from an average of ninety one to only fifty one51. In 1985 ASUAG-SSIH was renamed SMH and the consultant Hayek was brought on board to manage the company. By 1985 two thirds of SMH’s output was quartz watches. Hayek cut work force in half and stopped the production of ten brands of watches to maintain business focus. SMH brands included Omega, Longines, and Rado, at the top, Tissot, Certina, Hamilton, and Mido, in the middle, and Swatch on the low end.


The traditional Swiss watch makers resent outsiders. Hayek was an engineer, coming in and shaking things up. The traditional Swiss were especially upset when Hayek acquired the luxury brands Blancpain and Piguet52. Hayek has claimed that Swatch saved the Swiss watch industry by boosting confidence in Swiss watch making. There is disagreement with this claim from luxury makers, many of whom credit Rolex with continuing to make mechanical watches while other Swiss brands were converting to quartz.

 


CHAPTER 4


ANALYSIS


Many of the different trends in the study of innovation are present in the case history of the watch industry and the transition to quartz movements and fashion. The analysis section of this paper will examine technical discontinuities, the S-curve, change from new entrants outside of the established industry, entry into new markets through the use of niche products, use of a long time horizon for planning, business focus, product improvements, process improvements, product champions, integration of existing technologies, dominant designs, complementary assets, and
appropriability.


Technological Discontinuities


Technological progress is the result of discontinuous advancements preceded by long periods of incremental improvements53. This observation accurately describes the long period of improvements to mechanical watches before the rapid ascendance of quartz designs in the late 1970s. The transitions to new technologies and innovations are the result of technical discontinuities54. The relatively sudden change from one technology to another has been called a “chaotic sequence of events” 55 that usually does not occur in a linear manner. These chaotic technical discontinuities are effected by two factors; the level of technical complexity of the product and the stage of the innovation’s development56. In the 1960s the mechanical movement was at the end of the S-curve and showing very slow incremental improvements. The mechanical movement was complex, but well understood and there was little pressure to make dramatic improvements. The tuning fork was introduced in the Bulova Accutron in 1960, but was relegated to a niche market that had no impact on mechanical watch market share. The tuning fork watch was technically more complex than the mechanical movement and was at the beginning of its development cycle. The quartz watch was not even a prototype until 1967. Tushman and Rosenkopf noted these developments in the watch industry and made the following observation; “Similarly, in watch manufacture in the 1960s, quartz, tuning fork, and escapement mechanisms competed with each other on size, stability, durability, complexity, and frequency dimensions of merit.” 57 Examining these dimensions of merit will help the reader understand why quartz movements soon dominated the market. Early quartz movements were bulky, but sizes quickly dropped from five millimeters to one millimeters in width. Mechanical movements that were originally prized because of their thin profile could no longer compete once quartz watches reached the one millimeter mark. The early quartz watches had stability problems as was discussed with the large number of returns to J.C. Penny. The crystal circuits would breakdown over time and the accuracy would begin to deviate. Improvements in quartz manufacture soon overcame this difficulty. In fact, cheap quartz movements in watches are far more accurate than those mechanical movements made by hand in Switzerland. One study of the accuracy of a six dollar (1988 Dollars) Lorus digital wristwatch over a four year period showed that it outperformed John Harrison’s famous No. 4 Chronometer which won a £20,000 (1772 British Pounds Sterling!) prize from King George of England for accuracy in a British Admiralty competition58.


S-Curve


The S-curve is a basic tool in understanding innovation and technological change59. The S-curve explains the relationship between the rate of technological change and resources (time and money) invested in a product’s research and development. Initial product improvements are usually the result of large investments that show slow results. Once the basics of the new technology are well understood there is a period of rapid growth in the technology. Further improvement is limited by the laws of nature and greater investment will provide only limited returns60. The shape of this curve of performance versus investment is in the shape of the letter “s”. As an industry approaches the end of the S-curve it is a warning sign that there could be an appearance of a new technology61. A rapid decrease in the rate of change is exactly what was happening to mechanical movements during the late 1960s and 1970s. The inability of the Swiss to identify this trend is what cost them their large market share in the late 1970s and during the decade of the 1980s. The makers of quartz watches also fell victim to the same fate when the rate of quartz developments started to decrease and SMH introduced the Swatch with a focus on fashion.


Change from Outside the Industry


New technologies are often introduced from outside of the industry of the dominant technology. It is hard to detect a technical discontinuity from inside of industry62. In the case of quartz technology it was developed by the Swiss with large investments at CEH but not capitalized on by them. This is often the case because performance criteria for judging a new technology are often initially unknown. Anderer63 observed that; “Hindsight suggests that small and fragmented producers had a vested interest in keeping things as they were – the new technology was still unproven in the marketplace and the Swiss proposition was secure.” The Swiss did investigate quartz technology but they did not exploit it to obtain a competitive edge, this is in contrast to the standard model when the insiders do not investigate the technology at all64. The Swiss followed the classic model of defending their mechanical market while letting Seiko, Citizen, and Timex continue to improve quartz technology and therefor gain greater market share 65. In 1970 ninety eight percent of watch sales were still mechanical, so the Swiss did not yet worry about the new technology eroding their market share. The Japanese were outsiders and had everything to gain and nothing to lose by pursuing a quartz product. Even by 1974 less than six percent of Japanese watches used quartz technology. By failing to properly define the market two thirds of Swiss R&D expenditures were on expended on improving mechanical designs. It was the years between 1974 and 1978 that saw a dramatic increase in product technology and a corresponding ten fold increase in Japanese quartz output from one million eight hundred thousand to nineteen million seven hundred thousand units. The Japanese companies Seiko and Citizen, who were both already watchmakers, enjoyed tremendous success with quartz technology. Japanese watch makers brought in outside experts for advice in the new technologies. Seiko collaborated with Statek for their quartz crystal expertise and U.S. maker Hamilton brought in Electro-Data for their electronics experience. As quartz technology matured it became easier for almost anyone to enter the market and make a cheap watch66. As previously discussed, new entrants included Sharp, Richo, Casio, Texas Instruments, Optel, Intel, Hughes, and Fairchild. The same attitude that prevented the Swiss from adopting quartz technology would also repeat itself when Seiko and Citizen tried to push the limits of accuracy beyond what was required by the consumer. The complete pursuit of technological excellence on the end of the quartz S-curve caused the Japanese to miss the growing trends for watches to be used as fashion and lifestyle statements rather than precision timing instruments.


Niche Markets


Entering niche markets with new a technology is a standard strategy for gaining product acceptance and eventually market share. Niche markets were used for the introduction of both the quartz and fashion watches. A new technology gains in a niche market by offering something new to fill a special need67. The quartz watch provided a low cost and accurate timepiece while the Swatch provided a fun and useful fashion accessory. Strangely enough the quartz watch was introduced into the luxury market segment. Luxury watches only account for three percent of the market in unit sales. The introductory price for the Seiko Astron 35SQ was one thousand two hundred and fifty dollars (1969 dollars) and only the wealthy could afford such a watch. This introduction did not threaten the Swiss because they dominated the luxury market and looked at quartz as a passing fad. The rapid drop in prices as production increased and the technology became a commodity soon took over the mid range market as well and finally the low cost segment. The initial penetration into niche markets was also used by Swatch. SMH created a new market segment, fashion, with the introduction of the Swatch. The watch market was previously divided into low cost, mid range, and luxury markets. The Japanese companies dominated the mid range market. The entry of a fashion watch in the low cost category was not a threat to their business. It is interesting to observe that the use of fashion to sell watches had been a byproduct of the success of Timex, but it was never their early marketing focus. As sales grew from the introduction of the Swatch in 1983 at nineteen dollars and ninety five cents (1983 dollars) SMH was able to add features and start to move into the mid range market. Seiko made an attempt to enter the luxury market with the Jean Lasalle brand. Seiko’s attempt failed because they were not offering anything new or filling a special need.


Long Time Horizon


A long time horizon is necessary when making strategic decisions involving technology68. Many authors have identified a five to ten year time horizon for technological change to impact the marketplace69. This time frame is an accurate reflection of the history of Seiko who introduced their first quartz watch in 1969 and did not achieve market dominance until the late 1970s. Even five years after the introduction of Seiko’s Quartz Astron 35SQ less than six percent of Japanese watches used quartz technology. If the Japanese had given up after five years they would have missed the tremendous growth that took place from 1974 to 1978 that lead to world market leadership. When Swiss banks took over ASUAG-SSIH in 1982 they were looking at a five to ten year time horizon for a turnaround70. The bankers understood that it would take time for the Swiss to catch up with Japanese advances in quartz technology. Only four years after the takeover SMH increased its output of quartz watches to two thirds of unit production. In 1987 the debt of SMH was still at three hundred million dollars, but ten years later the turnaround was complete and the large debt was transformed into five hundred million dollars in cash by 199271.


Product Versus Process


Advances from new technologies take place in both the product and the process. Product improvements happen at the greatest rate of change in the first half of a product’s life cycle. Process innovations dominate in the upper portion of the S-curve in the final half of the life cycle. Abernathy and Utterback observed that; “major systems innovations have been followed by countless minor product and systems improvements, and the latter account for more than half of the total ultimate economic gain due to their much greater number.” 72 The watch industry has experienced many different product innovations. These include precision machining, water resistance, self winding mechanisms, pin-lever movements, alarms, electronic movements, quartz movements, LED displays, and liquid crystal displays (LCDs). Each of these product improvements had a profound impact on the industry and many showed rapid increases in product innovation.


Product improvements in mechanical watches include many types of complications. Perpetual calendars adjust every four years by adding an extra day on leap years. Moon phases show the phase of the moon throughout the month. Minute repeaters strike gongs inside the watch for the hour, quarter hour, and minutes when a level of the side of the watch case is depressed. Tourbillon movements rotate the escapement assembly inside the watch every minute to compensate for effects of gravity of the gears and springs. Split second chronometers allow stopwatch timing of two events. Slide rules have been added to the rotating bezel on the watch face. Power reserve indicators show how much life is left in the mainspring. Thin mechanical movements are now less than two millimeters in width. Additional hour hands have been added for telling time in more than one time zone.


The improvements in quartz technology included reliability, accuracy, battery life, and size. Continual minor changes are often a key strategy for maintaining technological leadership73. There are many product features that have been added to quartz watches. Altimeters measure altitude by detecting changes in barometric pressure. Anadigi displays show time in both analog and digital displays on the same watch face. Countdown timers track how much of a preset period of time has elapsed. Lap timers trap best and most recent lap time. Current trends and improvements will be discussed in the paper’s conclusion.


Mechanical and quartz watches have also experienced a number of process improvements. Citizen automated the manufacture of precision watch components and moved assembly off shore. Swatch made a large investment in automated assembly lines which allowed them to eventually lead the market in sales74. Swatch was able to keep down costs by lowering the number of internal components and by reducing assembly lines from three to one and replacing human labor with robots. This was a radical break from the Swiss tradition of hand assembly skill passed down from family to family and generation to generation of Swiss from the Vallée De Joux region. It is interesting to see the attitude towards the support of technology shift as the Swiss watchmakers become more familiar with quartz production. Abernathy and Utterback have documented such changes in attitudes as companies grow in size and modify their responses to innovative ideas75.


Champion


A champion is someone who supports and serves as a sponsor to a new technology76,77. Champions serve an important part in the innovation process78. There have been a number of champions in the history of the watch industry.


Edward Howard was a machinist that believed he could make a better watch movement if he introduced his machining techniques into the watch industry. It took different backers and over nine years, but Howard’s ideas later lead to almost a century of successful business at the Waltham Watch Co. The U.S. has provided support for a number of innovators from foreign lands. Max Hetzel is the Swiss engineer that first developed the concept for an electric watch. After taking his ideas to Swiss watch companies and receiving no support he left for the U.S. and convinced executives at Bulova to develop his idea. This lead to the tuning fork controlled Bulova Accutron that became the first electronic watch. Foreigner Clive Sinclair is a quirky English inventor that developed the idea for a digital watch. He was able to convince Hamilton Watch Co. to use this in their Pulsar brand and the first digital watch. Joakin Lehmkuhl is a Norwegian refugee that came to Timex and pushed for the pin-lever movement that replaced expensive jewels with hardened metal alloys. Attempts to market the watch through traditional distribution channels failed, so Lehmkuhl innovated and created new distribution channels never before used for watch sales. Nikolas Hayek is the driving force behind ASUAG-SSIH (now SMH). Hayek is an engineer that has always had a love of watches since he received his first Omega as a child. Hayek’s consulting company, Hayek Engineering, Ltd., developed the plan to reorganize ASUAG-SSIH around three divisions. With the help of Ernst Thomke, Hayek convinced an old line Swiss company to enter into a low cost fashion market with the introduction of the quartz Swatch. Hayek brought in technology (quartz), assembly lines, automated old manual processes, introduced robots, and reduced the size of the work force. Many analysts credit Hayek’s bold moves and leadership with saving the Swiss watch industry.


Dominant Design


Dominant designs in watch making have been gradually changing during this century. At the beginning of this century pocket watches were the most popular timekeeper. As mechanical watches became more reliable the mechanical wrist watch with an analog display became the most popular. The first electronic watch, the Bulova Accutron, used an analog display. The Seiko Quartz Astron 35SQ had a simple analog display. The introduction of the quartz movement was followed by the introduction of the digital LED display in the two thousand one hundred dollar (1970 dollars) Pulsar the following year. Even with LED watch prices dropping to twenty dollars by 1973, this display did not prove popular because high power consumption did not allow continuous display of the time. A button had to be pushed to display the time with an LED. The LCD revolutionized watch face design in the late 1970s and was the dominant design until the mid 1980s. The LCD was a low power consumption device, could display the time continuously, and was extremely inexpensive to manufacture. The introduction of the Swatch signaled a shift back to analog faces. By 1983 the novelty of the digital display was no longer driving the market and the familiar analog face made a comeback. The failure of the digital display demonstrates how important the impact of social factors can be on the advance of technology79. The digital displays failed in the fashion market place80 and the current use of digital displays are relegated to niche markets such as sports watches. For example, only fifteen percent of Timex’s two hundred and fifty watches are digital displays81. The two leading elements of modern watch design are the analog face and fashion82. This has lead to the quartz movement with an analog face as the dominant design today. Teece has observed that; “Once a dominant design emerges, competition shifts to price and away from design.” 83 It will be interesting to see if this observation applies to an industry so driven by fashion. A dominant design is usually established at the crossover point between the fall in product innovation and the increase in process innovation84. This appears to be the point on the curve where quartz technology is today.

 


CHAPTER 5


CONCLUSION


Future


What will the future bring? I think that the demand for low cost fashion watches will remain strong. There will always be demand for mechanical watches but I do not think that this market will grow. There are a number of interesting technology developments that show promise. The Japanese interest in technology continues with Seiko’s introduction of the Automatic Generation System (AGS) in 1988. The AGS is a hybrid design offering the best of both quartz accuracy and the mechanical automatic movement. The AGS is powered by a capacitor that is charged by a magnet sliding on a shaft surrounded by metal wires. This quartz watch will never need a battery. This watch has not been as successful as I originally predicted. I believe this is because the Japanese still are not gifted designers, the watches are just not attractively designed. Another interesting watch is the Junghans Mega 1 radio controlled watch. This watch receives a radio signal once a day in a small receiver in the watch and an antenna in the band that synchronizes itself to always show the correct time. The Timex
indiglo system is also a promising new innovation for lighting the face of the watch for easy legibility at night or in low light. Communications and computers will also play an important role in the future of watches. With further miniaturization of components there will soon be a market for wrist communications devices and personal digital assistants.


Summary


The history of the watch industry is an interesting case study for the analysis of theories on the management of innovation. There have been a number of cycles of resurgence from the Swiss after they failed to respond to technological changes in the industry. The watch industry amply demonstrates that most countries and companies make the same mistakes over and over again. Managers need to develop the ability to understand the patterns of technological change so that they can anticipate threats to their dominant technology or industry position. Quartz technology and the following shift of emphasis to fashion has had dramatic impacts on the watch industry. The introduction of quartz technology shifted the balance of power from the Swiss to the Japanese and then fashion shifted power back to Switzerland. Both countries failed to understand threats to their industries while they were in the dominant position. This lack of understanding resulted from an inability to predict future consumer demand when in a leadership position.


The Swiss and English did not understand the threat that machined watches with interchangeable parts were to them and they lost large market share in the Nineteenth century. It took almost half of a century for the Swiss to regain market share up to and during WWII. When Timex introduced the pin-lever movement the Swiss again did not react and lost most of the U.S. market share. The Swiss did not want to develop the first electronic watch and sent their own engineer to the U.S. for a success product launch. Even after they invented the quartz, the Swiss did not understand its market potential. The introduction of the quartz watch resulted in Japanese dominance in the mid range of the world market. The Japanese became so enamored over their technology that they did not even see the large threat to their position when the Swatch was introduced fashion as the key marketing principle of the last ten years. Timex had a large market share in the U.S. and turned down the opportunity to market the Swatch as they focused on durability. It is especially ironic that Timex with the introduction of their low cost watches was really the first innovator in allowing watches to be used as fashion accessories. The Swiss gained market share and cash for R&D with the Swatch and returned to world production leadership in 1995. The Swiss have also capitalized on the large consumer demand for mechanical timepieces. With the advent of the quartz watch the vintage mechanical market started to grow. This time the Swiss responded to consumer demand by providing complicated and well designed mechanical watches. Even though mechanical watches only account for thirteen percent of Swiss unit sales, they amount to fifty percent of revenues. With such strong revenue I expect to continue seeing mechanical watches doing well. This seems to be a product that the principle of satisficing applies to. In other words, how much accuracy is really needed on the wrist. It appears that most people are perfectly happy with accuracy to within one minute a day.


Success really comes down to understanding the customer and what they want. The key is to anticipate what they want before they know it and have it ready to sell to them.


1 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.691


Reading IV-1 “Communication between Engineering and Production: A Critical Factor” by
H.E. Riggs


2 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.317


3 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.319


4 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.319


5 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.325


6 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.340


7 “The Watch Watch: Swiss Tick Ahead of Japan”, U.S. News and World Report, January 8, 1996, Vol. 120, No.1, p.14


8 Gabor, Andrea and Pilarski, Laura, “A Last-Minute Comeback For Swiss Watchmakers”, Business Week, November 1984, No. 2870, p.139


9 “Swiss Watchmakers Fight Back”, Dun’s Business Month, January 1984, Vol. 123, No. 1, p.26


10 “Swiss Watchmakers Fight Back”, Dun’s Business Month, January 1984, Vol. 123, No. 1, p.26


11 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.314


12 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.339


13 Marbach, William, D., “Wristwatch With A Power Plant In It”, Science and Technology, July 18, 1988, No. 61, p.134


14 Gosch, John, “No Setting Needed – A Perfect Timepiece”, Electronics, October 1990, Vol. 63, No. 10, pp. 40-2


15 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.342


16 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.344


17 “Can New Management Team Keep Swiss Watches Ticking?”, International Management Journal, June 1985, Vol. 40, No. 6 (European Edition), p.57


18 “Programmed Precision”, Chronos, Special Omega Edition, p.17


19 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, “Timing Technological Transitions” by Richard N. Foster, p. 219


20 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.343


21 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.347


22 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.127


Case II-4 EMI and the CT Scanner by Christopher A. Bartlett. Copyright 1983 by the President and Fellows of Harvard College. Harvard Business School Case 383-194.


23 Landes, David S., Revolution In Time, The Belknap Press of Harvard University Press, Cambridge, Ma, 1983, p.351


24 Gabor, Andrea and Pilarski, Laura, “A Last-Minute Comeback For Swiss Watchmakers”, Business Week, November 1984, No. 2870, p.139


25 Roush, Chris, “At Timex, They’re Positively Glowing”, Business Week, July 12, 1993, No. 327, p.141


26 Levine, Joanne, “Restoring An Image”, Incentive Marketing, April 1988, Vol. 162, No. 4, p.52


27 Roush, Chris, “At Timex, They’re Positively Glowing”, Business Week, July 12, 1993, No. 327, p.141


28 Schnorbus, Paula, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.118


29 Fahey, Alison, “New Fancy Watches Will Get Even Fancier”, Advertising Age, July 18, 1988, Vol. 59, No. 30, p.4


30 Fahey, Alison, “New Fancy Watches Will Get Even Fancier”, Advertising Age, July 18, 1988, Vol. 59, No. 30, p.4


31 Schnorbus, Puala, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.120


32 Boyer, Edward, “A Family Rift Roils Seiko”, Forbes, November 12, 1984, Vol. 110, No. 10, p. 46


33 Eisenstodt, Gale, “The Last Emperor?”, Forbes, October 2, 1989, Vol.144, No.7, p.92


34 Boyer, Edward, “A Family Rift Roils Seiko”, Forbes, November 12, 1984, Vol. 110, No. 10, p.45


35 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.128


“Innovation and Corporate Strategy: Managed Chaos” by James Brian Quinn from Technology in the Modern Corporation: A Strategic Perspective, Edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc.


36 Phillips, Lisa, “Citizen Hopes It’s Time For New No. 1″, Advertising Age, September 9, 1985, Vol. 56, No. 70, p.36


37 Neff, Robert, “Citizen Adjusts Its Mainspring”, Business Week, August 27, 1990, No.175, p.80


38 Kulavis, Paul, “Timex Keeps On Tickin'”, Marketing and Media Decisions, November 1982, Vol. 17, No. 13, p.61


39 Roush, Chris, “At Timex, They’re Positively Glowing”, Business Week, July 12, 1993, No. 327, p.141


40 Schnorbus, Puala, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.119


41 Kulavis, Paul, “Timex Keeps On Tickin'”, Marketing and Media Decisions, November 1982, Vol. 17, No. 13, p.59


42 Fahey, Alison, “New Fancy Watches Will Get Even Fancier”, Advertising Age, July 18, 1988, Vol. 59, No. 30, p.4


43 McGrath, Neal, “After a Licking, They’re Back Ticking”, Asian Business, December 1994, Vol.30, No. 12, p.18


44 McGrath, Neal, “After a Licking, They’re Back Ticking”, Asian Business, December 1994, Vol.30, No. 12, p.18


45 “Debanked”, The Economist, February 9, 1985, Vol. 294, No. 7380, p.76


46 “Can New Management Team Keep Swiss Watches Ticking?”, International Management Journal, June 1985, Vol. 40, No. 6 (European Edition), p.57


47 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.60


Reading II-1 How to Put Technology into Corporate Planning by Alan R. Fusfeld, from Technology Review, MIT Alumni Association, Copyright 1978.


48 “Sweet Success”, The Economist, January 19, 1985, Vol 294, No. 7377, p.71


49 Schnorbus, Puala, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.118


50 Schnorbus, Puala, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.120


51 Anderer, Charles, “Swatch U.S.A.: Creative Marketing Strategy”, Leading Edge Case Study Project, Center for International Business Studies, Pace University, 1986.


52 Fuhrman, Peter, “Jewelry For The Wrist”, Forbes, November 23, 1992, Vol.150 , No.12 , p.173


53 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright.


Reading II-7 Organizational Determinants of Technological Change: Toward a Sociology of Technological Evolution by Michael L. Tushman and Lori Rosenkopf from Research in Organizational Behavior, Copyright 1992 by JAI Press, Inc. p.189


54 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.215


“Timing Technological Transitions” by Richard N. Foster, from Technology in the Modern Corporation: A Strategic Perspective, edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc.


55 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.123-137


“Innovation and Corporate Strategy: Managed Chaos” by James Brian Quinn from Technology in the Modern Corporation: A Strategic Perspective, Edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.124


56 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.186


Reading II-7 Organizational Determinants of Technological Change: Toward a Sociology of Technological Evolution by Michael L. Tushman and Lori Rosenkopf from Research in Organizational Behavior, Copyright 1992 by JAI Press, Inc.


57 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.186-207


Reading II-7 Organizational Determinants of Technological Change: Toward a Sociology of Technological Evolution by Michael L. Tushman and Lori Rosenkopf from Research in Organizational Behavior, Copyright 1992 by JAI Press, Inc.


58 S., R., W., “A $6 Watch Beats Harrison’s Chronometer”, Sky and Telescope, June 1988, Vol.75, No. 6, p. 659


59 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.135-154


Reading II-4 Technological Forecasting for Decision Making by B.C. Twiss from Managing Technological Innovation, 2d ed. (New York: Longman, 1980). p.143


60 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.215-228


“Timing Technological Transitions” by Richard N. Foster, from Technology in the Modern Corporation: A Strategic Perspective, edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc.


61 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.135-154


Reading II-4 Technological Forecasting for Decision Making by B.C. Twiss from Managing Technological Innovation, 2d ed. (New York: Longman, 1980). p.134


62 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.215-228


“Timing Technological Transitions” by Richard N. Foster, from Technology in the Modern Corporation: A Strategic Perspective, edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.219


63 Anderer, Charles, “Swatch U.S.A.: Creative Marketing Strategy”, Leading Edge Case Study Project, Center for International Business Studies, Pace University, 1986.


64 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.215-228


“Timing Technological Transitions” by Richard N. Foster, from Technology in the Modern Corporation: A Strategic Perspective, edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.219


65 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.215-228


“Timing Technological Transitions” by Richard N. Foster, from Technology in the Modern Corporation: A Strategic Perspective, edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.220


66 McGrath, Neal, “After a Licking, They’re Back Ticking”, Asian Business, December 1994, Vol.30, No. 12, p.20


67 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.45-60.


Case II-1 Advent Corporation by R.S. Rosenbloom. Copyright 1973 by the President and Fellows of Harvard College. Harvard Business School Case 9-674-027.


68 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.123-137


“Innovation and Corporate Strategy: Managed Chaos” by James Brian Quinn from Technology in the Modern Corporation: A Strategic Perspective, Edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.125


69 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p. 61


Reading II-1 How to Put Technology into Corporate Planning by Alan R. Fusfeld, from Technology Review, MIT Alumni Association, Copyright 1978.


70 Gabor, Andrea and Pilarski, Laura, “A Last-Minute Comeback For Swiss Watchmakers”, Business Week, November 1984, No. 2870, p.140


71 Fuhrman, Peter, “Jewelry For The Wrist”, Forbes, November 23, 1992, Vol.150 , No.12 , p.174


72 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.25-36


“Patterns of Industrial Innovation” by William J. Abernathy and James M. Utterback from work supported by the National Science Foundation Division of Policy Research and Analysis. p.27


73 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.123-137


“Innovation and Corporate Strategy: Managed Chaos” by James Brian Quinn from Technology in the Modern Corporation: A Strategic Perspective, Edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.124


74 “Debanked”, The Economist, February 9, 1985, Vol. 294, No. 7380, p.76


75 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p. 25-36


“Patterns of Industrial Innovation” by William J. Abernathy and James M. Utterback from work supported by the National Science Foundation Division of Policy Research and Analysis. p.25


76 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.123-137


“Innovation and Corporate Strategy: Managed Chaos” by James Brian Quinn from Technology in the Modern Corporation: A Strategic Perspective, Edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.131


77 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.565-584


“Entrepreneurs, Champions, and Technological Innovation” by Modesto A. Maidique from Sloan Management Review, Winter 1980. p.566


78 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.123-137


“Innovation and Corporate Strategy: Managed Chaos” by James Brian Quinn from Technology in the Modern Corporation: A Strategic Perspective, Edited by Mel Horwitch. Copyright 1986 by Pergamon Press, Inc. p.131


79 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.186-207


Reading II-7 Organizational Determinants of Technological Change: Toward a Sociology of Technological Evolution by Michael L. Tushman and Lori Rosenkopf from Research in Organizational Behavior, Copyright 1992 by JAI Press, Inc. p.189


80 Pellet, Jennifer, “Watching Watch Trends”, Discount Merchandiser, November 1990, Vol. 30, No. 11 pp. 57


81 Schnorbus, Puala, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.119


82 Schnorbus, Puala, “Brand Report No. 156: Wristwatches”, Marketing and Media Decisions, October 1988, Vol. 23, No. 10, p.117


83 Reading from Strategic Management of Technology and Innovation, 2nd Ed. Robert A. Burgelman, Modesto A. Maidique, and Steven C. Wheelwright. p.231-250


Reading II-8 Profiting from Technological Innovation Implications for Integration, Collaboration, Licensing, and Public Policy by David J.
Teece. p.234


84 Reading from Readings in the Management of Innovation, 2nd Ed. Michael L. Tushman & William L. Moore, Ed, p.565-584


“Entrepreneurs, Champions, and Technological Innovation” by Modesto A. Maidique from Sloan Management Review, Winter 1980. p.573


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