Friday, 2 July 2010

A consultant worth the money

Consultants are renowned for being expensive and useless. Every company has horror stories of incredibly expensive consulting which has proved to be utterly worthless. That doesn’t stop companies from continuing to splurge untold millions on consultants though. The consulting industry is alive , well and thriving.

But this is a story of a consultant who delivered a zillion times more value than what he was paid. In 1982, a management consultant was employed by a group of banks to advise them on the sale of Switzerland’s last watchmaking giant, which they had bailed out earlier. This was the early 80s, when Japan was sweeping the world. It looked like the famous Swiss watch industry was on its last death throes and that the centre of the industry must inevitably shift eastwards to Asia. Switzerland with its high costs and outdated notions of making mechanical watches by hand and charging the moon for them looked obsolete.

The consultant who walked in was Nicolas Hayek. But instead of selling the conglomerate which was what he was brought in for, he decided to turn native. He quit consulting and became a watch maker. Leading a group of industrialists he did the completely unexpected – he turned around a no hoper and made it into the world’s largest watch company. Today it holds a quarter of the global watch market.

The company was Swatch. Hayek’s magic was at both the bottom end and the top end of the market. At the bottom end, he championed the cause of the cheap watch. A team of designers designed the watch that could be mass produced and be virtually disposable. But by adding on clever marketing and snazzy designs, he made it desirable. Japanese watches may have been functional but were boring. Swatch soared meteorically.

But the magic was even more spectacular at the top end. He bought Blancpain and installed its owner Jean Claude Biver as head of Omega. Biver did everything wrong by the textbook. He created a shortage by producing less than demand – he wanted his customers hungry and wait for his product. It was by shortage that he said his watches would become desirable. And he famously said he would never make a quartz watch, bucking the technology trend. It was an industry changing move – today 70% of Swiss watches exported are mechanical.

Winning at the top and bottom end of the market takes some doing. Hayek is acknowledged as the man who saved an entire industry. How many business leaders can lay claim to such a tribute.

Nicolas Hayek died last week at the age of 82. Now, what would have happened had he stayed on in management consulting !


Chennai Vibes said...

Most consultants say or do what their clients want them to. They are usually used as a sounding board by some vested interests in the senior managment so that people can buy into their ideas since it is coming from a highly paid consultant. It is sad that commercial aspects prevails over common sense and logical consulting. Hats off to Nicolas Hayek for being a visionary and not succumbing to do what the management wanted them to.

Exkalibur666 said...

Great read. Truly a consultant worth consulting :). Thanks for the post.

zeno said...

Well, for one he dint steal your watch to tell you the time :)

Though i have heard/read about this turn around of Swatch as well as the swiss watch industry never knew the man behind about it![you truly do enlighten us]

May be the companies are in search of holy grail with a belief they will stumble upon a Nicolas Hayek!

Talking about his market focus,[uncontested market space] I think nowadays they call it "blue ocean strategy"! Recent e.g Wii.

W.r.t Shortage and desirability , Think no more beyond Apple and Google. Once very few owned Apple products making it cool and giving it a cult status. One of the reasons for a astounding success for Gmail was it's strategy of "By Invite only"

J said...

Cute story. But can't help thinking that such interventions by the consultants creates another problem - did he therefore privately believe that his earlier clients had loser projects not worthy of pursuing but maybe he gave them some "solution" all the same.

Ramesh said...

@Chennai Vibes - Hey Sanjay; great to see you here. Didn't realise you've taken up blogging too; Hurray ! But why Chennai ??/ Thought you should be more Bangalore vibes ???

@Exkalibur - Yes, truly a consultant worth consulting with, but then he became so only after he left consulting !!

@Zeno - True; but such people are very very rare. Not sure either Apple or Google would be fitting parallels. Yes, some shortage initially, but their products are ubiquitous. The luxury industry thrives on exclusivity ; the value of a product goes up based on how few people own one.

@J - Had no clue what he did in his earlier life as a consultant. I think he saw an opportunity and grabbed it.

Sandhya Sriram said...

Ramesh - you can sell your posts to management institutes/ orators for motivational episodes/ speeches. amazing it is. i hope i can also shamelessly borrow this content (for free :-)) to use in some forum

the point here is probably not whether he was a consultant or not. the thought leadership, fostering the right team, and driving absolute execution is the skill of a real business leader which is what Hayek did to Swatch.

Anonymous said...

dito with wat sandhya sriram said...i wud suttufy these series and hope get a chance to use it somewhere :)


Anonymous said...

Wow,what an enlightening post!
Do more like this,so that we could get updated.


Ramesh said...

@Sandhya - Awww; the undeserved praise yet again. Thanks so much. As always very perceptive a comment ; yes its not about what he was, but what he brought to the table.

@gils - Nanri thalaivare

@ambulisamma - Gee, thanks.

Vishal said...

Great read Sir! Amazingly amazing to read such inspirational stuff.

Perhaps, Swatch provided Hayek with his divine calling. Totally agree with Sandhya. It really did not matter whether he was a consultant or not. Sometimes, right persons do wrong jobs and vice-versa.

Hayek's story gives a lesson that how important it is to have a strong vision and even stronger willpower. It is so easy to tread along the way on which the masses go. Hats off to him that he had something different in his mind and he did it!

Deepa said...

Thanks for this post. An inspiring story and a good learning.

RamMmm said...

Lovely obit.

Ramesh said...

@RamMmm - Many obits have been written about him in glowing terms. Seems to be the rare businessman incredibly liked.

Reflections said...

Loved this post Ramesh and sooo agree with wht u replied to J "... he saw an opportunity and grabbed it."

Ramesh said...

@Reflections - Yes, sometimes its all about being at the right place at the right time and being able to see that you are there.

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