Friday, July 2, 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 Switzerland with its high costs and outdated notions of making mechanical watches by hand and charging the moon for them looked obsolete.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 !