Lean Six Sigma, Kaizen, Kaikaku, TRIZ...and a Yodel: Swatch turns the watch industry on its head again with Sistem51

The Swatch Sistem51 prototype.
As many of you know, I'm a bit of a watch afficianado...well, make that geek. Afficianados can blow $100,000+ on some Harry Winston creation on the spur of the moment: geeks talk in awe about the mechanical (or - Lord help us - electronic!) intricacies of the latest miniature masterpiece without any intention (read: capability) for the credit card to be sodomized even worse than when you open a payslip from a certain logistics firm...

And now, with Baselworld having rolled around again, I am stuck between the sweaty loop of Sydney, Seattle and London, longing for a quick trip to the Land of Milka to gaze in awe at the only pieces of a jewellery that a straight non-rapper should really even consider.

Watches occupy a rarefied field in the world of NPD: they can range in price from $3 to $30,000,000+ (arguably the greatest range in any conventional product category); their primary function of accurate time telling is actually often done more effectively by cheaper watches; they are largely redundant for most people and yet one of the most desirable statements of success...and Baselworld is where the good, bad and the outrageously ugly of them all come out to play...

This year, next to the mouth watering HWT, Arnold & Son, Jaquet Droz as well as the more conventional but brilliant Omegas, Rolexes and Tag Heuers, there was a new Swatch watch, one that will retail for about $120. Now, as a high end watch enthusiast, this should have been of no interest to me...but as an Evangelist of business excellence and innovation, Swatch has now got me giddy with excitement (actually, Jaquet Droz is a part of the Swatch Group, though they are very much a separate company with unique people, processes and parts not shared by other companies within the Group).

Swatch have just blown the industry apart with the Sistem51, a concept in watchmaking that pretty much rewrites the rules of the game. But before I go into a bit more detail, we need to understand why Swatch is such a pivotal company.

Swatch single handedly saved the entire Swiss watch industry in the 1980s, after the quartz crisis of the late 1970s/1980s hammered the traditional mechanical watch that was the hallmark of the Swiss tradition. The brilliance of Swatch's strategy was to create a funky new quartz watch built on an advanced automated process and combine it with a groundbreaking marketing campaign that made the Swatch a purchase not once every few years, but at least every year, even every quarter...and sometimes more. The watch as a cheap style statement. And simultaneously, Swatch started buying up many of the surviving Swiss brands and quietly - brilliantly - turned the mechanical watch into an emotional statement of the passionate art of engineering and a symbol of personal business success that all should aspire to.

This is one of the greatest acts of marketing magic within our lifetimes.

In truth, quartz watches offer incredible advantages over mechanical watches: logically, excepting a few very rare circumstances, a quartz watch makes infinitely more logical sense than an automatic from both a pure performance and a cost perspective. But that is hardly the point. If you have to ask why, it is hard for me to answer briefly, but consider this: many wealthy individuals spend upwards of $50,000 having a portrait painted of their partners, when a photograph would be more 'accurate' and cost way less than $5,000 even for a high end shot.

Swatch is an innovator - sure, Seiko and Citizen and many other companies come up with innovation that makes headlines, but Swatch is the one company that transforms an industry.

Now, when I heard about Sistem51 and combined it with a few things I know about how Swatch operates as a company, I am confident that I have seen one of the finest examples of best practice management theories being put into very effective practice - in fact, a number of them. If you have your doubts as to these 'management fads' working in real life, let me put them to rest right now...well, it helps if you've got the calibre of people working for you that Swatch has.

This is New Product Development at its finest.

Let's examine things in more detail...

1) TRIZ / Kaikaku

Triz (and its myriad of variations) is a systemic way to solve problems in an inventive way. Originally developed in the Soviet Union and now being deployed to great effect with many Western companies, it's a set of tools and protocols to help you solve problems. It's been criticized (quite rightly) as being tricky to use, but newer developments such as Trizics have made it more accessible to a wider audience.

Kaikaku is the Japanese philosophy of radical, sudden transformational change. It is really a set of guidelines, principles and advice rather than a comprehensive system as Triz, however it does connect nicely with Triz in bringing order to what can be quite a chaotic event.

So...how does the above tie in with the Sistem51?

A] Usage of only 51 parts required for the watch. This required a total rethink of the traditional automatic movement that has been around for 90 years in well executed form (and in concept / earlier forms for over 250 years). The most basic conventional automatic movements have around 90+ parts. Fewer parts reduce costs, complexity and of course the opportunity for defects.

B] Usage of a new type of anti-magnetic alloy of copper, zinc and nickel. In automatic watches, magnetization plays havoc with accuracy, but it is hard to get the right mechanical properties for the movement without using at least some magnetic materials. Swatch has done it, with an alloy that has the right weight, strength and anti-magnetic properties.

C] Hermetically vacuum sealed case. There are many enemies of automatic watch movements, such as moisture and dirt, which can enter the watch over time and cause corrosion and excessive wear to the mechanism. However, there is another enemy that few have paid any attention to - air. In the highly sensitive movement of a watch, even aerodynamic drag is a factor in the power reserve (the maximum time when a watch movement is wound to its maximum potential and when the watch stops after no further winding movement is performed). Most automatic watches have a power reserve of about 40-50 hours. The Sistem51 will have 90+. Whilst other conventional automatics can also achieve this, it is at the expense of size and cost. The Sistem51 is a very thin and small watch where such a reserve has thus far proven impossible to achieve (excepting a very exclusive Cartier prototype).

By hermetically vacuum sealing the watch and using new types of seals, Swatch has virtually guaranteed almost all aerodynamic drag on the movement and the intrusion of water or dirt will be prevented. Furthermore, the accuracy of the watch (the regulation) is set at the factory by a short wave laser based system prior to sealing. Whilst we cannot definitely know the accuracy / stability for this watch that will be released in late 2013, it is likely to be far superior to even high end automatic chronometers costing many thousands of dollars.

2) Lean / Kaizen

Lean is simply a westernized variation of Kaizen, which has its origins in the Toyota Production System. It focuses on the elimination of waste, which is pretty much getting rid of things that have no true value to the end user.

How has this been applied to the Swatch?

A] Reduction of the amount of parts in the System51 - this is pure Lean thinking, in that wastage of redundant components has been reduced. The watch is now faster and cheaper to make than anything comparable that has preceded it - including the vaunted Seiko 5 series.

B] Fully automated new generation CNC machines: some of these machines are an advanced step up from earlier generations, showing continual improvement within known guidelines. The layout of the machines also allows for 'printing' of new designs onto the watch very quickly.

C] Internal design: true, whilst much of the watch is a breakthrough, some parts, such as the rotor location, are really improvements on an older theme that enable more radical ideas to be added. It sometimes is a matter of debate between engineers as to the Kaizen / Kaikaku balance: definitions vary. However, in this instance there has been a superb combination of both.

3) Six Sigma

Six Sigma is the concept pioneered by Motorola and popularized by GE. By reducing variation, quality and profitability can be improved.

With the Sistem51...

1] Usage of new concept CNC machines reduces variation to an unprecedented degree; new type of laser, optical and related machines for regulation of movements and QA/QC; almost complete remove of human element from every stage of manufacture further reduces variation.

In truth, most watch companies apply some of these tools to a certain degree. But with the Sistem51, Swatch has taken things to a different level compared to its competitors and shown just how to rewrite the rules. This watch and the way it is made offer dramatically superior performance at a fraction of the previous cost of automatics, achieved by applying the techniques in a superb manner across intrinsic concept and manufacturing execution.

And that is what business excellence is all about: being the best consistently...and doing it whilst taking things to a different level is just icing on the cake.