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Interview - Georges Kern - on IWC stories

Substantial sections of this article are published in iW magazine (December 2008).
This unabridged version from an interview before the 2008 global financial crisis, appears by courtesy of FineLife Media Inc.

INTERVIEW – GEORGES KERN – ON IWC STORIES

By: Dr Melvyn Teillol-Foo and Anthony Tsai

Georges Kern is the CEO of International Watch Company (IWC) and six years have passed since he joined the company.  We have seen many changes as he built a new team and the global distribution network for IWC.  Starting with only 20% control of the global distribution network for its products when Mr. Kern started, IWC now controls nearly all of its regional distribution, globally.

The shift in emphasis for IWC has been from a company that in 2002 had to build brand awareness and explain complicated watchmaking to one that in 2008 finds itself struggling with production ramp up and maintaining quality control to keep up with demand.  Much of this is due to the exponential market growth in China and the Far East for IWC products.  Some say that IWC does not need to advertise its products or further fuel the demand that it cannot cope with.  Mr. Kern has been a prolific and busy CEO and we caught up with him for an update.  

Participant Key

IW =International Watch and PuristSPro.com

GK =Georges Kern, CEO of IWC 

On Stewardship of IWC

IW : In a 2003 interview with ThePurists.com , you stated that 60% or more of IWC watches were sold in only 4 countries before you joined – Austria, Switzerland, Italy and Germany.  The German and Austrian markets were for a long time IWC's main support and even kept it alive.  Has this importance changed during the last six years?

GK : Yes, of course – Thank God.  We developed strongly in Asia, other countries of Europe and in the States (USA).  Of course, it would take years to have the same level of maturity of recognition in these new markets versus some European markets where we are huge; where we are in the top-3 ranking brands.  We are much more balanced today in terms of geographical sales than we have been in the past.

Portuguese Tourbillon in RG

GK : When you take over a company, which you don't know, it is difficult to talk about your goals.  I would say that at that time, IWC was a famous brand… a little dusty…but not destroyed.  It was a very strong brand but the analogy was a sports car driven in 1st gear, and we're driving now in the 3^rd gear – by far not yet in the 6^th gear.  We have restructured our product lines, we have animated our communication, and we have restructured our distribution.  We have worked on everything over these last years and depending on the development stage, to answer you second question, we adapted…today we have totally different issues than we had six years ago.  We played in the 2^nd league and now we are playing in the 1^st league.  If you want to play in Champions league, to take soccer as an analogy, you need another environment and you need to do it in a different way.

We have strong increases in average product prices because of more expansive range.  We sell more complicated watches and more gold watches.  When you look at our collection, it is totally different and happened so quickly.  When you look at the catalogue from five years ago and our product lines today – it's like 'day and night'.  It's always a question of product and communication – these make a brand.  It's not because you have a good accounting department that you have a good brand, it's because you have the right product and I think we made great efforts here.

On 2008 New Models

IW : Which new models at 2008 SIHH are you most excited by and why?

GK : We have our Jubilee Line for our 140^th anniversary.  We take this opportunity to talk about our history, which is very original – we have an American founder [Editor's Note: Florentine Ariosto Jones] from Boston, who crossed the ocean to reach France and Geneva and then, Schaffhausen.  We are the only watch manufacturer in the German part of Switzerland; that makes us different.  We have an original story, which we want to tell because it is important as a luxury company to have strong roots and I don't know any true luxury company without history becoming part of it.

The second thing, which is interesting, is that every product line that we have today was created years back.  So, in a way, we can say we've never changed anything; that is a little untrue because the products are much more contemporaneous.  For each line, we have these roots – Pilots (1936), Portuguese (1938), etc.  Everything has its original product – 30, 40, 50, even 80 years back – which is very interesting.  We can always talk about the vintage product and the existing line, and I think that is very exciting.

On Advertising and Target Customers

IW : Looking at your recent advertising campaigns, IWC appears to target the male customer.  IWC is also targeting the next male generation with your 'Father & Son' Pilot's watches.  Is this still the trend for the future?  Has your target customer changed from 5 years ago?

GK : We are indeed a man's brand.  We gained a wider customer base because we've developed and people know us.  For the 'father and son' campaign – we are not talking to kids as the targets – in fact we are talking to mothers because we want the mother to buy them for the husbands and their kids.  So we don't target the men here; we target the married women.  Now there is a little story to tell, which is beautiful.  My son inspired it because he wanted an IWC watch so I had to find a solution and it's how we created it.  The interesting part is that it's not a gimmick product because in fact, the 'Son' watch is a Mk XVI so it's not a 'Disney-esque' watch which is re-packaged, it's a true product and it's the only brand in the world where you have the Big Pilot and now the Mk XVI which matches.  Just shrinking the product would make that product very 'funny' and not good.  So, the target remains the same – men, but obviously we succeeded to reach more of them than in the past.

Father & Son Pilot's Watches

IW : Will you ever specifically target the female customer down the road with maybe a matching 'Father and Daughter' or 'Mother and Daughter'?

GK : We always had… people forget that we always had women's watches.  It was never communicated through time but we launched this year, for instance, a more feminine Da Vinci watch.  But it's a big watch; in fact it's a mid-size.  We do big watches for men and now we do big watches for women. But it's a line where historically we had women's watches; all Da Vinci watches came in women's sizes and with diamond pieces.  There is no shift at all in terms of strategy towards our feminine target.

Ladies' Da Vinci Automaticw/ Precious Stones

On Celebrity Marketing

IW : Some commentators have noted that the current IWC management has focused on celebrities and marketing events rather than brand development itself.  Would you like to respond?  Why do you think that events and celebrities are so important for a brand like IWC?

GK : IWC is a storyteller.  We have the Cousteau story.  We have the Saint Exupéry story.  We have the 'Top Gun' story.  We have the story of our founder.  We have many stories and it is important because you need to animate the left-hand side and right-hand side of your brain to target your emotional and rational sides of your mind.  What is interesting with IWC is that ' stars' are used to illustrate our stories; the stories are the celebrities and not the 'stars'.  If we have a celebrity working for us, they're illustrating that story which is a very different thing.  Kevin Spacey last year (2007) portrayed Da Vinci and Cate Blanchett helped this year (2008); that makes us very different and gives us another look from what others are doing.

[Editor's Note: Jacque Cousteau – aqualung diving pioneer and Antoine Jean-Baptiste Marie Roger de Saint Exupéry – aviator pioneer and poet]

Pilot's Top Gun inBlack Ceramic

On Product Positioning

IW : How do you see IWC positioned relative to the other brands in the Richemont Group?

GK : What is important is that we stick to our rules; Richemont Group will not impose otherwise.  Every brand at Richemont is complementary.  I don't think you can compare IWC with JLC or A. Lange & Söhne or Panerai.  We do compete by product line with other brands and also within the Richemont brands.  The Portuguese, in a way, competes with A. Lange & Söhne or Vacheron & Constantin.  But it's not an issue; it's part of our history and our 'DNA' to have that model line.  It's fine as long as we don't target clearly one of our sister companies with a specific product, which would be ridiculous and that is not happening.  As long as you are within your 'DNA', everything is fine.

IW : Which other brand(s) do you consider your greatest competitor(s)?

GK : Thank God – at the brand level – honestly, I don't think we have a clear competitor because we are so diversified.  As I said, at the product level, our Aquatimer competes with Panerai or Seamaster.  With the Portuguese, I compete with Blancpain, Lange, other Richemont brands or outside Richemont brands.  With the Pilot watches, it may be Breitling.  On the product level we compete with many brands but as a brand, I think we are very different and as a brand – I wouldn't be able to give you one competitor.  I can give you twenty competitors at the product level.

IW : If you had 2 potential customers in front of you, where one had $3000 and the other had $300,000 to spend, what would you say about why they both should seriously consider an IWC watch?  What makes IWC watches so special to stand out from the crowd at both ends of the price range?

GK : When you buy a product, it is mainly for three reasons:

First, you buy a brand; you buy values of a brand, you buy an image of the brand, and you buy something that will represent the brand.

Secondly, there are brands you like and don't like; you buy an aesthetic.  Do I like the Portuguese? Do I like the Pilot? Do I like this one?

Thirdly, you buy a reassurance that is mainly a technical reassurance at that price point.  If you buy a Hermes bag you wouldn't question the quality of the leather.  You don't even ask the question – it's a given.  At a price point for watches, it's also a given; the quality is there, it's Manufacture, etc..  It is this combination of three aspects that makes the customer buy… it's a brand image.  It's the design of a watch and it's technical content, which is more about reassurance.

It is true that we have products from $3,000 – 300,000 in our portfolio; products that are clearly IWC, and that clearly have a quality level but of course in terms of execution, they might vary a lot.  We have that portfolio and we have that credibility at every price point.

Kurt Klaus Da Vinci Perpetual Calendar in Steel

On Design and Production

IW : Is the design process top down or bottom-up approach?

GK : Ah…. It's always top-down…. Come on! (tongue-in-cheek chuckle)

IW : Who is the ultimate chief designer?

GK : The ultimate chief designer is our Art Director – he is called Guy Bove.  The ultimate chief decision maker is called Georges Kern because he is the 'bloody CEO'.

IW : What is IWC's current production per year, and do you plan for IWC reaching equilibrium with demand?

GK : We are and we will remain a niche small brand.  We will never go for 'mass market'.  This is not IWC and we don't have the production for that but we haven't tapped at all the full potential of the brand for the two reasons I mentioned – the increased growth of watch culture and growth of markets in the world.  People are buying more watches simply because of that and secondly because of new emerging markets.  For both reasons, the market will grow and we will grow over the market growth but this is, in my opinion, a natural trend in the next ten, twenty, or thirty years.  The market will grow.

[Editor's Note: This interview was before the 2008 global financial crisis]

IW : How many ETA-equipped watches does IWC sell per year?  Do you plan to replace all these movements with your own after 2012?  Are your own movements reserved only for the higher end watch series?

GK : Today, by value, we make approximately 60% of our turnover with in-house movements.  The last few years, we launched basically four calibers: 7-days going, chronograph, hand-wind F.A. Jones and an automatic in the Ingenieur.  This gives us autonomy.  We are not seeking for independence because that's ridiculous.  You always need suppliers, but it gives you a certain level of autonomy that is fine to have.

On the Future

IW : Every brand has its weakness whether it's design, brand image, distribution, etc.  What do you think IWC needs to improve upon?

GK : I think it's our level of maturity; it's our level of awareness towards our target group.  We are, in a way, a very young brand in many countries.  I mentioned the strengths in Europe for historical proximity reasons and we have started in many countries only a few years ago.  So we need time.  It's funny to say that the weakness of IWC as a time Manufacture is Time.

Pilot's St. Exupery UTC in RG

IW : IWC currently has the Portuguese, Da Vinci, Ingenieur, Pilot's Watch, Aquatimer, and Portofino lines.  What is the game plan for your product pipeline and existing lines?

GK : I think we are fine with the structure of our collection.  I don't think we are going to change the structure of our collection.  I think this covers basically all segments of the market and everything that IWC stands for, in terms of classicism and sportiness.  So what will happen over the next years is that we will continuously improve products, adapt products, and to make them contemporary.  The cycles are a little bit like the car industry; every five years you revamp your products a little bit, you adapt, and you re-launch it.  This is because, in my opinion, the cycles are of that periodicity today.  So, in a way I could tell you what we are doing in two years, five years, even ten years because you need to have that cycle.

On Watch Collectors and Discussion Forums

IW : How do you rank the importance of avid watch collectors as an inspirational source for your company decisions?  For example, with PuristSPro.com , do you think participant opinions are important, and should be recognized in objective company decisions?

GK : The thing that I can tell you is that I'm reading them.  I read comments on the Internet and they are always interesting.  Of course, it's easier for an outsider to make statements.  People are not in charge, people don't have the total background, but it's very interesting and very inspiring.  I like to read also the comments on novelties and all that stuff but it is not a systematic process.  It's a source of inspiration, criticism and learning – that's how I see it.

Of course, we are talking about absolute collector specialists, so there might be reactions which do not reflect the realities of the market.  Nevertheless, it is inspiring and very interesting to read and sometime comments that are made – I really implement or integrate them in my thinking or my briefings and stuff like that.

IW : Thank you very much for your time.

GK :  You're very welcome.

Photo Credits:
Georges Kern picture:  Anthony Tsai
Watch pictures:  IWC press pictures 

IW Publisher's note:

Dr Melvyn Teillol-Foo is an executive moderator on PuristSPro.com and ThePuristS.com .  He has been a regular contributor to iW (USA & Chinese editions) and a quoted authority on the industry in Wall Street Journal and other international publications.

Anthony Tsai is General Manager of the PuristSPro.com website.

Copyright November 2008; all rights reserved.