Swiss Conundrum

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So I was doing some reading on Switzerland, specifically Swiss products and business processes. My stereotype going into the reading was that the Swiss are known for banking (obviously), but also known for engineering and precision products. It’s a country with a high GDP per capita, high education levels, and a highly skilled labor force. All these would indicate an engineering powerhouse, but my reading suggested the opposite. The subtle suggestion is that Swiss are lacking in innovation, which didn’t make sense right away.Rolex-Daytona-4130-Movement

So it is true that the Swiss are known for precision manufacturing and product development, largely in the medical and machinery field. I believe the lion’s share of worldwide timekeeping mechanisms and watch movements, as in high-end watches are all supplied from Switzerland. So what’s with the lack of innovation?

Turns out it is caused in part by the institutionalized practice of Continuous Process Improvement (CPI) in the Swiss engineering practice and product design. I know this is contrary to my general view that CPI is a good thing, but for the Swiss it may have gone too far. The Swiss openly practice CPI as a means to standardize work and increase quality, which characterizes products that come from the region. Watches from Rolex, Omega, Hamilton, etc, etc are super high quality products that demand high dollars in the marketplace. Cracking one of these watches open will show an amazing level of detail in springs, gears, levers, metalwork and finishes, all working in unison to tell time. Now take a look inside a Japanese watch, you will see a battery and some plastic that houses a tiny quartz crystal that vibrates crazy fast to produce accurate time.

Am I saying a Timex from Japan is better than a Rolex from Switzerland? No.

What I am saying is that the Swiss have invested an enormous amount of time and effort into CPI in order to produce an intricate mechanism that can tell time from a wound-up spring. The Swiss are very good at what they do, but their scope of expertise is relatively small. The quartz and digital watches from other regions are technologically far more advanced than the mechanical units from Switzerland, far cheaper, far longer lasting and far more accurate, but definitely far less precise from a component level and far less cool. Careful telling a Rolex guy that a $10 Casio is more accurate and longer lasting than a $12k Rolex, but he still has to wind his daily whereas the Casio will last years on a $2 battery. (I know, I know, the Rolex is a self-winder, but you should see the point) I would not say the Swiss missed the innovation boat with Quartz watch movements, rather they chose to stick with the old-school high quality mechanical movements.

What do I mean by Institutionalized? Well, the Swiss are conservative by culture, they have a high Uncertainly Avoidance and are pretty risk-adverse. All of these attributes combined would suggest that culturally the Swiss prefer to do the same thing that worked previously, but do it better than everyone else to maintain their competitive advantage. I’m a little biased here, but look at the US in comparison. In the US we are not afraid to take risks, culturally and infrastructural we actually promote it. The vast majority of businesses that start in the US fail for a variety of reasons, but the point is that in the US we have a try-it mentality with little downside. If an idea fails, try another. Heck, we even have tax structures that reward and subsidize risk in development.

Don’t get twisted, I’m not suggesting the US system is superior. The ‘try it’ mentality can produce innovation in abundance, but it can also lead to sloppy implementation and poor quality. Look at the US Auto industry from the 70-80’s, arguably into the early 2000’s. Lots of good ideas that were poorly implemented, and the Japanese put more effort into perfecting these ideas and selling them back to the US in high quality product offerings.

So if I haven’t offended everyone yet, what is the take-away from all of this? My takeaway is that of balance. Too much CPI in your design and manufacturing can tie your hands from trying new things, or it can slow the experimentation process and allow your competitors to jump by. Evolutionary changes are good, but one revolutionary idea can change the landscape. Think iPhone and killing the competition. On the flip side, too little process improvement will lead to poor implementation and poor quality. This will put you out of business before getting to the next idea.

What are your thoughts? Please leave a comment.

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