ThePuristS Interview Georges Kern
Chief Executive Officer of International Watch Co - IWC

Introduction

The Georges A. Kern Curiculum Vitae provided by IWC is straight forward and simple. He is the tenth leader in the long history of the International Watch Co.

At the beginning of 2002 and ten years after he put on his first IWC, he was appointed as the new CEO.

Born in 1965 to the renowned Düsseldorf jeweller, René Kern, he grew up in a home with two languages - a French father and a German mother. He was surrounded by the world of jewellery, gems and luxury watches. After his youth on the Rhine, he studied politics in Strasbourg and then business management in Swiss St. Gallen.

As a young sales and marketing manager in the central office of Kraft Jacobs Suchard in Neuenburg, he was responsible for the distribution of foodstuffs and enjoyment foods such as coffee and chocolate. A rather short episode, followed in 1992 by his first job in the watch industry with TAG Heuer, where he coordinated the marketing and built up a worldwide distribution network.

When I put my ear to the ground, my understanding of this bold personality is elevated to another level. Being the right hand man of the irrepressible Franco Cologni, Georges Kern was the key member representing The LMH takeover team from Richemont. Post Merger, he worked very closely with the late Mr. Gunter Blumlein in the integration of IWC, Jaeger-LeCoultre and A Lange & Sohne into the Richemont Group. I cannot get a confirmation from Kern, who insisted on being humble, but he impressed me with his no-nonsense personality, his in-depth knowledge of the Industry, his strong grasps of the company and his willingness to share his knowledge and information.

The interview went on for more than an hour and I am proud to present an edited transcript of the Georges Kern interview.

The Interview

TP: Richemont took over LMH. Is the synergy between brands working?

GK: I think what Richemont bring into a brand like IWC is a different power: the power of distribution. We were able to dramatically speed up our internationalisation of IWC, and this was a major issue for IWC, but how we attained a worldwide presence quickly.

Without Richemont, it would have been very costly to even open a single subsidiary. It is obvious that without the help of Richemont, we wouldn't be at the same comfortable position we are today.

IWC controls 80% of our distribution on a worldwide basis. 18 months ago we were controlling 20%. We had only 3 subsidiaries and the rest were authorized agents. This is a huge advantage for us in terms of understanding the market activities, promoting brand visibility, quality, response time to dealers and customers etc.

I think what we bring, as IWC & Jaeger-LeCoultre to Richemont is the technical know-how, the added value which other people can benefit from. It is a perfect match.

TP: Why did you choose to run IWC?

GK: In fact, Mr. Blumlein asked me the question one day, "If I could give you a company to run, which would you chose?" I said, "IWC," immediately. I believe IWC has, by far, the greatest potential of all the brands, not only in the Richemont stable, but also perhaps in the whole market.

(Mr. Gunter Blumlein, a legendary man who passed away too early)

We are in the right kind of watches and shape, a technical brand with complications. We are the only brand in the world who can sell watches from €2,000 to €200,000. No other brand can do that with the same acceptance and credibility. In the case of IWC, we are talking about 50-50 for both the high-end and mid-range/entry-level products. When I looked at the figure then, with 60% of watches or more sold only in 4 countries, Austria, Switzerland, Italy and Germany...

TP: Wow, I can understand the potential!

GK: Yes, there were so many more markets to conquer, an important potential for future growth. Don't forget that in these 4 countries, we were already one of the top brands in terms of turnover, recognition and brand awareness. With potential exports to other countries included, we can be a very important brand in the next few years, if we can achieve that. And that is the job of our new team, which we have put in place for only about 12 months.

TP: When you first joined IWC, did you feel any resistance from the then native IWC staff?

GK: Of course, I think that was the factor I underestimated the most. When you are young, you see a problem more from a strategic and intellectual point of view; you analyse strengths and weaknesses, opportunities and threats. Because you lack experience you forget you need the people to do that. It does not make sense if you run alone and the team is 10 miles behind you. After a while you lose your breath and you are out of the game.

I hope I did it quickly enough to understand, and built a team at the right pace, to create a new culture combining the traditional watchmaking mentality and skills of Schaffhausen with a modern and forward looking management, and take an international perspective.

You have to find the right balance to build a team. Everything in life and business needs the right balance; it took me a few months to understand that.

TP: And probably longer for the watchmakers?

GK: No, they are very keen and proud to see their products being exported from Schaffhausen to Singapore and China etc.

(Engraving of IWC Grande Complication case-back)

TP: Is there a case where watchmakers are only interested in making the best watches? Not caring about the business side of the equation?

GK: No. Nowadays everybody is aware of and feels the need to make commercial sense, obviously, especially in such a difficult economic environment. You look at and you care about how the company and the group are doing.

TP: Would you say you have solved this problem?

GK: Oh yes, of course!

TP: The new group of IWC managers is very young, they are great, but do you have problems getting respect from the older IWC native team? Bearing in mind that watchmaking is a very traditional craft?

GK: I don't think there is a correlation between age and competence.

TP: Perhaps the reverse is true, where younger managers carry less historical baggage?

GK: It is a question of balance. One of my most experienced watchmakers is Kurt Klaus. He left us a few years ago and I asked him to come back. Now he acts as a consultant, advisor and an expert in all our development teams, and we are making huge developments in IWC.

Kurt has worked for 42 years in IWC, longer in IWC than my whole existence here on earth; I am only 38 years old. Kurt has the intellectual approach, and I know he must have made all the mistakes already.

(Mr. Kurt Klaus, Talented and experienced, and much appreciated in IWC)

The young technical managers are very bright but they can make mistakes. Kurt Klaus is there to guide them, the good thing is that the young people accept him, respect him and understand that Kurt is not their current or future competitor.

We have dynamic people, and you will find people who are always pushing and other people who are more cautious - I strongly believe that we have the right balance. We have the tradition and the history, etc., balanced by the creativity of a sufficiently aggressive team.

TP: So there is no age-gap problem?

GK: The team is very young, but I have 10 years of experience in the watch industry. As you know, I worked at Tag for 8 years. When we started, everyone was laughing at us, I was in my twenties then, and it was not uncommon to hear phrases like, "Look at the kindergarten kids running the company!"

TP: The success of Tag should be a classic business success text book case study.

GK: Tag is a marketing story, IWC is an industry, so it is a different issue but it proved that you could be successful when you are young. Again if I lack experience, I learn from people like Kurt Klaus within the company.

(The IWC print advertisement, still sexist after all these years?)

TP: IWC's marketing campaign is frequently considered as sexist and demeaning to women...

GK: It was never the intention; initially the idea was a German style of campaign developed by Mr. Blumlein, to effectively communicate a very masculine brand to the German speaking market then. He wanted to expand the appeal of IWC watches. Today, IWC is an international brand, and we are evaluating how we can customize our campaign to each region best. We are definitely looking at this issue.

TP: What is Kurt Klaus exact role in IWC now?

GK: We have many technical teams and projects, and he is in every one of them. His ideas are amazing, for example, he did the Double hemispheres moon phases. But if a younger guy has a good idea, Kurt is there to help him implement it!

TP: IWC's 2003 products are almost a complete update of the entire Classic Pilot, Spitfire and Portofino range. It looks great! But are you worried that die-hard classic IWC fans may revolt?

GK: One of the problems of IWC was that the company grew very quickly. There was a lack of product care in terms of aesthetic. We have to evolve, like the Porsche 911. We have Pilot watches and Portofino, which are classic, but you have to update it on a regular basis.

What we did was simple, we have a very successful Portofino range, but it was too small for the current market, you cannot have a product with a 36mm diameter today. And we double the order for this year. Similarly for the Flieger, we kept Mark XV and the chronograph but we added a new Spitfire which is less conventional, because there are people who are less conventional! Next year we will continue to update our product range to combine technicality with a contemporary design and style.

We are not in the fashion industry; we don't want to see a complete change of products every year. We want to maintain a certain consistency in an IWC watch but we have to evolve. Look at our Portuguese, it is the most beautiful watch and yet it still has the same case since 1930! Radical changes can work for cheap fashion watches but not for an IWC costing €5,000 to €6,000. We want to update but with a clear product consistency.

One journalist told me, "IWC surprises with the existing", and yes, we want to, "Surprise with the existing." We do everything by the rules, we don't have to invent archives like the others, and we have them in our factory. If we need any design or ideas, we look at the IWC Museum. At this time of crisis, with the Iraq problem, SARS and September 11, you have to be truthful.

We invite anyone to come to the factory. We have 5,000 to 6,000 visitors to our factory every year. How do we prove that we are a real manufacturer, which is exclusive and of value? We conduct tours everyday, you can go to our atelier and factory to see what we are doing. Everyone who has visited the factory will eventually buy an IWC sooner or later. This is the marketing at its best because we have true values! There are a lot of watch companies out there; I don't know what you can see in their head office!

(The IWC manufacture in Schaffhausen)

TP: Perhaps an old cottage with a single old watchmaker sitting alone? (laughter) Any negative backlash yet regarding the 2003 updates?

GK: Of course, you cannot please everyone, this reminds me of Porsche, when they changed the Air Cooled engine to Water cooled, there was an uproar!

(Calibre 5000, basic movement for even more complications?)

TP: The Big Pilot and this year's Portuguese Perpetual Calendar is a clear trend of utilizing calibre 5000 but with added complications. Can we expect to see more and more complications from the same basic calibre?

GK: This was what Mr. Blumlein wanted to do, especially for the higher end products: to make IWC a true manufacturer, a character we lost in the 80s to perhaps up to the 90s. That was the correct strategy. The only thing I can tell you is that we have more than one front to our strategy now. There will be other things.

As you know, Calibre 5000 is the biggest automatic movement available, and you cannot put the movement into every IWC. In 2 to 3 years, you will see a lot of other things coming from our technical departments. We have 15 engineers; I mean real, full time constructers and we invest lot of money and effort in our R&D. You will see the results in the coming years.

TP: How many watchmakers in IWC?

GK: In the assembly - not workers, real watchmakers - we are talking about 160 watchmakers.

(True watchmakers in IWC, there are 160 of them in IWC!)

TP: Expensive watches are not new to IWC. Grande Complication, Destiero Scafusia, Portuguese Minute Repeater, but all IWCs have always been known as good value for money products. One look at your 2003 Portuguese Perpetual Calendar, its pricing and availability only in gold and platinum, no steel model. Is this an indication that IWC is moving into a higher market positioning and higher pricing points?

GK: When IWC launched Da Vinci Perpetual Chrono in 1985, it was revolutionary; you could adjust the moonphase and everything on the dial with one crown, at half the price of every Perpetual Calendar available then.

(The 2003 Portuguese Perpetual Calendar, 7-1/2 Day Power Reserve, Double Hemisphere moon-phases, a beauty worth appreciating)

TP: Not forgetting the first 4 digit years and the most accurate moonphase then?

GK: Yes, unparalleled in terms of user comfort. Double hemisphere moonphase Perpetual Calendar, at around CHF30K, is still one of the lowest priced and the only one with 7 day power reserve, 577 years moonphase accuracy. Look at the price! - Perfect quality at a reasonable price.

We want to offer a brilliant product for a fair price and we will always do that. When we launch a product, we always launch from the top, it doesn't mean there will not be a steel version later.

TP: I agree it is fairly priced. Is it a subtle attempt to move up-market?

GK: No, Platinum limited edition Perpetual Calendar for CHF50K and we still have Portofino for CHF2,700. We are the only brand who is credible with both. Some of our customers love IWC but they don't have the money for Grande Complication. Our, Probus Scafusia (meaning Craftsmanship from Schaffhausen) philosophy applies to all our watches. At the entry level, we have top quality in the case, in the bracelet. Due to our limited manufacturing capacities, there is an exclusive luxury watch even at the entrance price.

(Destiero Scafusia, the most complicated IWC)

TP: IWC watches, well known as traditional, technical and engineered, but lacking in sufficient movement decoration and finishing like some other top brands...

GK: Clearly, IWC is the only manufacturer in the German part of Switzerland, and our founder is American. We want to keep our roots and spirit, we are engineers and we are problem solvers, we want to have accurate and solid craftsmanship.

(The Original Jones calibre, one of the legacies left behind by the American founder)

We have launched anti-magnetic cases, double cases, ceramic cases. We have added in comfort in the perpetual calendars. The IWC Grande Complication is one of the only high complicated watches you can wear everyday. Quality and performance for everyday is what we want. This differentiates IWC from the other brands.

We want to be fair to the consumers in terms of price, features and quality. Everything we are doing has to be "true and efficient for the consumer".

TP: Would it be fair to say, if IWC decorates the movement much better, prices has to be higher?

GK: Of course decoration is an element, but the point is that we are not known for decorations. Why should we over-do this? Our decoration is fine, and is not an issue here.

(Destiero Scafusia, Sapphire case-back view)

TP: IWC is one of the few brands who is still doing exceptionally well in this very difficult time, is it true? and if so, why?

GK: I believe so. I think the reason is the strong brand image; our predecessors in the past 150 years have made our job much easier. This Swiss German image, the engineering competency, and the brand have been well positioned. Secondly, the teams in Schaffhausen and on a worldwide level are doing an exceptional job, they have the right attitude, the right fighting spirit.
A good brand combined with the right workforce and the tradition of Schaffhausen works, thank God!

(Pellaton Calibre 5011, nice work!)

TP: Obviously you have made a difference, but what would you say...

GK: I believe in the team effort. It's like a Formula 1 team. A great car needs a good driver, engineers, maintenance crew, tyre changers etc. It is a package, a team, a perfect cultural boiling pot, they turn out to be our biggest advantage now. The natural consequence is that we made the right decisions and implemented them in the right way.

TP: Are you a workaholic?

GK: I work hard, but I am certainly not a workaholic. I certainly think about the brand all the time. What we can do, what we can change and improve. But I don't believe in people who say they can work 16 hour a day for the long term.

I don't want my people work just long hours. When work has to be done, it has to be done. If somebody continuously is working too many hours, it's because either the company is not well organised or the person is not well organised. Both problems can be solved.

TP: Tell us a little about your personal life?

GK: I am a father of 2 lovely children with a daughter of 4 and a son of 6 years. I spend lots of time with my family and my very supportive wife. She supports the way I work fully. I do sports, I sail, I play tennis, I try not to gain too much weight with my frequent travelling and eating. I like to be surrounded by people. And meet my friends.

(Mr. Georges Kern, a confident leader who has made a difference)

TP: Do you like watches personally?

GK: My father Rene Kern was a very successful jeweller; he is famous mainly in Germany and had a natural talent for design. He won some "Jeweller of the Year" Award in New York. When my father died, we sold the company to Douglas, which is building it up to a leading luxury and watch retailer chain in Germany.

I was raised with jewellery and watches; I have a natural relationship with them. I love watches and I was exposed since when I was a child. The natural affinity for watches is there. Obviously I don't have the talent for design - my dad was a fantastic designer. My 6-year-old son has it, unbelievable. I think the talent skipped a generation.

What I got from my father is his taste and judgment. Watches must be nice and suit the brand image. This is very important.

TP: Are you tempted to put more diamonds on IWC then (laughter)

GK: No, this is not the DNA of IWC.

TP: If you can pin point any weakness for IWC.

GK: Brand awareness: In some countries, we still need to build this knowledge for a complicated brand, it needs to be explained. When you are just selling an image and a design, it is easier. In IWC's case, we have to explain a lot more. We need to make our customers understand and this is what we have to focus on.

(The hottest IWC, The IWC-Prada GST)

TP: Your limited edition co-branding with Prada, is that detrimental to the technical image of the IWC brand?

GK: The true story about Prada is very simple. The owner of Prada, Mr. Patrizio Bertelli, is an IWC freak. He loves, collects and wears IWC. He phoned one day, and said he wanted to make a watch with us. It was a few months before the America's cup. He was impressed with our technical achievement and he wanted to do a limited edition with IWC.

(Mr. Patrizio Bertelli, Prada Owner and IWC collector)

It wasn't a strategy step but it was an opportunity for us to work with a great man and a great brand. If you are asking, about brand associations, I would say yes. I believe in it when they make sense. We did that with Porsche design and Prada. We might have others in the future.

TP: So you don't think it hurts IWC

GK: No, it is a limited edition; it was so successful I couldn't believe it myself, especially in Japan.

TP: It is now trading at a premium in some markets, I don't hear any complaint regarding Prada. I do remember a lot of die hard IWC fans being quite unhappy with the Porsche Design co-branding though.

GK: Mr. Blumlein decided to stop the co-branding because the association was starting to harm IWC. One brand was overshadowing the other and had reached a dangerous proportion. We had 2 different catalogues, 2 marketing campaigns 2 product developments and I think Mr. Blumlein made the right decision to cut the tie. If not, there was a possibility that you would not have seen the existence of the brand IWC today. Co-branding should add values to a brand but should never become the core business of any brand.

TP: For serious IWC fans, what can they expect next year?

GK: We will work continuously with both the high end and the entry-range level, there will be complication but we have our feet on the floor, and there will be new products at our entry-level watches. It is essential to keep the balance. We will have some very exciting products next year.

(IWC watchmaker working with a Breguet Overcoil)

TP: The watch market in Europe has been extreme weak. Has it affected IWC negatively?

GK: The German market suffered a lot. Overall Swiss Exports to Germany dropped dramatically, from being the 4th biggest market now to the 8th. We suffer in Switzerland because of reduce tourism, but we are able to develop in France, Spain and to further develop the Italian market. On the whole, we are fine. IWC is resisting the bad economy better than any other brands. If we outperform the market, which we are, we are doing well.

TP: How to further improve IWC?

GK: In summary the real key elements for success are good products and good communication, not logistics, not IT, not finance nor any other thing. We are continuously improving our products. We need to invest more in communication to gain brand awareness. We need to explain whom we are, our roots, where we come from. And it is difficult to do. But we have to do it.

TP: Thank you, I am honestly impressed by your good grasp of the situation and intelligent handling of your company.

GK: Thank you.

(Exploded view of Calibre 5000, a new trend for IWC?)