March 30, 2018. Shanghai – How do you make sure 100 people in a classroom can all clearly hear the melody from a tiny music box? By simply putting a piece of wood underneath it. This “magic trick” was how Mr. Oliver Audemars, Vice Chairman of the Board of world-renewed Swiss watch brand Audemars Piguet, began today’s speech at CEIBS Shanghai Campus.

He explained that this quality to help transmit sound was specific to that particular type of wood, and it is one of the natural resources – unique to Switzerland – which shaped the formation of the country’s watch industry. Cold winters and an abundance of raw rocks with iron ore also helped, he told his audience. To cope with cold Swiss winters, the early dwellers of Vallée de Joux started to dedicate their workday to craftsmanship, developing extremely complicated technical skills for the production of watch parts. And that transformed a place with an average temperature of 5 degrees Celsius into the cradle of today’s high-end watchmaking business. Among those early craftsmen and artisans, Mr. Jules Louis Audemars and Mr. Edward Auguste Piguet established their company in 1875. Today the great grandson of one of its founders captivated the entire room with the surprising, yet inspiring story of the origins of this 140+ year-old legendary watch manufacturing company which is still in the hands of the founding family.

The deep-rooted legacy is more than technical skills merged with excellence and a finely-tuned sense of detail, there is also a spirit of independence. In his speech on Family Business Heritage and Innovation, Mr. Audemars pointed out that the family’s fierce independence helped them to master the unyielding environment and pursue their passion. It helped the company endure the hard times during WWI and the Great Depression. When the Japanese-made quartz watches poured into the market in 1970s, innovation was the key to Audemars Piguet’s survival. Royal Oak, the world’s first luxury sports timepiece with octagonal bezel and stainless steel case, was launched in 1972 when most watches were made of gold. “This is where we combined tradition and modern technology. It shows that we can transform raw materials into an art piece, into something really precious,” said Mr. Audemars. And that is also how the Swiss watch industry transformed itself after the 1970s. As a matter of fact, today, Switzerland’s export volume in the global watch market is less than 2% but the value is more than 55%. In other words, these handmade watches are not only used to measure time, they are also valuable works of art.

The other side of the coin is that many luxury groups, such as LVMH, Richmont, Kering and Citichamp from China, started to acquire Swiss watchmakers. In 2000, to gain market share, Audemars Piguet decided to buy back the distribution channel and manage each boutique and store around the world. This strategy led to a tripling of revenue growth between 2002 and 2007. As Mr. Audemars explained, “It is critical to be successful financially. You have to be strong. Otherwise, you cannot remain independent. Independence is the key to be able to continue the tradition. And we are not thinking in terms of quarterly reports, but in generations.”

The company balances tradition with innovation. Mr. Audemars pointed to several examples – exhibitions in Shanghai, the animated movie “Time Spy” in New York, and the newly-built AP museum and hotel in Vallée de Joux – of how art-related projects have led the company to evaluate the possibilities of doing some things differently and embracing change. “For a company that started in a small valley in Switzerland, that is overreaching; it is a great way to enter into different parts of the world through artists’ eyes,” he said. “The financial report just gives you one aspect. Another important aspect is the artistic perspective. It is critical for us to prepare the company for the next generation.” Mr. Audemars ended his speech with an overview of the company’s most deeply held values, then took questions from the audience.

The forum was organised by the Centre for Family Heritage at CEIBS, chaired by Prof. Jane Wang and funded by Fortune China.