President of Patek Philippe: ‘I am, by far, the watchmaker who knows his customers best’
Thierry Stern is both the owner and director of Patek Philippe, one of Switzerland’s four leading independent watch brands. In an interview he explains why the prestigious Geneva-based company produces almost all its timepieces in-house, while delegating sales to outside partners.
While it may not rival Rolex – the other major Geneva brand – in terms of sales, many in the know regard Patek Philippe as the best watch manufacturer, and the most exclusive. Its most emblematic models, such as the Nautilus, are snapped up for a fortune on the secondary market.
Together with Rolex, Audemars Piguet and Richard Mille, Patek Philippe is one of the “Big Four” watchmakers, the four independent brands that generate around half the profits of the Swiss watchmaking industry.
Founded in 1839 and owned by the Stern family since 1932, Patek Philippe employs around 3,000 people worldwide, including 2,050 at its Geneva headquarters. It is run today by Thierry Stern, who joined the family business in 1990 and took over as its president in 2009.
Unlike the directors of Rolex, a watchmaking company that has based its success on the cult of secrecy, Stern regularly speaks out in the Swiss and international press. SWI swissinfo.ch met him at the recent Watches and Wonders trade fair in Geneva.
SWI swissinfo.ch: How has Patek Philippe evolved over the past ten years and what changes can we expect in the future?
Thierry Stern: In terms of design, we’ve moved with the times while remaining true to our DNA. For instance, we’ve incorporated more innovative colours – such as watch straps in jeans-inspired colours – while maintaining a classic style. In other words, we’ve been able to combine my father’s very classic culture with my younger ideas – although I’m already 53. In short, we’ve managed to win over the hearts of fathers, mothers, sons and daughters.
As for the future, I don’t have a crystal ball, but I find myself in the same position as my father years ago. I’m trying to teach my young colleagues the importance of innovation while staying faithful to the codes of Patek Philippe. Ultimately, it’s crucial to combine innovation with tradition in order to continue surprising and pleasing our customers.
SWI: How about the evolution of watch movements?
T.S.: The movement is the heart of the timepiece, so you can’t play around with this component, which must always be perfect, fine and precise. We’ve reached such a level of quality and requirements that changes to the movements are rarer and less daring. Nonetheless, we strive to launch two innovations a year, taking care to make them practical and not just gimmicks.
Regarding design, we’re currently preparing products for marketing in 2027. The development cycles for watch movements are much longer: we’re now working on innovations that will be launched in 2038. As a watchmaking leader, I have to propel myself far ahead and take risks, for there is no guarantee that the new advances in watch movements will appeal. It’s always a gamble, but that’s also the beauty of watchmaking.
SWI: You often highlight the “verticalisation” of your production. This is quite the opposite of Porsche, for instance, which outsources 80% of its added value but meticulously controls its suppliers. Why not follow this model?
T.S.: We have a complete manufacturing facility and 95% to 98% of our added value is produced in-house. Of course, we purchase screws and straps from external suppliers and, for safety reasons, we duplicate certain production lines – dials, for example – with outside companies.
But I don’t see the point in outsourcing more, because the best way to control quality from A to Z is to do everything in-house, even if it is more expensive. We go so far in terms of craftsmanship, development and research that we really can’t contract these tasks out.
Concerning Porsche, I think their strategy is dictated by cost-cutting. In any case, a Porsche isn’t really comparable to a Patek Philippe; they’re not at all in the same sector.
SWI: How do you explain the success of the main independent watch brands compared with the big groups?
T.S.: I can’t speak for other brands, but at Patek Philippe our success is due to our passion for our products and for watchmaking in general. We only employ people who share this passion and take pride in developing and representing the best watches in the world, in line with the founders’ vision.
Another pillar of our success lies in the credibility of our brand. Since our founding in 1839, we have consistently produced watches and maintained an unchanged strategy: making Swiss watches entirely in-house. Our customers and retailers, who have known us for several generations, bear witness to this constancy.
Finally, the leaders of Patek Philippe are deeply passionate about their craft and are involved in designing new watches. I know I’m patting myself on the back here a bit, but that’s how it is.
SWI: Yet big groups such as Swatch, LVMH and Richemont benefit from greater financial clout and internal synergies.
T.S.: Since we’re independent, we have to compensate by being smarter in steering our small boat. One advantage is that we can alter course very quickly, as I can change my mind without having to battle against other shareholders or a board of directors. This means I can modify a product line or budget line in one minute. We also have excellent control over our costs because it’s our own money.
We furthermore have highly competent managers who have often cut their teeth in the big watchmaking groups and are very happy to work for Patek Philippe, precisely because the decision-making chain is so short. And finally, we don’t have any political battles within our company, as everyone knows that I’m the boss and no one is going to take my place.
SWI: A small boat? According to reports by the bank Morgan Stanley, you sell 70,000 watches a year and have an annual sales revenue of CHF2 billion ($2.2 billion).
T.S.: As an independent family group we don’t disclose any figures, so I wonder how these estimates were reached. In any case, I don’t read these reports. The figure of two billion is flattering, but I can tell you we’re really not at that level.
SWI: The leaders of several successful watch brands are convinced of the importance of direct sales. Your strategy is diametrically opposed.
T.S.: Let’s not delude ourselves. Those who emphasise the importance of direct sales are not seeking to get closer to their customers, but to earn more money by obtaining the highest profit margins. I’ve worked for Patek Philippe for 35 years and am, by far, the watchmaker who knows his customers best. I challenge any other watchmaking boss – or market manager for that matter – to contradict me.
Patek Philippe does sell through retailers, but this doesn’t mean we don’t go and see our customers. On the contrary, we’re constantly out and about, for example at events organised by our retailers or during visits to our manufacture facilities. Not only do I go and see our retailers and customers in big cities such as New York and Paris, but I also travel to the depths of Texas, and I’m the only watch company CEO to do so.
SWI: Since you have a lot of contact with your customers, why don’t you set up your own boutiques in addition to your salons in Geneva, Paris and London?
T.S.: Because we don’t have the time for that and we prefer to put all our energy into producing beautiful watches. Rather than running shops, I prefer to spend more time with our customer base. This is really important for us, as a family business. Lastly, our retailers have been our partners for two to three generations and we know each other inside out.
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SWI: Patek Philippe is a family company and independence is one of your core values. How are you preparing the next generation?
T.S.: I don’t think there’s just one method, but rather 36,000. It depends very much on the family and the mentality of each child. The main thing is not to worry unduly. In our case, my children’s mother and I didn’t do anything special, but our two sons grew up hearing a lot about the company.
When my children turned 16, I told them they should start thinking about whether they wanted to take over the family business, as this would impact their choice of studies. But above all, their mother and I told them that if they wanted to do something different, we had no problem with that at all, because we didn’t have children so that they could take over Patek Philippe but out of love.
Once I’d taken this load off their shoulders, their school marks soared! In the end, both our boys have chosen to work with me, and I’m very happy about that.
SWI: If neither of your sons were to succeed you, would you be tempted to sell the business?
T.S.: Not at all. I would appoint a non-owner managing director to skip a generation. We have highly capable managers in our company, so I have nothing to worry about here.
Adapted from French by Julia Bassam/ts
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