Harry Winston: “Glitz, Glam, and Gorgeous Rocks”
Transforming Fine Jewelry into Fine Works of Art for over eighty years
Business Model
Founded in New York City in 1932, Harry Winston represents the best in fine jewelry and high end watch making, setting the standard for all brands within the luxury segment. With his innovative design philosophy focused on allowing stones to dictate settings as opposed to the metal, Mr. Harry Winston, the founder, transformed fine jewelry design, establishing the foundation of the timeless aesthetic of today’s Harry Winston creations. To this day, the company remains focused on delivering creativity, rarity, and quality with each of its products and throughout its retail experience.
Operating Model
The company’s operating model maps to its two businesses: fine jewelry and high-end watch making.
Fine Jewelry
Maintaining the high quality, requires a focus on the development of new products and investment in diamond and gemstone acquisition. Winston was known as the “King of Diamonds,” building a collection of the world’s most famous diamonds and rare gemstones including the Hope Diamond, the Star of the East, the Portuguese Diamond to the Indore Pears, and his first major rough diamond, the 726 carat Jonker. By the early 1950s, his collection was the second largest and most important in the world. The signature style focused on allowing the diamond to guide each design. To accommodate the focus on the diamond, clustering, their signature production technique, was developed, where different cuts of diamonds were set together at varying angles to create highly dimensional pieces capturing light from all directions. This method created the unparalleled sparkle associated with Harry Winston jewelry.[1]
The entire production process was designed to ensure adherence to their three pillars of creativity, rarity, and quality. Vertical integration guaranteed access to a reliable supply of materials with steady pricing and ethical sourcing. Harry Winston was formerly owned by the Harry Winston Diamond Corporation, now Dominion Diamond Corporation, the operator of Canadian diamond mines and part owner of the Ekati and Diavek mines. A continued partnership was established in January 2013 at the time of the acquisition by the Swatch group, maintaining this access.
Diamonds were selected using the Four Cs: carat weight, clarity, color, and cut. The precise cut determined the final size, shape, and facets of the diamond and was undertaken to enhance overall beauty. Designers and master craftsman were responsible for the entire production process from gemstone sourcing, working with gemologists, to the initial sketch to finally setting creation. The process took place in the upper floors of the flagship store on Fifth Avenue. Once a diamond was sourced, the designer created a sketch of the setting for each stone, providing details to the craftsman who then produced the piece. Items were produced in extremely small batches depending upon the number of diamonds yielded from rough stones with no piece exactly the same. Only platinum settings are used to maintain the focus on the diamond itself. An extensive quality control process ensured that each detail of the piece was reviewed before the jewel left the workshop.
Continued investment was made in human capital to ensure that all involved in production possessed both an understanding of the material and technical aspects but also the creativity and vision to realize the brilliance of each stone. By combining superior materials, craftsmanship and innovation with experience and tradition, Harry Winston was able to create handcrafted, impeccable jewels attracting a high net worth clientele that includes Hollywood and royalty.
High End Watch Making
Harry Winston Timepieces were unveiled in 1989, with the application of their innovative approach to fine jewelry design to the tradition and art of fine watch making. Continuing the focus on quality, Harry Winston created ZaliumTM, a lighter, harder titanium that was rust resistant, following the history of requiring better materials to create exceptional products. The timepieces echoed the manufacturers own aesthetic and were identifiable. Unlike, fine jewelry which was produced in New York, the watches were made in Geneva, Switzerland in a factory operating at 40% capacity. The focus on rarity was essential to the business and the desire to maintain luxury.[2]
Alignment
Ultimately, Harry Winston’s operations are designed to produce high quality, one of a kind pieces and are focused on allowing for creativity, rarity, and quality which is central to the preeminence of the brand. Historically, the company has been focused on limited production to maintain the placement of its product in the fine/high end or “art” category. The Swatch acquisition, has resulted in a desire to expand the international footprint and improve the ~5.7% 2012 profit margin to ~25% by 2018, mainly by focusing on the watch making business given Swatch’s expertise in this area. Despite Harry Winston’s original designs and well-respected place in the industry, the low production volume has hindered significant growth within watches. With the economies of scale due to the group-wide sourcing and the ability to utilize the excess factory capacity across all Swatch brands, there is room for improvement. Additionally, the retail distribution network has been extended to five new locations with renovations of existing salons. The deal represents a tremendous opportunity for growth, but attention must remain on maintaining Harry Winston’s reputation for creating exceptional fine jewelry and timepiece collections with the focus on craftsmanship and design which have defined and will continue to define the brand.
Sources:
- http://blogs.barrons.com/penta/2013/01/16/why-swatch-swallowed-harry-winston/
- http://www.edgeboston.com/style/news/189158/diamonds_are_everyone’s_best_friend_at_harry_winston
- http://www.swatchgroup.com/en/investor_relations/letters_to_shareholders
- Swatch Group 2014 Annual Filing, 2015 Half-Year Report, 2014 Half-Year Report http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports
- www.harrywinston.com
- Discussions with sales employee, former owner, designer, and craftsman
- Personal tour of production facilities
[1] www.harrywinston.com
[2] http://blogs.barrons.com/penta/2013/01/16/why-swatch-swallowed-harry-winston/
Elizabeth,
Fascinating case study here. I find it interesting how Harry Winston has backwardly integrated in to the diamond mines themselves to ensure access to supply. This move raised two questions for me: (1) is access to a few mines enough to ensure sustainability given the percent of the total global supply controlled by De Beers? and (2) is the business model and core competencies that come with running a high end jewelry and watch brand truly compatible with diamond mining?
Interesting, Elizabeth!
I am curious how their operations model differs from other fine jewelers. Harry Winston is certainly in a class of its own, but surely others operate similarly? The vertical integration piece does seem incredibly important for quality control and cost reduction. I also agree with Mark about their core competencies though. Mining vs jewelry design and the sustainability of partnerships to do both.
Great job!
Annie
Hey!! Great article! Your article made me wonder what, if any, marketing efforts Harry Winston has utilized to convey to potential customers the high quality of its jewelry and the element of extreme luxury/exclusivity the jewelry represents? Is it’s strategy purely word of mouth in order to attract the “right” people or has there been a broader campaign?
I loved this post, Elizabeth! When i typically think about strong operating models, i’m immediately drawn to businesses that are able to scale, drive volume – but here you drew my attention to a model that reinforces high quality via limited production.. very interesting thought.
Thanks Elizabeth! I worked above the New York flagship store, and the only aspect that surpassed Harry Winston’s jewelry in beauty was its price! I’m concerned about the sustainability of charging such a high markup on jewelry, especially with the strong US dollar and the Chinese and Russian economies stalling. Can their business survive with decreased international demand?