Seiko’s Duelling Factories

Transcript

It’s the late 1940s, and Japan is rebuilding its economy after World War 2. To make that happen, the government needs foreign currency. And so, certain products have been earmarked as vital exports. One of those products...is wrist watches. Government support is being pumped into the watch industry. For example, a council is created to host a competition between manufacturers to see who’s watches keep better time. The goal is to raise standards and make the whole industry stronger. One of the country’s biggest watchmakers, Seiko, enters the competition feeling confident.

David Flett: 

I think they submitted 130 some watches, 60 failed during the test, they just stopped running. 

David Flett is a writer at the watch website “Beyond The Dial'' as well as a vintage Seiko collector. And yeah, many of Seiko’s watches were so unreliable, they actually stopped running while being tested.

David Flett: 

...And this really brought home to the Seiko management that they really needed to improve things.

But how were they going to do it? How were they going to quickly turn the company around so they could play their part in Japan’s much needed economic recovery? As Japan’s most prominent watchmaker, they needed to up their game if they stood any chance of selling their watches internationally. After all, they would have to go up against the heavy hitters of the watch world, the Swiss. Seiko realized they could take inspiration from those Japanese Council watch trials, which pitted different companies against each other.

David Flett:

So that is when they setup the competition between the two factories.

That’s right, Seiko changed their fortunes by having two of their own teams, each based in separate factories, compete against each other to innovate new ways to beat the Swiss at their own game. And then bringing the resulting in-house research and development together, they went from being an industry failure, to at one point the biggest watch company in the world. All by changing the way they worked.

I’m Gabriela Cowperthwaite and this is Teamistry —  an original podcast from Atlassian. This show is all about the chemistry of teams – proving that when teams work together, and teams of teams work together, they can achieve more than they ever thought possible.

When I was a teenager, I remember that my dad had a lot of Seiko watches. So when we started working on this story, I gave him a call on video chat...

Gabriela and Dad:

Can you hear me now? I can’t hear you…

Like everybody, we had some technical difficulties at first…

Gabriela and Dad:

Dad, what do you remember about Seiko watches?

I had Seikos that look a little bit like a Rolex, with all kinds of buttons on them, and other little dials within the dials. Seiko was fun to have because you’d get a very functional watch, and I was into carpentry and working on cars and stuff like that, and I would wear a watch and I had a tendency to break them, just physically break the damn things. And with a Swiss watch, it would have been a catastrophe. But you could break a Seiko and it wasn’t the end of the world.

That’s the way my dad experienced Seiko, as fun and functional. But also disposable watches. Maybe you did too, maybe you got a cheap digital Seiko when you were a kid. But did you know that Seiko also produces luxury watches that cost many thousands of dollars, that you definitely don’t want to wear while doing carpentry? Either way, we might take it for granted that Seiko is pretty much a household name. To find out how that happened, we have to go back to when this glorious future for Seiko was almost unimaginable.

It’s the late 1930s and Seiko is owned and run by the Hattori family, the folks who founded the company in the 19th century. As World War II breaks out, their head office, which markets and sells watches, has a major concern. The company that actually makes Seiko watches, the Daini Seikosha factory, based in Tokyo, can be targeted and destroyed at any moment during the hostilities. (Spoiler alert: it eventually is). They need to find an alternative site to move production.

Daniel Moriwaki:

So the Daini Seikosha starts looking for an evacuation site outside of Tokyo already in 1940, even before the war with the U.S. breaks out. And they form a partnership with the Yamazaki Watch Company.

That’s Daniel Moriwaki, a Seiko watch collector and enthusiast. The Yamazaki Watch Company he mentions was based in Suwa, just outside Nagano. The Hattori family partner with the Yamazaki company and that’s where most of Daini’s watchmakers spend the war years. After the war, they head back to Tokyo to restart production in their own factory. But in order to increase capacity, the Hattori family decides to bring the Suwa factory into the Seiko family. It becomes a subsidiary of Daini Seikosha.

So now Seiko has two fully functional factories and teams:  Daini in Tokyo and Suwa in Nagano.

Daniel Moriwaki:

Culturally, those two factories are completely different...because essentially, there were people from Nagano, Japan, who are far away from Tokyo. They're more kind of countryside, and they have a completely different culture from people in Tokyo who are, you know, more cosmopolitan, they live in the city, and educated in these universities in Tokyo. 

So you have these two factories with two different work cultures. They operate pretty much independently of each other, because of their distance and individual histories.

By the late 1940s, both Daini and Suwa are submitting entries to the Japanese council of watch accuracy. Separately. And failing. Miserably. The Hattori family that owns Seiko head office, and both factories, makes a decision to change things, as David says...

David Flett:

Each of the factories were tasked to stop copying Swiss movements, to stop deriving their watches from Swiss movements, and actually create their own movements from scratch. 

This really matters because making everything from scratch would allow Seiko to innovate from the ground up. This new focus on internal research and development would be the foundation upon which all future success would be built.

The Suwa team in Nagano is first out of the gates. In 1956, they debut the “Marvel,” the first watch in Seiko’s lineup that is created completely in house, not using Swiss technology. Not only is it the most accurate, reliable and durable Seiko watch to date, it introduces new technology into the Seiko line, a shock absorption system called “Diashock”. Any time a mechanical watch is dropped or knocked, that can affect the part of the watch that regulates timekeeping, the little ticking you hear if you hold it up to your ear. Which means if jolted, the watch stops keeping good time. Not being able to use a shock absorption system from the Swiss, the team at Suwa develops this brand new approach. And since they are under one Seiko umbrella, they share this Diashock technology with the Daini team.

The Marvel is an instant success in Japan. Not only is it popular with customers but you remember that competition for the best watches in Japan?

David Flett:

They weren't just winning it they were wiping the floor with it by the mid '50s. There were no other Japanese companies even submitting entries anymore because Seiko was so far advanced in the '50s.

So Seiko’s first goal has been reached: They are the best watchmaker in Japan and they did it using their own R&D to develop home-grown technology. This huge development is followed by a key moment, one that would change Seiko’s history, as Daniel says.

Daniel Moriwaki: 

That's when the parent company ordered the factory in Tokyo to build a model that could challenge the Marvel, that was built by the Suwa factory in Nagano.

The dictate that all watch production should be done in house was Seiko’s first step towards fundamentally changing its fortunes. But now they take it a step further. Using the new technology that their Suwa team developed, they ask Daini, to see if they could come up with a better watch than the Marvel. It lays the groundwork for a whole new level of internal competition. As Daniel Moriwaki points out, it immediately becomes an intense rivalry.

Daniel Moriwaki:

Because just by the sheer volume of the models that were competing against each other, and if you look at the timeline of all these new models coming out from both of these factories, competing against each other, it’s like, one month you have this model coming out, one month you have another model coming out from Tokyo. It just goes back and forth for a couple of years, just both factories trying to one-up each other. 

Now, usually, competition within a company can lead to tension, burnout and stress. Roni Reiter-Palmon [ron-ee rider pawl-man] is a professor of Industrial Organizational Psychology at the University of Nebraska. She points out that unchecked competition can also hinder creativity.

Roni Reiter-Palmon:

Part of the reason for that is because competition really puts the pressure on what we call extrinsic motivation, so motivation to be creative that comes outside of you. And that tends to not be great for creative performance relative to intrinsic motivation where you're trying to be creative because it's something you care about and want to do.

But what is starting to happen at the Seiko factories in the late 50s is not unbridled, negative competition. There is a control system in place. It’s the idea that the factories are part of the same family. Hirokazu Imai is a representative of Seiko Epson, the modern day company that was once known as Suwa. He explains that like members of a family, each of the factories has its own way of doing things. 

Hirokazu Imai

After Suwa was founded, it gradually gained independence and then a strong rivalry began to grow with Daini. Since they were considered to be the youngest in the family, the team at Suwa felt they had to show their full potential and capability in order to be acknowledged as a full fledged company by its owner/parent. The owner used to say that rivalry to a certain extent was good as it led to healthy competition, but the two factories should work together on key things when needed because they were family.

Suwa’s position within the Seiko family is cemented in 1959 when they become an independent subsidiary of Seiko, and gain a seat at the family table. 

Hirokazu Imai

Suwa was founded in 1959. Since then, people have described Seiko head office as the first son, Daini as the second son, and Suwa as the third son. 

In this setup, the owners, the Hattori family, are the parents. The head office and the factories are their children. And traditionally in Japan, the further you are down the pecking order, the less power you have within the family. But you also have less responsibility and therefore more flexibility to take risks. Regardless, though, you’re still family: your siblings will support you when you need it and when a child succeeds, it’s considered the family’s success. And that’s how the relationship plays out. And it’s this dynamic that Sieko employs in their persistent growth from industry failure to innovating their way to domestic success by this point in the late 50’s. Anthony Kable runs the website Plus9Time, all about the Japanese watch industry

Anthony Kable:

I think they both saw themselves as part of the greater Seiko Group, but I'm sure that the different production teams and design teams, whenever they saw something new from the other team, was definitely pushing forward and saying, "Okay, we need to do better. Okay, let's make our movement thinner. Let's add, you know, complications," or make any additional features that they can to try and push forward and have a more dominant point in the market.

You could call this approach to collaboration “constructive competition” - the two factories are striving for better watches not for their own sake, but for the sake of the greater company. That competition has already led to innovations to make them the best in Japan. But there’s something else happening here, something I doubt the Hattori family was even aware of: a different way for the broader company to approach research and development. 

Some companies have multiple R&D labs working on different projects. Starting in the late 50s, Seiko has two parallel R&D labs working on the same thing: building a watch as good or better than the Swiss. And while each strives for that goal in their own way, should they come across a real game changing innovation, they will share it with the other because they are, after all, brothers.

Within this setup, the Hattori family takes an almost parental leadership role. As Anthony explains, they set the goals that this competitive relationship will strive towards. Remember they may be at the top of the game in Japan but if they want to sell their watches to the world, they need to do more than that. If their top competitors for that market share - the Swiss - are known for anything, it’s quality.

Anthony Kable:

If they came up and said, "Look, we want a high quality movement." They may even specify at a certain price. Ask both companies to produce it, each company is going to do their best to hit that price point and provide the best quality movement and best features that they can.

It is the most junior son, Suwa, who again comes up with an innovation, in response to that call for higher quality, to push the whole company forward. It’s 1959 and they’ve just released the Gyro Marvel, a self-winding watch which has this tiny piece of amazing technology called “The Magic Lever.” You see, the way a self-winding watch works is that there’s this little rotor that spins around like crazy every time you move your wrist. And that rotor does the winding. But only in one direction. If the rotor spins in the opposite direction, nothing happens. The Magic Lever is able to harness both directions of the spin, meaning the watch is wound tighter and more consistently, which means it keeps better time. And it’s a technology that is still used in Seiko watches today. But back in 1959, it is so innovative, so important, it is shared with their “siblings” at Daini, to improve their watches as well. 

Again, this is a key part of what makes the constructive competition work, says Roni Reiter-Palmon.

Roni Reiter-Palmon: 

We know that knowledge sharing is very beneficial for creativity. So in this particular situation, what you have done is you removed some of the difficulties associated with creativity in terms of competition and allowed the creativity to flourish because you have a different mechanism.

Seiko’s approach for how its team of teams works together through constructive competition, along with intense persistence, is starting to pay off. But there’s still a long way to go. Watch writer and Seiko Collector David Flett points out that there was something else happening in the watch industry as the company enters the 1960s, bubbling away in the background, that would turn out to be the biggest of all game changers. A new watch technology that could completely upend the industry. And if Seiko’s R&D teams can capitalize on it, it might be the silver bullet against their Swiss competitors.

David Flett: 

The dictate that came down from management saying, "You must produce a quartz watch before the end of the decade." Somewhat similar to, "We will put a man on the moon by the end of the decade." From Seiko it was, "We will have a quartz watch that will be an order of magnitude more accurate than any mechanical timepiece and we will have it on sale by the end of the decade."

This was a massive ask, because at the beginning of the 60s, quartz technology - which uses a  battery that powers a vibrating crystal to keep time, instead of springs and gears - is extremely expensive and bulky, only being used in experimental clocks and timers. But it is also far, far more accurate than mechanical timekeeping. While the race for a quartz watch is also part of the competition between the Seiko factories, it is primarily tasked to Suwa. Since they are the most junior son, with the other sons there to back them up, they have more freedom to experiment. Even the freedom to fail. 

It’s a decade into Seiko’s transformation, from a disaster at the Japanese watch competitions, to the best watchmaker in the country. But even after all the strides they’ve made, what about their big hairy audacious goal, to be the best watchmaker in the world? 

David Flett: 

As the '60s dawned they still couldn't compete with Swiss watches. And they couldn't compete with Swiss watches on two fronts. One was accuracy. They still were not that accurate, even though they were reliable. And secondly they just didn't appeal, from a design perspective, to the Western export markets. And it was the export markets that Seiko really wanted to go after. 

Becoming a world class watchmaker doesn’t happen overnight. Despite years of improvements, the Seiko teams must remain persistent in chasing their goal. On one hand, they need to make their watches more visually appealing, more modern looking. And while they are reliably consistent, they aren’t accurate. Each day, for instance, they’ll be about 30 seconds off. Great that they’re stable, not great at keeping good time.

The first major step in this direction happens in 1960. The Suwa factory has just released their pinnacle watch: the Grand Seiko. Despite their past successes, as the most junior son they feel like the underdog, so they push themselves even harder, creating their own internal testing system, which the Grand Seiko aced. Keeping up the competition, the next year, Daini counters with the King Seiko. While both watches are by far the best released by Seiko, the Grand Seiko, because it passed those internal quality tests that Daini didn’t have, is priced higher and considered Seiko’s first luxury watch. Seiko’s constructive competition, and especially the family dynamic where Suwa is the youngest and most risk taking child, gives them freedom to be more innovative. Meanwhile, the Hattori family is confident that finally, after a decade since their embarrassment at the Japanese watch competitions, they can soon face off against the Swiss as equals. In Switzerland's own watch competition.

It’s 1964 at the International Observatory Competition in Neuchâtel, Switzerland. Seiko is the first ever non-Swiss watchmaker to enter the wrist watch part of the competition. And even though the watches have the Seiko name on them, they’ve actually been submitted separately by Suwa and Daini. But that doesn’t mean there isn’t sharing behind the scenes, explains Seiko Epson’s Hirokazu Imai.

Hirokazu Imai

Although Suwa and Daini were usually independent and were participating separately in the competitions in Switzerland, they were collaborating in some fields. For example, Daini was mainly in charge of developing and producing mainsprings. Suwa’s experts did come up with some ideas in terms of development of mainsprings, but Daini was in charge of actually producing them.

Mainsprings are super-thin strips of coiled up metal that power a watch. And at the Neuchatel competitions, inside all of Suwa’s submissions are mainsprings made by Daini. Because the family agrees that Daini’s mainspring R&D is superior. But how does it all come together in Switzerland?

The results come in. Daini’s best result is... 153rd. Suwa’s best result is better, but barely: They come in... at 144th.  

Calling this a disappointment would be an understatement. And not just because it seems to dash Seiko’s hopes of competing with the Swiss in international markets. They are also competing with the Swiss at home. With Japan’s economic recovery in full swing by the mid-60s, income levels are rising to the point that imported Swiss watches are selling well in Japan, threatening Seiko’s home field advantage. 

The results fire up the Suwa and Daini factories even more. They spend the next few years in their persistent search for success, continuing to innovate as individuals while sharing knowledge together. And at long last, a decade of constructive competition produces a stunning result in 1967. One of Suwa’s watches comes in 12th place, while Daini captures 4th and 5th places. The following year, Seiko arrives in Switzerland confident that their mechanical watches are now better than their Swiss competitors. But shortly after testing begins, the wrist watch competition is called off. Is this a conspiracy to insure the Swiss aren’t beaten on their own turf? 

Undeterred, Seiko switches over to another watch competition, this one in Geneva. This time, Seiko takes fourth to tenth places, the best result from any single manufacturer. And while their watches are beaten by Swiss movements, they aren't mechanical watches. The Swiss had entered prototypes of quartz movements. And that, by the way, is probably the real reason the other competition was called off, not to disadvantage Seiko but because this new quartz technology was inherently so much more accurate than mechanical, it wasn’t a fair contest.

This loss to quartz watches sets off another flurry of activity at Seiko. Yes, after nearly twenty years, they have achieved their goal of going toe to toe with the Swiss. But now there’s something even more urgent. Like the space race, even though the Soviets were first to put a man in space, the US in 1969 was keen to get a man on the moon before the Russians did. In the same way, Seiko can see that the Swiss are ahead when it comes to quartz technology, but who would be the first to successfully shrink down that technology and get a quartz powered wrist watch to market?

Well, a quartz watch is released just a week shy of 1970.

SFX: Seiko Ad

This tiny quartz crystal is helping Seiko change the world’s standard of time-keeping accuracy. Because a quartz wrist watch is at least four times more accurate than any other kind. Accuracy you can see as the second hand moves in precise, one second intervals. The Seiko Quartz. Someday, all watches will be made this way.

Seiko has done it. The very first commercially available quartz wrist watch isn’t released by the Swiss. It’s the same Japanese underdog who for years couldn’t compete on the international stage. Watch writer David Flett.

David Flett: 

If you wanted to buy the quartz watch, that first quartz watch on Christmas day 1969, you were going to have to pay more than the cost of a family car to own that watch. It was extremely expensive. 

And that watch, the very first quartz wrist watch, is called the Seiko Astron. Created by the team at Suwa, that “youngest son” originally tasked with the challenge. And who, with persistence, a dose of risk-taking freedom, along with familial rivalry and support, pulled it off. 

Less than a year later, Daini releases their own quartz wrist watch. Not only has Seiko beaten the Swiss to market with a quartz watch, it ends up being even more monumental than trying to beat their mechanical movements. As the 70s go on, quartz watches become so affordable, thanks to innovations from the Daini factory, that quartz threatens the market dominance of mechanical watches. So much so that by the early 1980s, most Swiss manufacturers have not only given up on mechanical watch making, they are on the verge of bankruptcy. 

And Seiko, whose watches once couldn’t even make it through a competition without stopping, made quartz innovations and sales the cornerstone of their business. Becoming, for a time, the biggest watch company in the world.

I think it’s amazing that after trying to beat the Swiss at creating the best mechanical watch in the world, it was actually quartz technology, something that relies on crystals and batteries instead of gears and springs, that disrupted the industry. But as David points out, even the push for quartz was fueled by the duel between the two factories. Having all that R&D capacity in house, was key:

David Flett: 

I think it's absolutely true to say that without the competition they would not have made the strides they did at the speed they did.

This was certainly the view inside Seiko. Kiyoko Nakayama was employed at the Suwa factory, working on very high end watch assembly and adjustment. In fact, she was recognized for her work at the Swiss competitions, the first woman to win the movement adjustment prize at the Geneva Competition in 1968. She later wrote about that time at Seiko:

Kiyoko Nakayama (read by actor)

I think we had a strong sense of purpose. It wasn’t about logic, it was about our doggedness and zeal to ‘build a watch that betters the Swiss.’ Our corporate principles include the phrase ‘the power of the individual and the demonstration of comprehensive strength,’ but this might never have emerged had we not had this competition experience. In this sense, I wonder if it wasn’t the Observatory Competitions that created the principles that became the life and soul of the company.

That phrase Kiyoko uses, “The power of the individual and the demonstration of comprehensive strength,” you can apply that to the battle between the factories. They were given the freedom, as individuals, to innovate on their own. But then, by combining their work to further evolve their techniques - by sharing technologies like Diashock, the magic lever, even mainsprings - they found their comprehensive strength. Which is the root of Seiko’s success at the time, says Hirokazu Imai.

Hirokazu Imai

Because the two were independent companies on their own, each came up with different ideas and could learn from each other. While competing with each other and learning from each other, both climbed the ladder to become one of the top watchmakers in the world.

Organizational Psychology professor Roni Reider-Palmon points out that beyond the constructive aspects of this competition, something else was at work.

Roni Reiter-Palmon: 

One of the things that I think speaks a lot about creativity is that persistence, right? So they tried and they tried again and they tried again and they weren't successful. They came in, maybe not last but close to it and they sent watches again to those competitions, and that persistence in trying and trying again and learning from things that did not go well and improving on them, it is again, one of those characteristics that we see with successful innovations.

Roni thinks there’s also another element to Seiko’s success.

Roni Reiter-Palmon: 

One of the things that comes out is the importance of leadership. And we find that that's the case across the board, that leaders have a great effect on both the team climate and how team members behave, their willingness to share information, their ability to manage conflict, whether conflict gets out of hand and so on. So leadership sets the tone.

Much like a parent and their kids, you might say?

On the outside, Seiko’s success and why we know the company so well today, was a result of superior technology and exceptional design, hitting the market at just the right time. Behind the scenes the secret of their success was how they managed their teams. By framing the competition as a friendly sibling rivalry - so, “play nice together, no biting each other” - it allowed for individual innovation along with shared knowledge. A whole new form of R&D that encouraged the factories to bolster each other, not burn out by carrying the load alone -- but remain creative in the face of failures. 

Not only that, Suwa and Daini could play to their own strengths and thus have different roles within Seiko: Daini was the more mature and conservative team, when it came to movements, while Suwa was the risk taker, the innovator. All of it meant Seiko ended up with world-beating watches.