Udyog Jagat

RIP HMT Watches – What went wrong?

Post selling >100 million watches, “timekeepers to the nation” is now down & dusted. Was it Obsolescence, Leadership breakdown, a failed business model or something else…  

  

Most companies follow a typical business model - "Start, Grow, Invent, Grow, Mature, Diversify or perish”.

Classic example to elaborate this model is “HMT Watches” (hereinafter referred to as HMT) – One of India’s most iconic and traditional watch making PSU. Started in 1961, HMT ruled the Indian market in the 1990s by providing inexpensive mechanical watches that were affordable by all. Who can forget the memorable “Pulse of India” ad of HMT! The melodious era of 1990’s comes alive in this ad with the beautiful picturization of family, individuals and country as a whole.

Unfortunately, dated-Jan 2016, HMT’s clock stopped ticking. The Union Cabinet announced its closure due to non-performance and unviability.

The term “Grow” (as indicated above) for HMT was to tap new markets, increase manufacturing capacity and achieve profits. The term “Invent” was to engage their talent for innovation to further enhance sales and profits. My dad still owns a “HMT PowerWatch” that charges from body heat. HMT was truly a pioneer in churning out innovative designs to market.

HMT’s journey wasn’t easy, but it stood still for >4 decades through its innovation. Though HMT collaborated with Citizen-Japan, and few others, its business model was never aggressive on acquiring any Category Kings⁽¹⁾. HMT, being a giant PSU, could have easily acquired Category Kings to stay fit in its business. In short, HMT adopted “Build” as its business strategy.      

On the flip side, Savvy big companies - Tata, Reliance, Google, Apple, Schneider Electric, etc. follow “Buy” as their business strategy. Schneider Electric SE, a French MNC, alone has acquired >35 Category Kings till date, and hence it’s one of the market leaders in energy management solutions, with approx. annual revenue of €27 billion (as on 2015).

When a Savvy big company buys a small growing company, they aren’t buying their revenue, profits or even technology, they are buying their position in a new category. The big company wants the growth potential and the chance to become a Category King in a new space. They aren’t just buying the product.

Based on above comparison, it seems “Buy” is The Business Mantra. Depends on factors influencing an acquisition is the answer.

When “Google” couldn’t buy “Facebook” they created a me-too copy “Google+” and failed. “Facebook” could have easily copied “WhatsApp”, but they acquired it as “WhatsApp” is the Category King. “Colgate” is still the preferred toothpaste in Indian market, “Parle-G”, “Ujala” still dominates the rural Indian market, “Coke” still dominates “Pepsi”, and so on.  

Strategically equipped companies always look to gain long-term, profitable growth. To do that they either have to design and dominate new categories and/or acquire the companies that do.    

Instead of “Build” if HMT picked “Buy” or a mix of both strategies, it would have survived. Today, when I see HMT watch on my dad’s wrist, I feel sorry for this iconic brand and wish it was still blooming. I feel myself (from Y2K generation) unfortunate to have this yesteryear “pride of nation” missing on my wrist.  

Finally, I leave you with this popular ad of HMT (year 1996) that truly brings back the wave of memories from the past and the forlorn event of its unfortunate shutdown.   

⁽¹⁾ Category Kings are the explosive and enduring companies that create great value overtime. They change our lives. Introduce us to something different. They create a whole new way of doing things and create new markets.