Richard Mille was able to disrupt the stubborn luxury watch industry through ignorant thinking. A knowledgeable person generally thinks inside the box. When you’re ignorant, you don’t even know the box is there. This is where product differentiation and innovative systems are born: on the edge of absurdity.
Update: Two years after writing this, I realized I was trying to explain the concept of First Principles Thinking. An invaluable skill.
The luxury watch space is known for having very few newcomers. The most successful brands have a rich history and date back hundreds of years. Richard Mille was able to disrupt the industry with an innovative product design, unique business strategy, and radical marketing techniques. And he did it without any prior market research before starting his company.
Mr. Mille was a late-blooming entrepreneur who decided to start his own brand at age 50 after noticing a gap in the industry. He noticed that in the high-end sector many watch brands were not open to categories like sports or women’s watches. He also noticed that contemporary watchmakers were not using modern technology. “Most brands use modern tools to make what are essentially replicas of 19th-century watches,”
“My objectives were weightlessness and shock resistance,” Mr. Mille said. “The idea was to be clinical in the design, and put nothing in the watch that was not absolutely necessary to meet those objectives.”
Morgan Stanley’s latest annual report on the state of the Swiss Watch Industry promoted Richard Mille from 8th to 7th in terms of annual revenue. But the six companies ranked ahead of it all have one thing in common that sets them apart from Mille; an average age of 163 years, while Richard Mille started only 22 years ago.
Richard Mille has achieved phenomenal success in such a short span through its eponymous founder who had a genuinely disruptive vision of forward-thinking high watchmaking. One of Mille’s distinguishing characteristics is its price point. It earned $840m in revenue from selling just 4,300 watches over 12 months, making the average sale price of $195,000 per watch. By comparison, Cartier, which ranked 3rd in the top 50 brands, had a revenue of $1.73B from selling 490,000 watches, making for an average sale price of $4,675.
Mille also bet against the established distribution model of working with retailers. Instead, they chose to sell every watch it makes through their own stores. Rolex, which takes the top spot with $4.7B in annual revenue, doesn’t own a single store. Even Rolex boutiques are operated as franchises by retail partners. While Mille’s approach is more expensive to achieve, it does give the brand 100% of its sales.
In just over two decades, Richard Mille has captured a 2.5% market share of a centuries-old industry. This might not sound like a lot until you consider it’s a tenth of that held by the largest player in the industry, Rolex, and still growing.
Richard Mille’s lack of market research allowed him to think outside the box which is necessary to disrupt an old, brutal industry where the players are stuck in their old ways. Before Richard Mille, the concept of a tourbillon withstanding the everyday conditions of a sports watch is comparable to launching a commercial airplane into outer space—conceptually absurd and technically impossible. This is where real product differentiation often occurs: on the edge of absurdity.
“When you don’t know how it’s supposed to be done, that means you’re going to do it differently.” – Sara Blakely
The relationship between differentiation and absurdity is popular in the technology industry. Facebook, Airbnb, and Microsoft were all considered fads and unsustainable business models when they first launched. Fast forward twenty years later, and they are the new normal, just as the watch industry has reconciled Richard Mille’s product.
By using ignorance to his advantage, Mille fabricated a unique marketing approach and created a design that established brands wouldn’t dare attempt due to institutional norms. If Richard Mille were to follow traditional luxury watch-making fundamentals, they likely wouldn’t have succeeded, nonetheless to this magnitude.
This excerpt from investor Paul Graham’s essay explains why he thinks that ignorance benefits startup founders “Frankly, the most valuable antidote to schlep blindness is probably ignorance. Most successful founders would probably say that if they’d known when they were starting their company about the obstacles they’d have to overcome, they might never have started it. Maybe that’s one reason the most successful startups of all so often have young founders.”
“When Sergey and Larry founded Google in 1998, they had no formal business training or experience. They considered this an advantage, not a liability… They believed that if they created great services, they could figure out the money stuff later.”
Excerpt from the book How Google Works by Eric Schmidt
Successful Entrepreneurs who benefited from their business ignorance:
Richard Branson, $4.4B, had no higher education or formal business training before starting the massive multinational conglomerate, Virgin Group. Today they operate globally in many industries such as Travel & Leisure, Health & Wellness, Music & Entertainment, Telecoms & Media, Financial Services, and Space.
Andrew Carnegie, between $300 and $372 billion at his peak, lacked professional experience or formal education. He dropped out of school at an early age to work as a bobbin boy at a cotton mill, and then as a telegraph messenger. He then worked his way up through the railroad industry and taught himself enthusiastically by reading and writing.
Ray Kroc, $600M, met the McDonald brothers while working as a traveling salesman. He had worked a few odd jobs but didn’t have any formal business education. He offered his services to the brothers, who were looking for a new franchising agent, and together they made McDonald’s a household name. Ray built his value by experiential lifelong learning and leveraged his love for learning to successfully build the largest fast-food chain in the world.
Coco Chanel, $100M, learned to sew not from formal training or education, but from making and altering her own clothes while living in a convent orphanage. She later started making hats as a hobby, and later sold them to other boutiques before eventually opening up her own.
Mark Zuckerberg, $110B, studied psychology and computer science at Harvard before dropping out in 2004 to work full-time at Facebook. While he was a prodigy at coding, he had no formal business education. He learned while building Facebook and still continues to learn to this day.
Others:
Bill Gates dropped out of Harvard. Steve Jobs dropped out of Reed College after one semester. Steve Wozniak, Apple co-founder, was expelled from the University of Colorado Boulder, and later dropped out of Berkeley. Henry Ford learned his trade through apprenticeships and was an enthusiastic autodidactic. Michael Dell started Dell computers from his dorm room and dropped out at age 19 to work on his business full-time. Walt Disney dropped out of high school at 16, earned his first job as a commercial illustrator at 18, and the rest is history.
Part of the reason for their success despite lacking business education is that business isn’t a skill. To be good at business is to understand and relate to people. These people listed above happened to be skilled at something else, whether it was Steve’s design, or Mark’s coding, Dell’s hardware, or Walt’s animation. They all were experts at those things and were able to build a great product where it then turns into a business. They started a business around a great product and not the other way around.
These entrepreneurs succeeded also by doing things differently. They had the advantage of a unique perspective and each created a new path for their industry. An entrepreneur with a concrete modus operandi will create a product no different from their established competitors who have more resources and customer loyalty. Ignorance is important for discovering new processes and disrupting an industry.
Ignorance is defined as the absence of knowledge. There is nothing shameful about not knowing something, in fact, it is impossible to know everything about everything. Having the self-confidence and self-awareness to admit ignorance for something is what allows for growth and learning
There are many different ways to learn. Doing before learning how to do entails the person learning as they go. This type of learning is referred to as experiential learning, which has significant advantages. Learning only has good effects when learners have the desire to absorb the knowledge.
Experiential learning entails a hands-on approach instead of a teacher transferring the knowledge to students. It makes learning an experience that moves beyond the traditional methodologies of a classroom and instead presents a more involved way of learning.
Experiential learning requires self-initiative, an intention, and an active phase. Then, reflection is a crucial part of the process. Like experiential learning itself, it can be facilitated or independent. What makes Experimental learning so special is that reflective thought can grow out of one another, creating a scaffold for further learning, and allowing for further experiences and reflection.
One of the benefits is that there are no boundaries to what you can gain from an experimental lesson as opposed to a curriculum that has limitations structure by nature. The main point of difference between this and academic learning is a more real-life experience for the recipient.
Most of our real learning, whether academic or experimental, comes from doing something wrong. Science shows that experimental learning is among the most effective, in that once learned from the mistake, we hang onto it better than if we learned that same lesson from a teacher. Essentially, doing things wrong leads to doing things right. Sounds counterintuitive but mistakes are fascinatingly important.
Lack of knowledge can even help get us started. Sometimes what we don’t know helps us rather than hurts us. Analysis paralysis is something that affects all types of people in every industry. From the startup founder too scared of his competition to even start, to the CEO of a Fortune 100 company delaying an important decision because of fear of making a mistake—which usually stems from information overload. There are benefits to ignorance. Ignorance isn’t so much negative rather just the state that precedes knowledge.
Ignorance in business also provides an entryway for creativity. When you’re highly knowledgeable in business, you have a specific process for everything, and you have expectations for how everything should work. On the other hand, when you’re ignorant, you have a much different perspective. You rely a lot more on creativity for problem-solving and coming up with solutions. This leads to outside-the-box solutions that an educated business professional wouldn’t think of.
When you are ignorant, you have no idea if what you’re doing is inside the box or outside, so you’re more likely to think outside the box compared to the average person in your industry. Without a set system or process for doing everything, you are forced to find creative ways of solving a problem in your business. This is how people end up reinventing the wheel and generating absolutely revolutionary processes, marketing tactics, sales techniques, and products. A knowledgeable person generally thinks inside the box. When you’re ignorant, you don’t even know the box is there.
This is true for product innovation, systems breakthroughs, company culture, financial planning, and every other part of a business. Most times people just accept things as they are, and only know one way of doing things, and in business that can be dangerous. Stagnation in business is deadly and is a guaranteed way to be overtaken by competitors.
You may have more experience, skills, knowledge, and resources, but they could put you out of business simply because they found a new way of doing things. Sometimes the best way to innovate is by being ignorant or by generating ignorant insights.
If you are an entrepreneur with minimal business knowledge or skills, there are things you can do to hedge your deficit and increase your company’s chances of success:
- Partnering or hiring experts to fill in the gaps. Hiring a consultant can help you solve problems where you lack knowledge or experience. For example, a consultant who specializes in marketing, finance, sales, or general business strategy can help you specialists in areas you’re unfamiliar with.
- Outsourcing work through outside firms or independent contractors allows you to delegate some of your business’s high-level decision-making to an organization with more insights.
- Work with mentors whom you trust and respect. Ask your mentors a lot of questions and listen to their advice. They’ll provide you with complimentary perspectives that can help make up for your lack of experience.
This article is not to convince you to stop increasing your business knowledge. After all, knowledge is power. I am emphasizing the benefits of creativity, open-mindedness, and outside-the-box thinking which are inherent in ignorant thinking.
If you have a business idea you truly believe in, hopefully, this convinces you that you don’t need to know everything before you begin your venture. You might even be more qualified than a fresh MBA graduate! Just be sure to always learn as you go. As Mark Cuban said, “life-long learning is probably the greatest skill”.
Economic Motivation 