Partnership is Key: Frédéric Arnault, TAG Heuer CEO
TAG Heuer CEO Frédéric Arnault firmly believes that one needs good partners to achieve success. From the Connected Watch to Ryan Gosling and Porsche, we get into it with him
TAG Heuer has had some famous leaders over its 185 years. Of course, the brand is defined by the era of Jack Heuer, who developed and introduced most of the collections that are emblematic of the brand today. This century alone has seen TAG Heuer under the leadership of industry legends such as Jean-Christophe Babin (now of Bulgari), Jean-Claude Biver (no introduction necessary) and Stephane Bianchi (now head of LVMH Watch and Jewellery).
Today, the brand is the domain of another famous name, Arnault. CEO Frédéric Arnault is perhaps best known as the son of LVMH supremo Bernard Arnault, one of the world’s richest people (some say the richest, depending on how Elon Musk is tweeting) and definitely Europe’s richest man. That is of course unfair, and we bring it up now just to get it out of the way. Just using the surname Arnault in an LVMH-related story will have you thinking immediately of the senior Arnault, so there is no avoiding it. In our conversation with Frédéric Arnault, we did not discuss his family — except for one specific mention, related to his first watch — and the standard publicity strictures around the young CEO (he is 28) preclude any personal questions. This is not unusual, in itself, because plenty of CEOs do not put themselves at the centre of their brand’s narratives.
We finally managed to get some face time with Arnault in Singapore when he was in town for the Singapore Grand Prix this year, and we were excited. The timing was not ideal, given the length of time between the interview and publication. With that in mind, it was decided to try a different format for this story, given that we have never spoken with Arnault previously, in any capacity. This is not to say that he is a cipher or anything, although he is more reserved than expected for a CEO. Certainly, the contrast between himself and other more established figures at TAG Heuer is a strong one. While we could have used this story in the Legacy issue, it seemed a better fit for our standard Festive issue instead. We have had a deluge of interviews in the second half of this year, resulting in the biggest interview section we have run since 2016, and we are managing all this by publishing in chronological order.
Back on Track
As far as the story of the Arnault family and their ties to TAG Heuer go, bringing this up in relation to Frédéric Arnault’s top job is particularly unfair for a number of reasons. First of all, on the marketing side of things, TAG Heuer faithful will remember Frédéric Arnault as the man who finally made the Carrera connection between Porsche and TAG Heuer official. Biver did not do that, and not even Jack managed it. Frédéric Arnault did, but first he had to pivot the brand away from football, or soccer, and back to motorsports, in a move that many — inside TAG Heuer and amongst watch lovers too — were unconvinced by, initially.
“People were saying, ‘Oh, motorsports, it’s not what it was; it’s not as exciting; it doesn’t attract a young crowd… Are you really sure you want to reinvest heavily in that direction?’ And there’s like all this sustainability issues (connected with motorsports), but I had the belief that that was right for the brand, and that’s where we need to be strong. That’s where we needed to also dominate in the industry as being the watch brand most closely linked with this world. So, of course it was motor racing for us.”
It was a bold move, even if it felt like a return to tradition because the football connection was only in its nascent phase, or beta phase as Arnault says, and he notes that it was a major investment. In any case, TAG Heuer is back in Formula 1 now, and climbed to the top of the podium in its partnership with reigning world champions Red Bull Racing. The successful Porsche connection followed, but it was not the case that Arnault could just ride on both his famous name and that of the brand he commanded. According to various sources, including the excellent New York Times article by Vanessa Freidman referenced heavily for this story, Arnault achieved this by making cold calls and being tenacious.
“He writes a letter to the chairman and gets no answer,” Bianchi told the New York Times. “He writes to the VP for marketing: no answer. He invites them to see the company. He had three or four refusals before they even agreed to come and listen.”
“So the management, and the family as well because you know it’s a family-owned business, saw the historic connection,” said Arnault. “They saw the vision we have for the brand, and they wanted to be part of it. For now, it’s doing very well for us.” It seemed to line up perfectly, what with Porsche almost certain at one point to re-join Formula 1 with none other than Red Bull Racing. Events have put paid to that plan, but the dust has not yet settled.
Arnault is also the architect behind the digital renaissance at TAG Heuer. It is no small feat that TAG Heuer remains the leading Swiss player in the smartwatch game, giving fellow LVMH brands such as Louis Vuitton and Hublot a leg up in this area.
“We have a vision and strategy that’s different from our watch competitors because we decided to invest heavily, and build (the Connected Watch) as a pillar. Of the watch brands, we have legitimacy because avant-garde is part of our name [this was in response to our suggestion about the meaning behind TAG – Ed] hence innovation as well…also because of our relationship with the worlds of sports, health and wellness. This has always been so important for TAG Heuer, and is also one of the key features on the Connected Watch. Our values (thus) allow us to make it work better than other brands.”
- READ MORE: TAG Heuer Connected Calibre E4: Winning Form
Growing Up Arnault
It is this development of smartwatches that seems most salient when it comes to discussing the younger Arnault. It is no exaggeration that most of the Swiss watch trade never really tried to make a go of grabbing part of the smartwatch pie. So why and how did TAG Heuer manage it? The answer in one name is Frédéric Arnault, although he was behind the scenes at the time and has never really made the TAG Heuer Connected Watch about himself. There is an interesting story here, which requires us to backtrack a little and get into Arnault’s history.
The fourth child of Bernard Arnault, Frédéric is on the record saying he never felt pressured to join what amounts to the family business. Notably, he is also one of five Arnault children to find himself working at LVMH, and now the second in the watch business; younger brother Jean works at Louis Vuitton watches, but Frédéric paved the way for him, arguably. The New York Times and South China Morning Post, amongst others, note that Frédéric and the other Arnault children all grew up in, or around, the business, which may be a supposition but not an unfair one given that they are essentially part of a family business. Think of it this way: What do you call a farmer’s wife, and children? The answer is farmers, of course.
Like many of France’s elite, Frédéric Arnault attended the École Polytechnique, emerging with a degree in applied mathematics and computer science. He later interned at Facebook and McKinsey & Company, before co-founding a mobile payment start-up with a friend from school. At the same time, he was already working on the Connected Watch at TAG Heuer. The start-up was sold to investment firm BNP after 18 months and Arnault properly joined TAG Heuer in 2017 in a temporary role as the boss of connected technologies. At the same time, he indulged in his love of music, reportedly playing piano at impressive levels. He used to give concerts once a year, until he became CEO of course, according to the New York Times.
While Arnault’s rise may have been meteoric, he did learn some impressive lessons during his technology stints. For example, in our discussion, he expressed a degree of incredulity about the fascination Swiss watchmaking firms have with vertical integration, although he does note the importance of leveraging TAG Heuer’s know-how in assembling great wristwatches. He just did not think the company needed to be in the micro-electronics business. Arnault understood immediately that software was the game.
“When I joined, emphasis had been put on the production, making everything Swiss-Made, so investing in our own factories to build the Connected Watch. When I studied the industry, the technologies evolve so fast that it’s almost impossible (to accomplish) with the volumes that we had, and what we planned to achieve… It took some time for me to shift this (to say) actually we’re not going to invest ourselves in production (of the Connected Watch). Where we need to invest is on differentiation (between all the many smartwatch offerings), which means software, and that’s why we built our own software team.”
In the end, Arnault leveraged on his expertise in the technology sector to set up shop in Paris, where TAG Heuer takes care of design and mechanics by leveraging off the expertise of the Swiss production teams. He notes that they now focus on developing software, and making some hardware, to build the brand’s use-cases and drive the technology behind the success of the Connected Watch. The rest of the electronics hardware, well that is built by partners and vendors. One major pay-off here is that TAG Heuer has the most popular golf app in the world, according to the Times.
This partnership narrative plays out in other areas of production as well, with quartz technology being another example. It also explains one of the most talked-up and surprising developments arising from TAG Heuer this year: the Aquaracer Superdiver, powered by a Kenissi automatic movement.
“What’s important is differentiation on the products and the level of quality we offer to our customers. Sometimes for some movements, we invest in-house for most of the aspects like the Heuer automatic movement and where we go very deep. We are investing also on the hairspring…it’s not industrialized yet so we can only offer it on very high-end pieces such as our tourbillon or some of the Only Watch pieces that we do. We are working on industrializing it because it has a lot of benefits for the customer: better precision, better durability, and some production benefits as well.
“So, there’s reasons for us to invest there, but we don’t necessarily want or aspire to do everything ourselves. For some movements, we partner with the best…so with Kenissi for a threehand movement in our Aquaracer. Also, for quartz, we’re not going to develop and build quartz ourselves when we can have access to the best technology and work hand-in-hand with a partner that will allow us to develop exclusive technologies for us.”
This level-headed and pragmatic approach is not limited to production and the digital realm, and goes a long way towards explaining why Arnault (and LVMH) are not shy about Web3 elements such as cryptocurrency and NFTs, current headwinds notwithstanding. Why should brands not hedge their bets, after all. Perhaps the most famous of Arnault’s partnership moves is his biggest publicity coup: securing Ryan Gosling as a TAG Heuer brand ambassador. Just like the Porsche partnership, Arnault drove the effort to secure the Drive star. Gosling had never accepted any brand partnerships, and famously does not play this game. Nevertheless, Arnault felt he was a great fit.
“Yes, sports played an important role in the history of the brand, but we also always had a very strong connection with Hollywood, being present in some iconic movies. Of course, there’s Steve McQueen (whose relationship with the Monaco is legendary, see #65 – Ed) and more recently we had also some very iconic ambassadors in this world (Chris Hemsworth, notably).
“We want to build the relationship with Ryan Gosling (he is currently designing a watch with TAG Heuer). You know, that’s how we approach it. We don’t want a one-way partnership where the ambassador is just there because he’s been called upon by the brand (to do something). No, he needs to want it. To give his time, to give input; it’s real collaboration we have with him, and he’s very involved in the details of all the creatives with him. He gives a lot of ideas. He challenges us.”
Clearly, Arnault relishes challenges, and is himself somewhat challenging. He is certainly an interview challenge, as noted earlier, and perhaps Gosling’s rejection of social media (he has no public presence on any platform, except TAG Heuer’s now) resonated. Internally, Arnault clashed with plenty of TAG Heuer executives, with various news reports harping on his tendency to be stubborn about getting his way. “We clashed everywhere in the beginning, but now we laugh about it,” Bianchi said. “You can have a big brain and not be a leader. He has both.”
It seems Arnault has mellowed somewhat, if he values partnerships as much as said he does in this interview. Given that these initiatives are all long-term, then his actions give force to his words. We look forward to checking in with him again soon.
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