Prof. Klaus SchwabInsight on Global Competitiveness p5

Confiserie SprüngliThe Swiss confectioner p9François-Paul Journe

The watchmaker p17Mario Testino

A philanthropist p21Suvretta House

The deluxe hotel p27 Fondation BeyelerThe art museum p34

Quincy JonesAn encounter at the Montreux Jazz festival p39

VictorinoxThe Swiss army knife p43

Maxon MotorThe engineering manufacturer p50

ActelionThe biopharmaceutical company p54

Prof. Youssef CassisInsight on Swiss banks p58

ISSUE FOURTEEN | WINTER 2013 MADE IN SWITZERLAND

Foreword

Cover Image–View from St Moritz on the Lake Silvaplana, Grisons, Switzerland

Pictet editorial team–Ninja Struye de Swielande and Olivier Capt Design & editorial consultancy–Winkreative | Rapporteur–John WillmanPhotography–Beat Schweizer, Richie Hopson, Meinrade Schade, Claudio Bader, Elisabeth Real. Photographs for Mario Testino courtesy of Musuk Nolte and MATE.Fondation Beyeler: Matthias Willi and Serge HasenböhlerFondation Beyeler artworks by Thomas Schütte © 2013, ProLitteris, Zurich Artworks by Alexander Calder: Collezione Gori, Pistoia; Courtesy Galerie Vedovi, Brussels; Calder Foundation, New York, © Calder Foundation, New York / 2013, ProLitteris, Zurich. Winter 2013 ISSN 1664-008XFor subscription information please contact: privatebanking@pictet.com

Switzerland is a small land-locked country with around 8 million inhabitants, four official languages and a history as a federal republic dating back less than two centuries. Yet when the world economic Forum published its annual Global Competitiveness index earlier this year, Switzerland was in first place for the fifth successive year. in this issue of Pictet report, we wanted to understand what makes Switzerland so special and how the Swiss ‘brand’ has become synonymous with quality and innovation.

we started by asking Professor Klaus Schwab, founder and executive chairman of the world economic Forum, how Switzerland had out-stripped much larger countries. we then looked at some of the industries behind Switzerland’s global success, and at the values they embody of excellence, discretion and first-class service. they included Victorinox, manufacturer of the famous Swiss army Knife, Maxon Motor whose precision motors power the Mars rovers, and actelion whose biopharmaceutical products treat life-threatening diseases.

But Switzerland also stands for watches, chocolates and some landmark hotels. we spoke to François-Paul Journe, who launched his fine watch brand in 1999. we visited Confiserie Sprüngli which began selling delicacies in the heart of zürich in 1836 and Suvretta House near St Moritz which has provided outstanding service to guests since 1912. and of course there is banking. we asked a leading financial historian how the Swiss banks had evolved to become global leaders in wealth management.

we did not neglect the arts. at this year’s Montreux Jazz Festival, we interviewed Quincy Jones, the legendary african-american musician who has been involved with the festival for decades. we visited the Fondation Beyeler in Basel, home to a remarkable collection of modern and contemporary masterpieces. and in our regular look at philanthropy, we spoke to Mario testino, the photographer whose recently created foundation celebrates the artistic heritage of his native Peru.

Pictet has grown and prospered in Switzerland by embodying the Swiss values of excellence, discretion, long-term thinking and service. we hope that you will enjoy learning more about the unique characteristics of this small but influential country which has been our home throughout our history.

Philippe BertheratPartner, PictetDecember 2013

3 pictet report | winter 2013made in switzerland

contents

entrepreneurs

Inspire

educate

TO BE REPLACED BY NEW HIGH RES

Prof. Youssef cassis p58Insight on Swiss banks

Quincy Jones p39An encouter at the Montreux Jazz Festival

Prof. Klaus schwab p5Insight on Global Competitiveness

Mario testino p21A philanthropist

suvretta House p27The deluxe hotel

confiserie sprüngli p9The Swiss confectioner

Fondation Beyeler p34The art museum

François-Paul Journe p17The watchmaker

Maxon Motor p50The engineering manufacturer

Victorinox p43The Swiss army knife

Actelion p54The biopharmaceutical company

5 global competitivenesspictet report | winter 2013made in switzerland

Global Competitiveness

Professor Klaus Schwab

The founder of the World Economic Forum says that Switzerland has retained its top place in the Global Competitiveness Index for the fifth year running as a result of the excellence of its economic and business performance, its human capital and the strength of its public institutions

Professor Klaus Schwab is Execu-tive Chairman of the World Eco-nomic Forum, a Swiss non-profit foundation based in Geneva which he founded over 40 years ago. Born in Germany to parents of Swiss or-igin, he has two doctoral degrees, one in Mechanical Engineering and the other in Economics. He spent a year at Harvard University in the US and went on to be the youngest professor at the University of Gene-va where he developed ‘stakehold-er theory’. The World Economic Fo-rum began life in 1971, and fulfils its mission of improving the state of the world by engaging business, political, academic and other leaders of society to shape global, region-al and industry agendas. In 1998, he co-founded with his wife Hilde the Schwab Foundation for Social Entrepreneurship, supporting so-cial innovation around the world. He also established the Forum of Young Global Leaders in 2004 and the Forum of Global Shapers in 2011.

When Professor Klaus Schwab launched his first competitiveness report in 1979, he was seeking to find the secret formula that makes some countries more successful than others. At the time, he was primarily interested in how European economies were positioned in comparison with their main rivals around the world. But the report has become increasingly global in its scope, and now covers 148 coun-tries from every region and at all stages of economic development. And a striking devel-opment has been the emergence in the last five years of tiny, landlocked Switzerland as the world’s most competitive country.

Switzerland has held on to its top place again this year because it scores highly on the main competitiveness indica-tors across the board, according to Prof Schwab. Despite the problems afflicting the neighbouring eurozone in recent years, the country has recorded impres-sive growth while maintaining one of the most stable economic environ-ments in the world. Many qualities drive

Switzerland’s excellent performance, he adds, with the country’s most nota-ble strengths lying in its strong institu-tions, human capital, innovation record and efficient markets, as well as the sophistication and diversification of its business sector.

‘The country is famous for its finan-cial institutions, and they contribute more than 10 per cent of value added to the economy,’ he says. But Switzerland is much less dependent on one sector than many other countries, such as those in Latin America whose growth is based on exports of raw materials. The highly diversified range of products and services—which extends from finan-cial services and watches to industrial machines and pharmaceuticals—gives the economy resilience.

‘Swiss companies offer high-qual-ity products and compete across a very sophisticated product range. This has helped alleviate the adverse effects of a strongly appreciating Swiss franc, so

6 global competitiveness pictet report | winter 2013made in switzerland

‘Swiss companies offer high-quality

products and compete across a

very sophisticated product range’

that the market share of Swiss goods has remained largely stable. Productivity is further enhanced by a highly sophisti-cated business environment supported by well-functioning labour and finan-cial markets.

‘Against the current high unemploy-ment in Europe and other parts of the world, Switzerland compares extremely well. The country has a labour market that is both flexible and efficient in deploying its talent. Employee protec-tion and the interests of employers are well-aligned, with strong employer-employee relations, and conflict resolu-tion resting on social dialogue rather than industrial action.’

Then there are Switzerland’s public institutions, which Prof Schwab describes as among the most effec-tive and transparent in the world. ‘One thing that sets the country apart from any other is its unique governance struc-ture. In addition to its highly decentral-ised form of federalism, seven members of the Federal Council act as a collec-tive head of state. The political system ensures cohesive and inclusive leader-ship across political boundaries, which enables the country to implement a long-term economic agenda.

‘Also important is Switzerland’s strong collaborative culture among stakehold-ers. Government, business and civil society work together in a coherent way to find solutions for the country. This effort is facilitated by the strong involvement of its population, which votes on major decisions directly. Governance structures—including an independent judiciary, strong rule of law, and a highly accountable public sector—ensure a level playing-field, enhancing business confidence and thus reinforcing competitiveness.

Switzerland is also a global leader when it comes to innovation, he says—not just in coming up with products, but also in doing things differently. The excellent innovation ecosystem makes the country an attractive place to work for highly qualified people. Its scien-tific research institutions are among the world’s best, with strong collabora-tion between the academic and business sectors. Combined with high corporate spending on research and development, much of this research is translated into marketable products and processes.

‘The education system is outstand-ing, producing a highly skilled work-force that continues to receive important on-the job training. Unlike many other countries, Switzerland’s labour force is growing, thanks to the migration of particularly skilled labour, boosted by the bilateral agreements on free circu-lation with the European Union that entered into force in 2002.

‘This investment in human capital is underpinned by strong intellectual property protection. The robust inno-vative capacity leads to a high rate of patenting per capita, which puts Swit-zerland in second place on this crite-rion. Indeed, the combination of highly innovative companies with a strong institutional environment is a charac-teristic of other countries at the top of the Index, such as Singapore, Finland and Germany.’

Switzerland’s ascent to the top of the competitiveness league table has come at a time when the shift in the centre of gravity from advanced to emerging or developing economies has

7 global competitivenesspictet report | winter 2013made in switzerland

Switzerland is a global leader

when it comes to innovation

been accelerated by the global finan-cial and economic crisis. Prof Schwab expects that broad shift to continue, with hundreds of millions of people in China who still aspire to higher living standards continuing to drive economic growth through their productive work and their purchasing power. In the longer term, however, he expects to see more balanced but lower growth in the global economy, as the increasing size of emerging economies makes it harder to maintain annual growth rates of 10 per cent.

‘There is also an underlying global trend of moving away from mass production in emerging markets, with repatriation of manufacturing to advanced economies such as the US, encouraged by cheaper shale gas and oil and rising labour costs in China. This will raise one of the biggest issues facing the world, which is whether 3-4 per cent annual growth rates will satisfy people, even though in the past they would have been normal. Annual growth of 5 per cent doubles the economy every 14 years, while growth of 3 per cent means that it takes 24 years. And with the growth in productivity due to technology, the chal-

lenge will be how to create enough jobs while the world’s population continues to grow.’

The Global Competitiveness Index is compiled by looking at the extent to which countries have developed their productive potential, measured using more than 100 variables. The perfor-mance of different countries against similar competitors and over time varies considerably. South-East Asia performs much better than South Asia for exam-ple: Indonesia is the most improved G20 economy since 2006, while Malaysia remains the most competitive economy among the Asian developing nations. By contrast, India has fallen 15 places since 2006 to fall behind the Philippines which was once 40 places below it—while Pakistan has slumped 28 places, one of the biggest declines of the past eight years.

The Index focuses on the medium to long-term drivers of economic perfor-mance. Some changes can have an impact in the shorter term—regulations affecting the time required to start a business can be eliminated at the stroke of a pen through policy reforms. But others such as improvements to educa-

8 global competitiveness pictet report | winter 2013made in switzerland

tion or building infrastructure take longer to bear fruit. Switzerland may be the most competitive nation now, but barely 150 years ago it was a poor coun-try which had only recently become a federal republic after centuries of strife.

‘I recently met Madame Park, the Korean President, and she reminded me that in the late 1950s, the GDP per capita in Korea was the same as that of Kenya. Today, it is around USD23,000, while Kenya’s is under USD1,000. The two countries have developed in differ-

ent ways, and it needs long and consist-ent economic and institutional progress to achieve significant improvements in competitiveness.’

How long can Switzerland hold its top place in the Index? Prof Schwab says that it will be important to resist drifting into complacency. ‘The banking sector is under scrutiny and necessarily under-going great change. Finding ways to integrate more women into the labour force will be important for enhanc-ing the country’s talent pool further.

‘The education system is

outstanding, producing a highly skilled workforce’

And Switzerland must continue to build on its competitive strengths and resist over-regulation and protectionism.

‘But at present it is a magnet for global talent. Indeed, that is one of the most important factors which attracted the World Economic Forum to locate here: being based in Switzerland rein-forces an organisation’s ability to attract and retain top talent.’

9 the swiss confectionerpictet report | winter 2013made in switzerland

The Swiss confectioner

Confiserie SprüngliAn iconic family business in the heart of Zürich, established in 1836 and now in the sixth generation of its management, is famous across the world for its delicious Luxemburgerli truffles, pralines, tarts and pastries

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Walk down Bahnhofstrasse, Zürich’s exclusive main street, and you soon reach Paradeplatz the commercial heart of the city. And there on the corner of the famous square stands one of Europe’s most renowned confectioners, selling exquisite delicacies made in its own workshops from Swiss milk, cream, butter and eggs. Confiserie Sprüngli is a national institution, which more than 175 year after its foundation continues to prosper, expanding its product range and global reach.

Sprüngli’s flagship product is the world-famous Luxemburgerli, a macaroon that melts on the tongue. The name reflects the origins of the young pastry chef who more than 50 years ago introduced the speciality of the Luxembourg master confectioner he worked for while spend-ing time at Sprüngli. Constantly refined in their new home, there are now more than 30 different varieties of Luxemburgerli, with flavours includ-ing chocolate, vanilla, champagne, raspberry, lemon and pistachio. Every month, new tastes are developed for devotees who are encouraged to enjoy their fresh ingredients—made without preservatives or artificial colours—immediately.‘We make more than 800 kilogrammes a day on average—around 80,000 Luxemburgerli,’ says Tomas Prenosil, Sprüngli’s chief executive. ‘And we sell them only in Switzerland and only

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through our own retail outlets. They are not available wholesale or through other retailers. Everything we produce, we sell ourselves exclusively.’

That policy, he adds, is central to the company’s success, because it can ensure the quality of its products and keep in close contact with its market. ‘It also means that we determine our prices and can control our margins, which is important in the luxury food sector. Other companies that distrib-ute through third parties get squeezed by retailers, but our approach helps us to stay independent and maintain our luxury niche in Switzerland and around the world.’

The company was founded in 1836 when David Sprüngli bought Konditorei Vogel in the marketplace of Zürich’s Old Town. His son intro-duced chocolate production in 1845, and in 1859 the confectionery business was moved to the newly built Parade-platz where a modern transport and business hub was developing. The construction of Bahnhofstrasse in 1864 created a direct link to the city’s central railway station, and Confi-serie Sprüngli’s key position made it a popular meeting place. In 1892, Choc-olate Sprüngli went its separate way as an industrial enterprise that later became Lindt & Sprüngli, leaving the confectionery business to continue as a family-owned craft business.

Under Richard Sprüngli, a fifth generation family member, produc-tion was moved out of Paradeplatz in 1961 because of traffic and space considerations, to the home it has today in Dietikon to the west of the city. And in 1970, a second sales outlet was opened in a Zürich shop-ping centre, launching a programme of expansion into prime retail posi-tions in the city. But with no children of his own, Richard decided to pass control of the business in 1994 to two nephews: Milan and Tomas Prenosil. They had arrived in Switzerland from Czechoslovakia after the Soviet crack-down on the Prague Spring of 1968, making a new start in Zürich where their aunt had married him.

‘At that moment,’ Tomas says, ‘we who had been found ourselves at the centre of Zürich society through our connection with one of the best-known companies in Switzerland. We would spend a lot of time with my uncle on holidays and at weekends, and my brother and I grew up with Confi-serie Sprüngli. During the summer holidays we sometimes worked in the factory and drove trucks to deliver orders—from our earliest days we were involved.’

Tomas originally intended to be a lawyer, and studied law at the University of Zürich after his national service. His uncle wanted him to study economics, but he thought being a lawyer be more interesting and chal-lenging. However once he had quali-fied in 1994, his uncle asked him if he would like to join the company—giving him one week to answer. When he agreed, he started work as plant manager at the Dietikon production factory. His older brother Milan was already working in the business in marketing and sales and is now the company’s President.

Amazingly, this was not the first time that the succession had passed sideways through the family chain in this way. ‘The fourth generation Sprüngli also had no children,’ Tomas says. ‘He adopted his nephew—my

‘I love to identify new trends

and devise new products,

packaging and designs’

12 the swiss confectioner pictet report | winter 2013made in switzerland 12

uncle—and put him in charge. So we have now had two successions that brought in younger people eager to prove themselves. The old saying used to be that a family business lasts three generations: the first starts it, the second continues it and the third runs it down. We are now in the sixth generation because two of our prede-cessors were able to choose the next generation family members with the right characteristics to succeed.’

Tomas Prenosil says he quickly realised that he had made the right decision by joining the business: he found that he had management skills, he liked to work with people and was good at dealing with tacti-cal and emotional issues. One of his motivations for wanting to be a lawyer was that he felt it would give him independence, but being a direc-tor of the family business gave him the independence he desired. He has no outside shareholders to answer to, and since the company finances itself from its own resources, no banks to

worry about. Thus he has the freedom to be entrepreneurial, constantly inno-vating in a world where the pace of change is accelerating.

Tomas describes innovation as his hobby. ‘I love to identify new trends and devise new products, packaging and designs—working with staff, shar-ing experience, thinking about what the market wants and finding ways to meet those needs. We organise inno-vation through a dozen groups that bring together financial, procurement, production, marketing and sales staff to work on ideas for developing the business. I always try to encourage young talent, being flexible when they come up with new ideas and never tell-ing them that if they don’t like it here, they can leave.’

One good example of the fruits of that approach was the introduc-tion of takeaway lunch products in the company’s shops. ‘People came to me with little sandwiches and salads in Tupperware containers and suggested that we offer takeaways. At first there was resistance by those who said we only sell chocolates, but confi-series have always made canapés. So we started to produce our takeaway lines and today they are an important part of the business, attracting regular customers who often buy chocolates at the same time.’

The expansion of retail outlets started by his uncle has also contin-ued. Today there are 21 shops, mostly in Zürich but with branches in other Swiss cities. There are also airport branches in Geneva and Zürich which have high footfall because their prod-ucts make good presents for colleagues and family. Tomas expects to open a few more stores in Switzerland, but he is also excited about the growth poten-tial of Sprüngli’s online shop, espe-cially for corporate customers.

‘For corporate clients, we can indi-vidualise everything—boxes, packag-ing and even special Luxemburgerli flavours for a single event. A lot of global companies have head offices in Switzerland and our very strong logistics division can ship our prod-

‘We are Sprüngli today because of our outstanding

quality, because we are Swiss, because

we are in Zurich and because we are in the Paradeplatz’

13 the swiss confectionerpictet report | winter 2013made in switzerland 13

ucts wherever they want them to go. And companies can even link into our online shop through their intranets to make ordering easier.’

As for international expansion, Tomas Prenosil sees few opportuni-ties in other European countries which have had their own long-established chocolatiers. But he sees potential for the internet business outside Europe, especially in countries such as Japan and cities such as New York, Dehli and Shanghai where Sprüngli Luxem-burgerli and luxury chocolates could be be sold online. A subsidiary in Dubai is pioneering B2B (business to business) markets in the Middle East and India, and also B2F—business to families in those regions who often stage very large events such as weddings and the Eid celebrations. While the cost of flying in supplies to ensure quality and freshness is expensive, people from those markets spend time in Switzerland and know Sprüngli’s products, he adds.

With rising turnover of more than CHF120 million a year, Confiserie Sprüngli is not a small business: to retain its artisanal manufacturing techniques, it employs around 1,000 people. But Tomas is keen to point out how Sprüngli’s success reflects the wisdom of the early family members in buying the Paradeplatz shop in 1859. ‘It was one of the most impor-tant decisions in our history, since it gave us a visible presence in a very important and exclusive place. Selling coffee, croissants and Luxemburgerli could never pay the rent for this loca-tion today—only fashion, watch and jewellery shops can afford to be on the Bahnhofstrasse now.

‘We are Sprüngli today of our outstanding quality, because we are Swiss, because we are in Zurich and because we are in the Paradeplatz. Without this location, we would be somebody else.’

Tomas Prenosil’s tips for family businesses

• Stay close to the vision for the business, so that it survives and remains independent

• Define a system of family governance with rules about the role of family members in the business and procedures for resolving issues

• The succession process is the biggest challenge—it means finding successors who are willing and able to take over, and who have the right personality to run a family business

• The older generation must step back when the younger generation takes over—and not hold on to any aspects of the business. It can be very difficult for entrepreneurs to let go, but it is essential if their successors are to succeed

• Appoint directors who can contribute to running the business—avoid giving power to family members who have nothing to contribute

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made in switzerland 14

15 pictet report | winter 2013made in switzerland

Grand Restaurant, Suvretta House, St. Moritz

15

16 the watchmaker pictet report | winter 2013made in switzerland

17 the watchmakerpictet report | winter 2013made in switzerland

‘My first watches in Switzerland

were available on subscription only

to clients I personally knew’

When François-Paul Journe created his first watch 30 years ago, the Swiss watch-making industry was in crisis. New quartz products had flooded the market, replacing traditional mechanical watches and driv-ing many of Switzerland’s world-renowned manufacturers out of business. Yet today the industry has been restored to health, with buoyant demand for Swiss-made timepieces produced by the country’s best-known watch-makers. Among the most sought-after by collectors are those of F. P. Journe, the marque established by François-Paul in 1999.

‘I created my first watch during the evenings and weekends while working as an antique watch restorer with my uncle in Paris,’ he says. ‘When I had finished it, a watch collector asked me if he could buy it, and then a second one asked the same. At that time, watch collectors were very few, but each year I had new requests for tailor-made watches, which I continued to make on my own.

‘I thought there were probably only ten collectors in the world and that I would not have a job in ten years’ time. But I continued to work on my own, and the orders steadily rose to 11, 12, 13 and then 100. I had created a need, and today we make 900 watches a year.’

By 1989, the French watch-making industry was all but dead, so François-Paul left his country of birth for Switzer-land where he could still find all that he needed to make his watches. He opened his first movement manufacture at Sainte Croix in the Jura—the original home of the Swiss industry in the Jura mountains. A year later, he moved to Geneva where he continued to develop a range of watches which were very different to those of competitors who often stuck to tried and tested designs. Ahead of the times, his innovative timepieces attracted little attention at the Basel Watch Show at first, but recognition began to grow around 1995.

‘An important factor behind this was the launch of watch magazines, such as La Revue des Montres in 1991. Even though watches have been around for more than 200 years, it is only in the last 20 years that they have become fash-ionable. When I started making watches, I had no business plans—I did it because I enjoyed it and hoped that some-one would like them. My first watches in Switzerland were available on subscription only to clients I personally knew, who paid half the price upfront.’

He finally decided to launch his own brand, and F.P. Journe made its debut in 1999 under the motto of Invenit

The watchmaker

François-Paul JourneIn less than three decades, the Geneva-based Frenchman has become famous among discerning collectors for timepieces which combine traditional Swiss quality with revolutionary innovation and exceptionally beautiful design

18 the watchmaker pictet report | winter 2013made in switzerland 18

et Fecit—Latin for ‘invented and made’. His very first time-piece had been a pocket watch with a tourbillon mechanism which had taken him five years to complete. In 1999, he premiered the first tourbillon wristwatch in his Souveraine collection, with the remontoir system he had created in 1982. At Basel in 1999, there was now a queue to order them.

He now employs 25 watchmakers in a beautifully restored 19th century building in Geneva, with in total 65 employees. Another 50 collaborators works in Meyrin close to the city at the Cadraniers and Boîtiers de Genève that belongs to F.P.Jorne. With ten F.P.Journe Boutiques world-wide in cities such as Paris, New York and Tokyo, his staff totals more than 150. And he has continued to innovate and win prizes in many international forums.

François-Paul Journe designs all his watches, draw-ing inspiration from many sources. The Grande Sonnerie, for example, is a very complex timepiece, created in 2000, which chimes the hours and quarters. Designed to be used by a child of eight, it took six years to develop, has ten patents behind the design and is guaranteed to strike 35,040 chimes a year. Many of his watches have windows

‘We are the only watchmaker to use 100 per cent

Swiss-made parts, including

the cases’

19 the watchmakerpictet report | winter 2013made in switzerland 19

in the faces to reveal the mechanisms beneath, and where the hours and minutes are shown on a smaller dial, it is placed to the right-hand side—easily seen when on the right wrist with a shirt cuff half covering the case.

There are different business models in Swit-zerland’s watch industry, he says. Some watch-makers focus on luxury and craftsmanship, while others with factories in China target the mass market. F.P. Journe is firmly in the former group, and is the only watchmaker to produce and use 100 per cent Swiss-made parts, including the cases.

‘Other watchmakers claim to be Swiss-made, but their parts are only 60–70 per cent Swiss in origin. I think the government should be much firmer on this and defend the ‘Swiss-made’ brand for a certain quality of watch—there is no inter-est among collectors and discerning buyers in ‘Swiss-made’ watches manufactured in China. Obviously you cannot produce an entirely Swiss-made watch for CHF250–300, but you can for one that costs CHF250–300,000 or less.

François-Paul says the challenge of running a watch-making business is to bring together all the elements: design, the workshop, the admin-istration—and then to find the right watchmak-ers. Making just 900 pieces a year means that his watchmakers spend a lot of time producing each watch. A new timepiece, for example, requires 900 to 1,000 plans to realise the design. And around 90 per cent of the movement parts are made in-house using highly sophisticated equip-ment capable of cutting metal at molecular level and measuring as little as two microns.

When it comes to assembling a watch, a single watchmaker works on one timepiece from start to finish, which can take as long as three months. His or her name is engraved beside the serial number of the watch, and that person is responsible for all after-sales service during the two-year guaran-tee period. As for finding the best watchmakers, he likes to recruit them from other manufactur-ers, because they will appreciate the advantages of working for F.P. Journe. But he will never take

20 the watchmaker pictet report | winter 2013made in switzerland

someone back once they have left: ‘Watchmakers are very fickle, and will change jobs for a small salary increase.’

He adds that he is not really a busi-nessman by nature. ‘I manage growth carefully and prudently, and I never spend more than I have. That way I never have to raise too much debt. My only growth plan at the moment is to launch a women’s collection next year, and it will have taken me eight years to do so. If you grow 20 per cent per year and your spending rises by more than 20 per cent, you have to raise debt. If you earn 15 per cent after tax, that is the amount you can invest in machin-ery, sales outlets and so on. We have just opened in Los Angeles, and will open another Boutique in Beirut by the end of the year.’

Around 70 per cent of his sales are to established collectors around the world. Real collectors, says Fran-çois-Paul, stick to one brand only—many who now collect F.P. Fourne timepieces had previously collected

François-Paul Journe’s tips for entrepreneurs

• Do something you enjoy doing, because you will spend so 0much time on it—you need passion to succeed in business

• Be organised—it is vital to have a plan and follow it

• Manage your growth so that you can avoid incurring too much debt

Patek Philippe watches. Some of the other watches are sold to customers in emerging markets. Hong Kong and Taiwan have been good markets for a long time, and mainland Chinese are slowly becoming buyers. ‘But this takes time: they have to buy their first Rolex, and then develop over time into real collectors.’

When entering a new market, most of the watch companies initially work with distributors and are in competi-tion with each other for the best retail space. As a result, smaller brands such as F.P. Fourne start off with smaller displays which means that it can take time to achieve the profile necessary to attract potential customers.

However, F.P. Journe’s carefully managed growth strategy has other trump cards, the most important of which is the enthusiasm of those who collect its watches. ‘They are our ambassadors,’ says François-Paul, ‘and therefore they are our most important customers.’

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A philanthropist

Called back to his Peruvian rootsThe renowned Peruvian photographer Mario Testino has created a cultural institute in Lima to exhibit his work, celebrate the artistic heritage of his native country and provide a focus for his philanthropic activities

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Mario Testino is a fashion photographer well-known for his portraits of models such as Kate Moss and Gisele Bündchen, celebrities like Madonna and Gwyneth Paltrow, and members of royal families around the world. His royal commissions have included Queen Rania of Jordan, Britain’s Prince of Wales, Prince William and his wife Catherine Duchess of Cambridge, Prince Harry and—most famously—Diana Princess of Wales. Intensely proud of his Peruvian origin, he has now established a cultural institute in Lima to promote and celebrate the arts of his home country, and to partici-pate in cultural and social programmes for the benefit of the poorest in society.

‘It is a way of giving back to my coun-try,’ he says. ‘People always say that you reach an age in life when your roots call you back. I left my country in 1976 because of the lack of opportunities in my chosen field of fashion. Now there are lots of new opportunities—Peru is no longer just a small Latin American country. Today, Peruvian artists are making an impact on the global scene, and I want to be part of this movement.’

MATE, Asociación Mario Testino, is a not-for-profit cultural institute which opened in July 2012 in Lima’s historic Barranco district, once the

23 a philanthropistpictet report | winter 2013made in switzerland

home of many of Peru’s leading intel-lectual figures, writers and artists.

‘I had bought a house in Lima close to the sea to spend time with my mother who is now 90. The person who helped me to buy it said that there was a wonderful Republican villa just a block away which nobody wanted to buy. It is a historical monument, but people today want modern homes and aren’t interested in these older proper-ties. They see them as “big elephants”, with high ceilings and no heating or air conditioning, and they don’t want to have to renovate them.

‘So I bought it. The price was low, but restoration was very expensive. My intention was to use it to store my work which up to then had been stored in London after being exhibited—I wanted to bring it back to Peru, my home. But I soon realised that it was pointless to leave the work in storage in Lima: I felt that Peruvians should own my work and so I decided to open it up to them. I could use the building as a place to show my own work, as a platform to promote Peruvian art and as a place to bring to Lima things that would not otherwise come to Peru.

‘When people are doing well in Europe, they give back to their communities through art or other activities. But this is not yet happen-ing much in Peru, and while I am not the only person to do it, I wanted to be part of this new move-ment. Peru is going through such a good moment right now.’

Mario Testino quickly realised that he had the power to make things happen in his country. ‘When I call people, they are likely to take my call—so I can really put things together. It is like painting by numbers: as you put one number after another, it becomes a picture. I can call the private sector and the cultural, tourism and govern-ment sectors to persuade them to work together for the same purpose.’

MATE opened in 2012 with a show of his own work called Todo o Nada (All or Nothing) which brought together 54 photographs illustrating two contrast-ing themes of his work: fashion and

‘It is like painting by numbers: as you

put one number after another, it

becomes a picture’

the nude. The intention is to stage two special exhibitions a year among other projects. For example, in 2013 it was Alta Moda (High Fashion)—a series of striking portraits of Peruvians wearing traditional and festive attire from the Andean region of Cusco.

‘Alta Moda has been a sensation. For many years, Peruvians had looked abroad for artistic greatness—like all third world countries, they felt that the grass was always greener on the other side. But after years of looking down on their own people, they have now become very proud of their heritage. I try to promote our culture to encourage this, creating a new nationalist feeling.

‘I have worked abroad for 30 years, yet when people write about me they always describe me as “the Peruvian photographer Mario Testino”. You don’t hear people talking about “the German designer Karl Lagerfeld” or “the British photographer David Bailey”. They are never associated

24 a philanthropist pictet report | winter 2013made in switzerland

with their countries, but this has been another sign for me that being Peruvian is a great asset.’

Mario Testino’s next project for MATE is an exhibition in October 2013 to showcase 30 contemporary artists worldwide. It will be called Somos Libres (We Are Free), which has been the first sentence of Peru’s national anthem since independence in 1821. It will feature the work of artists he has already collab-orated with, such as Keith Haring, George Condo, Ugo Rondinone and Julian Schabel, together with photo-graphs he has taken of them at work.He expects resistance from those who do not see many modern works as art at all. ‘I have been collecting for 25 years and I am not worried about the perceptions people may have about this. It is important to show people that art has to live. I have been work-ing with Neville Wakefield, the curator of this exhibition, and the whole point of it is that artists today are fully free to do what they want in their work. The works on display are not just paintings on canvas but various mixed media, such as pieces using chewing gum

or items of rubbish glued together. It’s all about freedom.’For the moment, MATE is focused on his cultural projects, but Mario Test-ino is bubbling over with other plans. He has been asked to help a new engi-neering university in Peru, which wants all its students to take an art course. His original plan was to target people from the arts scene only, but with others wanting to learn from him he has realised that he must cast his net more widely. He has also decided that it is time to set up his own chari-table projects.

He had already been involved in the philanthropic activities of Russian model Natalia Vodianova whose Naked Heart Foundation creates parks in her native Russia where children can find a safe and inspiring play environment. He has long supported her work and recently donated a portrait sitting that was auctioned off for EUR1 million at her LOVE Ball. Part of the money raised will go towards Mario taking this initiative to Peru and developing play parks there—with his own twist.

‘Nothing in life is without a purpose’

25 a philanthropistpictet report | winter 2013made in switzerland

‘In Europe, children are taken very early to museums and galleries which open their minds. So I want to create an entertainment park with swings, but I also want to have creative expo-sure for poorer children. When I went to Europe, I knew nothing about art, but I went to galleries and taught myself all about it.’

He had also helped raise EUR450,000 in 2006 to build play parks in a hospital in Russia for chil-dren with cancer. ‘When I was 18, my younger brother died of cancer at the age of 10. When I visited the park at the hospital in Moscow, it all came back to me. Nothing in life is without a purpose—I felt my brother had taken me there.

‘So in my philanthropy, I try to tie together all the formative experiences in my life. I chose children and cancer because of my brother’s death, and I chose culture which can help people out of poverty.’

He admits that he has no overall vision yet, but says that life throws up challenges that will help the cultural institute find its place. ‘The more ideas I have, the more it costs,’ he adds, laughing.

One source of income for the cultural institute is sales of prod-ucts developed in partnership with sponsors, using the MATE brand. He has already designed clothing, bags and jewellery with a modern take on Peruvian craft for exclusive sale by Net-A-Porter, the online luxury fash-ion retailer. Each sale will produce a donation for MATE to help fund its activities.

He is also involved in a partner-ship with the Peruvian Government and the World Bank to organise cultural and educational initiatives during the lead-up to the World Bank and International Monetary Fund 2015 annual meetings in Lima. The three aims of the partnership are to promote the brand of Peru, to link the country’s cultural assets to under-privileged communities, and to create new learning centres for arts and leadership.

Other plans include encouraging foreign tourists, who tend to visit only the Inca sites at Cusco and Machu Picchu, to explore Lima and its rich culture. He is also keen to do more in the Baranco district where MATE is based to restore it to its former glory. And he wants to promote the Peru-vian textile industry, perhaps with a national costume institute. ‘We have such a rich history in our traditional costumes,’ he says. ‘For Alta Moda, I took photographs in only one region—Cusco—but we have 23.

‘Alta Moda (which moves to New York in November) was amazing, but now I want to do something very differ-ent. You plant seeds in your garden and you see which flower the best. My only clear vision is that I can give my time and rather than stick to one thing, try to do the next new thing—as I have always done as a photographer.’

‘So in my philanthropy,

I try to tie together all the formative

experiences in my life’

27 the deluxe hotelpictet report | winter 2013made in switzerland

The deluxe hotel

Suvretta HouseIn an era when numbers have come to dominate the hospitality industry, a family-owned hotel high in the Alps offers outstanding personal service to guests who return year after year to enjoy its unique and peaceful location

Switzerland is renowned the world over for its luxury hotels, many of which are located in stunning alpine locations offering fabu-lous skiing in winter and idyllic mountain walking in summer. One of the grandest is the stylish Suvretta House, high in the Upper Engadine valley above St Moritz in the south-eastern canton of Graubünden. Opened just over a century ago, it is still owned by the same family—the reason for its legendary reputation for service, according to Helen and Vic Jacob who have managed the hotel since 1989.

‘There is something special about Swiss hospitality,’ says Vic. ‘But we are now one of the few hotels in Swit-zerland which is still owner-managed and has been from the beginning. The long relationship between the found-ing Candrian-Bon family and the hotel makes a big difference, and is very attractive to the many guests who have come here for many years. They want to see everything the same—that nothing has changed in the hotel, the nature of its clientele or its manage-ment. They often come back year after year, bringing two or three generations of their entire families, so these values are very important.’

Suvretta House, built in just 18 months, opened in December 1912—one of the last grand hotels built in Switzerland. The founder, Anton Bon, kept the hotel open when the First World War broke out, but it was forced to close during the Second World War.

When it reopened in 1946, it had no guests, no money and needed to be restored. But in the following decades, it was modernised by the family, who brought in the first outsiders to run the hotel in 1968.

Located at 1,850 metres above sea level on a plateau two kilometres from the alpine resort of St Moritz, Suvretta House has uninterrupted views of mountains and lakes. Even the journey there can be magical, trav-elling in panorama cars on the world-famous Rhaetian railway which winds through rugged mountainous terrain and across deep gorges on vertiginous viaducts. It is not surprising, therefore, that it has always attracted famous guests, such as the ballet dancer Nijin-sky, Douglas Fairbanks Snr, Emperor Akihito of Japan, Evita Perón and Gregory Peck.

The Candrian-Bon family—which has other interests in the hospitality industry—remains the hotel’s owner, and fifth and sixth generation family members sit on its board. Most of the investments required over the years have been funded from cash flow, although there has been one capital increase and there are other big share-holders, including Urs Schwarzen-bach, the wealthy Swiss investor. But, says Vic, the family commit-ment to Suvretta House means that it still keeps control and is prepared to invest for the very long term through constant refurbishment.

‘Clients often come back year after year,

bringing two or three generations of their entire families’

28 the deluxe hotel pictet report | winter 2013made in switzerland

Today, it has 181 rooms and suites, and a wellness and spa area with a 25-metre swimming pool. It owns three mountain restaurants, as well as its own Grand Restaurant and the more rustic Suvretta Stube with a sun terrace. The Grand and the nearby Restaurant Chasselas have both been awarded 15 out of the maximum 20 points by France’s prestigious Gault-Millau restaurant guide. With as many as 45 chefs in high season, the kitch-ens make everything, including all the hotel’s bread and the chocolates served with coffee.

The Jacobs are only the second outsiders to run Suvretta House, having arrived with solid experience from jointly managing two other Swiss hotels. They are proud that the hotel is called a house, because it aims to make guests to feel at home—Helen and Vic

personally greet every arrival and bid farewell to every departure. Traditions are carefully preserved: dark suits and ties are de rigueur for gentlemen guests at dinner in the Grand Restaurant, while some choose to wear dinner jack-ets for big occasions.

With their three children also in the hotel business, Helen and Vic feel that the industry is deeply in their hearts. ‘It is a 24-hour-a-day, seven days a week job,’ says Vic. ‘You have to be in good health in this business, and you have to love the job. And you must be disciplined and able to decide what is really important and what can be calmly neglected. I contrast our job with that of a conductor, who can always say “play it again”. We do not have that option.

‘There are a lot of very good hotels so there is more competition than

Precision, security and long-term

thinking: values of Swiss hospitality.

29 the deluxe hotelpictet report | winter 2013made in switzerland

ever,’ he adds. But while many of them are very beautiful, they lack soul and spirit. It was not easy to step into the footprints of our predecessors, but in our 24 years here, we have tried to give Suvretta House soul.’

The hotel’s most important markets have always been Switzer-land, Germany and the UK, along with other European countries such as France, Austria, Italy and The Neth-erlands. Word of mouth is now bring-ing visitors from further afield—from countries such as Brazil, Israel and Australia—and from Eastern European countries from Estonia to Armenia. Meanwhile, North American guests continue to return to Suvretta House year after year.

‘Two days ago,’ says Vic, ‘an Ameri-can family came back after a 15-year gap. They wanted to visit the Kiddy Club [the in-house kindergarten] and the Teddy Club children’s restaurant, to revisit the places of their memories.’

After so long in the business, noth-ing that guests request surprises Vic any more. But he admits to being impressed with the personal contacts and long-term friendships that develop over time. ‘People come with personal stories and challenges, approaching you as a friend rather than a hotelier. That is why Swit-zerland’s tradition of discretion is so important when dealing with families.’

Helen and Vic stress other tradi-tional values of Swiss hospitality: preci-sion, security and long-term thinking. But they are also acutely aware that while staying within their traditions, they must be open to new ideas and ways of working as the market changes. Suvretta House is now on internet hotel sites such as Booking.com, for example, because that is where customers expect them to be.

‘If you don’t do these things, potential guests see you as not modern and open for bookings. However our business model is still firmly focused on personal service, which has been lost in a lot of the industry. Nobody wants to be treated as a number, but the trend today is to turn customers into numbers. When our guests call,

‘There are many beautiful hotels but Suvretta has a soul’

we recognise their voices. And we also look for long-term relationships in our suppliers: we still use the builder who built the hotel.’

Suvretta House opens for two seasons each year: ten weeks in summer and a 17-week winter season. The hotel has its own ski-school, the first in Switzerland in the 20th century, with 200 instructors, a ski shop and storage facilities for regular guests to leave their equipment from one season to the next. In summer, it offers wind-surfing, sailing, horse-riding, tennis, golf and other mountain pursuits, though inevitably revenues fall below those of the winter season.

30 the deluxe hotel pictet report | winter 2013made in switzerland

31 the deluxe hotelpictet report | winter 2013made in switzerland

Vic jokes that he does not show the much weaker summer figures to the bank: ‘They would just say “Close the hotel”!’ Winter has more to offer, he adds, but at least Swiss mountain hotels have two seasons: ‘Italy and St Tropez have just one.’ And although Europe’s financial crisis has had an impact on business, with the economies of Swit-zerland’s neighbours suffering, the hotel is surviving without subven-tions. ‘Because we are now more global, we are very well connected to other markets,’ he points out.

The seasonal nature of the business presents people management challenges for the hotel. ‘It is like a cruise boat which has to hire part of the crew for one season at a time. All of our impor-tant positions are full-time contracts, but we cannot guarantee that to all of our employees. For many young people, however, a season at Suvretta House is a step in their career—and an important one. We have to manage that.’

He adds that there is also a chal-lenge in motivating permanent staff. ‘We have people who have been with us for 10, 20, 30 or even 40 years, and we do not want them to become just numbers.’ Long-serving staff are awarded a star for each decade of service, which they wear on their jack-ets. The maître d’hotel, for example, sports four stars.

Due to retire in 2014, Helen and Vic Jacob see their role as ensuring that the next generation of managers have the same opportunities that they enjoyed. ‘It is like a ship that moves in one direction, and you hope it continues in that direction rather than becom-ing just another hotel. In our 25 years of managing Suvretta House, we have seen it as the Patek-Philippe of the hospitality industry: we never own it, but hold it for future generations.

‘The challenge has been to decide which trends to follow, and which are just fads or fashions. A guest wrote to us that Suvretta House is a rock in a sea of short-lived trends. That is what I hope: what I know is that the mountains outside will still be there when I have left, and that is very reassuring.’

32 pictet report | winter 2013

made in switzerland

33 pictet report | winter 2013made in switzerland

Watch movements, F.P. Journe, Geneva

34 the art museum pictet report | winter 2013made in switzerland

Thomas Schütte, Frauenkopf (2006), W

alser’s Wife (2011), and Frauenkopf (2006)

35 the art museumpictet report | winter 2013made in switzerland

‘We want to pay homage to the great artists of our time’

Ernst Beyeler was one of the most successful art dealers of his time, a friend of artists such as Picasso and Giacometti and a key player on the international art scene. Together with Hildy, his wife and business partner, he assembled a fine collection of some 250 classic Modernist and contemporary artworks of the highest quality in their home town of Basel. Housed in a stunning museum designed by the eminent architect Renzo Piano, it has become a magnet for visi-tors from all over the world.

The museum, clad with red porphyry from Patagonia, has a glass roof and glass walls on three sides, providing views over the gardens and bathing the exhibits in the natural light. And those exhibits are of exceptional quality: paintings by Monet, Degas, Cézanne, Van Gogh, Picasso, Klee, Kandinsky, Mondrian, Miró, Rothko, Warhol, Bacon and many others; sculptures by Picasso, Miró, Calder, Giacometti and Arp.

When the museum was opened in 1997, Ernst Beyeler described the couple’s motivation as follows: ‘Firstly, we have always been deeply moved by great works of art, and their impact on us is such that we are often loathe to part with them; and secondly, we have a need to share these works with others and pass on the profit they bring. Also, and above all, we want to pay homage to the great artists of our time, a time which will probably go down as one of the outstanding periods in the history of art.’

The story behind the creation of the Fondation Beyeler is a remarkable one. Ernst Beyeler, born in Basel in 1921, was studying economics and art history at the city’s univer-sity in 1940 when he landed a job in an antiquarian book and print shop run by Oskar Schloss, a Jewish refugee from Nazi Germany. Ernst later recalled that his education was completed by the evenings spent discussing literature, philosophy and art with his employer, and that he also learnt much about business from him.

When Schloss died unexpectedly in 1945, Ernst took over the business along with some substantial debts, helped by a loan from Hildy Kunz whom he later married. Buying and selling books was not where his heart lay, and he decided to pursue his love of art instead. In 1947, he staged his first exhibition to raise money by selling off Japanese woodblock prints which had come with the shop. Although it was successful, he felt out of his depth with the Japanese prints, so he started exhibiting Swiss artists. And in 1951, he launched his first exhibition of classic Modernist works by artists such as Bonnard, Renoir, Picasso and Matisse. It was

The art museum

Fondation BeyelerA unique collection of modern and contemporary art masterpieces, assembled over more than 50 years by a husband and wife team, has welcomed more than five million visitors since 1997

36 the art museum pictet report | winter 2013made in switzerland 36

the first of more than 300 such exhibi-tions in what was soon renamed the Galerie Beyeler.

Success quickly followed, as Ernst established friendships with many artists, including Picasso who allowed him to acquire 26 works from his own holdings. Hildy Beyeler oversaw the financial side of the business and managed the staff, while he travelled abroad—including to the USA. There he met G. David Thompson from Pitts-burg whose decision to sell him his legendary collection of modern art—including 100 works by Klee and 80 by Giacometti—put the Galerie Beyeler on the map in North America. Another coup came in 1972 when he was able to acquire around 100 Kandinsky oil paintings, water colours and drawings from the artist’s widow.

Most of the artworks he handled were sold on to private collectors, foundations and galleries but Ernst and Hildy held on to some of their

favourites which they put into a Swiss foundation in 1982. The collection was first shown in its entirety in 1989 at Madrid’s Centro de Arte Reina Sofia, and when Ernst decided to hang the pictures himself, he was astounded at their quality. Having attracted inter-national attention, the collection was later shown in Berlin and the need for a permanent home was clear. The couple decided to build a museum to make it accessible to the wider world.

Offers of generous support for building and running the museum were received from several countries, but Hildy and Ernst wanted to keep the collection in their home town. So with the backing of the canton of Basel City, they decided on the grounds of the Villa Berower in the suburb of Riehen on the northern outskirts. The plan was endorsed in a local referen-dum by more than 60 per cent of the voters, and the site was provided free of charge by the Riehen authorities.

A priority for the Foundation is to

fulfil the Beyelers’ desire to share their

love of art

Alexander Calder, The Hairpins (1939), The Tree (1960), Untitled (ca. 1958), Sumac II (1952), The Tree (m

aquette) (ca. 1958) and Small City (1964)

37 the art museumpictet report | winter 2013made in switzerland 37

To design the museum, the Beyelers turned to the Italian architect Renzo Piano, whose work included the Centre Pompidou in Paris. The aim was to create a ‘total work of art that paid homage to the artists,’ as Ernst put it—to be guided by the artworks it would exhibit rather than operating independently of them. The challenge for the architect was to understand the spirit of the Fondation Beyeler, and the design required repeated revisions before Ernst and Hildy were satisfied. After the museum was opened, Ernst said: ‘The exchange was so intense that we both emerged in the end with a feeling that each of us could now enter the other’s profession: Renzo could become a collector and I could build the next museum!’

Hildy Beyeler died in 2008, followed in 2010 by Ernst at the age of 88, but the Fondation Beyeler contin-ues to develop and grow in ways that reflect their desires. While providing

a permanent home for the collection, the museum mounts three large exhi-bitions each year: one features a clas-sic Modernist artist in the collection; another an established contempo-rary artist such as Jeff Koons, Thomas Schütte or Jean-Michel Basquiat; and the third is thematic, often focusing on an art capital such as Vienna 1900 or an art movement like Surrealism in Paris. And there are smaller exhibi-tions of contemporary artists such as Philippe Parreno, Maurizio Cattelan and Louise Bourgeois.

‘We also work together with other museums,’ says James Koch, the Fondation Beyeler’s deputy director. ‘The collection is of such high quality that our artworks are in demand from other galleries such as the Guggen-heim or the Tate. This lending power is very helpful in securing loans for us, which is always one of the main chal-lenges for a museum. Our Degas exhi-bition in 2012, for example, had around

James Koch, Deputy Director, in front of Thom

as Schütte’s Fratelli (2012) at the Fondation Beyeler, Riehen/Basel, 2013

38 the art museum pictet report | winter 2013made in switzerland

150 loans from 101 lenders all over the world, in addition to our own works.’

The Fondation Beyeler continues to acquire works by artists such as Félix González-Torres and Louise Bourgeois, who became the first female artist in the collection. ‘Before their deaths, Hildy and Ernst Beyeler collected as private indi-viduals,’ says James Koch. ‘But now our Director, Sam Keller, is in charge of acquisitions. We have a collection policy to shape the decisions, which continue Ernst Beyeler’s tradition of collecting contemporary but established art rather than buying young and unknown artists. The process is guided by an Art Advisory Board whose member-ship includes the directors of the Guggenheim Foundation, Berlin’s Neue Nationalgalerie, the Centre Georges Pompidou in Paris and London’s Tate Gallery.’

Funding acquisitions is a big challenge, he adds. ‘The market goes up and up, but we have a generous budget for acquisitions which includes part of the proceeds from the sale of the Galerie Beyeler in central Basel after the deaths of Hildy and Ernst. We also raise private money to buy particular artworks and are offered donations of artworks by their artists and by collectors.’

Another priority for the Fondation Beyeler is to fulfil the Beyelers’ desire to share their love of art, especially with the next generation. Four family days each year provide workshops for chil-dren to experience the techniques used by the artists on display. There are also 1,800 guided tours a year in total, including children’s tours.Also dear to Ernst Beyeler’s heart was public art, and when the museum was opened in 1997, the

artist Christo was invited to wrap the trees in the park. Two sculpture exhibitions were held in the park during Ernst’s lifetime, and projects since his death have included light projections by Jenny Holzer in Basel and other Swiss cities and a national tour for the giant Maman spider by Louise Bourgeois and the ‘Vier Grosse Geister’ by Thomas Schütte.

Such projects are often attractive to the Fonda-tion Beyeler’s corporate sponsors, which include many of Switzerland’s best-known companies. The running costs of the museum are CHF20-25 million a year, which is partly covered by the Fondation Beyeler, CHF2 million in a grant from Basel City, CHF1 million from the Riehen commu-nity and a CHF1.5 million annual gift from the Foundation of Hansjörg Wyss who is President of the Fondation Beyeler. The remaining sum of around CHF15-20 million is raised from sales of tickets, books and food in the restaurant, corpo-rate sponsorship and individual donations.

Open 365 days a year, the museum attracts around 1,000 visitors a day or 350,000 a year, welcoming its five millionth visitor in 2013. ‘Because of its location on the border, few of our visitors arrive here by accident,’ says James Koch. ‘It is a destination with a beautiful park, land-scape and architecture in symbiosis with the art collection. Although the collection is rela-tively small if compared to those of other equiv-alent museums, it holds only masterworks. It is a unique collection that more than fulfils the desire of Hildy and Ernst Beyeler to share their love of the artworks they collected over their lives.’

Die Fremden (1992) at the Fondation Beyeler, Riehen/Basel, 2013

39 an encounter at the montreux jazz festivalpictet report | winter 2013made in switzerland

An encounter at the Montreux Jazz Festival

Interview with Quincy JonesOn a visit to Switzerland in the summer of 2013, the legendary African-American impresario talks about his approach to the music industry, his social activism and his continuing involvement in what he describes as the ‘Rolls-Royce of festivals’

40 an encounter at the montreux jazz festival pictet report | winter 2013made in switzerland

You have achieved so much, as a conductor, director, producer, musician. How important is the business side to you?I have always followed my heart. I do what I want to do because it’s some-thing I want to hear, and it gives me goose-bumps. I didn’t do Thriller for business—if you do something because it’s what someone else wants you to do, God walks out of the room. There’s a lot of divinity in making music: twelve notes—that’s all there are. You can’t be thinking about making money when you’re doing music. We came from the Be Bop era, when nobody gave a damn about money. Do what you love, and if it happens, it happens.

I had to learn about the business side, of course. I toured in Europe in 1959 and got stranded here aged 26 for seven months with 33 people. They say you learn by making mistakes, and Steve Ross [former chief executive of Time Warner] taught me the business.

So I know more about business now. You need to, so you don’t get killed—it took me seven years to pay for getting stranded in Europe. But I always go with my heart—and the goose-bumps—first.

You produced the We Are the World recording in 1985 which became the fastest-selling American pop single in history, even-tually selling more than 20 million copies. Sales raised more than USD10 million for Africa, with donations and merchandise sales bringing the total to more than USD60 million. How did it come about?It started with LiveAid in England, and Harry Belafonte said we had to do something similar in America. I was called in because I had done an album with Donna Summer just before Thriller, with a song called State of Independence. For that, I had put together what I called the best choir in the world, including Michael Jack-son, Lionel Ritchie, Stevie Wonder and

Quincy Jones is a record producer, conductor, arranger, composer, film producer and trumpeter. As a master inventor of musical hybrids, he has shuffled pop, soul, hip-hop, jazz, classical, African and Brazilian mu-sic into many dazzling fusions, tra-versing virtually every medium, in-cluding records, live performance, film and television. In a career span-ning six decades, he studied with the legendary Paris tutor Nadia Boulanger who had worked with Leonard Bernstein, toured Europe with his own jazz orchestra, worked with Frank Sinatra and produced Michael Jackson’s Thriller album. He wrote scores for films such as In Cold Blood and In the Heat of the Night, and co-produced with Steven Spiel-berg The Color Purple. He continues to support new initiatives in the indus-try, with his latest protégés includ-ing the youthful Global Gumbo All-Stars band.

41 an encounter at the montreux jazz festivalpictet report | winter 2013made in switzerland

‘I have always followed my heart.

I do what I want to do because it’s

something I want to hear, and it gives me

goose-bumps’

Diana Ross. They called me because they said I was the only one crazy enough to deal with all those super-stars—and we got it done. We had it very well-planned, and we calculated that you have to do the backgrounds first because if you do the solos first, the superstars leave. So we did the backgrounds first and planned where everybody stood—you can’t let that many superstars make the decisions.

Do you feel that We Are the World changed the way that the music business does social responsibility?When everyone came in that room, we all became one. We didn’t need a sign saying ‘Check your egos in’, because they had come to do something good for people. I always respect them for that, but it was hard. After we had recorded the background, I had to tell 44 people that only 21 of them could

sing solos. That was not easy and some were not happy. But the language then changed in the business, from ‘me’ and ‘I’ to ‘we’ and ‘us’—which was impor-tant, because we had to stop thinking about ourselves and think of others. When people walked into that room, they left behind their egos, because there were so many people there. It was a good song, but you never know whether it’s going to work. And the second one was terrible, because there were a lot of people interfering. That’s why I don’t like to do the same thing over again.

So we did something different in Rome in 2004, with 800,000 people in the Circus Maximus to raise the money for eight centres to educate children in the worst cities on the planet like Kigali, Nablus and Kabul. We had technology from Microsoft, Oracle and Cisco. Recently we’ve taken

42 an encounter at the montreux jazz festival pictet report | winter 2013made in switzerland

‘All the musical geniuses have a

common trait: they have their own

identity—they know who they are. ’

this forward with a big conference in Boston with the Massachusetts Insti-tute of Technology and Google which is setting up funding and education for African-American and Latin Ameri-can kids – it’s going to be great. There’s some smart kids out there and they just need a chance.

How long will it take to make an impact?I don’t know—just do it! We can give them a place to study and acquire information, and there’s no better place than MIT. I’ve been on its board for years with people like Marvin Minsky, Ray Kurzweil and Dean Kamen—they’re so smart. We are at a place in computer technology now where there’s going to be a jump in ten years from silicon microchips to carbon and hydrogen nanotechnol-ogy which will be a billion times faster. You’ll be able to buy a nanotechnol-ogy computer for USD1,000 capable of 1 trillion transactions a second—it takes a million people to think like that. It’s going to turn the world upside down.

You faced difficulties when your career took off in the 1960s, but now there is all this tech-nology. Is the world a better place now?It’s better and worse, because there’s always yin and yang. Twenty-one countries could not have done the Arab Spring without technology, but in the wrong hands it can be used for bad things. That’s the chance you have to take, like in medicine: you can’t stop progressing because someone is going to mishandle it. You just have to pray for the best.

What advice would you give to a young musician—a 20-year-old Quincy Jones?Work hard and study your craft, so that you know what you’re doing. The rappers are very talented, a lot like jazz musicians. I’ve worked with all of them, and my son produced a lot of them—Tupac, Ice Cube and all those guys. But they sample other people’s tracks, and don’t write any music. So I say to them: ‘What are you guys going to play in 20 years? You won’t have any music!’ Their background music samples everybody

else’s music, and that’s not a good habit as far as I’m concerned. They should write some of their own music. All the musical geniuses have a common trait: they have their own identity—they know who they are. That’s why they have their own sounds, from Bob Dylan to Ray Charles.

You are here for the Montreux Jazz Festival. What attracts you to Switzerland?I worked very closely with Claude Nobs [the Festival’s founder, who died in January 2013]. We met in New York and were friends for life. In 1991, he had me come over here to produce with him for nine years, the first including Miles Davis’s last concert. Montreux is the best festival in the world—the Rolls-Royce of festivals. I want to see Claude’s legacy kept alive. He was unconventional and mixed all the music up.

I’m the same way: after I co-produced a television show for Duke Ellington, he said that I could be the one to decategorise American music. What matters is that it is good music, and if you don’t work hard and study, it won’t be good—it’ll be accidental.

43 the swiss army knife pictet report | winter 2013made in switzerland

The Swiss Army Knife

VictorinoxThe family company which started making knives for the Swiss army more than a century ago is now run by the great-grandson of the founder—having diversified from knives and cutlery into timepieces, travel gear, fashion and fragrances

44 the swiss army knife pictet report | winter 2013made in switzerland

‘Victorinox was our playground,

and we earned our first pocket money

in the factory’

When Karl Elsener founded a cutlery workshop in 1884 in the village of Ibach in the Canton of Schwyz, his aim was to provide employment for local people who were forced to emigrate in order to find work. The Original Swiss Army Knife which he developed is still issued to every soldier in Switzerland, but is also widely used around the world because of its quality, functionality and design. Today, Victorinox under the leadership of the fourth generation of the founder’s family is diversifying into other products while never forgetting the values that have sustained it for more than a century.

Most cutlers and knife manufacturers have long ago moved production to low wage countries, but Victorinox contin-ues to employ 900 people in Ibach, the biggest employer in Schwyz. They make around 60,000 pocket knives a day, almost half of them the traditional Swiss Army Knife, as well as some household knives. The factory makes 15 million parts each month—stamping them from sheet metal, polish-ing them and heat-treating those that need to be hardened, before assembling the knives and quality checking them. Up to 80 per cent of the knives are sold through retail outlets, and the rest to the corporate market. And 90 per cent are exported, with half the remainder bought by tourists visit-ing Switzerland who take them home.

With its roots in the heart of Switzerland, Victorinox celebrates its commitment to the Swiss quality which is embedded in its products and admired around the world. And in the spirit of its 125-year history, the company constantly innovates—there are now 360 models of the little red Swiss Army Knife offering up to 80 functions. The top-of-the-range Swiss Champ, for example, has 33 functions, the SwissFlash® is a USB pocket knife with up to 32GB of digital storage capacity, and the Victorinox Rescue Tool has found life-saving uses for rescue and security services.

Victorinox now has 1,800 employees worldwide, but it retains the culture of a family firm, not having dismissed anyone for economic reasons for more than 80 years. Eight of the eleven children of Carl Elsener Senior, the grand-son of the founder who died in June 2013, work for the

45 the swiss army knife pictet report | winter 2013made in switzerland

company—including Carl Elsener Junior, who succeeded his father in 2007 having shared an office with him for more than 30 years. One of his brothers—the family geek—heads the IT department, while another who liked working with his hands is in charge of quality management and customer service for the Swiss Army Knife.

‘We are a very big family, and family values are important to us,’ says Carl Jnr. ‘The Victorinox company has been part of our lives since we were children—I was born across the street from the factory, and below us was the office, the warehouse and other departments. Victorinox was our play-ground, and we earned our first pocket money in the factory on Wednesday and Saturday afternoons by packaging knives in busy periods.

‘It was very important for my father to give us the feeling of the company, and he always introduced us to customers visiting the company from the USA, Germany or Italy. We had to sit quietly and listen, and while we did not always understand the conversation, we understood that these people were very important for our company. My father always said that at the centre of his thinking he put our people, our products and our customers—and that a business which concentrates on those cannot do much wrong in the long-term. He gave every new employee a booklet setting out the company’s history, values and philosophy. In that, he wrote that owner-families should not look at the reserves that the company has built over the years, the machines, the land and the buildings as their property, but as something that is entrusted to them to manage and lead responsibly.’

In line with this philosophy, the family established a Victorinox Foun-dation in 2000 which now owns 90 per cent of the share capital and rein-vests its share of the profits in the busi-ness. This will preserve the company’s assets intact through the generations, so that it can continue to develop and remain financially independent. Even before the creation of the foundation,

the family had never drawn a dividend from the company, earning only sala-ries which are no more than five times the average wage of employees.

The remaining 10 per cent of the shares are in a charitable foundation established in memory of Carl Snr’s mother and father, which uses it to support charitable projects in Swit-zerland and worldwide—for exam-ple, to build hospitals and schools and dig wells in Africa. These owner-ship arrangements reflect the Chris-tian values that have inspired all four generations of Elseners, of ‘gratitude towards employees, customers and our Creator’, as Carl Jnr put it at his father’s funeral.

Victorinox is an iconic company today, but the early days of Karl Elsener’s business were difficult. At first he founded an association of 25 Swiss craftsmen cutlers to cooperate on producing within Switzerland the knives used by the soldiers of the Swiss army. The first delivery was made in 1891, but the venture almost collapsed because a German firm could mass produce the knives more cheaply. Karl Elsener persevered but lost all his money and survived only because of the support of relatives and creditors until his products became successful and he voluntarily repaid all the credi-tors with interest.

‘The Victorinox company has

been part of our lives since we

were children’

46 the swiss army knife pictet report | winter 2013made in switzerland 46

After the death of his mother in 1909, Karl Elsener branded his knives with her name of Victoria and in the same year registered the distinctive trade-mark of the cross and shield which is now protected in more than 120 coun-tries. The invention of stainless steel revolutionised the cutlery industry, and in 1921 the company became known as Victorinox, combining his mother’s name with ‘inox’, derived from the French word for stainless. But it was the Second World War that led to a surge of exports of the Swiss Army Knife which was sold in the PX stores of the US Army, Marines and Air Force.

One of the biggest challenges the company has faced in recent years followed the 9/11 terrorist attacks on the USA in 2001. New airline safety regulations which forbade passen-gers from carrying blades on board hit Victorinox hard, since so many of its knives were sold to travellers using airports or given as corporate souve-nirs that were no longer useful to trav-elling executives. ‘After 9/11 sales fell

more than 30 per cent overnight’, but the company strained every sinew to maintain its record of not dismissing employees for economic reasons.

‘We only managed to do this because of the reserves we had always built up in good times, which allowed us to go on investing in new markets’ says Carl Elsener Jr. ‘We stopped hiring, cancelled overtime and retrained some staff assembling the Swiss Army Knives so they could make the household and professional knives. We also moved others to our timepieces division and we even lent around 60 people to companies in the neighbourhood with big orders to fulfil. Before 9/11, we had seen high sales and had asked our people to work overtime to restock the ware-houses—so after 9/11 we asked them to consume their outstanding holidays and overtime. With all these meas-ures, we managed to keep on all of our people who appreciated that the family was prepared do everything possible to protect their jobs.’

‘After 9/11 sales fell more than 30 per cent overnight.’

47 the swiss army knife pictet report | winter 2013made in switzerland 47

By the time of 9/11, Victorinox had already been diversifying its prod-ucts—a responsibility that Carl Snr had delegated to Carl Jnr to allow him to focus on the core knife products and avoid the international travel which he did not enjoy. This suited Carl Jnr, who had spent six months in the US working with the public company which imported Victorinox products, and who enjoyed working abroad and learning about new cultures. The diversification was initially prompted by concerns in the 1980s over coun-terfeiting, as cheap imitations of the pocket knives flooded.

‘My father and I discussed how we could keep production of the Swiss Army Knife in Switzerland and be competitive. Our conclusion was that we should invest in our brand and make it more visible, because people are prepared to pay a little more for a brand and for customer service. Despite all the functions of the Swiss Army Knife, it has one disadvantage—it is carried in the pocket where it cannot be seen. People who buy a brand like to show it off, whether it is a Mercedes car or a Nike shirt, so we needed to make our brand more visible.’

His first project was the launch of the Swiss Army Watch in 1989, like the knives made in Switzerland at the company’s own assembly facili-ties in the Jura watch-making region. Today the high performance time-pieces account for one in five of the Swiss watches sold in the US. In 1999, Victorinox partnered with a US company to enter the international travel gear market, followed by the launch of a fashion line in the US in 2001 and fragrances in 2007. His wife Veronika leads the brand team which ensures that all the Victorinox products support the values of Swiss quality and reliability behind the little red knives.

The company also opened its first Victorinox store in New York’s trendy SoHo district in 2001, and its first European flagship store in London’s fashionable New Bond Street in 2008. There are now 12 stores in the US, one in Geneva and two in Germany where

the Swiss Army Knife has always been popular. Victorinox products are sold in more than 130 countries today, and the company is focusing its growth efforts on Latin America and Asia where the prospects are best and people are less likely to assume that knives and cutlery are its only products.

The company is also promoting activities that will encourage the use of a pocket knife by children—something that it believes many parents want to see in today’s world. ‘We are working with an outdoor specialist who has written a book about whittling and has started to give courses about how to do it. The feedback from schools has been incredible, because parents have had enough of computer games and would like their children to play in the woods and work with their hands to make things. And although children today have smart phones and tablets, when a boy is given his first Swiss Army Knife, his eyes still light up.’

Carl Elsener Jnr’s tips for entrepreneurs

• The advice given to me by my father remains true today: focus your energy and your passion on your people, on your products and on your customers

• If you want to lead or manage people, you must be yourself—be authentic and able to live the values of your private life in your business. If you have to adopt different values in business, it will be challenging to work with passion and commitment

• Lead your people by example: do not ask them to do something that you would not do yourself

• Go for organic, long-term, sustainable growth—don’t borrow too much

• Stay grounded

48 pictet report | winter 2013

made in switzerland

49 pictet report | winter 2013made in switzerland

Maxon Motor, Sachseln, Switzerland

50 the engineering manufacturer pictet report | winter 2013made in switzerland

51 the engineering manufacturerpictet report | winter 2013made in switzerland

Despite being a small country, Switzerland has long been noted for the excellence of its engineering manufacturers, which include global powerhouses such as ABB, Schindler and Georg Fischer. Less well-known outside their indus-tries are a host of small and medium-sized Swiss compa-nies, many of which are world-leaders in their sectors. Typical of these smaller engineering businesses is Maxon Motor, whose high precision drive systems power appli-ances such as medical prostheses, robot vacuum cleaners and NASA’s rovers exploring the surface of Mars.

The company was created in 1961 by Braun, the German consumer electrical company, to produce the shaving foils for its famous electric razors. Soon after, a separate development department was set up to make niche electromechanical devices which became its main focus after the sale of Braun to Gillette of the US in 1967. It launched a series of innovative products, including much more effi-cient motors, smaller motors for pocket calculators, video and cassette devices, and miniature devices—including the smallest and strongest positioning motor in the world with a diameter of just 4mm.

Since its foundation, Maxon Motor has been headquartered in Sachseln, a village of around 5,000 inhabitants in the picturesque canton of Obwalden—one of the forest cantons behind the founding of the Swiss Confederation in 1291. Today it employs more than 2,000 people, half in Sachseln and the remainder at German, Hungar-ian and Korean plants. Its revenue in 2012 was CHF360 million and it invests around 10 per cent of its total revenue in research and development. It exports 80 per cent of its products, with sales in every relevant market in the world.

The company is 100 per cent owned by the family of Dr Karl-Walter Braun, grandson of Max

Braun, who founded Braun in 1921. Karl-Walter represents the family on the Maxon Motor board, whose membership also includes Dr Bianca Braun, Karl-Walter’s daughter and Max Braun’s great granddaughter. Currently Maxon’s Head of Internal Audit (and nine months pregnant), she wrote her doctoral thesis on what makes leading family businesses more successful than companies listed on stock exchanges. Understandably, there-fore, she attributes her own company’s success to its family ownership.

‘We are prudent and long-term in our approach, and we do not spend more than we have—our growth is completely financed in-house. Since my father and I come from the commercial side of the business, we employ non-family members in management and engineer-ing roles, with long-term profit-sharing schemes. And although we have a long-term strategy, we can take decisions very quickly, sometimes in our headquarters but also on occasions, over a good dinner or a weekend.’

Maxon’s capabilities were amply demon-strated in 1997, when NASA sent the Pathfinder probe to Mars. It carried the Sojourner robotic vehicle to explore the surface—driven by eleven of the company’s motors. Two further rovers landed on the red planet in 2004, each with 39 Maxon drives powering the robot arms, control mechanism, camera, stone-borer and wheels. The devices had to cope with temperatures that fluc-tuated from –120oC to +25oC, as well as tremors and the unique atmosphere.

Today, motors for medical technology appli-ances account for half the business, with the other half in industrial automation, consumer applications and—increasingly—aerospace. The

The engineering manufacturer

Maxon MotorDeep in the heart of alpine Switzerland, a family-owned engineering company makes small electric motors which are renowned all over the world for their technological innovation, quality and durability in even the most extreme conditions

52 the engineering manufacturer pictet report | winter 2013made in switzerland

company’s medical division was launched in 2007, and produces high-precision drives for appliances such as insulin pumps, prosthetic limbs and surgical robots. Its motors power a hospital bed transfer device that helps even the smallest nurse to move a heavy patient from one bed to another, as well as respiration therapy equip-ment for patients with sleep disorders.

The industrial automation and robotics division powers underwater robots and robotic rescue equipment which operates in disasters that are too dangerous for humans. Products for consumer appliances include model airplanes and trains, motorised golf caddies and electronic power shifts for sports bicycles. And in aerospace, the company supplies the new Boeing Dreamliner with equipment power-ing everything from the air-condition-ing and toilet flushes to new seats in First and Business classes which tailor themselves to the passengers’ shape.

‘We produce about 5 million motors a year in 14,000 different models,’ says Bianca Braun. ‘Many of our competitors mass-produce millions of motors a day for a couple

of cents each. But we are really in the high quality business, producing tailor-made motors for applications that can be up to six years in devel-opment—particularly in aerospace. The clients often require very small batches, so we need to be adaptable and flexible to supply them.

‘Our motors are used in all sorts of fancy products, many with a science fiction feel: humanoid robots, where we have 80 per cent of the market; Formula 1 racing cars; rotary tattoo machines; and devices digging on the seabed. New requests come in all the time and we produce new models almost every week. When NASA selected us, we didn’t know where the request had come from—we were just intrigued by the specifications which were very specific and looked interesting!’

Bianca Braun’s decision to join the company seemed the natural thing to do, she says—her father had always told her interesting stories about it. During her studies at the prestigious Univer-sity of St Gallen, she had done lots of internships at Maxon, including at many of its sister companies in the US. And now she works closely with her father who travels a lot, spending more than half the year abroad meet-ing clients, and visiting the company’s production sites and trade fairs.

She describes Maxon is a ‘true Swiss company’, which benefits from the country’s reservoir of skilled engi-neers. The Swiss Federal Institute of Technology (ETH) in Zürich and the École Polytechnique Fédérale de Laus-anne are in the premier league of the world’s universities for engineering and technology, but there are many other contenders behind them. Swit-zerland’s dual education system also turns out skilled workers as well as graduates. But the company’s growth has been such it could not recruit enough—despite being number six in the top 100 Swiss engineering compa-nies in 2012.

‘We have 200 engineers in Sachseln where the beautiful mountains and lakes and the high quality of life give us a distinct advantage. But it is not to

53 the engineering manufacturerpictet report | winter 2013made in switzerland

Maxon is a ‘true Swiss company’, which benefits

from the country’s reservoir of skilled

engineers

everyone’s taste: many people prefer to live in a city, and our plants in coun-tries such as Hungary and Korea can recruit the staff we need to fill the gap. And that creates internal competition between our plants, which is positive for performance.’

Producing abroad also helps in coping with the high exchange rate of the Swiss franc, an issue for many of the country’s manufacturers. ‘Our main competitor from Germany has the advantage of the euro, and is much less expensive for similar qual-ity products. But our production sites in Germany, Hungary and Korea have helped reduce costs, and although further afield, we can reach them easily and manage them much better than if we moved production to China.’

There are, of course, many chal-lenges, including the increasingly complex nature of the sector, shorter technology cycles and the decreasing visibility of future orders as compa-nies give shorter notice than before. Raw materials such as the rare earths needed for the company’s magnets have risen sharply in price in recent

years. Regulation is also an issue in sectors such as medical technology where there are more and more fences to jump in order to demonstrate that the company is compliant with the latest standards—some projects may never take off if approval is denied.

And like many companies, Maxon Motor was hit by the 2009 global reces-sion following the financial crisis. However the fall in revenue at 16 per cent was less than feared because of the company’s diversification and the importance of the projects it was supplying. And while sales in Europe continue to stagnate outside Germany where half the company’s sales go, Asian markets such as Korea and Japan have been growing again.

‘When the recession hit, we helped ourselves with shorter working times,’ says Bianca Braun. ‘Now I am glad to say that we have a full pipeline of orders. And it is great to see how our people can always use their expertise to launch new products and processes at any time. It’s almost like building a new company within the company—we are always reinventing ourselves.’

54 the biopharmaceutical company pictet report | winter 2013made in switzerland

55 the biopharmaceutical companypictet report | winter 2013made in switzerland

The biopharmaceutical company

ActelionThe co-founder and Chief Executive of Europe’s largest biotech company, which has pioneered a series of innovative drugs, says that Switzerland is to pharmaceuticals what Paris and Milan are to the fashion industry

When Roche, the Swiss pharmaceutical giant, decided in the mid-1990s not to proceed with a new compound discov-ered by its cardiovascular researchers, four of them made a momentous decision. They left the company to set up Switzerland’s first biotech company so they could develop bosentan, thought to be of use to just 5,000 people suffer-ing from a rare and life-threatening heart and lung disor-der. Today, the compound, marketed as Tracleer, treats almost 50,000 patients around the world, including some with a different disease. And with a string of other treatments on sale or in the pipeline, Actelion is now a company with a market value of more than CHF7 billion.

According to Dr Jean-Paul Clozel, the French cardiologist and researcher who is now the Chief Executive of Actelion, the move was about more than just the new compound: it was to create another way of doing research, and it would focus on specialised or rare diseases that were not of interest to the large pharmaceutical companies. In addition, the four co-founders had a total of 47 years of working for Roche between them, giving them the experience of bringing scientific discov-eries to market through the regulatory process which is often lacking in biotech start-ups.

‘Roche didn’t have the same view as us, and was shifting its focus from cardiovascular research to concentrate on oncology,’ says Jean-Paul. ‘But they licensed bosentan to us, which we initially paid for with our own money. Indeed we founded the company in late 1997 from our own resources—a frightening moment using a lot of money. We had given up well-paid jobs at Roche, spent our personal savings and we were still without investors.’

The company started on a lean basis, renting a room in a former hospital building which had become an enterprise centre at Allschwil, just outside the Basel city boundary on the French border. ‘It wasn’t quite starting in a garage,’ Jean-Paul says, ‘but we brought old furniture from our homes and used crates as desks and tables. We chose Allschwil because one of our co-found-ers lived here and there was a lot of empty space where land was cheap in comparison with the centre of Basel.’

The funding break-through came with the addition of a fifth co-founder: André Muel-ler, who as Chief Financial Officer of a biotech company had been through an IPO and had also been a founding partner of the first Swiss venture capital firm. He became CFO and raised CHF18 million of venture capital—though not before being turned down for a bridging loan by a large bank. He recalls that at first the company lacked the funds to buy laboratory equipment.

Altogether venture capital of CHF60 million was raised from French, Swiss, Dutch and US firms. Then in March 2000, less than two and a half years after its foundation, Actelion raised net proceeds of CHF249 million through a place-ment of its shares on the Swiss New Market Stock Exchange (SIX). The majority of shares were bought by American funds, which—unlike Euro-pean investors—were familiar with the biotech industry in the US. Today Actelion has grown to be Europe’s largest biotech company, with 100 per cent of its shares listed.

Entrepreneurs are often reluctant to lose control of their companies, but Jean-Paul says there was a very simple choice: ‘Either we stayed

56 the biopharmaceutical company pictet report | winter 2013made in switzerland 56

small and retained control; or we ceded control and grew rapidly. We chose the second option very quickly, because our aim was to find as many good drugs as possible and bring them to the market as quickly as possible.’

Switzerland is a natural home for pharmaceutical businesses, accord-ing to Jean-Paul. ‘It has the highest concentration of researchers in the world, with two world-class institu-tions in Zurich and Lausanne produc-ing excellent research and human capital. And it is home to innovative pharma companies such as Novartis and Roche. Switzerland is to pharma what Paris and Milan are to fashion.’

Jean-Paul says that he would not have contemplated making the leap into the unknown without the support of all four of his co-founders, whose roles were complementary. In addition to André Mueller, there was Walter Fischli, a Swiss biochemist who built up the biology department, and Thomas Widmann, a German cardiologist who was Actelion’s first Chief Executive. The fifth member of the team was Martine Clozel, Jean-Paul’s wife who had been behind the discovery of bosentan at Roche. She created Actelion’s pharmacol-ogy department, and in 2009 was given the additional role of Chief Scientific Officer.

Some of the co-founders have retired or stepped back from execu-tive roles, but all are still involved in the company. The five never had issues between them, says Jean-Paul, and are all still very good friends. ‘And I am still married to Martine,’ he adds with a smile.

The company which was founded with just four employees now employs 2,350 staff worldwide, with around 1,000 in Switzerland. It has moved into elegant purpose-built facilities next door to where it all started, creat-ing a working environment remi-niscent of leading higher education institutions, with plenty of spaces where staff can interact with each other. The surrounding area, mean-while, has grown into a substantial

business park, which has attracted other large pharma companies.

Unlike many of its competitors, Actelion spans the full pharma value chain, from research and development on which it spends 21 per cent of net sales, through production via part-nerships and licensing, to marketing and distribution. It has established 30 wholly-owned marketing affili-ates worldwide and has a distribution network which extends its reach to 70 territories worldwide.

‘Investors did not at first under-stand our model,’ Jean-Paul says. ‘But innovation is more than discover-ing new compounds. As Tracleer has shown, our breakthroughs can reach a much greater number of patients if they are explained to the medical profession so that they can be exploited fully. That is why our focus on rare and orphan drugs produces results: if you know exactly what the market is, that is not innovation.’

Tracleer is still Actelion’s block-buster drug, with sales of CHF1.5 billion a year. It was the first oral treat-ment approved for pulmonary arterial hypertension, a serious disease that

‘If you know exactly what the market

is, that is not innovation.’

57 the biopharmaceutical companypictet report | winter 2013made in switzerland 57

restricts the flow of blood through the arteries connecting the lungs to the heart. However, the company has several other drugs on the market, including the first oral medication for treatment of two rare genetic condi-tions, and a treatment for a type of skin cancer.

‘We are constantly looking to develop new products,’ says Jean-Paul. ‘In pharma, we have 10-15 years protec-tion for new drugs before they face cheaper generic products. Tracleer, for example, was approved first in 2001 and will soon face generic competi-tion, but we now have a new treatment which offers even better results and has recently been approved for use in the US. We will market it as Opsumit.

‘The two drugs are based on 25 years of research by my wife, which shows how long it takes to create new products. Although there are limited numbers of patients with some of the conditions our drugs treat, people are prepared to pay the high prices required to recoup costs—espe-cially when there is currently no other treatment.’

Jean-Paul Clozel’s tips for entrepreneurs

• Work for the long term—don’t expect to make money in the short term

• Formulate a vision related to the nature of the business. Making money should not be part of it

• Employ the best people, and look for people who are better than you

• Work on developing the right culture—it is your most valuable business asset

• Invest in infrastructure such as buildings and distribution as the business grows. Without it, a company becomes like a body without a skeleton, and cannot grow sustainably

There are challenges in operating a global company from Switzerland, he says—especially the high exchange rate of the Swiss franc which reduces the value of foreign sales revenues. It must also operate under Swiss company law which does not offer the protection against hostile take-overs enjoyed by competitors in the US and elsewhere. And despite the availability of qualified researchers, there is intense competi-tion for the best.

But the solution for these chal-lenges is to continue to innovate and be successful, Jean-Paul adds. ‘Nobody wants the second-best staff, and it is success that attracts the very best people. Our independence has been central to our success—helping us to develop a culture that takes risks, works differently from other compa-nies and produces drugs of great bene-fit to patients. But we cannot become complacent: only by consistently delivering those results can we justify our independence.’

59 insight on swiss bankspictet report | winter 2013made in switzerland

Insight on Swiss banks

Interview with Prof. Youssef Cassis A leading financial historian discusses the origins of banking in Switzerland, its evolution through the years and how it has adapted to the internationalisation and then globalisation of financial markets

When did banking first come to Switzerland?Like most European countries, Switzer-land has a banking tradition going back to the Middle Ages, though perhaps not as far back as Italy where the Medici Bank was founded in Florence in 1397. Banking appeared in Geneva in the 15th century, when commercial fairs held four times a year attracted Ital-ian merchants selling their goods. The Medici Bank opened a Geneva branch in 1425 and most of the Italian banks had a presence—the business was connected mainly with trade, which was financed by bills of exchange. But after 1464, Geneva’s fairs declined as most of the business moved to Lyon in France, 150 kilometres away.

What was the next stimulus for banking in Switzerland?It was in Geneva again, which became part of the ‘Huguenot International’ when French Protestants first began to emigrate from around 1540, until 1598 when the edict of Nantes gave them protection in France. Geneva, the centre of Calvinism, was an attrac-tive place for the Huguenots, as were cities such as Amsterdam, London and Hamburg in more tolerant coun-tries. After the Revocation of the Edict of Nantes in 1685, there was a second exodus which included many bankers who nonetheless retained close links with France. They played a significant role in financing the wars of Louis XIV and after, through to the French Revo-lution. Basle was another important Swiss banking centre at this time.

Where did this leave the Swiss cities in the European banking league table?They were significant centres in tradi-tional banking and finance, but not on a par with top-tier cities such as Venice in the early days, then Bruges, Antwerp, Amsterdam, Paris and of course London. Geneva—still a small city—was an important centre for foreign loans through its relation-ships with other European centres. However, there was a set-back in the French Revolution when lots of its bankers were ruined as a result of unbridled speculation on the tontines. After many of the Jewish and Prot-estant bankers returned to France following the end of the Terror, Paris emerged a second centre to London, leaving Geneva, like provincial French cities, weakened. Many of the private banks such as Pictet that had emerged to do commercial banking and financ-ing trade gradually switched to the more profitable business of advising wealthy merchants and families on how to manage their assets.

When did today’s big banks emerge?Between 1830 and 1860, the cantonal banks were set up, effectively ‘state banks’ handling the public finances of the cantons. They remained the larg-est banking sector well into the 20th century, providing mortgage finance and supporting local industries at times of crisis. But by the middle of the 19th century, big commercial banks began to appear, starting with Credit Suisse in 1856. It was followed

Youssef Cassis is Professor of Eco-nomic History at the European Uni-versity Institute in Florence, in both the Robert Schuman Centre for Ad-vanced Studies and the Department of History and Civilisation. Previ-ously, he was Professor of Econom-ic and Social History at the Universi-ty of Geneva between 2004 and 2011, and has also held professorial chairs in Grenoble, London and St Gallen. Pictet celebrated its 200th anniversa-ry in 2005 by commissioning Profes-sor Cassis to write Capitals of Capital, the first history of international fi-nancial centres and of their major role in the modern global economy. Published in 2006, it was updated in a revised second edition published in 2010 following the financial crisis and translated into six languages, including Chinese. His latest book, Crises and Opportunities: The Shaping of Modern Finance, was published by Oxford University Press in 2011.

60 insight on swiss banks pictet report | winter 2013made in switzerland

by Union Bank of Switzerland in 1862, Swiss Bank Corporation in 1872, and many others. They were not particu-larly big by European standards—of the top 25 European banks in 1913, none was Swiss. They were sound busi-nesses in a prosperous country export-ing capital, but centres in other small countries such as Belgium were more important. Brussels at the time came closer to London, Paris and Berlin than either Zurich or Geneva.

How did Swiss banking evolve in the 20th century?The First World War proved to be a turning point, when neutral Switzer-land came increasingly to be seen as a safe haven for foreign capital. Despite its neutrality, Belgium was weakened financially and industrially by occupa-tion, as were some other centres. Swit-zerland’s neutrality was respected, and it benefited enormously from this: before the war, the Latin Monetary Union had fixed the exchange rates of the Belgian, French and Swiss francs at 25 to the British pound. By the time the gold standard was re-established in the 1920s, there were 125 French francs to the pound, 175 Belgian francs but the value of the Swiss franc was still 25 to the pound. Maintaining the stability of the franc had been an explicit objective of the Swiss authori-ties, as it still is today.

How did this changed environment impact on Switzerland as a financial centre?Even before the war, France and Germany had had strong financial interests in Switzerland. Big German engineer-ing concerns would use Swiss finance companies to finance the construction of power plants, for example. Inves-tors in Germany and France, wary about investing in such ventures, were happy to invest through Swiss companies backed by the banks. It was also neutral territory between France and Germany, helped by the ‘Swiss branding’. This management of money from other countries to finance foreign investment developed further after the war.

When did banking secrecy become enshrined in law?There was a tradition of secrecy about people’s finances in the 19th century, and some cantons had already given this a legal basis in civil law. From the start of the First World War, foreign deposits had begun moving to Switzer-land from France and Germany, though not in large amounts. But the inflow increased after the war, attracted by the stability of the currency at a time when other European currencies were depre-ciating, particularly Germany’s during the hyperinflation. And the threat of exchange controls in periods of politi-cal instability was another motive. However, secrecy was enshrined in the criminal law only in 1934 when Swit-zerland adopted its first banking legis-lation, which established a supervisory framework for the industry. Article 47 made bank employees, managers, direc-tors, auditors and supervisors liable to fines or up to six months in prison if they divulged business information—in particular, the names of a bank’s clients.

What was the justification for secrecy?There are several explanations for this move. The Swiss banks were for the first time required to give confidential information to the supervisory author-ities, and wanted assurances on confi-dentiality. The authorities, for their part, wanted to protect their bank branches in countries such as France,

‘The quality of service offered by

the country’s banks, is so much smarter

and welcoming than in other countries’

61 insight on swiss bankspictet report | winter 2013made in switzerland

where police raids were attempting to uncover tax evasion. There were also fears that Swiss bank employees in Nazi Germany were under pressure to disclose the names of Jewish clients. Whatever the motivation, the new legislation undoubtedly preserved the banks’ reputations for confidentiality.

How were the Swiss banks affected by the Second World War?Although Switzerland was surrounded by Axis powers, it retained its independ-ence and neutrality. Belgium and The Netherlands, two serious pre-war rivals, were occupied. Amsterdam, in particu-lar, never regained the role in handling financial operations for Germany that it had enjoyed before the war. Switzerland, in contrast, emerged from the war with the only convertible currency apart from the US dollar. The Swiss franc was seen as a strong currency which provided protection for foreign capital. Through-out the 1950s and 1960s, Switzerland played an important role in attracting capital and investing it abroad when lenders were in short supply, floating foreign issues in Swiss francs. While New York was far ahead as an interna-tional financial centre, Switzerland was the third most important after London by the end of the 1960s—quite a develop-ment for such a small country.

What has happened since the 1970s?In the post-Bretton Woods 1970s when exchange controls were lifted and deregulation began, Switzerland did not have the scale to be a centre of the emerging Euromarkets. However, the Swiss banks were active in syndicates for Eurobond issues which could be placed with customers who were happy to invest in bearer bonds that were exempt from withholding tax. And they increasingly specialised in niches such as asset and wealth management where they had competitive advantage, with some ancillary services such as investment in precious metals. Geneva, the ‘capital of private banking’, also proved an attractive location for the asset management activities of foreign banks. The big Swiss banks, meanwhile,

had fallen from seven in 1945 to three in the 1990s, and then to two with the merger of Swiss Bank Corporation and UBS in 1998. They built up investment banking arms in London and New York by acquiring British and US businesses, but after burning their fingers during the financial crisis, there has been a partial retreat from this sector.

How would you characterise Swiss banking today?The Swiss banking industry has at times aspired to turning the coun-try into a fully fledged international financial centre, but found it could not achieve the necessary scale. As a result, Switzerland’s banks have instead tended to choose various niches, partic-ularly wealth management. And in doing so, the industry has benefited from its reputation for safety and confi-dentiality, both of which are important for wealthy people. Furthermore, its home base in a small country that has always had to look beyond its borders gives its bankers an international perspective when it comes to invest-ment that other countries often lack.And there is of course a tradition of

personal service in Switzerland—not just in banking. The quality of service offered by the country’s banks, even for someone like me who is not a wealthy person, is just so much smarter and more welcoming than that of banks in other countries. As a bank customer who has lived in different countries, I still much prefer to deal with a Swiss bank—as so many others do.

afterword

As this issue of Pictet Report has shown, there are factors that have contributed to the success of Switzerland. They include its stable economic, political and legal environment, its outstanding education system and its collaborative culture. Equally important have been the entrepreneurs who have created world-class businesses renowned for the excellence of their products and the quality of their service. The control and independence over such businesses maintained by the founders and their descendents encourages long-term strategic thinking and stimulates restless innovation.

We should like to thank Professor Klaus Schwab for analysing these characteristics of Swiss competitiveness for us, and Professor Youssef Cassis for his account of the history of Swiss banking. We are also grateful to the entrepreneurs who provided us with insights into their companies: Carl Elsener Jnr of Victorinox, watchmaker François-Paul Journe, Actelion’s Dr Jean-Paul Clozel, Dr Bianca Braun of Maxon Motor and Confiserie Sprüngli’s Tomas Prenosil. Helen and Vic Jacob described the attention to detail involved in running a luxury Swiss hotel, while James Koch outlined the events behind the creation of the Fondation Beyeler with its remarkable art collection. Finally, we would like to thank the remarkable Quincy Jones for taking time out for us at the Montreux Jazz Festival, and the famous photographer Mario Testino for telling us about his new foundation and the role he envisages for it in his native Peru.

afterword 62 pictet report | winter 2013

made in switzerland

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PiCtet rePort

Pictet report is published by Pictet on a periodical basis. its contents are based on a series of specially commissioned interviews and discussions on particular investment and business themes of topi-cal interest.

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PiCtet

Founded in 1805 in Geneva, Pictet is today one of Switzerland’s largest private banks, and the leading independent asset management specialist in europe, with CHF 392 billion (eUr 320 billion) in assets under management and custody at September 2013.

the Bank is organised as a limited partnership and owned and managed by eight Partners. the Partners thus act as managers, shareholders and the Board of directors.

Pictet, based in Geneva, employs more than 3,300 staff. the group has of-fices in the following financial centres: amsterdam, Barcelona, Basel, Brus-sels, dubai, Florence, Frankfurt, Hong Kong, lausanne, london, luxembourg, Madrid, Milan, Montreal, nassau, osa-ka, Paris, rome, Singapore, taipei, to-kyo, turin and zurich.

www.pictet.com

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