The 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.
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 continues 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, polishing 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 visiting Switzerland who take them home.
With its roots in the heart of Switzerland, Victorinox celebrates its commitment to the Swiss quality that 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 grandson of the founder who died in June 2013, work for the 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 playground, 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 Foundation in 2000 which now owns 90 per cent of the share capital and reinvests its share of the profits in the business. 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 salaries 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 Switzerland and worldwide—for example, to build hospitals and schools and dig wells in Africa. These ownership arrangements reflect the Christian 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 creditors with interest.
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 trademark of the cross and shield which is now protected in more than 120 countries. 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 passengers from carrying blades on board hit Victorinox hard, since so many of its knives were sold to travellers using airports or given as corporate souvenirs that were no longer useful to travelling 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 warehouses—so after 9/11 we asked them to consume their outstanding holidays and overtime. With all these measures, we managed to keep on all of our people who appreciated that the family was prepared do everything possible to protect their jobs.’
• 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
By the time of 9/11, Victorinox had already been diversifying its products—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 counterfeiting, 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 facilities in the Jura watch-making region. Today the high-performance timepieces 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 smartphones and tablets, when a boy is given his first Swiss Army Knife, his eyes still light up.’