Introduction According to the Federation of the Swiss Watchmaking Industry (FHS) in 2017, Switzerland occupies approximately 3% of the global market regarding the quantity of watches. As for value, Switzerland represents 54% of global sales that is 21 billion USD. About 95% of luxury watches with price starting from 1,000 USD are stamped "Swiss Made.” Thus, the Swiss watch industry has become an integral part of the luxury universe. However, it‟s not an easy task to get a place in this luxury market of reference. According to the estimation made by the Institute of Watch Marketing, there are approximately 200 active Swiss watch brands on the market today. In order to create an uncontested market space and stand out from the competition luxury watch brands are obliged to create a new way of dealing with concurrence. The majority of brands chose the positioning at the top of a watch pyramid. First of all, it is an economic issue: according to the recent Deloitte report (2017) on watchmaking industry, the most important increase is in the category of watches belonging to the “Haute Horlogerie” segment. While other categories have been steadily losing their shares in exports for years, the high-end category of watches is growing considerably. In the last two decades, luxury brand management has attracted much interest and discussions in academic and business circles. Among the business leaders and scientists, the debates were related to the challenges and paradoxes associated with luxury branding and management that emerged as a result of the evolution of the field (Okonkwo, 2007; Kapferer, 2008 Chevalier and Mazzalovo, 2008, Dubois B., Laurent G., et Czellar S, 2001). In order to create and maintain the position of a strong luxury brand, a number of key elements have been identified as crucial and divergent within the scientific literature (Sicard, 2008; Fionda and Moore, 2008, Merle, Chandon and Roux, 2008). Vigneron and Johnson (2004) proposes key luxury dimensions that managers should establish and monitor for creating a lasting luxury brand. Nevertheless, in our opinion there are no many researches explaining hyper luxury segment growth and the upward expansion of the Swiss luxury watchmaking to the hyper luxury. To our knowledge, there is no scientifically accepted definition of the hyper luxury segment. We attempt to define hyper luxury watch brands as “Haute Horlogerie” watch brands with a unique positioning based on the personal-oriented perceptions of customers, high experiential value and proprietary manufacturing know-how, offering mainly mechanical watches in a price range starting at roughly 60„000 USD and then passing to the price categories of 100‟000-500‟000-1‟000‟000 USD for a watch. In order to shed light on upward expansion to Hyper Luxury trend in Swiss luxury watchmaking we should formulate the following research question: What kind of resources to optimize and which processes to implement in order to create resource-based competitive advantage in a highly competitive market of Swiss luxury watchmaking? Methodology To gain a deeper understanding of the upward expansion to hyper luxury in Swiss watchmaking industry we proceed to qualitative research (semi-structured interviews with 20 CEO and Marketing managers) among watchmaking companies. We specifically focused on top managers involved in the product development and decision making and management processes. The key issues addressed were: definition of the key company‟s resources, information management, market sensing, innovative approaches in management, sources of value creation for customers and differentiation strategies, managerial vision and firm-specific practices and procedures. Qualitative research methods were selected for this study with the aim to generate data rich in details and embedded in context. This study will allow us to enlarge and enrich previous theoretical findings and illustrate it with practical evidences. Conceptual framework Last decades have seen an important economic shift from manufacturing to information and knowledge-driven services. This shift has been accompanied by an increase in the importance of intangible assets and capabilities. Thus the source of competitive advantage has changed from mostly manufacturing assets to market based intangible assets and capabilities (Ramaswami et al., 2009). The resource-based theory (RBT) provides an important framework in explanation and prediction of the firm‟s competitive advantage and superior performance based on market based insights (Barney and Arikan, 2001, Vorhies and Morgan, 2005). RBT considers a company as an idiosyncratic mix of resources and capabilities that are available for application by various departments in the company and are very difficult to imitate by competitors (Teece et al., 1997). Accordiang to Barney and Hesterly (2012), sustainable competitive advantage results only if resources are simultaneously valuable, rare, imperfectly imitable, and exploitable by the firm‟s organization (VRIO). This VRIO framework has acknowledged that resources need to be leveraged effectively by the organization, instead of simply possessed by the firm. Even if a resource is valuable, rare, and imperfectly imitable, a firm must be “organized to exploit the full competitive potential of its resources and capabilities. According to Newbert (2008), performance improvement is not directly a function of the value or rareness of a firm‟s resource-capability combinations but rather of the advantages it creates from their exploitation. Then, through insightful theoretical development researchers have expanded the RBT into the concept of dynamic capabilities. Specifically, dynamic capabilities are defined as the ability to build, integrate, and reconfigure internal and external intangible resources to address rapidly changing environments (Winter, 2003). Teece et al (1997) and Eisenhard and Martin states that sustained competitive advantage could be based on the firm‟s renewal and reconfiguration of its resources and capabilities through dynamic capabilities. The dynamic capabilities view changes from the resource-based view of the firm (Barney, 1991), by its attempts to the explanation of the conditions under which firms achieve competitive advantage based on their resources and capabilities (Molina et al., 2014). Furthermore, researchers have increased conceptual understanding of the role of marketing in enabling firms to create and sustain competitive advantage and superior performance (Ramaswami et al, 2009). In accordance with potential to improve business performance, some studies (Bruni and Verona, 2009), have introduced the term „Dynamic Marketing Capabilities‟ (DMCs hereafter). In fact, DMCs are specifically focused on releasing and integrating market knowledge that helps firms evolve. Developing DMCs could constitute the real basis for sustainable competitive advantage and superior performance in most competitive sectors (Molina et al, 2014). Fang and Zou (2009) define DMC as the responsiveness and efficiency of cross-functional business processes for creating and delivering customer value in response to market changes. It is this focus on customer value that distinguishes DMCs from dynamic capabilities in general. According to Bruni and Verona (2009) DMC are those capabilities aimed specifically at developing, releasing and integrating market knowledge that helps firm evolve. Main findings and analysis Analysis of semi-structured interviews with the CEO and marketing managers of the Swiss luxury watchmaking companies lead us to a number of findings concerning the role of DMC for the hyper luxury brand expansion. The exploratory study confirms many of the elements presented in the conceptual part of this article. Most of the Swiss high-end watchmaking companies are traditionally founded focusing on specific kind of watch and technological expertise in it. Often, these companies tend to develop and grow by mastering their technological competences. As it comes from our research nowadays rare are companies that uses dynamic DMC. Even if the majority of companies confirmed the importance of DMC, it is very difficult to implement it on practice due to the complexity of the numerous stages of industrial production, various operations and partners. Meanwhile, there are some companies that managed to integrate the concept of dynamic marketing capabilities and improve their performance. A deeper questioning into their management practices revealed that they are achieving these results because of the sophisticated and effective way of implementation marketing insights coming from partners and clients. These high performing companies generate growth because of their particular focus for constant improvement of their marketing activities. “The main idea is to question all the time our way of working and to elaborate more sophisticated marketing mix than most of our competitors. For us, sophistication of our watches has the same importance as sophistication of our marketing activities”. Our research pointed out that these few firms of Swiss luxury watchmaking industry, that successfully accomplish the search and gap-assessment stages concerning dynamic marketing capabilities have an advantage over rivals. The market-based identification of valuable resources and internal management of intangibles help managers recognize the need for improvement. In a case of such particular industry as Swiss watchmaking where any considerable changes are very costly and time consuming the companies that applies DMC through small steps and project-based development assure their presence and adaptability to the globalized changes of the economy. “Swiss luxury watchmaking industry strongly related to the overall economic and social changes in the world. So we need to be constantly aware and understand global trends, for example, emerging categories of customers and their expectations towards luxury products”. Thus, dynamic marketing capabilities are considered as very important value creation drivers. We identified marketing intelligence, customer relationships and professional networks as the most important elements for additional value creation. “It is clear that information is very important in order to stay “up to date” with the market. As most of decisions and processes depends on the feeling of the current situation on the market and clients, it’s very important to gather as much information as possible. There is no one source of information, but the multitude of different sources and various information as a puzzle helps to construct the right vision”. Organizational capabilities, information sharing and collaboration between various departments are directly related to new value creation. As it came from the qualitative analysis the main conditions are the “openness” of management vision and strategic flexibility of decision makers. Moreover, high-performing companies participated in our research confirmed that it is very important to adopt an entrepreneurial attitude and to implement “participative” way of collaboration. “On the initial stages of product development, all departments are invited to give their feedback on the product. We organize regularly a brainstorming in order to obtain various perspectives. Cross-functional teamwork brings more value”. Those companies who could create some sort of flexibility in organization of production find themselves mostly on the niche market of hyper-luxury with a very personalized, sometimes even “co-created” watches. In this approach, it is a client, his visions and his preferences that are incorporated into the watch through its design, configuration, functions and complications. This phenomenon also confirms the recent trends on the luxury market of ultimate personalization and unique experience creation that accompanying the product. “People who could acquire almost everything that they want are looking for new experiences. Millennials are willing to pay higher price for personalized high-end and luxury items. The watch became not only the symbol of the status of its owner, but the reflection and continuation of the personality of a client. In this case a unique watch for somebody unique is a great concept”. Managerial recommendations Our research revealed that the concept of the dynamic marketing capabilities as a part of intangible resources of the company could be very beneficial for swiss luxury watchmaking companies in the process of expansion to hyper luxury segment. Managerial contribution of this article lies in new approach illustration that could be used as a support for strategic decision-making in Swiss watch-making companies. The concept of dynamic marketing capabilities is a very complex phenomenon. As a first step for improvement it would be important to get more informed and deeply understand it. In order to create more value and better performance, it is important to deep “intuitive” way of decision making and to implement more explicitly insights coming from practice. Traditionally very segmented industry of Swiss luxury watches is on the road to changes due to radical social and economic changes around the world. Nowadays, company growth and performance requires connecting many elements across various sources of data. There are more opportunities and synergies in initial collaboration on the basic steps of the expansion to hyper luxury segment of watches then filling in the gaps that were not considered in the beginning. Feedbacks from customers and partners could be the most valuable data sources for sustainable changes and following up current trends on the market. Extensive data gathering and analysis, flexibility and learning has a direct impact to the performance. The more internal and external sources engaged into the flexible management and decision making process, the better performance and customer value it could bring. Nowadays, customer is placed in the center of the most of successful businesses. The level of understanding of the customer preferences and values turning to solid insights that could help for better and more efficient performance and decision making processes. Co-created value with customer‟s insights will help to achieve more recognition, exclusivity and appreciation from customers. Direct interactions with wealthy individuals are the main differentiators and value creation mechanisms of a hyper luxury segment of watches. There are numerous opportunities to engage customers in a dialogue instead of traditional for Swiss luxury watchmaking industry one-directional communication. Largely applied in other industries (luxury cars, yachts etc.) this approach is considered to be a niche in the luxury watchmaking. Thus, in our opinion even in the highly traditional industry as Swiss luxury watchmaking it is of great importance to understand and try to implement this dynamic approach and to adopt “Bottom up” management practices. From managerial point of view it is important to encourage curiosity, open-mindedness and cross-departmental communication of the employees. Our key managerial recommendation would be to state that in order to gain competitive advantage, information from the markets, partners and clients should be translated into actionable plans that, once applied, tend to yield concrete results. This transition from data to reconfiguration of processes represents the path that creates more value and competitive advantage in a highly competitive industry. More specifically, firms aimed to compete on the basis of the superior customer service and expansion to the “hyper luxury” sector are advised to invest into building new type of relationship and more dynamic organizational process based on the insights coming from various partners. Limitations and further research avenues The resource advantage theory was predominantly constructed on the theoretical level. In our opinion, such approach could be considered as the key drawback of scientific discourse. Recognition that science and practice produce distinct forms of knowledge has been longstanding. According to Van de Ven (2007), the gap between theory and practice may be a knowledge production problem. The aim of the current research is to suggest a vice versa point of view and to highlight empirical evidence coming from practice. The theoretical contribution of this article to the academic discussion lies in explaining the expansion to the Hyper Luxury Watchmaking Segment based on intangible assets management. We contribute to the development of RBT with its insights deriving from Swiss luxury watchmaking industry. These issues helps us to come up with managerial recommendations and thus to contribute to the advancement of the RBT. The main limitation of this research is in the nature of our research. The exploratory research helped us to identify the key elements in expansion to hyper luxury watch segment by Swiss luxury watchmaking companies. However, this does not allow us to understand the depth of this phenomenon. In order to confirm this results the more profound and focused analysis is needed. It could help to understand deeper micro-foundations of DMC. In addition to that, in our opinion a detailed case study of the firm with outstanding DMC‟s would be particularly valuable. Otherwise, to test quantitatively what are the links between various elements is also a promising avenue for this research.

This research paper examines the role of adaptive capability and absorptive capability in the development of digital marketing capability that, in turn, influences the firm performance. The results reveal that both adaptive and absorptive capabilities have a positive influence on digital marketing capability that positively contributes to customer relationship, new product and financial performance of the firm. The adoption of new digital technologies such as smart products, the Internet of Things (IoT), Artificial Intelligence, and machine learning will change markets, competitive landscapes, business models and consumer behaviors, new thinking about marketing capabilities becoming critical to succeed in today complex environment (Day, 2011; Kannan & Li, 2017). To remain competitive and survive, organizations have to develop new marketing capabilities to harness the potential of these technologies in supporting marketing functions and processes (Trainor, Rapp, Beitelspacher & Schillewaert, 2011). Despite the rapid diffusion of digital technologies in business practice, only few previous researches was focused on theoretical and empirical aspects of marketing capabilities needed in digital-empowered environment. To fill this knowledge gap, we develop the digital marketing capability construct, and explore its antecedents and consequences on performance.

Introduction This research will investigate the advancement of cognitive computing and how it can be applied through „Dynamic Marketing Capabilities‟ (Bruni and Verona, 2009) to raise the bar of personalizing services and amenities provided to the luxury watch market loyal customer. Through intuitive digital applications, new levels of interactive systems can focus on explicitly the next generation of hyper-connected luxury customers. Theoretical Development The purpose of this research is to investigate how to personalize the communication process in the luxury market segment through cognitive computing and address the high expectation of the new affluent consumer of the digital age. The next generation of affluent luxury consumers is accustomed to interactive systems and personalized interfaces that enable computers to get more intuitive of the customer(s) to enable them to personal the individual‟s needs. This level of personalization undoubtedly raises the bar on the luxury customer‟s journey from the tactile in-person luxury shopping experience currently found in brick-and-mortar locations, to a decidedly more interactive and increasingly immersive online customer experience. Abbott (1955) and Alderson (1957) focused on the notion that “what people desire are not products but satisfying experiences” (Abbot 1955, p. 40). The fundamentals of cognitive computing are to recognizing trends and behaviors that enable companies to utilize Artificial Intelligence to make proper predictions and give insight to intuitively give consumers what they need before they have to request it. The idea behind this research is to take the traditional luxury market sector of Swiss watches and combine it with the intuitive software provided by cognitive computing. Research Design According to the Federation of the Swiss Watch Industry (FHS) in 2017, Switzerland occupies only 3% of the global market regarding the quantity of watches. As for value, Switzerland represents 54% of global sales that is 21 billion USD. Thus, about 95% of luxury watches with price starting from 1,000 USD are stamped "Swiss Made.” Thus, the Swiss watch industry has become an integral part of the luxury universe. However, it‟s not an easy task to get a place in this luxury market of reference. According to the estimation made by the Institute of Watch Marketing, there are approximately 200 active Swiss independent watch brands on the market today. Under conditions of the highly competitive market, the challenge concerns not only market share, but also competitive advantage as well as customer relationships or brand equity. We situate this research within the context of the Swiss luxury watchmaking industry and focus on the power of the website to increase customer loyalty. We suggest ways to utilize a brand‟s electronic (desk, mobile, tablet) touch points to aggregate data to gain a deeper understanding of their loyalist. Armed with knowledge, luxury watch brands can connect to their customers through the power of artificial intelligence. Affluent “digital native” consumers have “hyper-connected” instincts, and increasingly expect more from their chosen brands through next-level personalization. The continued evolution of consumers‟ online behavior, attitude, and expectations from brands currently exceeds what is possible for a single human to process. It is, therefore, becoming increasingly necessary to incorporate both the power of cognitive computing and the information gleaned from large data sets (big data) to produce more intuitive and personalized experiences. This information enhances the brand‟s ability to uncover behavioral patterns and begin to incorporate “machine learning,” (a subset of AI) a calculated algorithm that can facilitate the process of personalization. The speed at which data can now be processed, analyzed, clustered and contextualized has increased the value of machine learning in the world of the consumer experience. Personalization of luxury branded communication that utilize artificial intelligence (AI) to help them connect intuitively with their audience are more apt to meet the needs of the next generation of affluent consumers on a more personalized level. By focusing on the shift in adaptive interactive systems, we highlight the power of cognitive computing to help offer more intuitive luxury personalization for their loyal customers (owners of the brand‟s watches). Achieving this stage of customization requires computers to mimic human intelligence using logic and insight. This research will explore new opportunities to help identify the independent luxury watch industry to capture the attention of the next generation of customers in cyber-space. The customer‟s journey no longer ends at the front door of the traditional brick-andmortar location – it continues into the digital space and even starts from it. Offline Swiss luxury watch brands have mastered the role of personalization through “white glove” in-person customer service and installations exhibiting their expert craftsmanship. This level of customer service is still best accomplished through cultivating and curating the boutique shopping experience, although AI is rapidly changing this dynamic. Currently, the online experiences of luxury watch brands have proven to be less than satisfying for their discriminating clientele because most still shy away from creating a fully-realized digital landscape including an e-commerce presence. Independent watch brands need to push beyond the generic expectations and curate rich aesthetic experiences that set a crucial dimension of the luxury sector (Berthon et al. 2009). This research begins to address how Swiss luxury watch brands can fully embrace the digital evolution and strategically utilize the valued subset of AI including cognitive computing, machine learning, and adaptive interactive systems. AI machine learning will ensure the level of personalization to which the discerning luxury customer has grown accustomed. The next section details how watchmakers can accomplish this integration. Conceptual Framework Over the past years, researchers have increased conceptual understanding of the role of marketing in enabling firms to create and sustain competitive advantage and superior value (Ramaswami et al., 2009). By potential to improve business performance, some studies (Bruni and Verona, 2009), have introduced the term „Dynamic Marketing Capabilities‟ (DMCs hereafter). In fact, DMCs are focused explicitly on releasing and integrating the market knowledge that helps firms evolve. The strategic position of marketing to absorb market knowledge allows Swiss luxury watch brands to provide accurate insight into brand equity and distinctive experience. DMCs are capabilities that use market knowledge to adapt firms‟ resources and capabilities (Day, 1994; Slater and Naver, 1998). In this research will explore the characteristics and uses of market-based resources, such as building brands, relationships, and knowledge and apply to digital solutions through interactive systems and personalized interfaces. This market-based perspective suggests that marketing research increasingly focuses on intangible, complementary resources, whose effects on the firm‟s sustained competitive advantage (SCA) and performance may be greater than the impact of tangible resources (Srivastava et al.1998). As much as 70% of a firm‟s market value may come from its intangible resources (Capraro and Srivastava 1997), and organizational performance increasingly seems tied to intangible resources, such as customer relationships or brand equity (Lusch and Harvey 1994). The abundance of active users globally on the internet, smartphones, laptops, tablets, and desktops creates a wealth of data, up to 80 percent of which is untapped and unstructured and not contextualized for use (Alexander, 2016). This unused data often referred to as “dark data,” includes web images, social media networks, emails, blogs, and videos (Alexander, 2016). An analysis of the online behavior of a brand‟s current customers contributes to the formation of stronger, more meaningful clusters based on current customer personas to reveal patterns of similar interests between groups of customers. This majority of available data can be analyzed by machine learning, and “the more data an algorithm can train on, the more accurate it will be” (Deep Learning, n/a). The sub-domain of machine learning, deep learning, which is itself a sub-domain of AI, breaks down tasks to make machine assistance possible (Copeland, 2016). Thus, deep learning provides insights, which can then be used to help curate a personalized experience through predictive analytics. Gathering customer attributes through insight for this research requires that we take a closer look at similar customer gathering registering their watches online (serial number required) making sure to capture necessary demographic and psychographic information, and through using clientele retail locations, which would then was mined for insights and more branded content. The reactive software would utilize deep learning algorithms to recognize moments, behavior and geo-location to offer realtime personalized mobile engagement. The increasingly common practice of merging of marketing teams enhances marketing deliverables through the User Interface (UI) and User Experience (UX). The interface, coupled with the experience, need to work synergistically to drive curiosity and encourage the user to explore and discover what will eventually become more personally-targeted curated content on the website. To further explain how these technologies can be employed for the luxury watchmaking companies, we examine several Swiss luxury watch brands. Describing how actionable data derived from cognitive computing can create a more intuitive customer experience, Vishal Katelia, Senior Manager, Global CRM at the luxury ecommerce website Mr. Porter provides an analogy from the luxury hotel world. He says that luxury hotels excel in many ways, “especially around the „surprise and delight‟ aspect of keeping track of small but important details that personalize their clientele‟s experience from the type of pillow they prefer to sleep on. Paying attention to these details can ensure future expertise, are as perfect as the hotel can offer (Miller, 2016). While machine learning focuses on building machines that replicate the human brain‟s cognitive capabilities to apply this knowledge from cognitive science to react in a intuitive way (Jones, 2017). Artificial intelligence refers to "a broad set of methods, algorithms and technologies that make software 'smart' in a way that may seem human-like to an outside observer," according to Lynne Parker, director of the division of Information and Intelligent Systems for the National Science Foundation (Noyes, K., 2016). Cognitive technologies are themselves products of artificial intelligence that perform human-like tasks such as speech recognition, natural language process, machine learning, computer vision (Schatsky D., Muraskin, Ragu Gurumurthy, R. 2015). Furthermore, it is important to look beyond AI to the most efficient way to personalize the customer‟s experience. By using cognitive technologies marketers can create intuitive experiences for customers offering services and experiences based on behavioral profiling through data clusters and affinity analysis. Result The actionable insight that can be gained through this research was presented in a two-pronged process. First, connecting data that would typically be collected from a brand‟ e-commerce customers‟ journey now would be used to produce more curated content. The ability to apply cognitive computing through tools such as Qubit (data science company) that was used for this study that offers gives us the opportunity to apply an affinity analysis to form insights, patterns, behaviors that previously were undiscovered. Insights gathered would help to identify and reward loyal customers beyond the standard loyalty programs with notifications, private activations on geolocation services. Second, understanding the UX and UI on the websites of the three pre-selected independent luxury watch brands enabled us to follow and eventually understand the user‟s journey both on mobile and desktop. The personalization of the interface allows for in-depth learning to better understand an individual‟s needs and create an intuitive experience for the user. This research is limited to the personalization of loyal users, not to the interested parties of the independent luxury watch brands. While for marketing purposes, most insight collected from a brand‟s website typically is obtained from e-commerce, the independent luxury watch brands are currently limited to UX to measure the movement and interests of the users. The practical application of utilizing untapped „dark data‟ through the process of deep learning personalizes the interface and further utilizing AI technology to offer unique immersive experiences raises the innovation of personalization. The behavioral insights provided by deep learning can contextualize actionable information, which can then be applied by the brand‟s marketing management, retail managers, digital marketing, and public relations (PR) teams. Collection Process & Insight 1. Discovery of Audience Clusters based on Interests 2. Selection Process of Interest-Sets 3. Profiling / Persona of Audience 4. Discovery patterns from AI‟s Subset of Deep Learning 5. Select Deliverables That Align with Brand Through Mobile Applications Further investigation and re-evaluation of changing audience should be measured through the new applied data collected from discovering of new AI subset of deep learning from the luxury consumer. The AI movement will continue to change the next generation of affluent consumer‟s expectations, and with a continued reliance on smartphone technology it is inevitable that the future of personalization will require further investigation. While we have specifically focused on these three independent luxury watchmakers and the four clusters of interests currently available on their websites, future research will need to more deeply examine how the continued evolution of deep learning measurements can be best utilized to match the organic interests of the next generation of loyal customers. The behavioral insights provided by deep learning can contextualize actionable information, which can then be applied throughout the luxury brand communication; marketing management, retail managers, digital marketing, and public relations (PR) teams. Conclusion In this paper, we aimed to revisit luxury customer‟s expectation in the digital age and discuss how the industry is in the midst of a revolution that is changing the level of expectations of personalization. There is no doubt that the new technology is shifting the levels of customization through interactive systems and personalized interface will continue to advance. The next generation of affluent consumers have a high demand for interactive visual content, and dynamic marketing capabilities concept helps to integrate data for creating the new value and competitive advantage for the company. Cognitive computing insight will continue to enable luxury Swiss watches makers to understand how to personalize for the next generation of affluent consumers; more research is required to continue to explore more actionable insight.