iWatch Speculation
“We are the most focused company that I know of or have read of or have any knowledge of. We say no to good ideas every day. We say no to great ideas in order to keep the amount of things we focus on very small in number so that we can put enormous energy behind the ones we do choose. The table each of you are sitting at today, you could probably put every product on it that Apple makes, yet Apple’s revenue last year was $40 billion.”
- Tim Cook, at the Goldman Sachs Tech Conference: 2010
So, why a wearable?
Apple seems to have two modes of operating. Be the first, or wait, figure it out, and be the best. There are plenty of wearable devices available that do all sorts of things, so they’re obviously not the first to explore this category.
“I think the wrist is interesting. I’m wearing this (Nike Fuelband) on my wrist…it’s somewhat natural. But as I said before, I think for something to work here, you first have to convince people it’s so incredible that they want to wear it.”
- Tim Cook at D11 Conference: May 28, 2013
It’s interesting, but not quite there. What is it that current offerings do that Apple isn’t impressed with?
The current state of wearable tech can be split into two types of products.
Notification Centric
Interface with your phone to display emails, notifications, etc. These are the Android Wear products. These provide “reactive” benefits, pulling for your attention from sources outside your control.
Generative Centric
Track and record biometrics like heart rate, steps taken, and even sleep. These are “proactive” benefits, generated by your actions.
Notification wearables need a central hub to pull information from. Your phone in this case. The perceived benefit is the 0.05 seconds you’ll save with a glance at your wrist instead of pulling your phone out of your pocket or purse. Or getting emails when trying to swim laps at the pool, which is distracting and places a large burden on your attention.
Cost clearly surpasses benefit in almost all situations.
There’s novelty here though, and it speaks to the tiny tech-subpopulation who showed impressive demand for the Pebble smart watch, and other things like it on Kickstarter. I think this is the full extent of that demand though. In this market, innovators and first-adopters are the entire market. Open-source tingles few loins in the entirety of those who turn to tech to make life easier.
To have a breakthrough product, there needs to be more than an “oh that’s cool” reaction. >10x the value of the previous best option. So many products and innovations can be understood through this lens. The difference in productivity given the same level of energy in this string is often orders of magnitude:
humans < horses < cars < trains < airplanes < ocean freight
(Trains and airplanes switch depending on whether we’re moving product or people) All of these methods radically changed how things were transported. Plenty of interests were challenged as these were invented, but the overall value of each was so immense that any opposition was overcome with enough market force.
All of Apple’s products target broad appeal. If Apple is going to ask “regular” people to hop on, there needs to be considerable benefits because products of this type are laden with heavy costs. It’s another toy to charge and remember. And for what? To relay what’s already in my pocket?
Category number 2 is where things get interesting. If you wanted to, today you can get a device to measure and track your heart rate, sleep, and steps taken with decent accuracy. Nike and Fitbit even allow you to take advantage of research in behavioral modification to “gamify” the process and compare your results to friends and a community at large, making progress toward health goals much more likely. It’s difficult to obtain what these devices allow you to obtain without the device, so the benefit is much clearer.
This seems like a more likely premise for a device. But would Apple even bother if it was just another device to track the usual? How close have we been paying attention to silent advancements in biotechnology? If we’re looking for our 10x reasons, they could very well be here. If the device lives on us, it has access to us. Are we all certain we know the full extent to what can be measured with diodes that come in contact with our skin? How unbelievable would it be if this was finally cracked?
One of Apple’s undervalued skills is building strong relationships with parties needed to add value to their products. Getting studios, artists, and movie producers to work with the iTunes model. Strong development tools. The WWDC announcement this year showed HealthBook coming to iOS 8 this fall, which is an obvious sign that supports a wearable. Health partnerships could also add an interesting layer here.
Some of Apple’s new hires have backgrounds that support Apple taking a serious look at biotech:
Jay Blahnik: Fitness guru and consultant to Nautilus, Gatorade, Schwinn, Nike
Nima Ferdosi: Algorithms Architect, formerly embedded sensors expert for Vital Connect
Marcelo Malini Lamago: formerly CTO of Cercacor [Medical Device Company], holder of more than 70 patents and/or patent applications
Yuming Liu: Formerly an experienced engineer who previously worked at Accuvein and O2MedTech
Divya Nag: Co-founder of Stem-Cell Theranostics; participant in StartX Med; experience in FDA approval
Michael O’Reilly: Formerly Chief Medical officer and Executive Vice President of Medical Affairs at Masimo
Dr. Roy J.E.M. Raymann: Formerly Philip’s Senior Scientist for Sleep Research
Ben Shaffer: Formerly Nike Research and Development head.
Stephen Waydo: Formerly of C8 Medisensors
Todd Whitehurst: Formerly Vice President of Product Development, Senseonics
Source: Fortune
And if functional benefit isn’t the metric we gauge by, the Swiss can relax, happily knowing that the appeal of handmade, beautiful timepieces relies on fundamental forces of scarcity in the materials, time, effort, and ability to produce items like that. I’m willing to bet whatever it looks like, it will be brilliant, but not Patek, Rolex, or IWC brilliant. Look at the monolithic, spartan nature of all Apple products. To even assume this device will have a screen, the most costly component in battery life, may be a misstep. What if we hardly had to charge this thing ever? To see this as a simple, yet remarkably powerful and low-maintenance tracking device seems almost natural. It plays to the highest capability something that lives on our wrist could aspire to.
As of June 2014, AAPL’s manufacturing and component purchase commitments stood at $15.4B (+18.5% y/y). In addition, other off balance sheet obligations that will be used for tooling, capital assets, advertising, R&D and other stood at $5.6B (+300% y.y). The material spike in off balance sheet commitments especially for tooling, which is the highest number we have seen […]
That’s some serious spending. They’ve clearly figured something out. I’m willing to bet it’s on something other than an iPhone notification center or marginally better sleep, calorie, step, and motion trackers stuffed into a wrist band.
I think we’re all in for some interesting surprises on Tuesday.
