15 Sep 2014

The Apple Watch: The next big thing or living on borrowed time?


Watch out. Apple hopes to claim a new frontier… on your wrist.

The company announced its new Apple Watch on Tuesday, sending journalists and a bevy of other observers, online and off, into a flurry of analysis and speculation over a product that few have yet touched (and many won’t until the product’s projected launch date next year). Will the Apple Watch reinvent wearables the way the iPhone did smartphones? What do those inside the watch industry think of it?

For answers, we turned to Harvard Business School assistant professor Ryan Raffaelli, who studies the emergence and “re-emergence” of technologies, industries, and organizations. He has also conducted extensive research on the watch industry. Raffaelli weighs in below on everything from battery life to the Apple Watch’s implications for the healthcare industry. HBS assistant director of communications Christian Camerota asks the questions.

For more on the Apple Watch, read Ryan Raffaelli's blog:
Why the Apple Watch Is a Gift to the Swiss Watch Industry

Do you think the Apple Watch will fundamentally change our lives in a similar way the iPhone and iPad did?

Ryan Raffaelli: We often define radical innovations as “competency- destroying,” meaning that they render all related products and services in the same market category obsolete. While the Apple Watch is certainly the most advanced smartwatch on the market today, I’m not sure it fits the traditional definition of a “radical” innovation. For instance, it is unlikely the Apple Watch will have the same transformative effect on society as other life-changing innovations throughout history – think about the streamship’s impact the sailing industry, how the personal computer ended the use of typewriters, or how electronic fuel injection systems replaced carburetors. It’s probably more accurate to say the Apple Watch introduces several impressive “incremental innovations” that improve and combine various technologies that have been evolving in the wearables market over the past several years.

What is the greatest functional value the Apple Watch offers to the consumer?

RR: What Apple brings to the table is user integration within their existing ecosystem. In the same way that the iPhone did when it was first introduced, the Apple Watch integrates easily across their entire platform. For those who already own an iPhone or iPad, the Apple Watch is an exciting new product that can track biometric and personal data. Also think about how the Apple Watch can facilitate partnerships with the healthcare industry. It’s hard to fully appreciate the implications, especially from a consumer health and wellness standpoint. It’s where we know the healthcare industry is moving.

Apple has always been known for innovative design. Have they succeeded to do that with the Apple Watch?

Several of the watch CEOs I spoke to in Switzerland this week were surprised by the design of the Apple Watch. Many told me is it not as aesthetically pleasing or distinctive as they would have predicted from an Apple product. If you put the Apple Watch in a lineup of its competitors, some people might be hard-pressed – just on appearance, not function – to point out which one was the Apple device. That’s somewhat surprising, given Apple’s long and successful track record of design-inspired products and innovations.

What are some of the impediments to the Apple Watch’s success going forward?

RR: My personal belief is that we will see many people buy the Apple Watch because they want to be tech-savvy. However, the Apple Watch is not a standalone device, since it’s dependent on your iPhone. So I highly doubt Android users, for instance, will make the jump to the Apple ecosystem solely because of the Apple Watch. The switching costs are just too high.

Also, I think Apple will have some difficulty convincing people who wear cheaper fitness-type watches to make the switch to a smartwatch. What those watches offer that the Apple Watch doesn’t – and these are critical components – are battery life, durability, and waterproofing. If you are used to wearing a fitness watch like a Timex or Polar, the fact that you can’t wear it in the water is a drawback – something that hasn’t been discussed much in the media. We also don’t yet know how well it will hold up to abuse in the gym. Finally, the $350 asking price is still a considerable jump compared to other fitness-related watches.

However, if you’re Fitbit or any of the other tracking and monitoring devices on the market today, you should be very concerned. The Apple Watch claims to render everything in these devices relatively obsolete. For $200 more than the price of a Fitbit, the consumer is getting a lot more functionality. And the market research on individuals who purchase these activity tracking devices suggests that most have the discretionary income to afford an Apple Watch.

Will the Apple Watch end up being a huge piece of Tim Cook’s legacy? Is it an ornament on the Apple tree or one of the stars on top?

RR: I think they’re hedging their bets at this point. It’s too early to tell if this is an ornament at the top, but my general sense is that it’s not. Betting on the Apple Watch as core to the company’s innovation strategy would be a very risky move, especially given the immaturity and unproven nature of the wearables market.

Any closing thoughts?

RR: If you think about the traditional watch industry, Apple’s competition is not the Swiss. (Why the Apple Watch Is a Gift to the Swiss Watch Industry) Since the 1990s, Swiss watch manufacturers have repositioned mechanical watches as status and luxury pieces that can sell for well over $10,000. The biggest hurdle for the Apple Watch will be whether there is enough demand for smartwatches in general. The wearables movement could reintroduce the idea of wearing a watch to a new generation of watch wearers who have grown up telling the time on their cell phones. But the true test of viability for the Apple Watch, and the wearables market more broadly, will be if others beyond the “Apple-faithful” will purchase the product. Only time will tell.

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