Living With Visual Vital Signs

I remember when Apple Watch first came out vividly because we had already been studying the wearable market, largely for health and fitness, for a few years. I was super excited to see what Apple had up their sleeve with this first product but had a hard time understanding why I, a relatively healthy and active person, needed for it.

Before using Apple Watch, and even the first few years in, I was still addicted to the notifications not the health and fitness elements. I know many healthy and active people, like my wife, swear by the data they love to track for goals they set, but that was not me. It wasn’t until recently I really understood the value from a preventative health standpoint, but also, more importantly, a deeper insight into the health I do have.

Two experiences got me thinking about how much the world of medical health will change once these two things become pervasive, and can benefit from mass amounts of data collected by millions of people.

My first experience was around blood pressure. While there isn’t a blood pressure monitor for Apple Watch, I’m certain there will be a band accessory someday that will do this. Omron is already testing their own blood pressure smartwatch, and I wrote about my experience with that product when I saw it at CES this last January. Having access to a real-time blood pressure monitor where you can check BP anytime anywhere, is going to yield enormous amounts of helpful data. Most people don’t understand what lifestyle, or food, related things they engage in and how it impacts their blood pressure. This information has the potential to help us better understand things we should or shouldn’t do as well as should or should not eat as it may impact our overall heart health.

I first encountered this eye-opening experience when I went in for a routine check-up and registered with slightly higher blood pressure than they want to see in someone my age. I checked my blood pressure, on average, five times a day for a few weeks after that doctor visit and discovered certain food dramatically raise my blood pressure and often keep it raised for many hours. This is not something I could have learned without constant checking of my blood pressure. Having access to this on our wrist, coupled with better machine learning to help us pair that blood pressure data with recent activity, diet, and other useful metrics will lead to health, and heart health breakthroughs I’m certain.

The second experience was around an EKG. AliveCor makes pocketable EKG monitors that you sync to your phone and can record EKGs. They came out with a band for Apple Watch that brings that same technology to your wrist with a new feature that continually tracks your heart rate and specifically watches for anomalies. If one is spotted, it alerts you and suggests you take an EKG at that moment to get a closer look at what is going on. Using this product was a fascinating experience, even for someone like me who thankfully has no heart issues.

Here are a few pictures of the band, the SmartRythym monitoring feature, and a EKG result which you can view on your watch or on your smartphone via the app. This product is already FDA approved and the data collected can be used with a doctor or health specialist who you can send data to. The first time you use the Kardia band, it asks you to take your first EKG which is then sent to a board-approved cardiologist to review. This was a little stressful because you couldn’t see the results right away as it said it would take 24 hours or so to get the results. Luckily, it came back as normal but that was a little more anxiety than I needed at that moment in time!

Both of these products are 100% invaluable to anyone today who needs to track an issue with their heart. Not just for peace of mind, but even if simply to better understand what conditions in daily routine can lead to issues. Ultimately, it will be the information gathered from millions of people and then cross-referenced with different variables which will lead to health breakthroughs in the coming years. In fact, I think it is safe to say that we could see more health-related breakthroughs in the next ten years than in the past 30 combined thanks to wearable technology.

While we are still in the early stages, it is also important to understand some of the downsides. Which consist of things, hopefully, technology will help solve. Here are some of my thoughts, having experienced or talked to people where this happened.

  • False Positives: I’ve heard from friends, and even a few stories people sent me via Twitter, where a false positive by Apple Watch on a potential anomaly in heartbeat sent them to see their doctor in a panic. While the Apple Watch has certainly made headlines saving people’s lives, the technology can improve to the point that needless worry does not arise from false positives. We also don’t want doctors to become frustrated with this technology and try to avoid it because they see more false positives than actual issues and thus waste their time on healthy patients when they can focus on those who really need the help.
  • Anxiety. Another big concern I have is that giving humans clear and visual access to their vital signs in real-time could create more anxiety than good on a regular basis. Take the AliveCor Kardia band I have been using as an example. Each time you take an EKG, upon completing, it runs that data through an engine to look for something out of the ordinary. This process takes a few seconds, and every single time I did this, I worried just a little thinking “what if it comes back anything other than normal?” It did each, time but that concern was still there because there was always that chance it detected something I should be concerned about. We humans are good at worrying, and that leads to anxiety and all other sorts of mental health issues. Having all your vitals being seen and detected in real-time has the change to mess with the mind and in turn cause harm.

For me, using this technology was an eye-opening experience. Getting insights into your vital signs on a regular basis has its pros and cons as you are exposed to way more data than you are probably used to seeing. Consumers need to be able to make sense of this data or be able to easily share it with people who do. Machine learning will play a key role in this dynamic as, when implemented correctly, can analyze the data and look for trends or anomalies. One thing this whole experience made me think is as these smart assistants like Siri, Google Assistant, and Amazon’s Alexa evolve, they will absolutely need to include health data and in some ways have health assistant capabilities as well.

When it comes to the product and ecosystem, I still see no one on the horizon who can challenge Apple in this regard. I’d like to see some healthy competition in the wearable tech space but we are still waiting for a serious contender to emerge.

Why Android Wear is Critical for the Smart Watch Category

Earlier this year, I published a brief report on the smartwatch market opportunity. A key part were several scenarios I laid out. Here is that section of my report:


• The vast majority of watches sold today go “smart” over the next five years and run Android Wear or another third party smart watch platform.
• Watch makers standardize on a smart watch platform and there is little to no smart watch platform fragmentation.
• Google or a third party standard platform is genuinely competitive with Apple’s.

It seems a safe assumption Apple will have the advantage in the early stages of the smart watch category. Like the iPhone, they have a five to seven-year advantage on the competition. It is logical that Apple maintains an advantage in this market for at least two years, if not longer, and we feel scenario #1 is how the market will look for at least the first three to five years if not longer.

While there is a strong case to be made for scenario #2 simply because it is logical the competition will need to contend at some point with Apple and will have to choose a platform to use or create their own and the market may likely flood with low cost Android (or another third party) smart watches. It is unclear if these products will stick or be competitive.

A mix of both scenarios is possible as well. Apple may not be destined to be the only dominant vendor in the top 20% of the smart watch market but poised to have much higher market share even if not the total majority starting to make watches.


It is certainly too early to know how all of this will play out but, from what I’ve observed and studied about the market the past year, I’m convinced the role of Android Wear is important to the smart watch category. I say this with the caveat that, if only Apple is successful in this space, then we don’t actually have a smart watch category. If that happens, there is absolutely nothing wrong with smart watches only penetrating a percentage of Apple’s approximately 500 million customers. The point is, for there to be an actual smart watch category, more companies than Apple need to be successful. If the TAM is to be larger than just Apple’s user base, Android Wear will play a critical role.

A fundamental concept of how markets mature is important to understand. At the beginning stages of any new category, the market is immature. Immature markets occur when consumers have no frame of reference for the product and are being exposed to something new for the first time. In the early stages of a new category, the landscape is also very fragmented. I use this slide to tell the story.

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Fragmented hardware and software platforms plague the early stages of a market. We see it in wearables and even IoT today — the same way we saw it in mainframes, mini’s, personal computers, and smartphones. This formula is tried and true and predictably repeatable. But what happens once a standard software platform emerges, and compatible hardware is build up around that standard software platform, is the market is driven to maturity. The hardware landscape becomes competitive, begins to scale, and market fundamentals emerge to bring that technology to the masses. Most recently, we can observe this with Android. If it wasn’t for Android, there wouldn’t have been much of a smartphone market. In fact, if it wasn’t for Android, it would have taken much longer than 5 years for the market to catch up with Apple. Offerings from Microsoft, Symbian, Blackberry, Samsung, etc., were not on a trajectory to go mass market. I’d also argue these companies were not well positioned for the broader consumer audience which is why it would have taken longer for them to adapt to catch up with Apple. Android helped mature the smartphone market by becoming the standard platform for smartphones and smartphone hardware companies.therefore, Android Wear is crucial to the smart watch category in the same way Windows was crucial to PCs and Android was crucial to smartphones.

If we are to have a smart watch category, we need a plethora of choice and Android Wear offers OEMs that choice. Choice in hardware design, price, features, etc. This is crucial for the category to grow. Google was smart to also bring Android Wear to iOS, a move we saw coming from a mile away. Interestingly, I think this will actually help Apple.

I believe Apple’s thesis is this. Consumers will enter a market buying the most affordable device they can. This could be a PC, tablet, smartphone or a smart watch. Apple knows they are not priced at entry level in most of their product offering, so they likely assume their product is generally not going to be the first choice, particularly of the price conscious first-time buyers of a new product. Therefore, Apple’s thesis is, as a market matures and those consumers who started entry level begin to want more and “spend up to move up”, their products will be ideally positioned to compete for those customers. We need look no further than China to see this play out. iPhones were not the first smartphones owned by hundreds of millions of Chinese consumers. However, as Chinese consumers started to mature and self-identify with what they like and don’t like and want and don’t want in a smartphone, they started to move up the chain. Hence, China has the single largest Android switcher numbers of any market we study. Similar dynamics are happening in the US with Android switching as well as many parts of Europe. This dynamic also explains the slow, yet steady growth of Macs. Customers are identifying value within their specific needs, wants, and desires, and many are considering Apple products. Apple is best positioned to compete when a market matures.

Therefore, if Android Wear helps mature the smart watch category, potentially both with Apple customers and non-Apple customers, it stands to reason, once the market matures, the Apple Watch may benefit from a similar dynamic Macs and the iPhone are currently experiencing.

There may or may not be a smart watch category/market. We know for sure there is an Apple Watch market but beyond that, consumers have yet to speak. Android Wear breaks this open and it may take us into 2017 before we can come to any conclusions about the category.

The Wearable Gold Rush

In case you haven’t noticed, the wearable technology segment is the fastest growing consumer electronics market in the world. You can expect nearly every company in the consumer electronics space to either enter the wearable market or put their foot on the gas pedal. There are already over a dozen companies with different products but only two with any meaningful volume–Apple and Fitbit. When a market is growing at over 100% YoY, we can expect to see it get even more crowded very quickly, both with products from companies you have heard of and from companies you haven’t.

While I’m skeptical, for now, that any other vendors will garner meaningful share from Fitbit or Apple in the foreseeable future, I still view this gold rush as a positive for the segment. We are still early in the wearable computing market. Companies and consumers need to experiment with different products. This is how a segment matures. With each generation of the product, consumers refine their interests, needs, wants, etc., and develop their own personal tastes. I love this visual of the car industry because it the best depiction of what a post-mature (a market that has been mature for a decade or better (something not true of any consumer computing category yet)),looks like.

Car-Body-Types-1

There is a car for every type of need or desire. A post-mature industry is extremely segmented. Now cars are expensive, as are PCs, so looking at things like wearables, which many will sell for well below $300, we can expect this segmentation to be even richer at some point. At least until the types of sensors that collect data from our bodies we deem useful and valuable get integrated into all our clothing and apparel. I expect consumer electronics companies, or ones aspiring to become consumer electronics companies, to look for areas of differentiation within this segment. There is an interesting challenge, however.

This is not your typical area of consumer electronics. Wearable technology is not like PCs, TVs, stereos, or other categories they are used to. This category, similar to cars, fashion and even smartphones, is deeply personal. Deeply personal purchases generally tend to have some emotion attached. Price is not, and rarely will be, the driving factor. Commodity electronics dynamics likely will not apply. Things like brand, quality, and design all matter when a purchase is personal and emotion trumps price. This is where so many who chase the wearable gold rush will fall short. It’s also why those companies with a focus on the design as well as the utility will have a stronger chance. I’m not just talking about Apple here since the category is large enough to sustain a number of players.

Back to the point of why the gold rush is good. We need more companies to experiment and throw ideas out there so we can see which ones stick. This is a key part of evolving the category. There are tons of sensors still waiting to go mainstream. Things like sweat, blood oxygen, UV, air quality (especially for China), glucose, and many more. Do consumers care about these? If so why? What are the positives for behavioral change once we have more sensors collecting data on our bodies? What are the software or services potentials around them? These are all things that need to be fleshed out in the market.

There are some very interesting changes to the healthcare industry coming as well. Dynamics that I believe will impact the wearable segment and further strengthen or weaken those who chase the wearable gold rush. More on this topic next week.

Report: Apple and Fitbit Dominate Wearable Market

As a part of a broader report I’m developing for my company’s clients both in the tech and financial industries, I’ve been modeling our views on what happens in wearables for the next few years. I will break out smart watch shipment estimates and health and fitness devices separately, although each category is intertwined in the wearables category. Taking a step back and looking at the macro view of the wearable market up until the launch of the Apple Watch, Fitbit was the dominant vendor in terms of unit shipments. Fitbit’s share of the health and fitness tracker wearable market was just over 70% in 2014 and over 50% of the total wearable market shipments even when smart watches are included. However, the problems with the current health and fitness market loom and must be solved for us to continue to believe in the upside of dedicated health and fitness trackers.

To put our view of wearables for the next few years into perspective, I’ve mapped them among our forecasts for other primary computing devices.

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As you can imagine, doing a forecast like this for something unknown like the wearables category is tricky. It is loaded with assumptions which we build into our reports for clients. I typically like to create a bull-base-bear scenario for each forecast outlining things to watch for which may signal the way the market is heading. But for now, we will operate on the assumption the wearables category will continue to gain interest globally. However, I do feel the next few years will signal more of a shift toward smart watches or perhaps smarter, more capable health and fitness bands than the basic health and fitness wearables which make up most of the market to this point. I’ve charted that shift here.

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Apple’s entrance to the category has contributed and will continue to contribute to a massive YoY growth spike for smart watches in 2015. We continue to see year-over-year growth in smart watches, more so than health and fitness bands, largely driven by the Apple Watch over the next few years. Where we do see some upside, and it is reflected in our forecasts, is in basic health and fitness bands, including ones with more sophisticated health sensors, that are starting to be adopted by doctors and health insurance companies and prescribed to patients with specific health conditions. This class of product would be purpose built as to pass the required regulations to be used and integrated into a health provider’s services.

Apple vs. Fitbit

I’m sharing a chart from my proprietary model of sales estimate and forecasts by specific vendors. I do ask our readers keep this chart private and don’t re-post it to the web for free. I build these models for investment firms and they are quite valuable. I have this model built out through 2016 but, as to not give too much of that away, I’m showing and will walk you through my estimate only through 2014.

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My initial estimates for Apple Watch sales appear to be tracking for both calendar 2015 and a full year of product availability. I’m still confident in our estimate of 19m Apple Watches in fiscal 2015 sold and the momentum is gaining toward the back half of the year as evidenced in our primary research of buyer intent. Supply chain sources continue to validate shipment momentum and, knowing Apple’s retail inventory tactics, it can only mean, as supply is catching up with demand, sell though remains in line with supply chain output volumes we are tracking.

As you can see from our estimates, the wearable market is a two horse race between Fitbit and Apple. While Xiaomi, with their low-cost MiBand, has come to the party and taken share, it still remains relatively low compared to Apple and Fitbit. We expect Xiaomi to stay committed to this category and hear other wearable products are in the pipeline.

I believe Fitbit will still carry some momentum and Apple Watch’s presence is what we believe will help Fitbit continue that momentum. Our buyer intent surveys around wearables have seen a dramatic increase in interest both in intent and consideration for the category since Apple’s entrance. This backs up many analysts views that the Apple Watch will help float all boats in the category. However, our surveys indicate it may help float FitBit’s boat more so than other wearable products and we don’t know yet for how long. FitBit has higher brand awareness than any other wearable–other than the Apple Watch–and the money they raised with their IPO should help them spend on marketing, IP, and future products. I have a bear case for Fitbit that keeps them competitive a while longer. These are the base assumptions being used to forecast Fitbit’s model through the end of the year and into 2016. This holiday season, both the Apple Watch and Fitbit products will likely see the strong seasonal bump the category saw in Q4 2014. This Q4 2015 is likely to see a much larger spike, thanks to the Apple Watch.

Where the Apple Watch will really outpace Fitbit is in their China momentum. As I outlined in my China smart phone report, Apple is becoming a genuine force to be reckoned with in China. While we surveyed the landscape in many markets, it was China that had over 20% of respondents who claimed a strong intent or a definite plan to buy the Apple Watch. China’s iPhone installed base is near that of the United States with nearly 100m units in active use (the US is over 110m units now). With such a strong and growing base of iPhone 5s (the single most owned iPhone in both China and US) and above, the China market is a hot zone for the Apple Watch.

Microsoft is the dark horse to watch. Right now, our estimates are the Microsoft Band has less than 10% market share of the health and fitness market, but they are only on version one of their product. If version 2.0 is much improved, it could help Microsoft grab market share, likely impacting FitBit, in the health and fitness wearable market.

The Next Step for Wearables: Health Care

With the release of the Apple Watch, the announced IPO for FitBit, and the introduction of lots of other wearables, there’s an increasing focus on this market and how large the opportunity really is. I wrote about my firm’s view on the overall smart wearables market a little over a week ago, but I continue to do research in the area and want to dive further into a specific application of wearables: health care.

Most people who talk about wearables focus on fitness and health care as the best near-term applications for these devices. In the process, they tend to lump fitness and health care together. While they’re certainly related, I actually believe they are two distinct areas. Fitness is specifically targeted at individuals who are active and want to track their performance. These are the early adopters of wearable devices and tend to be the most enthusiastic about them. However, they’re a relatively small group.

Health care, on the other hand, has a potential market of everyone. With wearables, health care applications involve medical organizations collecting and using data about individuals’ vital signs or other aspects of their overall health. The health care business is orders of magnitude larger than a business built around fitness enthusiasts, so this is where the biggest potential for wearables lies. At the same time, it’s a significantly tougher business to get into and it’s likely going to take a much longer time for wearable companies to have a serious impact.

Not only do they have to deal with the hassles of getting FDA approved here in the US (and jump through similar hoops for governmental medical organizations around the world), but they also have to get involved with the health insurance business, which I’m not sure I’d wish upon my worst enemy.

Despite these challenges, I’m pleased to report there is some initial interest from health care professionals. TECHnalysis Research is in the process of completing a survey of over 300 US-based health care professionals about IT trends in health care and a small portion of the survey includes questions about their potential usage of wearables.

According to the results, about 6% of health care organizations are actively leveraging wearable devices now, 12% are in the testing process, and about half are considering them for use at some point in the future. In all, about 2/3 of health care respondents said they are actively using them or giving them at least some consideration. That potentially represents a very solid opportunity for wearable makers.[pullquote]About 6% of health care organizations are actively leveraging wearable devices now, 12% are in the testing process, and about half are considering them for use at some point in the future.”[/pullquote]

Of course, the devil is in the details. When this 2/3 majority was asked about the specific type of wearables they were considering, half of the responses were for medically-approved (that is, FDA-approved) medical devices. About 18% said they would consider using the data from fitness bands, such as FitBit, versus 17% for smartwatches, such as the Apple Watch, and about 10% from fitness apps such as RunKeeper, which works with a variety of different wearables. These lower numbers are likely due to concerns with the accuracy of the sensors in consumer-grade wearables, particularly against true medical devices.

Another question asked about the kind of benefits these health care organizations would offer patients who provided data from these wearable devices. All told, over 70% said they would provide some kind of benefit, with 27% saying they would consider offering 3rd-party coupons or other similar benefits, 23% saying they were considering offering reduced fees for their services, another 20% noting they were considering reduced insurance premiums.

The bottom line is health care organizations have at least started taking a serious look at integrating wearables into their practices and procedures, and they’re looking at offering reasonably compelling motivations for doing so. It’s still early days, but that should give wearable vendors cause for hope.

How the Apple Watch Solves “The Wearable Dilemma”

It has been well documented that the current crop of wearables, mostly those in the health and fitness category, suffer from a steep rate of abandon after a period of time. Reports last year said more than half of the wearables purchased by US consumers were not in use after 12 months. It seems consumers find the initial experience novel for counting steps, calories, and other features depending on the band, but after a period of time, they lose interest. One of my working theories is these devices also offer little value beyond basic step, counting, heart rate, etc., and don’t help the owner make sense of the data or even evolve in their goal setting. Whatever the case, there is overwhelming evidence the current crop of wearables are not compelling enough for the vast majority of their owners to continue using them. Here is an excellent chart from Morgan Stanley research of US wearable owners and how long they have used the device after a length of time. As you can see, less than 10% of owners still use the device after 12 months.

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My initial thinking around what Apple should do in this category was to nail the health and fitness part since those devices are the ones selling in some volume, with estimates of approximately 20m in 2014 worldwide. So it seemed there was an opportunity and interest. My theory was Apple should release a wearable that was the best health and fitness device and not a general purpose smartwatch/wearable. However, after using the Apple Watch for more than two weeks, I’m convinced this initial thesis of mine was wrong.

I have to admit the health and fitness aspects of wearables have limited appeal to me. More specifically, there isn’t a product with a health and fitness angle that has given me good reason to care about it yet. I like the Workout application on the Apple Watch quite a bit. I do run and train for competition tennis so I do like being able to track set distance or time goals using the app. But the general activity tracking of the Apple Watch, while comprehensive, is not the feature I value the most. Yet I’m certain it will be to my wife.

The broader point in all of this is how the health and fitness aspects alone don’t seem to be a feature compelling enough for the mass market to continue using it. This is where I think the general purpose nature of the Apple Watch is what is going to help it break the current pattern of wearables. In my experience, it is the diversity in the value propositions the Apple Watch offers that makes it compelling enough to keep wearing. If all it did was health and fitness, I wouldn’t keep it on all the time. I’d likely wear it when I exercise but that is all. Because it offers a range of other value propositions from notifications to glances of useful information to health and fitness to apps to the fashion of it, I’m more willing to keep using it. The applications will also continue to expand the use cases making it even more compelling and sticky. It also happens to be extremely comfortable, more so in my opinion than any other wearable I’ve tried, which also makes it easy to keep it on.

When you think about the paradigm shift I mentioned in my Apple Watch review, that of the Watch being an interaction model measured in seconds rather than minutes or hours, it brings up an interesting observation. If i’m only interacting with this product for a few minutes every hour, then why should I keep it all on the time? Here again, it is the convenience of the additional use cases for glance-able information, but also the promise of the diverse value propositions.

On this point, I did notice an interesting new behavior with the Apple Watch I’ve never experienced before with any other wearable. If I take it off during the day to charge, or for any other reason, I miss it.

The Power of the Social Graph

With Facebook, Twitter, Pinterest, Snapchat, Meerkat, Periscope, and so many other companies in the social landscape making news lately, I’ve been thinking about something that doesn’t get talked about much — the “Social Graph”.

I’m going to share what I think about the social graph in the hope it is a helpful framework for our readers as well. It is my conviction a heavily curated social graph is and will be one of the most powerful, convenient, and useful things in the digital world. Especially related to content creation and consumption.

I first experienced this with Twitter. For the record, I’m exceptionally bullish on Twitter. Twitter is like the air waves that  broadcast TV and radio ride on in my opinion. I’ve spent a great deal of my time carefully curating sources of information of use to me through Twitter. Twitter acts as my filter of all the noise out there. I use Twitter, not as a social network, although no other network has befitted me more professionally than Twitter, but as a curated filter of information, since a primary role of my job as an analyst is to make sure I do not miss anything that happens in the tech industry. Prior to Twitter, I’d spend my mornings sifting through tech blogs and news sites to make sure I didn’t miss anything. When important news broke, I generally found out via email from someone who saw it first or from a reporter who called me to ask my opinion of what just happened. Thanks to Twitter, this has all changed. A heavily curated Twitter feed, or Twitter list in my case, allows me to narrow the sources of information to the essentials I choose. A quick scroll through my “tech list” and I’m caught up since my list is made up of people who break news, add insight or commentary, or companies who make the news. In the world before Twitter, I wasted a great deal of time staying on top of things. Now my time can be allocated to other equally important things. I have no idea how I did what I do before Twitter.

I also realize I’m different than most people both in interests and job function. I happen to not only be a source, or content producer/broadcaster on Twitter but also a consumer. I know most people are consumers, but this is where the social graph becomes key. Once consumers curate their sources of information, Twitter acts as a broadcast medium, or air waves for content, and helps them streamline how they receive content of interest. This is where the value lies. Once you have a heavily curated social graph, notifications get extremely powerful.

Once a heavily curated information source is developed, notifications enable something that did not exist before. If you think about the limitations of broadcast radio or TV, it is all based on scheduling. What notifications of a heavily curated social graph allow is a content producer to have a captive audience whether or not they are looking at a screen at that time. This paradigm has huge potential and we are only scratching the surface of notifications in this way.

Think about this. Your address book is a heavily curated social graph. Getting texts is a better example than phone calls in this analogy so let’s focus on that. Usually when you get a text message, you know who it’s from. So most people take a moment to pause what they are doing and view the notification of the text to see who it is and what they want. Now, extend this to content sources of interest. I assume a news or sports junkie does this today with apps that notify them of breaking news related to topics of interest. With a notification, the value of the information becomes unbundled from the app itself. I don’t need to unlock my phone, open the app, and take any steps to engage. I’m already engaged even if I’m not staring at the screen, because I have predetermined (via my curated social graph) what I want to be notified of and what I don’t.

There is a high level of maturity required of the users for this to work. However, that is a level I believe will happen among mainstream consumers as they realize the value of notifications. Curating what to be notified of and what not to be notified of is an evolution I believe will happen both in software, with the capability to further customize our notifications, and on behalf of the user.

A few examples. I certainly don’t want to be notified every time someone in my tech list tweets. Even though I get many hundreds of people mentioning me (wanting to start a conversation with me), I still value these notifications due to the interactions. However, I would like to be notified specifically whenever Benedict Evans or Horace Dediu tweets a chart. I know this level of granularity or intelligence around notifications does not exist yet but I am optimistic it will evolve. The power of this curated social/content graph plus notifications is to grab me as a captive audience even when I’m not engaged with a screen.

And as you can imagine, it is within this framework the idea of the smartwatch starts to get interesting.

Hands-On (or Heads-on) With HoloLens

What a difference a day makes in the tech business.

Having attended yesterday’s Windows 10 unveiling at Microsoft’s headquarters in Redmond, WA, I was one of the lucky few who got to try out an early prototype of Microsoft’s intriguing new holographic computing device: the head-mounted Microsoft HoloLens.

Though Microsoft showed the world a sleek, untethered headset, the demos they provided to attendees in their “hidden” basement labs were with much clumsier development systems that featured large, (what appeared to be) hand-built, camera and circuit-board-laden headsets tied to both an external circuitry box in a large metal case hung around our necks, and a large desktop PC. Microsoft vowed HoloLens will be released in the Windows 10 time frame—essentially by the end of this year—but it sure seems a long way between what we tried and what they unveiled. Nevertheless, the company did show a working prototype of the final device on stage, so I’ll just have to take them at their word regarding their release timetable.

The bigger question, of course, is what was it like to use? Overall, I have to say it was impressive. It is definitely not perfect and it’s still clearly a work in progress. However, I and other attendees got a pretty good sense of what it could offer and the general consensus was the product seemed pretty good.

In some ways, HoloLens is like other head-mounted displays I’ve tried in that the experience essentially projects a computer-rendered image you see in front of you and adjusts the image as you move your head around. It’s also very different than similar products; most importantly, it’s a completely standalone and not an accessory for or tethered to another device. In addition, unlike the Oculus VR, the HoloLens does not completely immerse you in a computer-generated image. While this may seem like a limitation to some, it’s a huge improvement to me. I feel somewhat nauseous and disoriented almost immediately after putting on complete virtual reality headsets like the Oculus. (I’ve been told you can get over that after extended use, but I think an issue like that immediately limits true VR headsets in their current form to a very small, rabid audience.) The HoloLens lets you see through the lens to the real world around you, thereby giving you a visual context that keeps you from getting disoriented. Bottom line, I didn’t have any motion sickness-like side effects when wearing it.

HoloLens is also very different from the currently on-hold Google Glass. (BTW, the timing of last week’s Google Glass announcement could not have been better for Microsoft—they must have been pinching themselves when they heard the news….) First, at a basic level, HoloLens is not something you’re going to wear outside or in social situations, nor does it record what you’re looking at, thereby avoiding the social stigma associated with Glass. Second, from a functional perspective, HoloLens provides a relatively complete field-of-view and isn’t limited to a small, transparent floating window as you had with Glass. HoloLens creates 3D (or in some case 2D) graphics in front of you and can either insert them within your real-world view or provide a more encompassing view that blocks out (though never entirely) some of your real world view.

Microsoft calls the images it creates holograms (and believe me, it still feels weird to say and type that with a straight face), hence “holographic computing.” While the company has yet to provide any details on exactly how HoloLens works, my sense is it leverages some type of projection display (one for each eye) that essentially replaces portions of what you are looking at through the lens with images it creates. Given the event, the company did say HoloLens runs Windows 10 (and made some still unclear points on how all Windows 10 devices will have access to “gaze” and gesture-oriented APIs for developers). They hinted it’s running some kind of x86 CPU and GPU, but they also said the HoloLens features a Microsoft-designed HPU (holographic processing unit) as well, which they said was necessary to perform the kind of calculations needed to create its visual world. Unfortunately, the company said nothing about battery life or pricing but, based on a few comments, I’m guessing it will be priced in the $799-$1,299 range—not cheap, but not completely ridiculous either. [pullquote]You couldn’t help walking away from the HoloLens demos, and this event overall, feeling Microsoft has clearly come roaring back as a force to be reckoned with.[/pullquote]

As you’ve undoubtedly read elsewhere, the company provided four different demos for us to see and each showed off different aspects of the device—from the immersive Mars rover experience, to building (and then 3D printing) 3D models, to a Minecraft-like experience using whatever room you happen to be in to play games in, to the highly practical Skype demo that helped people install a light switch with the help of a remote technician/helper.

Each was impressive in its own way, but more importantly, you couldn’t help walking away from these demos, and this event overall, feeling Microsoft has clearly come roaring back as a force to be reckoned with. Yes, they still face real challenges in mobile, but with this one bold move they have started the process of completely changing the conversation. In other words (he says half-jokingly), who cares about phones when you’re about to enter the Post-Smart Phone Era?

More seriously, I have no doubt there were a lot of very interesting and very serious discussions happening across the halls, meeting rooms and cubicles of Silicon Valley, and at tech companies around the world as a result of today’s news from Redmond. When was the last time that happened?

Welcome to 2015—it’s going to be a helluva year.

Profitable Niches

As of late, I have been speaking with management of many different companies. Oftentimes I’m asked for my recommendations in these engagements and I have noticed a certain theme that remains constant in my answer. That theme is to focus on profitable niches.

Way too many companies, in their internal strategic planning, make the mistake of doing zero sum game analysis. Having done a review of these analysis for Fortune 500 companies, it becomes clear that many bring an old world view to the competitive landscape. What I mean by “old world” is the thinking that, for someone to win, others have to lose. This may have been true at a time when the industry was small and the total addressable market of computing products was less than 500 million. It was in this environment Microsoft ruled computing and Apple was nearly bankrupt. Not long after that narrative, another emerged, also including Microsoft, with Internet Explorer vs Netscape. The online population was also only in the hundred millions and the narrative was only one of these browsers could win. Eventually, Internet Explorer did. The same was true when Palm entered the scene. Against Microsoft’s Pocket PC platform, most analysis looked at this as a zero sum game in a winner-take-all market. That world is gone and has been for some time. In a world being drive by computing’s S-Curve (pictured below), there is market share to go around.

Screen Shot 2014-09-29 at 3.00.32 PM

Market Share vs. Market Shares

“Enough market share to go around” seems to be lost on many companies. Which is why I hammer home the theme of profitable niches as a sustainable business in such a large market. Perhaps the best modern day example is Nvidia. A company thriving by continuing to advance high end gaming graphics cards with incredible margins. They sell these to an enthusiast market which, while small, spends a tremendous amount of money. Gamers are a profitable niche. In fact, you could probably argue any enthusiast market is a profitable niche. Every market has these. In the automobile world, there are cars designed specifically for car enthusiasts. In the consumer packaged goods space, health enthusiasts enable premium prices for more quality food and goods. Fashion, jewelry, and more all have their commodity products but these markets also have profitable niches.

In essence, this is what Blackberry is hoping to accomplish with their Passport. They hope there is a business “enthusiast” who values the hardware, software, and services they create and are willing to pay more for them. If successful, Blackberry will have found a profitable niche.

While it is hard to predict which niches will be profitable, I do believe the computing markets globally will continue to splinter. As the broader commodity smartphone, tablet, and PC categories grow, there will be some splintering off to these profitable niches. Nvidia again has a great example with their Shield gaming tablet. Nvidia knows the makeup of core PC gamers and built them a tablet to compliment and extent their PC gaming experience. Kids’ tablets are another great example. Nabi is moving millions of these products at decent margins by focusing on parents but delivering a kid-friendly tablet solution. Ruggedized PCs, tablets, and smartphones are profitable niches. GoPro is another great example of a profitable niche. There are already many examples and more will come.

The key is to be looking out for them or being an innovator and creating them. As computing grows, so will a large base of those underserved by commodity computing products and looking for things more reflective of their unique needs, wants, and desires. This will be true of everything around hardware, software, and services. Some profitable niches will be bigger than others in terms of their slice of the pie. However, these profitable niches are in essence zero sum games. These are the areas where first mover advantage is real and apparent. So the key to is see them early or create them.

Know your customers, and look to fill an underserved need in the market and the profitable niche will emerge.

Understanding Apple’s Ecosystem Strategy

Reflecting on where we are with wearables, the Internet of Things, smart homes, smart cars, smart cities, smart malls, etc., keeps opening up interesting holes in Apple’s ecosystem strategy. The more we look at how fast electronics are becoming connected, the quicker this market could get out of hand for Apple.

We start with the important observation that Apple will not make coffee pots, refrigerators, cars, light posts, dog feeders, thermometers, etc. However, they do want those devices to work with iOS. Right now they can through apps. The problem is, all these apps offer walled garden experiences. My thermostat app does not connect to my smart bed in order to adjust the temperature of my room depending on my current body temperature, for example. More importantly, the company that makes my smart bed and my thermostat are likely not to be the same company. Therefore, there needs to be a way for them to work together. What I am outlining is the case that the Internet of Things needs to be open. More specifically, built on open standards. This is, in my opinion, the only way the Internet of Things will move forward meaningfully.

What will be fascinating to watch is how Apple will insert itself in the middle of this. I’ve championed a “best with iOS” strategy I think is part of how they can address this issue. Apple has a hardware accessory program called “MFI” that allows third party hardware companies to make accessories that work with Apple’s proprietary ports like the Lightning connector for iPad and iPhone. Where IoT will differ is these devices will not connect to the iPhone or iPad with a physical cable but rather via an open standard like Bluetooth LE, WiFi, or something new in the future. The point is, these devices will not connect into Apple’s ecosystem with proprietary ports unique to Apple hardware. Any software platform like Android or Windows can come in and enter this new IoT ecosystem. Apple could, however, allow for unique differentiation and integration giving third parties ways to integrate into iOS in unique ways.

CarPlay I feel is an example of this to a degree. Apple is enabling automobile manufacturers to take a solution packaged for them that works uniquely with iOS. What is rumored about Apple’s smart home strategy sounds like it could be similar. Tech.pinions columnist Jan Dawson shared his thoughts on Apple and the smart home and it is worth a read.

The point worth thinking about here is how the broader connected device ecosystem will grow beyond Apple’s control. They will control computing devices that sit in the center of these connected experiences but will have to also work well, and work uniquely, with third parties as well those who will build the connected home, car, mall, city, etc.

In a very strange way, Apple competing in the Internet of Things will require the support and shared vision of many third party partners in a way they have not had to deal with before. I believe they can do this through unique hooks to iOS but we will see if this or some other path is the one they take.

Why Google Glasses is 10 years away from Consumer Success

Like many in the tech world I have watched, with great interest, the Google Glass project develop and evolve. I even became a Glass Explorer and have used it for about nine months. Like many who bought Google Glass, it now sits on a desk at home. It has proven to be less then easy to use and even worse, pretty bad at what it is even supposed to do correctly. For some, its novelty lives on but as most who bought Google Glass have discovered, this version’s UI is very bad and the dearth of any true consumer applications pretty much doomed it from the start. If I sound bitter, I am. Asking me or any other Google Explorer to pay $1500 for the privilege of beta testing a product for Google is absurd. Of course I made the decision to buy it knowing it was a wounded product and, at least in my case, I had a research motive behind it. But if I were a mainstream consumer, or early adopter, and bought this I would be pissed Google released a product to the open market instead of the actual market any Glass project should have been focused on in the first place — vertical markets.

In 1984 I was asked to look at a product for IBM and make a suggestion as to what they should do with it since it was not selling well. The product was the IBM PC Jr. Three years earlier IBM introduced their highly successful PC and it took off in business like wildfire. They made the assumption if the PC was doing well with business users, it should do well with consumers too. So they released what turned out to be a wounded product for consumers. It had a lot of limitations since it was much cheaper than IBM’s business PC; they did not want a cheaper product eating in to demand for their business product. But when I went to Boca Raton to do my presentation about this to IBM’s brass, I did not point out the PC Jr was a crippled machine and that’s why they should kill it. What I did present was a very strong and rational study on the fact that historically all new technologies first get targeted at vertical or business markets and showed them in almost all cases it took at least ten years from a new technology targeted at business users to eventually become cheap and easy enough to use for it to be brought to a consumer market successfully.

IBM was a tech company and at the time had not done anything for consumers. More importantly, they were not even a marketing company back then. Few at IBM understood the concept of the “marketing pyramid”. In the tech world, it must go through the early adopters who then suggest to people interested in what they are doing with the technology that they look at it. Over a 2-3 year period, it moves from early adopters to the next layer of adopters for any particular technology. However, in my experience I have found for any new technology to get broad adoption from consumers it takes on average 10 years to get the kind of apps and prices needed for consumer adoption. Then and only then does a new technology hit the mainstream. I told IBM they we were 10 years too early with the PC Jr and to kill it since it was going nowhere for the time being. It was not until 1994 the demand for consumers PCs kicked in — exactly ten years after the PC Jr was originally released.

I could go on an on about this tech marketing pyramid and show how things like VCRs, HDTVs, and dozens of tech products had to go through the pyramid of early adopters and ride at least a ten year slope down to delivering and acceptance of this core technology to consumer markets. This is especially true with hardware products that need to then pick up software apps and an ecosystem before it can go mainstream. Google putting Glass into the consumer market either showed their complete lack of understanding tech marketing pyramids or, even worse, targeted consumers knowing full well this market would not be ready for Glass for at least another decade and instead milk it for their own profitability.

For those of us who have put Google Glass through its paces and seen its glaring problems with consumers, it is not a surprise Google Glass will not gain mainstream acceptance for at least another ten years. While one could argue we are well into the early developer stage with Google Glass, which always goes through vertical markets first, the fact remains only now are vertical markets actually opening up their purse strings and starting to test Glass-like devices in earnest. This is interesting as Glass-like devices were introduced in 1997 and have been struggled to get serious vertical market adoption until only recently.

Google Glass also has some other problems, including social acceptance, privacy issues and how geeky one looks when wearing the current model. I have no doubt over the next decade Google and others will find ways to make the glasses less geeky and perhaps fold into eyeglass design so people don’t even know you are wearing a digital display. By then, Google and others may have worked through the issues of privacy, social acceptance and more importantly, found the killer app needed to drive this into high consumer demand. I see this tech marketing pyramid only now kicking in and am convinced Google Glass are at least 8-10 years away from being something the consumer market will adopt. During this time there will be money made with Glass in business and vertical markets but if history is our guide we won’t see Google Glass going mainstream until at least 2020.

The Genius Of Steve Jobs Or Why Google And Facebook Must Make Big Bets

The ghost of Steve Jobs haunts Google and Facebook. Unlike Apple, which has always aligned its interests with its users, both Google and Facebook must serve two masters: users and customers. They are not the same. Indeed, the divergent demands of these two groups has placed both web giants at a long term competitive disadvantage against Apple — one that will cost them billions to correct and will likely never be fully resolved.

Steve Jobs repeatedly veered from conventional Silicon Valley wisdom. His successes were legion. Given Apple’s current size and dominance, it’s easy to forget how so many of the big strategic gambles Jobs made were almost laughable at the time.

  • Vertical integration
  • Make both hardware and software
  • Keep design in-house
  • Create a global retail chain
  • Lock down your ecosystem
  • Make money on the hardware
  • Focus on fashion
  • Touchscreens are superior to physical keyboards

Google is, despite occasional shout outs to “openness”, absolutely following the Apple playbook which Jobs crafted decades ago. Facebook will follow as best it can, I suspect.

It’s not going to be enough.

Jobs made an even more profound strategic decision, one neither Google nor Facebook can ever match. It was a decision stunningly obvious in its simplicity, yet even today, despite Apple’s success, is still rejected throughout the Valley. That primal Jobsian strategy?

Your users are your customers and your customers are your users.

Sounds so simple, so obvious, yet think of nearly every start-up success in Silicon Valley this millennium, every hot new business model trend. Is the actual end user the actual paying customer?

In nearly every case, the answer is no.

In this disconnect, there is much weakness.

By linking Apple’s fortunes with the happiness of its actual users, Steve Jobs unleashed a slow-motion revolution that haunts Google and Facebook even now. Others, too. Even once dominant Microsoft, which remains radically dependent upon corporate buyers — not the actual users of their product — is hurting.

Obvious is not always easy.

The High Cost of Serving Two Masters

The divergent interests of users and customers is why Google and Facebook have been on such a massive buying spree recently. I do not expect a slowdown.

Big tech acquisitions

The latest acquisitions are not, as so many confounded analysts suggest, a sign Google and Facebook lack Apple’s “focus”. Rather, the fault lines in the Google and Facebook business models demand these acquisitions. That is, to make users happy and to make advertisers happy and to ensure an uneasy peace across both consumes enormous resources. Google and Facebook will always need to keep the checkbook handy. It’s not a lack of focus which explains their acquisitions. Just the opposite, in fact. Their focus is on a two-headed beast.

Before I go any further analyzing Google and Facebook acquisitions, I must acknowledge there are other, less critical factors at play:

  1. Real Control
  2. Fake Money

Google’s and Facebook’s founders have radically disproportionate voting control relative to their total ownership share. They can buy, even on a whim, and almost without explanation. Steve Jobs had no such control, nor does Tim Cook. Essentially, Larry Page and Mark Zuckerberg can buy whatever they wish without a single voice being raised.

In addition, the respective CEO-owners of Google and Facebook are fortunate enough to have inexplicably high PE values. $GOOG is at 31, $FB is 92 — that’s not a misprint. $AAPL on the other hand, trades at a stunningly reasonable 13. Whether you think the market is appropriately valuing these three companies is a separate issue. For now, the market is throwing money at Google and Facebook and money is of no use if it’s not being spent. I suspect if the market pushed Apple’s share price to a PE of 31, that Cook would likewise go on a shopping spree.

These two fortunate, albeit anomalous realities notwithstanding, the primary motivator behind the massive Google and Facebook spending sprees is, in fact, their respective CEO’s keen understanding of what their businesses require to succeed.

Think of a gushing well that nonetheless requires continuous priming. 

Encourage. Capture. Present.

To continue earning billions, both Google and Facebook must:

  1. Encourage use — to the point where they pay whatever is necessary to get billions more people online.
  2. Capture our personal data — including where we are, who we are with, what we are doing, even how we are feeling.
  3. Offer screens, tools, services and platforms so their paying customers — advertisers — can effectively present their message.

All their respective acquisitions are to maximize these three building blocks: Encourage. Capture. Present.

internet.org

Thus, while couched in feel-good language, it’s shrewd business to encourage more people go online.

Last year Facebook and other tech companies launched Internet.org, a global partnership to make the internet available to the two thirds of the world’s population that doesn’t have it.

Thus, cool-sounding “AI” projects are really little more than a means of better extracting maximum value from the captured information of a billion plus users:

By teaching a computer to think, Facebook hopes to better understand how its users do too. So today the company announced that one of the world’s leading deep learning and machine learning scientists, NYU’s Professor Yann LeCun, will lead its new artificial intelligence laboratory.

Thus, a few years from now, when we spend as much time inside ‘virtual reality’ as we now do staring at our smartphones, Facebook will need to have a suitable platform for its advertisers to present their message. Enter: Oculus Rift.

SWOT

Of course, each company has its own unique strengths. As the graph below illustrates, I contend Google does a far better job of capturing user information — via Play, Wallet, Android, search, Maps, etc.

Both Google and Facebook do an equally good job of encouraging use.

Facebook offers advertisers more and better options to present their message — Facebook, Instagram, WhatsApp.

capture encourage Facebook google

We should therefore expect both companies to acquire other firms, talent and technologies that enable them to further enhance their existing strengths and to shore up their weaknesses. For example, Facebook needs to build or buy tools to more effectively capture critical personal data. Might this lead to buying Foursquare, for example, with all its user-location data?

As we increasingly look to our wearables and smart watches, expect Google to buy or build tools to ensure their advertisers can present their message onto these new screens.

There’s still another consideration for potential acquisitions. The companies currently are split in the type(s) of information they are best at encouraging, capturing and presenting.

think do express feel

Facebook’s superiority is better suited for encouraging us to share how we feel, and its platforms allow users to more fully express themselves. Google by contrast, is far better at capturing what we want and what we are doing.

Given this, I suspect while both Google and Facebook will acquire companies that help them shore up weaknesses across the feeling-doing-wanting-expressing spectrum, the really big money will be spent on ensuring their current leadership is almost impossible to surpass.

Focused Acquisitions

Was $19 billion too much for WhatsApp? Likely. As was $2 billion for Oculus and $3+ billion for Nest. Fair enough. But, these acquisitions do not reveal a lack of focus – just the opposite:

  • Driverless cars will present ads and content in a captive environment without distraction.
  • Internet drones, lasers and balloons encourage more of us onto the web and onto the many and varied Google and Facebook platforms.
  • If any of us spends any appreciable time in the “metaverse”, then Facebook’s Oculus Rift gamble will enable advertisers to present a stream of messages into our eyes and ears, without any of the real world’s messiness.
  • Google Glass can (soon) present the latest reviews of the newest restaurant as we walk past — or instantly display where we can get a better price on our favorite gear.
  • Nest will help Google capture our home information.
  • WhatsApp encourages us to share a great deal of personal information.
  • Instagram encourages us to express ourselves.

The list goes on.

Therefore, when you read financial analysts, such as Felix Salmon, who insist Facebook’s latest acquisitions aren’t related, they are missing the big picture.

Look at his big purchases — Instagram, WhatsApp, Oculus. None of them are likely to be integrated into the core Facebook product any time soon; none of them really make it better in any visible way. I’m sure he promised something similar to Snapchat, too.

Wrong. It’s not about being “integrated into the core Facebook product.” Rather, it’s about encouraging use, capturing use, and maximizing its value to advertisers — which means enabling those advertisers to present their message to every user at any time, in all places, on all screens.

And it will never end.

Apple must make its customers happy. That’s no easy task. Google and Facebook, however, must make both their customers and their users happy. That’s much harder. The checkbooks will remain at the ready.

Intel Strategy Moves Forward

After a long period of relative stasis, it’s becoming clear that relatively new CEO Brian Krzanich and his leadership team are driving forward with some important new strategic directions for Intel. The company is moving aggressively to shed its image as little more than a PC and server component supplier—a welcome and long overdue move. They recently unveiled a forward-looking guiding principle/strategy catch phrase, “If it computes, it does it better with Intel,” which is a concrete reflection of their desire to extend their reach and influence to other new markets.

The company previewed some of these ideas at CES, where Krzanich unveiled a complete line of Intel designed (though not Intel-powered) wearable devices, as well as board-based products. The new boards are named Galileo, for the burgeoning “maker” market, and Edison, which the company hopes to see embedded into a whole new generation of wearables and other “smart” devices (think Internet of Things, or IOT). The Galileo is made more interesting by the fact it apparently only had an 8-week gestation period from idea to shipping product—a completely unheard of time frame for the “old” Intel. The company was late to the game for mobile phones and other mobile products, so it’s good to see them getting aggressive early on in what are expected to be higher growth areas.

One of the more interesting aspects of some of these recent announcements—based on comments Intel leaders have made—is the company is willing to acknowledge it’s not entirely sure where some of these new markets are headed—a refreshingly honest perspective—yet it still wants to actively participate to help drive innovations. Whether they actually can remains to be seen of course, but there’s clearly a new perspective from the top on how the company can and should proceed.

The company has also recently started to emphasize their developments outside of CPUs, with a particularly strong focus on communications. Again, this is also long overdue as the company is virtually unknown as the number two player in the modem market. They’ve also been making the point they want to be seen as an SOC (system on chip) company, not just a CPU company. The company has talked in detail about their achievements in LTE modems and mentioned improvements in process and packaging technology that could offer improvements for flash memory and other non-CPU components. Given their strong interest in wearables and IOT, it wouldn’t be surprising to see the company making investments in technologies such as sensors and wireless power, both of which would help them offer a wider range of key components for future SOCs. In fact, they may want to consider broadening their new strategy catch phrase to say, “Make your devices smarter and better connected with Intel.”

In the realm of PCs, its traditional stronghold, Intel also continues to drive forward, with plans to drive greater awareness for portable all-in-ones, like Dell’s XPS18, as well as continuing the push for 2-in-1 devices. The company has also targeted 40 million Intel-based tablets for the year—an aggressive target that, thanks to its many investments in Android compatibility, it could very well achieve. For PCs, things are going to be tougher because many of the same challenges that have plagued the PC market remain. But even here, Intel seems to be approaching things with a new, more realistic attitude by focusing on several potential opportunities for interesting sub-segments instead of a complete PC industry turnaround.

All told, Intel’s attitude and approach seems to reflect the beginning of some important changes stemming from the recent transition between former CEO Paul Otellini and Krzanich. The company’s view is arguably getting broader, deeper and more open than we’ve seen in some time and I for one hope it represents a sign of things to come.

Why I am Skeptical About Smart Watches

There is significantly more hype than substance around the smart watch category. While I completely agree there is a market for these products, I am still unconvinced the size of the market / opportunity is as large as others do.

Smart watches appeal to me entirely. I am an early adopter and a techie so I like many things that more normal consumers do. So I grasp the appeal of a smart watch. But I also know that my gadget desires to not reflect the mass market in most cases. So in order to understand the smart watch opportunity we need to land on what the form factor offers your mainstream consumer who represents the largest market opportunity.

Notifications

The primary value proposition being touted of the smart watch is notifications. These are the same notifications which a consumer would receive on their phone. So the logic behind the value proposition goes like this. You have your phone in your purse or pocket and when a notification like a incoming call, text message, email, etc., comes in it will alert you on your smart watch.

The strongest value proposition is one of convenience. The only problem with this value proposition is that the percieved value of this proposition is not universal. The conveneince of getting a notification on your wrist so you don’t have to pull out your phone of your pocket or purse has a limited appeal.

From my use with smart watches I’ve encountered and interesting dilemma. While I am in a meeting or at a lunch or dinner and I get a call or text or other notfication it is convenient to get a message on my wrist but I’m not in a context where I can do anything about it unless it is an emergency. In fact, in the same way that it is viewed as soically rude to be checking your phone every time it buzzes or makes noise in a meeting or lunch or dinner it feels equally rude to be chekcing your watch all the time. So where I thought I would want notifacations, I came to realize I didn’t unless it was an emergency.

Enter the need for smart filters for your smart watch. Meta, the rebranded name of the company Meta Watch, has filters built into their software that lets you choose which notifications to alert you and which to not. While Pebble does not have filters they have recently added the addition of a “do not distrub mode.” Which I found that I used to turn off notifications in nealry every context where I initially thought I wanted notifications.

The watch by itself requires the smartphone or another connected device to derive its value. The value features of the smartphone are extracted from the phone and placed elsewhere. Again, I don’t doubt this is valuable to a segment of the market. I simply struggle to believe it is a mass market solution.

Not a single product I use today is anywhere near ready of the mass market and I often struggle if it is even a mass market solution at all.

An iWatch

This leads us to the inveitable question about what Apple could do in this category. On this question I have several thoughts.

Let me first start off and state that while I understand those heavily vested in Apple’s future there is a sense that they need to attack a new or disrupt an existing category in order to march forward. I don’t personally believe this is true, although I see the investor point of view on this, but I will address this at a later date. Let me just say on this point, that China is Apple’s growth opportunity. More on this at a later date.

The fundamental challenges facing Apple with a watch form factor is in the required diversity of design in order to come remotely close to addressing the mass market. This is an area where one product design will not cover all the bases. Watches, for those who wear them, are extremely personal choices from a fashion standpoint and even more than smartphones in this regard. In order to Apple to be able to address a larger market they would need to offer a lineup from of these products. Perhaps not on day one but diversity in fashion is the key for every brand that choses to compete there. This tact is required if they are going after existing watch market customers or ones who are at least interested in a watch.

The other point worth considering is whether Apple can attract customers who aren’t watch wearers already or didn’t have any previous interest in a watch. Again, this is a harder sell than any other offering Apple has made in personal electronics. While our firm didn’t predict the iPod we saw and projected the market opportunity for music devices embracing the shift from analog to digital. And with the iPhone the market opportunity was clear even before Apple entered it. Even before the iPad we outlined outlined the market opportunity for tablets as we continue to do today. So it is within this industry and market context that we still remain skeptical of Apple’s offering being a watch at least at this point in time. While Apple’s products were not necessarily foreseen a market opportunity was. Many fundamentals of the technology market would still need to evolve for this category to make sesne outside of just the predicable early adopter category. These are not things we are certain even happen. Even before things like the iPod, iPhone, and iPad, as we speculate what Apple could do we could a market play that appealed to a wide audience. We don’t see this for smart watches.

I certainly understand the logic that people believe Apple can come in and do it right and show the market how to make one of these products. This is certainly how they operate, however, as I outlined above the market opportunity was clear before they entered with the right product. The smart watch is a category where this is not the case and may never be.

Samsung’s Dangerous Smart Watch Gamble

Next week, just before the IFA consumer electronics show opens in Berlin, Samsung is expected to introduce their first smart watch apparently called the Samsung Galaxy Gear. By my count, this will be at least the 14th smart watch introduced in the last 18 months. I have had a chance to work with and review at least six of these so far and members of my staff have reviewed at least two more recently.

One thing to note about all of these watches so far is that they are all rather big, not very stylish and to be truthful, aimed mostly at male geeks. I can’t even imagine any woman clamoring for any of these early models and suspect that Samsung’s version will be just as geeky as the others given the technology available today for use in building this first generation of smart watches.

Most of these new smart watches are focused on being an extension of our smart phones and delivering glanceable data or information tidbits from our smartphones on a wearable screen. After using a couple of smart watches with this feature I can attest that this is a very cool idea and in fact, the watch will most likely become the #1 wearable computer in the market over the next few years, trumping things like Google Glasses that may take a decade before it hits consumer stride.

Although I think Samsung’s smart watch may actually be cool in functionality, one thing I am pretty certain is that it will not be stylish and be attractive to anyone but male geeks. While Samsung has created stylish smartphones and tablets, let’s be honest here; this design basically copied Apple’s iPhone and iPad designs and literally rode Apple’s coattails into these markets.

This is where introducing a smart watch now is a real gamble for Samsung. I fear that they are rushing this to market so they can say they beat Apple to the market but their model will be very similar to the smart watches already available. Sure, they have a strong marketing machine and big bucks to try to drive this into the mainstream but Samsung’s track record in creating ground-breaking designs in any product is historically weak.

While creating a product for male geeks is not bad in itself if these male geeks buy them, there is one very key issue about watches that will prove problematic to Samsung and that is “stylish” designs. Watches are fashion statements and very little about functionality to most people.

I believe that this will be at the heart of Apple’s eventual smart watch in which functionality will be important but stylish design will be equally important to whatever they finally deliver to the market place. And it is doubtful that Apple does not understand the difference in style design between men and women and will factor this heavily in their actual product designs.

Notice that Apple is not rushing a product like this to market just so they can have skin in the game. If you look at Apple’s history, they usually wait to see if a product takes off and then, and only then, do they re-invent the product with an eye on form, function, design and eco system that lets them control and drive their products into a broader mass market. Apple did not invent MP3 players. They reinvented them. Apple did not invent smartphones. They reinvented them. And Apple did not invent the tablet. They reinvented it and along with their iPhone launched the post PC era.

I suspect that Samsung understands this and is taking a calculated gamble by introducing the Galaxy Gear now. However, I think it is a dangerous gamble. While smart watch functionality is cool, in watches, style and fashion play a key role in its ultimate success. By introducing something before Apple does it runs the risk of not even coming close to what Apple will deliver and in the end, Apple will do the Apple thing and reinvent the smart watch that transcends the geekiness of todays models and be the one that drives the smart watch wearable revolution to the masses.

Now they have to wait for the other shoe to drop from Apple and if history is our guide, copy Apple again if they really want to be a player in the smart watch wearable revolution for the masses.