We now know Apple has done well with the Apple Watch and that it outperformed the iPhone and iPad in terms of units shipped during their first 9 weeks on the market. However, they are doing these strong sales with the watch only connected to the iPhone. Of course, this makes sense. If the watch becomes popular and only works with an iPhone, it could cause many users of other smartphone operating systems to switch. Also, it creates great incentives for those who want the Apple Watch to buy or upgrade their current iPhones too. Strategically, this move to have it only work with the iPhone is important during the Apple Watch’s initial roll out.
But I have an interesting question about the Apple Watch’s future. Is it, strategically, a side product to the iPhone to help sell more iPhones or was it created to also be a viable standalone product with its own profit potential and market impact? It is clear that, at least initially, it’s designed to help sell more iPhones and, since the iPhone is Apple’s real cash cow, one could argue it needs to continue to be a side product to the iPhone in order to help boost sales of the iPhone itself.
However, if you listen to the rhetoric from Tim Cook and Jony Ive, it is actually a piece of well-designed fashion jewelry and should be thought of in that context too.
On the surface, this seems contradictory since it would be hard for Apple to push both positions and still do the Apple Watch justice due to its great design and place in the fashion world.
Apple actually has a precedent for supporting other operating systems with mobile devices. When the iPod came out, it only worked with the Mac. It was basically a “side loaded” device in that you had to connect to the Mac to get the music downloaded to the iPod. The iPod sold well but its audience of users was small since the Mac had only about 4% of the PC market at that time. In those early days, it did influence some to buy Macs so they could use an iPod but to really deliver the type of audience they promised the music industry to help save off piracy, Apple clearly needed to expand the iPod’s audience. To do that, they made it work with Windows-based PCs and that is what really made the iPod a mass market hit. Interestingly, they did this so well they basically dominated the market for mobile MP3 players and, even now, nobody has been able to compete with them in the dedicated MP3 player market.
Over time, as the iPhone included all of the functions that were in an iPod, demand for the iPod decreased. Only recently has Apple refreshed the iPod line as there is still interest, albeit small, for a dedicated mobile MP3 player tied to a great music store and app ecosystem. However, if Apple does want the Apple Watch to have a real impact in the marketplace and change the market for smart watches, they eventually need to open the Apple Watch up to those who use Android. A few weeks back, I wrote a piece that suggested Android is the new Windows. For the Apple Watch to reach its real potential as the game changer Apple wants it to be, it needs to have a broader audience than just iPhone users.
But the question is, will Apple do this and if so, when? Put yourself in Apple’s position. The iPhone is a global success that continues to grow and bring a huge amount of cash and profits to Apple, not unlike Windows was to Microsoft in the past. But, unlike Windows, Apple owns the hardware, OS, software and ecosystem which gives them tighter control. More importantly, they also control the channels. The iPhone drives their profits and, with each iteration of the iPhone, they seem to get more and more switchers and followers. But this also presents somewhat of a dilemma in that they have positioned the Apple Watch as a tech and fashion game changer and suggested that everyone will want an Apple Watch. But to achieve that goal I have to believe, at some point, they must make it compatible with Android and perhaps even the Windows Phone if they want the Apple Watch to have the global impact they hope it will have.
My personal guess is Apple will keep it proprietary to the iPhone for at least the first 18-24 months but eventually make it compatible with at least Android in order to help them gain the kind of impact they desire and allow it to be a broader industry game changer. Yes, there will be Android smart watches coming out that could rival the Apple Watch. But even so, if Apple made their watch compatible with Android, I am willing to bet they would get the lion’s share of the smart watch market. Their styling and channel make it hard to compete and the Apple Watch would be a big hit with those users too.