Yesterday, Apple announced Watch Series 2 which they say is ready for a run or swim anytime with a 50 percent faster processor, brighter screen and, most importantly, an integrated GPS. To be sure, the world’s most popular wearable is starting to find its footing. During the unveiling, Apple touted how Watch Series 2 could improve life for runners, swimmers, hikers and other people interested in fitness. The company noted that in 2015, it became the number two watch manufacturer in sales behind Rolex. It is certainly on an impressive trajectory in the wearables category but what we saw yesterday still only represents the beginnings of what will be a long journey toward eventual wearable convergence for this category.
Apple is not alone in its attempt to quickly evolve wearables with eyes on a broader audience. Last week, Fitbit revealed two new fitness trackers, each designed to stand up to rigorous everyday use. Other wearable products in the market, from watches and wristbands to eyewear and clothing, are also targeting specific use cases. We’ll see continued diversity in the near-term as device makers continue to search for the next generational leap beyond the smartphone. Like we saw with smartphones and tablets, which each consolidated several use cases to create a mass market product, wearables will also eventually converge into one or two must have form factors with broader appeal.
Moving wearables off the wrist and outside of fitness
The most successful wearables to date are those that focus on the fitness monitoring space. Even as Watch Series 2 targets a broader consumer segment, Apple highlighted fitness-focused features at nearly every turn during the unveiling. We heard about a partnership with Nike, learned how ViewRanger can improve hiking experiences and saw how leading ingress protection can expand usage to water sports and beyond. Apple Watch will continue to attract a broader audience, as will others that debut key functionality that improves applicability to everyday activity. Still, growth in this core segment will continue to be driven by several factors.
The segment has become increasingly competitive, which also extends to price. It has also become culturally acceptable and even fashionable to sport a wearable. The category is introducing a certain durability and portability that bigger and more fragile devices that we must carry, like smartphones, can’t match. And while tech advancements in the category are being made all the time, planned obsolescence isn’t forcing consumers to replace these devices on a one to two year timetable. To that end, relevant software updates pushed out to these devices give a further boost to continued relevance.
Despite some early success in the context of wrist wearable sales, mass adoption of wearables will not occur until they can become standalone devices that can also solve a range of specific problems.
Some argue that deeper customer segmentation and differentiation (personal assistants, pain management, diabetes monitoring, etc.) will push the market size to its inflection point. But the immediate barriers to growth in the wearables market will continue to be price, perception of utility (“Do I actually need this?”) and device fatigue.
Looking beyond the wrist, there are some interesting use cases that IBB Consulting believes could increase consumer perception of utility. New wearable adoption will be heavily dependent on the product’s ability to solve a user problem at a price point that makes sense for the customer. Wearable manufacturers must be conscious that the body is fairly exclusive territory with limited amount of space based on day, time and activity. They must also be built on platforms that support access across a range of mobile and PC computing platforms.
A glimpse at the future of wearables
Recently introduced wearables offer a glimpse of where the market may ultimately go. For clothing, Under Armour’s “Future Girl” campaign seeks to redefine athletic wearables. For the head, we continue to see advances in virtual and augmented reality like Avegant’s Glpyh and Microsoft’s HoloLens. For the finger, Nimb is a ring with a panic button that can send an alert to 911 dispatchers when a person is in danger. For the neck, there is the Vinaya ALTRUIS smart necklace that acts as a smartphone extension. For the torso, the DEXCOM G5 Mobile Platinum sends blood glucose readings to a diabetic’s smartphone. The Ring ZERO allows users to control smartphones, appliances, and other devices by simply by gesturing with their hands. We’ll also see wearables continue to expand beyond humans as animals get in on the action. For instance, Nuzzle and Fitbark are both designed for pets, acting as GPS and analytics tools.
As more wearables hit the market, IBB Consulting believes that all paths will eventually point to convergence. This converged innovation will happen naturally as a result of too many overlapping devices on “beach-front-real-estate” body parts and use cases leading to diminishing utility (the human body limits the number of wearables a person can wear at once), and the perceived value of separate devices dissipating over time, creating a lack of stickiness across all devices.
As more devices enter the market, we’ll see convergence efforts supported by increased partnerships between device makers and software providers that will enable devices to communicate to each other. New wearables will also be able to demonstrate increased value by pulling data from other connected ecosystems (e.g. smart home, connected cars, etc.). Once these connections are established, the use of contextual artificial intelligence to provide feedback and suggestions will drive differentiation and further value. We’ll eventually see centralized aggregation across multiple devices, eliminating the need for consumers to manage multiple apps and improve the overall user experience.
A converged ecosystem will have many similarities to the smartphone ecosystem today and will most likely be dominated by a few main players. These players will own the ecosystem, the “app store,” and perhaps even the network. The question is, how soon until we get there? We discussed this and other topics on a panel with Samsung, Withings and FitBark at CTIA this week. The short answer is “it depends.”
From our viewpoint, the market is still wide open for the right company and product lineup to stake their claim.
Jefferson Wang is a senior partner with IBB Consulting, leading the firm's wireless and mobility group's work with network operators, device manufacturers, and content providers on technical and business strategy from product innovation through launch. Follow him on Twitter at @jeffersonwang13