Who is the Customer?

I was reading about the new Apple Watch product in the Los Angeles Times over the weekend, and wondering if Apple knows something we don’t, or if they’re just getting ahead of the market again. The truth is that the company has made the right call a number of times in the last two decades, but not always; Apple has had their share of ideas that didn’t fly or just weren’t ready. Their introduction of the first real smart phone changed the telecommunications industry, not just the cell phone industry, forever, and they were also right about the tablet computer. But at the same time, they introduced the Newton PDA well before such devices achieved common usage, and never really did compete effectively with Palm Pilot for that market. The question here is whether there is anyone out there who wants a remote display and control node for their smart phone that you wear like a watch – and, more to the point, if anyone is willing to pay $349 USD and up for such a device…

If you’re not familiar with the Apple Watch – and you may not be, since the things are not for sale as of this writing – the descriptions of it that we have seen so far suggest that it really is a watch; you wear it on your wrist and you can use it to tell what time it is. You can also use it to get weather reports, stock quotes and reminders from your calendar, or to send and receive text messages and play music. The units will have a limited ability to tie into health-related applications on your telephone, and can monitor the number of steps you take during a workout and similar factors. Naturally, you will need to have a functioning smart phone on your person for any of these functions to work; the watch itself will not have cell phone or Wi-Fi connectivity. In fact, it’s really more of a peripheral for your phone – and, in the case of the gold-plated ones, a fashion statement – than the two-way wrist communicators beloved of some science fiction settings. The real question is who is going to buy the things?

As the Times reporter correctly notes, a lot of young adults today don’t even wear watches anymore; you will generally see them checking their phones for the time. But older customers, who do wear watches, are far less likely to see a use for a remote/peripheral device for their phones. One of the true advantages to an old-fashioned analog watch is that it will continue to function even if your cell phone’s battery is dead, the local cell network is down, or you happen to be an inconvenient distance from the nearest cell tower. And unlike certain markets and segments Apple has invaded in the past, in this case there is no population of users for them to take over, because this product category has never existed until now…

Now, I don’t want to sound like I’m beating up on Apple. Every company has to find the ideal balance between how much of their time they spend making money off of products and properties they already own, and how much of their time they spend exploring new products or technologies that will help them to make money. Apple has gotten this question right more often than not; there’s a reason they are still around and still profitable after nearly 40 years. They’ve got a lot riding on the new product category this time, though; the Apple Watch is the first major new product type to appear under their new CEO’s leadership, and if it fails badly enough this could cost the company in terms of investor confidence and cost of capital, not just money wasted on developing, producing and marketing a product no one wants to buy…

If Apple has guessed right, then wearable computers (and peripherals) really are the next big thing, and we can probably expect to see an increasingly sophisticated array of wrist-mounted computing platforms appearing over the next few years, some of which may eventually replace the smart phones they are currently just connected to. If they are wrong, the Apple Watch may be about to join the Newton, the Lisa, and the Apple TV system as ideas whose time just hadn’t arrived yet. And if Apple is able to leverage the development of the Watch system into a new product line or category that they can sell, then the actual success of the Apple Watch is irrelevant; the company will make back its money through later developments of the same technology – just as they did in all of the above cases…