iWatch concepts? You’re doing it wrong. Focus on the business model instead.
May 15, 2014 Editor 0
Although I was schooled as an industrial designer, I’ll give you a non-design-ish view on what to expect from the upcoming ‘iWatch’. If you’re looking for shiny, wet-dream mockups by fellow designers, I can point you to this endless stream of iWatch concepts that miss the mark. 99% of them strap a mini smartphone to your wrist (are you serious?). It’s probably the same group who designed iPods with keyboards as a vision for the iPhone in 2006. Thinking that slick design is the driver of Apple’s highly profitable strategy would be a very shallow interpretation of their business. No. A new product in Apple’s portfolio will be launched with a clear view of how it can strengthen their business model for the long term. A curved display and rubber-banding UI (as cool as it looks) are irrelevant in this context.
(For clarity’s sake, I’ll use the term ‘iWatch’… although I’m not counting on a form factor that resembles a watch or uses a mini touchscreen)
Another building block in Apple’s business model?
At this stage, iTunes and the App Store connect all hardware products with a recurring monetization model. If a new wearable hardware device was launched, it would need to tie in to this proven revenue model. Follow my scenario:1.The iWatch will be Big Brother on your wrist
1a. Monitor your (media) consumption
1b. Listen and map your friends and family
2. The iWatch will be the most convenient way to pay in a retail context
3. The iWatch will be a health companion to solve the chicken/egg problem in step 2
1.a Big Brother: Monitor your (media) consumption pattern
Apple makes good money on the hardware it sells – but don’t let that blind you. iTunes alone is expected to grow to make up 20% of Apple’s profit (includes apps and services, iTunes covers music and media sales etc.). I assume that, together with the iWatch launch, Apple TV might be pushed to the next level. In order to sell tons of media (TV and movies on demand, music etc.), Apple will need to get the best insights in this market. The best means not just gathering the movies you claimed to like (on Facebook) or what movies you’ve bought (on Amazon), but to observe which media you’re actually consuming and are relevant for you today.
Imagine an iWatch with a Shazam-like feature to continuously listen to what TV soaps, radio channels (or other ambient sounds) you’re surrounded by. Together with the metrics already monitored in iTunes, Apple could build a more representative profile of the media you’re actually enjoying. With such technology available, imagine how Apple – in the long run – could even track whether you’ve listened to a TV/radio commercial or not?
Remember, Apple likes to offer a lifeline to industries under pressure. Just see what they’ve already done with magazine and news publishers. They could support traditional advertisers to track and boost the effectiveness of campaigns in order to fight Google.
1.b Big Brother: Microphone to map your friends and family
With a microphone that listens to your environment, Apple could start to map who you talk to and who you ignore. Apple already has your phone book. So does Google (Android) and Facebook (which just bought 450m address books). With such a feature, it could enter the social space in a disruptive way (remember Ping?). I assume they will find a way to connect this functionality to iMessage to make it acceptable and have a decent use case to start from.
Creepy or not, eBay is experimenting with Watch With eBay (limited results so far). Some apps listen while you sleep. Samsung TV’s already use this in their marketing & Microsoft took huge steps forward with the Kinect. Just to say, this is not 20 years off.
2. Your signature upgraded: the most convenient way to pay in a retail context
Apple would be stupid if it couldn’t leverage its massive credit card database in a traditional retail context. Yes, payments by phone are already available in a variety formats, but this can still be simplified. Just check how easy it is to throw money at Apple via the App Store. In an active session, you don’t even have to confirm with a password. You just click and buy. So convenient that it hurts my wallet. Imagine if we saw the same simplicity at a retail counter?
Your smart-wrist device would simply recognize a ‘payment gesture’ in order to accept your purchase. Just as you draw a pattern on your smartphone to unlock it, you could draw a simplified ‘signature’ on the counter when you pay in a retail store. iSign – or whatever Apple calls this payment option – could have the same impact on retail as the App Store has had to (online) software.
Although 30% commissions in retail are not an option, this could be lower. But don’t expect Apple to move in a tiny margin, high-volume business. What if they only ‘claimed’ their commission if a shopper was a verified and tracked customer who’s triggered by a specific ad (see 1.b)? Closing this loop is probably far fetched, but it makes you think where this might lead to in the long run.
3. Be a health companion to solve the chicken/egg problem within the business model
The introduction of a new payment solution is a classic chicken and egg problem. Basically, you have a two-sided marketplace business model. Why would customers use a new system if no retailer supports it (and vice versa)? Expect Apple to open up with 2-3 big retail brands committed to accept their ‘iSign’ payments. Apple could only arrange such an agreement if it could convince these retailers that, in the short term, numerous customers would be carrying around such a payment system.
A health or fitness companion (co-branded by Nike?) would be an excellent vehicle to make this happen. If this was the strategy, it would make sense to make the iWatch compatible with Android (just like MacBooks suddenly becoming compatible with Windows). A FuelBand-like service could suddenly be available to users not currently supported.
In my view, the iWatch will be a stand-alone hardware product, not just an extension of the iPhone. People don’t need a wrist-tied remote for the smartphone in their pockets. Many non-Apple users discovered the ecosystem of Apple via the iPad. Also in this case, Apple can only grow if it can pull in new markets so the iWatch needs to also be relevant to some Windows/Android users. While the device probably has a screen element, I don’t assume this will be a straightforward touch screen. A subtle pattern (think Misfit Shine or the breathing MacBook sleep light) might just do the trick.
Anyhow, it will be an exciting time. How do you think the iWatch could contribute to Apple’s business model?
Categories: Business Model
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