Monday, May 21, 2012

Smart watches vs. dumb watch manufacturers: the battle for the most precious piece of real-estate in the world!

You don't need to be a chart analyst to work this one out. Yes, it is a tragedy. I just hope you have not invested in this company or its products. Because if you have, you've just lost 94% of your investment. Gone forever!

The company we are talking about here is Nokia, the Rolls Royce of mobile phone manufacturing fame. A company which still builds high quality phones, well engineered, sold at very reasonable price. Now, it is fair to say that Nokia is still the world's second largest mobile phone manufacturer with annual revenue of 38 billion dollars. But Nokia's share market is shrinking and as such, the share value has dropped through the floor. For one reason: Nokia is no longer a cool phone maker. Or more precisely, Nokia makes dumb phones.
In just couple years time, the phone market has changed dramatically. We have entered the era of smart phones: phones which no longer look like mobile phones but are capable of almost anything your personal computer is. When we think smart and cool, we now think iPhone or Samsung.
Don't take my word for it: on your way home tonight, look around you. I bet you won't find ONE Nokia user playing with his phone. And this is precisely why Nokia shares are almost worthless.
Now let me give you a bit more of bad news.
As we speak today, right now, we are in the middle of another shift in technology:
the smart phones are evolving to the next level: they are becoming smart watches!
Here are the two major players in the smart watch industry: Pebble which is "compatible" with Apple's iPhone and Android and Sony, compatible with Android phones. No, these are not prototypes: Pebble will soon be available in a store near you, and Sony is already available - for as little as $149! Sony's resemblance to the iPhone is just amazingly familiar.

While smart watches are still dependent on your main mobile phone device (via Bluetooth connectivity) these watches allow you not just to tell the time, but to check your messages, twitter, control music devices - and much more.
Now if you think this is cool, let me just state the obvious: this is just the beginning - on an evolutionary scale, we are talking about amoeba. Give them a year or two - and watch this space!
If you are not impressed, then here is a brief 'technical' introduction about this exciting technology.
For example, while the 3 watches on the left look like 3 different models, it is really the same watch. They look different because they run different applications. In other words, your smart watch is no longer just a piece of hardware, but anything you want it to be, controlled by a software application.
And here is another crucial bit: the software applications are not controlled - or even supported - by hardware manufacturers, nor in the case of SONY, not even by the operating system because the source code is FREELY available to all developers and users! Which means the smart watch will continue to get smarter and offer you even more functions and capabilities.
Now, if I am a Swiss watch manufacturer, I would be in a state of perpetual panic. Compared with what is coming, the watch war between the Japanese and Swiss fought in the 1970/80s is equivalent to that of WW1. The next war is going to be a full blast nuclear Star war!
While in the 80s Swiss manufacturers had all the hardware and know-how to at least produce decent watches and consequently offer some resistance to the Japanese, in 2012 the Swiss watch industry is armed with stone age technology, hoping to fight the Star War.
And here is my key point: the battle is not about the technology, or price, or even performance, this battle is all about that precious "piece of real-estate" - your wrist!
The smart technology is no longer happy to place your gadget in your bag, or back pocket. The smart watch wants to be placed on one and only one spot it deserves - YOUR WRIST. This is what the battle is all about.
You may have a bunch of watches, but you can wear only one at the time.
And you need not be clairvoyant to figure out which one will take that well deserved spot: a smart one, which represents free spirit, creativity, ever changing design, a watch which talks to you, and represents the new age of NO RESTRICTION; or the other one, which is a product of Swiss monopoly whose main concern is how to stop everyone else from entering the market (including fellow Swiss makers), restrictive to the extreme and arrogantly treat the most loyal supporters as ignorant, and whose only business model is this: "if it does not sell, double the price." A watch made by a company which refuses to sell you a spare part, spare bracelet, even a spare link! A maker so arrogant who can afford to upset even the most loyal customers and brand promoters.
Here is my message to the Swiss watch industry: myopic, narrow minded and restrictive policies are not going to work this time. Unless you change and open FAST, you will be out of the game. No one is too big to fall! (Ask Nokia!)
The 'luxury watch market' is no different from any other luxury goods market.
Customers buy luxury watches for many reasons, and value for money, ability to service watch at a reasonable cost and durability of the product are core reasons. Those who can afford your watches are not naive nor ignorant: they will only 'invest' in your watches if your watches are perceived as worth investing in.
There is only one way out, and if you don't want to take my advice, then watch this video: it is about the Porsche car manufacturer and the way Porsche treats its customers and their products.
It is about value for money, about respect and vision.
Mark every word and learn from those who got it right.

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