Saturday, September 06, 2014

Will Smartphones Displace The Swiss Watch Industry?

...The Moment Of Truth Is Upon Us...

Apple v. Rolex
Designed in California v. Made In Switzerland


Rolex is by far and away the best-known, most prestigious watch brand in the history of the world, and they should be. After all, Rolex achieved this position in the marketplace the old-fashioned way–they earned it.

The only other old-school brands I am aware of that match Rolex's popularity, status, instant brand recognizability, and enduring zeitgeist are Mercedes-Benz, Ferrari and perhaps Louis Vuitton. So notice, I am not referring to other watch brands, I am saying Rolex is one of the best known and most respected brands on earth!

Rolex is also revered within the watch industry. Every watch brand on earth studies–often times in awe–all of Rolex's strategic moves, and tries to emulate or get around them. Rolex is the unequivocal horological industry leader and standard by which all other watch brands are measured.

In other words, Rolex has not only become synonymous with being The International Mark Of Success, but Rolex has been the belle of the ball for at least a half-century. Rolex is the timeless and elegant brand that is the Cary Grant of Sophia Loren of watches.

How did Rolex earn this highly enviable position? In one word? INNOVATION!!!

We live in a world where innovation is the name of the game, and companies that fail to innovate fall by the wayside, or become also-rans. Ironically, there was a time where Microsoft was the King of the computer world, and Apple almost went out of business. How did Apple under Steve Jobs' tutelage make such a strong comeback to now be the King? INNOVATION coupled with the ability to mass produce high-quality machined computer products, with excellent software. Microsoft today continues to implode upon itself, and not only has rested on its laurels, but has failed terribly to innovate.

This story is fascinating on so many different levels. Most particularly since it involves the most successful company today in the world, which is Apple, and Apple in my opinion is gunning for Rolex in the sense they desire to steal the mindshare mantle that Rolex possesses.  In other words, Apple wants and is seeking what Rolex owns today. Apple wants to occupy that coveted position of prestige that Rolex has owned for at least the past 5 decades, and that is what is at stake today.

An obvious question is 'can Rolex and Apple coexist, side by side, with Rolex being the old-school innovator and Apple being the new-school innovator?' Sure. Why not!? The only challenge is that Rolex is not used to playing second fiddle to anybody, and Rolex, as you will learn later in this story basically pioneered and created the old-school smart watch. Thus is stands to reason that Rolex should not rest on its laurels like Microsoft, and Rolex should once again push-the-envolpe of innovation!!!

Will SmartWatches Displace The Swiss Watch Industry?

Let's face reality for a moment. We are living in the digital age, and many, many technologies are quickly converging and evolving. No matter where you live in the world, you see people walking down the street staring at iPhones and Android smartphones which appear to be glued to their hands–even at Rolex's International Headquarters in Geneva, Switzerland!

This is the world we live in...The world of the smartphone...The world of today and tomorrow...and things are evolving very quickly in this world, and the new focus is on wrist time and wearable technology, which Rolex basically invented and began pioneering more than 100 years ago...But, there is a new world order today, which has been driven primarily by Apple in California...

The Intersection of Technology & Humanites

Are Rolex and Apple on an inevitable collision course for wristwatch innovation, status and mindshare? It is widely rumored that Apple with be launching their iWatch platform on September 9, 2014. Apple rarely introduces new products, and they only do so when they believe they can leapfrog all the competition and dominate the new market they create. In order for Apple to successfully reinvent the smartwatch for the 21st century in 2015, they must displace the company that invented the smart watch in the 20th century, in 1915, and arguably this puts Rolex and Apple on an inevitable collision course.

"It's in Apples DNA, that technology alone is not enough. It is technology, married with liberal arts, married with the humanities, that yields us the result that makes our heart sink. Nowhere is that more true than in these post PC devices." –Steve Jobs 

Can you hear the battle drums beginning to beat loudly in the distance? I certainly can, and the stakes are higher than ever. I wrote a short article on this subject earlier this year which I highly recommend reading before you continue reading this article.

SmartWatch v. StupidWatch

A Clash of titans is beginning for the battle of the wrist...Are digital and analog worlds about to collide again? Will it be a zero-sum game? Will one disruptive technology overcome and displace another? It happened with TV sets...Flat screen TVs and computer monitors obsoleted tube technology screens...Cell phones replaced land lines, and smartphones with large flat screens have arrived everywhere. As the world moves quickly into the digital information age, we are constantly surrounded with large, colorful flat screens wether it is an iPhone, iPad, MacBook laptop, TV and even in cars like the Tesla–large, bright colorful screens abound and are quickly becoming omnipresent...

So what exactly is convergence and what does it mean? It means everything that can be digital will be digital, and it is happening at a breakneck pace. The following animated graphic from the Harvard Innovation Lab, illustrates how our desktops have evolved since the 1980s. The obvious question the graphic below poses, is what comes next in the evolution? Could the wrist be the place that consolidates the laptop and phone, or at least highly supplement it?

So the obvious question is, are we at a strategic inflection point? Is the watch world at a tipping point? Is it time for out with the old and in with the new? Is the future arriving? Will you walk down the street or go to the gym in a few years and see everybody staring at their watches, flicking through screens non-stop, like they do with their iPhones today? Will our world replace house, office and car keys with smart watches?  Is this an inevitable evolutionary step, or just a passing trend? Is it Science Fiction, Science Friction, or Science Reality?

The worlds first real watch that delivers on the promise of delivering a Dick-Tracy-like watch just arrived yesterday, with the advent of the Samsung Gear S Smart-watch. This Samsung works independently and can make and receive 3G phone calls on its own, and it's not far off from the Dick Tracy vision.

As a matter of fact, it goes way beyond the original Dick Tracy wrist phone since it comes standard with a 260x480 pixel curved Super AMOLED display, and also features a GPS sensor, accelerometer, gyroscope, barometer, heart-rate monitor, and UV detector. The GPS sensor not only offers turn by turn directions, but can also remember where you parked your car, and can direct you to it! 

And look at the crazy, super-high screen resolution on this display. If you look closely at the simulated analog display, you can see the micro-sub minute markers like they are on an actual dial with crystal clarity...this is just crazy detailed...and this is NOT the black and white low-res screen calculator watch of yesteryear...This is not a joke...Things are getting very serious, very quickly...

The Samsung Gear S comes standard with 4GB of memory, coupled with 512 of RAM, coupled to a Dual-Core 1Ghz processor. It also includes Bluetooth 4.0. When it comes to specs, it is remarkably similar to the first generation iPhone–but it fits on your wrist...

The following Samsung Mobile video gives a fairly comprehensive and deeply inspirational overview of the new Samsung Gear S...

There has been an ongoing debate for a few years now about wether or not smart-watches will displace traditional wrist watches, thus the most obvious question is what effect this will have–if any–on Rolex? And most importantly, is Rolex gearing up to counter the competition with its own smart-watch? In other words, what will a new Rolex look like in 10-20 years from now? Will it still just be all mechanical, or will it evolve into something else? Will Rolex watches in the future, evolve into smart watches or will they remain stupid watches? This really is the $64,000 question...

Many people have dismissed smart watches as being gimmicky toys, as apposed to being real tools, but in my opinion the new Samsung Gear-S Smartwatch introduced yesterday demonstrates the threat is real and credible, and should be taken very seriously!!! 

After all, this new generation of smart watches is still just in its infancy. Think about how much the iPhone has evolved in just the past 7 years, and since technological evolution is exponential in nature, think about how useful and powerful smart watches are likely to become in the next decade!?!

Don't forget these shots across the bow of the Swiss Watch industry are just an opening salvo. And don't think for one moment it is Rolex that potentially has something to lose. The entire Swiss watch industry is befuddled by Apple and smart watches, and has attempted to discount the value proposition of such a product, much in the same way Steve Balmer, the CEO of Microsoft tried to do when asked about the potential for success with the original iPhone in 2007 as seen in the video below:

I must say I am personally amazed and how quickly Samsung has iterated, and pushed the innovation envelope with the advent of the Samsung Gear S smart watch. If this is a harbinger of what is to come, what is now considered to be the roof, will quickly become the new floor.

The video above gives an excellent overview of the all-new Samsung Smartwatch due out in October. Samsung has not announced pricing yet, and they are probably waiting to see how Apple prices their iWatch, which will likely be introduced next week in Northern California. The photo below shows the new Samsung worn on a woman's wrist as she text messages.

"Swiss watchmakers are f**ked!"
–Sir Jonathan Ive [Chief Apple Designer]

The real threat could and should come from Apple next week. The New York Times just published an article that quoted Apple head designer Jonathan Ive as saying "Swiss watchmakers are 'f**ked", as well as saying "Switzerland is in trouble."

Apple has a special event scheduled for Tuesday, September 9th @ 10am Pacific Standard Time, and it is widely believed they will introduce the Apple iWatch Smartwatch at that event alongside the very highly anticipated new iPhone 6 models.

So what is the big deal? How could a Northern California based company displace the Swiss watch industry. That would be impossible, wouldn't it!?!

Apple is extremely ambitious, and only aims very, very high–basically for the top. Before Apple introduced the iPhone, the key smartphone players were Nokia, Palm, Blackberry, Sony-Ericsson, Motorola and Microsoft Windows Mobile, which since have all gone the way of the dodo bird. Apple single-handedly annihilated the entire marketplace, and the only company they haven't decimated is Samsung. So that is why next Tuesday is perhaps going to be the single most interesting day in Rolex history!?! Will Apple come after Rolex and the rest of the Swiss Watch Industry? 

Last time this happened, was in the late sixties during the Quartz crisis, of which Rolex was the sole beneficiary. The Swiss watch industry is very healthy today, but that could all change very quickly if Apple takes serious and decisive action. There is no doubt Rolex can weather just about any storm Apple can subject it to. The real question in my mind is how prepared is Rolex to fight such a battle? Will Rolex rest on its laurels, and argue that they just make old-fashioned mechanical watches, or will they do what the old man would have done, if he were still alive?

When I say "The old man", I am referring to Rolex's founder, Hans Wilsdorf. Hans Wilsdorf iterated Rolex every day of his life, and basically invented the smart watch. If I could bring Hans Wilsdorf back from the grave today, after getting him back up to speed on what has happened in the watch industry since he passed away in 1960, the two greatest questions I would ask hime would be:

1. What do you think about the advent of Quartz technology? Or how would you have handled Quartz technology back in the late sixties? Don't forget that Rolex was part of the Swiss Beta 21 consortium that developed Quartz, and ironically failed to figure out how to successfully implement it. Instead the Japanese grabbed it and ran with it, which resulted in the Quartz crisis of the 1970s. Rolex was able to weather that storm as previously mentioned because the old man left Rolex in such a strong position when he passed away.

2. The second questions would be, to ask the old man what he thinks about the state of modern smartwatches in 2015. In other words, if Hans Wilsdorf were alive today, would he go pedal to the medal into making Rolex smart watches, or would he ride the brakes, and stay with old-fashioned mechanical watches. In my opinion, having studied and documented Hans Wilsforf's career far more closely than any other Rolex historian, I would guestimate he would go full speed ahead (pedal to the metal) with trying to continue to innovate on the wrist.

So once again, this begs the question about wether Rolex has plans to introduce their own smart watches in the future? Is Rolex going to compete, or sit on the sidelines and try and wait this one out? If they try and wait it out, they risk losing their position of dominance in the Swiss watch industry. In my opinion, this smartwatch situation, for lack of a better  term, is different than the Quartz Crisis. There is much, much more at stake this time around. This time, Rolex potentially has Apple, which is the best capitalized company in the world, breathing down their neck.

So what will happen? It is going to be awfully interesting to watch (pun intended), and as they say, time will tell...which is why I titled this article, "The Moment Of Truth Is Upon Us." If Apple does not announce the iWatch next week, or if they do and they deliver a dud, we'll have to wait longer to find out the outcome of the ensuing battle. Also it is worth noting Samsung's all new smart watch is EXTREMELY impressive, and I would not underestimate their drive. If Apple has the prowess, I believe they do, and they deliver an excellent 1.0 version iWatch next week, then I say, watch out for flying brick!!!!!

The SmartWatch DreamTeam?

In a surprise announcement, on Friday, September 5, 2014, Apple announced that famous designer, Marc Newsom is joining Apple's design team.

"Marc is without question one of the most influential designers of this generation,” Ive said in a statement provided to VF Daily. “He is extraordinarily talented. We are particularly excited to formalize our collaboration as we enjoy working together so much and have found our partnership so effective." –Sir Jonathan Ive

Marc Newsom and Sir Jonathan Ive are pictured above. They are close friends and have collaborated in the past on design projects. Also, Marc Newsom has experience in watch design. Arial Adams from wrote an excellent overview of Marc Newsom's watch design history, which I recommend checking out. Below is a video of Marc Newsom talking about his watch design career.

Non of this really should come as a surprise since, Apple has been recently putting together the ultimate dream-team for designing, manufacturing and marketing the Apple iWatch. This includes Apple recently hiring Angela Ahrendts, who is the former CEO or Burburry, who is renewed for being "Wicked Smart" according to Forbes.

So what does all this mean? I recognize I could be overestimating Apple's seriousness, but I really don't think I am. What does this mean for Rolex? Hard to say. Who knows, perhaps Rolex will end up working with Apple to build a Rolex SmartWatch. I think Rolex is safe, since no matter what, there will always be customers who appreciate and prefer the old-school design aesthetic of the classic Rolex watches. 

At the same time, I think Rolex should continue in the early decades of the 21st Century to innovate the way they did in the early decades of the 20th Century. After all it is in their DNA. Don't forget Rolex also has a new CEO, Jean-Frédéric Dufour coming on board soon, and he is the first Rolex CEO in history to come on-board from outside Rolex. Hopefully he will have the wisdom, insight and moxie to keep Rolex at the forefront of horological innovation, and as they say, hopefully he will be able to Think Different!

Arial Adams from recently wrote an article about this same subject, and sees things quite differently (no pun intended) than my perspective, while adding additional insight. I recommend reading Arial's fascinating counterpoint argument.