Essay: An Assessment of the Societal Implications of Apple Watch as a Disruptive Technology.

Abstract
‘Our most personal device yet’ (Apple, 2015)
The first ever smart watch produced by Apple, named the Apple Watch, will fundamentally disrupt society. Connected to the iPhone, the Apple watch will serve to not only tell time, but to be a virtual personal assistant, it will enable a user to have access to social networks, and it will even enable saving human lives. Based on Apple’s reputation of being an Innovative Disruptor, the Apple watch will undoubtedly try to reciprocate this trend. The Apple watch has the potential to be the bench mark for other smart watch makers and it also has the possibility to usurp the wrist watch market by being the innovating disruptor. Apple watch could affect the wrist watch industry the same way Quartz disrupted the Swiss watch Industry nearly half a century ago. Among the numerous societal implications of the Apple watch as a Disruptive Technology, the major one will be how the latter will affect human lives on a daily basis. While the watch could have positive implications such as to facilitate the tasks of humans, it is also very much probable that the Apple watch will have adverse psychological effect on human behaviour. It can also be argued that the Apple watch will have cultural & historical as well as ethical & moral implications. Different theories on Disruptive Innovation by Clayton Christensen and Constantinos Markides, namely the Business-Model Innovation and the Radical Product Innovation are compared and applied to the Apple watch in later sections of this report. The business models of Apple, and its competitors, namely Google, Samsung, Pebble, and Swatch is also discussed. This report will assess the various societal implications of the apple watch as a disruptive technology. ‘
1. Introduction
The Apple watch – the first ever produced by Apple Incorporated – is the most eagerly anticipated smart watch of this year and is expected to be released on the 24th of April 2015. Apple has designed its watch using a three-fold concept;
1) To make notifications simple and intuitive.
2) To promote health and wellness via its watch.
3) To use the watch for simple day to day activities such as replace the keys to a car or even enable the user to make simple payments online.
Like the previous smart watches produced, this model will not only serve the purpose of indicating date and time, but it will also enable the wearer to carry out numerous activities such as; make or receive phone calls, check and send text messages & emails, view notifications on social networks such as Facebook or Twitter as well as monitor the heartbeat of the person.
However, unlike previous smart watches of yesteryears, the apple watch appears to be fancier and more desirable. This may be because Apple has released not one version of its smart watch, but three models; the Apple Watch (Standard one), the Apple Watch Sport (Sports version), and even the Apple Watch Edition (a luxury 18 carat gold version!). Also, Apple has launched its watch with not one but 18 different designs. While the design in elegant yet simple, the Apple watch appears to be very sophisticated.
‘In addition to being a beautiful object, Apple Watch is the most advanced timepiece ever created, it’s a revolutionary new way to connect with others, and it’s a comprehensive health and fitness companion.’ (Tim Cook, 2015)
Any innovation, either sustainable or disruptive, will have huge implications. For a smart watch, one of the major implications is how it affects society. There are numerous subcategories; the smart watch has ethical & moral implications, psychological implications, legal & security implications and even historical & cultural implications. These implications will be discussed further in this report.
With Apple’s huge fan-base and its world-wide popularity, not to forget its reputation as ‘The Disruptor’ ‘ having constantly shown that it can upend any market; this new-born from the company will definitely affect the life of thousands of users like previous releases from Apple Inc., namely the Ipod and Ipad. But isn’t it too soon for the apple watch be classified as a ‘Disruptive Technology’ given it is yet to be released?
2. Background Studies
a) Theories on Disruptive Technology
The original theory on disruptive technology, or rather disruptive innovation, was created by Clayton M. Christensen. According to Christensen; ‘Disruptive Innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up a market, eventually displacing established competitors.’ (Clayton Christensen, 2015)
Based on Christensen’s theory, it is too early to use the term ‘Disruptive Technology’ for the Apple watch, namely for the following two reasons:
1. The product is yet to be released in the mass market and no one knows what the response will be. While many surveys carried out suggest that the response will be overwhelmingly positive; this is not the case yet.
2. Consumer demand towards previous smart watches has been low as the smart watch market has not yet ‘taken off’.
By considering the history of wrist watches & smart watches, it can be found that Christensen’s theory is not completely valid. The timeline below indicates the history of watches:
(i) Year 1880: The mechanical wrist watch was established.
(ii) Year 1940: The smart watch concept appeared in Science-fiction novels/movies.
(iii) Year 1970: The Quartz Revolution ‘ Quartz watches revolutionized the industry with electrification.
(iv) Year 1990: The experimentation with the first smart watch began.
(v) Year 2010: Smart watches become commercial success. (Smart Watch Group, 2015)
If compared to the wrist watch, the smart watch has not taken over its market yet and thus cannot be categorized as a Disruptive Technology.
A refined theory by Constantinos Markides states: ‘Over time, Christensen’s theory has been used to explain all kinds of disruptive innovations. Different kinds of innovation have different competitive effects and produce different kinds of markets.’ (Markides, C. 2006)
Markides eventually divides the term ‘Disruptive Innovations’ into 2 distinct categories:
1. Business Model Innovations
2. Radical Product Innovations
As pointed out by Markides, ‘while both share similarities, they are both different since they pose different challenges to establish firms and have radically different implications’. (Markides, C. 2006).
Business Model Innovations
‘Business Model Innovation is the discovery of a fundamentally different business model in an existing business. To qualify as an innovation, a new business model must enlarge the existing economic pie, either by attracting new customers into the market or by encouraging existing consumers to consume more.’ (Markides, C. 2006)
Radical Product Innovations
‘Radical innovations are disruptive to consumers because they introduce products and value propositions that disturb prevailing consumer habits and behaviours in a major way. They are disruptive to producers because the markets they create undermine the competences and complementary assets on which competitors have built their success.’ (Markides, C. 2006)
Apple did not discover the smart watch. Several companies such as Samsung, Pebble, or even Nike have launched their smart watch way back in 2013. As a matter of fact, Samsung and Pebble could be classified into radical product innovation because those two companies invented the smart watch.
However, what Apple has done is to redefine its smart watch by making it more fashionable and more appealing to the market. With its large fan base, Apple is sure to challenge the existing smart watch market. This is why the Apple watch can be termed as a Business Model Innovation. Apple will directly increase the sales of smart watches with it newly launched watch, and will also indirectly cause other producers to come up with better designs which will in turn directly increase the appeal of smart watches and thus increase the sales of smart watches in the world.
b) Models
Before going into depth regarding the different business models, it is imperative that the leading smart watch companies are listed. The sales of smart watches really took off in 2013 and maintained its ascension in 2014. According to Smart Watch Group, in 2012, only 0.3 million smart watches were sold, with the figure increasing by tenfold to over 3 million in 2013, and finally to around 6 million in 2014. This ascending trend indicates that the demand for smart watches is increasing on a yearly basis. Back in 2013/2014, the major smart watch sellers were Samsung, Nike, and Garmin in 2013, and Samsung, Lenovo, and Motorola in 2014. It can be noted that Lenovo and Motorola were late entrants in the smart watch industry, and yet they were placed 2nd and 3rd among the top sellers in the smart watch market. While it can be argued that Samsung has maintained its position as the leading seller of smart watches, it must be noted that its sales growth increased only by 25% (800,000 devices in 2013 to 1,200,000 devices in 2014). (Smart Watch Group, 2015)
It is widely expected in the smart watch market that the Apple watch will have a definite upheaval of the sales of smart watches.
Apple’s Business Model
Apple launched its smart watch with a different ideology: rather than launching just one version of its device, it has launched three; namely the standard edition, the sports edition, and the luxurious 18 carat gold edition. The prices of the three editions vary between $ 350 up until $ 17,000. With this new idea, Apple has targeted more customers. Unlike its competitors, namely Google and Samsung amongst others, Apple plans to have a high profitability margin. For example, for every Gold Edition watch sold by apple, Samsung will have to sell over 48 Galaxy Gears (price varies between $350 – $400 for the Galaxy Gear) to match the same income generated from sales. Apple’s business model comprises of users buying applications on its ‘App store’ and buying music from ‘iTunes’.
By so doing, Apple has planned to generate revenues from its services. When a user buys a smart watch, he/she will have to pay for the company’s services when he/she downloads an application or listens to music. Apple is also investing in the ‘Research Kit’ ‘ a service destined to help its smart watch users to get numerous medical benefits and this service will also be at a premium price. Apple has developed its business model with the possibility of generating income from services provided on its App store, iTunes, and now the Research Kit platform. Apple also has a very sophisticated personal distribution network which also generates revenues on a constant basis for the company. Apple focuses its business model almost solely on software sales.
Google’s Business Model
The ‘Android Wear’ is the biggest competitor for Apple’s watch. The former packs an attractive operating system and is armed with a huge array of applications on ‘Google Play store’ and while Apple is now developing the Research Kit platform, Android boasts its established ‘Google Fit’ platform for health & medical services linked to its smart watch. However, unlike Apple, the medical service provided is free of charge and is already being used by its users. The Google business model is completely different with Apple in terms that the latter can only be used by iPhones whereas the Android Wear can be used by a vast array of phones such as Samsung, LG, Lenovo, Motorola, Sony, amongst others. Thus, Google consolidates its business model by generating income through hardware sales. Google’s primary business is to sell adverts and to make publicity. By using the Android Wear, this mission is being achieved as it gets to know its customers even more and can provide catered solutions which will generate Google’s revenues.
Samsung’s Business Model
Samsung is the leading smart watch maker since its launch back in 2013. The Samsung Galaxy Gear is the name given to the company’s smart watch. Literature indicates that Samsung launched its first smart watch back in 1999 but it was met with commercial failure. Similar to Apple’s watch, the Galaxy Gear has a heartbeat sensor, and it also integrates a camera on the wrist, and it can also be used to make/receive calls, as well as send messages/emails.
However, unlike Apple’s business model, Samsung has launched its smart watch by targeting ‘the broad consumer market. The watches are mostly sold via Samsung’s powerful distribution network around the world ‘ telecom operators. The Gear S ‘ Samsung’s most expensive smart watch, priced at $ 350 ‘ is subsidized by some telecom operators as the product generates recurring revenues.’ (Smart Watch Group, 2015)
Pebble’s Business Model
Pebble is one of the most famous smart watch maker, namely because it has had a tremendous crowd funding campaign in 2013 after which it launched the ‘Pebble Steel’, its first smart watch. After meeting with commercial success, Pebble reciprocated with the ‘Pebble Time’ ‘ its second smart watch in 2015. The ‘Kickstarter’ crowd funding campaign greatly helped Pebble become one of the leading smart watch makers. Pebble has set its business model around creating a software development platform for its smart watches. Pebble is one of the smart watch makers with ‘the most hands-on experience in terms of software development for smart watches’. (Smart Watch Group, 2015)
While the ‘Kickstarter’ campaign was the main source of revenue for the firm, it is expected that Pebble will soon start to generate income by offering paid services to its clientele.
Nike’s Business Model
The ‘Nike Fuelband SE’ was the smart watch developed by Nike in 2012. In 2013, Nike was ranked second in the top smart watch selling companies. However, in 2014, Nike opted to discontinue the production of its watch. The main reason behind which, was the ‘Nike Fuelband SE’ operated only on iOS ‘ iPhone’s Operating System – developed by Apple. Since Apple announced that, it too, will be producing smart watches in September 2014, Nike preferred to discontinue the manufacture of its ‘Fuelband SE’ as sales of the latter was being done not only in Nike stores or online, but also in Apple’s stores.
Nike’s business model was founded around a different clientele ‘ those who wanted to keep track of their activity levels during workouts. ‘Social media was at the heart of the Nike Fuelband SE’. (Smart Watch Group) Nike had even built the ‘Nike + Online Community’ for its smart watch users. Nike aimed to generate revenues by giving the users ‘Nike Points’ which could be redeemed while buying sports equipments in the Nike store.
Xiaomi’s Business Model
Xiaomi is a Chinese company founded in 2010. It is widely popular in mainland China and its smart watch is known as the ‘Xiaomi Mi Band’. Xiaomi’s business model is the complete opposite of Apple’s. Xiaomi sells its products at the lowest possible price. The majority of sales occurs online, unlike Apple’s, which are mainly sold in its iShops. ‘The margins of distributors ‘ or the cost for an own distribution network such as Apple’s ‘ is largely eliminated’. (Smart Watch Group, 2015) Xiaomi’s business model is to generate income based on its cloud-based services in the near future.
Swatch’s Business Model
Swatch is a world renowned Swiss wrist watch maker. Swatch group has had a history of innovation. It has based its business model by ‘selling watches as fashion accessories rather than family jewels or pragmatic time keeping devices’. (Smart Watch Group, 2015) By redefining the watch when the watch industry was stagnant and even failing, Swatch has managed to persuade consumers to choose its products. Swatch has managed to challenge the Quartz revolution and pave its way to the top of the pyramid of the wrist watch industry.
Nowadays, Swatch is also a smart watch seller. The ‘Swatch Touch Zero One’ is the name branded to its smart watch. ‘In fact, it has been one of the pioneers, developing watches with integrated pager functionality (in the early nineties), integrated GSM (in the late nineties), the Swatch Paparazzi (launched with Microsoft in 2004), and various other products with advanced functionalities.’ (Smart Watch Group, 2015)
c) Empirical Studies
The Quartz crisis refers to the end of the 1970s and early 1980s where the Swiss watch makers were seriously affected by the emergence of cheaper and yet more efficient Quartz watches. The Quartz crisis is a true disruptive innovation by definition since it very nearly caused the Swiss watch industry to become extinct. It is only by accepting and by changing their watches that the Swiss managed to stay in business. Swatch is the Swiss watch maker which probably saved the whole Swiss watch market from total collapse.
Some analysts are predicting the smart watch to be a second innovative disruption as they believe that the smart watch will have a larger impact as compared to the Quartz Revolution. However, smart watches have been created and released to the mass market way back as in 2000’s. They were not really accepted back then. The second but successful commercialization of the smart watch was done in 2013 with Pebble. However, adoption to this new technology has been expectedly slow. Now, with the launch of the Apple watch, many people believe that finally the smart watch could cause an upheaval of the watch market.
3. Discussions on the societal implications of Apple Watch as a Disruptive Technology
‘Given though Apple watch does so many things, there are cultural, historical implications, and expectations.’ (Jony Ive, 2015)
As mentioned previously, any innovation will have both positive and negative impacts. Considering the Apple watch, it will have the following main societal implications:
i) Historical & Cultural Implications
ii) Ethical & Moral Implications
iii) Psychological Implications
Historical & Cultural Implications
The Apple watch, like previous smart watches, is still new to the wrist watch market. The latter has been sustained so far by the sales of conventional watches. Many of the leading brands, such as Swatch, Rolex, and Patek Philippe prevail in the wrist watch market for several reasons. One of them is because those brands form part of an Elite group. The wearer of a Rolex or Swatch watch is perceived differently just because of the history behind those companies. Those Swiss watch makers have a long, rich heritage, dating back to the 1800’s. Based on the fore-mentioned reason, it would be disadvantageous to the Apple watch to be compared with the centuries old conventional watches. Even the luxurious 18 carat gold edition of the Apple watch may seem inferior to a Swatch or Rolex due to the latter’s heritage.
‘For the longest time, technology limited communication to one on one; just think of the telephone. But now worlds are complicated networks that overlap. The implications have yet to be fully realized.’ (Danah Boyd, 2015)
Through the use of social networks on the smart watch, the latter will enable users to connect to the broad world. Similar to Facebook & Skype, the Apple Watch will have huge sociological ramifications on the way humans communicate nowadays. It is becoming very rare to see people dialling up an old childhood friend or relative just for the sake of keeping in touch. They would much rather use social networks or do video calls as it is much less mainstream as compared to a conventional phone call. Thus, the Apple watch, together with the help of social networking, will have a transformative effect on the way humans communicate. Apple watch can also have a positive impact on people’s life by helping them become emphatic. Other societal implications of the Apple watch are that it will prevent the user from delving in his/her pocket to check for any notification. These little actions will undoubtedly help save a lot of time.
Ethical & Moral Implications
The Apple watch has many moral & ethical implications. The watch can be classified as both intrusive and non-intrusive wearable technology – depending on how it is used. If the watch is used as a complementary device ‘ one which does not affect our interactions ‘ it can be termed as non-intrusive.
However, if the watch is used as a supplementary device ‘ whereby we use data generated by the watch to interact with society ‘ it can be classified as intrusive. For example, for the apple watch, by constantly using the heart rate sensor and sharing the data on social media, the wearer is using the phone as an intrusive technology.
Many people tend to become self-obsessed rather than just health conscious. As a result, their behaviour may become unethical. It can also be argued that the Apple watch will have unethical implications as it will enable sharing of a person’s private data, for example, the Research Kit will collect health information for a user and many users will tend to share that data on social networks, rendering this unethical. There is the risk of privacy leaks when people share too much of their personal data. By sharing intimate details about themselves, they may also be at risk of identity thefts. Another potential societal implication of the smart watch is that it will encourage people to rely too much on it. From planning of schedules for meetings to saving information such as credit card pin code and personal login information, the user will tend to save everything on the watch.
While it may be possible that Apple’s smart watch will have the same adverse effect as smart phones, namely making people become anti-social; on the opposite side, the Apple Watch could be used for life saving or to send SOS distress signals. For example, if the heart beat (pulse) of a person is low, the smart watch could send a distress signal to the emergency services. However, while the Apple watch may be a blessing in disguise for a stricken user, it might be the completely opposite for emergency services. Due to the uncertainty with technology, it is highly probable that the heartbeat sensor might send out wrong or false distress signals to the Emergency Services. Imagine thousands of false distress signals being sent daily if millions of users wear smart watches. This might prove to be a hindrance to the Emergency services.
‘Widespread use of smart watch would mean that instead of relieving boredom by answering emails or using social networks, people will spend time sifting through their bio data stream, planning ways to maximize their personal wellness ratings.’ (Social Implication of a smart watch, 2015)
It can also be argued that by using a smart watch, the moral & ethical implications will become more widespread and prevailing. If people are already using their phones while holding face-to-face conversations, then they will undoubtedly use their smart watch in the similar way. This is unethical behaviour. However, by making small noticeable adjustments, the smart watch can actually lead to a better ethical behaviour.
By pairing the Apple watch with the iPhone, a user will not have the tendency to keep delving in his/her pocket and check for any unread notification. Instead, he/she will only need to check the phone when the watch rings or vibrates. By so doing, they would not rudely delve for their phones during conversation.
Psychological Implications
Another profound impact of the watch on society would be the psychological implications on human beings. As mentioned previously, people will tend to become self-obsessed with some functions of their smart watch, namely the heartbeat sensor. People will be addicted to the bio data and this could have an adverse effect to the psychology of the user. Rather than being relaxed, people will have the tendency to be excited on a constant basis as they will be able to read any variation in the heartbeats; for example, in a person’s life, there are moments when the heart rate is slow and at times it may be high. Many people might resort to different alternatives to try lower the heart beat and it may cause an adverse psychological effect on them.
4. Recommendations & Conclusion.
Apple has shown, on countless occasions, that it is willing to not only challenge, but to be different from others. The Apple watch, based on Apple’s reputation, will have as its mission to be an innovative technology. The watch has been crafted and designed with such finesse, that it will probably disrupt the wrist watch market. However, the first generation of the Apple watch will probably be only the first step on the ladder to achieve this mission. It will probably require some much more Research and Development from Apple to present to the world with its disruptor smart watch.
While the price range of the watch seems shocking, it is even more so when considering the fact that the smart watch is just a technology device. It is bound to be updated every few years, if not on a yearly basis, with new models, to keep up with the technological advancements. Paying $17,000 for a smart watch – one which will probably be so outdated within the next decade, seems to be beyond the wildest ideas for countless people.
There is so much potential behind the use of a smart watch. It is said that, in the future, it will replace keys for vehicles, it will become a virtual personal assistant, it will be a health companion, and it will even help in saving lives. Yet, the smart watch is literally useless to do any of those activities without being connected to a smart phone. Until companies manage to make the smart watch a stand-alone product, and the latter is able to do all those things listed above by itself, the watch will not be called a disruptive technology.
True disruptive technologies like the iPhone or Ipod are very rare and are not predictable. However, similar to the smart phone, using a smart watch will have drastic changes in our day to day activities. As technology keeps on evolving, more societal implications would prevail. Used correctly, the smart watch would be a powerful tool, one which helps us in our daily activities, helps us save time, and enriches our wellness. However, over-use of the smart watch can lead to obsession and eventually have adverse effects on our lives.
Will Apple be able to reinvent the wrist watch industry in the same way it has redefined others like computing and music? (BBC News, 2015) It might achieve its mission in the future, but not with its first generation smart watch. While the Apple watch will fundamentally change the lives of its users, possibly to enhance and even to disrupt the latter, it is however too soon to call the Apple watch a Disruptive Technology.
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