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The Golden Age of Wearables:
 Personal Networks, Smart Things & Intimate Knowledge

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The golden age of wearables is upon us. But we should be wary: there is no easy path forward. From smart watches to smart socks to smart door locks, the business models are uncertain and the competition is intense. There are five battlegrounds ahead for companies that want to survive.

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The Golden Age of Wearables:
 Personal Networks, Smart Things & Intimate Knowledge

  1. 1. The Golden Age of Wearables:
 Personal Networks, Smart Things & Intimate Knowledge Paul Brody Americas Strategy Leader, Technology Sector Wearable Technology, Adoption & Monetization Conference San Francisco, 21 April 2015
  2. 2. Page 2 The future is already here. It’s just not evenly distributed. William Gibson
  3. 3. Page Here, there, and everywhere, the Internet of Things has arrived in huge volumes 3 Source: Gartner Group estimate of connected devices by category. Forecast Volume of Connected Devices to 2018
 Millions of Devices ValueAxis 0 7,500 15,000 22,500 30,000 2016 2017 2018 2019 2020 Automotive Consumers General Business Vertical Business
  4. 4. Page With every order of magnitude reduction in cost comes an order of magnitude or greater increase in adoption 4 Typcal Platform Cost At Introduction, US$, Log Scale $1 $1,000 $1,000,000 Mainframe Servers PC Phone Wearables Estimated Device Installed Base, By Type, Number of Devices 1 100 10,000 1,000,000 100,000,000 10,000,000,000 Mainframe Servers PC Phone Wearables
  5. 5. Page And these devices are getting very up close and personal with all of us 5 Sensoria Smart SockOmSignal Smart ShirtWrist Bands Galore BSX Insight
  6. 6. Page What’s fueling this massive growth curve? 6 Technological Change Business Model Envy New Market Opportunities Wishful Thinking
  7. 7. Page Powerful software and cheap sensors are increasingly competitive with precision sensors & skilled interpretation 7 Intel Basis Peak • Cardio activity • Total calories • Heart rate Cheap Sensors Are Everywhere • LEDs & Image Sensors for O2 Sat • 3 Axis Accelerometers • MEMS Microphones & Speakers Atlas Wristband • Form & intensity • Strength training • Heart rate & calories
  8. 8. Page Powerful computers are now cheaper than dumb ones. 8 At higher end of the market, this shift has already started: These high powered SOC chips can do far far more than their basic embedded tasks Apple Lightning HDMI Adapter • Full ARM SoC with over 256MB of RAM • Boots OS X Core when plugged in • Conducts software conversion of MPEG to HDMI in real time Powerful System on Chip costs are dropping so quickly, they are converging with traditional embedded chip costs: Non-Recurring Engineering Cost for Customized Embedded Chips Shift to SOC with software customization here Illustrative: As SOCs drop in price, customization will shift to software, not hardware Time + + + + Embedded Unit Cost Average Embedded Cost Average SOC Cost
  9. 9. Page New technology architectures mean that powerful cloud services have a marginal cost of zero 9 Traditional cloud services models are built on centralized services. Distributed systems will harness the vast computing power already out there.
  10. 10. Page Annuity, service & software business models are (deceptively) attractive to hardware manufacturers 10 $0 $17,500 $35,000 $52,500 $70,000 Whirlpoo Electrolux Bosch Nokia Sony LG Electronics companies are bigger than home appliance makers… 2012 Revenue for Major Electronics & Appliance Companies in US$ MM Detergent and cleaning supplies companies are the most profitable 2012 Operating Profit Margin for Major Detergent & Cleaning Supplies Companies -10% 50% Clorox P&G Unilever Appliance makers are significantly more profitable 2012 Operating Profit Margin for Major Electronics & Appliance Companies in Percent -10% 50% Whirlpool Electrolux Bosch Nokia Sony LG
  11. 11. Page Clearly, we’re all in the wrong line of business 11 Organic Soap $16/Bottle Delicate Detergent $10/Bottle Cascade Dish Cleaner $20/Monthly Supply Tide Laundry Pods $20/Monthly Supply Typical gross margins for cleaning products: >50%
  12. 12. Page The lure of new markets is most powerful of all, of which three seem the most compelling 12 The Quantified Self The Smart Home The Economy of Things
  13. 13. Page 13 Make the most of yourself, for that is all there is of you. Ralph Waldo Emerson
  14. 14. Page It’s too bad there’s no evidence that wearables make much of a difference, at least in the fitness department 14 Wearables dirty secret: 50% Lose Interest - Tech Republic, February 2014 My fitness band is making me fat: Users complain of weight gain with trackers - USA Today, July 2014 Fitness trackers are long on hype, short on credibility. - Wired Magazine, January 2013 Fitness Trackers Only Help Rich People Get Thinner - The Atlantic, January 2015
  15. 15. Page Most the market for wearables is driven by information seekers rather than the most highly motivated 15 Source; IBM Institute for Business Value, The Future of Connected Health Device,s, 2013 Motivated Healthy Chronically Monitored Information Seekers
  16. 16. Page Interventions that work in clinical environments don’t seem to work with consumers 16 Less Effective With ConsumersWork In A Clinical Environment
  17. 17. Page All of that may be about to change: the era of A/B testing is about go from the web shopping cart to your underwear 17 A B Google Fit HealthKit ResearchKit
  18. 18. Page With more than a million in estimated pre-sale, the Apple Watch is kick-starting a new era of wearables research 18 Unprecedented user volume. Apps & Development Tools Openness for research and analytics Integration across multiple devices
  19. 19. Page The second big market calling is the Smart Home. Long promised, and never delivered, it’s getting smarter all the time 19 Direct Control Z-wave Hub Efficiency Nest Thermostat Well-Being Misfit Bolt
  20. 20. Page The biggest market of all is the market for smart, digital assets. The Internet of Things will digitize the physical world 20 Digital ContentFind It Consume It Pay For It Digital Content
  21. 21. Page The biggest market of all is the market for smart, digital assets. The Internet of Things will digitize the physical world 21 Physical WorldSearch Utilize Monetize Physical World
  22. 22. Page 22 Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. Sun Tzu
  23. 23. Page I said we are in the golden age of wearables 23
  24. 24. Page After the renaissance came the industrial revolution 24
  25. 25. Page Wishful thinking seems to be the foundation for many business models and forays into connected services 25 Device Revenue Services Revenue Customer Analytics VS Top Concerns for Wearables Users Data Security Data Sharing Data Portability Mobile Access 0% 20% 40% 60% 80% 34% 59% 63% 77% Source; IBM Institute for Business Value, The Future of Connected Health Device,s, 2013
  26. 26. Page Economics of information markets are challenging 26 Supply Marginal
 Cost $0 Market 
 Price $0
  27. 27. Page Software & Services markets aren’t universally profitable. 27 Where The Money Goes: Online Media Services for a $1 Music Track or App 10% 5% 15% 70% Artist Transaction Processing Data Center & Delivery Everything Else
  28. 28. Page As wearables consolidates and accelerates, lots of business models may not survive 28
  29. 29. Page Five battlegrounds where companies in the wearables space can distinguish themselves and make a difference 29 Sensors Analytics Integration Business Model User Experience
  30. 30. Page Sensors 30 Low Cost Hardware Powerful Software Accurate, Low Cost Data
  31. 31. Page Analytics 31 Better Sensors Huge Data Sets Predictive Analytics
  32. 32. Page Integration 32 • No single source of truth • No single source of data • No possibility to live in a walled garden Openness to integration may outweigh individual strengths
  33. 33. Page Business Model 33 • Don’t defer profitability • Leverage sustainable cost models • Be wary of “two-sided” business models
  34. 34. Page User Experience As A Science 34 A/B Testing Methods Massive Data Sets Lasting Behavioral Change
  35. 35. Page Making a better world through technology 35 It’s all built on optimism about the future.
  36. 36. Paul Brody @pbrody linkedin.com/in/pbrody