Apple Should Give Up On The iWatch And Design Clothes Instead

More news today that analysts believe an iWatch would rescue Apple’s design and innovation reputation. Sanford C. Bernstein analyst Toni Sacconaghi, quoted here on Forbes as the top-ranked financial analyst covering Apple, reckons Apple could capture additional cash flow of at least $2.3 billion  a year by selling the watch at $250 to existing Apple fans.

According to Sacconaghi:

“The successful introduction of the device could illustrate that innovation remains high at Apple and underscore the option value of owning Apple as a platform company – i.e., having a large and loyal iOS installed base that Apple can sell additional products and services into."

So hold on a minute. Apple was, for a brief period, the company with the largest market cap in the world and is far and away the most profitable tech company around. It has a cash pile in excess of $130 billion.

And we’re supposed to believe that it can recover its reputation for innovation by squeezing its existing customer base for an extra $2.3 billion? And that a smart watch rounds out its platform?

This, alone, sounds preposterous. Then there’s the idea of the smart watch.

Over on Fortune today, Cyrus Sanati builds a good case against a smart watch – it’s been tried over and over (and competitor products like Pebble sell at $150) and has still to find a market. Apple and Samsung (also making a watch), he says,

"would be making a grave mistake entering the low-margin cellular accessory market, where the competition is fierce and the barriers to entry are incredibly low."

In contrast to Sanati, I think companies like Pebble will succeed and that’s exactly where the product belongs, with a start-up. Any number of them that want to pitch in. That low barrier to entry makes the watch like ear phones, a commodity looking for differentiation.

I also believe, however, that if any company can make a success of a smart watch, it is Apple because Apple will explore the use-case more fully that its competitors could. And it will be well designed, in the sense of all that functionality coming in a desirable form just like the iPod did.

But Apple is the number one company in the fields it addresses, an absolute pioneer of popularizing complex technology and forging new fields of consumer activity. I cannot believe Tim Cook will want a legacy of people checking their watches every five minutes. An iWatch will not revive its reputation for innovation and its easy to read the figures as a gouge on existing customers.

There is also another reason. The real genius in technology right now lies in going beyond metal and glass.

Information Week today has a short piece on peak smartphone, another way of saying lets move on. It’s well worth a read. I addressed the same issue here and here.

The distribution of the smartphone and sensor technology has to be into wearable apparel not into another device. Think of the device as a Bose base cube somewhere in the room or in your pocket – all the interesting music is played out elsewhere and in the case of sensor technology that can be in your sports vest, your runners, even your day clothes.

Why is Apple ideal for this kind of project?

When Apple began its road to recovery in the 1990s it did so by creating computers that did not look like computers – remember the iMac. Its MP3s did not look like MP3s. Apple changed the way phones looked and worked.

It’s in this vein that Apple needs to think of its next generation of products. If it is a wristband smartphone accessory, how much kudos will come with it? Next to none. On the other hand there is a bridge to be built between computing and wearables.

This is a convergence zone just like computing and mobile was 6 years ago. Apple created something that did not look like a phone, as we knew them then, and transformed the computing/telco world.

Pervasive computing has reached a similar convergence point. Sensors will be distributed around our bodies, through our clothes, and around our environment, linking us to more computing intelligence.

But this converged market needs a company with exceptional design values and an unusual ability to explore and create the use cases. It needs a stylish innovator that can cross over from geekdom to fashion. Who does that sound like?

I don’t think an Apple peripheral device will revive its reputation for innovation. But Apple apparel will.

Forbes.com