APPLE WATCH – TECHNOLOGICAL DISRUPTION · Apple introduced 3 types of smart watches for multiple segments Apple Watch 2 coming soon In the current market: 27% prefer Apple Watch

SMART WATCH –TECHNOLOGICAL DISRUPTION

University of Alberta Innovation

PROBLEM STATEMENT

PROBLEM ANALYSIS OPTIONS SOLUTION IMPLEMENT OBSTACLES SUMMARY

What is the best path forward for the Swatch Group in the smart watch segment?

SOLUTION

Expand into the Smart Watch Segment Innovation SimplicityQuality Fashion / Luxury


CURRENT SITUATION

Among top 3 in luxury segmentMultiple brands in all price segments Design and sell watches, jewelry, components,

movements Swatch TOUCH Zero One – Smart watch for active users Swatch Bellamy – Smart Watch for payment


COMPETITIVE SITUATIONChanging market landscape Apple introduced 3 types of smart watches for multiple

segments Apple Watch 2 coming soon In the current market:

27% prefer Apple Watch15% consider Apple Watch a substitute

Increasing sales of Swatch luxury among young people 16% 18+ own a wearable device and use it once per

month


COMPETITOR MAP


LUXU

RYM

ASS

M

ARK

ET

LOW ADVANCED

TISSOTSmart-Touch

SWATCHTouch Zero One

fitbit

WATCHEdition

TAG HEURConnected

WATCHHermes

FitbitSurge& Charge

MULTIPLES:Moto, Watch Sport, LG Watch

KEY TAKE AWAY: Swatch is present in the market but not competing in the same segments

ANALYSIS


Strengths- Brand (established)- Patents - Components- Craftsmanship

Weaknesses- Slow to make changes

- Brand loyalty

Opportunities- Luxury market- Component sales / B2B - Partnerships

Threats- Smart Watches

- Technological disruption

SWOT

KEY TAKE AWAY: Apple Watch is a serious threat

10 TYPES OF INNOVATION


KEY TAKE AWAY: Swatch can improve their process and specifically the product system

Apple (watch brand) Swatch (watch brand)Configuration Well known, luxury Luxury, CraftsmanshipOffering Apple Watch All segmentsExperience Standardized StandardizedService Channel Retail Stores Retail StoresBrand Cust. Exp. Familiar FamiliarProduct Performance Apple ecosystem MissingProduct System Standard StandardProfit Standard StandardNetwork Standard StandardStructure Standard StandardProcess Standard Vertically integrated

PORTERS 5 FORCES


RIVALVRY

7 / 10

SUBSTITUTES6 / 10

BUYERS5 / 10

NEW ENTRANTS

6 / 10

SUPPLIERS1 / 10

KEY TAKE AWAY: Threat of substitutes must be mitigated

CUSTOMEREXPERIENCE


THINK AND FEEL

DO AND SAY

HEAR

SEE

Luxury brandTimelessCraftsmanshipLimited

BeautifulFashion / JewelrySmart Watches Increase prevalence

Purchase for statusBrandReputationAttract Younger Gen.

“Smart watches not a threat”Apple Watch vs. Swatch

CUSTOMEREXPERIENCESmart Watch


THINK AND FEEL

DO AND SAY

HEAR

SEE

ConvenientHigh Price

Increasing usePaired with smartphones

Purchase and use dailyCharge every day

“Cool”, “High Tech”Functionality

KEY TAKE AWAY: Smart Watch creates Blue Ocean segments

Financial Snapshot and Forecast

Net operating profit 1.45 B

Operating margin 17.2%



-

500

1,000

1,500

2,000

2,500

2013 2014 2015 2016 2017

Net Income CHF Million



0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2012 2013 2014 2015 2016 2017

Net Sales CHF Million



0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2012 2013 2014 2015 2016 2017

Unit Sales (Millions)


ALTERNATIVES

Option Cost Profitability Growth Competitive ValueAlignment

1. Focus on luxury watches only

2. Components and B2B

3. Partner with Apple

4. Expand into the Smart Watch Segment


ALTERNATIVE 1 – LUXURY WATCHES ONLY

PROS CONS- Focus on core competencies- Reduces IT and software demand- Use existing resources

- Low Profitability- Disruptive technologies- Exiting a potentially profitable market


ALTERNATIVE 2 – COMPONENTS AND B2B


PROS CONS

- Widens consumer base and customer segments- Uses core competencies and existing innovation resources

- Cuts out consumers from the luxury watch market- Would create high costs in the short term

ALTERNATIVE 3 – PARTNER WITH APPLE


PROS CONS

- Wider reach with Apple and increased number of consumers- Does not tarnish brand- Increase capability and uses Apple’s tech reputation- Diversify offerings- Uses Apple’s brand

- Brand history not accounted for- No alignment with vision - Hard to implement - Not easily achieved with Apple brand

ALTERNATIVE 4 – SMART WATCH SEGMENT


PROS CONS

- Brand alignment would be high- Growth potential is high- Can leverage existing reputation and quality- Can use market position – luxury- Less maneuverability for competitors

- Not core competency- Need to do Research and Development- Could potentially self-cannibalize

RECOMMENDATION


THE SMART SWATCH PLAN

Growth Quality Innovation

IMPLEMENTATION


Increase marketing

Organize for growthResearch and Development

Launch Smart Touch 2

Research and Development

Launch Swatch Diamond

Evaluate and Continue

Development12 months 24 months 36 months

IMPLEMENTATION – SHORT TERM

Action Timeline Cost KPI

Increase marketing for Swatch TissotSmart Touch

1-6 months $ 4 million Increase sales by 10%

Organize for growth

2-8 months $3.3 million Hire 20 developersHire 10 salesHire 3 support

Research and development

3-12 months $10.7 million Increased functionalityLuxury design


IMPLEMENTATION – MEDIUM TERM



Launch Tissot Smart Touch 2

12-24 months $4.6 million Net incomeincrease by 5%

Research and development

16-24 months $9.1 million Incorporate more technologyLuxury design

IMPLEMENTATION – LONG TERM



Launch Swatch Diamond

36 months + $ 5 million Net income increase by 5%

Evaluate and continue R&D

36 months +

COMPETITOR MAP


LUXU

RYM

ASS

M

ARK

ET

LOW ADVANCED

TISSOTSmart-Touch

SWATCHTouch Zero One

fitbit

WATCHEdition

TAG HEURConnected

WATCHHermes

FitbitSurge& Charge

MULTIPLES:Moto, Watch Sport, LG Watch

SWATCHDiamond

TISSOTSmart-Touch 2

IMPLEMENTATION – VRIO

VALUABLE•Brand value•Long history•Quality

RARITY•Owns the

segment•Patents

IMITABILITY•Simple •IP

ORGANIZED•Positioned for

growth


SmartSwatch Plan Investment

0

2000000

4000000

6000000

8000000

10000000

12000000

2015 2016 2017 2018

HR R&D Marketing


Past Finance

-

500

1,000

1,500

2,000

2,500

2013 2014 2015 2016 2017



Financial Result of SmartSwatch

-

500

1,000

1,500

2,000

2,500

2013 2014 2015 2016 2017



OBSTACLES

APPLE EXPANSION PRODUCT FAILURE COMPETITOR

ACTIONS


0123456789

101112

0 1 2 3 4 5 6 7 8 9 10 11

Impa

ct o

n Sw

atch

Probability

OBSTACLE – Apple Expansion

Apple can move into the same space and imitateMITIGATION: Simplify products and make them practical

to consumer needs


OBSTACLE – Product Failure

The product launch could be a failureMITIGATION: Prior to manufacturing and launch,

conduct extensive polls of consumers, use R&D core competency to provide innovative products reflecting the consumer needs


OBSTACLE – Competitor Actions

The competitors can take the same path or even some of the presented alternatives

MITIGATION: For the smart watch segment, use multiple brands in the luxury, low

segment so that dependence on one brand is low If competitors partner with Apple, leverage quality and luxury

brands in the marketing approach If competitors focus on watches only, maintain current operations

and use marketing plans to separate the luxury watch brands from the smart watch products.


SUMMARYFirst Mover

Quality

Diversify

Blue Ocean Strategy


APPENDIX – BUSINESS CANVASRESOURCES- Patents- Brand- Innovation

PARTNERS VALUE PROPOSITION“Provide luxury,handmade, innovative products”

CUST.RELATIONS- Known for

quality- Maintain

relations

CHANNELS- B2B- Retail- Online

ACTIVITIES SEGMENTS- Sports- Techies- High earners- Traditionalist

COSTS- Normal costs

REVENUE- Dropping revenues due to decreased sales

APPENDIX

0

10

20

30

40

50

60

70

Smart Watches Wristband Sports Watch

30.3

2

30.1

5

21.0

2

50.4

34.9

7

23.9

8

66.7

1

44.1

26.9

2

Market Growth

2015 2016 2017

Documents

APPLE WATCH – TECHNOLOGICAL DISRUPTION · Apple introduced 3 types of smart watches for multiple segments Apple Watch 2 coming soon In the current market: 27% prefer Apple Watch