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The SIMM Smartwatch
and the Internet of Things:
Designing a Business Model
By Ted Ladd
Designing a business mode! for a wearable, internet-connected computer requires an understanding
of the market, technology, customers, and competitors. This case describes the circumstances around
{startup in Silicon Valley making products for the Internet of Things, starting with a smartwatch. Yet
the company’ initial business model was not gaining traction. What new business models should it
consider? How should it select among these options?
The Challenge
In 2010, the wristwatch was dying. Except for a small category of luxury watches made from
precious metals by premium brands at prices that rival the cost of a large car or a small house,
few people were buying wristwatches (Figure 1). Because of the popularity of devices that give
the current time—smartphones, computer monitors, billboards, even household refrigerators—few
people need the core time-telling function of a wristwatch, Diego, a veteran executive with large
technology companies in Silicon Valley, was intimately familiar with the pace of technological
Innovation in the consumer electronics space. He had held several positions at a computer
hardware company, moving through the ranks as the company expanded until he assumed a major
role in one of the world's largest technology companies. Yet he yearned to start something new. As
an aficionado of wristwatches, he envisioned a rejuvenation of the category by hamessing rapidly
evolving computing technologies to bring a person’s personal web data to his wrist. He primarily
envisioned this device for men in general, but more specifically for affluent male technophiles like
himsett,
By 2012, Diego's vision was coming to fruition. His company, SIMM Labs, had created a prototype
smartwatch device that delivered a rich experience of “glanceable” content, earning it positive‘The SIMM Smarwatch and the Internet of Things: Designing a Business Model HUTSs2H17-006¢
reviews from industry pundits. With 25 employees in Silicon Valley and a partnership with Foxconn,
the world’s largest manufacturer of consumer electronics, SIMM Labs seemed polsed to pioneer
a new product category of “wearable devices” within the broader set of connected miniature
computers that made up the Internet of Things.
Despite this promise, Diego's strategy to license the core product was not working. Several
‘major brands had shown intial interest, but none had signed a deal. The company’s cash was
running low. Raising another round of capital to pursue the same faltering business model might
not be feasible. With a credible prototype, experienced team, and broad acknowledgement that
the market for wearable smart devices would explode within a few years, Diego faced a clear
challenge: what business model should SIMM adopt? And what steps should members of the
company take to inform, refine, and verify this choice? What would this change in business mode!
mean for the product that it already offered?
The Vision
As a successful technologist and business executive, Diego believed that advances in
miniaturization of computers and displays would allow wristwatches to contain functionality,
far beyond just telling the time. They might even offer the same information and applications
that reside on a smartphone, just in a smaller container. With computing power, memory, and
connectivity all getting faster, smaller, and cheaper, these smartwatches would return the
wristwatch to profitable relevance (Figure 1). Moreover, In Diego's vision, the gadget had sensors
that would allow it to become a vital component in the expanded category of wearable technology,
or even in the blossoming Internet of Things, or loT (Figure 2).
Figure 1: Purchase of wristwatches in the United States in prior 12 months
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