This is an industry point of view on the Wearables sector, how disruptions are happening across companies and technologies. It is authored by Ashwin Pai (Associate Director at Zinnov) and Vatsal Malavia (Consultant at Zinnov).

1. Wearables: Disruptor Disrupted | 2
Wearables:DISRUPTOR DISRUPTED
An Industry Point-of-View by
Vatsal Malavia and Ashwin Pai

2. Wearables: Disruptor Disrupted | 2
Wearable Devices have been arguably one of the biggest disruptive products of the last decade.
The first fitness tracker was launched by Fitbit in 2007, while the first smartwatch was launched in
2012 by Pebble. Since then a number of companies including Apple, Jawbone, Samsung, Sony,
Nike, Tomtom, Xiaomi, and Garmin have entered the race and have acquired significant market
share for themselves. The demand for wearable devices was tremendous in the first half of the
2010 decade. According to IDC, wearable device shipments grew 170% from 28.8 Million devices
in 2014 to 78.1 Million devices in 20151
. Fitbit’s revenue increased from $271 Mn in 2013 to $1858
Mn in 2015 at a CAGR of 161%. Apple shipped 12 Million2
Smartwatches in 2014-15 on debut.
Clearly Wearables was a market disruptor in recent times after the smartphone revolution and
every company wanted a pie of the cake.
However, the last one year has not looked as promising as the ones before. Fitbit had an annual
revenue growth of 150% from 2014 to 2015 but grew a mere 17% between 2015 and 2016.
Tomtom’s revenue from their consumer division which is majorly contributed by wearable devices
fell by 10% from €624 Million in 2015 to €563 Million in 2016. Apple’s smartwatch shipments fell
71% YoY in Q3, 20163
. Pebbles, the first company to launch a smartwatch, closed shutters in
December, 2016. There are 40+ companies making smart wearable devices today, however most
of these have revenues less than $50 Million. These numbers indicate that wearable devices may
have reached a plateau or even begun to degrow post the boom experienced earlier.
To understand current market positioning of wearable devices, we leveraged Zinnov’s proprietary
framework to determine where and why wearable devices are lacking, by comparing them with
the other prominent consumer electronics available in the market. The products were evaluated
on two major aspects- Innovation Intensity and Utility Intensity. Each of the two factors had
multiple enabling parameters under them and we applied appropriate weightages to each of these
parameters. All the major consumer electronic products were rated on these parameters to arrive
at a comprehensive picture.
The framework is as follows:
Utility Intensity
DISRUPTION FRAMEWORK
InnovationIntensity
HYPE
Product lines that have created too much buzz
due to high innovation intensity, but are not
very critical to the user
DEATH
Product lines that have gone obsolete as newer
and better alternative products have been
introduced in the market
DISRUPT
Product lines that have been the biggest
technological disruptors in terms of both
innovation and utility
SUSTAIN
Product lines that have been in the market
since a long time due to their high utility factor
and absence of alternatives

3. Wearables: Disruptor Disrupted | 3
In order to get a relative product positioning, we rated the top consumer electronic products till date
on the above parameters and arrived at a comprehensive positioning of wearables. The products
considered were Smartphones, Tablets, Laptops, Traditional Home Appliances, Television,
Printers, Desktop Computers, Netbooks, Digital Cameras, Smart Appliances, e-book readers, AR/
VR Devices, and Gaming Consoles besides Wearable Devices. The ratings for Wearable Devices
on the parameters mentioned above are as follows:
The enabling parameters in each of the factors are as follows:
INNOVATION INTENSITY
UTILITY INTENSITY
Application Diversity
Demographic
Addressability
Displacement
Capability
Product Necessity
Evolution Potential
Indulgence Frequency
New Market Creation
Ability
Adoption Rate
Interoperability
Number of unique application scenarios/use cases addressed by the product
Coverage of the product across demographics- age, profession, interests, education,
gender, geography, etc.
Product’s potential to displace similar incumbent products
It is the criticality of the product’s utility
Potential of the product to cater to newer applications/ functionalities
It is the number of hours per week the product is operated or interacted by consumer
Ability of the product to create a new market/opportunity for itself
The rate at which product is adopted by consumers
Degree of compatibility with different products or platforms

4. Wearables: Disruptor Disrupted | 4
INNOVATION INTENSITY
UTILITY INTENSITY
1. Application Diversity
1. Demographic Addressability
2. Indulgence Frequency
3. Product Necessity
4. Adoption Rate
2. Evolution Potential
3. Displacement Capability
4. New Market Creation ability
5. Interoperability
Wearable devices have relatively low application diversity as they are limited to very few
functions and applications. On the other hand smartphones and laptops rate very high on
application diversity as they offer innumerable functionalities to their users. Television and
traditional appliances serve a very specific purpose.
Today we have wearable devices that cater to almost all the sections of the society be it gender,
age, education or profession. Hence, they have very high demographic addressability. Devices
such as TV, traditional appliances, printers, and smartphones are other devices with high
demographic addressability.
Wearables may be worn on a person all day but the indulgence of that consumer in the device is
very low. They are more of passive devices which are checked once or twice daily. Smartphones
have a very high indulgence frequency while TV, digital cameras, gaming consoles and traditional
& smart appliances have medium indulgence frequency.
Wearables have developed a new market for themselves by creating demand among the
consumers. Consumers have realized how handy and helpful these devices can be, hence they
are rated high on this parameter. Other devices with high product necessity include appliances,
smartphones, and printers.
Wearable devices revenue boomed between 2012 to 2015, however as mentioned earlier these
numbers have plateaued and degrown for some companies too indicating that the adoption has
slowed down. Hence, we have rated Medium for wearables on adoption rate.
Even though the rise of wearable devices has been recent, they have undergone many significant
advancements to support new features such as activity, sleep, and heart rate, etc. In the future,
Wearables have tremendous potential in predictive and preventive healthcare. Hence they are
rated high on evolution potential. Devices such as smartphones, gaming consoles, AR/VR
devices have evolved quite significantly while devices such as digital camera, printers, TV have
not undergone much change since their inception.
Wearables have limited potential to displace existing products, hence they have been rated low
on this parameter. Smartphones, laptops and smart appliances are some of the products which
displaced their incumbent counterparts.
Smart-watches and fitness bands have developed interest and curiosity among their consumers
and have created a whole new market where none existed earlier. Hence, they have a very
high rating on this parameter. AR/VR devices and Gaming consoles are other such devices that
created a new market for themselves.
Wearable devices are highly interoperable as they are compatible to smartphones, tablets as
well as laptops. Printers and Gaming Consoles also have high interoperability.

5. Wearables: Disruptor Disrupted | 5
The basic inference from the above framework is that for any product to survive and last, it has to
be high in utility intensity. Devices such as Smartphones, laptops and Smart appliances have or
would completely revolutionize the way things are done. On the other hand Gaming Consoles, TVs,
printers, and traditional appliances have been able to sustain their market as they have their own
sets of irreplaceable utilities. The wearables are currently in the Hype Zone as they do not have a
value proposition critical to the consumers. If they continue to remain in the same zone, they will
enjoy popularity for a limited period and eventually die when the novelty wears off. They need to
push themselves to increase their utility among the consumers. Otherwise, they themselves will be
disrupted by newer innovations, eventually pushing them into the Death Zone. In the past, digital
cameras, netbooks and more lately desktop computers have been pushed into the death zone due
to new and disruptive technological innovations.
The biggest argument as to why these wearable devices are not gaining traction with the general
public, is the hype around it. These devices are considered more of a style statement rather
than an essential product. Other factors contributing to the fall in demand include continuously
discharging batteries, dependency on a smartphone application to operate as well as smartphones
getting embedded with fitness tracking technologies, devices being generic and not personalised,
and lastly, lack of predictability factor i.e. to show the user as to what results they can achieve if
they follow the prescribed plan and what if they don’t. Companies need to increase the criticality of
wearables in the lives of the consumers so that they can fare better on both Indulgence Frequency
and Product Necessity.
One such company to achieve higher rating on the Utility Intensity is Goqii, an India-based fitness
and heath company. Goqii sells their own line of fitness bands just like Fitbit or Jawbone. However,
their USP is the services they provide over the wearable devices. They offer personal coaches and
doctors who monitor user’s daily activities and then provide recommendations to the user to improve
their lifestyle in order to get fitter and healthier. They earn revenue through their subscription model
by engaging better and offering more lifetime value to their customers. Wearable Devices by Goqii
will be rated high on both Indulgence Frequency and Product Necessity thus shifting their position
rightwards into the Disrupt Zone.
In conclusion, wearable devices have definitely created a lot of buzz among the people. However,
they still have a long way to go before they are established as critical devices by the consumers.
Utility Intensity
DISRUPTION FRAMEWORK
InnovationIntensity
HYPE
DEATH
DISRUPT
SUSTAIN
Digital Cameras
Netbooks
Desktop
E-book Reader Tablets
Wearables
Smart Appliances Laptops
SmartphonesAR/VR Devices
Gaming
Consoles
Traditional Appliances
Television
Printers
After rating all the products on the above parameters, the final outcome was as follows:

6. Vatsal Malavia is a Consultant with Zinnov. He has been working with Zinnov for almost two years
and has been part of multiple market expansion engagements such as organic diversification and
M&A target identification for global product engineering service providers. He was also involved
in due diligence of a potential acquisition target for a large Private Equity Firm and has assisted
the Zinnov Zones PES and IoT teams in publishing the respective reports. He has a Bachelor’s
Degree in Electronics and Instrumentation from BITS, Pilani.
Ashwin Ballambettu Pai is an Associate Director with Zinnov. Having 5 years of rich experience
in management consulting, he has advised leadership teams of clients in formulation of business
and operations strategy. He has spearheaded multiple client engagements in product R&D,
Globalization and GTM strategy for both MNCs and global product engineering service providers.
Ashwin has deep expertise in various hi-tech industries such as semiconductors, consumer
electronics and telecommunications. Previously, Ashwin spent over a decade in Semiconductor
industry working for organizations such as Avago Technologies, Solomon Systech. Ashwin has an
MBA from Indian Institute of Management, Bangalore, a Master’s degree in Consumer Electronics
from Nanyang Technological University, Singapore and a Bachelor’s degree from MIT, Manipal.
Reference Links
1.http://www.mobihealthnews.com/content/wearable-device-shipments-topped-78-million-units-2015
2.https://techcrunch.com/2016/02/05/apple-watch-took-two-thirds-of-smart-watch-market-in-2015-says-analyst/
3.http://www.cnbc.com/2016/12/05/apple-watch-shipments-plunge-70-as-consumers-favor-simpler-wearables-
idc-says.html
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