Building a Billion Dollars of Wearables
Photo courtesy of WT | Wearable Technologies
The wearable device market is expected to grow dramatically over the next few years. The market will balloon to $37 billion in 2020, according to research firm Strategy Analytics. IDC expects 237 million wearable devices to ship that year. Wearables are expanding beyond the wrist to encompass smart clothing, “safety jewelry” and implantable medical devices.
Start-ups and established companies are looking at different business models to figure out where to add value. Do they make money from hardware, from the data that the devices generate, or hopefully, a combination of the two? Properly managed, a one-time product sale can create an ongoing customer relationship that expands and becomes engrained in the consumer psyche over time. But moving from a mocked-up prototype to mass-market distribution is an area where Flex’s sketch-to-scale™ solutions and experience can help.
Vice President of Consumer Technology John Dwyer and his team at Flex have helped build the vast majority of wearables currently on the market, booking nearly a billion dollars’ worth of wearable revenue in FY2016. Flex is constantly innovating and reinventing components including motion sensors, TPU encapsulated bands, OLED displays and flexible batteries, to ensure the quality and usability of wearable devices improves each year. At the same time, Dwyer’s team is pointing customers to where technology is going next, so they can hit the magic combination of price, reliability and functionality with their next game-changing device.
When Dwyer spoke with Flex’s Brian Kemp recently at the Wearable Technologies conference in San Francisco, where Flex unveiled a new partnership with MAS Holdings to create smart clothing. In this interview, Dwyer explains the challenges customers face as they embrace the expanding wearable market.
Brian: Tell me a little bit about your role at Flex. What are you doing with customers on a regular basis?
John: I work in our consumer technology group and it's a customer facing team. We're really focused on Intelligence of Things, driving things like wearable technology, connectivity solutions, engaging with customers as early as possible and working with them to pull in different types of resources to look at solutions development. The team is a combination of technical architects and customer facing group is an extension of a business development function.
Brian: Flex has had tremendous success in the wearable space. What are some of the customers that you've worked with, some of the products?
John: We're a major presence in wearables. One of the things about wearables in general is as it advances, wearables has kind of become normal products. Sometimes there's some variations in numbers as what's classified as a wearable. We've really broken the wearables down into different market categories where we see emerging technologies. If you look into those markets or those new channels we've got five that we’ve defined, things like sports fitness and outdoors, health and wellness, fashion and beauty. We are, as a group, developing relationships and, it's kind of exciting, new interest with different various consumers across those markets. We've been working closely in the smart watch category with traditional electronics companies, but also getting into fashion companies like Fossil, who are major player in that industry. That opens doors into some different markets. The sporting goods area, obviously we've been working closely with Nike. We just recently announced a development relationship with Bose.
When you look at the wearable technologies and you look at the consumer brands and you look at the convergence of the technology and connecting things together it opens up opportunities for many different types of customers. I mentioned a few that were product companies. We also get the chance to start to engage with everything from insurance companies to media outlets. It's a new venture for Flex working and talking to companies like Disney, for example. It brings new challenges and definitely helps identify new opportunities.
Brian: A lot of these companies, they're looking at some of the data that's coming out of these devices. They're looking to Flex to make the hardware so they can focus their business model on what you're finding out.
John: It's real interesting because I mention known companies and there are startups that are driving a lot of times a particular technology or maybe a software solution or they have a developed business and they're looking to expand their portfolio along with the trends. Like anything, I guess we get leaders and we get laggards relative to technology. One of the advancements is how to monetize the information that people are looking for. It's quite common that a company that may be looking to us to provide hardware is also themselves trying to figure out a solution of where they're going to play in a new emerging market.
I think that's part of the evolution we're going through where we develop hardware with somebody and they haven't quite figured out whether they want to own the software ecosystem, whether they want to make their business plan around the hardware or something different. As you do run into the challenges as you develop a product that's figuring out their model, understanding clearly with the longevity or volumes of those products are going to be, or where their emphasis is going to be relative to where they're going to put their investments.
Brian: Flex has discussed our Sketch-to-Scale™ capabilities, this ability to take an idea from literally a sketch on a napkin and take that all the way up to making hundreds of thousands of millions of units. Can you talk about some of the Sketch-to-Scale products you've worked on?
John: I interpret our Sketch-to-Scale strategy as aligned to our whole supply chain platform. I think that Sketch-to-Scale is getting engaged at the earliest conceptual stages, regardless of what part of the business you're engaging in. It doesn't have to be product design. It doesn't have to be just a piece of our service business. It's about really engaging a customer with the groups that do conceptualize products and business models and then proactively become an extension of their group and try to help define where we can help add that value in. One of the common areas that customers expect us to look at is speeding the time to market, getting something that's going to be economically feasible to market.
Most of the Sketch-to-Scale, we got traditional products and examples of where we're driving sketch-to-scale from developing at the earliest design stages, products that are not there today. Example would be a smart watch is on the market today, but a smart watch technology that will serve the needs of the design and fashion world is not necessarily out there today, or it's not an optimized solution yet. It's in an early stage of evolution. We, at that point, aren't necessarily just looking at Sketch-to-Scale of taking an order to design something, it's really understanding what the end goal is, what we're trying to create in the future and proactively developing from that. That could be enabling small pieces of something, it could be more system level integration and design. Again, it kind of depends on the situation.
Brian: Well, and there's so much change in there. Wearables, and we touched on this earlier, is becoming such a broad area. You see this being fitness bands or something like that, smart watches. Now it's everything from your shoes up to a headband, headphones, all sorts of medical devices. We're here today at wearable technologies conference, what are some of the stuff that you're showing here?
John: We do quite a bit of work with the wearable technology group and a few different wearable technology accomplices. We tend to build each session around different types of themes. There's been a few identified. What's clear here in San Francisco today is we're looking at the integration of technology to apparel and to clothing so you're seeing a lot of emphasis on that. We just announced a partnership with MAS Holdings is a large clothing manufacturer to develop technology integrated into clothing.
There's other types of emphasis that are not traditional thinking either. There's media and advertising companies and merchandising companies and companies that are looking at challenging the people doing wearable tech from different perspectives to create products that are more accurate, that are pushing information that's more meaningful. That starts to really tie the integration of the hardware, the connectivity, and multiple levels of the software. It's definitely not something that happens overnight. The more this evolves in the space, the more we start to see interest from different types of industries, so safety, security, banking industries. What we're really trying to do is prioritize the pieces and the elements that we can leverage across those which is part of our strategy.
Brian: Looking a little bit further down the road, we've got smart clothing happening, where are things going after that?
John: Well, I think that there's probably some milestones that can be defined as far as when things become available and cost effective and when data integrity is ... When you combine those two. In some markets I'd say it's the data integrity first. Once you can develop or evolve to where reliable data is coming off of that network, now you can really look at changes to things like push medicine or when we start to combine where data can come off with enough integrity that you can look at expediting artificial intelligence and looking at ... If you think about being able to collect data points that you haven't seen and then align those with perform metrics or ... You can start to analyze things that we haven't really thought about analyzing. I think that's where the system level is going, where the real creativity's going to come and the value it brings.
You can usually look at any sport, look at what your performance metric, whether it's a baseball swing or a golf swing. If you're really connected, you're connected to the environment. Now you start looking at variables that are not just your motion, that are the temperature or humidity, other aspects that you're connected with, you can start to get more valuable information and make decisions. I think you can apply that to a consumer application, you can definitely apply it to numerous industrial applications and start to ... One of the taglines is don't want to tell me what I did yesterday, tell me what I need to do tomorrow. It's taking it to that more predictive type information that you get.
Brian: What really excites you about the job and gets you out of bed every day?
John: I think the one thing that's really interesting to me in this job is we can take a group and there's so much diversity. It's part of the challenge of the job, but it's also the interesting part. There's not many places where you can just think about in a given week I will have an unforeseen engagement with a customer I wasn't aware of or a technology that we hadn't really seen. That may not be for everybody, but that's definitely interesting. It never gets boring.
I think the other thing is the way we're set up in this group, it allows to look at going forward with customers in an outward focus. When we're putting a team together that is trying to become experts or industry leaders, you can get a high level of confidence in that group that the metrics and things you're trying to do is creating that content that's looked at from the outside as being the best as opposed to just looking at executing internally, it's a balance.
I think that when we do that and when we set up metrics like that it helps from our customers' perspective look to us as somebody they want to pull in, somebody they want to hire as an extension of their group.