1

EXECUTIVE SUMMARY

The trend of wearable technologies consists in incorporating technology into items of
clothing and accessories which can be comfortably worn: imagine a t-shirt that releases
chilled water vapour when it senses its wearer is hot or a pair of eyeglasses that allows
you to take pictures of what you see, engage in live conference calls and see restaurant
reviews as you walk in front of them all in one product. This trend is far from being a new
thing (20+ years old), but it is gaining traction now because of (1) a rapidly growing
smartphone user base, (2) significant component cost/performance improvements, (3) the
presence of established software ecosystems (Android/iOS), and (4) the opportunity to
leverage other businesses models needs to develop the market (such, apparel industrys
need for products that enhance users performance). Few industries will remain untouched
by this trend and the market is estimated to be of around $42.5bn over the next 3-5
years. Many players are diving in it: established tech companies (e.g. Google, Apple,
Samsung, etc.) willing to dominate the next disruptive innovation, traditional companies
(e.g. Hamilton, Casio, etc.) willing not to be ousted from the industries they have
dominated for decades, and many start-ups (Im Spa, LUCE, etc.) willing to be rapid
enough to become the next giants. Out of this panorama, Google seems the horse to bet
on: a well-established ecosystem, an impressive strength of the brand, and a relentless
force for innovation make Big G the best positioned to catch the booming demand.
Behind these wearable technologies, in fact, lies a true revolution with many business
implications: the possibility to collect data on every aspect of users interactions, to create
an ecosystem of enhanced reality, to establish totally new means of customer interaction,
and to change every aspect of peoples lives. As Steve Lee, head of the Google Glass
project said, in three to five years it will actually look unusual and awkward when we view
someone holding an object in their hand and looking down at it. Wearable computing will
become the norm.
2

INTRODUCTION

The so-called wearable technology is a trend that refers to incorporating electronic
technologies or computers into items of clothing and accessories which can comfortably
be worn on the body
i
, with the aim to enable what we wear to act as an active device.
Examples are t-shirts with sensors that release chilled water vapour when sensing its
wearer is hot, or watches that can cover all the usual features of a smartphone. Wearable
technologies have existed in some capacity for more than 20 years
ii
: they have been
considered functional, but they have never attracted significant attention. In last years, lot
has changed and wearable technologies are the new raising trend, projected by many to
revolutionize consumer behaviour. The present report will firstly explain how wearable
technologies developed, why they are gaining traction now, what is the size of market and
the main competitors, and finally what are the possible future scenarios. I believe this trend
is unique in its impact on peoples lifestyle as users and consumers: it is foreseeable a
future in which every wear will incorporate technology, entirely changing our lives.
THE TREND AND ITS DEVELOPMENT

While $30mm of wearable technologies have been sold in 2012
iii
, this trend has developed
slowly, passing unnoticed for long. Looking back at its history, we can say it gradually
gained traction as its concept became applied in different product categories, one after the
other: firstly clothing, secondly sport/activity trackers, and then watches and glasses.
Smart clothing For many years, wearing companies have developed futuristic forms of
cloths functioning as active devices, by storing/manipulating data, displaying
images/text/video, connecting to the Internet, etc. The main applications have been limited
to the military and sport industry and no product reached the mass market;
Sport/activity trackers The apparel industry has been an early adopter of smart
wearables first in the form of the wristwatch, then of activity trackers like Nike+ Fuelband
and FitBit (Appendix 1). Sport companies (e.g. Nike, Adidas, Under Armour, etc.) applied
3

wearable technology to enhance the fitness experience/efficacy of their products by
accumulating users athletic statistics and becoming an integral part of his performance
improvement. Critical to this product category affirmation has been the Nike+ FuelBand
activity tracker, a user-friendly and stylish wrist-tracker on which you set a daily goal (e.g.
number of calories to consume) and the tracker helps you achieve your goal
iv
. Activity
trackers have brought consumers closer to the concept of wearable technologies and can
be considered by far the most successful commercial application: it is estimated
sport/activity trackers will account for 61% of the wearable technologies market in 2013
v
;
Smart watches Wearable technologies have been applied to the centuries old watch
industry, with the potential of cannibalizing its $56bn market
vi
. While several players
compete in this field, no clear-winning alternative has emerged (both Sony and Samsung
watches, for example, have encountered negative reviews). Apple and Google are
rumoured to be working on alternative products
vii
;
Smart glasses Google Glass
viii
has represented a ground-breaking innovation, not
because it scaled up the application of wearable technologies (no mass production has
started so far), but because it acted as catalyst of change, educating the public to
wearable technologies. Soon after, many companies producing advanced optical devices
for military use have started adapting their products to consumer use and price range.
We are about to cross the chasm to mass market adoption (Appendix 2) and see an
avalanche of new wearable technology products. These devices can be classified into six
segments: Fitness, Medical, Lifestyle, Infotainment, Gaming, and Other (Appendix 3).
WHY THE TREND IS GAINING TRACTION NOW

Industry experts consider very likely a leap in wearable technology from niche market to
mass production. The main reasons for such a forecast are:
1. rapidly growing installed base of smartphones

(Appendix 4), from 1.1 to 3bn+ units
in 3-5 years. Smartphones support wearable technologies enhancing their capabilities;
4

2. component cost/performance improvements

(Appendix 5), in particular in power
connectivity, sensors, battery life, interfaces and displays;
3. opportunity to leverage established software ecosystems (Appendix 6) in order to
increase adoption rate. Apple and Google can respectively leverage on iOS and
Android to achieve a higher penetration rate (strong position in entering this industry);
4. opportunity to leverage other businesses models needs to develop the market.
Many companies and industries benefit from a wide use of wearable technologies such
as companies in appliance, mobile payments, medical monitoring, e-commerce, and
LBS industries. Wearables have the potential to add context to location and provide an
additional channel to reach consumers (just imagine a discount coupon materializing in
your view field as you walk in front of a Starbuck with your Google Glass). Yelp and
eBay are already developing applications to function on wearables (Appendix 7).
THE SIZE AND THE MAIN COMPETITORS IN THE MARKET

Forecasts on the size of the wearable technology market largely differ from source to
source. To give the reader an idea of the numbers we are talking of, Credit Suisse in a
report published in May estimates a market of around $42.5bn over the next 3-5 years
(applying a 15%/25% attach rates of wearables to smartphones), while Juniper Research
only reports a value of $19bn that will be touched by 2018 (up from current $1.4bn). The
main competitors in the market can be divided in three groups:
- Technology companies (e.g. Google, Samsung, etc.), which can leverage their existent
technological capabilities to disrupt traditional industries like the clothing and watch ones;
- Start-ups (e.g. Im Spa
ix
, Luce
x
, etc.), that are diving in the market leveraging their
flexibility and strategic focus, but lacking brand recognition and financial strength;
- Traditional companies (e.g. Hamilton and Casio in the watch industry), which have
played for decades in the industries currently disrupted by wearable technologies. They
are investing to offer their own alternatives to the market and, even if suffering from
5

organizational rigidity, they could leverage on brand recognition and market knowledge to
survive the paradigm shift. Among all these players, I see Google and Apple best
positioned to win the competition since they have a strong brand name, huge resources to
innovate and an experience in disrupting traditional industries (e.g. Apple with the iPod).
Traditional companies are likely to see their market share drastically reduced, unless they
are able to adapt to the paradigm shift.
FOCUS ON ONE COMPANY: GOOGLE INC.

So far, Google has only been working on the Google Glass (probably available to a limited
number of users in 2014) and it has been rumoured to be working on a number of other
projects, among which a smart watch
xi
. However, I see Google ahead of competition in
the wearable technology market for three reasons that set it apart:
1. Well-developed ecosystem Thanks to its dominance in the smartphone market and
in the online World, Google can deliver a far superior, unified user experience;
2. Strength of the brand Google not only can release a product, but can actually create
a market for it. So far the greatest result of Google Glass has been attracting vast media
attention and therefore educating the customer on the next big thing;
3. Innovative force Googles relentless effort in exploring and experimenting can be a
significant advantage when creating a whole new category of products.
THE VISION BEHIND THE TREND: CHANGE IN THE LIFESTYLE

Behind the affirmation of this trend, it is possible not only to envision a whole new product
category, but an entirely revolutionized lifestyle: We envision a connected world, in which
everything in peoples life will have computing power, wireless connectivity, and a lot of
sensors. Wearable technologies will empower people to have a healthier and more
connected life style (Harry Strasser
xii
, 2013). The business implications are massive:
1. Collection of data on every aspect of users interaction While we live in a more
connected World today, connectivity is still mainly one dimensional it has the ability to
6

say where the user is, but not what the user is doing the next wave of Wearables will
be able to add context to location providing a deeper understanding of how we interact
with our surroundings.
xiii
The implications for businesses (e.g. ability to access to much
more detailed info about their customers) are huge;
2. Creation of an ecosystem of enhanced reality Pushing the concept further,
wearable technologies can change how the user lives and interacts with the World the
vision behind the Google Glass. Without interrupting real social interaction, the user
lives in an enhanced, constantly online reality: as he enters in a commercial centre,
reviews of the restaurants he is looking at appear in his vision field and a visual
navigation system guides him to the selected destination all this while walking along
and talking with a friend;
3. Establishment of new means of customer interaction Companies can establish a
much closer relationship with customers, with the goal of offering products perfectly
crafted on users profile, current behaviour, and consumption history.
4. Growth in profitability for consumer technology companies The wearable trend
has the potential to boost the currently thin margins of consumer technology products
by allowing tech brands to price their products at the kind of premiums normally
reserved for fashion accessories
xiv
.
5. Revolution in every sector of the economy The revolution of wearable technologies
will touch every industry: think about the potential for wearables monitoring health
conditions for an health organization or an insurance company, or the usefulness of live
streamed medical surgeries
xv
.
In conclusion, will wearable technology become as widespread as smartphones are? Yes,
says Steve Lee
xvi
in three to five years it will actually look unusual and awkward when
we view someone holding an object in their hand and looking down at it. Wearable
computing will become the norm.
7

APPENDIX
1. Sport/Activity Trackers Source: Company website, 2013
FitBit Nike+ FuelBand






2. Adoption Curve of Wearable technologies Source: Wearable Technologies Group,
2013


8

3. Wearable Technology Products Source: Credit Suisse Equity Research, 2013
9


10



11


12


13


14


15


16


17


18

19


20


21


22


23


24


25

26

27

28

29

30

31

32

33

34

35

36

37

38



39

4. Growing Installed Base of Smartphones Source: Credit Suisse Equity Research,
2013

5. Wearable Technologies Component Cost / Performance Improvement Source:
Credit Suisse Equity Research, 2013

40

6. Established Software Ecosystems Source: Credit Suisse Equity Research, 2013

7. Yelp Application for Google Glass (Yelp Monocle) Source: Google website, 2013
In this product concept the user while wearing the Google Glass can see the reviews of
the restaurants he is looking at as they are on the Yelp website.



41

Endnotes

i
Source: WearableDevices.com, 2013
ii
To give just one example, the first concept of what we know today as Google Glass has been developed by Steve
Mann already in 1994
iii
Source: Wearable Technologies Group, 2013
iv
Video on how the Nike+ FuelBand works: http://www.youtube.com/watch?v=dG0vLFFtZDs
v
Source: ABI Research, 2013
vi
Source: Credit Suisse Equity Research, 2013
vii
Source: On Google smart watch, please refer to Wall Street Journal,
http://online.wsj.com/news/articles/SB10001424052 702304655104579165080029933904 . On Apple smart watch,
please refer to MacRumors, http://www.macrumors. com/roundup/iwatch/
viii
Due to space limitation, I decided not to explain in detail how the product named Google Glass works, assuming an
expert reader. However, here how Google itself explain the product: http://www.google.com/glass/start
ix
Source: On Im spa: http://www.imsmart.com/en
x
Source: On Luce: The LUCE is a project nurtured at the X-lab of Tsinghua University and I have entered the team as
Marketing Manager as I arrived in Beijing in September. The business idea is to develop wearable technologies in the
form of fashion products with a technological component. For more information: http://www.luceisabela.com/
xi
Source: http://www.crunchwear.com/patents-suggest-google-is-getting-in-the-smart-watch-game/
xii
Managing Partner at Wearable Technologies AG and former CTO at Siemens
xiii
Source: Credit Suisse Equity Research, 2013
xiv
Source: Jenny Lai, HSBC analyst, to WSJ reporters
xv
In fact, Philips is collaborating with Accenture to deliver vital patient data via Google Glass. Source:
http://www.wearabledevices.com/news/2013/10/12/philips-collaborates-with-accenture-google-glass/
xvi
Product Manager in charge of the Google Glass project together with Babak Parviz