Assessing Apple Watch's Primary Risk

Last week I published my Apple Watch sales projections. Some of the feedback I received dealt with how I can be confident that Apple Watch won't have build-quality issues or other performance problems. Taking into account Apple's product-focused structure and the way risk is mitigated, I think a more appropriate criticism would be to question Apple Watch's biggest risk: consumer acceptance.

Apple's Risk Mitigation

Much of Apple’s recent success can be explained by the company's organizational structure mitigating internal risk, such as lack of attention or motivation, and ineffective collaboration, leaving only external risk embodied by consumer demand. I went into this phenomenon in greater detail in my article, “Making Big Beats and Controlling Risk – How Apple Succeeds." Apple's structure allows decision makers (upper management) to come in contact with everything that is shipped to consumers and, more importantly, everyone who is in charge of the product (designers, marketers, engineers). Within the past four years, Apple's executive team has seen nearly 50% turnover, including a new CEO, and yet Apple is still functioning, showcasing how this process is built to last beyond its current operators.  

For many companies the concept of mitigating internal risk and leaving the consumer as the biggest unknown variable is underappreciated, since such an action positions a company to rely on marketing and storytelling to sell a well-designed product. The iPad is a prime example of this strategy as Apple's marketing team was tasked with addressing the last remaining risk factor: customer demand. Consumers needed to hold and play with the device in order to understand its magic and eventually find a need for it in their lives. If the device wasn't ready to ship due to hardware or software issues, Apple would have delayed the launch. On the other hand, Apple Maps is a good example of when the Apple Machine isn't well-oiled and risk is kept internally with nasty politics possibly getting in the way of Apple's product-focused strategy.

Apple Watch's Risk 

Apple Watch's biggest risk is consumer acceptance, not poor material design or bad software. Will consumers envision an Apple Watch fitting in their daily schedule? Over the past few weeks I've laid out several use cases that I think make a compelling argument for how the Apple Watch can function alongside an iPhone, all of which invoke the same theme: breaking the "problem" into more granular tasks, with the more complicated and power-hungry steps kept to iPhone, while Apple Watch tackles the finishing touches. Apple's primary job to address consumer demand risk is to focus on marketing, showcasing Apple Watch in various settings outside the tech world and installing Apple Watch demo units throughout the Apple retail distribution network, allowing consumers to wear and test the product. 

Word-of-mouth marketing is another variable that is left largely out of Apple's control. With an addressable market numbering in the 10s of millions of iOS users, these early Apple Watch adopters will play a role in determining what kind of adoption rate the Apple Watch experiences in its first few years on the market. If internal risk factors are mitigated during the product development cycle, a well-engineered device is created with consumer demand left as the biggest risk.