Every very great person has his/her own Waterloo. There are just some battles that you are not supposed to fight. You end up getting all proud and getting ahead of yourself. Not surprisingly, you get spanked at a critical junction in time. This has happened with great military leaders, ranging from Alexander the Great all the way to Napoleon, Hitler, and even modern day military leaders. Overextension is always a risk.
This doesn’t just play out in the battlefield. It also occurs in corporate boardrooms. In particular, product strategies can be minefields. If you need proof of this, just take a look at what has happened to Microsoft (NASDAQ:MSFT)
Microsoft used to have the Midas touch. Every niche, it seemed, that it touched turned to gold. Microsoft was so dominant in the early to mid-90s. In fact, it only had to issue a press release that it had a product coming out in a particular niche to effectively destroy existing competitors in that niche. This is precisely the kind of network marketing power that Microsoft had that eventually led to antitrust judgments against the company.
Overreach is always a threat. This is what I sense with the Apple (NASDAQ:AAPL) smartwatch. Will the smartwatch be a success? Well, it depends on how you define success. I have no doubt that people will buy the smartwatch and get turned on to the idea of wearable wireless technology because Apple is supporting it.
It can easily become Apple’s waterloo and form a financial black hole that might threaten Apple’s other businesses. That is the downside. Why? Wearable wireless technology is especially vulnerable to a race to the bottom. The whole appeal of wearable wireless is that you divide different apps and functionalities among different devices. You have a smart-jacket, you have a smartwatch, you have a smart-earphone, you have smart-glasses, so on and so forth. All of these devices obviously aren’t going to be running the same app. They are going to divide different app specializations.
It is obvious then that it doesn’t make much sense to pack as much features into all these devices. If that is the case, then any third world manufacturer can crank out these devices and the name of the game is pricing. Sure, there will always be people who will pay a few hundred dollars more for any kind of gadget with the Apple logo on it. However, Apple probably cannot build a sustainable business model on just that fact alone.
The wearable wireless market is essentially a throw-away market as far as Apple’s long-term strategy is concerned. There is really not much space there for high premium items. Depending on how aggressively Apple pursues this market, it might spell its doom. It might end up throwing good money up so bad, and end up with very little to show for it.