Links to iPhone create conundrum for Apple's wristy business

What if someone came up with a new technology product that was hailed as a breakthrough with the potential to rival the smartphone, but then didn't make it available to 85 per cent of possible buyers?

That is what Apple is about to do with the launch of its Watch. It will start collecting orders online from Friday and release the device in nine countries in two weeks.

For something that carries with it the best hope yet for a new "wearables" computing platform, the Watch risks being hamstrung. Only a subset of Apple's existing customers will end up owning one. That is because it is yoked to the iPhone (which is used by only one in six smartphone owners): Watch gets its connectivity from the iPhone, and the only apps that work on it are extensions of the ones that are carried by Apple's App Store for use on its own mobile devices.

According to influential US management professors David Yoffie and Michael Cusumano, this is just the latest manifestation of Apple's halfhearted acceptance of the significance of tech platforms. In their book Strategy Rules*, to be published next week, they argue that the late Apple co-founder Steve Jobs was instinctively drawn to building self-contained products - tightly integrated pieces of technology that worked on their own terms.

Platforms, by contrast, benefit from network effects as other tech companies add complementary products and services, such as apps, which in turn draw more users. Jobs finally bowed to the power of the platform idea with the App Store for Apple's mobile devices. But, according to Mr Yoffie and Mr Cusumano, the mix he exhibited is still evident at Apple and could result in the tech group squandering a lead in the post-smartphone computing platform.

The picture is not black and white. It is probably better to think of the Watch as an extension of an existing tech platform, rather than a product with no platform aspirations at all. It will, after all, run stripped-down apps from third parties. As such, it represents a first, cautious play in a new market where there are likely to be rethinks along the way.

History shows that Apple is quite prepared to make adjustments. After all, it displayed a similar caution with version 1.0 of other gadgets, including the iPod and iPhone. The iTunes music software, an integral part of the iPod, was initially limited to the Mac. The iPod only took off once the software was opened up to PC users. In a similar vein, the iPhone was initially designed to run only Apple's applications.

The first iterations of these products didn't set the world on fire. Apple sold fewer than 1m iPods in the first year and only about 6m iPhones. Watch 1.0 should at least do much better than that. Most analysts are predicting sales of 20m-40m in the first year. But this could still represent a missed opportunity if Apple cedes a dominant market share in wearables to Google's Android, as it has in smartphones.

The trick will be deciding when - and if - to treat the Watch as a platform in its own right. Such decisions, made in the heat of the moment, don't always look like calculated strategy choices taken in a cold and deliberative manner. According to various accounts, for instance, Jobs was deeply opposed to opening up iTunes and only gave in when his managers ganged up against him. Mr Yoffie and Mr Cusumano describe the scene as told to them by one former Apple executive: "After yet another heated argument, [Jobs] hurled an expletive at the assembled managers, yelled, 'Do whatever you want, you're responsible,' and stormed out of the room."

For the Watch to cut its tie with the iPhone, some fundamental issues would need to be solved, ranging from battery life (needed to connect to a 3G network) and cost (the 3G chip and a separate data plan) to usability.

If one of the Watch's main uses is to display notifications pushed out by smartphone apps, could it have an independent existence? It may be that wearables like this are never more than marginal peripherals for smartphones, rather than pieces of a new computing platform in their own right.

The more immediate challenge for Apple, meanwhile, will be to convince its existing loyal customers that there are enough good reasons to brandish a computer on their wrists, even one bearing the stylish hallmark of Apple design studios. There will be plenty of time to loosen the ties with a Watch 2.0.

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* Strategy Rules: Five Timeless Lessons From Bill Gates, Andy Grove and Steve Jobs, by David Yoffie B Yoffie and Michael A Cusumano.

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