Intel On The Outside: The Chip King's Wearables Strategy
Intel missed the mobile market but it is determined not to miss out on wearables. Mike Bell, Intel vice president and general manager of the company’s New Devices Group; and Jeff Holove, now a general manager in Bell’s New Devices Group discuss Intel’s strategies.
In March, Intel announced it had completed the acquisition of Basis Science Inc., a privately held company specializing in wearable device technologies for health and wellness. With major industry players like Apple, Google, Samsung, Intel and others racing to grab a share of the expected $8 billion wearables market by 2018, the Basis acquisition was viewed as a move that would help Intel accelerate its wearable focus.
Q. What is Intel’s wearable strategy?
Mike Bell: We’re not discussing the whole strategy because we want to surprise people. But at the end of the day, if it connects and computes, we want Intel inside. We want to produce the best platforms for wearables and have people build lots of wearable devices that show off the benefits of technology. It’s pretty straightforward.
Q. In other words, are you trying to build a PC-like ecosystem around Intel technology but for wearables?
Bell: Well, I actually think if you compare wearable stuff to PCs, it’s very different. For wearables, something that somebody has on their body potentially 24 hours a day, the level of integration and finesse and polish has to be so much higher. It’s a much harder thing.
Jef Holove: In order to make systems like this work, you have to have the expertise at the device level including the subsystems, chips and sensors in the device. You also have to have an understanding about what makes a good 24/7 user experience. At Basis, we’re still learning that even today, but we came into this with a particular thesis about what made a device wearable 24/7.
You’ve got to have the science, the algorithms to figure out: Okay, we can get sensor data, but how do you turn that into meaningful insight for consumers? You’ve got to have the software and the cloud expertise. We’re a really small team with even smaller teams in each of those areas of expertise. But it’s a little example of what Mike is talking about to scale this big.
Q. So develop most of the basic technology, and then customers can take it and put their own stamp on top. How does Basis fit into all this?
Bell: With Basis, we’re going to be showcasing what’s possible. We’re going to build best-in-class products to show what’s possible. A lot of people are more hesitant. They’re taking a wait-and-see attitude. We see great possibility in this space, and we want to get out there with something that shows the potential of what this stuff can do.
Holove: Because it’s wearables, the opportunity goes well beyond classic consumer electronics. The kinds of brands who will do wearables over time stretch way beyond the classic CE and computing brands. The further beyond that you get, the less they know about any of the things that we were just talking about: the cloud, and in some cases, even hardware design.
All of those are areas where Intel provides more and more value because the kinds of customers and consumers know less and less about all the things that we were just talking about.
Q. As Intel tries to catch up in smartphones and tablets, is this an opportunity to be on the ground floor?
Bell: There’s no established leader in the wearable space, and we’d like to be that leader. We really want to push the envelope with what’s possible, get a lot of know-how, get the right people onboard, and try to get so far ahead that we’re actually helping set the standards.
Q. Does Basis bring to Intel the ability to have a lead customer, similar to what Google does with its Nexus program?
Bell: Well, no. [Basis] has arguably the best product in the wellness wearable space. For us, it’s the chance to get great people and great technology quickly, and the chance to experiment with something that’s not the Intel brand. Plus we can showcase some of the best stuff we’ve had ruminating in the labs here and really control what’s possible with Jef and his team.
Q. How did Basis then become the company to acquire?
Bell: Before we decided to talk to them, all of us took a look at every one of the devices on the market. And what you find is a lot of them are glorified pedometers.
You shake your wrist and it goes, “Hey, look, you took 10 steps.” And you go to the website and it says, “Hey, you took 10 steps,” which is fun and motivating for a period of time, but what we find is people lose interest.
So, it’s not only the device, but it’s the work the Basis team did with having an engaging Web presence and the feature they call habits to encourage people to stay with what they do and to stay engaged with the Web portal. It makes the device more valuable, as opposed to some of the things where you go, “Hey, look. You took 20 steps today. Take more tomorrow.”
At some point, people go, “Yeah, I don’t really want to wear that anymore.” It’s really that understanding of how to keep people motivated and engaged that’s important—it’s an end-to-end solution. I think for wearables to become less about hype and more about reality, we’re going to need more devices like this where the whole experience is really good.
Holove: Some of the real breakthroughs that we had were not just on power management and form function and using LEDs to get heart rate. It was on behavioral science, thinking about the actual user experience and what makes this product truly valuable for someone in their everyday life.
What data can we get that’s actually relevant? How do you illustrate it in a way that’s understandable and interesting over time? And how do you keep them coming back?
We designed an algorithm where the difficulty, the routineness and the frequency that you have to do these habits automatically goes up and down based on the user’s actual performance, without them assigning a level of difficulty.
People typically get ahead of themselves. What happens in this space all the time is a user comes, especially if they get to set all their own goals, they’ll come in and set them for who they want to be versus who they really are. But their immediate experience is failure. Guess how motivating that is after a few weeks? Not very.
The point is it’s all these insights about not just how do you get the product done and on the shelf, but what actually makes it valuable.
We’re hoping to bring our experience—dealing with consumers directly, getting feedback through customer support, managing retail channels as a discrete brand under Intel’s umbrella, being on the front line—and leverage that intelligence, insight and wisdom times 10 within Intel.
Because there are all these other products and experiences that we can do well beyond health and fitness, which is what Basis is going to stick to doing.
Q. Jef, why team up and join Intel?
Holove: I think we were very excited about the existence of the New Devices Group and how important that was to Intel’s strategy. We felt like this is a bet we can make, where we know we’re part of the agenda that already exists. We do not have to convince a company that they should be investing in wearables or that this space is important.
The other thing was Intel from the very beginning made it clear that their intent was to get and to sustain the entire team. They valued this whole platform that we’ve been talking about. It’s not just the device. It’s the software. It’s the user experience. It’s all of that stuff combined.
The last piece for any deal is, what does this get to become under a bigger umbrella that we couldn’t accomplish on our own? We looked at the amount of science and R&D that’s already going around Intel, some of which is very relevant to stuff we were already working on or wish we were working on. We thought, “Where better are we going to be able to shape what the guts of this thing are capable of over time than here?”
Plus, Intel has a huge global reach into the same kinds of consumer channels that sell this stuff. We were on an interesting trajectory as a boutique, premium brand. But it all of a sudden puts that boutique premium brand on a worldwide stage. The amount of inbound interest we have on Basis now is already an order of magnitude above what it was on our own.
Q. How do you see this market playing out?
Holove: I don’t pretend to know anything in particular about what others are going to do. We have to operate with assumptions, and I believe that only the paranoid survive [laughter]. But historically, with Apple especially, they usually grow markets. That’s not all bad, right?
I think having a brand of that caliber with the amount of money they’re going to spend, in most cases they have blown categories up. They own a share of it, but mostly those categories have gotten huge as a result of their presence and their marketing. I’m fine with that dynamic in this space, particularly since what they’re going to do is just going to be different than what we’re doing. But more consumer awareness, more credibility for the space is a good thing.
In the meantime, I would say in wearables at large, on the one hand, yes, there’s a dozen micro-niches, but there’s one big fat obvious winner so far. And that’s the health and wellness category. That’s where most of the volume is today to the extent there is volume. There’s millions of units a year, and it’s growing very, very fast.
I think part of the question is: What other niches are going to explode into bigger obvious plays? I think there are several. And there’s also the question of, if [health and wellness is] the big obvious play right now, how does that evolve over time?
Nike’s announced they’re getting out of the hardware side of it. There’s been a number of challenges in that space. As Mike said, there’s no real obvious winner there yet. That’s pretty exciting, right? There’s plenty of evidence there’s a real category there and no obvious winner. That’s good for us.