Fossil Group’s sudden announcement Thursday, that it’s selling part of its smartwatch tech to Google, took the wearables sector by surprise. But it doesn’t mean the watchmaker wants to shed the high-tech product category.
On the contrary, it’s doubling down, Fossil Group’s Greg McKelvey told WWD — though he seems to understand if there’s any confusion over the deal.
“We’ve had such a close partnership with Google for so long that, even internally, people are like, well, what exactly is this?” said McKelvey, Fossil Group’s executive vice president and chief strategy and digital officer. “Because we’re still creating products and innovating, like we were before. We’re on the same mission we were already on. So I think that, internally, people are not going to feel like it’s that different.”
Well, a few might. The deal covers some research and development talent, who will change hands along with some of Fossil Group’s intellectual property [IP] — though not all of it, McKelvey emphasized. But as they have in the past, the companies will continue working together to bring new wearables to the market.
Naturally, that begs the question, if the partnership was so good, why wouldn’t Fossil Group and Google stick with the status quo? Turns out, the answer has to do with two of the buzziest tech trends today: Health features and voice assistants.
Immediately after the Google announcement, McKelvey publicly disclosed that the new products the companies are working on involves technologies descended from Fossil Group’s 2015 acquisition of Misfit, a brand known for producing well-designed activity trackers.
A major focus for wearables, health looks to be the main driver of the category’s growth. The momentum seems clear among the leaders in the market: Apple has been steadily boosting its Apple Watch’s health features, most recently with heart monitoring and even fall detection, and Fitbit is practically a pioneer in consumer fitness and health tracking. Google hasn’t overlooked health either. The search giant has been paying more attention to its own Google Fit software as well, giving it a well-received makeover in August, alongside its WearOS update.
The other focal point is voice features, and Google Assistant has been the only contender to challenge Amazon’s market-defining Alexa — which, by the way, is only available on wrists through third-party companies.
Seeing the landscape, the deal made sense to Fossil Group. Here, WWD spoke with McKelvey to learn more about how and why the company struck the deal, as well as what shoppers can expect.
WWD: When did the conversations about the Google deal start? How long has it been in the works?
Greg McKelvey: Obviously we’ve been partners with Google for something like four years now, working on WearOS, so the partnership is not new. And really, the way this came about is, a little over a year ago at Fossil Group, we started to think about [our plans]. We built a multi-year strategy and a plan for our product roadmap and what we felt like we needed to be able to unlock the category.
One of the key principles of that strategy was that health and fitness technology would continue to evolve. Today, they drive category demand and will continue to do so. And everybody in three to five years will have a personal assistant, whether that’s Siri or Google Assistant or others.
We just believe that Google has such deep technology experience and expertise, and has a roadmap for this technology, that we felt like we wanted to get closer to [it] and build a deeper partnership. So we’re innovating around those core technologies.
So that’s really what this is about. We at Fossil Group developed some technology and some product that we’re pretty excited about. And we just think that, with Google’s support and tighter integration of those services, collectively, we’ll be able to get pretty outstanding products out of this partnership and transaction.
WWD: I understand the deal is for work that’s under development. You mentioned health technology and voice assistants. Is there anything more you can tell us about the technology or the scope of what Google’s buying?
G.M.: We’re not going to be able to talk about the product too specifically. But for a couple of the key messages, I would say, number one, we believe in health tech and fitness. And then this assistant — they’re going to be integrated ultimately into nearly every wearables product that we make.
So it’s about unlocking the best product and growth through integration of those types of services with Google as are our preferred partner there. That’s number one.
Number two: Just to be very clear, we have made significant investments in our technology capability. And we believe we have significant competitive advantages in the technology stack that we’ve got and our ability to design and bring to market pretty incredible product that scales across a full portfolio of 14 brands today. We are carving out a small subset of that technology, and we’re keen to support it, focused on this very specific product.
We’re still maintaining all of those core capabilities and the ability to innovate like we were before. So I just wanted to make sure you understand that we’re not losing all of that capability. We’re looking at a very specific product that we’re super excited about with Google. And they are as well, obviously.
WWD: So for anybody wondering whether this represents Fossil stepping back or away from the smartwatch business, it sounds like you’re saying that couldn’t be further from the truth…
G.M.: Could not be further from the truth. We are leaning in. The technology that’s transferring over is a subset. It’s IP and the team that we’re going to transfer over to Google. We’re going to co-develop the product, bring the product to market at Fossil Group, and scale it across our brands.
Then Google — in true Google fashion — will also open it up to the ecosystem as well, broadly, outside of Fossil. And that’s okay with us too. But we are co-developing this product, ultimately, despite there being a transfer of IP and team.
WWD: You’ve already been partnering with Google, and you’ve been developing this new tech. Why not keep it for yourself, as a way of differentiation for Fossil Group watches? Why go down this road?
G.M.: We have the ability to have highly differentiated products anyway, because we’ve got advantage design, advantage brands and global scale. So just like traditional watches, there’s no differentiation in the product movement. So with the internal technology, we have premium products, great brands and great design that people love and buy — buy a lot of — because we’re differentiated through branding and design. So that remains. We also will continue to be advantaged in designing and implementing the full wearable products.
So there’s a specific technology within the overall product that Google is going to be bringing to market…. There’s still a tremendous amount of technology work, to take what Google’s going to do in the operating system, wrap that into a great product that can scale within our watch business and across many brands. So that all remains. And we’re retaining all those capabilities.
[As for] why this transaction and that product make sense — we believe the technology is evolving very rapidly, where we need to be able to tap into advanced health tech and the personal assistant, the Google Assistant. How you pull those great technologies into a great product experience become the point of differentiation.
So it’s accessing the technology, which Google will open up. But it’s really how you design a great product experience and bring that to market, in something attractive that people want to wear, that’s really our core competence.
WWD: Is that what Google wants to work with here — Fossil’s fashion-savvy understanding of what consumers want, in addition to the IP and the tech stack you’re talking about — so it can then bring that across different WearOS devices?
G.M.: I think that, generally, yes. But I would say the technology will help develop and build out our wearables business broadly, [for] WearOS and products that are not in the market yet.
WWD: Has Google filled you in on their WearOS plans?
G.M.: Yes. I would say that we have a deep partnership with Google. We are both leaning into this category heavily, and are really just getting started. And this transaction really helps both of us continue to lean in in the right way. We’re both going to continue to innovate, both in WearOS and in other form factors within wearables that we can scale across our branded portfolio.
WWD: Can you talk about next steps, after the transaction completes later this month?
G.M.: Sure. We’re continuing to deliver on the product roadmap that we’ve already got within WearOS. We’ve also got hybrid smartwatches. We recently did a deal with Citizen as well, to continue to innovate and scale that part of our product category. So we’ll continue to innovate and drive growth in those. And then we’re going to be collaborating closely with Google on this next product development opportunity. And I think there’s going to be some short-term product benefit to that.
Then I think there’s going to be a multi-year path to continue to innovate in ways that are going to be incremental to the existing products that we have.