Brexit is symptom of lack of vision and leadership since 1992

Last Friday morning Britain and Europe were shocked by the result of the British EU referendum. As the British vote to leave started to sink in, feeling of shock quickly changed to uncertainty about the future, about the British place in Europe and the world, about the structure and future of the European Union itself. As the day went on politicians, business leaders, media commentators, etc. all gave their responses and tried to assess the future. Few people regretted David Cameron’s election pledge on having a referendum on remaining in the EU. Some commentators blamed British media and politicians on their long history of Euroscepticism and outright lies. What people haven’t really asked is how things even got to this point. I believe that the referendum and its result were the only logical out turn of decade’s long lack of vision and leadership in Britain.

It all started in 1992 when members of the European Economic Community were negotiating new treaty to advance European co-operation into a new level. With Maastricht treaty EEC member states created an entity with its own internal market, with its own currency, with its own foreign- and security policy, with definition of its own citizenship, etc. were all about creating European federal state in all but in name. The writing was in the wall for everyone to see. The British leaders at the time clearly understood the situation and opted out from the last chain that would lead their country into a federation without no easy way out, they opted out from the single currency.

Since 1992 the British political establishment has been turning from side to side on what their relation to EU should be and are they on in its development or not. When in other countries such as Finland joining the EU and single currency was seen not only as economic question but a question of security and politics, British establishment continued to pretend that everything was just about economics and trade. When Euro as currency finally saw its daylight, Britain joining it or not was seen as only as economic question. Most famous example of this thinking are Gordon Browns, then Chancellor of the Exchequer, five economic tests that were designed to give any answer that Brown and then Prime Minister Tony Blair wanted them to give. This indecisiveness can be best underlined from Tony Blair’s interview in Newsnight in May 2002 where he said…

“Should we stand apart from the alliance right on our doorstep as a country? It would be crazy to do that.”

 vs.

"It is an economic union. We shouldn't, for political reasons, stand aside. I don't believe that would be a fulfilment of our national interest. I believe it would be a betrayal of our national interest."

This is an excellent example of the British establishment’s double think on understanding fully well that EU isn’t just about trade and economics while pretending that is all about economics and trade. Politics of pretending reached their ultimate height in signing of the Lisbon Treaty that the then Prime Minister Gordon Brown signed hours after others alone in a back room.

The British EU referendum result is a wakeup call for the political establishment in the UK. They have to accept that EU is not anymore just a free trade area, but a de-facto federation that will keep advancing on future integration. They and especially British Eurosceptics also have to accept that EU is not going to collapse, they have been predicting imminent collapse of the Euro since 1999 and been wrong every time. The question that British need to ask is do they want to be part of possible European super state and if not then what will their relationship be with it. There was time and maybe there is still to negotiate for creating truly multispeed Europe with Britain being part of it, but the time will run out if British political establishment isn’t truthful to their people. What Britain needs is vision and leadership to implement it, be it vision of Britain in or out of the European Union.

Finnish smart watch makers at a crossroads

Ever since Apple introduced iWatch in 2014, market for smart watches has been under great amount of change and turmoil. Virtually all smart phone makers have pushed their own smart watches and smart bands to the market. Traditional watch manufacturers have also reacted, Tag Heuer publishing their Connected smart watch running Android wear. Companies from other industries have also shown interest on the nascent market, for example Nokia, manufacturer of mobile networks, acquired French connected health appliances maker as part of their Internet-Of-Things strategy. Fast change and evolution of the market with introduction of new competitors have put Finnish sport watch makers Suunto and Polar at crossroads.

Suunto and Polar both have shared history on being specialists on heart rate monitoring. Polar received its first patent on wireless heart rate monitoring in 1979 while Suunto expanded from being a compass maker to manufacturer of wrist computers with build-in navigation and instrumentation capabilities. They both have expanded and moved to become specialists of sports and health’s instruments with sport watches being at the core of their offering. While concentrating to serve a special niche market have allowed them to grow and show profit, it has also left them to be small companies. In 2015 Suunto reported total revenue of 63 million euro while Polar in 2014 reported revenue of around 203 million euro. Suunto is owned by Amer Sports, of sports equipment conglomerate, with yearly revenue over 2.5 billion euro and EBIT of 212 million euro. Polar on the other hand is family owned business.

The key problem that both of these companies share is that they are too small and have very limited resources compared to their competition. Big technology giants such as Apple, Samsung and Microsoft have more or less unlimited money to spend. Even smaller competitors such as Garmin has yearly revenue of over 2.8 billion USD with fitness products counting for 662 million USD. Both companies have responded to the changing market structure with different strategies. Polar has chosen to seek revenue growth by introducing multitude of different products such as activity and fitness trackers in lower price points. This strategy has enabled the company to keep up with the overall growth of the market. Suunto on the other hand has chosen to concentrate on higher end of the market with mix of design and usage of premium materials. This can be best seen in the new Spartan collection where the all titanium model retails at around 749 euro. This strategy of concentrating to a niche has caused company revenue growth to halt.

When looking at the future, what can be seen is that the sports and smart watch market is moving from being appliance centric to being application and service centric. When Apple first introduced iWatch, applications running in the watch were dependent of the phone. With Apple watchOS 2 and Android Wear 2, applications now run independently in the watch itself. What this means is that device functionality and offered value is not anymore tied to the manufacturer, but is largely created by independent third parties. While Suunto and Polar have resources to create few supporting services to their devices like polarpersonaltrainer.com, they don’t have enough resources to serve the whole wider market and even if they would, they would be playing catchup all the time. The question isn’t will there be a killer application for smart watcher or not, the question is when that application and service will come out.

What currently protects both companies is slow progress of battery technology and computing power requirements of both watchOS and Android Wear. While Suunto sport watches have battery life of weeks, smart watches running watchOS or Android Wear have in best day scenario battery life of 1-2 days. As technology develops this will change. The big question that both of these companies need to ask, how are they going to respond to technological change and how will that impact their overall strategy. There are three options for these companies to take: 1) develop offering based on Android Wear; 2) develop offering based on fork of Android or Linux; 3) continue using and developing in-house operating system.

In my honest opinion the most difficult option for these companies to take would be option number 2: to develop offering based on their own fork of Android or Linux. The reason is that keeping internal version of Android or Linux active and update needs lots of developer resources, not to forget the need to create their application stores and keep up connections to developer community. Clearly this option is too expensive and offers too little return of investment. Unfortunately other options are not much better. The biggest problem of using Android Wear is that Google doesn’t allow individual manufacturers to customize it and thus prevent creation of unique user experiences and offerings. With Android Wear manufacturers can only compete with hardware which essentially will lead into commoditization of the Android watch market where low cost and scale of economies only dictate winners. Finally the third option is to continue developing in-house operating systems which suffer from missing out the application market.

So what should Suunto and Polar do? Whatever the technical solution will be, as small companies they should target higher price segments and compete with specialization and quality. Suunto has already geared its strategy towards this and Polar should do the same. In case of technical solution, be it creating a new version of Android or Linux, or further developing their in-house operating systems, it is necessary to move away from developing closed source software and instead move on to develop open source platforms and components as group of companies with same interests. If Suunto or Polar would take the lead and create an open source project with a small dedicated team for creating either operating system or application runtime for future wearable devices, they could make big impact on how the market will develop.

Personally I see application runtime environment as the key ingredient that will make or break any future wearable project as there is no benefit with the project if it doesn’t achieve more applications to be available for the platform. Instead of inventing the wheel again, I would instead choose to copy an already popular platform like Google’s Java-language based runtime environment. The good thing about this is that there are already lots of available tools and companies specialized on enabling Java based programs to run both on embedded Linux and on real time OS’s. Whatever the specific solution will be, time is of the essence as it is easier to develop solutions for a market that is just about to bloom than to a market that has already formed. I believe Suunto and Polar can response to the challenge that Apple and Google have created, but they have to move very quickly.