How HP and Fossil Handed Apple the Smartwatch Market

The inside story of vision without execution: why being right about the future means nothing without the courage to act on breakthrough insights

I was reading the news on my laptop, still recovering from medical leave, when I saw the headline: "HP Discontinues WebOS Devices." My stomach dropped. In that instant, I knew we'd just killed not only Palm but every partnership that depended on our mobile ecosystem—including the MetaWatch project that Bill Geiser from Fossil and I had spent two years building.

Just five months earlier, Bill—Fossil's VP of Watch Technology who joined the company in 2004—and I had revealed our MetaWatch partnership in China. As HP's CTO, I'd been developing our connected device strategy, and Bill had been working on smartwatches at Fossil since joining the company. Together, we'd created a working smartwatch that connected to phones via Bluetooth, featured week-long battery life, and anticipated every key feature of what would become the Apple Watch four years later.

Bill and I had spent those two years convincing our respective companies that connected wearables represented the next platform shift. We had the technology, the manufacturing scale, and the retail dominance. What we didn't have was the organizational courage to see innovation through uncertainty.

This is the inside story of how partnership decision-making failures at HP and Fossil handed Apple a market that now generates tens of billions in annual revenue.

For a deeper dive into the specific decision-making mistakes that killed our partnership and how the DECIDE framework (FREE download) could have saved it, watch this week's YouTube video: "The Partnership Mistakes That Created Apple's $50 Billion Opportunity."

When Leadership Changes Destroy Innovation Momentum

The MetaWatch partnership became collateral damage in HP's leadership chaos. I'd spent months aligning our wearables strategy with HP's broader mobile ecosystem—connecting watches to WebOS tablets and phones through our Palm acquisition. Then everything changed.

Within 13 months, HP cycled through three CEOs, each with conflicting visions. When Leo Apotheker arrived as Mark Hurd's replacement in September 2010, he immediately began dismantling our mobile strategy. His background running SAP convinced him that HP should become an enterprise software company, not compete in consumer platforms.

I watched our carefully orchestrated ecosystem strategy crumble. The MetaWatch wasn't just a standalone device—it was designed to be the wrist component of a connected HP experience spanning tablets, phones, and eventually laptops. When Apotheker killed our consumer mobile strategy in August 2011, he destroyed not just WebOS but the entire platform foundation that made MetaWatch strategic.

Bill and I had spent two years building technical and business alignment between our companies. In one boardroom decision, it became irrelevant.

Bill's Warnings and Fossil's Frozen Response

While I was fighting HP's abandonment of its mobile strategy, Bill was battling his own leadership's risk aversion. The man was practically clairvoyant about what was coming. In 2011, he told me, "Phil, I wouldn't be shocked if Apple evolved the Nano to take advantage of this space. They'll legitimize it in consumers' minds worldwide."

Bill understood something most of us missed: Apple didn't need to be first to market—they needed to be first to create a platform. Yet despite this insight, he couldn't get Fossil's leadership to move beyond their comfort zone.

Here's the paradox that made Bill's job nearly impossible: Fossil's watch sales had actually grown dramatically from $950 million in 2004 to $3.25 billion by 2013—more than tripling during the decade when everyone assumed smartphones were killing traditional watches. This explosive growth made it extremely challenging for Bill to sell the smartwatch concept internally. Why cannibalize a business that was generating record revenues?

"Success can become the enemy of transformation. Why cannibalize a business generating record revenues?"

But Bill understood what Fossil's leadership missed: the smartphone threat wasn't immediate—it was inevitable. Instead of leveraging their manufacturing scale and wholesale channel, which spans approximately 20,000 retail doors, to dominate the emerging wearables market, they positioned MetaWatch as a "development platform" priced at $200.

This wasn't a consumer product strategy. It was innovation theater designed to appease the engineering team without threatening traditional watch revenues. Bill later admitted: "The connected watch business wasn't in scope of Fossil's core competency of lifestyle products."

That statement reveals everything wrong with how established companies approach disruption. They wait for new markets to fit their existing competencies instead of building new competencies for emerging markets.

When Committee Thinking Kills Innovation

Bill and I found ourselves fighting the same battle on different fronts: convincing leadership that wearables represented a platform shift, not just a product extension. At HP, I was presenting to executives who couldn't see beyond quarterly earnings calls. At Fossil, Bill was explaining to watch traditionalists why fashion alone wouldn't protect them from technological disruption.

The partnership structure made this worse. Multiple stakeholders created governance complexity without clear decision authority. We'd have month-long approval cycles for changes that startups could implement in days. I remember one meeting where we spent 45 minutes debating some esoteric item while Apple was probably finalizing its entire ecosystem strategy.

This is what I later came to understand as "innovation theater"—lots of activity but no meaningful progress toward market. We had sophisticated PowerPoint presentations showing market opportunities. We had working prototypes with impressive technical specifications. What we lacked was someone with the authority to say, "We're going all-in on this" and allocate the resources for the consumer launch.

"Innovation theater—lots of meetings, no market progress—kills more breakthrough ideas than bad technology ever will."

The early MetaWatch releases reflected this half-commitment. While our technical design called for week-long battery life, the actual units users received had 3-4 hour battery performance and Bluetooth connectivity issues—problems that dedicated engineering resources and software optimization could have solved quickly. Instead, our "development platform" positioning meant neither company took full ownership of creating a consumer-ready product.

When I returned from medical leave during the WebOS crisis, HP engineers immediately confronted me: "You can never take leave again—EVER! The CEO and board need adult supervision." That was their way of saying our leadership couldn't make sound technology decisions without constant technical oversight.

The Technical Foundation We Had Right

Here's what still frustrates me: we had solved the hard problems. The MetaWatch featured an MSP430 ultra-low-power processor, 96x96 pixel display, 3-axis accelerometer, and—most importantly—was designed for week-long battery life. We included a full SDK/API for developers, anticipating the app ecosystem model that would later drive Apple Watch success.

These technical advantages, combined with Fossil's manufacturing scale, could have established market dominance 2-3 years before Apple's entry. What made the partnership even more powerful was HP's retail dominance—we controlled about 10% of consumer electronics shelf space, making us the single largest player in retail distribution. This was the same retail muscle that led Apple to partner with us for the original iPod introduction, leveraging relationships we'd built since introducing HP calculators in 1972.

The scale difference was telling: while Fossil's 20,000 retail doors were large by watch industry standards, it was insignificant compared to consumer electronics distribution. Sony Ericsson, then the fourth-largest mobile handset supplier, sold through over 100,000 retail doors. HP's reach bridged that gap.

But technical superiority and retail reach mean nothing without organizational commitment. We were optimizing for the wrong metrics—engineering elegance over market speed, committee consensus over decisive action.

"Committee consensus optimizes for comfort, not courage. Markets don't wait for unanimous approval."

The irony haunts me: HP had every piece needed for smartwatch success—the technology, the manufacturing partner, and unmatched retail distribution—but lacked the organizational patience to see it through. Our later attempts—a limited partnership with Michael Bastian in 2014 and work with Movado—came too late. By then, Apple had already established ecosystem lock-in that no amount of technology or retail access could overcome.

Watching Apple Prove Us Right

The most painful part came later, watching Apple execute exactly what Bill and I had envisioned. The smartwatch market exploded from 0.3 million units in 2012 to 133 million by 2015—growth that early movers like us could have captured.

Apple's approach validated every strategic insight Bill and I had shared with our leadership teams. They positioned the watch as a platform, not a device. They integrated it with their broader ecosystem. They optimized for consumer experience over technical specifications. When the Apple Watch launched in April 2015, it sold 4.2 million units in its first quarter—more than the entire smartwatch market had sold in previous years combined.

Bill had predicted this exact scenario. In 2015, he told me: "Apple has done to wearables what IBM did to the Personal Computer category—legitimized it in the minds of consumers worldwide." He saw it coming but couldn't get Fossil to act on the insight.

By 2018, Apple commanded 51% of global smartwatch market share. Their watch business alone generates more annual revenue than many Fortune 500 companies' entire operations. That could have been us—if we'd had the organizational courage to back our vision with meaningful resources.

"Being right about the future means nothing without the organizational machinery to act on insight."

Frameworks for Innovation Partnerships

The HP-Fossil failure provides clear lessons for navigating innovation partnerships under uncertainty.

First, cultural alignment matters more than strategic logic. HP's rapid cycling between consumer and enterprise focus created irreconcilable conflicts that no amount of technology could bridge. Fossil's traditional manufacturing mindset couldn't adapt to platform business requirements.

Second, decision velocity must match market dynamics. The partnership needed weekly sprints and rapid prototyping, not quarterly committee meetings. When facing technological uncertainty, organizations must optimize for learning speed over planning precision. HP's 49-day WebOS abandonment and Fossil's "development platform" positioning both reflected organizations moving at corporate speed in a startup market.

Third, fear of cannibalization guarantees disruption. Fossil worried about protecting traditional watch sales even as smartphones destroyed that market. HP feared consumer devices would distract from enterprise transformation. Both companies chose short-term protection over long-term position, handing the market to Apple who had no legacy business to protect.

"Fear of cannibalization guarantees disruption. Legacy protection hands markets to competitors with nothing to lose."

Finally, partnership governance requires unprecedented clarity. The MetaWatch project suffered from unclear authority, competing stakeholders, and misaligned incentives. Future innovation partnerships require dedicated profit and loss (P&L) structures, separate innovation budgets, and leaders empowered to make decisions without committee approval. The anti-pattern of "innovation theater"—lots of meetings but no market progress—must be actively prevented through clear success metrics and exit criteria.

"Partnership governance needs unprecedented clarity. Competing stakeholders create innovation paralysis."

Conclusion: When Vision Meets Reality

The HP-Fossil MetaWatch partnership taught me that being right about the future means nothing without the organizational machinery to act on that insight. Bill and I had correctly identified wearables as the next platform shift, developed the technology foundations, and understood the market dynamics that would drive adoption.

Our failure wasn't technical—it was human. We couldn't overcome the institutional momentum that prioritizes short-term comfort over long-term position. HP's leadership chaos and Fossil's innovation paralysis combined to create a case study in how even the best-positioned companies can hand markets to competitors through systematic decision-making failures.

The human elements of this story—my frustration with leadership requiring "adult supervision," Bill's accurate but unheeded predictions, our mutual struggle to convince risk-averse executives—reveal that innovation success depends more on decision-making courage than technical capabilities.

Today, as I work with leaders facing similar partnership decisions, I return to the MetaWatch lesson: in an age where technology and traditional companies must collaborate to survive, having the best technology and market position means nothing without the organizational fortitude to see innovation through uncertainty.

To see exactly how the DECIDE framework (FREE download) applies to partnership decisions like ours, check out this week's YouTube analysis: "The Partnership Mistakes That Created Apple's $50 Billion Opportunity."

Resources:

1. HP MetaWatch reveal at China event, March 2011. Engadget coverage

2. New York Times coverage of HP-Fossil smartwatch partnership, March 2011. New York Times

3. Fossil Group financial data showing position as world's fourth-largest watch producer with $2.2 billion annual sales. Wikipedia: Fossil Group

4. Bill Geiser interview on wearables and smartwatch predictions. Phil McKinney Podcast

5. HP Palm acquisition announcement, July 2010. HP Investor Relations

6. Detailed analysis of HP's Palm strategy and 49-day failure. Phil McKinney: "I Convinced HP's Board to Buy Palm for $1.2B. Then I Watched Them Kill It in 49 Days"

7. MetaWatch technical specifications and development history. Wikipedia: MetaWatch

8. Global wearable device shipment growth 2012-2015. Statista: Smartwatch Market Share

9. Apple Watch first quarter sales data, Q2 2015. Apple Newsroom

10. FastCompany analysis of Fossil MetaWatch as "Bluetooth-Powered Revolution." Fast Company

11. HP's 2006 vision for personal communications that prompted initial Fossil partnership. ZDNet