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When We Wear the Future

Wearables will disrupt and accelerate change in industries beyond technology, thereby turning the now remote and abstract Internet of Things into something personal and familiar.

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You’ve seen them before in the movies: voice-controlled watches, helmets with display glasses, gadgets embedded in clothes—those cool devices that endowed James Bond and Tony Stark’s Iron Man with superhuman abilities.

Wearable technology, once the stuff of action thrillers, has leapt from the silver screen into the real world. Moreover, those movies may turn out to be mere previews for the dramatic features unfolding in coming years, as wearables and the Internet of Things (IoT) begin to take hold, changing the way we interact with the real and virtual worlds around us.

Wearable devices seem set to surpass market expectations. With demand strong and growing, Morgan Stanley analysts expect the category to become the fastest ramping consumer technology, outstripping even smartphones and tablets. Wearables will disrupt and accelerate change in industries beyond tech, thereby turning the now remote and abstract IoT into something personal and familiar.

Latest Evolution

Wearables are electronic devices worn on the body, or attached and/or embedded in clothes and accessories. They are essentially wirelessly connected minicomputers able to display, process or gather information. Wearables represent the latest evolution of computer technology, from mainframes as big as houses decades ago to portable, personal devices.

This trend has made possible the IoT era we are entering, where machines are constantly communicating and interacting with each other and with their environment. In many ways, wearables characterize the most human facet of the IoT, which is enabled on the hardware side by distributed computing power, sensors, actuators and wireless communications, and on the software side by apps and Big Data analytics.

“Killer” Feature

Many of the technologies behind wearables—such as sensors, semiconductor chips, broadband connectivity, and software—are already falling into place. But the “killer” feature needed to transform the industry had been missing—until now. “Persistent identity is the ‘killer’ feature that will ignite a long tail of industry use cases and augment existing mobile applications,” says Katy Huberty, lead Morgan Stanley technology analyst covering IT hardware. The newest wearables to enter the market will be personalized devices, able to identify its user at all times.

Such “persistent identity” promises to make wearables an extension of the user. Through their wearables, users can connect to just about anything, not as an anonymous device owner, but with a specific identity. This will allow users to streamline time-consuming processes, such as making payments, locking and unlocking their cars, and automating security or heating and air conditioning systems at home, among many other activities where personal identification or preferences is crucial.

Persistent identity, in turn, will drive two other applications that will create business value and spark innovation. Strapping a wearable to your wrist or clipping one to your chest lets the device collect your personal data, such as pulse rates, distance walked, time spent sitting, and so on. Users could monitor the data themselves using software, and they could share the data securely with companies that can leverage such data to create new services and added value.

Overcoming Hurdles to Adoption

Some possibilities: Doctors could better monitor the health metrics of at-risk patients; pharmacies can fill prescriptions in a timely manner; retailers could offer personalized deals based on where and how long you spent browsing in a section of a store. Wearables could also give a boost to other nascent technologies. For example, persistent identity wearables would reduce transaction times for mobile payments. Making transactions simpler, frictionless and intuitive could also help merchants improve the retail experience, boost efficiency, and improve sales.

As with any new technology, wearables will face hurdles to broad adoption. Hardware makers must offer fashionable designs, ease of use, and, over time, some independence from smartphones. Software makers must offer innovative applications, accurate data, and a smooth interface with existing platforms. In addition, the privacy and security of such personal data must be ironclad.

Most importantly, wearables must deliver on the promise of enhanced personalization. As extensions of our personal identity, wearables must show they can add value to our day-to-day routines, thereby becoming intimate and essential aspects of our lives.

Morgan Stanley Research has written a Blue Paper, “Wearable Devices: The ‘Internet of Things’ Becomes Personal” (Nov 19, 2014). Explore more Ideas and Research, or contact your Morgan Stanley representative for the full report. Find a Financial Advisor to discuss your investment goals and strategy.

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