What the watch needs is what most computer innovations need - a killer app. Something a watch does better than the phone it's going to complement.
Right now the only app I can think of that a phone can't do is health monitoring, because a watch physically touches you whereas a phone doesn't.
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I consider myself a pretty heavy user of my phone. Of all the kewl things they can do, phone, text, e mail, GPS, search, calculator, calender, address book, notes, camera, video, watch TV, weather, voice recorder, music player, stop watch, timer, voice commands, my hassle with them, the thing that would really help me, would be comprehensive voice commands.
I can push a button and tell it to call So and So or push some buttons and then tell it to search for thus and such, etc. But, as I've grown accustomed to all those great features I use all the time, I know what faster, simpler and less, WAY less having to interact physically by pushing ANY buttons.
Ideally, I'm driving, phone is sitting there and I just say 'phone, wake up, text sam 'hey, great idea....' or 'phone, read me sams' text'.
As is, I have to wake it up, unlock it and then select text to see or have it read it to me.
That is the HUGE next big thing to me; phone as, basically, personal assistant you merely have to talk to and barely touch at all, if at all.
"Phone, weather for this afternoon?"
"Phone, did the e mail come in yet from sam, read it to me if it did"
True hands free, truly comprehensive ability to interact such as "Well, Larry, there are three new e mails, one is spam, one is so and so and one is from Sam Spade.."
"That's who I meant, Sam Spade..."