The control mechanism that's lasted over 100 years obviously works well. We are not too far into the touchscreen era, and when the thing is only 1 inch on each side the touchscreen isn't going to work especially well.
Someone made a mockup a week or two ago that used the ring around normal watch face as an input mechanism. I actually thought that was kind of a neat idea. I'd kind of like to see one of the Android watchmakers give it a try. But it was more of a 'watch with some interaction' (like the old Timex Datalink) than a 'smartwatch'.
Crown mechanisms worked well for a completely different purpose. They are the easiest way to set and wind a watch that is not on your wrist. Totally different use case than controlling the watch's screen while you're wearing it!
Apple could easily do that for a round "Apple Watch 2". It's the same as the digital crown in function, just in a different place. The just have to make the bezel touch sensitive. The feel of using it would be very reminiscent of the iPod scroll wheel.
Someone made a mockup a week or two ago that used the ring around normal watch face as an input mechanism. I actually thought that was kind of a neat idea. I'd kind of like to see one of the Android watchmakers give it a try. But it was more of a 'watch with some interaction' (like the old Timex Datalink) than a 'smartwatch'.