It would be hard for apple to convince people to not only upgrade their phones every two years, but also their watches.
And I don't believe there are significant updates in store for the watch. Yes, they could make it slimmer, but as others have said, not much room for improvement hardware wise. Any updates would simply be design changes.
The issue is that software advances and computer chips must be able to hand the extra demand, even if the software stays the same, I feel as though over time the watch will become sluggish from "wear and tear" on the electrical components. There's a reason high tech cars nowadays that rely on electrical components don't last as long as their older more mechanical counterparts.