Company Case Fitbit: Riding the Fitness Wave to Glory lt was 2009. James Park and Eric Friedman were at a breaking Point. They'd been fiting around Asia for month, setting up the supply chain for their compary’s frst product, the Fitbit Tracker. Having raised capital to launch the product with nothing more than a circult board in a balsa wood box, they were now on the verge of pushing the button to start the assembly line, But with ‘thousands of orders to fil, they clscovered thet the antenna on the device wasn't working propery. They stuck apiece of foarn on the Circuit board and called it “good enough.” Five thousand custom- fs received shiny new Fitbit Trackers just in tne forthe holidays. Getting @ start-up company off the ground is challenging, Gotting a hardware start-up to succeed is neer impossible, 65 pecially when you're the pioneer. But with so many changes in the marketing envionment, Park and Friedman knew they hag something special. Pedometers had been saling for years, fol lowing personel fines and wellness trends. But those devices ‘were low-tech and limited in the Information they provided con- ‘sumers. And with the seemingly endless demand for high-tech ‘gadgetry, Park and Friedman saw big potential for using sensors in smal, woarable devices. “The two entrepreneurs were correct. In just seven years, Fitbit has marketed more than a dozen cifferent products and sold mi- lions of unts, Last year alone, the company shioped 21 milion devices—almost double the previous year's number—ringing up $1.86 bilion in revenues and $116 milion in profits. Fitit crested, ‘what is now a fast-growing segment—wesrable tech. Amid its best year to date, Filbt went public with an intial public offering ‘of $4.1 bilion. How cid the company go from a balsa wood box to siting atop an exploding industry? To heer Park tal, “It was the right produet at the right time atthe right price point" ‘A Magical Device ‘though Park's response may seem simplistic, i's right on. Coming up wth a product that delivers tha right Benefits to con- sumors af precisely tho time they need them isthe key to any new product launch. In FUDR' case, consumers were hungry for this eral device that could not only track stops taken but cacuite distance walked, calories bumed, foors clmbed, end activity duraton end intensity, all fom an uncbtrusve spot— Gipped on a pants pocket. Whats more, the. Fibit Tracker ould track sleep quetty based on periods of rstiessness, the mount of te befor feling asleep, and the amount of time actualy sleeping ‘Even mote ering to consumer, the device could upload clia to a computer and make them avalatle onthe Fitit wob- Sito. At the sto, usrs coud oveniow their physical activity, set and track goals, and Keep logs on food eaten and edtonal atts not tracked by the dovice. To top things of, the explo- Son of social mecia and sharing personal information went hand in hend with whet users were uploading. By design, Park and Frodtran put more ito F's softwere than is own hardware, recognizing thet other hardware device companies lke Garmin | had shortchanged the software aspect. But Fitbi's euccess can also be attributed to new models. Recognizing that gadgets have a limited life span and that competition would attempt to improve on its offerings, Fitbit has rade development a constant process. From the original ‘Tacker to its current Blaze smartwatch with GPS, heart-rete monitor, and the abifty to display smartphone notifications for cals, texts, calendar alerts, Ftbit has stayed ahead in giving con- ssumers what they want. ‘An Unexpected Sil, Fitit’s path to success has been challenging. One big chal lenge the company has faced from the start is customer reten- tion. Like many diets and pieces of exercise equipment, users are drawn to the “wow" factor of something that can improve their health and wellness but quickly fizzle out, And if users stop using a device, they are far less likly to purchase the *new-and- improved" version, much less recommend Ito anyone else. But {an interesting thing happened as Fitbt got things roling. The company reosived a flood of calls and messages from corporate human resoures depertments. Perplexed as to why businesses ‘would want to buy Fitit devices in buk, the company assigned a point person to find out It tumed out that corporate Amerioa was going through a push| to enroll employees in wellness programs. The reasons for this push extended far beyond concems about employee health end well-being. Healthy employees provide major benefits for & com- pany. They cal in sick less oft and are generally more productive, ‘They also cost less in terms of health-care benefits, And although diet and exercise can't eres every poor health condition, they can have @ big effect on health factors such as blood pressure, choles- terol levels, and blood sugar levels—conditons related to common diseases such as heert disease, stroke, and dlabeles. So i's no wonder that companias have an incentive to do whatever they can to motivate employees to take better care of themselves. ‘As Fitbit talked to companies, it discovered that most Were struggiing to enroll even a small proportion of employ- es in their workforce wellness programs—meny had less ‘than 20 ‘percent compliance. One problem was that—even as the latest fitness woarables from Fitbit and its competitors were showing up around offices everywhere— participation in corporate wellness programs often required the use of @ bulky corporate-issued tracker, better known as an analog pedometer. "Can you imagine asking engineers to wear a Janky old pedometer and write down their steps?" mused Amy McDonough, Ftbit’s corporate point person. Fitbit, af course, offered a much more high-tech option, leting individuals easly track more complex data and letting HR departments easily ‘compile and analyze the data as well. Fibit's bulk sales to cor- porations started rolling in, Much to Fitts pleasant surprise, Ftbit products sold through corporations versus those sold to individuals had noticeably higher retention rates. Fitness trackers in corporate wellness programs were offen used in wellness challenges—maintain @ rrinimum of 10,000 steps a day and got free vacation days or a discount on health insurance premiums. It might seem logi cal that people would stop using their devioes once a challenge ended. But when IBM gave out 40,000 Fitts to employees over @ two-year period, it found not only that @8 percent of employ- ‘ees routinely logged thei health data and eating habits but that 663 percent of employees continued to wear their Fitbits months after the challenge concluded. Other companies noted even greater tangible benefits, Cloud-servicés start-up Appirio bought Fitbit devices for 400 ‘employees. Armed with data from the weerables, Appiio was ‘able to convince its heelth insurance provider, Anthem, that the increased health benefits were transiating into lower health-care costs. This gave Appiro the leverage to negotiate lower premi- tums, shaving $280,000 off ts annual bil,Today, Fitbt's wel dvision offers tools specifically designed for employers, such as dashboards, dedicated service suppor, ‘and webinars, Corporate oilents include BP America, Kimberly- Clark, Time Wamer, and Barclays, Target offered Fitbit Zip ‘trackers to 835,000 of its employees. Corporate sales currently ‘account for 10 percent of Fibit revenues. But the corporate share of the sales wil increase, as adoption in that sector is rowing at a faster rate than in consumer markets. Founder Park ‘leis that the use of Fitlts in employee wellness programs is having an Impact not only on health and well-being but on job safety as well, Companies have also experianced improvements in office cutures as a resutt ofthe unified effort among coworkers to achieve fitness goals together—a factor that is also licely boosting retention numbers in the corporate setting. | Encountering Hurdles With high growth rates and plenty of markst potential, it would ‘seam that the sky is tho limit for Fitbit. But Fitit stil faces nu- merous obstacles, For starters, privacy issues have increased as technology crestes new ways to gather and share information, In Fitbit’s early deye, inforration logged by users was public by default, That meant that as users integrated their information into social networks, ther fitness, eating, sleeping, end in some cases sexual activities were being posted for all to 886. That was e3s- ly remedied by making “private” the default setting. But general ‘concems about what happens with uploaded personal data re- rain, even amid aseurances from Fibit that it does not analyze Individual data or sell or share consumer data, But other privacy matters haven't been so easily managed. Fitness trackers and the data they generate ate not reguisted, ‘That means that any organization bound by compliance with the U.S. Health Insurance Porteblity and Accountability Act (HIPAA) has had to tread lighty when adopting a cigital tracking device. Fitbit has always besn proactive on privacy and information secufiy Issues, leading the industry by working with Congress (on legislation in this area. Fitbit recently achieved HIPAA compll- nce, which goes a long way toward putting employers’ fears about privacy and security to rest. But other concerns remain on the part of both empioyers: nd employees. Even as Fitbit and its corporate customers do all they can to allay privacy concems, many employees have ex- pressed concerns that companies will misuse the data, Conoarn. ‘bout what date are being collected and how they are being Used has led some employees to wonder whether their Fitts could be toling employers if they are recovering from a wid night, of partying, calling in sick when they really aren't, oF feeling ner= vous in a meeting or even if they became pregnant. ‘Aihough the overall benefits of integrating a Fitbit devies Into wellness programs and the associated challenges seem clear, there are negative outcomes as well. Health experts point to the potential for a cultural divide between the “dos” ‘and the ‘do nots” Employees with disabilities, chronic all- ments, or even unhealthy habits may opt out of such pro- ‘rams, Particulerly in programs thet use leaderboards and ‘group incentives, the result can be to celebraié the fit but demaralize those who are not. And rewards given to those who Participate as well as those who sucosed are viewed as penal- ties for those who opt out. ‘Cheaters are also a concern. Yas, some participants in well- ‘ness programs have found ways to fool their Fitts. For example, ‘dog can tigger 13,000 to 30,000 steps per day with a Ftbit al- tached to its colar, easily exceeding the standard 10,000-step ‘goal. Social media sites have erupted with shared practices. "Want to cheat your Fitbit? Try @ puppy or a power dil” sug- gests one Tweet with a link to instructions. Other methods for logging steps include putting it in the dryer, shaking the fst, attaching it to small children, playing the plano, leading music, ‘and whisking a bow! of chocolate-chip cookie batter. Even the vibrations from riding a Hertey or @ lawnmower can do the trick, Beyond these concerns thet etand in the way of more wide- ‘spread acceptance and use, perhans Fitbit’s greatest challenge is competition. With @ dominant market share in the rapidly ‘growing product category that it created, you might think the Fitbit has it made, However, as digital technologies advanos on al fronts, t has become apparent that a fitness tracker is not a product's a feature. That became painfully apparent when the ‘Apple Watch hit the market. The Apple Watch wowed the public 88 a wrist-wam extension of the IPhone with practically unlimited ‘app potential. Its fitness tracking features seemed to minimize those of Fibi’s products. And if Apple can jump Fitts train as fone simple adaftion to a far more robust product, what other ‘companies and devioss might make their way into Fitbit’s teri- tory? And on the software and analytics side, Apple Health and Google Fit seem poised to corner the market with compatibility ‘across mobile platfons. But Fitit is hard at work differentiating ts wares and posi- tioning itself as more than just a maker of filness trackers, It has already introduced its own smartwatch. And its “next big leap" 's to move beyond fitness tracking into mecical diagnosis. By partnering with organizations that can link Fitts products with ‘more detailed clinical research, Fitbit devices could soon replace blood glucose meters and even alert users fo dangerous health cconaitions and disease. If Fitbit can successfully postion itself on strengths that competitors have a herd time replicating, the sky ‘may be the iit