Nike – from products to platform

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While I was interning in Seattle this summer, I learned from a friend — who happens to be both a software developer and a fitness enthusiast — that she had applied to “enroll” her startup idea with the Nike+ Accelerator program. Every summer, Nike hosts multiple start-up companies in their company headquarters in Portland for 3 months and helps them build products and services using Nike’s user data and proprietary technologies. At the Demo Days in June, in Portland and San Francisco, these companies present their product concepts to over 1000 Nike leaders, angel investors, venture capitalists, industry leaders, and members of the media.

The Nike+ Accelerator program encourages startups to adopt and build for the Nike+ platform that Nike has invested in over the last several years. Nike+ is a membership site that provides members with a variety of apps and resources to encourage motivation, fitness, and commitment to a healthy and fit lifestyle. Nike+ is adding hundreds of millions of athletes in 190 countries every day, and is fast approaching 30 million members in total. In addition to Nike+, Nike also lets developers use its proprietary NikeFuel technology, which is a Nike-designed algorithm that measures body movement.

Nike has had success with its Digital Sport products before – in particular with Nike-developed apps (such as Nike+Running, which lets runners track distance, calories burned and speed; Nike+Training Club, which lets users choose among over 100 workouts; and Nike Soccer, which allows soccer players to find or schedule a game). Nike+ Accelerator is different, however, in that it enables external developers to build software (and potentially even hardware) for Nike users using Nike’s technology. Nike wants to do more than just sell products – they want to create a platform that benefits users, external developers, and in turn the company’s products.

As with any multi-sided platform with network effects, the Nike+ Accelerator program has distinct value creation propositions for all parties involved:

  • For developers: Nike has made it easy for external developers to plug into their platform by providing developer-friendly and easily accessible APIs (Application Programming Interfaces) and iOS and Android SDKs (Software Development Kits). In addition, Nike allows these developers access to it’s 30M strong user base. Considering how expensive and difficult it can be for apps to acquire new users, this readily available consumer base proves to be a great asset to app developers.
  • For users: Users get access to more apps. More apps leads to more users and more user data, which in turn leads to better underlying algorithms resulting in better-performing and more useful apps.

The potential value capture by Nike is multi-fold. More and better apps lead to more “product” sales, and in the longer term, customers that have a higher willingness-to-pay given the complementary value-added services. Customers are potentially more sticky too given Nike has all of their historical physical activity data. Nike can also target newer demographics and customer segments with these new apps (Some examples are discussed later). There is also potential to capture value through charging external developers a revenue share. Nike is a shoes and athletic gear company at its core, and they possibly can’t keep up with the rapid innovation happening in software applications and wearables. This platform strategy enables Nike to capitalize on the shifting technology landscape, without actually doing the work they are not good at doing.

I wanted to share a couple of examples of startups that have historically participated in the Nike+ Accelerator program:

  • FitDeck creates digital decks of exercise playing cards that deliver new workouts for fitness and training enthusiasts.
  • GeoPalz is a gaming peripheral that captures kids’ real-life physical activity and converts it into digital coins, game tokens, and rewards.
  • Sprout At Work is a provider of corporate wellness solutions leveraging social and gamification tools to inspire employees and empower employers.

While FitDeck targets one of Nike’s existing customer segments – trainers, GeoPalz and Sprout At Work help Nike reach new and less traditional customer segments – kids and companies.

In addition to creating the Accelerator program, Nike has also partnered with other, more established companies to further its platform strategy. An example is FitStar, which offers users apps that help craft new routines and challenge them when they’ve hit a plateau. Nike integrates NikeFuel into Fitstar workouts. Another example is Garmin, which offers wearable trackers for activities ranging from running to golf. Through its partnership with Garmin, Nike enables runners to review the time, distance, and pace captured by their Garmin GPS devices in the Nike+ Running app.

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Student comments on Nike – from products to platform

  1. Last year, Nike discontinued the production of their fuel bands and fired the entire fuel band team. Instead, they are opting to engage with the wearable technology revolution through partnerships with Apple and fuel integration with other software applications. If wearable technology and fitness/health tracking are the future, is Nike at a competitive disadvantage by outsourcing these innovations? Nike has always been at the forefront of creating and capturing value of new athletic technologies, will this continue to be the case if they are no longer the source for innovation?

    1. You bring up a great point, that Nike has often been a source for innovation, but I would argue that the innovations they have capitalized on are actually in manufacturing, in supply chain and in manufacturing. In the field of wearable technology, where there are already front-runners, perhaps they understand where they have missed the first-mover and therefore would be better equipped to pattern versus vertically integrate.

      1. I’ve always believed that this initiatives help to build Nike’s brand and benefit from stronger market share in the “sneakers” business. I totally agree with what has been mentioned above. Does it make sense to spend all this resources in building software platforms instead of improving its products? To me, there is a huge component in that the driver for sports fans is the performance of gear and thus is the major driver to join this network. If Adidas or Under Armour come up with better products (or even different but complementary) there will be not only multihoming but very little customer loyalty.

  2. This is a great example of a company sticking to its core competency (physical products) but also acknowledging that they need to keep up with the demand for software / technology embedded in their products, so outsourcing it to people who do that best. I’m not concerned about Nike not being the source of innovation going forward (to SEA8’s point), because it sounds like the multi-homing factor is low for products developed on the Nike platform. So effectively, once a product is developed, it’s seen as a Nike product, thus a Nike innovation. Nike also has the huge advantage of a large existing user base, so by building this new technology that is only available with Nike products, Nike is increasing the network effects. I think Nike is well-positioned to win with this strategy.

  3. Interesting initiative from Nike, though to me it is hard to believe the objective is really to capture value on the platform. I would liken it more to a marketing investment for them, where the return is not to be expected via the app, but through physical product purchases. For sure, the same network effects would apply when it comes to influencing users’ purchasing behavior.

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