Smartwatch. The Zip. Syncing my steps. It’s hard to believe these terms did not exist just a few years ago. With the emergence of new digital technologies and the trend to incorporate the Internet of Things into consumer wearables, the health and fitness sector has seen a radical transformation and now provides consumers with the capability to take control of their own health.
Fitbit’s Business/Operating Model
In 2009, Fitbit became the first-mover into the wearable fitness technology space. It built its business model around the idea that sensors and wireless technology could be integrated into wearable devices to empower consumers to live a healthier lifestyle . While Fitbit has launched multiple fitness tracking devices, its key differentiator lies within its software integration. As Fitbit’s cofounders explained, “the lack of focus on hardware was what allowed us to take over the market very quickly… 2/3 of our engineers are in software, not hardware” . Additionally, Fitbit’s initial competitors focused on hardware, allowing Fitbit to create the most data-driven value for its users.
- Hardware: Fitbit designed several wearable devices (clip-on trackers, wristbands) to provide convenience for daily wear. These devices measure users’ fitness and sleep activity levels 24/7.
- Software: All of Fitbit’s devices sync automatically with its online dashboard and mobile app. The web platform offers users a myriad of data analytics on their daily activities and progress, as well as the ability to track goals and log activity levels. Additionally, users can choose to interact with friends online through sharing of activity levels, competing in challenges and achieving virtual badges.
Fitbit has further leveraged its strength in software/data analytics in its product marketing strategy. The company uses its current database of user-tracked metrics to segment its customer base. Through its data research, Fitbit has identified that different age demographics have been using its products for different reasons. This allowed Fitbit to launch its “Find Your Fit” campaign in 2014, which catered specific advertisements/channels and product offerings to customers by age, gender and levels of fitness interest .
In recent years, Fitbit has focused on diversifying its revenue streams by 1) branching out its customer base (i.e.: both selling direct to consumers and partnering up with major corporations/health insurance companies) and 2) offering premium software services on a subscription basis (i.e.: virtual coaching, customized fitness plans) . The firm’s strategy has proven successful thus far, with Fitbit’s revenue increasing rapidly each year .
While the market for wearable technology is expected to continue growing over the next decade, the industry’s low barriers-to-entry have attracted many competitors from all angles. Today, Fitbit is positioned as the “best value” product, wedged between the premium and economy ends. On the premium side, Apple has become Fitbit’s largest competitor with its 2015 launch of the Apple Watch. On the other end, many copycat products with similar features are being sold at a fraction of Fitbit’s product prices. Additional companies like Jawbone and Xiaomi are directly competing with Fitbit’s product/price offerings, and even non-technology firms, such as Swiss watch manufacturer Mondaine, are entering the market .
As competitors begin to crowd this market, Fitbit will soon lose its competitive advantage in software integration/data analytics. To thrive, Fitbit will need to reposition its strategy and find the best way forward to leverage its strengths in digital analytics. CEO James Park envisions Fitbit’s “next big leap to be in detailed clinical research and creating consumer devices that can make lightweight medical diagnoses,” such as a blood glucose meter [7, 8]. While I agree this is the right direction forward for Fitbit, given its experience in software analytics, there are two key factors that Fitbit should consider:
- Given that software companies like Google can easily enter this new market and become a direct competitor, Fitbit should leverage its history of integrating user-friendly hardware with its software expertise to maintain a competitive edge. Fitbit could consider partnering up with a leading athletic apparel company, such as Under Armour, to create a more seamless, integrated apparel-wear that allows for healthcare/activity monitoring. For example, as consumers demand more user-friendly products, data-tracking running shirts could provide more seamless and accurate data analytics to both consumers and health care providers than a wristwatch or clip-on device.
- User data privacy could pose a potential roadblock for Fitbit, particularly as it turns to more serious tracking of consumer health. It would be prudent of Fitbit to explore legal protection of health data records that the company tracks, similar to the protection of patient medical records.
By moving quickly, identifying its new value proposition and addressing potential challenges early on, Fitbit can position itself to thrive in future years, beyond the increasingly competitive wearable technology space.
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- Fitbit. www.fitbit.com.
- Hof, Robert. “How Fitbit Survived as a Hardware Company.” Forbes, February 2014. http://www.forbes.com/sites/roberthof/2014/02/04/how-fitbit-survived-as-a-hardware-startup/#3ba3e9494f42.
- Agomuoh, Fiona. “Fitbit Dominates the Wearables Market, but Can It Survive the Coming Onslaught of Smart Watches?”. International Business Times, November 2014. http://www.ibtimes.com/fitbit-dominates-wearables-market-can-it-survive-coming-onslaught-smart-watches-1725780.
- Quittner, Jeremy. “You Don’t Need to be a Giant to be a Threat.” Magazine, June 2015. http://www.inc.com/jeremy-quittner/fitbit-ipo-will-bolster-first-mover-advantage-for-wearable-device-maker.html.
- “Press Release Details.” Fitbit Investor, February 2016. investor.fitbit.com.
- “Worldwide Wearables Market Increases 67.2% Amid Seasonal Retrenchment.” International Data Corporation (IDC), May 2016. idc.com.
- Marshall, Gary. “The Story of Fitbit: How a Wooden Box Became a $4 Billion Company.” Wareable, September 2016. http://www.wareable.com/fitbit/youre-fitbit-and-you-know-it-how-a-wooden-box-became-a-dollar-4-billion-company.
- Meola, Andrew. “Wearable Technology and IoT Wearable Devices.” Business Insider, August 2016. http://www.businessinsider.com/wearable-technology-iot-devices-2016-8.