I chose to research Nike for this blog post because in my memory Nike has operated on the forefront of the digital revolution over the last two decades. Back in high school I remember designing my own shoes on Nike.com. Later on I started to see the Nike+ brand in more places, from an app icon on my iPod to the treadmill I ran on at the gym. And when the wearable trend took off a few years ago, Nike was right there in the mix with the Nike+ Fuelband (though I chose FitBit). However, while Nike made early and aggressive moves to capitalize on the digital revolution and evolve its business model, they also stumbled in places, and today are not the digital leader in athletic and fitness that I thought they would be a decade ago.
In 2006, as the iPod was becoming commonplace in many young adult’s lives, Nike took its first big leap into the digital age when it joined forces with Apple to develop the Nike+ app. The Nike+ initiative was on the forefront of the fitness data revolution and was a significant departure from Nike’s historical business model of providing superior and stylish athletic equipment to consumers. Now Nike was adding value for consumers through fitness data. The application gathered data on running performance from a sensor in the shoe allowing tracking and analysis of your historical activity. It enabled consumers to connect better with their running experiences and set up a feedback loop that could be used to set and achieve fitness and health goals. As the Nike-Apple partnership continued, Nike+ would evolve to continue to bring value consumers through new capabilities such as running course mapping and music integration.
Nike was able deliver the Nike+ platform by partnering with an established tech giant instead of going it alone. This was a strategic operating model decision to leverage Apple’s talent, resources and expertise in tech design, hardware, software development and big data to deliver this new value proposition to the consumer. This partnership enabled Nike to stay focused on its core capabilities of delivering superior athletic goods while quickly bringing to market a digital application that added value to consumers.
In 2012, Nike entered the newly emerging activity tracking “wearable” segment with the Nike+ Fuelband. The Fuelband was a fitness-oriented tech device which brought value to consumers by allowing them to set fitness goals, monitor their progression, and compare themselves to others, all with integration into Nike+ online community and phone application. This was a huge move for the company, which invested heavily to evolve its operating model by hiring talent and acquiring capabilities in hardware, software, cloud computing and big data to support the product. No longer just an athletic apparel and software company, Nike had now capitalized on the digital revolution to enter an entirely new segment.
Sadly, Nike’s venture into the wearable space did not last long. Three years after the launch, Nike Fuelband was discontinued. In launching the Fuelband, Nike had entered a complex business that was radically different than manufacturing and selling running shoes. The product failed on “Fuel Points,” which confused consumers who could not understand what a fuel point meant in relation to specific physical activity. Nike also struggled to retain many of the talented engineers and designers that were hired for Fuelband, who frequently departed Oregon for high tech jobs in Silicon Valley. With a lack of talent and capability, the organization was not able to keep up with the innovation of its competitors like FitBit, which developed methods to collect and turn data into a valuable product for corporate wellness departments and health insurers.
Finally, and perhaps the biggest contributor to the Fuelband failure, was the conflict that was created with Apple, who was still a key partner on the Nike+ platform. In 2014 it became clear that Apple had intentions to enter the wearables market with the Apple Watch. The timing of the Fuelband’s exit suggests that the conflict with such a key partner had contributed. It seems that Nike, already struggling in the wearables segment, stepped aside in an effort to maintain close ties with the company that it heavily relied on to deliver it Nike+ application to consumers.
So what can we learn from Nike, who in 2006 seemed poised to be a leader in the athletic and fitness digital revolution? There are many opportunities to create and capture value from the digital revolution. For companies like Nike, seizing on these opportunities can require drastic change to the business model. Strategic partnerships, like the one between Apple and Nike, can be extremely valuable for firms to quickly flex their operating model and leverage unique competencies to deliver digital innovation. However, these partnerships can be risky and need to be carefully considered and managed because overlap in product or service offerings can cause conflicting interests to get in the way. <818 words>