{"id":20542,"date":"2016-11-18T17:54:17","date_gmt":"2016-11-18T22:54:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/under-armour-the-next-big-tech-company\/"},"modified":"2016-11-18T17:57:47","modified_gmt":"2016-11-18T22:57:47","slug":"under-armour-the-next-big-tech-company","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/under-armour-the-next-big-tech-company\/","title":{"rendered":"Under Armour: The Next Big Tech Company?"},"content":{"rendered":"

Context<\/u><\/strong><\/p>\n

For decades, athletic wear was largely defined by two dominant players: Nike, founded in 1964, and Adidas, established in 1949. This started to change in 1995 when a new entrant, Under Armour, came onto the scene, offering innovative, new products that improved the performance and comfort of football players. Roughly two decades and several product launches later, Under Armour grew to become a major competitor in the athletics market, earning $4B in revenue and securing several lucrative brand sponsorships with the likes of Steph Curry and Misty Copeland. [1]<\/p>\n

The Future of Under Armour<\/u><\/strong><\/p>\n

Despite this success, Kevin Plank still had one problem. Under Armour was clearly the #3 brand in terms of rank and popularity, and was trailing Nike\u2019s revenues by over ~$26B. [2] Given this, how could Under Armour position itself for growth?<\/p>\n

The answer for Plank rested in technology and big data analytics, which he believed would create value for consumers above and beyond regular clothing retailers. His vision was to create a world of \u201cconnected fitness,\u201d where consumers could easily manage and track their health across four key dimensions of exercise, activity, sleep, and nutrition. [2] Data inputs across these dimensions would then converge to create a \u201cconcierge\u201d type service, where Under Armour could manage every aspect of one\u2019s health and workouts. To illustrate this vision more clearly, Under Armour\u2019s app, Record, would be used to facilitate the following:<\/p>\n

\u201cIt knows your location, and the day\u2019s forecast there. It knows you run best when it\u2019s between 60 and 70 degrees, and there\u2019s only one window in your day when it\u2019ll be that temperature. Record will alert you to that, and tell you when it\u2019s time to go. It also will know there\u2019 a gym around the corner, it\u2019s offering a class you love, and will sign you up and check you in with a single swipe or tap. Visit the doctor for your checkup and you\u2019ll have all the data needed to take charge of your own health.\u201d <\/em>[3]<\/p>\n

Of course, underlying all of this technology is a recommendation engine that stimulates demand for Under Armour products based on one\u2019s exercise patterns. For example, using gear tracking features on the app, Under Armour can remind customers that they need to buy new shoes after running 600 miles. [1]<\/p>\n

Organizing for success<\/u><\/strong><\/p>\n

In order to achieve this vision, Under Amour has a made a number of important operational decisions. For one, it has invested heavily in building its tech assets and capabilities, spending ~$710M to acquire three fitness apps. These include MyFitnessPal, MapMyFitness, and Endomondo, all of which feed into Under Armour\u2019s umbrella app, Record. While it may seem like a very costly acquisition for a company that is only $4B in revenue, Under Armour has gained unprecedented access to consumer data. In fact, those apps alone hold a community of over $120M users, who have logged more than 1.7 billion workouts throughout 2015. [3] Additionally, the company has also been hard at work building partnerships with organizations like HTC to create a suite of wearable devices that will continue the data tracking and fitness connectedness. [4]<\/p>\n

While the acquisition of mobile apps represents an important first step towards building Under Armour\u2019s fitness ecosystem, they have also made strides in product innovation. Specifically, they have launched a new shoe with a built in chip that contains an accelerometer, a Bluetooth antennae, and a battery. Although enabling production of this shoe required re-tooling some of their factories and overhauling some of their testing and control processes, the product seems to represent an important step towards producing \u201csmart gear,\u201d not just wearable accessories. [3]<\/p>\n

Finally, Under Armour is also organizing for their digital future, employing 300 engineers to work on their digital strategy. [4]<\/p>\n

Key watchouts<\/u><\/strong><\/p>\n

It\u2019s obvious Under Armour is taking on enormous risk by pursuing a digitization strategy so aggressively, especially when competitors like Nike have tried and somewhat failed to launch successful wearable products (Remember the FuelBand?). [5] The key difference for me however is that Under Armour has a much broader vision for what technology will mean to the company. To that end, not only will Under Armour need to invest in their data analytics capabilities, they\u2019ll also need to formulate strategies that will keep customers engaged with the brand long term. Given that increased competition in the app space will be inevitable, Under Armour should seriously invest in their app marketing techniques, offering discounts for product purchases made through their recommendation engine. Adding a social component to the app, whether by coordinating meet ups or simply sharing fellow member\u2019s performance stats, could be another way to increase stickiness to the Under Armour ecosystem by creating strong network effects. Though the brand has the potential to benefit from \u201cfirst mover\u201d advantages, Under Armour will need to stay nimble and innovative if it wants to beat Nike.<\/p>\n

Word count: 800<\/p>\n

Sources<\/p>\n

[1] Parmy Olson, \u201cSilicon Valley\u2019s Latest Threat\u201d Under Armor,\u201d October 19, 2015, http:\/\/www.forbes.com\/sites\/parmyolson\/2015\/09\/30\/kevin-plank-under-armour-apps-technology\/#564d77bf4b25<\/a><\/p>\n

[2] Bernard Marr, \u201cHow Nike and Under Armour Became Big Data Businesses, November 16, 2016, \u00a0http:\/\/www.forbes.com\/sites\/bernardmarr\/2016\/11\/15\/how-nike-and-under-armour-became-big-data-businesses\/2\/#1a205d421778<\/a><\/p>\n

[3] David Pierce, \u201cHow Under Armour Plans to Turn Your Clothing into Gadgets,\u201d January 5, 2016, https:\/\/www.wired.com\/2016\/01\/under-armour-healthbox\/<\/a><\/p>\n

[4] Larry Dignan \u201cWill Under Armour\u2019s big data app experiment pay off?\u201d February 5, 2015, http:\/\/www.zdnet.com\/article\/under-armours-grand-big-data-app-experiment-will-it-pay-off\/<\/a><\/p>\n

[5] Chris Smith, \u201cNike FuelBand: The Rise and Fall of the Wearable that Started it All,\u201d February 22, 2016, http:\/\/www.wareable.com\/nike\/not-so-happy-birthday-nike-fuelband-2351<\/a><\/p>\n

[6] Lauren Goode, \u201c The Best Part of Under Armour\u2019s HealthBox is the Software, not Hardare,\u201d January 16, 2016, http:\/\/www.theverge.com\/2016\/1\/19\/10787676\/under-armour-htc-healthbox-review-connected-fitness<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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