{"id":2804,"date":"2015-12-08T00:12:13","date_gmt":"2015-12-08T05:12:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/fitbit-find-your-fit\/"},"modified":"2015-12-09T17:40:33","modified_gmt":"2015-12-09T22:40:33","slug":"fitbit-find-your-fit","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/fitbit-find-your-fit\/","title":{"rendered":"Fitbit \u2013 Find Your Fit"},"content":{"rendered":"

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Business Model<\/u><\/strong><\/p>\n

Fitbit provides various product lineups from well-known wrist-bands to clip-type devices. The main functions\u00a0these products deliver are tracking user\u2019s activities and\u00a0showing the statistics and summaries of the activities such as steps, distances, speeds, calories active minutes, and even sleeping patterns. The market forecast is\u00a0fairly\u00a0optimistic. According to market research institutes such as Gartner and IDC, wearable devices market will grow very fast, and Fitbit will take advantage of the inflowing wave of the industry. The company is now a public company after its IPO in June 18th<\/sup>\u00a02015 at the price $20, and is traded in NYSE. The current stock price is $33.18, as of Dec. 4th<\/sup>.<\/p>\n

<Exhibit 1> General Introduction of Fitbit platform<\/p>\n

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Fitbit\u2019s main source of revenue is Hardware sales. In 2014, Fitbit\u2019s market share in 2014 was 70%, significantly outperforming Jawbone, the second-largest player in wearable fitness tracker product category.\u00a0They\u00a0also\u00a0generate\u00a0revenue from\u00a0their\u00a0Software sales, which is\u00a0a\u00a0yearly-basis premium service that provides five distinctive features \u2013 other people’s benchmarks, food report, activity report, sleep report, and fitbit trainer function. Their business model is generating hardware sales as a main source of revenue, and using software as both additional revenue and retention, with affordable premium services. The company introduced Fitbit Premium service, which is\u00a0a\u00a0$49.99 yearly-fee basis service. This premium service provides in-depth analysis on\u00a0one’s\u00a0physical activities. For example, you can compare your physical status with other people in your age group, and its trainer function challenges people to go beyond their personal limits to be healthier and well-shaped. In 2014, paid active users of the service were 6.7mil, and it is expected to rise to 9.5mil for Mar. 2015. Also, their accumulated customer base and data\u00a0are helping them\u00a0develop improved features and services\u00a0for\u00a0customers, which\u00a0will be\u00a0the key to\u00a0further success and retention of customers in the fitness service industry.<\/p>\n

< Exhibit 2 > Sales Unit Volume \/ Revenue \/ Paid Active User figure<\/p>\n

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Operating Model<\/u><\/strong><\/p>\n

First, Fitbit is very\u00a0effective\u00a0in terms of sales unit per\u00a0employee. The company has achieved 10.9 million unit sales with only 469 employees as of December 2014, which means each employee sold 23,241 devices in\u00a02014. Considering that Samsung has more than 150,000 employees worldwide, and\u00a0Fitbit’s direct competitor Jawbone also has more than 400 employees but recorded only 27% of\u00a0Fitbit\u2019s sales,\u00a0Fitbit shows quite an efficient operating model as a device manufacturer. Also,\u00a0as\u00a0the number of paid users\u00a0is\u00a0significantly increasing from the year 2012 to 2015, the limited number of employees are generating higher values\u00a0than just product sales.<\/p>\n

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< Exhibit 3 > Wearable Fitness Tracker Market Share<\/p>\n

Second,\u00a0Fitbit concentrates on their strength,\u00a0showing consistency on wrist-band shaped design and analysis on huge customer base. Initial Fitbit product showed some problems\u00a0to people\u2019s skin, but now the company has learned a lot about people\u2019s wearing behaviors so\u00a0the\u00a0field claim rate\u00a0dramatically improved compared to\u00a0the\u00a0customer claim rate of the initial product. The efficiency comes from the fact that the company keeps focusing on wrist-band shaped designs, which generates not only\u00a0expertise as a wrist-band manufacturer, but also\u00a0provides accumulated customers\u2019 behavior data for further improvement, and their data is the largest in the world regarding customer base.<\/p>\n

Third, the company\u00a0developed\u00a0an efficient hardware lineup.\u00a0And\u00a0the company also shares many basic but essential tracking features, such as Bluetooth technology to connect with smartphone, micro-usb charging hole, simple display and tracking module based on GPS and other activity sensors such as accelerometer. Sharing the core features and components among their various products, while differentiating with design, material and additional new features by product, the company is pursuing operational efficiency in its hardware lineup.<\/p>\n

< Exhibit 4 > Fitbit Hardware Lineup Feature Table<\/p>\n

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Last but\u00a0not least,\u00a0is its\u00a0efficient software. The company’s software not only raises retention rate of customers with its customized premium service, but also efficiently aligned with various products. Similar to the company\u2019s hardware operating model, all these products share basic functions and provide the same application\u00a0for all products.\u00a0Introducing an all-in-one application for Fitbit’s\u00a0diverse products\u00a0is an\u00a0efficient model for\u00a0the\u00a0software engineers because they do not need to develop all the different applications for the different products.\u00a0By\u00a0simply figuring out which type of product\u00a0is being used, the application can be optimized to\u00a0the\u00a0user\u2019s product and provide necessary tracking and analyzing services. Therefore, the company provides only one application from mobile appstores\u00a0for analyzing and showing\u00a0the\u00a0user\u2019s performance.<\/p>\n

< Exhibit 5 > Product Selection Page in the same Fitbit Application
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Aligning the company’s business model with its operating model seems crystal clear – the company’s efficient operating model enables Fitbit to 1) reduce hardware development costs and gain procurement power with optimized components for minimized SKUs\u00a0 2) save\u00a0application development and operation resources by using same application, and use these for creating\u00a0new products like premium service \u00a03) gaining learning curve for wrist-wearing band type product and analysis of accumulated data and \u00a05) finally lead to customers’ retention and increase of sales.<\/p>\n

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< References ><\/p>\n