Fit for Work

Fit­bit is los­ing mar­ket share to Ap­ple, but that’s okay. Cor­po­rate well­ness is saving it.

Forbes - - Technology - By Parmy ol­son

Given how things go in Sil­i­con Val­ley, Fit­bit shouldn’t be around. It started sell­ing wear­able ac­tiv­ity track­ers when other hard­ware star­tups strug­gled for fund­ing. Its founders hadn’t sold a sin­gle gad­get when they shipped their frst prod­uct and had no clue how much it would cost. Last year Ap­ple launched a smart­watch that was to blow all other wear­ables away. In­stead, Fit­bit re­mains the big­gest de­vice seller by ship­ments, and its founders, James Park and Eric Friedman, raised $841 mil­lion in one of 2015’s most suc­cess­ful IPOS. They’re on track to earn $215 mil­lion on sales of $1.8 bil­lion for 2015, dou­ble what they earned last year.

Threats to Fit­bit’s ex­is­tence aren’t go­ing away. Its share of the global wear­ables mar­ket shrank from 33% to 22% in the past year as Ap­ple and China’s Xiaomi launched their own de­vices. Fit­bit’s most high-tech smart­watch, the $250 Surge, is nowhere near as good as the Ap­ple Watch or the Sam­sung Gear. An­a­lysts sus­pect con­sumers will grav­i­tate to­ward watches that do more than count steps. Fit­ness track­ers have a ten­dency to wind up at the bot­tom of the sock drawer af­ter a few months of use.

Yet Fit­bit has a bufer that could pro­long its sur­vival: an ob­scure mar­ket called cor­po­rate well­ness. Around 80% of Amer­i­can em­ploy­ers do things such as sub­si­dize gym mem­ber­ships or or­ga­nize ac­tiv­ity chal­lenges that en­cour­age their staf to be healthy, and they spend an av­er­age of $693 per worker on such pro­grams, ac­cord­ing to Fidelity In­vest­ments. Fit­bit has been go­ing af­ter th­ese dol­lars since it frst started ship­ping to con­sumers in 2009 and will gross as much as $180 mil­lion this year from thou­sands of em­ploy­ers, making the cor­po­rate mar­ket one of its fastest-grow­ing busi­nesses. More than 70 large Amer­i­can em­ploy­ers have bought Fit­bit de­vices in bulk for their staf, in­clud­ing Tar­get, which re­cently bought 330,000, and Bar­clays, which is sub­si­diz­ing their cost for 75,000 stafers.

Other wear­able- de­vice makers such as Jaw­bone and Misft sell to em­ploy­ers, too, but Fit­bit dom­i­nates. Jif, a startup that makes soft­ware for man­ag­ing well­ness pro­grams, says that some 70% of the de­vices or­dered by its cor­po­rate cus­tomers are Fit­bits. Though Misft charges em­ploy­ers less per de­vice at about $40, cor­po­rate cus­tomers still grav­i­tate to Fit­bit be­cause of its bet­ter soft­ware and an­a­lyt­ics ser­vice, says Jif CEO Derek Newell, and they avoid the Ap­ple Watch’s high price tag. Ex­pect more em­ploy­ers to ape Tar­get and buy de­vices in bulk, says Stephanie Pronk, head of well­ness at in­surer Aon, who advises em­ploy­ers on how to build their pro­grams. “De­vices are com­ing down in cost, so em­ploy­ers see that

as a vi­able op­tion.”

Fit­bit dates back to an un­usu­ally cold May morn­ing in San Francisco in 2006 when co­founder Park was shiv­er­ing in line to be­come one of the frst peo­ple to buy the Nin­tendo Wii. He took the game con­sole home and was struck by its com­bi­na­tion of so­phis­ti­cated sen­sors with a dead-sim­ple in­ter­face that kids and grand­moth­ers could use. He called his part­ner on a pre­vi­ous startup, the tall and lankier Eric Friedman, who was in Bangkok for a con­fer­ence. “I’ve got an idea,” Park said, for a pe­dome­ter that would be as so­phis­ti­cated and ac­ces­si­ble as the Wii. They flew to Ja­pan, where pe­dome­ters and on-the-job ex­er­cis­ing were plen­ti­ful, to sur­vey how peo­ple use their de­vices. In 2008 Friedman bought a small balsa-wood box and stufed it with cir­cuitry to fash­ion their frst pro­to­type.

Months af­ter launch­ing their $99 Fit­bit Tracker, Park and Friedman got a phone call from Vickie Lee, a vice pres­i­dent of h.r. at the Austin, Tex. of­fice of semi­con­duc­tor frm Tokyo Elec­tron. In the midst of plan­ning her frst cor­po­rate well­ness pro­gram she spot­ted an ad for the Fit­bit Tracker and or­dered two de­vices to try out. Fit­bit’s web­site was clunky, but its app’s graphs and data were just geeky enough to thrill her 1,200-per­son work­force of mostly en­gi­neers. She paid $120,000 to buy a Tracker for ev­ery­one. A couple of years ago Aon’s Pronk con­tacted Fit­bit. “There’s an op­por­tu­nity here to come into cor­po­rate Amer­ica,” she told them. At the urg­ing of sev­eral em­ploy­ers, Fit­bit de­vel­oped soft­ware to track and an­a­lyze work­ers’ steps and sleep ac­tiv­ity and in the mid­dle of 2015 be­gan bundling it for free.

Not many bosses have the nerve to track their work­ers’ sleep just yet, even though it would be a step to­ward ad­dress­ing work­place men­tal health is­sues; in­som­nia is highly cor­re­lated with de­pres­sion and anx­i­ety. Jif ’s Newell says a few of his cor­po­rate cus­tomers tried ofer­ing re­wards to staf who showed the health­i­est sleep pat­terns and met with a pri­vacy back­lash from their work­ers.

Fit­bit needs more pi­o­neers to ex­pand the mar­ket for cor­po­rate well­ness track­ing. Em­ploy­ers (es­pe­cially those that are self-in­sured) are al­ready saving money. Cloud-com­put­ing ser­vice frm Ap­pirio cut its 2014 in­sur­ance pre­mi­ums by 6%, or $280,000, af­ter show­ing its in­surer the ac­tiv­ity data from 400 Fit­bits it had given to work­ers. Tokyo Elec­tron, also self-in­sured, is pay­ing $11,800 per em­ployee per year on health costs but es­ti­mates the num­ber would be $15,000 if it weren’t for its Fit­bit-fo­cused well­ness plan. Its an­nual claims growth is now run­ning at 5%, down from 11% in 2008.

Fit­bit’s re­searchers are work­ing on adding more ways to track health. What about talk that it could in­tro­duce a sen­sor for mon­i­tor­ing blood sugar, a way into the diabetes mar­ket? “No com­ment,” says R&D chief Shel­ton Yuen, whose team built one of the frst op­ti­cal sen­sors to mea­sure pulse. It’s not al­ways the peo­ple you ex­pect who solve the trick­i­est prob­lems.

Well­ness war­riors: Fit­bit co­founders James Park and Eric Friedman at their ofces in San Francisco.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.