Nike’s Smart Move Out of Hardware

Nike is getting out of the digital wearables business. It’s been big news for the past week or so that Nike is laying off most of its hardware team. It won’t stop selling the FuelBand, but it won’t be making new versions of it, either.

I wore a FuelBand for several years and liked it, though it wasn’t without its issues. Bluetooth connections were inconsistent and I had to exchange the Fuelband several times for both hardware and software (firmware) problems. My wife had a FuelBand and had similar problems.

Despite that, we enjoyed using them, mostly because they were integrated with Path, the social network we use with our friends. The Nike integration with Path, which still exists both for Fuel as well as Nike running apps, is well done. Ultimately, however, interest in competing with friends on Fuel wore off after about a year or so. Of the six of us who used FuelBands on Path, nobody does any more.

I’m now wearing a Shine from Misfit, which is a great product, but I don’t use it all that much. I don’t check my points frequently. I don’t care about hitting my daily goals, so it’s not motivating. I sometimes check my steps on active days just to see how many I took, but that’s probably once a week. I may not be the ideal customer for these products despite desperately wanting to use them and quantify myself.

The big question is why Nike is making this move out of digital hardware. It wasn’t a cheap endeavor even for a company like Nike to build the FuelBand product team and product line.

Ultimately Nike realized that it would rather be in the software business. Sensors — driven by advances in hardware, short-distance communication, and battery life — are becoming ubiquitous. Companies produce sensors only and put a greater focus on digital tracking hardware than Nike. Fitbit and Jawbone are the largest examples, with others like Under Armour (after its BodyMedia acquisition) and Misfit further back.

Additionally, Samsung and Apple are putting sophisticated tracking capabilities (along with software that makes it easier for developers to access that data) into their smartphones. Those are the companies I would worry about about if I made digital hardware for tracking activity.

It’s best to look at Apple because it has good examples that are similar to activity tracking. Its smartphones have opened up opportunities for developers and third parties to leverage hardware without having to learn how to build and support hardware and spend the money doing so. Those opportunities have resulted in some massive successes:

  • Instagram used the camera on iPhones. It supported Android before it was acquired, but the iPhone is what made Instagram. It added filters and social features and grew at insane rates before getting acquired by Facebook.
  • Waze used the iPhone GPS and consumer-collected traffic info to create a better mapping experience, beating rivals and Google and Apple. It was acquired by Google.
  • Uber used GPS and the connectivity of the iPhone to revolutionize the experience of getting a ride. Uber hasn’t been acquired, but it’s growing like crazy.

All of these were enabled by Apple hardware and assisted in distribution by the iOS App Store. There are other examples.

Timing is funny sometimes. Just this week as the buzz was all around about Nike firing its digital hardware team, RunKeeper is releasing its new Breeze App for iOS. It uses the motion sensor in the iPhone 5S to track steps passively for app users. This is not the first app to use the iPhone as an activity tracker — Moves and Kaiser’s Every Body Walk apps are good examples — but RunKeeper has been around a while, has a good ecosystem of connected apps and devices for fitness, and has a decent following for its flagship exercise app. RunKeeper is obviously focused on harnessing handset hardware to accomplish more than hardware-based activity trackers.

Nike is wisely pulling out of the hardware business and I don’t think the timing could be better. Nike has improved its core fitness apps and expanded its line of apps over the last several years. Focusing on software is a better fit for the company, leaving the hardware to the dedicated guys (Fitbit, etc.) and the handset makers. Nike can focus on integrating its software and profiles with hardware vendors and becoming a major partner for Apple, which is moving into the activity tracking hardware space with each new device release.

To become the standard currency for fitness and fitness metrics, Nike should be more willing to share and exchange data, something it hasn’t done very well in the past. It has the concept of NikeFuel and it is getting better about opening Fuel up to developers. Nike launched the Nike+ Fuel Lab, which is a developer program and an accelerator meant to identify and promote companies that integrate NikeFuel. That’s a great start, and moving away from hardware enables Nike to focus more on Fuel and software than hardware.

Only time will tell if NikeFuel will become a widely-used fitness currency. I’m not terribly confident about it, but it is a better area to focus than hardware.

TGphoto

Travis Good is an MD/MBA and co-founder of Catalyze. More about me.

  • MHager #KeeptheChief

    Considering the mess Nike made of the FSU logo I would recommend they get out of that business too. Just because it says Nike doesn’t mean it’s great.

  • Brandon

    This move may prove its all but certain the iWatch hits before the end of this year.

↑ Back to top

Founding Sponsors

Platinum Sponsors