The battle for global sports brand supremacy is increasingly dependent on leaders being able to find best of breed technology partners or targets that they can inspire, inform and influence without disrupting their unique ability to innovate
Under Armour announced it had acquired MapMyFitness. Knowing that I’ve spent a lot of time over the past year in and around the activity tracking ecosystem, a writer at a leading tech publication emailed me asking my opinion of the deal. Specifically, she asked me what it meant for the big sports brands, Nike, Adidas, and Under Armour now that Under Armour announced its acquisition of the Company and its 20M users for $150M (You can read a great take on the acquisition by Owen Thomas here. ) Here are some different things I’m thinking about today in relation to what looks to be one of the first and most significant financial outcomes in the activity tracking space to date.
(1) Owning the intersection of peak athletic achievement, cultural relevance, and technology has never been more up for grabs. Technology has increasingly lowered the barrier to entry for new brands to emerge that carve out meaningful market space from incumbents like Nike, Adidas, and Under Armour. MapMyFitness is a great example. Strava, Tough Mudder, Runkeeper are others. But while a lot of the media attention in activity tracking is centered on these companies today and will be over the next 12-18 months, real technology, intellectual property and know how around advanced MEMS sensors, data fusion, and computational biology IS and will be increasingly important to driving and protecting core businesses of these massive incumbents. This is especially true as technology extends from shiny new wrist baubles, chest straps and armbands to tried and true core product lines. Said another way, acquisitions like MapMyFitness are important, but not IMPORTANT. Likewise, Fuelband SE and its community are important. Driving technology and innovation into Footwear and Apparel is IMPORTANT!
(2) The battle for global sports brand supremacy is increasingly dependent on leaders being able to find best of breed technology partners or targets that they can inspire, inform and influence without disrupting their unique ability to innovate. To date, the combination of authentic consumer insights and unencumbered technology innovation is a sweet spot no incumbent sports brand has been able to find. The big three sports brands have smallish armies of people trying to figure out how to bring cutting edge technology and innovation engines into their core business units, some much more successfully than others (Under Armour has done a great job embracing Zephyr for instance, but we have yet to see the fruits of that partnership enter the core product lines, e.g. things Wall Street cares about!). But none of the big three can do it alone or internally. And if the number of trips senior executives from Adidas and Under Armour have taken to Silicon Valley or other innovation centers (Boston) are any indication, it is clear that they realize this too. Finding Nemo is important. Finding Pixar is IMPORTANT! It is the model of partnership and integration post acquisition that all should be thinking about.
(3) Partnering or acquiring technology companies looks great on a pretty Board of Directors strategy deck, but is much harder to execute in practice. Over the past 10 years, you can probably count on one hand the number of traditional brands that have successfully integrated technology companies into their core business. In most cases, acquisitions or substantial partnerships are not natural for any of these companies and each is working very hard to understand technology companies and to learn how to work with them. It has been a familiar refrain that this is more than a big company working with small company problem, but rather an apparent lack of sensitivity to the culture of technology companies, e.g. how they operate, accrue value, and interact with partners. Companies used to working in a principal-agency model, and especially those that have excelled to become industry behemoths struggle to get and embrace this and it is especially acute when working with well funded companies that are capable of controlling their own destinies and accruing value rapidly in ways that might have little to do with revenue or profitability. And that is where a lot of the innovation is occurring that can most help drive core business value as opposed to driving value at the margins. Acquiring companies like MapMyFitness at a minimum gives Under Armour some “tech” DNA, albeit light tech DNA and street cred to begin thinking about bigger moves that affect the core business.