Published on July 23, 2015

This post was previously on the Pathfinder Software site. Pathfinder Software changed its name to Orthogonal in 2016. Read more.

We asked David Provost,  Founder and CEO of MakeItCount to write a guest post with his perspective on the space:

The retail season and its rush of devices are well behind us and the raft of “major” announcements trumpeted at CES has thankfully faded. There have been a few events of notice, such as Intel’s acquisition of Basis and conversely, Nike’s decision to kill the FuelBand. Then there’s the growing debate over the role of smartphones and an industry-wide recognition that most wrist-wearables end up abandoned in a drawer to monitor lint.

Meanwhile, the wearable industry marches on and the proliferation of devices continues, in an ever-increasing number of form factors (shirts, pants, beer hats, etc.).

Is this success? You bet it is.

Innovation is hard, particularly at the early stages. Some of my favorite examples:

  • Typewriters were introduced when Mark Twain was around and he becomes a big fan. One practical problem was that you couldn’t see what you were typing until several lines were written. There was a social problem too – when Twain typed a routine letter to his bank manager, the manager was deeply offended. The text was in all caps (that was the only option) and in that era, only advertisements were in all caps.
  • Automobiles had their fans and detractors – some thought they were fast, versatile, and useful. Others thought they were too fast, noisy, smelly, and were only driven by reckless maniacs.
  • Quality control was a concept the American auto industry nailed so well that when W. Edwards Deming came calling, they pooh-poohed his work. He returned to Japan (years before the US government had assigned him to assist in post-war reconstruction) and revolutionized manufacturing procedures there. The automobile industry has never been the same.

Let’s bring this back to the wearable industry by looking at some reasonably well-substantiated numbers related to market share. According to NPD, 2013 market shares broke down this way: Fitbit, 68%; Jawbone UP, 19%; Nike FuelBand, 10%, for a total of 97% of the market.

Fitbit’s commitment to the corporate wellness market is timely. The Affordable Care Act (ACA) has brought about significant change in corporate wellness programs and becoming physically active is a key element.

It’s unlikely the Fitbit team cares about Nike, Jawbone, or anyone else as long as they stay out of the corporate market.

Jawbone’s been going from hit to hit for the past several years, starting with its headsets, then speakers, and now the UP. It’s easy to imagine the folks at Jawbone rubbing their hands with glee at the prospect of the FuelBand disappearing from the market.

As for Nike, the rationale for their withdrawal isn’t clear. Nike has a well-regarded GPS running watch (and other electronic gear), so hardware doesn’t seem to be the problem. Mastering the data generated by FuelBands may have been part of the problem, but Nike solved numerous global supply chain problems years ago. Internal politics? Who knows.

That still leaves the 3% that accounts for all the other brands. It’s harsh, but they need to find a way to become statistically significant – some are bound to, others are not.

There’s more going on than simply device innovation and good marketing. The Affordable Care Act, advances in corporate wellness programs, and the affinity the 20-35 year old segment has for wearables produces a mix of factors, some of which will have substantial staying power (forget the politics – the ACA is here to stay). I believe that numerous marketing and strategy teams have come to the same realization. While we head into the summer season these groups will be adjusting their plans to account not only for advances in technology, but also to account for whatever role wearables will play in the course of systemic changes occurring in American society. I expect that by this time next year I’ll be writing a similar piece, but the market context will have evolved significantly.