How FuelBand fuels Nike's bold tech ambitions

Learning from the history of technology, Nike isn't just building a clever gadget with its FuelBand electronic fitness-tracking bracelet. It's creating a platform on which other tech companies can build.

Nike's Stefan Olander at the Nike+ Accelerator Demo Day in Beaverton, Ore., on June 10. Nike

BEAVERTON, Ore. -- Earlier this month, Phil Black bounded onto the stage at the Tiger Woods Center at Nike's world headquarters here, dropped to ground, and pumped out a handful of perfectly executed pushups with the precision of a former Navy Seal instructor, which Black is.

And then, with a booming voice that commands attention, he reeled off a litany of reasons why the collected venture capitalists should pump money into his startup, FitDeck, with just as much as ease. FitDeck, which has already sold $4.3 million worth of fitness-focused playing cards from his garage, is raising funds to digitize that business by creating an app that offers up daily workouts that integrate with the Nike's popular FuelBand electronic bracelet.

"There is real money coming in the door, real traction," said Black, who in addition to his military background is also a a Harvard Business School grad and a former Goldman Sachs investment banker.

The pitch was part of a Demo Day for the Nike+ Accelerator, a program it announced in December to jump-start the application platform. The company, with help from startup mentoring group TechStars, handed 10 app developers, including FitDeck, $20,000 each, and gave them mentoring and office space in Portland, to build health and fitness applications that use the Nike+ technology. Nike is hosting a second Demo Day Thursday afternoon at San Francisco's Dogpatch Studios for Bay Area venture capitalists.

Nike might not be the most obvious company to emerge as the next consumer tech giant. After all, it's known globally for its running shoes, soccer cleats, and sports apparel. But over the last few years, it's been laser-focused on developing a franchise in consumer electronics.

Nike dove headlong into consumer electronics in 2006, debuting Nike+, a sensor that slipped into its running shoes to track performance data such as speed and miles logged, and then connected that information up to its Web service. The company was miles ahead of rivals, such as Adidas, which tried to create copycat rival services.

Nike's 15-month-old FuelBand ratcheted up the company's bid to lead the wearable computing business. The $150 electronic bracelet does much of what the shoe-sensor did before it: it tracks athletic performance using a built-in three-way accelerometer that can detect the number of steps users take and, when combined with personal data, such as their weight and height, how many calories they've burned. And Nike has created Fuel, a proprietary metric for measuring movement relative to a person's age and body type.

Nike is doing much more than just tossing out a handful of interesting gadgets with slick designs, though. It's doing what tech giants like Microsoft and Apple have done before it: it's creating a technology platform on which it hopes other companies will build. Nike is reaching out to developers to create apps that use the data generated by its FuelBand in order to make the device relevant to a wider audience, which should then lure in even more developers.

That virtuous loop, as it's known in techdom, is what led to Microsoft's Windows monopoly, a franchise that's expected to generate nearly $20 billion in annual revenue for the company as developers continue to create apps for a platform that more than 1 billion people use worldwide. Similarly, the vast selection of apps in Apple's iTunes store, and the data users generate and save using those apps, continues to help maintain the smartphone market share lead of its iPhone, even as rival devices running Google's Android operating system proliferate.

None of that history is lost on Nike.

"We're going to create the most meaningful platform for fitness," said Stefan Olander, vice president of digital sport at Nike.

That's what attracted FitDeck's Black. His company's app integrates with the FuelBand to generate specific Fuel points to help athletes meet their personal goals. Sure, there are other fitness monitors, such as Jawbone's Up and the family of Fitbit activity trackers. But Black said that building an app for FuelBand was the obvious choice, given Nike's size and its history in sports.

"We're definitely talking with others," said Black, after his high-energy presentation. "But none of them fit in so well."

That track record with sports is something Nike is counting on to help with developers and consumers. Its rivals in the emerging market are either startups or come to the business with expertise in tech not fitness.

Consumers "believe we know what athletes need," Nike's Olander said. "It's hard to do that as an electronics company with expertise in sensing technology because you don't have the same credibility."

Building a tech platform has also taught Nike to think a bit differently about developing the new business. As huge as it is in the shoe and apparel world, Nike recognizes that it can't control every piece of the FuelBand platform. That's why making sure developers know there will be opportunities for them on the platform where Nike won't go.

"It we make it only about Nike and Nike Fuel, it makes it harder to grow," Olander said. "We want to tread carefully. It's worse for people to feel that it's dominated by Nike."

FitDeck's Phil Black talking about his startup during Nike+ Accelerator Demo Day in Beaverton, Ore. Nike

What's more, developers are already coming up with apps that create new uses for the FuelBand that Nike hadn't ever considered. In turn, they are bringing consumers to the device that might not have otherwise purchased one; Companies such as Sprout, another Demo Day participant, that is creating an app for businesses that encourages workers to get fit, and gives employers tools to promote and measure wellness. Or Chroma, a game developer that's building a new title that ties a player's real-world activity to his or her virtual world avatar.

FitCause, too, is chartering a territory that Nike never would have tackled on its own, creating a social fundraising app. Much in the way runners raise money for charities by jogging five kilometers in local events, FitCause lets groups generate funds when athletes hit certain Fuel scores. With its app, fitness-focused fundraisers don't need to be tied to a specific event or location.

"Now the fundraising device is on your wrist," said Laura Temel, FitCause's co-founder and chief executive.

It's an entirely new type of opportunity for Nike. The business is less about the FuelBand than the Fuel platform; less about the physical product, where Nike has long had expertise, than the digital one, where Nike is still learning. But Olander recognizes that the potential, like platforms built by tech giants before it, is vast.

"I think we have a tremendous runway," Olander said.

 

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