Harvard University Proposed Alternative for Fitbit Memorandum

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Memos to Management (Cases/Presentations) – Learners PREPARE FOUR HBR CASE ANALYSIS. Two are INDIVIDUAL ASSIGNMENTS (which are LIKE MIDTERMS) and TWO are GROUP ASSIGNMENTS. Whether the assignment is Learner or TEAM (no more than 4 PPL – self formed) this assignment involves making a written presentation (formatted as MEMOS TO MANAGEMENT) based on Harvard Business Cases.

Learners should consider the method (described BELOW) in conducting and reporting on their analysis. The cases may have supplemental data in a spreadsheet; analysis of this data should support any conclusions.

ANY case Presentation should use the following outline (note, this mirrors the discussion of the case presentation process presented above):

(1) Identify Audience, presenter, date, and KEY ISSUE- you are preparing a memo so the TO/From should be appropriate (you are writing to the organization in the case and your are writing as a consultant or analyst) and the SUBJECT line should indicate the possible solution (e.g. to increase sales revenue....).

(2) Provide an executive summary (key Issue, Analysis, Recommendations and expected outcomes) THIS should be very concise and clear and action oriented.

(3) Define the problem or opportunity to be analyzed (use measurable/specific objectives for best impact). DO NOT REPEAT facts from the case - identify the challenge and how it relates to what the organization is trying to accomplish.

(4) Develop a relevant and balanced analysis (note SWOT and PEST are insufficient, but a good place to start)

(5) Identify viable alternative solutions (the case will always suggest some options, but there are always more options, including "walk away" or "stay the course/do nothing").

(6) Analyze alternatives in context with defined criteria (Ideally, evaluate the option using pro/con analysis using insights developed in the analysis (step 4) and TIE back to the OBJECTIVES (step 3, above).

(7) Selects a recommended alternative and discuss issues related to implementation. I DO NOT WANT lots of detail on implementation (I know, other classes ask you to do this); I want to know if the organization does this, will it need more resources or skills, or investment, etc - think picture implementation.

Note – while Harvard Business Cases often POSE specific questions, these questions should only guide thinking. The objective of the assignment is to use a decision making process to identify opportunities and to support recommendations. LEARNERS SHOULD SEEK to EXPLICITLY connect the case to course material.

So that's the basic outline of the memo presentation, but you need to do the ANALYSIS PROCESS; the basic steps to ANALYSIS/REPORT, which are covered extensively in the course, include a clear statement of:

  • Decisions: What are the key decisions that must be made by the focal decision maker? Learners often isolate/focus on relatively minor decisions; learners need to develop analysis so that a full decision scope is identified. This discussion also includes a concise statement of the “problem” or “opportunity” faced.
  • Objectives: What objectives is management trying to achieve? These often take the form of growth, market share, profit, or cash goals. Do these make sense, given analysis?
  • Analysis
    • Market Analysis: What is known about the market size, growth, presence/evolution of market segments? What markets for other products forms impinge upon the market being considered?
    • Environmental Analysis: What are the key imperatives and/or changes taking place outside of the industry that affect both the firm and its competitors? Examine the economic, technological, social, regulatory, political, and legal environments.
    • Industry Analysis: What is happening in the industry? What is the state of competition between existing competitors? To what extent are new firms entering the market? What is the level of competition from products made with different technologies? Are suppliers integrating forwards, laterally? Are our customers integrating backwards?
    • Customer Analysis: Who are the customers? What sets of benefits do they require?
    • Competitor Analysis: What are the strengths and weaknesses of competitors? What are their strategies? Can their strategies change? If so, how? What strategies might be expected from new entrants?
    • Firm Analysis: What are the firm’s strengths and weaknesses? What strategies have been pursued in the past? How successful had these been?
    • Economic Analysis: What does the economic analysis show? Given the set of decisions and objectives facing the decision maker, what is the nature of the consequences of the decision in economic terms?
  • Assumptions: As learners reflect on their analysis, it is critical to state the key assumptions upon which the strategy is based.
  • Alternatives: What are the two or three major courses of action that could be followed to reach the firm's objectives? For each alternative identified, lay out pros and cons (this can be done as a table for conciseness, but learners should be prepared to defend their positions).
  • Action Plan: What is being recommended? Lay out a broad strategy and identify specific action steps as well as a rough plan for implementation. Consideration of investments/costs must be made.

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For the exclusive use of T. Xu, 2021. 9-317-007 REV: DECEMBER 1, 2020 REGINA E. HERZLINGER CHRISTINE SNIVELY SARAH MEHTA Fitbit Fitbit, a San Francisco, California-based manufacturer and marketer of wearable fitness trackers, was founded in 2007 by 39-year-old serial entrepreneur and avid runner James Park and experienced technologist, 40-year-old Eric Friedman. Before launching Fitbit, Park co-founded and served as Chief Technology Officer of Epesi Technologies, a business-to-business (B2B) operation that offered Internet infrastructure services and served as an application (app) service provider for e-commerce websites. Friedman and Park also founded Windup Laps, a digital photo sharing service acquired by CNET. 1 Friedman and Park saw potential in incorporating sensors into wearable devices to create a fitness tracker. 2 They were inspired by Nintendo’s use of wires and sensors in the Nintendo Wii video game console. Released in 2006, the Wii was the first video game console to respond to the physical movement of a controller, which contained built-in accelerometers (sensors). In the Wii Sports tennis game, for example, players made the serving motion with their arms while holding the motion-sensor controller. This movement was then reflected on the television screen. (Earlier video game consoles had relied on a series of buttons on a controller to play the game.) Friedman and Park presented the Fitbit prototype—clipped onto a user’s clothing to track the distance traveled and calories burned—at the TechCrunch50 conference. Hoping to generate 50 pre-orders, to their surprise, they received 2,000 pre-orders in one day. 3 Fitbit’s suite of products grew to include wearable wristbands and watches. Fitbit benefited from first-mover status, as its competitor Jawbone did not release its first fitness tracker until 2011. Early Fitbit adopters, wearing Fitbit products on their wrists, provided visibility. 4 Prices ranged from $69.95 for the Fitbit Inspire tracker to the high-end Fitbit Ionic Adidas smartwatch, which sold for $279.95. The Fitbit Charge 3 ($149.95), one of Fitbit’s best-selling products, was worn as a wristband and tracked steps, calories burned, and sleeping patterns. The Charge wirelessly synced the recorded data to the user’s smartphone and computer. (See Exhibit 1 for Fitbit products and features.) The company marketed its higher-end products to fashion-conscious consumers and early technology adopters, and its lower-cost devices to price-sensitive shoppers. In 2019, revenues from 65 countries exceeded $1.4 billion, primarily from the sale of devices. 5 The revenues from paid premium services on a subscription basis, such as virtual coaching and personalized progress reports were less than $29 million. Fitbit Premium, for example, cost $79.99 per Professor Regina E. Herzlinger, Case Researcher Christine Snively and Case Researcher Sarah Mehta (Case Research & Writing Group) prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2017, 2020 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit year and allowed users to compare their data against the entire Fitbit community and those within their age group. It also contained a 12-week personal fitness plan. 6 In 2019, over 29.6 million Fitbit customers were active users. 7 Although Premium subscriptions generated less than 2% of company revenue in 2019, the company expected that number to grow. 8 In 2019, the global wearables market was 305.2 million units. 9 Apple was the market leader with 35.0%, followed by Xiaomi, a Chinese wearables manufacturer, with 14.6%, Samsung at 9.8%, Huawei at 8.4%, and Fitbit a distant fifth with 4.1%. Would competitors continue to erode Fitbit’s position?10 While the Apple Watch gained market share on the high end, the Chinese Xiaomi competed on the low end with its Mi Band, a step and sleep tracker that sold for $32.99. 11 Other competing devices included wearable wristbands, smartphones with built-in health monitoring capabilities (Apple’s Health App), and free or paid apps that served as fitness trackers such as RunKeeper, MapMyRun, and others. With dozens of new threats, Fitbit sold 16 million devices. 12 Low engagement and high abandonment rates for activity trackers also posed a challenge to Fitbit. 13 Industry observers reported that one-third of consumers who purchased fitness trackers stopped using them within six months. 14 Fitbit claimed a significant percent (28%) of active users among its customers. 15 In 2019, 55% of new revenue had come from new products, with 39% of new product activations from repeat customers, indicating that some customers found value in returning to the platform. 16 It defined “paid active users” as anyone who logged 100 steps or connected a Fitbit product to the company’s app; 17 but as Park noted, “Engagement levels aren’t what drives the business.” 18 He added, “In context, you have to compare Fitbit devices to gym memberships or home gym equipment.” 19 Gym membership abandonment rates were consistently 80% over the years. 20 As the fitness tracking wearables market became increasingly crowded, some companies expanded into medical applications. One company, dorsaVi, received FDA clearance for its ViMove product— wearable sensors placed on the body to measure, record, and report lower back/lumbar spine movement and muscle activity. FDA clearance allowed dorsaVi to market ViMove as a medical device to physical therapists. 21 The dorsaVi app also provided medication reminder notifications to patients. Aging and/or chronic disease patients often had long lists of prescribed medications. For some, missing a dose could lead to serious health consequences. One analyst estimated that “costs associated with this non-adherence range upward of $1 billion annually in hospital costs.” 22 Though Fitbit was focused on wellness, should it evolve some of its products into disease management devices? Park noted, “Our platform consisting of devices, apps, social motivational features, advice and personalized coaching is aimed at helping people make key behavioral changes to be more active, exercise more, eat smarter, eat better and manage their weight. These are exactly the kinds of behavioral changes that experts in diabetes, hypertension, asthma, obesity, and sleep apnea, as well as mental health conditions such as depression and anxiety, believe can change the course of those diseases.” 23 If it entered the space, Fitbit would not necessarily be dependent on doctors or hospitals to introduce its products to patients. Rather, Fitbit could rely on its customers to maintain regular use of its products for efficacy and upgrade to new, more advanced Fitbit devices as they become available. Fitbit’s co-founders considered the company to be both a hardware and software company. Park noted, “While press and analysts focus on Fitbit as a wearables company, the mission of the company is actually a lot broader…. We’re all about ‘How do we use technology to help people become healthier and more active, giving them data and inspiration and guidance?’ And we’re pretty agnostic about how that’s done. It could be in the form of devices that are wearables, devices that are not wearable, or software and services....” 24 2 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 About Fitbit As of 2019, Fitbit’s diverse suite of products were sold directly to consumers through its website, and were also carried in more than 39,000 retail stores and in 65 countries. 25 The company had grown to over 1,600 employees worldwide. 26 Marketing to Consumers Fitbit engaged consumers on platforms such as Facebook and Twitter. Demonstrating its reach, the company garnered more than 2.8 million likes on Facebook alone. 27 One analyst noted that “Fitbit does well because it’s built a community and helped make fitness a more social experience—they’ve created staying power.” 28 “It often takes an expanding range of apps and hardware add-ons from third party developers to create the kind of ecosystem that keeps drawing customers back,” another observer added. 29 Gartner, the world’s leading research and advisory company, in its 2018 Digital IQ Index survey, ranked Fitbit the leading small electronics brand with a “Gifted” designation. Fitbit scored significantly above average in all four categories of Site & E-Commerce, Digital Marketing, Social Media, and Mobile & Tablet Apps, demonstrating focus on its customers and its use of the digital medium as a customer support tool. 30 (See Exhibit 2 for Fitbit’s digital media performance metrics.) Fitbit ramped up its sales and marketing spending, expanding beyond purely digital advertising. In 2019, advertising expenses accounted for 12% of revenue, or $170 million. 31 “You could say we’ve been underinvesting as a brand over the years,” Park noted. 32 “The challenge of creating a whole new category from scratch, which is what Fitbit has done, is in educating consumers and raising awareness. It requires pretty significant sales and marketing.” 33 Fitbit ramped up spending in a number of ways in 2019, including advertising during high-profile events. One digital media expert remarked, “These online-born startups are reaching the point of maturity, looking for new audiences, and reaching the point of diminishing returns.” 34 In 2016, the company began marketing across all media channels including television in Africa, Asia, Europe, and the Middle East. The campaign generally aimed to draw attention to the Fitbit brand, rather than one particular product, but also featured new products such as the Charge 2, released in 2016, which contained new features such as a cardio fitness level to measure breathing and provide guided breathing exercises to reduce stress, and the Flex 2, Fitbit’s first swimming tracker. Some models also sent the user reminders to move throughout the day, and synced to the user’s smartphone, sending an alert when the user received a text or phone call. The company believed that these options would cause more consistent use. 35 One Fitbit’ television ad featured an emotional, benefit-driven story about a girl and her father competing against one another for the most steps prior to her wedding day. 36 The ads created specifically for France and Germany focused more on the product attributes and featured popular activities in those regions, such as soccer and cycling. Fitbit believed Europe represented a large, unpenetrated market. Park noted in a conference call, “The population of the five largest countries— Germany, France, the UK, Italy and Spain—equals the approximate size of the U.S., but less than 15% of our total devices sold today.” 37 In the Asia-Pacific region, Fitbit believed the opportunity was likely even larger. As Park said, “We are looking to bring greater localization and continue to refine our marketing based on additional consumer research.” 38 3 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit Marketing to Employers and Wellness Programs Fitbit initially marketed exclusively to consumers, but in 2010 it launched Fitbit Wellness, providing hardware, software, and services to corporate wellness programs. It began working with insurance companies and employers that incentivized their policy holders or employees to use Fitbit as part of a larger strategy to promote health and wellness. Some companies encouraged teams of employees to compete against one another in various initiatives, such as exercising and weight loss, and offered prizes and other incentives for participation. In some cases, employers or health insurance companies subsidized the cost of the device. Fitbit’s corporate wellness business actively recruited employers to encourage Fitbit usage. In September 2015, retailer Target began offering Fitbits to its 335,000 U.S.-based employees. As part of the deal, Target either purchased Fitbit Zip devices for its employees or subsidized the purchase of another Fitbit device. A Target representative stated, “We’re putting a new focus on wellness across our business—a commitment to helping our team members, guests and communities achieve wellness through programs and initiatives that promote healthy eating, active living and clean-label solutions (think simple, recognizable, easy to read ingredients and materials), and making them affordable and accessible to all.” 39 Target and Fitbit also planned to work together on back-end software that allowed Target to compare the activity of employees from different stores and organize challenges. 40 By 2019, Fitbit worked with over 1,500 corporate partners including 70 of the Fortune 500 corporations. 41, 42 There was some insurer interest as well. U.S.-based insurer John Hancock, as part of a partnership with corporate wellness firm Vitality, a encouraged policy holders to use a Fitbit and exchange their activity data for lower life insurance premiums. Those who signed up for the optional program received a free Fitbit and the device automatically uploaded activity data to the insurer. John Hancock noted that the data would be shared only with Vitality. The most active customers could receive a discount of up to 15% off their premiums, in addition to other perks such as Amazon gift cards. 43 Tivity, a publicly–traded wellness provider for employers, health plans, and health systems, integrated Fitbit and other fitness tracking devices into their wellness apps. Research and Development (R&D) Fitbit’s R&D was largely dedicated to enhancing the performance, functionality, and style of Fitbit devices. Park explained, “The fruits of R&D are not just about new sensors but also miniaturized form factors (hardware components), more power-efficient electronics, more fashionable designs, intuitive user interfaces and engaging social and community features.” 44 Fitbit had 602 issued patents, with 335 patent applications pending as of 2019. 45, 46 Fitbit management believed this provided a strong competitive advantage. 47 One firm questioned the strength of its portfolio, noting that while Fitbit has been active, it lacked early and potentially foundational innovation. Further, Fitbit’s patents generally covered the U.S. alone, with applications only extended to China, while competitors’ patents held much broader geographic coverage. 48 R&D expenses jumped from $27.9 million in 2013 to $300 million in 2019, mostly to hire new software developers and hardware engineers (a cohort that one company representative referred to as “mad scientists”). 49 a For more information, see Regina E. Herzlinger, “The Vitality Group: Paying for Self-Care,” HBS No. 310-071, February 7, 2020. 4 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 The Six Factors Structure Fitbit faced many competitors, among them the manufacturers of mobile devices that helped to facilitate ease of Fitbit’s use, since more than 200 iOS, Android, and Windows Phone devices were Fitbit-compatible, allowing users to sync Fitbit data to these devices. 50 Though Apple, Google, and Microsoft had to approve all apps submitted to their respective app stores, any fitness tracking company could submit an app for a fee ($99 annual fee on the Apple App Store, $25 one-time fee on Google Play, and a $99 annual fee on Windows Phone Store). Apple’s iPhone was also sold with a builtin Health app that tracked its users’ steps. In the past, Apple blocked competing products from its App Store. For example, in 2012, it removed Google Maps from the iPhone and iPad when it released its competing app, Apple Maps. But after users complained, Apple reintroduced Google Maps to the App Store. 51 In 2019, analysts estimated about 31 million Apple Watches were sold. At an average price of $448 per watch, the Apple Watch generated $13.8 billion in revenue, almost ten times Fitbit’s annual revenue. 52 But some analysts wondered whether the Apple Watch could sustain such sales at such a price level and users had to carry an iPhone while wearing the watch in order for the watch to work properly. 53 The “smart” clothing space was also developing. Hexoskin, a small company founded in 2006, released a biometric shirt that measured heart rate, breathing, and sleep patterns. It was compatible with the iPad, iPhone, and Android devices, and prices ranged from $169 to $579. Consumers Fitbit benefited from general trends toward healthy living. As of 2019, about one-third of all Americans reported having used a fitness tracker. Women used fitness trackers slightly more than men, and about 31% earned over $100,000 per year. 54 Demand for activity trackers spanned global markets. 55 Observers noted that the aging population in the U.S. could also yield higher demand for health monitoring devices. 56 A 2017study found that Fitbit was most popular among all age groups, with women aged 35-44 most likely to use a Fitbit and the segment of men and women over age 55 growing the fastest. 57 The introduction of new Fitbit products bolstered consumer engagement. In early 2016, after Fitbit released the Blaze and the Alta models, 20% of customers reactivated a dormant Fitbit account. 58 Fitbit Alta was a more stylish fitness tracker with a longer battery life that synced with a user’s smartphone to display basic phone notifications. 59 Fitbit Blaze tracked running, cycling, weight lifting, and elliptical machine workouts. 60 Some experts warned against a price war between Fitbit and Xiaomi, whose no-frills Mi Band for $32.99 contained many of the same features as the Fitbit Inspire, which sold for $99. Although the initial Mi Band product was not sophisticated enough to track heart rates, Xiaomi’s Mi Band 3 (retail price of $19.99) could report heart rates. 61 The social aspects of Fitbit’s devices—Fitbit allowed users to track progress against friends and coworkers—encouraged use and helped market the product. One fitness tracker reviewer noted, “Fitbit has a hands-down lead on social features: not only can you find and add your existing friends who have a Fitbit, but you can also find and add other Fitbit users who have similar activity levels to you.” 62 5 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit In a 2015 survey, 36% of individuals using health and fitness apps indicated that these social functions made them more likely to purchase a wearable. 63 Most Fitbit competitors also allowed users to connect with one another. Fitbit’s number of units sold and active users in 2019 (100 million and 29.6 million, respectively) were substantial. 64 Researchers found that the larger the digital community, the more likely users were to find friends with whom to connect. Part of Fitbit’s success could be credited to network effects. Sports apparel and accessories company Under Armour’s entry into the wearables space and its digital community of 200 million users could jeopardize Fitbit’s lead in social networking. 65 Commenting on Fitbit’s continued dominance, an analyst noted: “Key strengths include leading market share, an open platform, social connectivity, creating a strong ecosystem and heightened user engagement and a healthy balance between battery life & functionality.” 66 Through Fitbit’s application program interface (API), external developers and companies (such as a wellness company) could incorporate Fitbit data into their own apps, products, and services. One observer noted, “[Fitbit has] done a great job at spreading awareness and targeting the growing segment of fitness trackers. Apart from great devices . . . their growing distribution network have been key in maintaining their lead.” 67 Technology Fitbit faced several production challenges. In 2014, Fitbit recalled more than one million of its Force devices after users reported rashes, blisters, and other irritations caused by the device. The Consumer Product Safety Commission instructed Fitbit to provide warning labels indicating that the product contained nickel, a common allergen, and new sizing guideline to ensure users wore looser wristbands. 68 Some analysts reported on Fitbit’s struggle to keep up production, as the company was in “hyper growth mode.” “Because many of the key components in our products come from limited or sole sources of supply,” noted a Fitbit annual report, “we are susceptible to supply shortages, long lead times for components, and supply changes, any of which could disrupt our supply chain.” 69 As an analyst commented, “Fitbit’s growth would be limited if it struggled to find manufacturing capacity to match demand.” 70 San Francisco, California-based Flextronics was the main manufacturer of most Fitbit devices and the primary manufacturer of most wearable technology products, servicing Jawbone and Misfit bands. The company reportedly produced 75% of the world’s wearable activity trackers. 71 Flextronics claimed it was at “the forefront of designing and manufacturing wearable devices world-wide that deliver brand-new capabilities in compact form-factors.” 72 The company provided their clients with “limitless options for creating wearable technology by combining intelligent manufacturing techniques with unique product innovations including flexible circuits, 3D printed circuit boards, and stretchable sensors.” 73 Fitbit aimed to diversify its contract manufacturers and multi-source key components. Hardware start-ups often struggled because of the pressure to continually release new products with short production cycles. Commenting on the challenges associated with hardware, Park said: “When we started, there was no public information on how to make hardware. The key to success in hardware is access to information—about suppliers, manufacturers, techniques. The thing we spent the most time on was gaining access to that knowledge.” 74 He continued, “Two-thirds of our engineers are in software, not hardware. The lack of focus on hardware was what allowed us to take over the market very quickly. Garmin and others that were already doing hardware gave software short shrift.” 75 6 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 Financing In 2007, Fitbit was founded with an initial $400,000 in seed funding. 76 In 2008, in its first round of funding, Fitbit raised $2 million from early-stage VC firm True Ventures and SoftTech VC. The company raised three more rounds, totaling $63 million, before its 2015 initial public offering (IPO). 77 The IPO raised $732 million. 78 At the time of the IPO, Fitbit’s market cap exceeded $6 billion. 79 As of 2019, it had dropped to $1.6 billion. 80 Revenues increased from $745 million in 2014 to $1.4 billion by 2019. 81 The Fitbit user typically paid for the device directly. In some cases, employers or insurance providers covered the cost of wearable fitness trackers, along with gym memberships to encourage healthier lifestyles. In 2019, less than 10% of Fitbit’s revenue came from its corporate wellness arm. Its enterprise customers included Wendy’s, Teach for America, Geico, Quicken Loans, and others. 82 Public Policy In January 2015, the Food and Drug Administration (FDA) released a preliminary guidance document (a non-binding document distributed for comment purposes) suggesting that it would not seek to regulate general wellness products, such as wearables, that “present a very low risk to users’ safety.” 83 Further, “wearables will not be considered medical devices unless they make claims about fitness to treat specific diseases or conditions… among the claims that the FDA will allow under the umbrella of ‘general wellness’ are those related to weight management, physical fitness, relaxation or stress management,” 84 and others. Devices that made claims regarding treatment or diagnosis, however, were subject to FDA scrutiny. Apple, before it released the Apple Watch, reportedly met with FDA officials to “ensure that the device would meet any forthcoming regulatory requirements due to its strong focus on health tracking.” 85 Begun in 2013, the International Medical Device Regulators Forum, a voluntary group of regulators from around the world chaired by the FDA, formed the Software as a Medical Device (SaMD) Working Group to develop guidance regarding innovations in SaMD devices worldwide. The Working Group agreed upon the key definitions, framework for risk categorization, the Quality Management System, and the clinical evaluation of SaMD innovations. 86 By 2019, the FDA had adopted 16 of the Working Group’s outputs in guidance documents governing SaMD devices like Fitbit. 87 Accountability Fitbit claimed positive long-term fitness results when wearing the tracker. The company’s successes included Emory University, which reported 92% of its employees were motivated to be more active, and the South Carolina Statehouse, which reported that 18% of its participants lost significant weight. 88 The Dayton Regional Transit Authority also reported cost savings of $2.3 million over two years on a projected $15 million spend. 89 Some studies questioned the accuracy of the devices. In one study, Fitbit’s measures did not match that of treadmill output, and the faster the walking speed, the greater the error in distance measured. Because Fitbit allowed users to specify their stride length (or generated a default stride length based on the height the user inputs), some researchers suspected that the inaccuracy was due to varying strides among users. 90 Another study found that Fitbit underestimated calories burned during certain activities such as cycling or doing laundry. 91 Yet, in another study, whose participants wore a Fitbit and a research-grade accelerometer while talking on a treadmill, the Fitbit showed a high correlation with the steps recorded by the accelerometer, demonstrating accuracy. 92 7 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit In an NBC News segment, a news anchor wore three trackers on a walk across Central Park in New York City and noted that all three reported different step counts. Researchers at NYU’s Tisch Sports Performance Center recorded the anchor’s steps on a treadmill and compared their numbers to what the trackers reported. After taking 500 steps, Fitbit was the most accurate, reporting 502. 93 The devices were less accurate when reporting calories burned. The lab computer recorded that the news anchor burned 19.9 calories. Jawbone was the closest in calories burned with 43, followed by Fitbit with 67 calories and Garmin with 78. 94 The accuracy of other sensors found in wearable devices was questioned by several members of the medical community. One cardiologist noted that the metrics measured by most wearables were “never scientifically proven to have wellness benefits.” 95 For wearables to be accepted by physicians, one noted that they need to be “designed with the kind of 99-plus percent precision” expected from clinical devices. 96 But Fitbit also focused on another form of accountability: it aimed to support medical researchers who wanted to incorporate Fitbit trackers into their studies. 97 Park explained, “Consumers are interested in tracking deeper metrics about their sleep. [. . .] Right now, to really diagnose sleep apnea, you have to go to a sleep lab, which is pretty expensive and impractical for a lot of people.” 98 Fitbit Zip devices were offered as part of these programs. 99 A survey of members of the Association of Clinical Research Organizations reported a large increase in the use of wearable technology in medical trials. Those surveyed reported that “wearables represent a huge opportunity to gather additional data, and make clinical trials more efficient and more convenient for participants.” 100 In 2019, the U.S. clinical trials database (clinicaltrials.gov) included 507 current, completed, or pending studies that involved Fitbit devices, covering a range of conditions from obesity to cancer—either using Fitbit to gather data or to test the devices themselves. A smaller number of studies involved Jawbone or Apple Watch. In addition, Fitbit technology was used in scores of clinical research studies at Johns Hopkins University, Mayo Clinic, Northwestern Medicine, and other institutions on conditions ranging from arthritis, breast cancer, heart disease, patient compliance, and surgical recovery. 101 Chronic Disease Management for Fitbit? Park stated, “A big theme for us is going to be the inclusion of more advanced sensors.” 102 He added that the company wanted to reach a point where “not only are we addressing lifestyle conditions but more chronic conditions as well, whether it’s heart disease, obesity, etc.” 103 Medication was a crucial part of the long-term management of chronic diseases. About 91% of all prescriptions filled were for chronic disease management. 104 About 76% of adults aged 60 or older regularly used at least two prescription medications, and more than one in three (37%) were on five medications or more. 105 In 2016, Quest Diagnostics, a laboratory company with annual revenue of $7.4 billion, began offering patient-initiated testing, allowing consumers to purchase a variety of lab tests without consulting with a doctor. Tests could help patients monitor thyroid and lipid levels, and test for celiac disease, hepatitis C, or sexually transmitted diseases. A physician would then reach out to patients with concerning results and encourage them to visit a health care provider. The price for the tests, which would not be covered by insurance, ranged from $29 to $379 each. 106 8 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 Chronic Conditions Chronic diseases included a range of long-term health conditions that progressed slowly and had no immediate cure. 107 Unlike infectious diseases, chronic conditions were not contagious and their causes could not be traced to a single pathogen. Common chronic diseases and conditions included cancers, cardiovascular diseases, diabetes, obesity, and chronic respiratory diseases. 108 (See Exhibit 4 for chronic disease descriptions.) Chronic diseases and conditions were increasing worldwide. As of 2019, 45% of American adults (145 million) had at least one chronic disease or condition. 109 According to 2010 data, chronic diseases constituted seven of the top ten leading causes of death in the U.S. 110 Of all chronic conditions, cardiovascular diseases (including coronary heart disease, stroke, congenital heart disease, and pulmonary heart disease) resulted in an estimated 610,000 annual deaths in the U.S., and were the leading cause of death for both men and women. 111 Key risk factors for these diseases included smoking, excessive alcohol consumption, poor nutritional status, and a lack of physical exercise. 112 While genetic predisposition influenced an individual’s risk profile, these behavioral risk factors increased the likelihood of developing a chronic disease. The World Health Organization estimated that as many as 80% of all strokes, cardiovascular diseases, and type-2 diabetes could be prevented if these behavioral risk factors were eliminated. 113 The likelihood of developing a chronic disease increased with age: 92% of people over the age of 65 had at least one chronic condition. 114 There were also racial and ethnic disparities. African-Americans were 40% more likely to have high blood pressure than their non-Hispanic white counterparts, and African-Americans, Hispanics, and Asian-Americans were at higher risk for diabetes than nonHispanic whites. 115 Chronic diseases were also most prevalent in the Southeastern U.S. 116 In a survey of 3,000 people, the Pew Research Center found that people living with chronic conditions were more likely to track essential health information—such as diet, weight, blood pressure, and blood sugar—than individuals without chronic conditions. However, this population primarily relied on pen and paper to track information (41%) as opposed to a mobile device or phone (4%). 117 Obesity illustrated the potential role of tracking devices in the management of chronic conditions. At its core, obesity was caused by an imbalance between energy expended and energy consumed. Others factors included a genetic predisposition to obesity, smoking, sedentary work settings, insufficient access to healthy foods, and poverty. 118 The rise in obesity was linked to an increasingly sedentary lifestyle and changes in the American diet. 119 Poor health outcomes associated with obesity included heart disease, hypertension, diabetes, stroke, high cholesterol. 120 Some health care providers and organizations experimented with providing wearable devices and wireless sensors to learn more about obesity and provide treatment. In 2018, the Foods for Health Institute at the University of California Davis completed a validation study of a device to automatically measure calorie and water intake. Calorie counting was tested by comparing the manually recorded intake of test subjects and data from the device. Researchers analyzed the calorie content of items and measured the correlation between recorded intake and data from device. Over a two week period, 27 test subjects wearing the device compiled an accuracy of 89.6% in calorie intake. 121 In 2019, scientists at Tufts University’s SilkLab reported work on tooth-mounted sensors that monitor and report on diet. The sensors communicate wirelessly with a mobile device, sharing realtime information on glucose, alcohol, and salt intake. While uses for such an innovation are many, two 9 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit early candidates identified were sugar monitoring for diabetics and salt monitoring for high blood pressure patients. 122 Similarly, Medtronic plc, a global leader in sophisticated medical technology, announced a partnership with Fitbit to integrate health and activity tracking for patients living with diabetes and their physicians and care teams. The iPro2™ myLog mobile app allowed Type-2 diabetes patients to view their glucose levels and physical activity data in one application. The partnership aimed to generate insights into how exercise affected glucose levels. 123 Reimbursement According to a 2016 survey by Deloitte, the use of telemedicine for post-surgery recovery and chronic disease monitoring was embraced across all generations, but younger generations were willing to pay more out-of-pocket for such services. Of those surveyed, 20% were willing to pay (see Exhibit 5). Millennials were willing to pay up to $100 for one-off telemedicine appointments and up to $88 for a subscription monitoring service. 124 Willingness to pay could increase as companies earned the trust of consumers. The report recommended “digital health businesses develop risk mitigation strategies that take into account potential uses and misuses of personal information.” 125 The report also noted, “Many caregivers are interested in using technology—but adoption thus far is low. Some focus groups have shown that caregivers seek integrated, multifaceted platforms that help them coordinate tasks and selectively disseminate information. Most caregivers also want tools to ensure that medications are managed accurately and with ease.” 126 In the U.S., public and private insurers reimbursed health providers through a fee-for-service system. Under this approach, providers received payment for each individual service performed. Because payment was tied to quantity of services, this system rewarded providers for a high volume of services, rather than for quality of care or efficiency. The fee-for-service system also did little to incentivize care coordination among multiple health service providers, which were often involved in chronic disease management. 127 But the growth of bundled payments schemes represented an alternative to the fee-for-service system. Through bundled payments, insurers paid hospitals and other care providers a flat fee for all care associated with a specific surgery or treatment episode (e.g., knee or hip replacement). If the actual costs of care fell below the agreed-upon fee, providers kept most of the profit. If the costs exceeded the fee, the providers assumed the loss. Since the 1990s, the Centers for Medicare & Medicaid Services (CMS), which administered the Medicare and Medicaid programs, had explored using bundled payments. 128 This gained momentum in 2010, through the Patient Protection and Affordable Care Act, which aimed to disburse 50% of Medicare payments through schemes different from fee-for-service by 2018. 129 In 2013, CMS’s newly created Bundled Payments for Care Improvement Initiative designed four models for bundled payments for 48 episodes of care (i.e., specific, defined medical events such as hip or knee replacements). 130 This national, voluntary program recruited 1,448 participating care providers by July 2016. 131 CMS was well on its way to achieving its disbursements goal, with 30% of Medicare payments made through alternative payment schemes by March 2016. 132 In October 2018, CMS initiated the Bundled Payments for Care Improvement – Advanced (BCPI Advanced) program. BPCI Advanced qualified as an Advanced Alternative Payment Model, in which participating providers were exempted from reporting requirements of the Merit-Based Incentive Payment System (MIPS). Comprising 832 participating Acute Care Hospitals and 715 Physician Group Practices located nationwide, participants could earn additional compensation under the new payment 10 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 model if expenditures for an episode of care were less than a spending target factoring in measures for quality, or reduced compensation if expenditures exceeded the target. The BPCI Advanced program was scheduled to run through December 2023. 133 Going Forward Fitbit could comprehensively monitor and effectively engage and communicate with patients to drive better health outcomes. As Fitbit continued to grow, it could continue to target consumers, employers, insurers, and wellness companies and/or aggressively help patients manage chronic diseases. If it decided to enter this space, what strategy made the most sense: Should Fitbit appeal to the medical community or instead maintain its focus on its consumer operations? And, if so, what chronic diseases was it best positioned to help manage? Assignment 1. What kind of innovation is Fitbit: cost cutting, consumer facing, or technologycommercializing? 2. Evaluate the alignment of each of the potential Fitbit market strategies below with the Six Factors of Structure, Financing, Consumers, Technology, Public Policy, and Accountability, and recommend which, if any, Park should follow: b 3. • Wellness targeting of consumers, employers, insurers, and wellness companies • Helping patients manage chronic diseases If you recommended that Fitbit’s strategy should include helping patients to manage their chronic diseases, please specify the chronic diseases it should focus on and the critical elements of this business model. b For more on the Six Factors and the elements of a business model, see Regina E. Herzlinger, Innovating in Health Care: Creating Breakthrough Services, Products, and Business Models (New York: Wiley, 2021). 11 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Exhibit 1 Fitbit Fitbit Product Introduction, 2012-2019 Year Introduced Price (as of 2019) Clip-on Clip-on 2012 2012 NA NA Tracks steps, calories burned, and active minutes Tracks steps, distance, calories burned, active minutes, floors climbed; Includes an alarm Aria Smart Scale 2012 NA Tracks weight, body mass index, and body fat percentage Flex Wristband 2013 NA Tracks steps, calories burned, active minutes, distance, and sleep; Includes an alarm Charge Wristband 2014 NA Tracks steps, calories burned, active minutes, distance, floors climbed, and sleep Surge Fitness “super watch” 2014 NA Tracks steps, calories burned, active minutes, distance, floors climbed, sleep, heart rate, and workouts; Includes GPS tracking, call and text notifications, and watch display; Plays music Charge HR Wristband 2015 NA Tracks steps, calories burned, active minutes, distance, floors climbed, sleep, heart rate and workouts; Includes caller ID and time display Blaze Smart Fitness Watch 2016 NA Tracks steps, calories burned, active minutes, distance, floors climbed, sleep, heart rate, and workouts; Includes GPS tracking, music control, an alarm, and call and text notifications Alta Wristband 2016 NA Flex 2 Wristband 2016 NA Tracks steps, calories burned, active minutes, distance, sleep; Includes reminders to move, a time display, and call, text, and calendar notifications Tracks steps, calories burned, active minutes, hourly activity, stationary time, and swimming; Swim-proof; Includes call & text notification Charge 2 Wristband 2016 NA Ionic Smart Fitness Watch 2017 $249.95 Tracks steps, calories burned, active minutes, distance, floors climbed, sleep, heart rate, and workouts; Includes GPS tracking, call and text notifications, and watch display; Plays music Versa/ Versa2 Smart Fitness Watch 2018 $199.95 Tracks steps, calories burned, active minutes, distance, floors climbed, sleep, heart rate, and workouts; Includes GPS tracking, call and text notifications, and watch display; Plays music Charge 3 Wristband 2018 $149.95 Tracks steps, calories burned, distance, active minutes, hourly activity, heart rate, and floors climbed; Includes call & text notifications, calendar Product Type Zip One Features Tracks steps, calories burned, distance, active minutes, hourly activity, heart rate, and floors climbed; Includes call & text notifications, calendar alerts, reminders to move, GPS, and multi-sport tracking 12 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 Year Introduced Price (as of 2019) Product Type Ace/Ace 2 Wristband 2018 $69.95 Inspire/ Inspire HR Wristband 2019 $99.95 Versa Lite Smart Fitness Watch 2019 $159.95 Features alerts, reminders to move, GPS, and multi-sport tracking Tracks steps, calories burned, active minutes, distance, sleep; Includes reminders to move, a time display, and call, text, and calendar notifications Tracks steps, calories burned, distance, active minutes, hourly activity, heart rate, and floors climbed; Includes call & text notifications, calendar alerts, reminders to move, GPS, and multi-sport tracking Tracks steps, calories burned, active minutes, distance, floors climbed, sleep, heart rate, and workouts; Includes GPS tracking, call and text notifications, and watch display; Plays music Source: Casewriter, compiled from Fitbit company website, http://www.fitbit.com, and the 2015 Fitbit 10-K filing. Note: The above table omits Fitbit products in the company’s tracker line that, as of June 2016, had been discontinued. These include the Fitbit Tracker, the Fitbit Ultra, and the Fitbit Force. 13 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit Exhibit 2 Source: Digital Media Performance Metrics Gartner ”Brand Lookup: Fitbit,” 2020, https://www.gartner.com/en/marketing/research/data-tools/brandsearch?brand_id=IdzEXqTcct&study_id=fe977f70-6f4c-4883-b3b4-6f74cdcf5668, accessed March 23, 2020. 14 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 Exhibit 3a Fitbit Consolidated Statement of Operations, 2013–2015 (in $ thousands, except per share and per share amounts) 2015 2014 $1,857,998 $745,433 $271,087 Cost of revenue 956,935 387,776 210,836 Gross profit 901,063 357,657 60,251 Revenue 2013 Operating expenses: Research and development 150,035 54,167 27,873 Sales and marketing 332,741 112,005 26,847 77,793 33,556 14,485 General and administrative Change in contingent consideration Total operating expenses Operating income (loss) Interest expense, net Other expense, net - - 552,865 (7,704) 199,725 69,205 348,198 157,929 (8,954) (1,019) (2,222) (1,082) (59,230) (15,934) (3,649) 287,949 139,773 (13,685) Income tax expense 112,272 7,996 Net income (loss) 175,677 131,777 Income (loss) before income taxes Less: noncumulative dividends to preferred stockholders Less: undistributed earnings to participating securities Net income (loss) attributable to common stockholders - basic Add: adjustments for undistributed earnings to participating securities Net income (loss) attributable to common stockholders - diluted Net income (loss) per share attributable to common stockholders: Basic Diluted Shares used to compute net income (loss) per share attributable to common stockholders: Basic Diluted Source: 37,937 (51,622) (2,526) (5,326) - (59,133) (98,103) - 114,018 28,348 8,821 10,175 122,839 38,523 0.88 0.70 (1.32) 0.75 0.63 (1.32) 129,886 40,351 39,179 164,213 61,179 39,179 (51,622) -(51,622) Fitbit Inc., December 31, 2015, Form 10-K, https://www.sec.gov/Archives/edgar/data/1447599/000144759916000018/fitbit1231201510k.htm, accessed December 2016. 15 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Exhibit 3b Fitbit Fitbit Consolidated Statement of Cash Flow, 2013–2015 (in $ thousands) Cash Flows from Operating Activities Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for doubtful accounts Provision for inventory obsolescence Provision for inventory obsolescence related to Fitbit Force recall Depreciation Amortization of intangible assets Write-off of property and equipment 2015 2014 2013 $175,677 $131,777 (51,622) 1,115 864 651 5,060 2,964 1,099 - - 10,251 19,405 6,131 3,012 1,702 - - 1,206 1,004 1,712 Revaluation of redeemable convertible preferred stock warrant liability Amortization of issuance costs and discount on debt 56,655 13,272 3,370 961 795 82 Stock-based compensation 41,024 6,804 620 Change in contingent consideration (7,704) - - Deferred income taxes (42,538) (42,001) - Excess of tax benefit from stock-based compensation (32,100) (13) (38) (263) - - (231,100) (158,788) (55,630) Inventories (68,108) (61,595) (47,376) Prepaid expenses and other assets (29,215) (9,679) (2,225) Fitbit Force recall reserve (17,354) (60,462) 72,687 56,759 123,791 50,881 138,748 47,733 27,043 Other Changes in operating assets and liabilities, net of acquisition: Accounts receivable Accounts payable Accrued liabilities and other liabilities Deferred revenue Income taxes payable Net cash provided by operating activities 34,891 3,403 859 4,336 12,804 17,795 109,157 18,774 33,171 Cash Flows from Investing Activities Change in restricted cash - 2,310 (2,310) (30,566) (26,495) (7,524) (230,935) - - Sales of marketable securities 58,011 - - Maturities of marketable securities 44,500 - - Acquisitions, net of cash acquired (11,037) - - (170,027) (24,185) (9,834) Purchase of property and equipment Purchase of marketable securities Net cash used in investing activities 16 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 (in $ thousands) 2015 2014 2013 505,275 - - 160,000 163,000 2,830 (294,503) (41,346) (596) (748) (2,575) (45) (5,089) - - - - 42,811 4,018 97 205 32,100 13 38 - 75 - 401,053 119,264 45,243 340,183 113,853 68,580 37 45 - Cash and cash equivalents at beginning of period 195,626 81,728 13,148 Cash and cash equivalents at end of period 535,846 195,626 81,728 1,157 835 999 150,923 34,616 12,930 124,492 - - 15,774 - - 56,578 - - 10,534 2,492 1,904 - - 170 1,080 - - 13,317 - - (7,704) - - Cash Flows from Financing Activities Proceeds from public offerings, net of underwriting discount and commissions Proceeds from issuance of debt and revolving credit facility Repayment of debt Payment of issuance costs Payment of offering costs Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs Proceeds from exercise of stock options Excess of tax benefit from stock-based compensation Proceeds from exercise of redeemable convertible preferred stock warrants Net cash provided by financing activities Net increase in cash and cash equivalents Effect of exchange rate on cash and cash equivalents Supplemental Disclosure Cash paid for interest Cash paid for income taxes Supplemental Disclosure of Non-Cash Investing and Financing Activity Conversion of redeemable convertible preferred stock into Class B common stock Reclassification of redeemable convertible preferred stock warrant liability to additional paid in capital Issuance of redeemable convertible preferred stock upon net exercise of redeemable convertible preferred stock warrants Purchase of property and equipment included in accounts payable Issuance of redeemable convertible preferred stock warrants in connection with debt financing Deferred offering costs included in accounts payable and accruals Issuance of common stock in connection with acquisitions Contingent consideration related to acquisitions Source: Fitbit Inc., December 31, 2015, Form 10-K, https://www.sec.gov/Archives/edgar/data/1447599/000144759916000018/fitbit1231201510k.htm, accessed December 2016. 17 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. 27.6 million diagnosed in the U.S. 28 million diagnosed in the U.S. An estimated 24 million diagnosed in the U.S. An estimated 10 million diagnosed in the U.S. An estimated 24 million diagnosed in the U.S. Type-2 Diabetes Chronic obstructive pulmonary disease (COPD) Essential Tremor (ET) Asthma Prevalence Prevalence higher in females, children, and nonHispanic blacks. Family history of asthma, viral respiratory infections, and allergies increases risk. Risk increases with age. Half of cases are caused by a known genetic mutation. Risk increases with age. Prevalence is higher in Southern and Appalachian states. Prevalence is higher among Native Americans, nonHispanic blacks, and Hispanics. Prevalence is also higher in Southern U.S. Risk increases with age Leading cause of death in the U.S. for African-Americans, Hispanics, and non-Hispanic whites. Prevalence is higher in Southern states. Risk increases with age. Demographics of Patient Chronic Diseases and Other Conditions Heart Disease Disease/ Condition Exhibit 4 Smoking; Overweight and Obesity No known behavioral risk factors Smoking Overweight and obesity; Lack of physical activity; High caloric intake Smoking; Overweight and obesity; Lack of physical activity; High caloric intake; Excessive alcohol consumption Behavioral Risk Factors Total direct and indirect costs from asthma in the U.S.: $106.1 billion; Average annual individual expenditure: $3,259 Very little information available Total direct and indirect costs from diabetes in U.S.: $32.1 billion (projected to hit $49 billion by 2020); Average annual individual expenditure: $6,000 Total direct and indirect costs from diabetes in U.S.: $245 billion; Average annual individual expenditure: $7,900 Total direct and indirect costs from heart disease in U.S.: $316.6 billion Average Medical Costs -18- Asthma control medications include anti-inflammatory corticosteroids that are inhaled, as well as oral medicine to relieve symptoms, among others. Few proven medications. Some patients use adrenergic blockers, but 60% experience no relief from medication. Patients may be prescribed medicine to relax the bronchial tubes, medicine to reduce inflammation in the airways, and/or antibiotics to treat associated viral or bacterial infections. Depending on disease stage, patients may be prescribed a number of medications, including insulin therapies, medicine to lower blood sugar, and/or medicine to regulate kidney function. Depending on the type of heart disease, patients may be prescribed a number of medications, including: 1) blood thinners, 2) medicine to prevent blood clots, 3) medicine to improve blood flow, and 4) medicine to lower blood pressure, among others. Medications Prescribed(if any) 317-007 For the exclusive use of T. Xu, 2021. This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. Older adults and pregnant women are more susceptible to back pain; Genetic predisposition increases risk. Women and older adults are at higher risk; Genetic predisposition also plays a role. Demographics of Patient Overweight and obesity; Lack of physical activity Overweight and obesity Behavioral Risk Factors Estimated direct and indirect costs from back pain in the U.S.: $100 billion (2006 estimate) Total direct and indirect costs from arthritis in the U.S.: $128 billion; Average annual individual expenditure: $1,752 Average Medical Costs Depending on severity, patients may be prescribed medicine to relieve pain and inflammation, as well as anticonvulsants and topical creams. Treatment may include drugs to relieve pain and inflammation, and prevent deformity of the joint. Medications Prescribed(if any) -19- “Statistics About Diabetes,” American Diabetes Association, http://www.diabetes.org/diabetes-basics/statistics/; “Age, Race, Gender, & Family History,” American Diabetes Association, http://www.diabetes.org/are-you-at-risk/lower-your-risk/nonmodifiables.html; “Risk Factors,” International Diabetes Federation, http://www.idf.org/worlddiabetesday/toolkit/gp/risk-factors; “Diabetes Report Card 2014,” Centers for Disease Control and Prevention, 2015, http://www.cdc.gov/diabetes/pdfs/library/diabetesreportcard2014.pdf; “The Cost of Diabetes,” American Diabetes Association, http://www.diabetes.org/advocacy/news-events/cost-of-diabetes.html; “Type 2 Diabetes Treatment,” Mayo Clinic, http://www.mayoclinic.org/diseases-conditions/type2-diabetes/diagnosis-treatment/treatment/txc-20169988; “Heart Disease,” Centers for Disease Control and Prevention, July 15, 2016, http://www.cdc.gov/nchs/fastats/heart-disease.htm; “Heart Disease Facts,” Centers for Disease Control and Prevention, August 10, 2015, http://www.cdc.gov/heartdisease/facts.htm; “Costs & Consequences,” Department of Health and Human Services, http://millionhearts.hhs.gov/learn-prevent/cost“Cardiac Medications,” American Heart Association, consequences.html; http://www.heart.org/HEARTORG/Conditions/HeartAttack/TreatmentofaHeartAttack/Cardiac-Medications_UCM_303937_Article.jsp#; “COPD Statistics Across America,” COPD Foundation, http://www.copdfoundation.org/What-is-COPD/COPD-Facts/Statistics.aspx; “COPD Symptoms and Causes,” Mayo Clinic, http://www.mayoclinic.org/diseases-conditions/copd/symptoms-causes/dxc-20204886; “Increase Expected in Medical Care Costs for COPD,” Centers for Disease Control and Prevention, July 29, 2014, http://www.cdc.gov/features/ds-copd-costs/; “Managing Your COPD Medications,” American Lung Association, http://www.lung.org/lung-health-and-diseases/lung-disease-lookup/copd/diagnosing-and-treating/managing-your-copd-medications.html; “Facts About Essential Tremor,” International Essential Tremor Foundation, 2012, http://www.essentialtremor.org/wp-content/uploads/2013/07/FactSheet012013.pdf; “Essential Tremor Symptoms and Causes,” Mayo Clinic, http://www.mayoclinic.org/diseases-conditions/essential-tremor/symptoms-causes/dxc-20177829; “Neurology and Neurosurgery,” Johns Hopkins Medicine, http://www.hopkinsmedicine.org/neurology_neurosurgery/centers_clinics/movement_disorders/conditions/essential_tremor.html; “Most Recent Asthma Data,” Centers for Disease Control and Prevention, March 2016, http://www.cdc.gov/asthma/most_recent_data.htm; “Asthma Risk Factors,” American Lung Association, http://www.lung.org/lung-health-and-diseases/lung-disease-lookup/asthma/asthma-symptoms-causes-risk-factors/asthma-risk-factors.html; “Costs of Asthma on Society,” Asthma and Allergy Foundation of America, http://www.aafa.org/page/cost-of-asthma-on-society.aspx; “Treatment and Drugs,” Mayo Clinic, http://www.mayoclinic.org/diseases-conditions/asthma/basics/treatment/con-20026992; “Arthritis National Statistics,” Centers for Disease Control and Prevention, July 15, 2016, http://www.cdc.gov/arthritis/data_statistics/national-statistics.html; “Arthritis Risk Factors,” Centers for Disease Control and Prevention, May 9, 2016, http://www.cdc.gov/arthritis/basics/risk-factors.htm; “Arthritis Treatment,” Mayo Clinic, http://www.mayoclinic.org/diseases-conditions/arthritis/diagnosistreatment/treatment/txc-20169117; “Arthritis Cost Statistics,” Centers for Disease Control and Prevention, October 28, 2015, http://www.cdc.gov/arthritis/data_statistics/cost.htm; E. Yelin, M. Cisternas, A. Foreman, D. Pasta, L. Murphy, C.G. Helmick, “National and State Medical Expenditures and Lost Earnings Attributable to Arthritis and Other Rheumatic Conditions—United States, 2003,” Centers for Disease Control and Prevention Morbidity and Mortality Weekly Report, January 12, 2007 / 56(01);4-7, https://www.cdc.gov/mmwr/preview/mmwrhtml/mm5601a2.htm; “Low Back Pain Fact Sheet,” National Institute of Neurological Disorders and Stroke, November 3, 2015, http://www.ninds.nih.gov/disorders/backpain/detail_backpain.htm; Jeffrey N. Katz, “Lumbar Disc Disorders and Low-Back Pain: Socioeconomic Factors and Consequences,” J Bone Joint Surg Am, 2006 Apr; 88 (suppl 2): 21 -24; all accessed September 2016. In U.S., 80% of people experience back pain (chronic or acute) at some point. Back pain Source: An estimated 52.5 million diagnosed in U.S. Prevalence Arthritis and other Rheumatic conditions Disease/ Condition 317-007 For the exclusive use of T. Xu, 2021. This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit Exhibit 5 Source: Willingness to Pay Out-of-Pocket for Telemedicine Leslie Korenda, Claire Boozer Cruse, Greg Reh, “Will patients and caregivers embrace technology-enabled health care? Findings from the Deloitte 2016 Survey of US Health Care Consumers,” Deloitte University Press, August 30, 2016, https://dupress.deloitte.com/dup-us-en/focus/internet-of-things/digitized-care-use-of-technology-in-healthcare.html, accessed August 2016. 20 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 Endnotes 1 James Park, CEO and Co-Founder, https://www.crunchbase.com/person/james-park#/entity, accessed May 2016. 2 “About Fitbit,” https://www.fitbit.com/about, accessed May 2016. 3 Gary Marshall, “The story of Fitbit: How a wooden box became a $4 billion company,” Wearable, December 30, 2015, http://www.wareable.com/fitbit/youre-fitbit-and-you-know-it-how-a-wooden-box-became-a-dollar-4-billion-company, accessed May 2016. 4 Matthew McClintock, “FIT Just a Bit Expensive,” Barclays, July 13, 2015, accessed April 2016. 5 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04-04ffd5e5ee83.pdf, accessed March 21, 2020. 6 “Fitbit Premium,” https://www.fitbit.com/fitbit-premium, accessed March 21, 2020. 7 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04-04ffd5e5ee83.pdf, accessed March 21, 2020. 8 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04-04ffd5e5ee83.pdf, accessed March 21, 2020. 9 ” Worldwide Wearables Market to Top 300 Million Units in 2019 and Nearly 500 Million Units in 2023, Says IDC,” Business Wire, December 16, 2019, https://www.businesswire.com/news/home/20191216005029/en/Worldwide-Wearables-MarketTop-300-Million-Units, accessed March 21, 2020. 10 “Worldwide Wearables Shipments Surge 94.6% in 3Q 2019 Led by Expanding Hearables Market, Says IDC ,” IDC, December 9, 2019, https://www.idc.com/getdoc.jsp?containerId=prUS45712619, accessed March 21, 2020. 11 Amazon.com, https://www.amazon.com/Xiaomi-Mi-Band-4/dp/B07T4ZH692, accessed March 21, 2020. 12 ” Number of Fitbit devices sold worldwide from 2010 to 2019,” Statista, March 5, 2020, https://www.statista.com/statistics/472591/fitbit-devices-sold/, accessed March 21, 2020. 13 McClintock, “FIT Just a Bit Expensive.” 14 Adam Levy, “Can the Apple Watch Avoid the Same Problems as FitBit?” The Motley Fool, May 18, 2015, http://www.fool.com/investing/general/2015/05/18/can-the-apple-watch-avoid-the-same-problems-as-fit.aspx, accessed May 2016. 15 ” Google is buying Fitbit for $2.1 billion, betting on fitness wearables,” Los Angeles Times, November 1, 2019, https://www.latimes.com/business/story/2019-11-01/google-to-buy-fitness-wearables-giant-fitbit-for-about-2-1-billion, accessed March 21, 2020. 16 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b0404ffd5e5ee83.pdf, accessed March 21, 2020. 17 Lauren Goode, “Tons of people are buying Fitbits, but are they actually using them?” The Verge, August 6, 2015, http://www.theverge.com/tech/2015/8/6/9110035/fitbit-fitness-tracker-watch-active-users-sales, accessed May 2016. 18 Goode, “Tons of people are buying Fitbits, but are they actually using them?” 19 Goode, “Tons of people are buying Fitbits, but are they actually using them?” 20 Goode, “Tons of people are buying Fitbits, but are they actually using them?” 21 “dorsaVi to Commence Sale of ViMove in the US Following FDA Clearance,” Business Wire, July 14, 2014, http://www.businesswire.com/news/home/20140714006278/en/dorsaVi-Commence-Sale-ViMove-FDA-Clearance, accessed December 2016. 22 Laurie Orlov, “A Look at Medication Reminders,” October 29, 2008, Aging in Place Technology Watch, https://www.ageinplacetech.com/blog/look-medication-reminders, accessed October 2016. 21 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit 23 “Fitbit’s (FIT) CEO James Park on Q4 2015 Results - Earnings Call Transcript,” Seeking Alpha, February 23, 2016, http://seekingalpha.com/article/3918226-fitbits-fit-ceo-james-park-q4-2015-results-earnings-call-transcript?part=single, accessed May 2016. 24 Jonah Comstock, “Fitbit CEO talks software focus, future acquisitions, and blurring fitness-health,” Mobi Health News, July 14, 2015, http://mobihealthnews.com/45333/fitbit-ceo-talks-software-focus-future-acquisitions-and-blurring-fitness-health, accessed May 2016. 25 “Fitbit Reimagines its Most Iconic Fitness Trackers, Unveils Fitbit Charge 2 and Fitbit Flex 2,” Fitbit Press Release, August 29, 2016, https://investor.fitbit.com/press/press-releases/press-release-details/2016/Fitbit-Reimagines-its-Most-IconicFitness-Trackers-Unveils-Fitbit-Charge-2-and-Fitbit-Flex-2/default.aspx, accessed September 2016. 26 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04- 04ffd5e5ee83.pdf, accessed March 21, 2020. 27 Fitbit, Facebook.com, https://www.facebook.com/fitbit/, accessed March 21, 2020. 28 Sarah Silbert, “Why Fitbit Is Still Winning Wearables,” Fortune, December 10, 2015, http://fortune.com/2015/12/10/why- fitbit-winning/, accessed June 2016. 29 Richard Waters, “Fitbit flop shows the challenge of building a hardware business,” Financial Times, January 7, 2016, http://www.ft.com/cms/s/0/32a27f3e-b521-11e5-8358-9a82b43f6b2f.html#axzz4GUI0fZID, accessed August 2016. 30 Alizah Farooqi, “Top 10 Consumer Electronics Brands in Digital,” Gartner, August 1, 2018, https://www.gartner.com/en/marketing/insights/daily-insights/top-10-consumer-electronics-brands-in-digital-3, accessed March 23, 2020. 31 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b0404ffd5e5ee83.pdf, accessed March 21, 2020. 32 Tilley, “How Fitbit CEO James Park Plans To Stay Ahead.” 33 Tilley, “How Fitbit CEO James Park Plans To Stay Ahead.” 34 Patrick Coffee, “Why Tech Rebels Like Uber, Jet and Fitbit Are Embracing Traditional Advertising,” Adweek, September 21, 2015, http://www.adweek.com/news/advertising-branding/why-tech-rebels-uber-jet-and-fitbit-are-embracing-traditionaladvertising-167005, accessed August 2016. 35 “Introducing Fitbit Flex 2, the Fitness Tracker that Fits Your Life,” Fitbit Blog, August 29, 2016, https://blog.fitbit.com/introducing-fitbit-flex-2-the-fitness-tracker-that-fits-your-life/, accessed December 2016. 36 Fitbit Charge 2 TV Commercial, ‘Big Day,’ https://www.ispot.tv/ad/AsiH/fitbit-charge-2-big-day, accessed December 2016. 37 “Fitbit’s (FIT) CEO James Park on Q3 2016 Results - Earnings Call Transcript.” 38 “Fitbit’s (FIT) CEO James Park on Q3 2016 Results - Earnings Call Transcript.” 39 “Target Kicks off New Team Member Wellness Initiatives,” Target, September 16, 2015, https://corporate.target.com/article/2015/09/team-member-wellness, accessed May 2016. 40 Aditi Pai, “Fitbit revenues top $1.8B in 2015, added 1,000 enterprise customers for corporate wellness,” Mobi Health News, February 23, 2016, http://mobihealthnews.com/content/fitbit-revenues-top-18b-2015-added-1000-enterprise-customerscorporate-wellness, accessed May 2016. 41 David Muoio, “Fitbit expands upon health, wellness partnerships, announces expanded support for Solera DPPs,” Mobihealthnews, March 6, 2019, https://www.mobihealthnews.com/content/fitbit-expands-upon-health-wellnesspartnerships-announces-expanded-support-solera-dpps, accessed March 21, 2020. 42 Fitbit, https://healthsolutions.fitbit.com/, accessed March 21, 2020. 43 Tara Siegel Bernard, “Giving Out Private Data for Discount in Insurance,” New York Times, April 8, 2015, http://www.nytimes.com/2015/04/08/your-money/giving-out-private-data-for-discount-in-insurance.html, accessed May 2016. 22 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 44 Adam Rogers, “Why Fitbit Is Increasing Its Research and Development Spending in 1Q16,” Market Realist, May 16, 2016, http://marketrealist.com/2016/05/fitbit-increases-research-development-spend-substantially-1q16/, accessed December 2016. 45 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b0404ffd5e5ee83.pdf, accessed March 21, 2020. 46 Patent Application Full Text and Image Database, U.S. Patent & Trademark Office, http://appft.uspto.gov/netahtml/PTO/search-adv.html, accessed March 21, 2020. 47 Rogers, “Why Fitbit Is Increasing Its Research and Development Spending in 1Q16.” 48 “How Fit is Fitbit?” Aistemos, July 2015, https://aistemos.com/wp-content/uploads/Cipher_snapshot_How-fit-is- Fitbit.pdf, accessed December 2016. 49 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04- 04ffd5e5ee83.pdf, accessed March 21, 2020. 50 Fitbit community, https://community.fitbit.com/t5/Blaze/All-About-Fitbit-Blaze/td-p/1096059, accessed May 2016. 51 Eric Zeman, “Why Apple Can’t Deny Google Maps On iPhone,” Information Week, November 16, 2012, http://www.informationweek.com/mobile/mobile-devices/why-apple-cant-deny-google-maps-on-iphone/d/d-id/1107428?, accessed December 2016. 52 Evan Niu, “Apple Sold Over 30 Million Apple Watches in 2019,” The Motley Fool, February 8, 2020, https://www.fool.com/investing/2020/02/08/apple-sold-over-30-million-apple-watches-in-2019.aspx, accessed March 21, 2020. 53 Daisuke Wakabayashi, “Apple’s Watch Outpaced the iPhone in First Year,” Wall Street Journal, April 24, 2016, http://www.wsj.com/articles/apple-watch-with-sizable-sales-cant-shake-its-critics-1461524901, accessed May 2016. 54 Justin McCarthy, “One in Five U.S. Adults Use Health Apps, Wearable Trackers,” Gallup, December 11, 2019, https://news.gallup.com/poll/269096/one-five-adults-health-apps-wearable-trackers.aspx, accessed March 21, 2020. 55 McClintock, “FIT Just a Bit Expensive.” 56 John Kernan, Krista Zuber, David Buckley, Jerry Gray, and Zoe Leavitt, “Fitbit.” Cowen and Company, September 10, 2015. 57” The Audience Numbers Behind Fitbit’s Wearables Market Lead,” Hitwise, February 16, 2017, https://www.hitwise.com/en/2017/02/16/numbers-behind-the-fitbit-market-lead/, accessed March 22, 2020. 58 Sam Mattera, “The Best Number From The Fitbit Inc Earnings Report,” Motley Fool, June 3, 2016, http://www.fool.com/investing/general/2016/06/03/the-best-number-from-the-fitbit-inc-earningsrepor.aspx?source%3Deptfxblnk0000004, accessed June 2016. 59 Dan Graziano, “Fitbit Alta Review,” CNet, March 25, 2016, http://www.cnet.com/products/fitbit-alta/, accessed August 2016. 60 Stables, “Fitbit Blaze vs Garmin Vivoactive HR: Sport watches go head-to-head.” 61 Amazon.com, https://www.amazon.com/Mi-Water-Resistant-Bracelet-Pedometer-phones-Chinese/dp/B01LRI86TK/, accessed March 22, 2020. 62 “Detailed Activity Tracker Reviews,” http://www.bestfitnesstrackerreviews.com/reviews.html, accessed August 2016. 63 Kernan et al., “Fitbit.” 64Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04- 04ffd5e5ee83.pdf, accessed March 21, 2020. 65Brittany W., “Under Armour’s Transition to a Data-Driven Fitness Lifestyle Company – Will it Pay Off?,” Harvard Business School, April 7, 2018, https://digital.hbs.edu/platform-digit/submission/under-armours-transition-to-a-data-driven-fitnesslifestyle-company-will-it-pay-off/, accessed March 22, 2020. 66 “Fitbit Inc. (FIT),” PiperJaffray, July 13, 2015, accessed May 2016. 23 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. 317-007 Fitbit 67 Sarah Silbert, “Why Fitbit is Still Winning Wearables.,” Fortune, December 10, 2015, http://fortune.com/2015/12/10/why- fitbit-winning/, accessed December 2016. 68 Rachel Abrams, “Fitbit Says It Will Make Changes to Address Complaints About Allergic Reactions,” New York Times, October 17, 2014, http://www.nytimes.com/2014/10/18/technology/personaltech/fitbit-says-it-will-make-changes-toaddress-complaints-about-allergic-reactions-.html, accessed May 2016. 69 Fitbit 2015 Annual Report. 70 McClintock, “FIT Just a Bit Expensive.” 71 “Fitness Tracker,” Flextronics, https://www.flextronics.com/live-smarter/wearable-technology-wearables/fitness-trackeractivity-tracker, accessed July 2016. 72 “Wearable Technology,” Flextronics, https://www.flextronics.com/live-smarter/wearable-technology-wearables, accessed November 2016. 73 “Wearable Technology,” Flextronics. 74 Robert Hof, “How Fitbit Survived As a Hardware Startup,” Forbes, February 4, 2014, http://www.forbes.com/sites/roberthof/2014/02/04/how-fitbit-survived-as-a-hardware-startup/#588bc9db4f42, accessed June 2016. 75 Hof, “How Fitbit Survived As a Hardware Startup.” 76 Marshall, “The story of Fitbit: How a wooden box became a $4 billion company.” 77 Maureen Farrell, “Fitbit’s Early Investors Now Sitting on Billions in Profits,” Wall Street Journal, June 19, 2015, http://blogs.wsj.com/moneybeat/2015/06/19/after-ipo-fitbits-early-investors-are-now-sitting-in-billions-in-profits/, accessed April 2016. 78 Maureen Farrell Corrie Driebusch, “FitBit Steps It Up in Its IPO,” Wall Street Journal, June 18, 2015, http://blogs.wsj.com/moneybeat/2015/06/18/fitbit-steps-it-up-in-its-ipo/, accessed April 2016. 79 “Fitbit Market Cap Tops $6B as IPO Opens at $30.40,” Bloomberg, June 18, 2015, http://www.bloomberg.com/news/videos/2015-06-18/fitbit-market-cap-tops-6b-as-ipo-opens-at-30-40, accessed June 2016. 80 “Fitbit Inc.,” MarketWatch, October 6, 2016, http://www.marketwatch.com/investing/stock/fit, accessed October 2016. 81 Fitbit Form 10-K, 2020, http://d18rn0p25nwr6d.cloudfront.net/CIK-0001447599/a8b5d236-bb56-4a1e-9b04- 04ffd5e5ee83.pdf, accessed March 21, 2020. 82 Pai, “Fitbit revenues top $1.8B in 2015, added 1,000 enterprise customers for corporate wellness.” 83 Food and Drug Administration, “General Wellness: Policy for Low Risk Devices,” January 20, 2015, http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM429674.pdf?so urce=govdelivery&utm_medium=email&utm_source=govdelivery, accessed Aril 2016. 84 Sam Oliver, “With Apple Watch near, FDA clarifies regulatory stance on health-tracking wearables,” Apple Insider, January 20, 2015, http://appleinsider.com/articles/15/01/20/with-apple-watch-near-fda-clarifies-regulatory-stance-on-healthtracking-wearables, accessed December 2016. 85 Oliver, “With Apple Watch near, FDA clarifies regulatory stance on health-tracking wearables.” 86 U.S. Food & Drug Administration, “Software as a Medical Device (SaMD),” December 4, 2018, https://www.fda.gov/medical-devices/digital-health/software-medical-device-samd, accessed March 23, 2020. 87 U.S. Food & Drug Administration, “Guidances with Digital Health Content,” September 27, 2019, https://www.fda.gov/medical-devices/digital-health/guidances-digital-health-content, accessed March 23, 2020. 88 Fitbit, “Invest in healthy behavior change,” https://healthsolutions.fitbit.com/employers/, accessed March 23, 2020. 89 “Two Fitbit Group Health Customers Demonstrate Cost Savings From Corporate Wellness Programs,” Fitbit Press Release. 90 Judit Takacs, Courtney L. Pollock, Jerrad R. Guenther, Mohammadreza Bahar, Christopher Napier, Michael A. Hunt, “Validation of the Fitbit One activity monitor device during treadmill walking,” Journal of Science and Medicine in Sport, 17, Issue 5, September 2014, p. 496–500, accessed June 2016. 24 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. For the exclusive use of T. Xu, 2021. Fitbit 317-007 91 J.E Sasaki, A. Hickey, M. Mavilia M, J. Tedesco, D. John, S Kozey Keadle, P.S. Freedson, “Validation of the Fitbit wireless activity tracker for prediction of energy expenditure,” Journal of Physical Activity & Health, Vol 12, No 2, 2015, p. 149-154. 92 “Fitbit at Work,” Fast Company. 93 “Rossen Reports: How Accurate Are Those Wearable Fitness Trackers?” NBC News, July 14, 2016, http://www.nbcnews.com/nightly-news/video/rossen-reports-how-accurate-are-those-wearable-fitness-trackers725459011980, accessed October 2016. 94 “Rossen Reports: How Accurate Are Those Wearable Fitness Trackers?” 95 Fred O’Connor, “Wearable devices with health IT functions poised to disrupt medicine,” PC World, May 1, 2014, http://www.pcworld.com/article/2150680/wearable-devices-with-health-it-functions-poised-to-disrupt-medicine.html, accessed May 2016. 96 O’Connor, “Wearable devices with health IT functions poised to disrupt medicine.” 97 Pai, “Fitbit revenues top $1.8B in 2015, added 1,000 enterprise customers for corporate wellness.” 98 Rachel Metz, “Fitbit CEO on Wearable Gadgets, the Future of Sensors, and Wall Street,” MIT Technology Review, January 7, 2016, https://www.technologyreview.com/s/545271/fitbit-ceo-on-wearable-gadgets-the-future-of-sensors-and-wall-street/, accessed October 2016. 99 Pai, “Fitbit revenues top $1.8B in 2015, added 1,000 enterprise customers for corporate wellness.” 100 Daniel Coughlin, “Why researchers are flocking to Fitbit in the fight against disease,” Wareable, June 17, 2016, http://www.wareable.com/fitbit/fitbit-clinical-studies-researchers-887, accessed October 2016. 101 “Fitbit and Fitabase Innovate Health Research Practices to Enable Real-Time, Continuous Measurement, Better Participant Engagement and Innovative Study Design,” Fitbit Press Release, July 28, 2016, https://investor.fitbit.com/press/pressreleases/press-release-details/2016/Fitbit-and-Fitabase-Innovate-Health-Research-Practices-to-Enable-Real-Time-ContinuousMeasurement-Better-Participant-Engagement-and-Innovative-Study-Design/default.aspx, accessed August 2016. 102 Metz, “Fitbit CEO on Wearable Gadgets, the Future of Sensors, and Wall Street.” 103 Metz, “Fitbit CEO on Wearable Gadgets, the Future of Sensors, and Wall Street.” 104 “The Growing Crisis of Chronic Disease in the United States,” Partnership To Fight Chronic Disease, http://www.fightchronicdisease.org/sites/default/files/docs/GrowingCrisisofChronicDiseaseintheUSfactsheet_81009.pdf, accessed August 2016. 105 Prescription Drug Use Continues to Increase: U.S. Prescription Drug Data for 2007-2008,” Centers for Disease Control and Prevention, September 2010, http://www.cdc.gov/nchs/products/databriefs/db42.htm, accessed August 2016. 106 QuestDirect, https://questdirect.questdiagnostics.com/products, accessed March 22, 2020. 107 “Noncommunicable Diseases,” World Health Organization, 2016, http://www.who.int/topics/noncommunicable_diseases/en/, accessed August 2016. 108 “Chronic Disease Overview,” Centers for Disease Control and Prevention, February 23, 2016, http://www.cdc.gov/chronicdisease/overview/index.htm, accessed August 2016. 109 ”Why We Need Public Health to Improve Healthcare,” National Association of Chronic Disease Directors, https://www.chronicdisease.org/page/whyweneedph2imphc, accessed March 22, 2020. 110 “Chronic Disease Overview,” Centers for Disease Control and Prevention. 111 “Heart Disease Facts,” Centers for Disease Control and Prevention, http://www.cdc.gov/heartdisease/facts.htm, accessed August 2016. 112 “Cardiovascular Diseases (CVD),” World Health Organization, June 2016, http://www.who.int/mediacentre/factsheets/fs317/en/, accessed August 2016. 113 “Chronic Diseases and Health Promotion,” World Health Organization, http://www.who.int/chp/chronic_disease_report/part1/en/index11.html, accessed August 2016. 25 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021. 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Kaplan, “How to Pay for Health Care,” Harvard Business Review, (July-August, 2016): 88100. 128 Porter and Kaplan, “How to Pay for Health Care.” 129 “Notice of Proposed Rulemaking for Bundled Payment Models for High-Quality, Coordinated Cardiac and Hip Fracture Services,” Centers for Medicare and Medicaid Services, July 25, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-07-25.html, accessed August 2016. 130 “Bundled Payments for Care Improvement (BPCI) Initiative: General Information,” Centers for Medicare and Medicaid Services, https://innovation.cms.gov/initiatives/bundled-payments/, accessed August 2016. 131 “Bundled Payments for Care Improvement (BPCI) Initiative: General Information,” Centers for Medicare and Medicaid Services, https://innovation.cms.gov/initiatives/bundled-payments/, accessed August 2016. 132 “HHS Reaches Goal of Tying 30 Percent of Medicare Payments to Quality Ahead of Schedule,” U.S. Department of Health and Human Services, March 3, 2016, http://www.hhs.gov/about/news/2016/03/03/hhs-reaches-goal-tying-30-percentmedicare-payments-quality-ahead-schedule.html, accessed August 2016. 133 ”CMS Announces Participants in New Value-Based Bundled Payment Model,” Centers for Medicare & Medicaid Services, October 9, 2018, https://www.cms.gov/newsroom/press-releases/cms-announces-participants-new-value-based-bundledpayment-model, accessed March 23, 2020. 26 This document is authorized for use only by Tianyi Xu in MKTG 4501-Spring 2021-CONRAN taught by MARY CONRAN, Temple University from Jan 2021 to May 2021.
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Running Head: MEMO TO MANAGEMENT

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Memo to Management
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SUBJECT: Proposed Alternative for Fitbit

Executive Summary
Fitbit is a manufacturer and marketer of wearable fitness trackers based in California. In 2019,
the company generated revenue of $1.4billion from its operations in sixty-five countries. The
company continues to experience stiff competition from market players like Apple, Samsung,
Xiaomi, and Huawei. The industry is saturated with competitors, and some are evolving into
developing medical applications. Some competitors like Apple and Samsung have the strength of
global brand recognition and competitive advantage of economies of scale. Fitbit has the option
of evolving some of its products into disease management devices and applications.
Alternatively, the company can maintain its status quo and watch its market share continue
dwindling. Fitbit's alternative of developing medical applications requires significant investment
in human resources, research and development, and production infrastructures like space and
equipment. The company will benefit from a new market segment that will generate additional
revenue and increase its business sustainability.

MEMO TO MANAGEMENT

3
Decision to be Analyzed

The first problem to be analyzed is the declining market share for Fitbit due to increased
competition. The company had a market share of 4.1% in 2019 compared to 35.0% of Apple,
14.6 for Xiaomi, 9.8% for Samsung, and 8.4% for Huawei (Herzilinger, Snively & Mehta, 2020).
This indicated that Fitbit was among the most impactful dominant players in the wearable
devices' global market. Out of 305.2 million units demanded in the market, Fitbit could only sell
4.1% of the units.
The company faced the problem of low engagement and high abandonment rates for
activity trackers. About a third of consumers that bought the fitness trackers abandoned using
them after only six months. The trend was impactful to the Fitbit because it had 28% of active
users among its customers (Herzilinger et al., 2020). Although the company did not largely
depend on engagement levels, the trends were significant considerations in business performance
primarily due to the competition in the industry.
Fitbit had an opportunity to diversify on the wellness market by producing disease
management devices. Most competitors such as dorsaVi were opting for this opportunity as
additional streams of revenue (Herzilinger et al., 2020). If Fitbit considered this opportunity, it
would not depend on its customers to the regular use of the wearable to upgrade to new ones as
they become available. This opportunity would restructure Fitbit into a ...

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