Chapter Thirty Eight

Case Studies

Quote Icon Sure, profit is important, but 'sell more stuff we already have at greater margins' is hardly an idea that will set the world on fire. And setting the world on fire is why we’re here, it is why we get up in the morning. Maybe not the whole world, but our own little corner of the world, for sure. This might sound corny, but the best companies, products and brands never forget a simple truth: Though we all need to pay the bills, we also need life to feel magical and wondrous at the same time. And that’s where the real long term value lies. Quote Icon gapingvoid art
In this Chapter we examine five companies that think and act differently. Harley Davidson, Bureo, a small company that is partialy funded by Patagonia in their quest to clean the ocean's waters, Krochet Kids a company that trains and provides jobs for women in Chile and Uganda, Warby Parker the company that donates a pair of glasses for each one sold. And Fitbit, the activity tracking company.

A Glut of Used Hogs Is a Drag on Harley-Davidson

For some younger riders, new motorcycles are too expensive, while well-maintained used ones offer good value

Harley Cycle
Three used Harleys are sold in the U.S. for every new one. A decade ago, it was the other way around. New motorcycle sales in the U.S. are down by half from a 2006 peak, while used sales are up 13%.
Milwaukee-based Harley in 2018 is heading for its fourth straight year of declining sales as the company’s core older customers scale back purchases while younger riders fail to pick up the slack. A glut of used Harley-Davidsons has emerged after years of strong sales growth and production volumes, and offers a variety of choices for those unwilling to splurge on pricey new models.
“It comes down to price, always,” said Jim McMahan, co-owner of a Harley dealership in Greensburg, Pa. “There are people who just don’t want to spend $18,000 to $25,000 on a new motorcycle.” Used Harleys in good condition can cost less than $15,000, dealers say. Harley wants to reverse its sales slump by drawing new riders with 16 middleweight bikes it plans to roll out by 2022. Among them will be the company’s first electric model, which will make its debut next year.
Harley Bike
Harley hasn’t released prices for the new bikes, but dealers expect many of the models will be cheaper than the big bikes that make up the core of the current lineup. Offering more motorcycle choices at lower prices could lure younger riders to the Harley brand for the first time and help offset slumping sales of traditional models. Heather Malenshek, Harley’s vice president of marketing, said used Hogs—as the brand’s motorcycles are affectionately known—aren’t the company’s biggest problem. “The greatest challenge is to bring younger people into the sport,” she said. “Our used-motorcycle base is a great way to get them in.
But some Harley fans—including one Harley salesman—say the price of a new Harley deterred them from buying one. John Call, 31 years old, has sold Harleys at a dealership outside of Cleveland since 2016. In buying his first Hog last year, he chose a used 2009 Dyna Fat Bob for just under $10,000. “A new Harley isn’t really practical for me,” he said. “I’ve got a growing family.”
Harley-Davidson motorcycles tend to have long lives. They don’t wear out easily or go out of style quickly and owners tend to take care of them, making the bikes appealing in the used-motorcycle market.
Harley has struggled to lessen its reliance on baby boomers, whose growing discretionary income and passion for hobbies including motorcycle riding brought the company back from the brink of bankruptcy in the early 1980s. Now, those riders are aging and buying motorcycles less frequently. But younger riders often can’t afford as many bikes as their parents or don’t see themselves living the Harley free-spirit lifestyle. In response, the company is pursuing younger people who don’t fit the profile of a typical Harley fan: male and clad in a black T-shirt and leather vest. On Monday, Harley said it would start selling its popular branded apparel through Inc. Currently, Harley apparel is sold through the company’s website or at dealerships. Some dealers said the move could diminish foot traffic to their businesses. “We generate a lot of revenue from our general merchandise,” said Scott Maddux, a Harley dealer near Knoxville, Tenn. “It’s an important part of our business.”
Two of Harley’s new models will be dual-purpose bikes for riding on both paved and unpaved roads, a motorcycle category that is growing in popularity in the U.S. Nine will be sports bikes with racing-style body features and seating to reduce wind drag. Harley doesn’t currently compete in either of these categories.
Some dealers said they doubt customers for those kinds of bikes will one day trade up for a new, expensive Hog. Ms. Malenshek acknowledged some might not, but said Harley also needs to accommodate riders who aren’t interested in its traditional models.
“The point of all of this is bringing new customers into the brand that weren’t there before,” she said. “They don’t all want to be in the lifestyle. You can have Harley on your terms.”
The new models are also designed to attract riders overseas, where Harley wants to generate half its sales a decade from now, up from about 39% currently. Harley in June said it would shift production of motorcycles bound for Europe out of the U.S., after the European Union imposed what would have amounted to a roughly $2,200 tariff on each Hog imported from the U.S. President Trump and unions representing Harley workers said Harley was using the trade fight to justify existing plans to move production overseas. Harley said that assertion was false.
Many foreign markets are dominated by Harley’s competitors. Japan’s Kawasaki Heavy Industries , Suzuki Motor Co. and Honda Motor Co. make popular utilitarian bikes, while Germany’s BMW AG and Italy’s Ducati, owned by Volkswagen AG , make higher-priced models. Harley faces those same competitors in the U.S., too, along with a resurgent U.S.-based competitor in Indian Motorcycles, owned by Polaris Industries Inc. Harley still accounts for about half of sales of U.S. motorcycles built for riding on highways. That share has held steady in recent years even as its own sales stalled because the market for new motorcycles overall has shrunk since the 2008-2009 recession.
And some riders of used Harleys do eventually buy a new one. Sarah Pellatiro of New Kensington, Pa., bought a new Harley Sportster this year for just under $12,000 after riding a used version for three years. Ms. Pellatiro said she chose the middleweight bike over a larger, more expensive model because she was confident she could handle it in traffic after gaining experience with a used Sportster. “I got that bike right when I was still learning how to ride,” said the 32-year-old photographer and silversmith. “I don’t think I’ll ever ride any brand other than Harley from here on."


'I'm Sorry, Yvon's Out Surfing'

Quote Icon I am probably here four or five months a year, 'Chouinard says later. “When I'm here, I work hard. But when I'm gone, I am out of here. I don't call in every day.” It is a style that has been in place at Patagonia since the day it opened. “Even when we started I was gone -- climbing -- more than four months of the year. One of the advantages of starting a company is that you can do what you want to do. Quote Icon


Patagonia Catalog


Patagonia’s $20 Million & Change fund was launched in 2013 to help innovative, like-minded startups bring about solutions to the environmental crisis and other positive change through business. Or, in Yvon’s words, to help entrepreneurs and innovators succeed in “working with nature rather than using it up.” Today, we’re introducing you to one of those companies, Bureo, a fellow B Corporation and member of 1% for the Planet.




Today, over 150 people in Uganda and Peru are working, receiving education, and being mentored toward a brighter future in creating gifts that give back. The products created abroad have been well received here at home and the collaboration of our staff and beneficiaries around the globe has created a sustainable cycle of employment and empowerment. Krochet Kids is know for their products that include a tag attached with the signature of the person who made it.
Meet the ladies that made your product. Krochet Ladies

The Krochet Kids quickly grew beyond us...


College found us three friends at different schools. Although there were brief resurgences of the crochet craze amongst new friends, we ultimately began exploring new opportunities — surfing, traveling. During our summer breaks we volunteered in various developing nations, hoping to gain a better understanding of the global community in which we lived. It wasn’t long before we came to realize how blessed we had been growing up. The desire was planted within us to help. To reach out in love. To make a difference. This is their story.


Through a unique model Krochet Kids are empowering the women of Northern Uganda and Peru with the assets, skills, and knowledge to lift themselves and their families out of poverty. The result is long lasting and sustainable change. We provide a job so that women can meet the present needs of their families. We educate them so that they develop beyond the need for outside aid. We provide mentorship to help each lady plan a unique and sustainable career path for the future. Learn more about Krochet Kids



Almost one billion people worldwide lack access to glasses, which means that 15% of the world’s population cannot effectively learn or work. To help address this problem, Warby Parker partners with non-profits like VisionSpring to ensure that for every pair of glasses sold, a pair is distributed to someone in need.


Warby Parker ground rules
  • Treat customers the way we’d like to be treated.
  • Create an environment where employees can think big, have fun, and do good.
  • Get out there.
  • Green is good.
At both Harry's and Warby Parker, our teams sweat every little detail. Our product design and the look and feel of both brands communicate quality, establish our perspective on the world, and reinforce our purpose in the eyes of our customers. We never cut corners. Everything we create should be exactly the way we want it, from the physical design to the words published on our website – we want to make sure that the brand experience is consistently simple and delightful. We believe you only have one chance to make a first impression on someone, so we sweat the details to make that first impression as good as it can be. Jeffrey Raider, Co-Founder of Warby Parker and Harry's in a Pulse interview.
Their message. Our customers, employees, community and environment are our stakeholders. We consider them in every decision that we make. Learn more at Warby Parker


Fitbit logo

Get fit in style with new Fitbit Blaze™ – the smartest, most motivating, most stylish fitness tracker yet. This versatile timepiece fits seamlessly into your life with a sleek design, an enhanced fitness experience with advanced coaching, easily interchangeable accessories, and the smart features you need to stay connected.
Fitbit was founded in early 2007 by James Park and Eric Friedman, who saw the potential for using sensors in small, wearable devices. They raised $400,000 but soon realized that that wasn't enough, so they did the rounds of potential investors with little more than a circuit board in a wooden box. But the idea was good, and when Fitbit addressed the TechCrunch 50 conference in 2008, Park and Friedman hoped to get 50 pre-orders, although Eric suspected the actual number would be nearer five. In fact, in one day, they took 2,000 pre-orders.
Getting orders orders turned out to be the easy part. Neither Park nor Friedman had any manufacturing experience. As Park recalled in an interview with Jeff Clavier at the Computer History Museum: “Several times, we were pretty close to being dead. We probably spent about three months in Asia looking at suppliers, bringing up production lines.”
There were also problems with their design, the antenna wasn't working properly. “In my hotel room I was thinking this is it,” Park said. “We're done. We literally took a piece of foam and put it on the circuit board to fix an antenna problem.”
Fitbit launched its tracker at the end of 2009, shipping around 5,000 units with a further 20,000 orders on the books. Because Fitbit was selling its product directly to customers, those 5,000 units were sold with "pretty darn good" profit margins - but Park and Friedman knew that to ship big numbers, they'd need big partners. They raised more money from venture capitalist Brad Field, teamed up with Best Buy to reach four, then 40, then 650 Best Buy stores. Fitbits are now sold in thousands of retail outlets worldwide.
One of the reasons for Fitbit's ongoing success is its investment in new models. The first tracker was pretty good, but in 2011 Fitbit improved it by adding an altimeter, a digital clock and a stopwatch. That was the Ultra.
Fitbit logo
From the very beginning, one of Fitbit's strengths was its website: you'd upload information from your Fitbit device to the web so you could analyze your performance and share it with other Fitbit users.
In 2011, however, that caused a little bit of a problem: it turned out that users who recorded their sexual activity (in terms of time spent, not what they spent the time doing) were unwittingly sharing that information with the world, and with Google. Fitbit realized that "share all my stuff with everyone" wasn't the best default option, and it changed its site so that user information would be private by default.
One of the problems of being an innovator is that you can end up at the forefront of issues you might not have considered, and in the case of Fitbit one of those issues is privacy. Health data recorded by Fitbit isn't legally protected in the way normal medical records are, and that means Fitbit's data can be subpoenaed by the relevant authorities. reference: wareable
Fitbit announced on 2/21/2014 that it would recall its new Force model, after users complained of rashes and burns while wearing it. Fitbit CEO James Park says the recall was motivated by “an abundance of caution.”
Quote Icon They're very generous on their replacements. I remember when I washed my Ultra, they sent me the new One model for free. I'm now on my 3rd Fitbit One, and I only paid for the Ultra once.Quote Icon Internet blogger


Fitbit Inc. is an American company headquartered in San Francisco, California. Founded and managed by James Park and Eric Friedman, the company is known for its products of the same name, which are activity trackers, wireless-enabled wearable technology devices that measure data such as the number of steps walked, heart rate, quality of sleep, steps climbed, and other personal metrics. The first of these was the Fitbit Tracker.
On May 7, 2015, Fitbit announced it had filed for an initial public offering (IPO) with a NYSE listing. The IPO was filed for $358 million. The company's stock began trading with the symbol “FIT” on June 18, 2015.
CEO James Park is a serial entrepreneur with a passion for creating great products and companies. Fitbit is the third startup that he has founded. Previously, James was a Director of Product Development at CNET Networks, where he led product management, engineering, and design for Webshots. Before CNET, James was a co-founder of Windup Labs, which was acquired by CNET in 2005, and prior to Windup Labs, he was the co-founder and CTO of Epesi Technologies. James also worked at Morgan Stanley, where he helped develop trading strategies and software for a quantitative trading fund. James never quite finished his computer science degree at Harvard College. reference: Fortune
“While Fitbit is clearly the overall leader compared to the other fitness bands such as Jawbone, Garmin and Misfit, a lead that is continuing to grow even over the last month, in the overall wearables category where smartwatches come into play, fitness bands in general are dropping as a share of the market,” said John Feland, CEO and founder, Argus Insights. Fitbit is losing out as a part of this comprehensive wearables category with a mindshare ranking of far less than the 68-percent market share disclosed in the S-1. Says Feland, “Fitbit will need to differentiate itself more as almost any smartwatch and other wearable product out there will tell you how many steps you took and lets you share that information with your friends.”
“Fitness bands stop being useful and people lose their fitness momentum – all similar reasons as to why people quit going to the gym," Feland said. “For Fitbit to continuously grow, they will need to keep users engaged and give them reasons to buy new versions of the products. Right now our data indicate that other more comprehensive devices are taking over for fitness trackers.” Argus Insights also expects the number of “white label” fitness bands to increase in six months – just as white label tablets proliferated. “ Learn more on white-labeling. It won’t matter that the generic fitness band does not have the brand identity. It will definitely be cheaper and work almost exactly the same way.” For example visit this Alibaba site for fitness-trackers.

When a company "white-labels," it simply means that another company will be rebranding one of its products or services to make it appear as the purchasing company's own.

“To sum up,” says Feland, “we think Quarter 2, 2016 is looking weak for Fitbit compared to the other brands globally. They are especially impacted by slack demand for their smartwatch which was introduced in December. We recommend a wait and see attitude when it comes to Fitbit and their future.”
The Fitbit Surge, Fitbit’s smartwatch, had a rocky launch over the holidays when users’ reactions were extremely negative, and Fitbit is only now recovering. Improved strength with Fitbit’s watch is very important if the company wants to compete with the Apple Watch and myriad other smartwatches now on the market.
One other area where competitive pressures may come to bear, according to Feland, is in the growth of cheaper, while still adequate, white label fitness bands enabled by motion sensor suppliers like Invensense and its Sharkband fitness band reference platform. For more information about the Argus Insights Fitbit Demand Report, visit Argus Fitbit Insights
“We operate in a highly competitive market. If we do not compete effectively, our prospects, operating results, and financial condition could be adversely affected. The connected health and fitness devices market is highly competitive, with companies offering a variety of competitive products and services. We expect competition in our market to intensify in the future as new and existing competitors introduce new or enhanced products and services that are potentially more competitive than our products and services. The connected health and fitness devices market has a multitude of participants, including specialized consumer electronics companies, such as Garmin, Jawbone, and Misfit, and traditional health and fitness companies, such as adidas and Under Armour.
In addition, many large, broad-based consumer electronics companies either compete in our market or adjacent markets or have announced plans to do so, including Apple, Google, LG, Microsoft, and Samsung. For example, Apple has recently introduced the Apple Watch smartwatch, with broad-based functionalities, including some health and fitness tracking capabilities. We also compete with a wide range of stand-alone health and fitness-related mobile apps that can be purchased or downloaded through mobile app stores. We believe many of our competitors and potential competitors have significant competitive advantages, including longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio of products and services, larger and broader customer bases, more established relationships with a larger number of suppliers, contract manufacturers, and channel partners, greater brand recognition, ability to leverage app stores which they may operate, and greater financial, research and development, marketing, distribution, and other resources than we do.
Our competitors and potential competitors may also be able to develop products or services that are equal or superior to ours, achieve greater market acceptance of their products and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors may aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us. If we are not able to compete effectively against our current or potential competitors, our prospects, operating results, and financial condition could be adversely affected.” From public documents submitted to the SEC and accessed on the Edgar data base.
Fitbit relied on its popular Fitbit Charge and Fitbit Surge models to maintain its leadership in the worldwide wearables market, and also saw continued growth within the Asia/Pacific and Europe, Middle East, and Africa (EMEA) markets. Equally noteworthy has been its fast-growing Corporate Wellness strategy during the quarter, which added North American retailer Target and its order of 335,000 fitness trackers for its employees. Target joins Bank of America, Time Warner, and more than 70 other Fortune 500 companies to deploy Fitbit devices to its employees.
The big picture for Fitbit, Woody Scal Fitbit’s chief business officer said, is its evolution into a digital monitoring platform to discover and prevent health problems. Fitbit has teamed up with corporations that offer wellness programs for employees. BP, for example, offers Fitbits to more than 23,000 employees, partly to ensure they are getting enough sleep before they work on oil rigs. Mr. Scal said the data from sleep monitoring, a feature built in to all Fitbit devices, could lead to new health revelations.
Fitbit’s mission is to help people lead healthier, more active lives by empowering them with data, inspiration, and guidance to reach their goals. They design their products primarily in California and outsource the production of their devices to contract manufacturers, which are responsible for procuring most of the components used in the manufacturing of our products from third-party suppliers. They also outsource packaging and fulfillment to third-party logistics providers around the world.
Fitbit generates substantially all of it’s revenue from sales of their connected health and fitness devices. They sell their products in over 50,000 retail stores and in 63 countries, through their retailers' websites, through their online store at, and as part of their corporate wellness offering. They seek to build global brand awareness, increase product adoption, and drive sales through their sales and marketing efforts. They intend to continue to significantly invest in these sales and marketing efforts in the future.

Fitbit stock performance
Fitbit's stock performance

Fitbit has spent heavily to drive its sales growth and future product launches. Operating costs nearly tripled in 2016, causing profit to plunge 77% to 5 cents a share after the payout of preferred dividends. As a result, shares dropped about 12% in after-hours trading. “Our hope is to accelerate the pace of development that we have on the product side, and also lower the time frame in which we launch products,” said Fitbit Chief Executive James Park. Fitbit Sales Climb, but Expenses Eat Into Profit - WSJ May 4,2016
Full-year and second-quarter 2016 guidance continues to reflect the company’s planned higher investments in research and development to accelerate the pace of innovation to deepen its competitive moat; investments in sales and marketing to drive revenue from new products in 2016; and investments in consumer engagement features to accelerate the network effect of the company’s large user community, to strengthen consumers’ brand preference.
On May 19, 2016 it was reported that Coin, a startup was going out of business. Fitbit is moving to add a mobile payments feature to its market-leading line of activity trackers, but slowly. The company purchased wearable payments technology from startup Coin last week, but won’t integrate the feature into new bands until at least next year, CEO James Park told Fortune. The deal also includes intellectual property and key engineering and sales personnel from Coin, but doesn’t involve the company’s mobile wallet. reference; Fortune
tech–crunch reported on 12/1/2016 “ It looks consolidation is acoming to the wearables space with Fitbit set to acquire smartwatch maker and multi-million-dollar Kickstarter-darling Pebble, according to a report from The Information. Pebble released the newest version of its smartwatch in October, but the past year or so has been a challenging period. Fitbit, too, has experienced its own challenges. The company priced its shares at $50 when it listed on the New York Stock Exchange in 2015, but today it is trading at $8.40. That depression is largely due to less-than-impressive financial results. Some may cite the emergence of Apple and the Apple Watch as a competitor, but analyst reports have noted that smartwatch sales are tanking as initial consumer interest in wearable devices has waned.“ The problem might be that once you have one you don't need another. And, everyone who wanted one has one! Added 12/1/2016
On Oct. 1 2017, Fitbit announced two new products for its line of connected fitness gadgets: the Ionic, its first attempt at a real smartwatch, and the Flyer, its first attempt at wireless headphones. Karen Hao who covers technology for Quartz tested out both products over the last two weeks, but forewarning: This review focuses almost entirely on the Flyer, for a reason. The Ionic is basically a poor man’s Apple Watch Series 3, which was unveiled last month. If you can afford the Ionic—currently selling for $299.95, you can probably pony up $29.05 more to get the Series 3. It does almost everything that the Ionic does—including heart rate tracking, music storage, and payment support—in addition to so much more, including messages, Yelp, Google Maps, tons of other apps, and voice commands through Siri. For an extra $70, you can also buy a version of the Series 3 with a built-in LTE chip that can make phone calls on its own. Read the entire review here: Fitbit’s hope for the future

Fitbit's Financial Results 2015 and 1st Quarter 2016


Income Statements/ Statements of operations show the companies performance over a period of time.


View here: Fitbit's three months results for the first quarter 2016


Balance Sheets are a company's snapshot at a moment in time. View Fitbit's Balance Sheet for 2015 here: FIT Balance sheet 2015
From Bloomberg “Fitbit Inc. will eliminate about 110 jobs, or 6 percent of its workforce, and said fourth-quarter results won’t meet analysts’ estimates amid declining demand for its fitness trackers. Fitbit expects to report that it sold 6.5 million devices in the quarter ended Dec. 31 2016, with revenue of $572 million to $580 million, the company said in a statement Monday. Analysts were expecting $736.4 million, on average. Fitbit forecasts revenue in 2017 of $1.5 billion to $1.7 billion. Analysts had estimated $2.38 billion. Official results are due to be released Feb. 22.” “That is a brutal miss, following on last quarter's brutal miss. As I noted then, Fitbit is in a pretty untenable position: Apple will take the high end wearable market, while Chinese competitors will take the low-end. The company's fundamental flaw has always been that wearables as accessories leaves no room for a non-Apple branded offering, but neither Fitbit nor the state of technology was in a state to create wearables that were standalone devices, at least not yet. That was compounded by the upgrade problem: if you already have a Fitbit, why would you buy another one? Clearly most people didn't.” reference - stratechery, 2/1/2017.

top / home / next