“Put down that video game and….” Most Moms could find some way to fill in that sentence. “clean your room” “do your homework” “play outside”. Luckily, James Park’s Mom didn’t pull the plug on his Wii playing. Using the accelerometer in the Wii, James was inspired to create FitBit, which was valued at $4.1 billion at its 2015 IPO. Looking at the evolution of FitBit from a startup to an IPO, it’s evident that the founders followed a very Effectual path.
When the Wii came out in 2006, it got FitBit founder and gamer James Park off his couch. Not just to play, but he waited in line at Best Buy to get one of the new sets. He immediately saw the power of using technology to get people to move more. He noticed that his own physique had gotten soft after long hours of working with Silicon Valley startups and coming home to relax with video games. He thought about making the actual technology smaller, making the impact larger, and rather than taking a break from life to game, making life itself the game.
First Effectual Principle: Pilot in the Plane. The future is created, not predicted.
Putting these pieces together, he reached out to a friend and colleague of his to share his idea for wearable technology. This friend was Eric Friedman. Eric has a computer science background and had participated in both successful and failed startup efforts in the past. They had been colleagues at a previous startup venture, so they knew that they could work well together and that they had complementary skill sets.
Second Effectual Principle: Bird in Hand. Start with what you have, what you know, who you know.
James and Eric both had startup experience, Silicon Valley and Ivy League networks, and computer science backgrounds. They had the knowledge to get into a high tech business and access to resources to help them with funding and additional know-how. The pair formed the company in 2007 and set about to make a prototype of their idea. They initially raised $400,000 from their network of “friends, family, and fools”. And they leveraged connections in Asia to find suppliers to help them get a very basic model made. It had a sensor, antenna, and a circuit board jammed into a wooden case that was scotch taped together. It certainly didn’t have the sleek appeal of today’s FitBit model, but it was what they could afford at the time and it got the idea across.
Third Effectual Principle: Affordable Loss. Don’t risk more than you can afford to lose.
By 2008, the new company had managed to get a spot in a TechCrunch Conference to show off their prototype. Beyond revealing what they had made, they were prepared to take pre-orders. Their hope was that 50 of the audience members would be excited enough about the possibility to pre-order the product. At the conclusion of the conference, over 2,000 attendees had made a commitment to purchase the first round in production.
Customer purchase commitments gave them access to more funding and partnerships with larger organizations, such as Best Buy.
Fourth Effectual Principle: Crazy Quilt. Grow through partnerships obtained through stakeholder commitments.
Getting orders seemed easy for this new company. But fulfilling them was not. They’ve faced a series of manufacturing and design disasters but by using the Effectual principles of “affordable loss” and “crazy quilt”, the damage inflicted has not been fatal. In fact, James Park told Forbes magazine, that struggles “have almost put the company out of business seven times” over seven years. While FitBit hasn’t been particularly adept at turning these setbacks into advantages, they have managed to prevent them from being ruinous.
Fifth Effectual Principle: Lemonade Principle. Turn disasters into advantages.
In the Game of Wearables, Who’s Winning?
As consumers change in their usage of wearables and technology shifts, the space becomes more crowded. But James Park remains adamant that he doesn’t focus on competitors and instead keeps his sights on what customers want. He’s played the startup game long enough to know that the winner isn’t the player who comes up with the best idea, but the one that continues to execute well.
Less than a decade ago, “wearables” weren’t even a market. Entrepreneurs like James and Eric made it one.
Game on.
--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC