Under Armour’s acquisition of several fitness tech companies over the past two years is a bold, multi-million-dollar bet. The sportswear retailer is hoping this arsenal will help it defeat Nike, the biggest fitness brand the world has known. But as Under Armour CEO Kevin Plank turns his workout apparel brand into a hybrid apparel-tech firm, he risks losing sight of his key advantage.
In its short existence, Under Armour has positively blitzed the fitness world, going from a one-man-operation in Plank’s grandmother’s basement to, in 2014, overtaking Adidas as the world’s second-biggest sportswear brand. Last year, the company posted nearly $4 billion in revenue. That’s still many dollars short of the more than $30 billion Nike raked in last year. To continue to grow his company, Plank has recently spent $710 million acquiring three fitness tech companies.
Under Armour isn’t the first non-tech brand to start acquiring tech startups. Recognizing that it was becoming a mobile computer company as much as an automaker, Ford bought up in-car-app-maker Livio in 2013. For years, behemoth Walmart has been snapping up tech firms of all kinds to maintain its edge. But the tech game is notoriously fast-paced and merciless. There’s no consolation prize, no second place. To win, companies must invest heavily in innovation.
Tech doesn’t reward dabblers—yet dabbling is exactly what Plank is doing. I worry that he’s not buying these companies because he’s interested in their technology or in how it improves people’s lives. He’s strictly interested in a byproduct of these tech companies: the data they collect about his customers. Plank’s strategy: defeat the Goliath that is Nike by collecting a wealth of data about customers’ workout habits.
Spending $710 million to collect a lot of data seems to me like a misguided effort—when there are many less-expensive methods to collect the same data, and that data doesn’t even give Under Armour a complete picture of its customers. According to a recent interview in Inc., Plank estimates about one-fifth of Americans have downloaded one of Under Armour’s fitness apps. Those apps help Under Armour learn when its customers work out, how often and with what intensity. The brand will even learn what its customers eat. What the company won’t learn, however, is the most important question of all: Why customers make the choices they do.
Under Armour didn’t succeed in the first place because it had access to data about millions of customers. It succeeded because it had extremely high quality data about one user: Kevin Plank. A former D-1 football player, Plank knew from experience that the cotton T-shirts he and other players wore under their pads became soaked with sweat, which slowed them down. He created a shirt that solved that problem and the rest is history.
To beat Nike, Under Armour needs more than big data—it needs to fully map the customer journey to truly understand customer motivations. Getting to that level of insight will require observing customer behavior by analyzing the massive data sets its fitness apps provide. More importantly, it will require listening to customers through other feedback channels, like culling data from call centers and monitoring the chatter on social media. Finally, and most importantly, Under Armour will have to ask customers why they do the things they do through traditional channels like surveys and focus groups, or through a curated community of engaged customers it can return to again and again.
Any sportswear company could have told you in 1995 that football players slowed down over the course of a game, that they sweat a lot and that their shirts were made of cotton. It took a player—a customer—to connect the dots and bring the insight that transformed an industry. Getting that kind of insight, the kind Under Armour can depend on to make important business decisions, is not going to happen at scale with data alone. If it thrives in its new endeavor it will be because it is observing customer behavior but also listening to what customers are saying and, crucially, asking for their insight. If the company does those three things it stands a good chance of winning in its showdown with Goliath.