What Netflix, Tesla, and FitBit Have In Common (hint: its not tech)
Fitbit recently filed for a $358 million IPO. Yes, the fitness tracker company. The other day I overheard someone expressing shock at this. All I could do is shake my head. Not in disbelief about the IPO, but at the shortsightedness of that shock.
Back in the mid-2000s, Netflix faced a wave of competition. In 2005 Wal-mart launched and folded a copycat DVD-by-mail service and Amazon was rumored to have been ramping one up. And, of course, there was Blockbuster with their money-losing platform. All anyone could talk about was the looming competition coming to crush Netflix.
Internally we were focused on what was coming next — streaming. The long-term strategy for Netflix was to get “big on DVD, then transition into streaming” That way, when we transitioned into streaming, we would have a built-in base of subscribers. Notice that I used the word “when”. That’s because the company has always thought about what was next. As Internet speeds continued to increase it was obvious that consumers would opt for digital delivery over DVDs rented from a store, kiosk, or delivered by mail. We were always thinking about what the next five years would looke like while executing against the current plan. Strategy wasn’t accidental.
And Netflix was not alone:
- Amazon has been doing it in online sales- they proved the concept with books, then moved into other products and services including cloud services.
- Uber is doing it in the underutilized capacity space- starting with town car service, then adding peer-to-peer, and now delivery.
- Tesla is doing it in the energy space- starting with high end roadsters, then building more mainstream cars, and now transforming into an energy company.
And this is why I had to shake my head about that person’s thinking around the Fitbit IPO. Sure, they make fitness trackers now. But pick apart what that means. A fitness tracker is really, at its core, a sensor-based device. FitBit devices track and transmit all kinds of personal fitness and health data. And they’ve been making and refining them for years. Now, turn your gaze forward to the coming Internet of Things (IoT). The IoT is, at its core, everything hooked up to sensors and having those sensors communicate via the Internet and amongst each other. Estimates are that by 2020 some 25 billion devices will be a part of the IoT. So it’s not hard to see that a consumer-focused company that has a track record of selling sensor-based devices to consumers would have the long-term strategic goal of being a big player in the IoT. Which would require a fat wad of cash, the kind of a wad a company gets from an IPO.
The only question now is how relentless they are at innovation. If they only use that wad of cash for marketing then they will have missed the long-term play entirely. And I can’t imagine they would be that shortsighted.
Big thanks to Lesley Grossblatt (@LesleyK) for editing assist.