130 Part One Organizations, Management, and the Networked Enterprise
INTERACTIVE SESSION: TECHNOLOGY
Smart Products, Smart Companies
If you don’t use a smart product yet, you soon will.
Your shoes, your clothing, your watch, your water
bottle, and even your toothbrush are being rede-
signed to incorporate sensors and metering devices
connected to the Internet so that their performance
can be monitored and analyzed.
What difference does that make? Take Nike,
the world’s biggest sports footwear and apparel
company. Nike has created a series of information
technology–based products and an ecosystem of
gadgets and services built around measurable per-
sonal improvement through exercise. The Nike+
ecosystem links Nike’s corporate computer system
to smart devices such as the Nike+ SportWatch
GPS, the Nike+ FuelBand, and the Nike+ Running
App on Apple and Android mobile devices. This
enables Nike to analyze individual performance
and activity data collected by the devices to help
users train and work out more effectively. It also
adds value to Nike products and a reason to stay
with the brand.
The Nike+ SportWatch GPS keeps track of your
location, pace, distance, laps, calories burned, and
(with the Polar Wearlink+) heart rate. The Nike+
Running App tracks your route, distance, pace, calo-
ries burned, and time using your phone or another
Nike-partnered device, giving you audio feedback
as you run. The Nike+ FuelBand activity tracker is
worn on the wrist and used with an Apple iPhone or
iPad. The FuelBand enables wearers to track their
physical activity, steps taken daily, and amount of
calories burned. The information it collects is inte-
grated into the Nike+ online community and phone
application, allowing wearers to set their own fitness
goals, monitor their progress on the device LED dis-
play, and compare themselves to others within the
Nike community.
Nike’s proprietary software turns all tracked move-
ment from Nike’s smart devices into NikeFuel points,
which can show achievements, can be shared with
friends, or can be used to engage others in competi-
tion. NikeFuel is Nike’s universal way for measur-
ing movement for all kinds of activities using a
metric that enables comparisons—no matter what
height, weight, gender, or activity—to past perfor-
mance, another person, or a daily average (which
Nike defines as 2,000 Fuel points.) Users of multiple
Nike+ devices can visit the nikeplus.com site to
access all their data—including lifetime NikeFuel
points accumulated from all their Nike+ devices.
Nike is developing other fitness technology prod-
ucts to integrate with Nike+. The more people mea-
sure their activity with NikeFuel, the more they are
locked in to the Nike ecosystem and the harder it
will be to switch to other companies’ products. Nike’s
integration of information and technology into its
products keeps people coming back to Nike’s own
website and apps.
Nike believes technology is revolutionizing its rela-
tionship with consumers, turning it into a company
that provides services as well as products. In the past,
when you bought a product, that was the end of the
relationship with the company. Now, the purchase
of any Nike product has become the beginning of
the company’s relationship with the consumer. The
deeper the relationship, the more consumers will
embrace and stay loyal to the Nike brand.
Under Armour, noted for performance clothing
using technologically advanced material, is mak-
ing its products smarter as well. The company has
spent $710 million to scoop up mobile apps such
as MyFitnessPal, MapMyFitness, and Endomondo,
which enable it to tap into the world’s largest digi-
tal health and fitness community. Under Armour
can generate revenue from in-app ads, including
ads from other companies, and purchases from app
users referred to its products. The platform deliv-
ers unprecedented depth of information and insight
about fitness-and health-oriented consumers, creat-
ing numerous opportunities for Under Armour and
other brands to engage with potential and existing
customers. For example, MapMyFitness collects data
about a user’s name, e-mail address, birth date, loca-
tion, performance, and profile if the user connects to
the app using social media. Under Armour does not
sell identifiable personal data about individuals to
third parties but does provide advertisers with aggre-
gate information about app users. Under Armour
is hoping that daily use of its smartphone apps will
build stronger ties to customers that will lead to
stronger sales of its own apparel, footwear, and other
athletic gear.
Under Armour has teamed up with e-commerce
retailer Zappos to send users a pop-up notification
when their sneakers need replacement, based on
workout data logged in MapMyFitness apps. Under
 Chapter 3 Information Systems, Organizations, and Strategy 131

Armour sees clothes themselves eventually becom-
ing the means to track movement and biorhythms.
Under Armour developed its own smart footwear
called UA SpeedForm Gemini 2 Record Equipped,
which tracks a runner’s time and date, duration, dis-
tance, and splits without the need for other devices.
The company also partnered with HTC to develop UA
HealthBox, a $400 red box that includes a Wi-Fi scale
(for measuring weight and body fat), a heart rate
chest strap and removable sensor, and a shower-proof
dimpled fitness band to track workouts and sleep.
The data these devices collect are stored on an Under
Armor Record app on an iPhone or Android phone.
Gatorade, with a 78 percent share of the $7.21 bil-
lion sports-drinks market, is developing a microchip-
fitted “smart cap” bottle that communicates digitally
with a bandage-like sweat patch to provide athletes
and fitness buffs constant updates on how much
they should drink. According to Gatorade, individual
hydration needs differ, with sweat loss ranging from
half a liter to more than two liters per hour of exer-
cise. The company is planning to launch as many as
a dozen different formulas for electrolytes and carbo-
hydrates in small pods that snap on to bottles.
Gatorade began testing the smart-cap bottle with
Brazil’s national soccer team ahead of the 2014 World
Cup and is testing a new version with the Boston
Celtics basketball team and FC Barcelona soccer
squad. In the field-tested prototypes, flashing lights
tell players when they need to hydrate. Users can
customize the smart caps with their name, team
logo, and number.
According to Xavi Cortadellas, Gatorade senior
director of global innovation and design, personal-
ized nutrition and integrating technology in sports
are the next frontier of performance. Gatorade’s
parent company, PepsiCo, is actively attempting to
expand into areas outside of sugary sodas, and such
technology-enabled products provide opportunities.
Sources: Kate Taylor, “Gatorade Is Developing a ‘Smart Cap’ That
Keeps Track of Hydration,” Business Insider, March 21, 2016; Mike
Esterl, “Gatorade Sets Its Sights on Digital Fitness,” Wall Street Jour-
nal, March 10, 2016; Edward C. Baig, “Under Armour and HTC
Team Up on Connected Fitness,” USA Today, January 5, 2016;
www.underarmour.com, accessed April 20, 2016; www.nike.com,
accessed April 19, 2016; John Kell, “Why Under Armour Is Making
a Costly Bet on Connected Fitness,” Fortune, April 21, 2016; and
Jared Linzdon, “The Rise and Fall of Wearable Fitness Trackers,”
The Globe and Mail, January 5, 2015.

CASE STUDY QUESTIONS

1. What competitive strategies are the companies
discussed in this case pursuing?
2. How are information technology and smart prod-
ucts related to these strategies? Describe the role
of information technology in these products.
3. Are there any ethical issues raised by these smart
products such as their impact on consumer pri-
vacy? Explain your answer.

views the firm as a series or chain of basic activities that add a margin of value
to a firm’s products or services. These activities can be categorized as either
primary activities or support activities (see Figure 3.9).
Primary activities are most directly related to the production and distribu-
tion of the firm’s products and services, which create value for the customer.
Primary activities include inbound logistics, operations, outbound logistics,
sales and marketing, and service. Inbound logistics includes receiving and stor-
ing materials for distribution to production. Operations transforms inputs into
finished products. Outbound logistics entails storing and distributing finished
products. Sales and marketing includes promoting and selling the firm’s prod-
ucts. The service activity includes maintenance and repair of the firm’s goods
and services.
Support activities make the delivery of the primary activities possible and
consist of organization infrastructure (administration and management), human
resources (employee recruiting, hiring, and training), technology (improving
products and the production process), and procurement (purchasing input).