ces 2016: the state of fitness wearables

By Brian Kane

CeS 2016: The STaTe of fiTneSS WearaBleS

author introduction: Brian Kane My name is Brian Kane and I lead the Precor® marketing research and commercial management team. As a researcher, this is a topic of strong interest to me. I have spent a great deal of time speaking to those in both the technology and fitness industry about wearables and am pleased to share with you my take on the space. I believe there is value in opinions and predictions, which do not formally represent those of Precor or Amer Sports. It is important to note that while Precor is not in the wearable technology space, Sports Tracker®, a different Amer Sports company, does have a heart rate tracker and activity tracking mobile app.

I have gone to the last two CES events on behalf of Precor and the prior six with HP® and Microsoft®. I am a product manager and strategist at my core, which should reveal itself in how I’ve approached this piece. This year, I dedicated a large amount of time to capturing the state of the fitness technology and wearable market from the perspective of the fitness industry. This is a combination of walking the trade show floor, speaking privately with experts and fitness tech partners, and attending education conference tracks on fitness technology. I’ve also separately spent a great deal of time with fitness technology companies who have reached out to Precor seeking partnerships.

introduction to CeS The Consumer Electronics Showcase® (CES) is the world’s largest trade show for consumer electronics with an annual attendance of over 150,000. There is over 1,800,000 square feet of floor space, showcasing every major consumer electronics category. Everything from televisions, luxury cars, smart home devices, and health and wellness devices can be found. Nearly every company involved in technology has a presence and for someone with a curious mind and a willingness to ask questions, it is a tech dream come true.

1

Table of Contents Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Introduction to Wearables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2What Is a Wearable? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3The Wearable Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9A Deeper Look Into Medical Wearables . . . . . . . . . . . . . . . . . . . . . . . . 12Wearables for the Coached Environment . . . . . . . . . . . . . . . . . . . . . . . 14Wearables for the Self-Coached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Five Wearable Predictions for 2016 and Beyond . . . . . . . . . . . . . . . . . 17Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2 CES 2016: The State of Fitness Wearables

introduction to WearablesIf you’ve been consciously ignoring wearables and fitness technology (I know a lot of people in the fitness industry who are), now might be the time to start paying attention. ACSM (American College of Sports Medicine®) crowned wearable technology as the number one fitness trend of 2016. Enormous sums of venture capital dollars are flowing into the broader space of fitness technology and the digital disruption of the fitness space is not a matter of if but when. For the savvy operator, these technological developments will present a new set of tools to enhance their brand promise to members.

Consider, for example, the incredible growth of the low-cost gym model. The likes of Planet Fitness®, McFit®, and Blink® appear to the novice eye to be just a modern rehash of Bally’s and low-cost operators of the past (who ultimately failed). I would argue that technology has fundamentally changed the low-cost business model and you can’t compare the two. Members sign up and manage their accounts online, group classes are delivered virtually, and at times the gym remains open with no staff. In other words, technology has become a tool which allows operators to reduce their value chain costs, enabling them to deliver a low-cost value proposition profitably.

I urge you to think of technology as a box of tools, which you can use to more efficiently deliver your brand experience (like low-cost gyms do) or enhance your points of meaningful differentiation (what makes you defensibly different). In the flurry of tech jargon, biometric «speeds and feeds» and noise, we must stay true to what makes our industry great. Our success is in our ability to provide the human component of the human body: motivation, accountability, support and community.

The fitness tech community today is driven by focusing on the body component of the human body. They take an engineering approach to solving the problems of weight change, caloric deficits, sleep quality, etc. They measure success by their ability to provide user experiences through scale and automation. Most fitness tech companies are not trying to displace the gym; rather they are aiming to change the playing field by going after the 82 percent of U.S. adults who aren’t gym members at all (higher than most other developed countries).

3

What is a Wearable?The technology industry definition of a wearable device is any piece of technology you wear on your body, including headphones, electronic watches and GoPro® cameras, when attached to clothing. It’s important to understand this broader definition because many industry reports will speak to the growth of wearables and include every category in the chart below (and possibly more). When I speak to gym owners and trainers, the conversation is always around fitness-related wearables: activity, fitness and heart rate monitors, smart watches and smart clothing.

Healthcare and Medical Fitness and Wellness Infotainment

Blood pressure monitors Activity monitors Smart watches

Insulin pumps Fitness and heart rate monitors Head-up displays

Continuous glucose monitoring Smart clothing Imaging products

Defibrillators Emotional measurement Smart glasses

Patches Foot pods and pedometers Industrial hand-worn terminals

Drug delivery products Sleep sensors Military hand-worn terminals

PERS Audio earbuds

ECG monitors Bluetooth headsets

Pulse oximetry

While most people use the term wearable, it’s more accurate and helpful to refer to them as sensors. At their core, wearables are a combination of sensors, combined with a power source and transmitter. To keep it simple, let’s start with the basic activity tracker (i.e. the step counter). The sensor powering the step-counting function in devices like Fitbit® trackers is the accelerometer. This sensor, which measures orientation and acceleration force, is already in use in nearly all smartphones. When you rotate your phone sideways, it’s the sensor that tells your phone to rotate the screen.


Here are some of the other common sensors and how wearables use them:

Once the data is captured, it’s just a messy stream of data points, which has to be cleaned up in order to translate the data and make it suitable for analysis and recommendations. At a conceptual level, the wearable must decide whether to do this processing on the device or allow the mobile phone / cloud app to transform the data. Either way, an algorithm is applied to determine what the activity was (sleeping, walking, running, etc.) and refine the raw data to be more accurate.

This point is worth noting because the algorithm accuracy is a key driver of wearable accuracy. A large number of data models are needed to account for the differences in our physiology. In this area, the bigger players have a distinct advantage. As you acquire more user data, your data models get better, allowing you to more accurately measure biometrics, predict activity type, etc.

Sensor and Medical

Accelerometers

GPS

Optical heart rate monitor

Galvanic skin response sensor

Thermometer

Ambient light sensor

UV sensor

Notes

Digital is better than analogue; three axis is more precise than two axis; sensors can vary in sensitivity

GPS is one of the most power-hungry sensors, which is why most smart watches rely on the phone for GPS

Used for heart rate tracking and variations in heart rate (which can indicate level of exhaustion)

Often used to measure exertion and determine whether the exerciser broke a sweat

Used for exertion and quality of sleep calculations

Helps save power by changing light setting at night

Particularly valuable for outdoor hardware

How Wearables Use It

Counting steps

Mapping of outdoor activities including terrain / altitude

Heart rate, heart rate variation

Level of activity based on sweat level

Level of exertion based on body temperature change

Time of day

Avoidance of sunburn

What It Measures

Orientation and acceleration force

Coordinates based on high-frequency radio communication with network of 29 satellites

Fluctuations in blood flow captured by an LED and optical sensor

Electrical connectivity of the skin

Skin temperature

Levels of visible light

Levels of UV radiation

5

The Business of Consumer WearablesRoughly 10 percent of adults and 20 to 25 percent of gym goers own a wearable (which doesn’t necessarily mean they are actively using the device). The market is doing well in aggregate, but is still a novelty for most. There are a variety of small data applications where wearables are fulfilling consumer expectations, but overall they have been a disappointment.

2015 was not a great year for wearables. While industry leader Fitbit achieved business success, they effectively dominated the basic consumer market looking for a strong brand with a well-executed retail presence. This is the weight-loss seeker looking for something, anything, to give them some positive momentum. However, their abandonment rate remains high (over half of consumers stop using their Fitbit after six months) and the overall experience remains static and lacking the behavior modification consumers want. Wearables have also been successful with physically fit consumers looking for a symbol of their active lifestyle and a way to geek out on metrics (still a novelty).

Is the basic tracker the iPod® that no one needs anymore because they have an iPhone®? This is the question I am now hearing as the conversation shifts to Fitbit versus Apple Watch®. For someone who wants to count steps or capture roughly accurate heart rate, the smart watch is the long-term solution. As battery life extends to at least a week and designers figure out how to make the smart watch viable, the pressure on basic activity trackers will be massive. At a previous company I worked for, many of the research fellows believed that the smart watch would take over the smartphone market entirely and be the only smart device you needed. In their vision of the future, you could beam content to dumb displays around you when you needed more screen real estate. I wouldn’t go so far as to predict that vision of the future is just around the corner, but I will say that the days of basic trackers selling for $99-plus are numbered.


Wearables outlookIf you read trend forecasts from the likes of IDC® or Gartner®, you will see a rosy picture, especially as their definition of wearables tends to be quite broad. Having been in the tech space for close to a decade now, I believe that those sources tend to get emerging technologies wrong. As an example, one year tablets were projected to overtake PC shipments within the next five years, but the next year tablets were a niche. I’ve seen it with inductive charging, near-field communication, 3D televisions, and many other categories. I am now the curmudgeonly old man who prefers to go with what I see and hear from those in the space. At CES in 2015, I counted over 60 booths that featured some type of wearable device. This year the amount roughly halved. Heavy mergers and acquisitions, shrinking of venture capital funding in wearables, and the commoditization of sensors and hardware have made wearables an unappealing space to enter.

To phrase my skepticism as a question, where does the value lie within the wearable value equation? The initial gold rush of wearables bet on the hardware itself, treating a wearable like a cell phone case or other accessory. Component chips, reference designs, and contract manufacturing is easy to come by, so the barriers to entry for creating a wearable device is low. Precor has been approached by OEM partners who are willing to sell to us the equivalent of a basic tracker for well under five dollars. If you have a strong brand, distribution, and design team, there is an immediate appeal, but spoiler alert: we have no plans for a Precor wearable.

Most wearables get it wrong by not realizing that the value is in the data itself, more specifically the ability to transform the data into intelligent behavior modifying insights. Basic sensors are already commodities, so the category winners will have to have a data first, hardware second mentality, which is no short order. The capabilities needed to deliver behavior-modifying recommendations is entirely different than a consumer hardware product.

I’ve listened to dozens of executives of large tech firms speak about the promise of combining hardware, software, and services. From my perspective, this sounds like a pitch for a restaurant that is great at Mexican, Italian and sushi. The culture, skill set and capabilities needed for each are so different that few could pull it off. Companies tend to, rightfully, focus on the critical path associated with their revenue stream, which means they choose not to focus on other areas. Being great at retail consumer electronics, a mobile app and data science is by its very nature difficult to pull off.

For wearable companies, the risk of betting on hardware is the risk of competing in a commoditized space where, at best, you will match or slightly outpace overall industry averages in profitability. On the other hand, building the capabilities needed to deliver data-driven insights requires dollars, attention and headcount to be taken from somewhere else. Hardware-driven companies struggle to make this shift because there is seldom a clear financial picture of the benefits of incremental investments in software, data science or cloud offerings.

7

Nearly all wearable companies today financially rely on the sale of the device itself and have no recurring services revenue post-sale. The entire «smart» industry is in this predicament. Most Internet of Things (IoT) companies, including wearables, are focused on solving smaller problems like unlocking your door with your phone, tracking your steps per day, turning down your thermostat when you are out of the house, etc. These small problems are small data problems and don’t offer enough value to justify a monthly or annual fee. This leaves financial success relying on advertising revenue, sponsorships and charging others companies (with user permission) for access to the data, all of which are difficult to build a business around.

In order to justify recurring revenue, products need to provide solutions to larger problems, which requires machine learning and big data. If I have ten smart devices in my home, I›ll likely be willing to pay for a smart digital advisor who detects them all and makes recommendations I can approve or reject, leveraging the small data capabilities of each. For fitness tech, I›ll pay once the tech can deliver proactive coaching and recommendations that lead to a state of total wellness. Data by itself is just an ingredient. Step tracking, calorie tracking, sleep quality and stress levels are flour, yeast, salt and water in isolation. Combined and cooked, they become something edible – a loaf of bread baked for me just the way I like it.


The totality of our physiology, personality, life circumstances and motivation makes the challenge a formidable one. I believe the most under-reported CES story was Under Armour® working with IBM® Watson to see what insights can be gained from over 100 million active users across UARecord® (MyFitnessPal®, Endomondo® and MapMyRun®). This is a potentially tectonic event or an epic miscalculation of the intersection of artificial intelligence and an inherently social creature – the human being.

As one CES panelist put it:

PredictionsMy not-so-bold prediction is that the majority of wearable companies will focus on the easiest options available in their pursuit of differentiation. Today, this is fashion. Hiring a couple top-notch designers to take a basic bundle of sensors and put some bling on it is relatively quick and easy, and will provide good short-term results. It’s a simple story to tell and sell. Another path is to focus on small data problems for small segments, the niche play, and create devices for specific sports, medical conditions or user types (pregnant women, babies, pets, etc.).

My bold prediction is that the majority of wearable companies will shutter their big data efforts and double down on their consumer hardware core. They will choose to maximize their on-shelf assortment, promotion and branding, while deferring the real value-creation opportunities to the fitness cloud companies. The winners in this space will be the ultimate category winners because they can provide unique and defensible differentiation.

“It remains unclear if there is a point where automated insights and recommendations can provide value. Many believe that the personal interactions trainers, nutritionists and workout buddies provide are needed. Exercisers ultimately need confidence, motivation and inspiration.”

9

The Wearable StrategyThe strategy for consumer wearable companies is built from the strong consumer core they have established. Their pitch to non-consumer customers is “your employee/patient/user is either already a customer of ours or wants to be” (awareness and intent). The target markets for consumer wearable companies are, in order of priority:

1. Retail (brick and mortar, e-tail, direct) The strong consumer interest and excitement made Fitbit the number one downloaded mobile app on Christmas in the U.S. The capabilities needed to win with consumers are their core capabilities (securing shelf space, retail merchandising, strong packaging, generating consumer interest, etc.) and as long as the consumer sees a compelling value proposition, they are positioned for success. With the decline of other categories (physical media, computers, point-and-shoot photography), retailers are eager to see the consumer health category succeed, so they will give consumer health products precious shelf space, circular ad space, and sales rep focus.

2. Corporate Wellness Insurance costs for companies of all sizes continue to rise, which has led to a boom in employee wellness programs. Getting employees moving more, eating better, and reducing their insurance claims is the basic goal. Driving overall worker productivity is also a focus, especially for companies with a large core of knowledge workers. Subsidizing wearables is one of the easiest options for a wellness program and companies like Fitbit have done extremely well selling them in the hundreds to tens of thousands to companies. Most programs will provide minimal results, but the buzz and sheer size of the space will keep performance strong.

3. Medical The medical opportunity is purely about economics. With the “size of the pie” at 17 percent of the U.S. GDP and growing, there’s simply too many medical opportunities to ignore. With the growth of remote patient care, preventative healthcare and shifting medical visits towards value (versus frequency), this is an investment for the future. The opportunity is worth the bet, despite the massive volume and variety hurdles: data accuracy, (in)ability to make clinical decisions from data, how data (doesn’t) flow within medical records systems, government regulations, medical billing, etc.


The Wearable Where-not-to-Play ChoicesRetailers, corporate wellness and medical are all logical where-to-play choices for wearable makers. But what about gyms, weight-loss companies and all the real-life people who are often the key variable in someone’s wellness journey? The simple answer is that most of these where-not-to-play examples are service providers who rely on reoccurring revenue events based on the relationships they form with customers. Today, most wearables rely on the sale of hardware as their sole revenue event.

The long answer is that the fitness and wearables industries exist in parallel but rarely engage with one another. Both acknowledge the same problems, namely increases in obesity, sedentary lifestyle, stress, poor diet, preventable chronic illnesses, and the opportunity to take good athletes and make them great. Both have a shared desired goal: to help people live healthier and happier lives. They just disagree on how to help people get there.

Fitness companies believe that relationships are everything. For many of them, fitness technology gets put into the same bucket as new equipment types, group exercise class formats and training innovations. Fitness is a dynamic and constantly changing industry and, for a gym owner, these innovations are all potential tools to compliment the services they provide their members. They believe that behavior

11

changes require support, encouragement and personalized instruction, which requires coaching. Group and personal training is second only to membership dues as a revenue source for most clubs for this reason. Training can be expensive (sometimes overpriced), but it has consistently produced results for decades.

Fitness tech companies believe that technology can provide personalized coaching and recommendations based on biometric capture, large data sets and machine learning. They see gyms as a delivery mechanism for activity and a key data input opportunity for the data models they are building. As one panelist puts it: “Gyms are a gatekeeper and stakeholder in the user experience of the exerciser.”

While there is a fringe fitness tech community that sees gyms as nothing more than dumb boxes (i.e. a large space with equipment “leased” to members), nearly everyone I spoke to were members of gyms themselves and viewed gyms as an opportunity, not a threat. Put another way, fitness tech companies are not aimed directly at the pie gyms compete over, but are after a far larger pie they can service through the scale and efficiencies of digital disruption.

I have now been to three fitness events where the wearables situation was compared to the disruption of music, and I think the comparison makes sense. Digital music (including illegal downloads) expanded the user base of music and actually drove sales of concerts, vinyl records and merchandising to new heights. In other words, once someone has established a habit of music, they are more likely to pursue music experiences. Replace music with fitness and the statement still holds true.


a Deeper look into Medical WearablesU.S. healthcare topped three trillion dollars in 2015 and accounts for 17 percent of our GDP. For context, in 1970 it was 7 percent of our GDP. This size and growth is not economically sustainable, so there are growing efforts to reduce wasteful spending. One education session panelist estimated that 20-30 percent of cost is wasted due to the inefficiency of the in-person care model. This has resulted in a tectonic shift in how healthcare providers are paid.

Within the Affordable Care Act (“Obamacare”) is a significant change in how care providers are compensated. Rather than focusing on volume (number of visits) the focus is now on value (getting the right diagnosis and treatment the first time).

Another key strategy to reduce costs is remote patient care. The ability for healthcare providers to diagnose and treat patients outside of the hospital is a rapidly growing space. Many estimate that remote patient care will grow to 10 percent of total healthcare expenditure within the next five years. This is especially true for patients with chronic illnesses such as diabetes, high-blood pressure, etc.

There is a clear market split for wearables in the medical space. Let’s call the top third clinical grade for clinical decisions. If you are modifying someone’s dosage of medication, diagnosing a condition, or doing anything you could be sued over, the biometrics captured have to be clinically reliable. In this category, wearables have over-promised and under-delivered. The nurse might ask him or herself: Is my patient using an accurate blood pressure monitor? Did they put it on correctly? Can I trust the measurements?

13

The middle third we will call care-giving. With many medical conditions, the burden of care falls on the care-giving team, which is often neighbors, children, and friends. Wearables provide strong value in this segment where they are able to provide data related to specific conditions. By measuring the vitals of someone with a particular condition, you can predict when they are likely to have a fall, why they feel worse in the mornings, or if the doctor should be called. Imagine the product here being a kit of wearables and assorted tech for a specific medical condition, with the patient and immediate care-giving team being the customer. In aggregate, the care-giving team cares most about the action they need to take. As much as possible, they want to see if:

1. There may be a problem.

2. There is a problem.

3. There is a critical problem.

The bottom third is the consumer-grade equipment, primarily for preventative healthcare. Wearable companies desperately await the day when a doctor can prescribe a wearable tracker to a patient, but don’t hold your breath waiting for this one. Fitness wearables vary dramatically in accuracy, capture metrics not approved for use in clinical diagnosis, and are often redundant with what a doctor can see through other vitals or their years of experience. As one doctor at CES put it:

“I’ve got a waitlist for the entire day in my waiting room right now. If you just give me a massive dump of data on a patient I saw six months ago, I have no interest in seeing it unless I trust it, which I don’t, and if it›s directly tied to my compensation.”

The opportunity is challenging for many reasons. I had a long lunch with a medical tech company and there was a lot of head shaking and long sighs. These are the top challenges I remember from our conversation:

1. Consumer wearables are not accurate enough for clinical decisions.

2. Doctors don’t find most data from wearables useful and aren’t compensated to review it between patient visits.

3. The electronic medical records system is built on varying standards and data flows poorly through it, by design. Big data insights require big amounts of data, which requires data flow. This sounds fairly obvious, but is a commonly overlooked challenge.

4. Privacy concerns remain high. Patients are especially leery about what data is shared with their insurer (and employer).

5. As with consumer wearables, medical wearables remain focused on data and often overlook the human touch. A huge driver of healthcare cost is at the end of life of a patient. Isolation is a key driver of inactivity and recidivism. Replacing human interaction with sensors and video conferencing could make this problem even worse.


Wearables for the Coached environmentThe business of sports is a fascinating one. With deep roots in military tactics and strategy, it’s the ultimate competition, where you seek to exploit the slightest advantage you hold over your opponent to achieve victory. The pressure and stakes are massive and teams are seeking any tools that can help them maximize the potential of their players. Sports technology, including wearables, is being used to enhance the coaching experience both during the playing season and off-season.

“The most important thing in coaching is relationships. They don’t care how much you know until they know how much you care.”

This was a direct quote from a former NFL® quarterback (with a Super Bowl ring) who was on one of the sports tech panels. This sounds exactly like what I hear from personal trainers, as well any other type of coach (physical therapist, nutritionist, etc.). All of these technology tools are just that – tools to enhance coaching. The ways the tools are being used include:

Training the right Skills for the right Position The path to victory for a team begins at the individual player and position. Each athlete must go out and win their match up. The best position coaches are able to train their position players to maximize the techniques that will best position the player for success, best simulating in practice the physical requirements needed to perform in the game. Wearables are being used as a tool to provide measurements and immediate feedback to players. For the coach, it’s about focusing on the right measurements for that position, which could include speed, strength, coordination, adaptability, recovery, endurance, flexibility, mobility, etc.

15

reducing injury rates and reducing recovery Time Coaches are able to reduce injury rates of players by developing a training strategy that pushes their athletes in the right areas of skill development, while choosing not to focus as intensely on others. It speaks to the classic quote “mules work hard, thoroughbreds work smart.” By training athletes smarter, coaches don’t have to push them to the brink of over-training and exhaustion, thereby reducing injury risk significantly.

extend the Playing Careers of elite athletes Can you imagine if Michael Jordan had played another five years? A lot of sports science junkies think that the advancements in sports technology could have made this possible. Father Time will always win out in the end, but through training and playing smarter, our best athletes can play longer. When you measure a player’s physiology, you know how much and how hard you should be playing them and are able to craft training strategies specific to that player.

Making Great athletes elite Elite athletes possess the physical abilities of the great athlete as well as the mental ability to “see the game” differently, which stems from their ability to consume and process data quickly and make the right decisions. This leads to consistent performance under pressure because “the game slows down” for them. The opportunity for sports technology is in how data is presented to the athlete, versus what data is presented. We all have different learning styles and one athlete will respond strongly to data dashboards while another is visually driven.


Wearables for the Self-CoachedI firmly believe that wearables will struggle to change people’s behavior. It’s the ongoing challenge that gyms, the weight-loss industry and smoking-cessation companies face. The great news for wearables is that there is incredible appeal for those who have already established a habit of activity and simply want to participate in their activity more effectively. This isn’t for your Couch to 5K® or Biggest Loser® exerciser. This is your marathon runner, casual skier or weekend kayaker. The tools being used by the elite will trickle down the value pyramid to the roughly 30 percent or so of the population that is active in some capacity.

Consider these two pitches for mock products:

Nearly 70 percent of runners are injured each year. Learn to run better with the smart shoe, so you can keep on doing what you love: running.

Tired of being stuck on the blue square slopes? Learn how to improve your posture, turn better, and step up to the black diamond slopes with the ski trainer boot and app, which provides real-time feedback and coaching.

For gyms, the opportunity is in bridging outdoor activities their members participate in with indoor training that enhances or compliments the activity of choice. For the member who is an outdoor runner, imagine the value of a run assessment, performed on a treadmill already in your club. All you need is a phone or tablet, sensor to place on the shoe and some basic training. You could then build this into a program that includes regular run assessments, group outdoor runs, race day nutrition advice, and more.

I will go so far as to say that this is one of the greatest untapped opportunities for gyms. In the U.S., for example, a good percentage of the population (approximately 12 percent) engages in an active lifestyle but doesn’t go to a gym. If you can provide an experience that enhances their activities of choice, you have a high-value member prospect: someone who has already established a habit of physical activity.

17

five Wearable Predictions for 2016 and Beyond1. The wearable becomes the invisible.

The size and costs of wearable hardware will decrease, making the economics of “put some sensors in ______” feasible at scale. The wearable will blend into everyday objects like shirts, bras, jewelry, pills you can swallow and even tattoos. This will begin with sport-specific and high-end product lines and migrate into mass-market products and prices.

2. No big sales without big data. Those who deliver on smart coaching and personalized behavior modification will reap the most rewards and hold the keys to the castle. Those who bet on their hardware will be relegated to sector-average financial performance and likely be consumed by a larger commodity hardware provider like Lenovo® when they flat line and their investors want out.

3. Fitness technology focuses more on social sciences. Behavior modification can’t be approached as an equation of just modalities, calories and biometrics. The human sciences (psychology, sociology, etc.) must be taken into account. Furthermore, the impact of human-to-human connections can’t be understated. We will realize the limitations of algorithms and machine learning and shift to a blended model of community and analytics.

4. Sport-specific wearables become a necessity for athletes. The small data implications of immediate and actionable biometric feedback are a strong use case for wearables, especially for those who engage in a specific sport or physical pastime. Those who are naturally competitive or drawn to analytics will fully embrace these type of solutions.

5. Google® makes a big play in the digital health space. Google has become the dominant mobile player with over 80 percent of mobile share through their brilliant expansion of Android®. A market saturated with commoditized hardware players struggling to provide a data-driven experience is the perfect alignment for the world’s leading internet player.

It is only a matter of time before they see the opportunity to apply their cloud and analytic capabilities to the wellness challenge. To date, their approach has been largely that of an aggregator, which leaves the data at the ingredient level. Personalized recommendations based on aggregated profiles of similar users is exactly what Google provides in other businesses, so the question is not if but when.


Concluding remarksIt was not long ago that the wearables section at CES was a small aisle of a small hall, tucked away from all the hot devices of the day. The wearable company booths are now large, plentiful and in prime real estate. The big consumer electronics conglomerates all have their wearable sections as well. In rapid time, fitness wearables have emerged, grown exponentially and tapered off.

Wearables, however, have not truly arrived. They remain in an awkward adolescence, still trying to figure out what they want to be when they grow up. I fear that many fitness tech companies are saying the right things (throwing out buzzwords like “smart coaching” and “personalized recommendations”) but not committing to the investments needed to become big data companies.

For gyms, wearables and other fitness technologies are tools that can meaningfully enhance coaching. We have talked about total health or holistic wellness for decades, but few have delivered. We are now at a time when we can capture nutrition, sleep, stress and activity. When combined with the knowledge and personal touch of a coaching staff, there is an incredible, untapped opportunity for total wellness programs.

For the more standard gym business model, wearables provide data that can enhance coaching experiences. Today we think of this as one-to-one and possibly small group training, but that’s not good enough.

19

I believe the future of gym monetization is menu-based, where members are given a range of options to choose from. Today the only item on the menu at many gyms is a $100 steak (i.e. one-to-one personal training). Small-group training has provided another option on the coaching menu, but I think we can take it further.

8 Technology Tips for Gyms 1. Write down your values, vision and mission statement. Always consider technology options within the context of who you are, what

makes you different and why members continue to choose you.

2. A gym-branded mobile app is rapidly becoming a necessity, which is the key enabler to secondary revenue opportunities in the mobile-first world we live in. If you don’t have a website, social media page and app, you are putting yourself at a disadvantage. Members expect digitally-enhanced experiences and progressive service providers.

3. Consider an automated training system (a kiosk or mobile app) for self-guided coaching, especially for new members. Programs need to be heavily front-weighted in the membership journey to establish new-member momentum and drive retention.

4. Create experiences for micro-communities in your gym (runners, skiers, etc.) and evaluate technology based on them. In your new-member survey, you could ask what activities the member participates in outside the club. Make sure to get these members to refer their friends, who are likely to be physically active but not necessarily members, to your gym.


5. Create a goal that every member receives a coaching experience, which can be self-guided, virtual, small group, or one-to-one. Wearables should be used to enhance these offerings as appropriate.

6. If you have (or can partner with) talent in nutrition, sleep, and stress management, consider building a total wellness program, which can take advantage of wearables as an input into a total wellness plan. The key is to have a team of experts who provide a total assessment and recommendation to the client. Some of these can be partnerships with local nutritionists or experts. This will reveal the true definition of success for the client, which may have little to do with weight loss.

7. Create a wearable club within your staff, where each month participants try a different app and wearable (rotating each month). Fitness technology products are tools your staff, especially trainers, can use. It’s important to know what the tools are capable of doing before you can know how to use it in your programs.

8. Experiment with heart rate-based training options. There is tremendous growth in wearable wristbands and smart watches that capture heart rate, as well as future growth in clothing. Heart rate training provides the most personalized cardio journey achievable at scale. It is better to implement and refine programs now, rather than react when the «smart shirts» start flooding clothing rack shelves.

Precor Creed

The Precor Creed is an expression of the Precor employee culture.

i desire a life without limits.

i believe fitness is key to living the life i desire.

i believe in the power of the human spirit.

i believe the human body is an amazing thing.

i believe tomorrow will be even better because of my actions today.

i believe in the importance of doing things right versus first.

i believe in mutual respect and the overwhelming returns of sharing.

i am the heart and soul of Precor.

Precor is a brand of Amer Sports Corporation. For more information please see www.amersports.com

© 2016 Precor Incorporated. The information contained within this brochure is correct at the time of printing.Precor reserves the right to make any changes without prior notice. 15. March 2016, 3:27 PM.

Get more CeS 2016 information:

precor.com

http://www.precor.com/en-us

https://www.linkedin.com/company/precor

https://www.facebook.com/PrecorIncorporated

https://www.youtube.com/user/precorinc

https://twitter.com/precor

https://www.instagram.com/precor/