Steve Kovach May 16, 2016 at 10:25AM
In 2013, famed fashion photographer Juergen Teller snapped a bunch of models partying on a Greek island. His photos showed them sipping wine on a sailboat, skinny dipping, and taking bubble baths in a marble tub.
This was not a campaign for perfume or designer clothes. Instead, it was for the $180 Jambox Mini, a new product from San Francisco tech company Jawbone, which paid a rumored $500,000 for the shoot. The campaign was timed to launch during New York Fashion Week.
But some employees at Jawbone weren’t feeling it. In addition to the Jambox, Jawbone was getting ready to release a new UP fitness tracker, which would eventually be the primary focus of the company. The concern stemmed from what seemed like mixed messaging: One product was marketed with a bunch of models drinking and partying, while the other product was supposed to help you live a healthy lifestyle. The two just didn’t jive.
At an all-hands meeting, one employee voiced those concerns to Hosain Rahman, Jawbone’s founder and CEO.
Rahman got upset with the criticism and strongly rejected the idea that the ads were promoting "unhealthy eating habits or drug abuse," as the employee had suggested claimed.
“He totally lost it,” one person who was there told Tech Insider.
Rahman later apologized for the outburst in an email to employees and agreed to look into some of the concerns, but he continued to defend the campaign. "Over tens of thousands of photos were shot for this ad campaign and I was personally involved in the weeding out of photos that were not in line with the image Jawbone seeks to convey," he wrote.
It was a brief but telling conflict. Jawbone was at the time trying to create two breakthrough products at once, and a series of missteps had led some employees to doubt whether it could follow through on either. In subsequent years, things have only gotten worse, as the company de-emphasized the Jambox and has still failed to release a fitness tracker that lives up to its own hype.
What's going wrong at Jawbone?
Current and former employees at the company told Tech Insider stories about executives wrapped up in the lofty goal of finding the next big tech gadget, while refusing to remain grounded in the reality.
The company, which has raised around $1 billion, got another lifeline in January, with $165 million in funding — which Rahman told Tech Insider shows that investors think company is onto something big. But now, as the wearables market turns suddenly gloomy, Jawbone may have one last chance to follow through on the fitness tracker it's been promising for years.
“Everyone is frustrated when you’re not shipping”
Jawbone, which made its name selling Bluetooth headsets in the late 90s and early 2000s, entered the wearables market in 2011 with an ambitious vision: a fitness tracker that you almost never take off.
Rahman told Techcrunch at the time: “It seems like a big departure, but once we start talking about the things it takes to make this whole category work, we get into things like making it tiny, having a long battery life, making it fashionable, making it waterproof, working with smartphones, having a rich, visual experience on your smartphone and making it social.”
The original UP fitness band was the first device to market that was supposed to deliver that promise.
But Jawbone quickly ran into problems. The UP band had to be removed from store shelves in 2011 because of reports it would “brick” and stop functioning after a few days of use. Gizmodo called out Jawbone for “knowingly selling defective products” in a review for what otherwise would’ve been a groundbreaking gadget. Eventually, Jawbone identified the problem and did the right thing: It stopped selling the UP and offered full refunds to anyone who bought one.
Jawbone released a new version of the UP in 2012. Reveiwers loved the design and extra-long battery life, but they complained that it couldn’t sync with phones wirelessly like competing trackers from FitBit and Nike.
The company included wireless syncing with the UP24, released in late 2013, but it was still missing key features like waterproofing that Rahman was pitching three years earlier.
That was poised to change with another product on the horizon: the UP3. Announced in the fall of 2014, the new fitness tracker was scheduled to launch in time for the holidays. A press push drew in pre-orders and promised Jawbone’s new product would be completely waterproof. Not even market leader FitBit had pulled that off.
But shortly after the UP3 was announced, Jawbone issued a product delay, citing problems with the device’s waterproofing feature.
Rahman blamed Jawbone’s manufacturing partner in China for problems with the UP3’s waterproof testing. The initial results from China showed that early versions of the UP3 were completely waterproof, Rahman told Tech Insider, which is why he says Jawbone initially ran with that messaging. But he says it soon became clear that the final iteration of the UP3 didn’t meet the waterproofing spec.
Rahman boarded a plane to China on Thanksgiving night to find out what went wrong with the testing.
“I was like, ‘Oh my God.’ The testing that they were doing was not up to par,” Rahman said of the trip.
Employees who were working on the UP3 say they spent the months between the original UP3 announcement and the product’s actual spring release trying to convince head of product Travis Bogard and Rahman that waterproofing the device was nearly impossible. Instead, they say they urged the executives to consider changing the spec to “splash proof” and get the product out in time for the 2014 holiday cycle.
The sources say Rahman and Jawbone’s SVP of operations, Richard Drysdale, were convinced they could get waterproofing to work. This stubbornness frustrated some employees, but those who questioned the strategy never felt their concerns were taken seriously.
“Their point of view had no value,” one former employee told Tech Insider.
Bogard pushed back on the notion that executives were purposefully delaying the UP3 in order to make it fully waterproof.
“There was a minimum threshold we needed to achieve,” Bogard said in an interview with Tech Insider. “We also believed it needed to still be splash- and water-resistant and in some cases it wasn’t even that. We can’t ship something if we don’t understand the dimensions of it.”
Either way, Jawbone missed the important holiday sales season and nobody was pleased.
“Everyone is frustrated when you’re not shipping,” Rahman said.
In April 2015, Jawbone finally launched the UP3. Confusingly, Jawbone also launched a new flagship wearable, the UP4, at the same time. Both devices were only “splash-proof” and missing features at launch, like respiration, perspiration, and passive heart rate monitoring. The sensors for those features were included on the UP3 and UP4, but they would have to be unlocked with a software update later.
Why so many problems?
Several former Jawbone employees described a chaotic product testing environment, where devices were being fixed and tweaked practically up to the date of their launches. The constant changes made it difficult to plan marketing or retail partnerships for the new devices; no one could land on a clear concept of what they were supposed to do. Others said it was difficult to push ideas for new features through to upper management.
“It discouraged the employees,” one person who worked at Jawbone said. “We couldn’t make things happen because they would just say ‘Yeah, we’ll put it on the roadmap.’”
Bogard, the product head, blamed the testing hiccups on the fact that Jawbone was attempting to do something that had never been done before. Jawbone’s ambitious goal, he explained, was to make a consumer tech gadget that was worn 24/7 and could withstand day-to-day wear and tear.
Bogard also said employees were often testing early versions of the products that were at least a generation behind what was being produced in China, so the bugs they reported were often ironed out by the time the next version arrived.
Rahman and Bogard both told Tech Insider that they had learned a lot from past mistakes, and that they were confident the company would avoid them in the future.
Falling behind
During all of these product hiccups, Jawbone’s biggest competitor, FitBit, started running away with the fitness wearables category. FitBit was able to snap up as much as 34% of the wearables market by 2015, according to research firm IDC, while Jawbone only took 4.4%. FitBit would eventually go on to have a very successful IPO. In the latest market share report from IDC, Jawbone doesn't even rank among its rivals in wearable technology.
Jawbone employees who witnessed Fitbit’s rise say Rahman ignored the competition and always claimed something bigger and better from Jawbone was on the horizon.
“There was a sense of dismissiveness [about FitBit],” one former employee said.
Rahman admits it bothered Jawbone employees to watch FitBit’s rise, but he says he wasn’t indifferent towards what his competitor was doing. He believed FitBit had an inferior product and didn’t want to put out one with similar features if Jawbone couldn’t accurately track what it wanted to.
For example, Rahman says FitBit went to market with a product that couldn’t accurately measure heart rate. Jawbone could have done the same, but Rahman wanted to wait for the technology to mature first.
“We made a decision, and I stand by that, to not launch something that’s not going to be accurate,” Rahman said. “I think that ultimately in this category that will be the thing that wins.”
After the messy UP3 launch, Jawbone needed a recalibration. In May 2015, it made a flashy hire. Sameer Samat, one of Google’s VPs in charge of commerce, was brought on to help Rahman run the company day to day and make everything run smoothly.
Under Samat, Jawbone went through a hiring freeze and layoffs to streamline the company’s structure. The company was gearing up for a relaunch of sorts for the UP3 and UP4 for the 2015 holiday season. The plan was to pitch the products as fully capable, finally unlocking all those dormant sensors on the wristbands.
“There was a collective sigh of relief when he came on,” one person who worked with Samat at Jawbone told Tech Insider. “It was clear he was going to make the hard decisions necessary in order to straighten out this company. He was very clear in his explanations … People rallied.”
Jawbone’s products did make some progress under Samat. For example, Jawbone was able to unlock new features in the UP3 and UP4 like automatic sleep tracking and passive heart monitoring through software updates. It also launched a redesigned version of the UP2 fitness tracker with a more stylish clasp.
But that was about it. There were still sensors in the UP bands for measuring respiration, perspiration, and more that hadn’t been unlocked through software updates. Rahman said he hired Samat to sort through the potential capabilities of the UP bands and decide which ones the software team could help execute. Yet Samat wasn’t around long enough to fully realize those ambitions.
The planned holiday 2015 relaunch never happened, and Samat was out of the company a few months later, lured back to Google with what sources say was a multimillion-dollar package and the promise to possibly run the Google Play store.
The glitches and delays ended up being costly for Jawbone. They caused the company to go through two crucial holiday seasons in a row — 2014 and 2015 — without any major new products. Jawbone was forced to rely on venture capital funding to keep moving as opposed to revenue generated from product sales.
The next big thing?
Now it’s crunch time.
With its new round of funding, there’s more pressure than ever for Jawbone to turn things around and create the breakthrough wearable it has been promising for years. For obvious reasons, Rahman couldn’t talk about future products, but he pointed to the fact that Jawbone’s investors have seen what’s coming and were impressed enough to whip out their checkbooks and give the company a $165 million cushion.
Without getting into specifics, Rahman teased that Jawbone is uniquely capable of making wearables useful and exciting again by including medical-grade health monitoring, which he says will be a key differentiator over other products.
“I think there’s going to be a convergence towards medical-grade signals that are telling people real things about themselves,” Rahman said. “I think there’s a consumerization of that kind of medical-grade thing happening.”
Rahman also said Jawbone spent over three times as much as FitBit did on research and development, which he believes will set Jawbone up for future success.
“We’re one of two companies in the space that has a chief medical officer,” Rahman said. (The other is Apple, which is also said to be thinking about clinical-grade sensors in future versions of the Apple Watch.)
Not everyone shares Rahman’s optimism for Jawbone’s future, however. One person familiar with the business called the $165 million round a “survival package” and said there was little chance Jawbone could pull off a “miracle” before running out of money.
Another headache Jawbone will have to face is its legal battle with FitBit. The two companies went to court on May 9 over a trade secrets dispute.
Jawbone alleges that FitBit poached employees from Jawbone and stole its intellectual property. If Jawbone gets its way, FitBit might be banned from importing its products into the US from its overseas manufacturing facilities, which could give Jawbone an immediate advantage.
But that doesn’t seem likely to happen. On April 29, the court ruled that it won’t look at any of Jawbone’s patents that were originally part of the dispute, greatly diminishing the chances that FitBit’s products will face an import ban. Even if Jawbone wins the case, it’ll have to deal with a lengthy appeals process from FitBit before any FitBit products are banned, according to one person familiar with the case. In a statement, a Jawbone spokesperson said the two patents that were thrown out "represent only a portion of Jawbone's case against FitBit" and planned to appeal the ruling.
Either way, this will be a pivotal year for Jawbone. Its best shot is to do something it has repeatedly struggled with over the years: Come up with a hit product that works.
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Jawbone has been promising a breakthrough fitness tracker for years: insiders reveal why it keeps falling short from Business Insider: Steve Kovach
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