Fluent Essays

Make sure you carefully read the assignment questions • Read the entire case, jotting down your notes. • As you write your case analysis, please include appropriate references to the assigned reading within the text. • Even if there are questions associated to the case, it is a good idea to make sure to have the sections presented below (Summary, Analysis and Recommendations and References). You can name your paragraphs and section in a different way from what is proposed, but make sure you follow a similar logic.include original exhibit to support narrativesupport recommendation with data and course conceptions gopro.pdf written_case_analysis.docx Unformatted Attachment Preview For the exclusive use of B. Hu, 2019. W18458 GOPRO: THE DISRUPTIVE INNOVATOR FACES CHALLENGES1 Rishi Dwesar and Geeta Singh wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2019, Ivey Business School Foundation Version: 2018-07-30 Because it’s a small company that’s living on its innovation, GoPro’s got to try and innovate like hell or else it just dies.2 David Cray, business analyst and professor, Carleton University, 2015 On March 15, 2017, American technology company GoPro, Inc. (GoPro), once the fastest-growing camera company in the country, announced it was reducing its workforce by 270 employees. This announcement marked the third time that the company had reduced its workforce since the start of 2016.3 Also, the stock price of GoPro had hit an all-time low in early March 2017. There were several reasons for the company’s fragile condition. GoPro had launched some new products; however, analysts were skeptical about whether these products would help the company regain its lost charm and lead to the same impact it had created earlier.4 One main problem was that GoPro faced severe competition from innovative companies such as Garmin Ltd., Sony Corporation, YI Technology, Nikon Corporation, and Polaroid Corporation, which had also started producing action cameras. How did the problematic launch of GoPro’s new camera and the delayed release of its much-anticipated drone affect GoPro’s reputation in the market? What strategies could GoPro executives adopt to re-enter the market with better competitive strength, and regain the confidence of its customers and investors? Of the few options available, which should GoPro choose to bounce back in the market so that its new development would pay dividends and restore its health? INCEPTION GoPro’s history could be traced back to 1999, when a young man in his early 20s, Nicholas Woodman, started an online gaming services company, Funbug. The company soon folded after the dot-com crash of 2000–01, in which Funbug investors lost US$3.9 million.5 After suffering such a heavy loss, Woodman needed to refocus his vision, so he went on a surfing trip to Australia and Indonesia. Being a passionate surfer, Woodman wanted to capture photos of himself riding waves. While surfing and trying to capture the perfect wave moments on his Kodak camera, Woodman used a contraption he had made from a broken surfboard leash and rubber bands. This device helped him dangle a camera from his wrist for easy operation. After returning from the trip, Woodman worked for sessions of up to 18 hours at a time to build the first prototype of his waterproof camera and its required accessories.6 This document is authorized for use only by Boyuan Hu in MGT4230 FL19 New Venture Creation-Cases taught by CAROLYN BOVIARD, Northeastern University from Aug 2019 to Dec 2019. For the exclusive use of B. Hu, 2019. Page 2 9B18A049 In October 2002, Woodman created Woodman Labs, the parent company of GoPro.7 In September 2004, Woodman finally debuted his camera at an action-sports retailer trade show in San Diego.8 He then entered into a deal with a Chinese camera company—Hotax Manufacturing Co. Ltd.—to manufacture each camera for about $3, which he then sold to surf shops for $14.9 With the launch of this camera, Woodman created an entirely new product and market: the action camera. RISE OF GOPRO Initially, Woodman invested $30,000 from his own savings, $35,000 from his mother, and two $100,000 investments from his father, an investment banker. Woodman engaged his roommate and college friend, Neil Dana, as the company’s first employee. By the end of its debut year, GoPro had sold products worth $150,000. These products mostly retailed at surf shops and specialty sports retailers. Woodman would go on business trips to convince customers, while Dana phoned surf retailers across the country to sell them cameras. The duo appeared on the QVC shopping channel, which further increased their sales. In 2005, Woodman and Dana managed to sell approximately $350,000 worth of cameras.10 Woodman started targeting newer market segments, including mountain biking and skiing enthusiasts, and the company’s revenues totalled $800,000 in 2006. In the meantime, Woodman’s friends suggested he transition from film to digital; this advice led him to launch his first digital action camera, the Digital HERO. The camera had no audio-recording capability but could film 10-second videos without the need for 35 millimetre (mm) physical film.11 Then, in 2007, Woodman launched the first GoPro with sound, the Digital HERO3. Unlike previous cameras, it captured activities with unlimited video and audio.12 In 2008, the company released the Digital HERO5, a camera installed with wide-angle lenses. This camera gave its users a distinct panorama shot and could be mounted on anything from surfboards to ski poles. That year, the company exceeded $8 million in sales. In 2009, the camera market got its biggest competitor when Apple Inc. introduced the iPhone 3GS, its first phone equipped with the ability to capture 3 megapixel video; this phone posed direct competition to traditional camcorders and video cameras.13 However, for GoPro, the release of its high-definition HERO HD (1,080 pixel video at 127 degree wide-angle) meant a new market was developed. As Woodman explained, “GoPro created a new category of camera with the HD HERO back in 2009, and it’s gone on to become one of the bestselling video cameras in the world.”14 The camera positioned GoPro as the name-brand camera for unique point-of-view perspective videos. GoPro had disrupted the traditional camera industry and overtaken the mainstream market15 (see Exhibit 1). In 2010, the company earned $64 million in revenue, more than tripling sales from the previous year. According to Woodman, the company was in the right place at the right time: when smartphones were replacing traditional digital cameras, GoPro became a pioneer of high-definition cameras16 (see Exhibit 2 for total, worldwide action camera sales). In May 2011, GoPro received Series A funding of approximately $88 million through a strategic investment from five venture capital firms. In October 2011, Woodman launched HERO2, with an 11 megapixel camera and improved low-light capability. Later, this camera was upgraded by doubling the pixels, giving it more depth than previous cameras. By early 2012, GoPro cameras formed one-third of all the U.S. units shipped. In December 2012, the company was valued at $2.25 billion after it received an investment of $200 million from Chinese electronics manufacturer Foxconn Technology Group.17 In 10 years of business, Woodman Labs had advanced from selling 35mm film cameras to selling highdefinition digital video camcorders. During this decade of evolution, the company released more than seven iterations of cameras, and every new version addressed the limitations of its immediate predecessor. From 2012 to 2014, the company continued its yearly product refresh with the smaller, lighter HERO3 and HERO4; some of these cameras were introduced with screens for watching the videos after filming. This document is authorized for use only by Boyuan Hu in MGT4230 FL19 New Venture Creation-Cases taught by CAROLYN BOVIARD, Northeastern University from Aug 2019 to Dec 2019. For the exclusive use of B. Hu, 2019. Page 3 9B18A049 In February 2014, the camera maker officially changed its name from Woodman Labs to GoPro, Inc.18 In June 2014, Woodman took his business public in New York with an initial public offering (IPO). The IPO valued the company at $3 billion, which rose to around $11.5 billion, up 283 per cent on the starting price.19 By the end of 2014, GoPro was the market leader in the action camera industry, with approximately 47 per cent of market share, followed by other brands such as ION (12 per cent market share), Sony (8 per cent market share), and others.20 In 2015, GoPro launched two more cameras, the GoPro HERO LCD and the GoPro HERO4 Session, both with improved photo and video resolution; these devices incorporated Bluetooth and Wi-Fi, touch screens, and updated editing software.21 REDEFINING CONTENT MARKETING Since the debut of its first camera in 2004, GoPro’s sales had more than doubled every year until 2012. By 2013, it had become The United States’ fastest-growing digital imaging company.22 The reach of GoPro cameras was not restricted to youngsters who strapped the cameras to helmets, handlebars, and surfboards. GoPro cameras were also used by Hollywood directors, police forces, the U.S. military, doctors, and oceanographers. GoPro adopted a strategy to go from niche to blockbuster, which could be attributed, in large part, to its social media friendliness. Since 2008, the company had been marketing its cameras as mountable devices that could be attached to ski poles, car frames, and surfboards, allowing people to film themselves and produce remarkably high-quality videos. Around the same time, it became a growing obsession for people to share their most exciting—or even most monotonous—moments on social media.23 GoPro equipped people with its cameras to create and share videos that could be uploaded on various social networking sites such as YouTube, Vimeo, LLC, Facebook, Inc., Instagram, and Pinterest. Public video sites gave people a platform to gain publicity, and GoPro helped them create such content. For people who enjoyed doing extreme sports only on weekends, GoPro cameras became the easiest way to get them their own three minutes of glory. These regular GoPro customers, who wanted their moments of triumph to be recognized by others, became GoPro’s advertisers.24 Analysts believed that GoPro was innovating—not just its products but also around the products—to make them more valuable for its customers.25 GoPro created a dedicated library on its website, displaying the best content generated by its users. Customers would upload their videos, view specific playlists, or create their own favourite lists.26 GoPro also bought the rights to self-shot videos that contained unique and inspiring content. After refining these videos, the company posted them on its channel and requested its users to create emotional and impactful content to share with the world.27 A GoPro hashtag helped users categorize their content; the hashtag also helped GoPro’s social media team find new videos to upload on various networking sites.28 Furthermore, GoPro launched contests such as the GoPro annual awards, GoPro Video of the Day, and Photo of the Day to encourage its customers to upload more videos and photos, and win awards; it distributed annual awards of up to $5 million in prizes to the best content submitted. To ensure that the content was relatable to audiences, GoPro either provided stories through its videos or shared videos with surrounding stories.29 By 2013, GoPro had become the fifth-largest YouTube brand, amassing approximately 3 million views globally.30 The company’s public relations team thanked individual users for their contributions, along with advising users and answering their questions on YouTube.31 GoPro’s success on social media substantially reduced its marketing expenses and dependence on paid media. From 2010 to 2011, the company doubled its net income to $24.6 million but had spent merely $50,000 more on marketing. Similarly, in 2013, GoPro’s marketing costs increased by only $41,000.32 For its advertising and marketing, the company did not spend money hiring an art director, acting cast, or team of videographers but simply handed over its wearable cameras to amazing athletes. By September 2015, at least 6,000 GoPro- This document is authorized for use only by Boyuan Hu in MGT4230 FL19 New Venture Creation-Cases taught by CAROLYN BOVIARD, Northeastern University from Aug 2019 to Dec 2019. For the exclusive use of B. Hu, 2019. Page 4 9B18A049 tagged videos were uploaded to YouTube every day, and some 380 videos of the athletes sponsored by GoPro succeeded in garnering more than 50 million views each on YouTube.33 Moreover, GoPro became a leading brand on YouTube, with more than 4.9 million subscribers in 2016 (see Exhibit 3). GoPro entered into partnerships with more than 130 professional athletes, including Olympic snowboarder Shaun White, professional skateboarder Ryan Sheckler, and even a National Hockey League (NHL) player, who provided glimpses into the life of a professional sports athlete. Inspired by these videos, GoPro’s customers would go out with their cameras rolling to record more adventures. It was not only amateur filmmakers who started using GoPro cameras to achieve a moment of glory; even action sport-oriented companies such as RedBull GmbH used GoPro to promote their brands. GoPro partnered with sports empires such as the NHL and ESPN, which used GoPro cameras during live broadcasts. GoPro also joined with hotels such as the Marriott hotels in the Caribbean and Latin America, which offered their guests complimentary cameras and encouraged them to upload and share their GoPro adventures.34 GoPro also sponsored the GoPro Mountain Games in Vail, Colorado, which attracted as many as 3,000 athletes and 53,000 spectators each year. GoPro did not limit itself to sports activities; it also covered daily routine activities. The company wanted to sell it products to people who were living regular lives and did not frequently participate in extreme sports activities or stunts; therefore, it shared videos of regular activities, silly things, and even a few sad moments. GoPro distributed its content by keeping its audiences in mind. For example, knowing that 85 per cent of Pinterest users were female, GoPro skewed its content for female audiences, and featured videos and images of women using GoPro cameras. Rather than promoting and talking about itself directly, GoPro used user-generated content shared on its website and on social media platforms or videos created with partners such as the NHL.35 THE BIG FALL: HOW GOPRO LOST PACE WITH INNOVATION Despite being successful for almost a decade, soon after GoPro’s IPO, the bumpy ride began. Throughout most of 2015, the company saw slowing sales; analysts opined that GoPro’s inability to innovate beyond its core product line hampered growth. Around this time, GoPro also started to face competition from innovators entering the action camera market. New entrants and globally recognized brands such as ION, Polaroid, Sony, Muvi, and Panasonic, started offering action cameras. In 2012, Sony launched its own action camera, with image stabilization and stereo sound-recording capabilities, positioning it as a strong contender in the action camera market.36 In 2015, GoPro launched its HERO4 Session camera. The Session, priced at $399, was marketed as the smallest, lightest, most convenient GoPro possible for those who wanted to capture everyday moments.37 However, the pricing parity with more powerful cameras that had already flooded the U.S. market led to disappointing sales, and even Woodman admitted that the Session’s price was too high. The company lowered its price to $299. Sales still did not pick up, pushing the company to further reduce the price to $199.38 Polaroid then launched a compact camera at just $99, targeted against the GoPro Session. Another video camera maker, Graava, Inc., launched a small and attachable camera, which could edit its own footage.39 Apart from competition from camera makers, analysts believed that GoPro faced tough competition from smartphones.40 Woodman agreed that when GoPro gained publicity from its IPO, the company failed to recognize the need to revamp its marketing, and relied mostly on viral videos and word of mouth.41 During these years, the market eventually witnessed another technological innovation: drones. Drones had the ability to shoot unique cinematic footage that had previously been difficult to obtain. Since 2013, this technology had become accessible to the general population, and people started using drones in a personal capacity—for weddings, holidays, and sports. In 2014, Nixie Labs manufactured wearable drones that could This document is authorized for use only by Boyuan Hu in MGT4230 FL19 New Venture Creation-Cases taught by CAROLYN BOVIARD, Northeastern University from Aug 2019 to Dec 2019. For the exclusive use of B. Hu, 2019. Page 5 9B18A049 fly off, capture the moment, and return like a boomerang. Similarly, in 2015, a camera drone start-up, Lily Robotics, Inc., released a drone camera equipped with GPS (Global Positioning System) technology; this camera could autonomously record footage using a wearable tracking device.42 GoPro, by this time, was working with drone manufacturers such as Chinese technology company DJI and 3D Robotics. In 2015, almost 10 per cent of the total GoPro cameras sold were attached to drones.43 The nascent drone market was still in the early stages of innovation trigger, according to the 2015 Gartner Hype Cycle of Consumer Devices (see Exhibit 4), and had the potential to transform the action camera market.44 GoPro found this era a great opportunity to start manufacturing its own drone. In late 2015, GoPro announced that in the first half of 2016 it would launch its first-ever drone, Karma, against its biggest competitor, DJI’s foldable drone—the Mavic Pro. Karma would be equipped with an innovative, foldable, removable stabilization system. However, its release was postponed to the 2016 holiday shopping season. (See Exhibit 5 for a popularity comparison of GoPro HERO, GoPro Karma, DJI Phantom, and DJI Mavic.) GoPro also invested huge resources to manufacture its first unmanned aerial vehicle (UAV). The investment involved bringing in other UAV start-ups to learn to build a device from scratch, and hiring influential developers and engineers. From December 2014 to September 2016, GoPro’s research and development (R&D) expenses doubled from $46 million to $96 million. The company pushed itself to manufacture the drone before the crucial Christmas period, and finally, in October 2016, launched Karma. However, within 16 days of its release, Karma was recalled due to a fault in the design of the latch holding the drone’s battery in place, which resulted in the drone’s mid-air power failure. This design fault led GoPro to announce that all 2,500 units sold were to be returned immediately.45 Some experts argued that the rush and pressure to hit unreasonable deadlines led to Karma’s failure, while others pointed to the management personnel hired to oversee the product’s manufacture, such as Pablo Lema, who had no technical background. The Karma recall took place at a time when GoPro had already failed to meet revenue expectations for the last quarter of 2016.46 GoPro’s UAV program was a costly affair, as it was a huge investment in R&D and external human resources. In 2016, the company spent more than half of its revenue on operating expenses, which were likely to cause large losses by the first quarter of 2017 (see Exhibit 6).47 Some analysts believed that GoPro cameras were still technically far behind traditional single-lens reflex cameras ... Purchase answer to see full attachment