Vibram Five Fingers
Entrepreneurship and Innovation Strategy Mini Project
Peter Holzaepfel, Lisa Hochman & Paulina Orkisz
October 7, 2011
Value Vision
With the resurgence of barefoot and minimalist running over the last ten years, an innovative
opportunity presented itself to Vibram, the leading manufacturer of rubber outsoles. The company’s
rugged rubber outsole was the perfect foundation for a minimalist shoe – a thin rubber soled shoe with
negligible padding designed to change the ground strike pattern of the foot during running. Growing
volumes of research, yet still small in aggregate, highlighted the benefits of barefoot and minimalist
running over traditional highly padded shoes. Researchers claim that the body’s natural ability to
absorb shock when running on the ball of the foot in barefoot and minimalist conditions reduces injuries
in comparison to traditional shoes, which force runners to land on the rigid heal of the foot.1
Vibram presented its innovative Five Fingers concept to many of the OEM companies it supplied,
such as Nike, but was rebuked by them all. For an industry starved for true innovation, Vibram’s
management was surprised.2 What initially seemed like an innovation failure from the start was
repositioned into a great opportunity for Vibram. Rather than look to an OEM partner to bring the shoe
to market, Vibram vertically integrated and produced the shoe itself.
A superficial analysis of Vibram’s production decision presents a seemingly headstrong attempt
to create new value for the company. A deeper analysis of the value to its potential partners highlights
that Vibram’s decision was likely more calculated and necessary. Vibram’s proposed shoe was
contrarian to everything that the athletic shoe industry was built on. Nike and its competitors had been
building sturdier and more well supported shoes for decades. Vibram’s new design, therefore, was
likely seen as value and competence destroying for companies like Nike. How could Nike continue to
market its highly padded traditional shoes next to a minimalist shoe of its own and maintain credibility
in either market?
1
2
Jungers, William L. “Biomechanics: Barefoot running strikes back.” Nature. Jan. 2010.
Denny, Stephen. “When Competing With Your Own Customers Is OK—Vibram FiveFingers and Eigen
Values”. www.marketingprofs.com. Jul. 2010.
It is likely that Vibram adjusted its expectations for the success of its Five Fingers shoe
throughout the development and production process. What the company initially assumed would be a
huge hit with manufacturers in the athletic shoe industry was likely tempered by their disinterest in the
concept. As the company transitioned to an internal production process and an opportunity to carve
out a protected niche in the industry, its expectation for success likely surged again. What’s reassuring,
however, is that the company recognized that the shoe is ugly and controversial.3 This self-awareness
has likely mitigated internal inflation of the company’s expected success with this product. Sales of the
Five Fingers shoes have tripled every year since they were introduces in 2006. Vibram expected more
than $10million in revenue from North American sales alone in 2009.4
Mapping the Ecosystem
The company’s initial expectations developed organically. Industrial designer Robert Fliri
developed the concept for Five Fingers, and proposed it to the grandson of Vibram’s founder. The
concept was immediately a hit.5 The two men worked together to present the concept to the President
and CEO, who acknowledged this to be the right solution to mitigate knee pane and soreness prevalent
in long-distance runners. Internal consensus bred enthusiasm for the product, and initial expectations
were set without dissenting opinions. It was not until later, when the product design was finalized and
sent to manufacturers that the company faced opposition. As an outsole manufacturer, Vibram had
never taken on complete product design inclusive of an upper and mid-sole. The company was
unprepared for the challenge of selling and marketing a concept that overturned the dominant
paradigm in athletic shoe design. While a number of manufacturing partnerships were considered,
ultimately, Vibram opted to integrate vertically. This decision was a digression from previous company
3
Ibid
Cortese, Amy. “Wiggeling Their Toes at the Shoe Giants.” The New York Times. Aug. 2009.
5
www.vibramfivefingers.com
4
strategy: Vibram partners with a number of dominant industry producers to develop outsoles, but had
never before been responsible for shoe production and manufacturing in its entirety.
The decision to vertically integrate was reached after careful assessment of intermediary players
that were necessarily critical to product adoption. We’ve identified retailers, designers, company
management, third party research, and athletes as the necessary precursors to widespread consumer
adoption. In order to secure a productive niche in the market, shoe designers, upper manufacturers, and
successful material sourcing were integral components. Without each of these, Vibram Five Fingers
would be stifled. In our view, the company assessed co-innovation risk with potential partners and
deemed it too significant to proceed. Instead, the company partnered with materials manufacturers and
suppliers and pursued the project independently. By vertically integrating upper manufacturing and
outsole manufacturing, the company successfully mitigated co-innovation risk, and took control of the
entire productive value chain. By eliminating co-innovation risk the company effectively removed
barriers to timely market entry. Below is a comprehensive mapping of the Vibram Five Fingers value
chain ecosystem:
Vertical Integration
Upper
Manufacturing
Retail Outlets
End Consumer
Vibram Five
Fingers
Outsole
Manufacturing
Professional
Athletes
Vertical integration was not a universal panacea. The company was essentially extending its core
competence, and introducing a new realm of potential execution risk. Of note, the company was now
responsible for working with new materials that differed significantly from rubber used to produce
outsoles, as well as adding “fit testers,” another constituency, to the value chain process. Fit testers
were an integral part of the design process, helping to influence whether materials or product designs
needed to be changed or improved. Adding a component of the R&D process not previously required
provided an opportunity for likely delays in the product development process.
Strategic Integration
Notably, Vibram Five Fingers was developing an entirely new product, and therefore lacked
competitors. The dearth of market competition offset the need to innovate quickly; however, the
proliferation of third-party research on the benefits of barefoot running, some done at Harvard
University, was beginning to create an attractive niche, and Vibram needed to work quickly.6
As noted above, vertical integration could not be effected without challenges, and likely delays.
Entering a new area of production and manufacturing for the company would likely prove challenging,
and managing a newly extended supply chain could prove difficult. Company talent and expertise
revolved around outsole production, and the extension of the product to include upper technology
required an additional step in supply chain management, as well human resources. The accompanying
execution risk mounted, and the potential for failure of a new and innovative product exacerbated
overall company risk. Removing resources from already successful productive capabilities meant that
the stakes were higher for Vibram to succeed.
Adoption risk for Vibram Five Fingers was significant. Not only was the product new and
innovative, it sought to overturn the entire athletic shoe industry. A dominant paradigm persisted in the
industry, stressing the benefits of support and protection. Vibram’s technology turned this conception
upside-down, highlighting instead the natural functionality of the foot. In light of this fact, the company
identified a very specific market niche, and recognized that the new technology was not one-size-fits-all.
6
Psaty, Kyle. “Locally-based Five Fingers Toe-ing the Line for Vibram.” http://bostinnovation.com. 25 March 2010.
Fortuitously, the company was contacted for an already well-known spokesperson for barefoot
running. “Barefoot” Ted McDonald contacted Vibram and requested to try out Five Fingers for running.7
The conversation resulted in an agreement whereby Barefoot Ted would run the 2006 Boston marathon
in Vibram’s new technology. This stunt helped the company to gain traction in a very limited niche
market. However, it was not until the 2009 publication of Born to Run, which featured Barefoot Ted as
the main character, that runners began taking the movement seriously.
Complementary adoption risk was evident in two channels: retail accounts and athletes. The
challenge in the former revolved around convincing retailers to either add shelf space or limit space for
competing products. This was particularly difficult without credibility and a strong following of athletes
who desired the technology. Further, the challenge of acquiring retail shelf space exacerbated the
company’s execution risk. The shoes were physically different from competing products, and therefore
required on-site retail personnel and point-of-sale marketing materials to move inventory. Both of these
endeavors were new for Vibram, and required investments in marketing personnel and an educated
sales force.
The second complementary challenge was attaining athlete buy-in. While academic journals had
begun to identify the merits of barefoot running, the movement was still in its infantile stages. While
Barefoot Ted was a successfully initial spokesman, the company needed to attract more talent in order
to gain credibility. Barefoot running would likely gain more followers with prominent athletes as the
face of the technology.
In light of these challenges, Vibram was forced to reset their expectations. The combined
challenges of overturning the existing market paradigm, supply chain constraints, and acquiring athlete
buy-in proved difficult. The conversations between Robert Fliri and company management initially
7
Trent, Ron “Kicks, Icons and Inspirations.” http://www.rontrent.com. 8 August 2011.
generated a positive outlook for Vibram Five Fingers technology. However, the company needed also to
consider adoption risk, mitigate co-innovation risk, and manage internal production risk in order for the
technology to succeed.
Today, barefoot running remains a niche within the running community. Vibram never expected
the Five Fingers to overturn the dominant technology, and took steps to secure its position as the most
significant player in a niche market. Vibram’s advantage as the first-mover in the market and its
significant understanding of the kinesiology of barefoot running have proved the most significant
aspects in securing its dominant marketposition. However, new competitors, such as Vivo Barefoots,
New Balance Minimalist collection, Merrell Barefoots, and Fila Skele-toes have entered the barefoot
running market.8 While direct competition may only create greater opportunity for Vibram as more
companies look to legitimize barefoot products and increase the potential market, industry giants such
as Nike are looking to stifle the market with more traditional products that offer similar attributes. The
Nike Free shoe gives runners a flexible sole, which repositions the ground strike of the foot but provides
more traditional cushioning and design. Ensuring the dominance of its value proposition and growing its
market niche will most certainly be the greatest challenges for Vibram going forward. Vibram was
uniquely positioned to bring an innovative, performance driven product to market, but like so many
other innovatve companies before it, the maintenance of its market dominance is far from certain.
8
Ibid.