Case Study: The story of Jawbone and how a once-successful startup joined the list of failed startups

With three successful hits in the wireless technology space, a company worth billions and growing rapidly, it was by all means a successful startup – until it lost momentum.

So what went wrong?

Let’s take one step back.

We all know about Fitbits and Apple watches as health-tracking devices but this technology obviously didn’t always exist.

Jawbone was the first to go to market with these devices. This was however not the first time they were first movers in the industry, they had two successful launches previously. Jawbone’s journey is quite an eventful one as well. I mean, what are the odds of launching a brand-new idea into the market when there is no demand yet and having your product sold out within the first couple of days? Let alone getting it right twice.

So a third time seems like a guarantee right?

This is exactly what had happened to Jawbone

If I mention the following:

  • Bluetooth headset
  • Bluetooth speaker
  • Fitness tracker

And then tell you that ONE company revolutionised every single one of these as first movers in the industry, it is almost incomprehensible how such a startup could fail, right? And if you add a 16-year existence with a total of roughly $930 million investment and valued at over $3 billion at some point, you probably really start having questions.

But this is exactly what had happened to Jawbone. In the early 2000’s, two friends Hosain Rahman and Alex Asseily, paired up to develop wireless technology which was still not well-used at the time. In 2006, after having run through a couple of iterations, Jawbone produced the first-ever Bluetooth headset in the world.

It was an instant hit. It sold out within minutes. Their revenue growth was one of the fastest in the startup history of Silicon Valley. But all of this came to an unexpected halt in 2008 with a global financial crisis and recession. The company sat with millions of dollars worth of inventory that had to be sold and after trying to hand-sell these units in the likes of Costco, they decided it was time to try something else.

This time they went the route of Jambox, a wireless Bluetooth speaker.


Again, they were first to the market with the idea of a wireless speaker in a time when people were on-the-go and looking for innovative products. With cool designs and appealing to people’s love of music and being able to take it with them, it was another instant hit. And an upgrade from the MP3 speaker with the dock that was popular at the time, because it was wireless.

They got lucky yet again. Having a hit on their hands for the second time around launching new products into the market. This was risky but it paid off. Even one of the founders said it so clearly:

“The risk in innovating a new product category is, like, there’s no precedent for what you’re doing.”

At this point, you might be wondering where the failure is coming in?

Well following the success of Jambox that saved the company, they were looking for another innovative product. With all the tech they had developed, specifically for the Bluetooth headsets that used motion sensors, they figured why not use it in another way? And the UP Bracelet was born and hit the market before Fitbits, Apple watches and Garmin.

How did they decide on the viability of the product?

As per one of the founders:

“I always used to use this metric of, like, are we building something that if you left it at your house, like your wallet, your keys, or your phone, you would go back for. And that’s the bar, right? Of like, would we be able to play a role in someone’s life that was so important around solving a thing that they cared so deeply about that they would go back and get it.”

But one fatal mistake cost them their business at this point.

Developing hardware is much more intensive than software due to manufacturing and trial and error with physical products. It is even harder if you have to fit all the tech into a small space and at the same time make it comfortable to wear, such as a wristband. So they really went deep into development and testing the product, including waterproofing. Even a twist test was performed on the elastic band and everything seem to be in order before the launch.

With a good success record at this point, the team even got to do a pre-launch during a TED talk about the UP bracelet and in 2011 when they launched, they instantly sold out. Again. And sales went nuts.

So where did it all go wrong?

Two things caused their eventual downfall.

#1 A lack of understanding

I am grouping a couple of things under this heading. Soon after their launch things went pear-shaped with the device. Within a couple of days, reports of breakages came rolling in. On many devices the battery stopped working. The elastic bands broke and the founders found themselves the victims of angry customers threatening them on Twitter.

What happened?

Because this was a brand-new product, the customer behaviour was not well understood. Understandably so. And while they did their waterproof testing with the product, they used pure water and did not take into account that people wore the bracelet for long periods of time and water mixed with sweat and body oils, something they did not test. So on a very molecular level, water seeped through the seals and damaged the electronics and battery.

Although they tested the durability over time, they didn’t foresee how much people would end up fiddling or playing with the device over time which shortened the life span substantially. At a high selling price, people did not take kindly to the broken devices and their reputation started to suffer.

The founders admitted that they didn’t think about multi-week testing and more rigorous tests to assimilate customer behaviour but this was an innovative product and clearly the existing testing protocols for technology were no longer adequate.

#2 Competitors joined

At the same time, Fitbit joined the market at lower prices and since there were only a couple of options available at the time, Jawbone lost massive traction to competitors during their recall of millions of products already shipped off to warehouses across the country.

Although they were upfront and owned up to their mistakes in the public, promising to fix the issues and keeping their promise by releasing an updated product in late 2012, they lost millions with the recall and refunds to clients. If a new product hits the market and competitors join to fight for market capture, a mistake like this, even unplanned or unforeseen, impacts momentum and reputation. And in the case of Jawbone, despite fighting with everything they had left, it was not enough.

Due to millions of dollars down the drain after the recall, new production costs were high but the demand lower as a result of trust lost in their devices and competitors winning over the market with more affordable devices. Order were late or couldn’t be fulfilled at all.

They tried everything, and even received two equity offers but ended up choosing a very risky offer under pressure of the board and this was the final nail in the coffin.

In 2017 they liquidated and closed their doors.

And the lessons to be learned from this?

Let’s ask the founders themselves:

“ It’s easy for me to look back with 20/20 hindsight and say, “Oh, what we should have done is this.” I think I was frustrated. And I think it came down to being too enamored by our ability to design fancy things, and not being able to actually follow through with reliable products with good margin. Reliable products with good margin. If you do not have good margins, you cannot build a business. It’s as simple as that.”

And this was what it boiled down to. Reliable products which effectively means trust. If your customers don’t trust your company to deliver the value they paid for, it is unlikely that they will return. If they are very loyal they might give you another chance but for most products, if people struggle to use your product or keep having issues with it, you have a limited amount of opportunities to re-establish their trust before they go to your competitors.

My takeaway?

I would say that you can not afford to let your customers down more than once. They might be forgiving the first time around but you will definitely have lost a couple along the way. But fail them a second time around, they’re probably not coming back. Despite refunds.

And I will be honest, this is probably one of the biggest challenges a tech startup faces. You test and retest and launch with high hopes. You cannot expect a perfect product which is why launching with an MVP is always the way to go, so it is easy to pivot when necessary. But consumers are not very tolerant of technical glitches.

  • Getting logged out of applications (like every time MS Teams kicks you out in the middle of a meeting right!?)
  • Going through the effort of filling out field after field on a form, getting distracted or reloading the tab by accident and when you come back nothing is saved.
  • A blank page that is loading and loading … and loading.

Competitors can basically get ahead by just not having any glitches, never mind having a better offering so it has to be your number one priority.

Staying customer-focused.

Are you focusing on fixing the right things today?


Have a happy week everyone!

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