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Under Armour’s Rise and Fall: Cautionary Lessons for Visionary Founders

In 1996, 24-year old Kevin Plank grew frustrated changing sweat-soaked cotton shirts under his university football jerseys that weighed him down on the field. Sensing a market need, Plank pioneered a moisture-wicking athletic shirt prototype from his grandmother’s basement. Just one year later, Plank’s nascent “Under Armour” company delivered $17k in sales.

This scrappy origin story foreshadowed staggering market success for the Under Armour brand over the next two decades. By 2016, Under Armour’s annual revenue rocketed past $4 billion with its logo emblazoned on global sports leagues and superstars like Tom Brady and Steph Curry.

Yet only three years later in 2019, Under Armour shocked Wall Street by posting its first-ever quarterly loss alongside a 20% nosedive in critical North America sales. Under siege by activists shareholders, Plank stepped down that year as CEO after a 14-year tenure helming the company he crafted into a sports apparel juggernaut.

Under Armour’s sudden change of fortune echoes failures of other visionary founder-led brands. This piece analyzes the factors precipitating Under Armour’s decline, including:

• Stagnating innovation and shifting consumer preferences
• Ineffective leadership and problematic culture
• Governance dangers of consolidated founder control

Examining Under Armour’s story offers all enterprises key takeaways on balancing vision with accountable leadership to achieve enduring success.

The Explosive Growth Years

Seizing First-Mover Market Advantage

The 1990s team sportswear scene was dominated by entrenched giants Nike and Adidas, who collectively controlled over 60% market share by the early 2000s. Most emerging brands perished attempting to wrestle share from these titans.

Under Armour Charted a Different Path

Rather than directly confronting adversaries boasting billion-dollar marketing budgets, Under Armour identified an underserved niche – performance apparel for hardcore gym rats and athletes.

The company leapfrogged textile industry fabric norms by adopting synthetic moisture-wicking material first utilized in women‘s undergarments. This innovative textile formed Under Armour’s first flagship shirt product in 1996, seeded to university and pro sports teams.

Under Armour also aggressively expanded into base layers, compression gear and other performance products solving pain points for extreme athletes throughout the 2000s.

The Retail Strategy: Performance Over Fashion

Under Armour further distinguished itself by foregoing flashy lifestyle positioning or celebrity endorsements adopted by Nike and Adidas at the time.

Instead, Under Armour cultivated grassroot partnerships with high school, college and pro sports teams. It pitched its apparel as high-function “tactical gear” enhancing safety and performance. This authentic approach resonated with athletes and coaches, resulting in retail chains welcoming Under Armour as a differentiated brand.

Year Revenue YoY Growth
2000 $5M 285%
2005 $281M 496%
2010 $1B 23%

This niche traction fueled staggering annual growth above 20% over Under Armour’s first 15 years – practically unheard of expansion rates at such volume.

Maintaining Premium Brand Positioning

Instead of competing on price, Under Armour concentrated on product performance as justification for premium pricing. Under Armour’s fledgling products cost over 3X more than incumbent brands, yet its unwavering focus on innovation and quality materials established strong credibility with retailers and athletes.

This premium product and brand positioning allowed Under Armour to achieve substantially higher profit margins and retain pricing power compared to discount-dependent competitors. Limited-edition product drops further cemented Under Armour’s aura as a top performance gear producer worthy of luxury price tags.

By leveraging equity earned from its hardcore training apparel foundation, Under Armour also successfully expanded into running shoes, basketball kicks, and other footwear categories starting 2013. Footwear sales skyrocketed from $300M in 2013 to over $1B by 2016, establishing another high-margin growth vector beyond apparel.

Cracks Emerge: Missing The Athleisure Trend

Despite defying odds to unseat Adidas as the #2 US sports brand by 2014, Under Armour still only claimed half the market share of frontrunner Nike – representing substantial untapped growth potential.

However, by 2016 cracks surfaced in Under Armour’s assumed ascendance. The company failed to sustain its incredible 20%+ sales growth streak asmeasured revenue expansion dropped to a pedestrian 14%. Stock analysts sounded alarms on slowing demand in North America, still the brand’s largest market.

Fashion-Forward Rivals Resonate With Casual Consumers

While Under Armour thrived with performance athletes, the larger “athleisure” apparel trend capturing casual fitness enthusiasts passed it by. Younger brands like Lululemon, Outdoor Voices and Alo Yoga resonated more with recreational wellness crowds embracing yoga pants, hoodies and other sporty lifestyle staples for everyday wear.

Meanwhile, Adidas decisively reinvented itself from a fading relic to streetwear sensation almost overnight through celebrity designers like Kanye West and Stella McCartney. Nike likewise aligned with in-demand stylists for hot collaborations, hype-building limited releases, and influencer/entertainment marketing blitzes.

As displayed above, Under Armour lagged behind arch-rivals in leveraging lifestyle branding, bravado marketing campaigns and pop culture credibility to excite consumers beyond strictly performance needs.

Struggles Breaking International Markets

Under Armour also fumbled ambitions to expand worldwide. Its singular athletic functionality positioning failed to cross over abroad where preferences leaned more fashion-conscious than the American tendency towards casual wear.

Lacking expertise navigating disparate sizing needs and local channel norms internationally further hindered market development outside North America. As late movers, Nike and Adidas boasted too great an advantage allowing tiny export market share for Under Armour outside Canada and Mexico.

This overexposure to one region greatly magnified worries over slowing North America appetite for Under Armour gear. Ominously by mid-2016, nearly 20% of Under Armour product stock was on discount indicating cooling demand – an alarming signal for a brand built on full-price prestige.

Tech Company Pivot Exposes Leadership Shortfalls

Beset by compressed growth and early signs of waning brand heat, Under Armour moved aggressively to demonstrate continued innovation clout under founder CEO Kevin Plank.

Amidst its 2016 executive shuffle, Plank recruited flashily from Silicon Valley rather than sports apparelDomains. Theincoming COO hailed from a software background while a Chief Digital Officer was among other tech outsiders brought on to revamp strategy.

This pivot sought to reposition Under Armour as a “technology company” driving the future of athletics participation through connected devices and training platforms.

Big Bets to Capture Training Insights

Under Armour made huge technology bets acquiring MyFitnessPal for $475M and Endomondo for $85M in 2015. It gambled assimilating user data from these massive training apps would unlock product development insights and build direct customer relationships beyond retail partners.

On the product front, Under Armour unveiled ventures like its $400 internet-connected Gemini 2 Record Equipped running shoes alongside a spate of workout tracking apps like UA Record, MapMyFitness and Endomondo allegiant to its connected ecosystem vision.

This scope of aggressive initiatives would strain even mature technology project orchestrators. But frailty in Plank’s hurriedly assembled management team hampered flawless execution.

As illustrated above, Under Armour’s tech strategy leadership lacked much relevant software product or services pedigree. The new Chief Digital Officer overseeing huge parts of the business transformation hadn’t actually managedsignificant budgets or cross-functional software projects before.

Grand Vision, Poor Execution

The greatest indictment of Under Armour’s shaky digital transition was near immediate product failure when introduced to market.

Despite flashy launches, its Bluetooth-equipped Record Equipped runners and workout apps scarcely made a dent moving the revenue needle. The costly Endomondo and MyFitnessPal apps also struggled to attract new subscribers at desired clip.

Within 3 years of acquisition, user growth stagnated at MyFitnessPal necessitating a expensive platform overhaul. Worse for Under Armour’s data mining ambitions, most users refused to share their activity information.

Meanwhile the Apple Watch and wearables from specialized companies like Garmin dominated the consumer body monitoring market. Under Armour’s $1B+ investment in connected device technology yielded little but unflattering scrutiny over poor management.

Financial Reckoning Forces Changes

The full extent of Under Armour’s misplaced overconfidence in growth strategy became undeniably clear by 2018. The company closed 2017 with its first ever year-over-year decline for the final quarter. Brand heat indexes continued trending downward, evidenced by rampant discounting.

But the biggest bombshell landed early in 2018 when Under Armour reported its first full-year sales drop in company history alongside slim 3% operating margins, far below long-held 20% targets. Its CFO’s emergency departure shortly after fueled speculation of internal firefighting.

Wall Street backlash was swift. Under Armour’s share price plunged nearly 50% over two years flirting with all-time lows. Kevin Plank’s billion dollar fortune took a massive hit.

While the brand fought to cite restructuring efforts and “reset the baseline”, credibility was already damaged in the investor community. Television personalities like Jim Cramer openly voiced disgust at the company losing its way.

The Perils of Founder Omnipotence

Amidst intensifying turmoil, large shareholders and business media spotlighted Kevin Plank’s unchecked leadership style as a root cause of Under Armour’s downward trajectory.

As founding CEO for over 20 years, Plank never had to answer to an independent board of directors that most public companies installed for governance checks. He seldom faced constructive dissent typical at mature corporations, instead surrounding himself mainly with personal allies.

Former executives who departed warned of an autocratic culture where “Kevin‘s word was final”. Strategy pivots reflected Plank’s temporary infatuations with Silicon Valley innovation myths rather than consumer reality.

This founder-knows-best atmosphere also seemingly tolerated bias and questionable conduct. Under Plank, the company hosted lavish corporate events at adult entertainment venues despite prohibitions on expensing adult services. Multiple complaints of executive sexual misconduct also surfaced with minimal accountability.

Few could now separate Plank from Under Armour’s failures after decades as omnipotent chief visionary. His unwillingness to bring in strong leaders from outside his circle contributed to inadequate succession planning.

In desperation, Plank finally ceded the CEO title in late 2019 – an act many critics argued was overdue by years for Under Armour’s good.

Signs of Renewal After Leadership Change

Plank tapped company operations head Patrik Frisk as only the second CEO in Under Armour’s history. The former apparel supply chain executive and hockey player brought extensive industry experience lacking on Plank’s technology-obsessed strategy team.

Frisk entered facing a worried workforce and skeptical Wall Street losing remaining patience. He promised to rebuild sales growth and profitability through strict financial discipline, improved consumer insights, updated branding and other back-to-basics initiatives.

True to his operational orientation, Frisk bolstered data analytics capabilities to react smarter to market trends. He diversified Under Armour’s historically male-centric perspective by installing more women in leadership roles. Licensing and co-branded product deals also helped accelerate growth absent bigger turnaround timeframes.

Recent Under Armour earnings results point to early progress stabilizing downward financials, as shown above. Efforts continue shedding outdated inventory while focusing promotions on full-price newer merchandise. Direct-to-consumer sales expansion is helping offset still sluggish wholesaler demand.

While the heavy lifting towards former profit trajectories remains ongoing, a refreshed Under Armour seems ready to battle back. However, analysts debate whether founder Kevin Plank passing baton sooner may have prevented much financial underperformance and brand damage from occurring.

Key Takeaways: Build To Last By Learning From Pitfalls

Under Armour’s astonishing market ascent followed by its humbling financial troubles reveals critical lessons for companies wanting to achieve enduring market leadership.

Inject Checks on Founder Omnipotence

Provide independent board oversight and feedback channels so all-powerful founders hear more than just personal allies. Dissenting perspectives provide invaluable market objectivity.

Balance Vision Setting With Analytical Rigor

Temper ambitious visions with data-driven scrutiny on market factors and risk scenarios by independent directors and external advisors.

Know When To Cede Control

Founder transitions should gradually happen at growth milestones before business complexities overwhelm knowledge gaps. New leaders with complementary skillsets can pinpoint blindspots.

Never Rest on Laurels

Continuously stress test strategy even when winning to avoid missing tectonic consumer shifts. Aggressively evolve despite past formulas working.

Visionary founders like Kevin Plank rightfully earn king-like status for boldly building empires from scratch against all odds. However, no leader or company stays revered without remembering to treat success as a phase – not permanent ordainment.

Under Armour’s rollercoaster ride conveys how dizzying success can precede rapid collapse if blindspots proliferate across leadership, culture and strategy. But its revival prospects prove reinvention is possible when FOUNDERS LEARN FROM PITFALLS – NOT JUST REFLECT ON GLORIES.