What Lululemon Teaches Us For Open Innovation Best Practices.

Lululemon recently acquired Mirror for $500M. Why do I care?

Lululemon started in 1998 in Vancouver, Canada, as a design studio by day and yoga studio by night.

In 2000 they became a "standalone store" of yoga-inspire technical apparel.

Since then we all got to know Lululemon for their durable, good fit, and great materials leggings. But there's something more boiling beyond this point.

In fact, in 2007 Lululemon became so popular that their growth took them to the point of going IPO (July 2007). And that wasn't even the peak, in 2018 they reached about $3.29 billion in revenue.

Lululemon positioned itself as:

• Great quality materials
• Durable products
• Best in the market
• Fashionable

Here my point comes, if you were the CEO of a clothing company mostly selling physical products for 20+ years growing from a design studio, what would you do next? What is the missing part of this puzzle?

And here it is, you acquire a tech company in the fitness world!

What is the next step?

Lululemon won't be a technical apparel company soon anymore - at least for what I can see from this move. But it will most likely become a tech company that offers yoga/fitness solutions through the use of technology.

Could they have achieved this by hiring 10 great engineers and put, what Mirror did, together in a few months. Well, yes, they have $3.9 dollar revenue, somewhere they will pull the funds. But at the end of the road, would they realize their product was so sophisticated like people that grew doing this since the inception? Would Lululemon be able to create something better than Mirror did? and yet still have to market it?

My personal answer is NO.

Because no matter the amount of funds Lululemon would have deployed in this endeavor, the time to market, the hassle, the distraction to main core features, and all the things we are not able to see from the outside—but that every exec of large organizations see from the inside—wouldn't have been worth it, so just buy Mirror business and technology.

Yet we are witnessing a traditional business giant starting to transition their model and focus to become part of an experience that goes beyond sewing materials together.

What does Lululemon teach us for Open Innovation Best Practices?

• Set your KPIs aligned to the mission of the company
• Enable open innovation initiatives and learnings throughout your team
• Look beyond your borderline and know the newbies in the market—the world changes and "static" businesses die
• Don't forget to provide the best experience in the market to your customers (their habits change constantly)

And while Lululemon likely is at the beginning of their open innovation journey, the start is promising. The acquisition gets completely in line with the mission the company set in 2019:

“In 2019, we detailed our vision to be the experiential brand that ignites a community of people living the sweatlife through sweat, grow and connect"

Lululemon CEO Calvin McDonald said in a statement.

“The acquisition of MIRROR is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities, and deepen our roots in the sweatlife. We look forward to learning from and working with Brynn Putnam and the team at MIRROR to accelerate the growth of personalized in-home fitness.”

Some good background to understand how the market is evolving that CB shared:

"Connected fitness has certainly become a popular sector for startup investments, as we’ve written about before. Additionally, there’s been an increase in demand for at-home fitness companies like Mirror and Peloton since the outbreak of the COVID-19 pandemic. Sales for at-home fitness equipment has soared, and gyms have also started renting out their spin bikes and other equipment to bring in revenue while they’ve remained closed. And with many people staying home, it’s not a far stretch to say there’s also likely been more people in athleisure or comfort-wear, like what Lululemon offers."

(sources: crunchbase news, reuters, lululemon)