ZEO is a sleep tracking product that provided online tracking history and advice regarding sleep patterns. The service operated for about five years then terminated services and closed the business. The CEO cited the business model was problematic and not sustainable. The CEO's remarks struck a cord with me as I used the ZEO product as well as the Fitbit product and others such as Withing's products too. My experience with these products and services as well as knowledge I have built in these blog postings combine in ways that may indicate business advantage.
I have included the article directly in this posting for quick reference. I also want to direct readers to the Art of Profitability posting for some background in what I am about to discuss. My purpose is not to second guess ZEO's leadership but instead to explore alternative ways of looking at this problem set. The overarching objective is for the service and product to be profitable.
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| Figure 1: Withings Aura |
ZEO Folds Under
In the article, the CEO cites commoditization of the service and device as a major contributor to ZEO challenges but the real issue was the business model. According to the CEO there were only two options; 1) A SAAS-like business with recurring revenue streams or 2) place all business performance into a single unit sale (Orlin, 2013). The CEO may have been a bit myopic. Business models are nice-to-have but they do not make money. Profit models on the other hand are how a business makes money.
There are only 25 profit models that detail how a business makes money. Therefore, ZEO is not constrained by the business models but instead the profit models. Business models differ from profit models as business models are more about the operational design rather than the profit design. Understanding how a company makes money is more important than attempting a business design, a common mistake. For example, the auto industry makes money using the installed based profit model. The auto makers attempt to increase the numbers of vehicles in operation in order to profit from repair costs as well as secondary and tertiary after markets. The size of
the installed base, numbers of vehicles sold or in operation,
establishes the value the automakers can sell rights to manufacture the
parts and provide services in the aftermarket. The business model is a central supplier of the installed base to independent and company owned dealerships who in turn sell to the install base and provide services to the market.
Using more than one profit model is common in the business model. Returning to the automaker example, Brand profit is also employed. The market has loyalist to the brand. Another profit model is the multi-component profit in which people accessorize the vehicle with fog lamps, leather seats, spoilers, etc... The automakers have figured this out and carefully designed the business model around the profit models. The ZEO product is good but perhaps incorrectly approached. Let me explain as a user of the product and business minded person.
ZEO was perhaps focused too strongly on a customer solution profit solely selling services to monitor peoples sleep patterns. In my case, sleep had been one issue in a host of concerns. While generally in good health, I had joined a local fitness club and was self-monitoring a breadth of vitals having purchased the Withing BP-100 blood pressure collar (Image 1), the FitBit activity tracker (Image 2), WiFi scale (Image 3), and the ZEO sleep monitor (Image 4). I was also using software that tracked my exercise more more intensely than FitBit. I found the iTouch app Runtastic served my purposes best (Image 5). Like ZEO, Runtastic provided improved accuracy and detail over the FitBit.
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| Image 1: Withings BP-800 | Image 2: FitBit | Image 3: Aria WiFi Scale |
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| Image 4: ZEO Sleep Tracker | Image 5: Runtastic | |
In addition to the products and focused services offered, I also sought a means to manage all the information collected. Most of the competitors offered a website and premium services but only their products were serviced for electronic uploads. Everything else was a time consuming manual entry. Likewise, the Veteran Administration's myHealtheVet website, Image 6, offered a feature for vital readings in which the products collected some of the data but again it was all time consuming manual upload. Commercial services were available for collating the information but were often costly and again required manual entry.
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| Image 6: My HealtheVet Website Application |
Looking at this broader picture than a niche market, ZEO was not much different than other services in terms of the business model. ZEO offered higher quality and accuracy than other sleep trackers. Speculating, the sleep tracking niche may be a smaller market than the other niche markets. Although the CEO indicated it was growing. Each of these niche products stand alone may achieve slim profit margins. The ZEO CEO was of the mindset the ZEO product and service had commoditized which is one of the greatest fears of a CEO. However, if viewed from a broader market perspective, these products and services are really profit enhancers to the broader health maintenance market. With this in mind then other profit models begin to become more viable.
One profit model that is attractive is SwitchBoard profit which is one stop shopping for complimentary products and services. The switchboard would hover around consolidation of information feeding blood pressure, activity, weight, and sleep tracking data into a comprehensive view. Supply point control would be achieved using brand saturation of the service in which websites like MyHealtheVet rebrands the service on their site. Microsoft uses this profit model leveraging Open Systems Interfacing with their operating system becoming the dominant operating system in the marketplace. As healthcare companies, insurance, hospitals, and clinics readjust under the healthcare reforms opportunities are abound for a health maintenance provider to develop a switchboard profit opportunities.
Many of the niche services remain focused on 'what they do good'. ZEO was an excellent sleep tracker. Runtastic is an excellent exercise tracker. Fitbit is good at weight and activity tracking and Withings is good at blood pressure tracking. None of these are Block Bluster profits. However, they do fit into the Profit Multiplier/Enhancer profit model. Anyone of these niche markets can set up a portal that has Application Programming Interfaces for the other dissimilar niche products that could enhance their own product and sales. For example, sleep problems are often in combination with other events. Hypertension, lack of exercise, weight, and other issues can cause sleep problems. Tracking these collateral details could improve sleep. Also by rebranding the online services into insurance and healthcare provider websites could also provide additional revenue streams.
Specialty Product profit is possible through branding the devices and services as approved by healthcare experts or certified by industry experts or insurance companies for healthcare monitoring. This adds value to the product increasing the earning potential.
Field Force Morale profit is another model that can increase revenue streams. ZEO could create a swarm of evangelist who build local community groups and socialize the product. For example, many returning veterans have sleep issues for a variety of reasons. The Veteran's Administration may use the product non-medically as a means of tracking sleep regularly having the data loaded into their Track My Health site. Veterans may meet in groups to discuss their sleep issues where the product is socialized.
Overall, ZEO has the potential to toe into a greater market but may have prematurely exited. The project manager should facilitate the ideation process for the CEO seeking to build the business case and options. One approach the project manager should use is to pull together a tiger team in order achieve breakthroughs in thought that disrupt the marketplace and create opportunities for profit.
In conclusion, ZEO should rethink market position of their service and product. The product is good and has merit among older folks and veterans who have sleep issues. The market can be expanded when thought of as a profit enhancer.
Sleep Tracking Startup Zeo Says Goodnight
By Jon Orlin
One of the early pioneers in the Quantified Self movement has quietly gone out of business. Zeo, a leading maker of hardware and software used by consumers to track sleep and improve their health, has not been operating since the end of last year. A trustee has nearly completed the sale of all company assets. Zeo has been very quiet about the news up until now. In fact, Zeo’s website is still up and doesn’t mention the news.
Zeo was founded by three students at Brown University who had a passion for using the science of sleep and technology to improve people’s lives. The company introduced its first product, the Zeo Personal Sleep Coach, in June 2009.
The following week, the first article mentioning the term “Quantified Self” was published in Wired magazine. While the article didn’t mention Zeo, it did claim “a new culture of personal data was taking shape.” And that every facet of life from sleep to mood to pain was becoming trackable. “Even sleep – a challenge to self-track, obviously, since you’re unconscious – is yielding to the skill of the widget maker.”
In 2011, the widget maker Zeo introduced a mobile version to its Sleep Manager product line. By wearing a special headband, with sensors to measure electrical current, the Zeo could track different phases of sleep, such as Light, Deep and REM sleep, in addition to awake time. This data was then sent to an iPhone, iPod, or Android phone, and could be automatically uploaded to a personal and private online sleep database. This data along with some analytical tools could then be used to help improve your sleep and health.
What Went Wrong
Former CEO, Dave Dickinson, who lead the company for the past 5 years, tells TechCrunch the problem was not the brand or the product. In fact, the company was growing before it shut down.
Dickinson says the problem was the business model. “The business model is more important than the brand. Consumer health devices are a very capital-intensive business. You have to find enough money to address the consumer, funds to address the physicians, and also the retailers, and that’s up and above the device business having to fund inventory.”
Zeo had two business model options on the revenue side. Become a SAAS-like business with subscriptions and recurring revenue or make enough money from a customer who bought just one unit. But that was very difficult when the company started pricing its mobile product at $99, with ‘sub-optimal’ profit margins.
The Newton, Massachusetts-based company had raised more than $30 million over eight years. Dickinson says raising capital was not the problem.
Sleep Tracking As A Commodity
Another problem for Zeo was that sleep tracking became a commodity. Devices like the FitBit, lark, and Jawbone Up use an accelerometer to determine sleep and awake cycles, using wrist actigraphy. These products brand their products as sleep trackers just like Zeo.
Dickinson says Zeo had peer-reviewed scientific studies, including one published in the Journal of Sleep Research, showing his technology was 7/8th as accurate as data from the a sleep lab, considered to be the gold standard for measuring sleep. The study also says data from wrist actigraphy to measure tiny motions in devices are much less accurate. But that didn’t seem to matter for enough consumers.
The Competition
Dickinson says he admires what the Fitbit and others like it have done. Those devices are not limited to one health issue like sleep, which was another problem for Zeo. Those other products work for different health and wellness areas, such as the well established desire to lose weight and become physically fit. Consumers already spend billions of dollars to achieve those goals. And they are already educated and motivated to improve their weight and fitness.
Part of Zeo’s business model required it to educate the consumer on the importance of sleep and how sleep awareness and data can improve your health. Arianna Huffington, Editor-in-Chief of the Huffington Post, our AOL sister site, has been a crusader on the importance of sleep to your health. But according to Dickinson, “sleep is still lagging behind as important to your wellness. So in that respect, Zeo was early in terms of its mission.”
The Product
I used the device for several months last year and thought it was amazing. While wearing the headband took some getting used to, for me and my wife, the data it revealed was eye-popping. In addition to learning that I wasn’t getting enough sleep, which I knew already, I learned about the different types of sleep I was getting.
Most nights, I would get a half hour to an hour of “Deep Sleep” (dark green in the chart below) after going to bed. This is the phase of sleep the helps you feel restored and refreshed.
I would also see several periods of REM sleep, important for overall mental health, mood, and the ability to retain knowledge. The bulk of my time asleep, like most people, was spent in “Light Sleep,” which is better than not sleeping but doesn’t do as much for my health as Deep or REM sleep.
I was able to see graphics like this on my iPhone in the morning.
Here’s a good night with a sleep score of 90 out of 100 and more than 8 hours of sleep.
here’s a bad night, with a score of 47 with just 4 and a half hours of total sleep.
If I woke up in the morning during REM sleep, it was hard to get out of bed. If I didn’t get enough Deep Sleep, I didn’t feel I had a good night sleep.
Zeo claimed the real value of the program was I could get personalized online sleep coaching. But this required logging in to the website and entering more information about my sleep and other variables I wanted to track. If I could have entered the data right on my iPhone, I would have likely used it more. Since it required logging in on the website, it proved too much friction for me.
I also stopped wearing the headband after a while because it does feel a bit awkward. The former CEO says the company was aware the device was too invasive for some customers.
But if a less invasive sensor was made and it was easier to enter custom data and get actionable information, I would have used it every night.
What’s Next
Dickinson can’t comment on exactly what’s next for Zeo, after all the assets are sold. But he is hopeful that there may be an opportunity for the company to re-emerge in the future.
An article appeared in the MobiHealthNews in March, that reported the Better Business Bureau had listed Zeo as being “out of business” but with no official announcement by the company, the news hasn’t been widely known.
It is still possible to log-in to Zeo’s “My Sleep” site that contains your sleep data. An article on the Quantified Self website today tells users how they can download their data in case the site goes offline.
As word about Zeo’s status has spread, Dickinson says they have received tremendous support and inquires from all over the world from disappointed customers and sleep researchers who had planned to use the units for the research.
He wrote a post on the MobiHealthNews site last week that included some additional lessons learned. He concluded by writing “motivating behavioral change through data visualization can be very powerful, but it is more of an art than a science. We will need far more artists, user interface experts and psychologists to help make our data work harder to motivate better health.”
References:
Orlin, J. (2013). Sleep tracking startup zee says goodnight. TechCrunch. Resourced December 23, 2013 from
http://techcrunch.com/2013/05/22/sleep-tracking-startup-zeo-says-goodnight/
http://techcrunch.com/2013/05/22/sleep-tracking-startup-zeo-says-goodnight/
Slywotzky, A (2002) The Art of Profitability, Warner Business Books, New York.
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