On Running's Premium Innovation Strategy
David Alleman of On Running details how the brand leverages radical innovation and a premium positioning to challenge legacy giants. The analysis covers the shift from luxury to premium accessibility, the strategic value of physical retail, and the operational impact of robotic manufacturing.
Strategic Positioning in a Shifting Market
On Running has established itself as a bellwether for a new generation of athletic brands by rejecting the traditional luxury model of scarcity in favor of accessible premium innovation. David Alleman, co-founder and co-CEO, explains that the brand’s core strategy is to be the most premium global sports brand, driven by radical engineering and design. This approach targets the emerging "movement class," a demographic that views sports not as weekend leisure but as a central pillar of societal vitality, longevity, and mental health. By positioning health as the new wealth, On captures a market segment that legacy players have historically overlooked.
Operational Innovation and Manufacturing
The company’s competitive advantage is rooted in its ability to collapse complex manufacturing processes. The development of Light Spray technology, inspired by a simple prototype, reduced the production of a shoe upper from 200 steps to a single robotic process. This not only accelerates time-to-market but also reduces the carbon footprint by over 75%. This operational efficiency allows On to maintain premium margins while investing heavily in R&D, creating a sustainable loop of innovation and profitability.
Retail and Brand Ecosystem
Physical retail has evolved from a branding exercise to a critical financial lever. By opening stores in city centers, On plants its brand in the middle of society and creates the necessary environment to sell apparel, which cannot be effectively displayed in traditional shoe walls. This "toe-to-head" strategy ensures that the brand controls its narrative and customer experience, driving growth in high-margin apparel categories that are expanding at over 50% year-over-year.
Leadership and Future Growth
The recent shift to a co-CEO model reflects a strategic pivot toward balancing operational precision with continued innovation. As the company scales, the founder-led structure ensures that the focus remains on building the next growth engine, such as tennis and digital channels, rather than merely optimizing existing operations. With revenue surpassing $3 billion, On is positioned to define the next decade of the sports industry through a combination of technological superiority and cultural relevance.
Key insights
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The luxury market is losing consumers who seek accessibility, creating a gap for premium brands that offer high quality without exclusivity. On Running exploits this by defining premium through innovation rather than scarcity.
Impact: Brands can capture a broader consumer base by decoupling high price points from limited access, focusing instead on tangible product superiority.
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Physical retail stores are essential for apparel growth because they allow for controlled brand expression and full product display. This environment drives cross-category sales and strengthens brand presence in city centers.
Impact: Investing in owned retail channels can significantly boost high-margin apparel sales and enhance overall brand equity in competitive urban markets.
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Robotic manufacturing technologies like Light Spray reduce production complexity from hundreds of steps to one. This innovation drastically lowers environmental impact and increases manufacturing efficiency.
Impact: Adopting advanced manufacturing techniques can reduce carbon footprints and costs, providing a competitive edge in sustainability-focused markets.
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Equity-based partnerships with athletes align long-term interests more effectively than traditional cash endorsements. This model fosters deeper commitment and authentic brand advocacy.
Impact: Structuring partnerships around shared equity can create more resilient and authentic brand relationships, enhancing long-term marketing ROI.
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Founder-led leadership is critical for maintaining innovation momentum during scaling phases. It ensures the company continues to develop new growth engines rather than focusing solely on operational optimization.
Impact: Retaining founder involvement in executive roles can protect the company's innovative culture and drive sustained long-term growth.
Action items
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Reposition brand messaging to emphasize accessible premium innovation over luxury scarcity. Highlight tangible product benefits and technological superiority to attract a broader consumer base.
Impact: This shift can capture market share from luxury brands while appealing to consumers seeking value and quality without exclusivity barriers.
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Evaluate the strategic value of opening owned retail stores in high-traffic city centers. Focus on creating environments that support full brand expression and cross-category sales, particularly for apparel.
Impact: Owned retail can drive higher margins and enhance brand control, leading to improved customer experience and increased apparel revenue.
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Invest in advanced manufacturing technologies that simplify production processes. Explore robotic or automated solutions that reduce steps, lower costs, and decrease environmental impact.
Impact: Operational efficiency gains can improve profitability and sustainability metrics, strengthening the brand's appeal to environmentally conscious consumers.
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Restructure athlete and influencer partnerships to include equity components rather than relying solely on cash payments. Align long-term incentives to foster deeper brand loyalty and advocacy.
Impact: Equity-based partnerships can create more authentic and enduring relationships, enhancing brand credibility and long-term marketing effectiveness.
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Ensure founder or key innovator involvement in executive leadership during scaling phases. Maintain a focus on building new growth engines and protecting the company's innovative culture.
Impact: Founder-led oversight can prevent innovation stagnation and ensure the company remains agile and forward-looking in a competitive market.
Quotes
“We took a conscious decision to embrace a lot of risk and say, hey, it sounds crazy, but crazy is good because the night is always the darkest before dawn.”
“I think there's a new movement class coming along. Sports has moved to the very center of society. It's the last life moment. It's what brings people together.”
“We have a whole pipeline process. So probably have at any given point 50, 100 ideas what we could do. And then we have review meetings where we're basically saying, hey, what is good to go and stage gates and decide what goes down the innovation funnel.”