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the $8 billion garden hose

Published 5 months ago • 1 min read


Hey so I found this $8 billion business that battles Nike and Adidas.

The founder used a garden hose for an early edge.

Then tennis star Roger Federer blew up the brand.

Here’s how On Running disrupted the crowded footwear category:

In 2010, a 6x Swiss Ironman athlete grabbed a garden hose.

And he realized the shape could offer cloud-like cushioning.

He grabbed glue and hacked together the first version of “On Cloud” running shoes.

Today, On does over $1 billion in yearly sales and worth $8 billion.

Here are 3 contrarian ways they got there:

1) Just Build It Better

Most new companies are terrified of competition.

But what did On Running think of Nike, Adidas and Puma?

"I always felt there wasn’t room for another running shoe. But there was for a different running feel.”

The founders never worried about competition.

Because they had a unique insight:

Every legacy company tried to maximize performance.

No one cared about cushioning or comfort.

So On built CloudTec to delight a customer’s feet without destroying performance.

In 2010, their first model won an ISPO award as an outstanding sports product.

It’s stupidly simple. But On proves you can win with by building a better product that delights customers.

Other examples:

  • Apple did smartphones better than Palm Pilot
  • Southwest Airlines did low cost US flights better
  • Google did search better than Yahoo

2) Dominate a “Small” Market

Every runner needs shoes.

So how is that a small market?

On stayed laser-focused on Switzerland.

And today owns 60% of the Swiss market.

This follows Sam Altman's framework for tech startups:

“Find a small market in which you can get a monopoly and then quickly expand.”

Swiss runners have a natural bias to buy from a local brand especially for a superior product.

Today, the United States is the largest market for On. But the momentum from monopolizing a smaller market was an early unfair advantage.

3) Distribution Jet Fuel

In 2019, Roger Federer emailed the founders:

Can we get dinner?”

A few weeks later, Federer became a co-entrepreneur and investor.

One year later, sales 3x'ed.

The future of brand partnerships is not a 5 minute ad read. It's 5 year relationships backed with equity.

The proof:

And Roger Federer with On.

Today, Federer reportedly owns 3% worth almost $250 million.

Go crush the week,

Chris Hladczuk

How I Think

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