How a Strategy Change Led to Nikeâ€™s Formation
Nike, the worldâ€™s most famous athletic company, didnâ€™t start out by making Air Jordans. In fact, it didnâ€™t make shoes at all. It distributed them.
Nike actually began as company called Blue Ribbon. It was founded in 1964 by Phil Knight, a runner from Oregon, along with his former college track coach, Bill Bowerman. At the time, the running shoe market was dominated by the German firms Adidas and Puma. However, Knight and Bowerman had become intrigued by new lighter, lower-cost running shoes made in Japan. Bowerman had always tinkered with shoe designs to try to make his runners faster. Meanwhile, Knight had just earned an MBA from Stanford University and was looking for a way to combine what he lovedâ€”sportsâ€”with work. So, the two men each chipped in $500, and began importing and selling Tiger-brand shoes (now Asics) made by the Japanese company Onitsuka.
Blue Ribbonâ€™s start wasnâ€™t glamorous. Bowerman and Knight began by selling the shoes out of their cars at local track meets. But runners liked the new lighter shoes, and the company started earning a profit. Eventually the business did well enough it was able to hire some employees, most of whom were passionate runners like the owners.
For about a decade Blue Ribbonâ€™s strategy worked well. Business grew, and the company even opened its own store in Santa Monica, California. But by 1971, the firm was facing a crisis. Bowerman wanted Onitsuka to make a lighter shoe he had designed. Onitsuka wasnâ€™t interested. Moreover, Knight believed Onitsuka was looking for other distributors to cut Blue Ribbon out of the business.
What did Knight and Bowerman do? They designed their own shoe called â€œthe Nikeâ€ and began selling it. Executives at Onitsuka were enraged by the move. They immediately stopped selling shoes to Blue Robbin and sued it to boot.
At that point, it looked like it might be the end of the road for Blue Ribbon. There wasnâ€™t much of a market for the Nike shoes yet. The company was still young and in debt, and a lawsuit would be expensive to fight.
Knight gave Blue Ribbonâ€™s employees the bad news. But instead of throwing in the towel, he laid out a new vision and mission for the firm: â€œThis is the moment weâ€™ve been waiting for,â€ Knight recounts telling them in his bestselling book, Shoe Dog. â€œNo more selling someone elseâ€™s brand. No more working for someone else. Onitsuka has been holding us down for years. Their late deliveries, their mixed-up orders, their refusal to hear and implement our design ideasâ€”who among us isnâ€™t sick of dealing with all that? . . . If weâ€™re going to succeed, or fail, we should do so on our own terms, with our own ideasâ€”our own brand.â€
After the initial shock wore off, relief swept across Blue Ribbonâ€™s employees. Not only were they undaunted by the new mission, they were energized and excited about it. Their future lay in their own hands, and they would find a way to achieve it. Immediately they began formulating new strategies and plans.
Knight thinks the culture and agility of the company were major reasons why Nike became the success it is today. Most, if not all, of its employees were scrappy competitive types. â€œEach of us was willing to do whatever was necessary to win,â€ he says. â€œAnd if â€˜whatever was necessaryâ€™ fell outside our area of expertise, no problem. Not that any of us thought we wouldn’t fail. In fact we had every expectation that we would. But when we did fail, we had faith we’d do it fast, learn from it, and be better for it . . . Taking a chance on peopleâ€”you could argue that’s what it’s all been about.â€
- Who is ultimately responsible for formulating a firmâ€™s strategyâ€”its managers, employees, or both?
- What strategy execution problems do you think Knight and Bowerman might have faced in their effort to make Nike successful?