What are you running on?

Volume 5 Letter 5

As I watched the amazing shot made by Tiger Woods a few weeks ago… with the ball paused on the edge of the hole as if choreographed by Nike, I couldn’t help but think about how Nike got its start and took on some giants in Adidas and Puma.

In 1963 Phil Knight, a young man fresh out of business school and at the end of his track and field career traveled to Japan. On a whim he scheduled an interview with the Japanese track shoe manufacturer Tiger. He presented himself as a buyer representing “Blue Ribbon Sports” (a name he thought up on the spot). No one at the time could have guessed that the first $8000 shoe order would be the beginnings of the Nike Sports Empire.

Phil Knight sold his first $8000 in Tiger track shoes mostly from the trunk of his car at track meets around the country. He started working with his old track coach, Bill Bowerman, who was interested in reducing the weight of track shoes and preventing injuries. It was Bowerman who destroyed his wife’s waffle iron by pouring rubber in it and producing the first waffle track shoe sole and thus reducing the weight of the shoe sole by almost half.

In 1972 Blue Ribbon ended their association with Tiger track shoes. They were reborn as Nike (named after the Greek goddess of victory) and they introduced the now famous Nike Swoosh which was designed by an art student for $35. Nike started doing something ingenious for the time – they actively pursued promising athletes for endorsements. One of their first contracts was with Steve Prefontaine (known as Pre) who won numerous Olympic medals for the USA. He was instrumental in converting other high profile athletes to Nike shoes.

It was in the 1980’s when Nike designed its Nike Air shoes and signed a young basketball upstart named Michael Jordan that things would really take off. Later when they developed their “Just Do It” advertising campaign, it was evident that Nike was not only influencing sports culture, but culture itself.

How did a company that started from the trunk of a car take on and beat large established competitors?


    1. They focused relentlessly on developing their competitive advantage: Nike’s driving force in shoe design was Bill Bowerman who consistently strove to make a better shoe for athletes. Nike was not satisfied with today’s competitive advantage – they wanted tomorrow’s.


    1. Nike Took a competitive advantage in track shoes design and turned it into a decisive advantage in a full range of athletic shoes: Once established and dominating the track shoe market Nike put themselves out of reach of their competitors by using their R&D capabilities to better design athletic shoes for many different sports.


    1. Nike attacked its competitors indirectly: Nike did not have the resources to take on the established giants in a head to head battle. Instead they captured a market that they understood well and was underserved at the time. Nike’s R&D capabilities, relationships with the athletes and deep understanding of the needs of the sport surprised both Adidas and Puma. Nike replicated this same effort in each market they entered.


  1. Nike attacked where the competitors were weak: Adidas and Puma were still making many of their shoes in Germany out of leather. Nike had a good infrastructure in Asia and the R&D to manufacture nylon shoes giving them a huge cost advantage. They translated this advantage into lower prices for the consumer and higher margins for Nike.

Tiger Woods’s golf ball paused on the edge of the cup just long enough to let the cameras catch a shot of the Nike Swoosh. As the ball plunged into the hole and the crowd roared one had to wonder which market Nike was going to ‘Tee Up’ and dominate next.


    1. For more info see Nike History by Scott Roth www.lehigh.edu/~smr8/NikeHistory.htm


  1. From Hardball strategies interview Off With the Gloves: The Hardball Approach to Business George Stalk and Rob Lachenauer


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