#nike #philknight #shoedog #LearningFromBooks #entrepreneurship #entrepreneuriallessons #lifelessons
Nike, like Apple, is one of those iconic, aspirational brands which generate a lot of pride & excitement even to those who buy and flaunt their product. How then would it be to be the creator of Nike? ‘Shoe Dog’ is an amazingly written autobiography of Phil Knight, the iconic (now 86) curator of this terrific brand.
Phil Knight made his beginning in 1962 by importing shoes of a brand called Tiger manufactured by a Japanese company called Onitsuka (now ASICS). He did this under the banner of Blue Ribbon Sports, later renamed to Nike in 1978 after the Greek winged goddess of victory. When Blue Ribbon made their humble beginning, Adidas was an established giant who had been dominating the world of sports footwear and sports apparel. Interestingly, Nike achieved the impossible. They surpassed Adidas in 1985!!
While Shoe Dog is an autobiography, abound with storytelling, which centers on Knight’s life and is not exactly written from the viewpoint of imparting business lessons, there are still many invaluable takeaways for entrepreneurs, ten of which have been listed and explained below, for entrepreneurs like us.
1) Business and Passion: A Lethal Cocktail
"In his heart of hearts, Johnson believed that runners are God’s chosen and running is a mystical exercise, no less than meditation or prayer, and thus he felt called to help runners reach their nirvana.”...Phil Knight on his full-time employee# 01 called Jeff Johnson
Phil Knight was a successful runner from Oregon. Right since his management education from Stanford, he was lured to the idea of starting a sports shoe business. He believed that running could make the world a better place.
Knight roped in his ex-coach Bill Bowerman, who also went on to become USA’s track & field coach and a legend, as his partner. All the people he initially hired – Jeff Johnson, Bob Woodel, John Bork, Geoff Hollister, and so on – were all accomplished athletes who got attracted to the idea of working with Knight & Bowerman and selling (and later manufacturing) high quality athletic footwear that made a huge difference to professional sportsperson’s performance and life. These same people later formed Knight’s core team (‘Buttfaces’ as Nike calls them) that helped him propel Nike to astronomical heights.
Before starting Blue Ribbon, Knight had tried his hands selling encyclopedias and mutual funds. He was unable to sell even a single encyclopedia. He was slightly better at selling mutual funds though he would feel dead inside. During his initial days selling Tiger shoes, most sporting goods stores outright rejected him. However, he devised a different sales strategy. He drove all over the Pacific Northwest to various track meets. Between races, he would pitch his Tiger shoes to coaches, runners, and fans. Knight sudden success at selling puzzled him. He wondered as to why be selling shoes so different? He realized he wasn’t selling. He believed in running. He believed that if people got out and ran a few miles every day, the world would be a better place.
Jeff Johnson too was an extremely passionate individual and super-passionate about running. Coach Bowerman even wrote the first-ever book dedicated to running called ‘Jogging’, which, having sold over a million copies, went on to became a best seller.
2) Stepping Out of the Comfort Zone
"How can I leave my mark on the world, I thought, unless I get out there first and see it?"...Phil Knight
Phil Knight, while pursuing his MBA at Stanford, had presented a research paper on shoes as his seminar topic on entrepreneurship. Being a runner, Phil knew something about running shoes. Being a business buff, he also knew that Japanese cameras had made a deep cut into the US (and the world) camera market, which had once been dominated by the Germans. He argued in his paper that Japanese running shoes might do the same. This run-of-the-mill assignment later evolved into an all-out obsession, which he termed as his ‘Crazy Idea’.
24-year old Phil Knight, soon after finishing his management degree in Stanford, decided to step out of his comfort zone and visit Japan to explore his Crazy Idea to fruition. He also decided to expand the scope of his trip beyond Japan and visit Hawai, Hong Kong, Rangoon, Calcutta, Bombay, Saigon, Kathmandu, Cairo, Instanbul, Athens, Jordan, Jerusalem, Nairobi, Rome, Paris, Vienna, West & East Berlin, Munich, and London. This was the time (1962) when ‘earth was much bigger’. 90% of Americans had never been on a plane. The average man never ventured farther than one hundred miles from his own front door.
Knight started by visiting Onitsuka’s HQ in Kobe, after being told in Tokyo that they would make the best partners, and made a bold pitch to them that he can be their American ambassador for Tiger shoes. After doing this successfully, he set off on a one month solo backpacking trip around the world on an extremely ‘shoe’string budget.
3) Masters of Innovation
“Inspiration (for innovation) can come from quotidian things. Things you might eat. Or find lying around the house.”...Phil Knight
Close association with sports helped Knight, Bowerman, and their team to precisely understand the needs of sportsmen.
Bowerman was an innovator. Even before Blue Ribbon/Nike, he used to customize off-the-shelf shoes for his runners. He had carried out many innovations that had helped his runners improve their performance. As Blue Ribbon’s association with Onitsuka grew, he regularly advised and guided Onitsuka management & production team on how should their products adapt to US-specific needs. Bowerman’s regular experimentation and subsequent recommendations to Onitsuka led to umpteen product improvements and innovations. He even helped Onitsuka to brand some of their products for the US market, ‘Cortez’ being one of the salient contributions.
The book quotes an interesting anecdote from Mr. Onitsuka’s early life. The inspiration for the unique soles on Tigers had come to him while eating Sushi. Looking down at his platter, at the underside of an octopus’s leg, he thought a similar suction cup might work on the sole of a runner’s flat.
Knight observed (in 1971), “Woodell and I pointed out (to Bowerman) that the outer sole of the training shoe hadn’t changed in fifty years. The tread was just waves or grooves across the bottom of the foot. There hadn’t been a single innovation in outer soles since before the Great Depression.” Bowerman more than addressed this concern by designing Nike’s waffle shoes.
On a Sunday in 1971, Bowerman was watching his wife, Barbara, make breakfast on a waffle iron when an idea struck. He noted the iron's grid-like pattern and he thought if the same pattern could be replicated on the sole of the shoe to make it sturdier. After experimenting with many substances, he finally figured it out. He swapped rubber for the batter, and the waffle outsole was born. He sewed the waffle sole to a pair of running shoes and gave it to one of his runners. It was a success. That’s how Nike got its first shoe nicknamed the 'Moon Shoe' which was made in a waffle iron.
In 1985, Nike launched its first pair of Air Jordans in the market after collaborating with the Chicago Bulls star Michael Jordan, the undisputed czar of basketball at that time, to counter the market leader, Adidas. This collaboration was insanely successful and Nike became a popular trend in the market. A new edition of the Nike shoe dropped every year of Jordan’s playing career.
4) Grow or Die
"To have cash balances sitting around doing nothing made no sense to me. Sure, it would have been the cautious, conservative, prudent thing. But the roadside was littered with cautious, conservative, prudent entrepreneurs. I wanted to keep my foot pressed hard on the gas pedal.”...Phil Knight
Blue Ribbon (and later Nike) was a hyper-growth company right since day one. They kept growing at a breakneck speed landing them into very high debts and extreme cash flow crisis every now and then. When Blue Ribbon made their humble beginning in 1962, Adidas was an established giant who had been dominating the world of sports footwear and sports apparel. Interestingly, Nike achieved the impossible. They surpassed Adidas in 1985!!
5) Power of Segmentation
“Nike was able to grow exponentially by breaking things into digestible chunks and by creating separate brands or sub-brands to represent them. If you have something that’s working, you can try to expand it, but first you have to ask, does this expansion dilute the big effort? Have I taken the thing too far? When you come to the conclusion that you have – through conversations with athletes, your own judgment, what’s happening in retail stores or focus groups – then you have to create another category.”...Phil Knight
Nike rose to phenomenal success by designing high-quality running shoes for serious athletes. The company branched out into making shoes for basketball, tennis, and football. By 1984, with revenues of USD 900 million, Nike had an estimated 1/3rd of the US footwear market. Their success ride took a major hit with Reebok’s onslaught with stylish shoes for the so-called ‘athleisure’ market. In three years, Nike’s market share fell by almost half.
Knight observed, “We are in the sports business, not in the shoe business.” He decreed a dual goal for Nike; (1) sharpen its focus as a sports company, and (2) zero in on specific market segments.
Nike introduced Air Jordan basketball shoe named after and promoted by Michael Jordan. Its success showed that slicing things up into digestible chunks was the wave of the future. They created a whole new segment within Nike, focused on basketball. Air Jordan became wildly successful ‘for about two years’. The sales collapsed as the fad cooled and Jordan himself was sidelined with injuries.
Defining a new segment means defining a consumer need that nobody else has thought of or addressed before. The answer for Nike was two new segments based on shoes for different styles of playing basketball: (1) Force for the aggressive style exemplified by Charles Barkley, and (2) Flight for the quick, high-flying style of Scottie Pippen. With this they had three distinct segments each with its own brand with great athletes representing it. They offered a complete product line (shoes, clothes etc) under each of these brands. Nike continued to invent newer and newer such segments. Their website now shows 71 basketball variants!
The company went on to create similar segments in tennis: (1) the Challenge Court collection promoted around the rebellious personalities of John McEnroe and Andre Agassi, and (2) the Supreme Court collection for the conservative majority of players. Nike's website now shows eight tennis variants.
Ever since, Nike has grown by developing new segments and moving into adjacent ones. It sliced up the fitness marketplace into many segments, large and small, from cross-training shoes to aquatic shoes, capturing nearly half of the US athletic footwear market and expanding around the world. It began selling apparel and accessories, and opened retail stores. They even manage athlete's careers.
6) Fail Fast
“My hope was that when I failed, if I failed, I’d fail quickly, so I’d have enough time, enough years, to implement all the hard-won lessons. I wasn’t much for setting goals, but this goal kept flashing through my mind every day, until it became my internal chant: Fail Fast.”...Phil Knight
It is important to understand that your business is a means to a larger goal. It is a ‘vehicle’ to help you achieve your larger objectives. While the role of emotions cannot be undermined, your expectations from your business should be more objective than emotion based. Be very objective and pragmatic, and even ruthless if needed, to decide whether the ‘vehicle’ caters to your larger needs or does it need a change. Make sure that your emotional attachment to your business does not end up becoming your Achilles’ heel.
7) Avoid Single Points of Failure
"A good rule of thumb is that everything that can break will eventually break. So avoid single points of failure. If many things rely on one thing working, and that thing breaks, you are counting the days to catastrophe."...Morgan Housel
Knight’s journey also serves as a cautionary tale for entrepreneurs. Knight’s passion and the product’s strengths led to business’ meteoric growth in the US market. Knight’s love & hate association with Onitsuka lasted for about a decade and then suddenly deteriorated in a short time, even leading to a bitter court battle. When Onitsuka pulled the rug, Knight’s company was left in lurch, lacking purpose and facing bankruptcy.
Knight should have foreseen the risk of being 100% dependent on Onitsuka and should have clearly avoided this single point of failure. He shouldn’t have waited for so long for his dynamics with Onitsuka to change and should have devised his Plan B, and even C, much before.
8) Risks of Being Overleveraged
“’Assets equal liabilities plus equity’, is the primary principle of all accounting. This foundational principle must always be in balance. Accounting is problem-solving. Most problems boil down to some imbalance in this equation. To solve, therefore, get it balanced. I felt a little hypocritical saying this because my company had an out-of-whack liabilities-to-equity ratio of ninety to ten.”...Phil Knight
This is another cautionary message for entrepreneurs. As famous author Morgan Housel quotes, "In most cases, debt proves to be that devil; it pushes routine risks into something capable of producing ruin."
Nike and its earlier avatar Blue Ribbons were always in heavy debts. Being a hyper-growth company, they kept borrowing as they kept growing. Nike kept finding itself in an existential crisis every now and then owing to the extreme debt and severe cash shortages. Knight said, “We were leveraged to the hilt. Therefore we were walking the edge of a precipice.”
9) Leadership Lessons from Knight
Hardwork: “I was putting in six days a week at Price Waterhouse, spending early mornings and late nights and all the weekends and vacations at Blue Ribbon. No friends, no exercise, no social life – and wholly content. My life was out of balance, but I didn’t care. In fact, I wanted even more imbalance.”...Phil Knight
Phil Knight was a workaholic. He worked passionately and relentlessly for years, rather decades. He started by converting his bedroom into his office cum warehouse. Once he outgrew the space, he rented a small apartment and both stayed and worked there. Finally, when he rented his first commercial office, albeit very small and cheap, he relinquished the apartment and started staying in his small office.
Since Blue Ribbon was a fragile organization for a long time, he also worked elsewhere, at various places, to keep his organization afloat. After all as J.R.D. Tata once quoted, “Nothing worthwhile is ever achieved without deep thought and hard work.”
Focus: “I’d never been a multitasker, and I didn’t see any reason to start now. I wanted to be present, always. I wanted to focus constantly on one task that really mattered.”...Phil Knight
According to Knight, focus is the key to success. He has consistently repeated this in his book: always make sure to focus on one thing and make sure that it is the most important one. He says, “I wanted to dedicate every minute of every day to Blue Ribbon. I’d never been a multitasker, and I didn’t see any reason to start now. I wanted to be present, always. I wanted to focus constantly on one task that really mattered. If my life was to be all work and no play, I wanted my work to be play.”
Role of Mentors: Knight’s mighty personality and rich & successful career has been shaped by several gurus. While Bill Bowerman’s name stays at the top, his Price Waterhouse boss Delbert Hayes is another salient one. In his biography, Knight is shown to revere these people and showered them with his unconditional loyalty, love, and respect. He refers to them with utmost respect while he recollects and narrates various events from his past.
Learning from Books: “Books and sports give people a sense of having lived other lives, of taking part in other's people’s victories. And defeats.”...Phil Knight
Knight was a voracious reader. He read on wide ranging topics. However, he particularly devoured whatever he could on generals, samurai, shoguns, along with biographies of his three main heroes – Churchill, Kennedy, and Tolstoy. Jeff Johnson was even more passionate and read on absolutely every topic. All this learning from books helped them build a mammoth brand like Nike.
10) The Brand Story
“A brand is something that has a clear-cut identity among consumers, which a company creates by sending out a clear, consistent message over a period of years until it achieves a critical mass of marketing. The thing is, once you hit the critical mass, you can’t push it much further. Otherwise the meaning gets fuzzy and confused, and before long, the brand is on the way out.”...Phil Knight
Nike is among the most popular and respected brands in the sports industry, as well as one of the most valued business brands in the world, ranking ahead of Intel and Mercedes-Benz. They are a champion brand builder. Nike’s advertising slogans – “Bo Knows,” “Just Do It,” “There Is No Finish Line” – have moved beyond advertising into popular expression. This blog therefore would be incomplete unless I include at least a few tidbits on their brand journey.
A) Shift from the Product to the Consumer and the brand
Nike, the consummate marketer, came to understand the importance of marketing late in its life; after it hit the USD 1 billion revenue mark. They hadn’t engaged in conscious marketing. However, Knight realized that the way forward was to expand their focus from the design and manufacture of the product, where Nike had always excelled, to the consumer and the brand.
In their initial days, they just tried to get their shoes on the feet of runners. They were able to get a lot of great ones under contract – people like Steve Prefontaine and Alberto Salazar – because they spent a lot of time at track events and had relationships with the runners, but mostly because they were doing interesting things with their shoes. The Nike team thought the world started and stopped in the lab and everything revolved around the product. However, this drastically changed as Nike transformed itself into a highly marketing-oriented organization.
B) The Swoosh
The iconic Nike ‘Swoosh’ was created in 1971 by Carolyn Davidson, a graphic design student at Portland State University. At the time, accounting instructor Phil Knight, asked her to design a logo for his new shoe company.
Davidson’s inspiration for the logo came from the Greek goddess Nike, known for her speed and strength. She also drew inspiration from the wings of the goddess, which gave her the idea for the Swoosh design. Overall, the Swoosh took Davidson around 17.5 hours to design. And she was paid just USD 35 for her work!
Phil Knight wasn’t entirely satisfied with the design, but he thought it had potential and kept it. Eventually, the Swoosh became the official logo of Nike, and it has remained so ever since.
C) NIKE: the Greek Goddess of Victory
In 1971, Blue Ribbon split with Onitsuka. By July 1971, Nike’s founders were ready to market their own brand of sports shoe, but they needed a name. Most of the suggestions echoed Puma and fast animals – Peregrine, Bengal etc.
Just five hours before the shipment was due, Woodell informed, “Johnson phoned first thing in the morning. Apparently a new name came to him in a dream last night. He says he sat bolt upright in bed in the middle of the night and saw the name before him. The name is NIKE.” Nike was the Greek goddess of victory.
While Knight wasn’t instantly convinced about the name, he recollected Johnson pointing out that seemingly all iconic brands – Clorox, Kleenex, Xerox – have short names; two syllables or less. And they always have a strong sound in the name, a letter like ‘K’ or ‘X’, that sticks in the mind. Knight realized that with a name like Nike, all that made sense.
D) Athlete Endorsements
In 1972, Nike was still a fledgling company trying to reestablish itself in their new avatar. Knight was increasingly getting aware of the need for athlete endorsements if they were to complete with the likes of Adidas, Puma, and New Balance. He observed, “We’d known for some time that athlete endorsements were important. If we were going to compete with Adidas, we’d need top athletes wearing and talking up our brand. But we still didn’t have money to pay top athletes.”
Knight was once told that a fiery Romanian tennis player called Ilie Nastase, aka ‘Nasty’, was slaying his opponents in a brand-new pair of Nike Match Points at the Rainier International Classis tournament. Knight thought that Nasty would be most suited celebrity athlete to make a beginning. He reached out to his agent and took his interest ahead. He signed Nasty for USD 10,000, a huge amount for Nike at the time.
Over the years, Nike signed umpteen celebrity atheletes including Michael Jordan. In 1984, the company spent its entire marketing budget to sign NBA rookie Michael Jordan in an attempt to breathe life into its basketball shoe division. Jordan signed a five-year, USD 2.5 million contract to promote the Air Jordan. The Nike/Michael Jordan contract changed how brands signed athletes and other celebrities to marketing deals, as well as how brands market themselves.
Knight shares, “The Air Jordan shoe was so colorful that the NBA banned it – which was great! We actually welcome the kind of publicity that pits us against the establishment, as long as we know we’re on the right side of the issue. Michael Jordan wore the shoes despite being threatened with fines, and, of course, he played like no one has ever played before. It was everything you could ask for, and sales just took off.”
Having embraced the ban and the controversy surrounding the shoes, Nike created ad campaigns around the ban, saying, “The NBA can’t stop you from wearing them.” Within the first two months of the shoe’s release, Nike sold USD 70 million worth of Air Jordans. By the end of 1985, the firm reported revenue in excess of USD 100 million.
In 1997, Nike spun the Jordan brand into its own division. Instead of the Nike swoosh, Jordan-branded shoes, apparel, and accessories feature the ‘Jumpman’ logo, a silhouette of Jordan in midair, holding a basketball.
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