1.11 Nike Case

Vision, Initiative, Mission & Commitment: Nike—Origins of a Sports Industry Giant

Philip “Buck” Knight was a normal kid who grew up in an upper middle class part of Portland, Oregon, where his father published one of the city’s two newspapers. He was slightly more introverted than most kids, but he was also an avid runner, and he had a lot of friends. At the University of Oregon, Knight was not a great runner, but he was good enough to make the track team under Bill Bowerman, an exceptional coach known for his ability to get the best out of student athletes.

When Knight finished his degree at Oregon, he went to graduate business school at Stanford. It was there that, for a class assignment, he was asked to develop a business plan for a small company. In mulling over his choice of a business, he found himself thinking about the competition that Japanese camera manufacturers had begun to pose for established European companies. Among other things, he learned that Japanese manufacturers could make very high-quality products at a lower cost than their European counterparts.

Knight’s track experience and his insight into the success of Japanese camera makers came together in his vision for the small business that he was supposed to plan. Brothers Adi and Horst Dassler had invented the sports shoe as we know it today by improving on the design of soccer shoes. Along the way to the marketplace, they had split up, with Adi founding Adidas and Horst founding rival Puma. In the meantime, the brothers’ hometown of Herzogenaurach, Germany, had become the sports shoe capital of the world. Just about everybody wore Adidas or Pumas, but a lot of runners—Knight included—didn’t particularly like them. He was also convinced that someone could make track shoes of higher quality and at a lower cost than the European shoes that dominated the market.

Vision

What Knight envisioned was the possibility of competing with Adidas and Puma in sports shoes the way Japanese Nikon cameras were competing with German Leica cameras. He collected his thoughts about producing higher-quality, lower-cost sports shoes and submitted them to his professor as a formal business plan.

Initiative

It didn’t take much convincing for Knight to take the Asian vacation that his father gave him as a graduation present. But what he did while he was there took a lot of initiative. In Kobe, Japan, Knight stopped to visit a company called Onitsuka, which was busily knocking off copies of Adidas shoes called “Tigers.” He managed to get a meeting with company president Kihachiro Onitsuka by presenting himself as president of “Blue Ribbon Sports.” Whether Knight chose the name because he liked Pabst Blue Ribbon beer or because he liked finishing first isn’t important. What did matter was the story he told Onitsuka—namely, that he ran a sports distribution company in Oregon. Dropping every name he knew in running circles, he asked for the exclusive rights to sell Tigers in the United States. Onitsuka agreed to give him the West Coast, and Knight had successfully maneuvered his way into the sports shoe business.

Mission

Back in Oregon in 1964, Knight got his old track coach, Bill Bowerman, to match his own $500 investment, and soon there really was a Blue Ribbon Sports to import and distribute Japanese Tigers. With $20,000 from Knight’s father and some local Portland businesspeople, Blue Ribbon survived its first two years. Knight ran the company while working during the day as an accountant, and Bowerman designed running shoes while keeping his job as a coach at the University of Oregon. Knight hired a friend and fellow runner, Jeff Johnson, as the company’s salesperson, and the more shoes he sold, the more runner-geeks he added to his sales force. Thus evolved the mission of Blue Ribbon Sports: to serve athletes. “The athlete,” says Knight, “remains our reason for being,” and sticking to that postulate is a big reason for Phil Knight’s financial success. Eight years after starting Blue Ribbon, Knight severed the company’s connection with Onitsuka Tigers and formed Nike—a company that now has annual sales of more than $25 billion.

Nike’s focus on serving the athlete has been a key factor in differentiating the company from many of its competitors. Many shoe companies view their customer base as the general population, which prefers comfort or fashion as features of athletic shoes. Nike, however, focuses on what athletes see as beneficial features and proceeds on the assumption that the general customer will be happy with the product preferred by athletes. After all, sports and the people who play professional games occupy privileged places in the popular imagination, and Nike’s marketing strategy calls for making connections between Nike products and sports fans. That’s why Nike signs up dozens of star athletes to wear the familiar swoosh logo and gives away free shoes and equipment to thousands more (including entire teams at Ohio State University and the University of North Carolina).

Commitment

Nike’s “serve-the-athlete” mission isn’t necessarily more or less effective than the missions of its competitors when it comes to selling athletic shoes and other apparel. But it’s specific and easy to understand, and the effort to fulfill it has led to a distinctive style or “culture” at the company. Some call it relaxed, others informal, but Nike’s corporate culture involves a lot more than a casual dress code. Nike employees report that they’re expected to show up every day “ready to play.” They’re expected to compete to win. In return, they’re given considerable freedom, and even allowed to fail, in the pursuit of competitive goals.

Nike’s mission of serving athletes also allows Phil Knight’s commitment to sports and winning to be shared throughout the company. Because Nike attracts employees who share these commitments, there aren’t very many people at the company who don’t care about sports or winning (and there are a lot of former and current competitive athletes). And at Nike, winning means giving athletes better products than the competition.