Shoe Dog

1. Pursuit of a Crazy Idea: The Birth of Nike

If you have a body, you are an athlete.

A passion for running led Phil Knight to pursue his "Crazy Idea" of importing Japanese running shoes to the United States. After graduating from Stanford, Knight traveled the world, including a stop in Japan where he secured a distribution agreement with Onitsuka Co. for their Tiger shoes.

Founding Blue Ribbon Sports: In 1964, Knight partnered with his former track coach, Bill Bowerman, to create Blue Ribbon Sports, the precursor to Nike. They started by selling Tiger shoes from the trunk of Knight's car at track meets.

Early challenges:

• Limited capital and inventory
• Balancing shoe sales with a full-time job as an accountant
• Maintaining a relationship with Onitsuka while developing their own brand

As the company grew, Knight and Bowerman faced numerous obstacles but remained committed to their vision of creating high-quality, innovative athletic footwear.

2. Overcoming Financial Struggles and Building Relationships

There is an immense amount of satisfaction in building good things that last.

Constant cash flow issues plagued Blue Ribbon Sports in its early years. Knight repeatedly found himself scraping together funds to pay for inventory and keep the business afloat.

Key relationships that helped sustain the company:

• Bill Bowerman: Provided credibility and innovative shoe designs
• Jeff Johnson: First full-time employee, dedicated to sales and customer service
• Nissho Iwai: Japanese trading company that provided crucial financing

Creative problem-solving: Knight often had to think outside the box to overcome financial hurdles. This included:

• Taking on personal debt
• Negotiating extended payment terms with suppliers
• Leveraging relationships with banks and investors

Despite the constant financial pressure, Knight's determination and ability to build strong partnerships kept the company moving forward.

3. Innovation and Quality Drive Growth

Don't tell people how to do things, tell them what to do and let them surprise you with their results.

Bowerman's innovations were crucial to Nike's success. His obsession with creating better running shoes led to groundbreaking designs, including:

• The Cortez: A revolutionary running shoe with full-length cushioning
• The Waffle Trainer: Inspired by Bowerman's waffle iron, it provided superior traction

Quality focus: Knight emphasized the importance of producing high-quality shoes, even as the company rapidly expanded production to meet growing demand.

Continuous improvement: Nike's culture of innovation extended beyond shoe design to include:

• Manufacturing processes
• Materials research
• Athlete feedback and testing

This commitment to innovation and quality helped Nike differentiate itself in a competitive market and build a loyal customer base.

4. Expanding Beyond Shoes: Apparel and Athlete Endorsements

I wanted to build something that was my own, something I could point to and say: I made that. It was the only way I saw to make life meaningful.

Diversification into apparel was a strategic move to compete with larger rivals like Adidas. Though initially challenging, Nike's expansion into clothing and accessories helped solidify its position as a comprehensive sports brand.

Athlete endorsements became a cornerstone of Nike's marketing strategy:

• Steve Prefontaine: One of the first athletes to officially endorse Nike
• John McEnroe: Helped establish Nike in the tennis market
• Michael Jordan: Perhaps the most iconic Nike endorsement, revolutionizing athlete partnerships

College team sponsorships: Nike aggressively pursued deals with college athletic programs, helping to build brand loyalty among young athletes and fans.

These expansions beyond footwear helped Nike become a dominant force in the sports industry, creating a lifestyle brand that resonated with both athletes and casual consumers.

5. Navigating Legal Battles and Government Regulations

You are remembered for the rules you break.

Onitsuka lawsuit: When Onitsuka attempted to terminate their partnership, Nike fought back in court, ultimately winning the right to continue selling their own branded shoes.

Customs battle: Nike faced a $25 million bill from U.S. Customs due to an arcane law called the American Selling Price. Key aspects of this fight included:

• Lobbying efforts in Washington, D.C.
• A public relations campaign highlighting Nike as a small company fighting big government
• An antitrust lawsuit against competitors

Creative solutions: To combat the customs issue, Nike:

• Manufactured a low-cost shoe in the U.S. to establish a new price point for import duties
• Filed a lawsuit against competitors and the government
• Negotiated a settlement for $9 million, far less than the original demand

These legal and regulatory challenges taught Nike to be resourceful and aggressive in protecting its interests.

6. The Importance of Company Culture and Team Dynamics

Beating the competition is relatively easy. Beating yourself is a never-ending commitment.

The "Buttface" meetings: These biannual retreats brought together Nike's core team to discuss strategy, solve problems, and build camaraderie. Key aspects included:

• Open and honest communication, often with harsh criticism
• A focus on problem-solving and innovation
• Building trust and loyalty among team members

Hiring philosophy: Knight often hired accountants and lawyers, valuing their analytical skills and ability to learn quickly. He also prioritized loyalty and cultural fit over industry experience.

Empowering employees: Knight's management style involved:

• Giving team members significant autonomy
• Encouraging creative problem-solving
• Fostering a sense of ownership in the company's success

This unique culture helped Nike attract and retain talented individuals who were passionate about the company's mission.

7. Going Public: Balancing Growth and Control

There is an art to maximizing growth without bankrupting your company.

The decision to go public was driven by the need for capital to fuel Nike's rapid growth. However, Knight was concerned about losing control of the company he had built.

Innovative stock structure: To maintain control while accessing public markets, Nike implemented a dual-class stock structure:

• Class A shares: Held by founders and key employees, with greater voting rights
• Class B shares: Offered to the public, with limited voting rights

Timing the IPO: Knight recognized the importance of timing the public offering:

• Waited until resolving major legal and regulatory issues
• Aimed to go public before an anticipated economic recession

This approach allowed Nike to raise significant capital while preserving its core culture and decision-making power.

8. Global Expansion and Entering the Chinese Market

If you have a body, you are an athlete.

Diversifying production: As costs rose in Japan, Nike expanded manufacturing to:

• Taiwan
• South Korea
• United States (New England and Puerto Rico)

China strategy: Recognizing the potential of the Chinese market, Nike:

• Hired David Chang, an expert in Chinese business relations
• Prepared an extensive presentation for the Chinese government
• Received an invitation for an official visit to China

Long-term vision: Knight saw China not just as a manufacturing hub but as a massive potential market for Nike products.

This global expansion strategy helped Nike reduce production costs, mitigate supply chain risks, and position itself for future growth in emerging markets.

9. The Power of Perseverance in Entrepreneurship

Don't stop. Don't even think about stopping until you get there, and don't give much thought to where 'there' is. Whatever comes, just don't stop.

Overcoming setbacks: Throughout Nike's history, Knight and his team faced numerous challenges:

• Financial crises and cash flow issues
• Legal battles and regulatory hurdles
• Production and quality control problems

Maintaining focus: Despite these obstacles, Knight remained committed to his vision for Nike, often working long hours and making personal sacrifices.

Learning from failure: Knight embraced failures as learning opportunities, such as:

• The Tailwind shoe recall, which led to improved product testing
• Early marketing missteps, which informed future advertising strategies

This relentless perseverance in the face of adversity was a key factor in Nike's ultimate success, transforming it from a small import business to a global sportswear giant.

Last updated: July 17, 2024