Success Secrets of Nike Co-founder Phil Knight

"Play by the rules. But be ferocious."-- Philip H. Knight

What is the secret behind the success of Phil Knight?

To think that he started with almost nothing in making Nike one of the world’s valuable companies today, how did he do it?

   

Philip H. Knight.   Photo Credit: www.businessinsider.com

It all started with a term paper

While he was taking up his master’s degree at Stanford University, he was assigned to do a term paper on how to start a small business.  Little did he know that it would serve as the blueprint for what would become the world’s no. 1 athletic shoe company.

As a former track star at the University of Oregon, he chose running as his field of study.  In his paper, he proposed a plan on how to crack the dominance of Adidas on the running-shoe market.  His strategy centered on cheap Japanese labor to manufacture low-cost but better quality running shoes.

Knight was so committed to the idea that shortly after graduating in 1962, he decided to take immediate action. He went to Japan to see the maker of an Adidas-imitation brand being sold there.  Introducing himself to the executives of Onitsuka Tiger Co. as the head of (then still a non-existent) Blue Ribbon Sports, he said that his company is interested to market the company’s shoes in the United States.  

Then he requested for some samples and promised to place an order after his “partners” examined them back in the States.

Starting with $500 capital borrowed from his father

When the samples arrived, he paid for them from money borrowed from his father and sent a few pairs to his former University of Oregon coach Bill Bowerman who became his instant partner.  It was only then that the Blue Ribbon Sports was officially formed.  After putting up $500 each, Knight began selling the shoes from his car at high school track meets throughout the Pacific Northwest.

The business grew fast and by the early 70s, sales had reached $3 million.  It was at this time that relations with Tiger were discontinued and Knight started designing his own shoes.  

Two years later in 1972, the Nike line named after the Greek goddess of victory was introduced.  Carolyn Davidson, an art student from Portland State University, was asked and paid $35 to design the Nike ‘swoosh” logo.  It was timed to introduce the new line of lightweight shoes featuring a unique "waffle sole design” that offered better traction, an innovative feature created by Bill Bowerman. 

Bill Bowerrnan.  Photo Credit: www.businessinsider.com

Winning Marketing Strategy

Knight's idea of marketing Nike was simply to get top athletes to endorse his shoes rather than rely on advertising which he admitted he hated.

When the Olympic track and field trials were held in Eugene, Oregon, Bill Bowerman, who's known to have a knack for turning many raw athletes into polished Olympic champions, was coach of the American Olympic team.  

When the athletes who participated in the trials were seen on national television, they were of course wearing Nikes. One of the most visible of them was the cocky American record-holder Steve Prefontaine who became the first in a team of pace-setting athletes Knight recruited to endorse his shoes.

As he expected, the endorsement of the athletes boosted Nike sales throughout the 1970s.  When John McEnroe hurt his ankle, he began wearing the Nike three-quarter-top shoes. Shortly, sales of the style zoomed from 10,000 pairs to over 1 million. 

What's more, jogging suddenly became popular and Nike’s smart marketing moves created new demand not existing before.  People began to aspire for what the best athletes were wearing. 

The Jordan Magic

Then enter Michael Jordan into the picture.  Commercials glamorizing his high-flying, slam dunking antics sold more than $100 million of Nikes on its first year of introduction and the brand experienced continued success throughout the early 80’s.  By 1986 Nike sales skyrocketed to $1 billion, making Nike the No.1 shoe manufacturer worldwide. 

The Reebok Debacle

While other great entrepreneurs have many ups and downs throughout their careers, Knight was lucky he had just one.  As Nike’s direction was focused on athletes, it overlooked the growing market for aerobic shoes which British shoe manufacturer Reebok took advantage of.  The brand quickly surpassed Nike in the top spot when it introduced its leather shoes as a fashion item for the trendy workout crowd.   

This caused Nike sales to drop 18 % between 1986 and 1987 and forced Knight to face the reality that while technology appealed to sports professionals, other consumers preferred looks than function. 

Nike responded with Nike Air, a multi-purpose shoe with an air cushion in the sole. Then it came out with a commercial to introduce the new line featuring the Beatles’ “Revolution”.  It cost Nike $250,000 in rights to the song but it revived sales.  Due to this move, Nike’s leadership was regained in 1990 and had remained since.

Facing Controversies

A company such as Nike growing into a huge multi-national organization was not without confronting social issues and controversies such as those raised by Jessie Jackson.  He complained that while African-Americans accounted for a large percentage of Nike’s sales, it had no black vice presidents or members of the board.  He initiated a boycott that led to the appointment of Nike’s first black board member.  Then there were incidents of teenagers being killed due to promotions-related issues as well as the accusations of worker exploitation in Asia.  Despite all these, Nike sales remained strong.

Knight was admired as a master strategist who knows how to skillfully respond to competitive pressure such as that posed by Reebok.  When asked by the press how he was able to parry Reebok’s attack, he replied, "How did John Kennedy become a war hero? They sunk his boat."

If Steve Jobs had his Steve Wozniak, Philip Knight had his Bill Bowerman.   

No matter how brilliant was Knight's marketing brains, Nike’s success was partly due to Bowerman’s innovative designs that kept Nike at the leading edge of athletic-shoe technology. 

Bowerman's out-of-the-box approach led to many of Nike’s winning product designs such as the famous “waffle sole” which was inspired by his wife’s waffle iron.  He thought it would give good traction to the shoes so he experimented with it and came up with the winning innovation.

Stroke of Genius

In the early days, Nike’s culture was far from being corporate.  As unorthodox as Bowerman’s approach to product development, Knight’s way of encouragement in bringing out the best from his people was unconventional too.  

His executives had their “buttface meetings” where direct confrontations and yelling were encouraged.  Booze during conferences, marijuanas in golf tournaments, and tattoos among employees were accepted perks and norms.   

Knight’s way of motivating people was interpreted as mere childishness by some observers but it was also seen by others as a stroke of genius. His people looked up to him as a kind of a knight in shining armor.

 “It was a holy mission, you know, to "swoosh" the world. We were Knight's crusaders. We would have died on the cross” said a veteran Nike employee to Entrepreneur in an interview.

As in any entrepreneurial saga, the story of Philip Knight was filled with many anecdotes that were both entertaining and inspiring to anyone aspiring to become a lead character in another success story.  It taught us that success in business takes commitment, guts, connecting and surrounding oneself with good people, a winning idea, and yes, some luck. 

Do you agree with the last one?  Why don't we talk about it. I’d love to hear from you.