The Great Leaders Series: Phil Knight of Nike
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It's not surprising that the world's largest maker of sports apparel was started by an athlete. As the co-founder of Nike, Phil Knight basically invented the market for running shoes by first making them must-have gear for serious runners, and then convincing the rest of the world—non-athletic types included—that they should buy them too. Along the way, he built an organization that anticipated many of the trends that have defined modern business, from the rise of Asian manufacturing to the power of celebrities to confer credibility on consumer products. He did all that, and he also ran a a 4 minute, 13-second mile on the University of Oregon track team.
Indeed, the winning ethos he absorbed as a competitive athlete seems to have inspired Knight's life as an entrepreneur. "If there was no track, there was no me," he told the Des Moines Register in April 2009. "I would be somebody entirely different and there wouldn't be a Nike. It all came from there." Knight never competed at the professional level but like any top athlete, he still wanted to win.
Nike was born from a research paper Knight wrote at Stanford Business School in the 1960s. He saw a huge market opportunity for Japanese manufacturers who were producing running shoes that were lighter and cheaper than the shoes than the German companies that then dominated the market. So on a post-grad school trip to Japan, he cold-called the owner of a factory in Kobe where sneakers were made. Knight told the Japanese manufacturer he was an importer from America and left a small deposit for shoe samples. The first shipment arrived more than a year later.
With product in hand and a total initial investment of $1,000, Knight lined up his former coach, Bill Bowerman, to be his partner in the company, which they named Blue Ribbon Sports. Bowerman made adjustments to those first pairs of sneakers to better serve serious runners, while Knight sold shoes from the back of a Plymouth station wagon to local runners.
Soon after Knight opened his first retail store in Santa Monica, California, a legal tussle with the Japanese manufacturer nearly sank the venture. That prompted Knight to launch a new line of shoes, protected by the new name Nike. In 1971, he commissioned a student named Caroline Davidson to design a logo for this new product line. She drew up the famous "swoosh," for which the company paid $35.
Knight's timing could not have been better, as interest in track and field and in running generally grew dramatically. Fred Lebow organized the first New York City Marathon in 1970, spurring the creation of more big-city marathons across the country. Olympic telecasts in 1972 and 1976 further drove demand for Nike's running shoes, as did the success and charisma of one of Bowerman's protegés, the runner Steve Prefontaine. In 1974, Bowerman invented a new waffle-sole design for the company's running shoes. It quickly became a sensation, establishing the Nike brand as a paragon of technological innovation in the athletic shoe market.
As the company grew, Knight looked to expand into other sports, starting with tennis. He signed Ilie Natase to the company's first major endorsement deal. Aligning the Nike brand with world-class athletes was to become of the key elements of the company's marketing strategy. To sell shoes, Knight made pointed bets on the right athletes early in their careers—most notably Michael Jordan in 1985 and Tiger Woods in 1995. Despite famously declaring "I hate advertising," Knight built a long creative partnership with Wieden+Kennedy, the Portland, Oregon ad agency that produced dozens of compelling TV commercials, as well as the memorable slogan "Just Do It." Nike's pathbreaking advertising campaigns ensured that its lucrative endorsement deals produced the desired return on investment and then some.
Knight's years at the helm weren't without stumbles, of course. Nike missed out on the mid-1980s aerobics craze which gave competitor Reebok a huge boost, as well as the extreme sports trend of the 1990s. Knight struggled to integrate into the parent company a string of acquisitions that included Cole-Haan, Bauer Hockey, Hurley, Umbro, and Converse. And persistent reports of poor labor condisitions at Asian factories producing Nike gear tarnished the company's reputation. But Knight faced each of these setbacks head on, remaining CEO of the company until 2005, long after he had become one of the world's richest people.
As it approaches $19 billion in annual sales, the Nike of today is a far cry from the company Inc. profiled in 1980, soon after Knight took the business public. At the time, the entrepreneur was still grappling with the scale of the enterprise he had created: "I hope nobody ever starts thinking this company is some kind of institution," Knight told the magazine. "We're still just a bunch of guys selling sneakers." Thirty years ago, no one could have known how far Knight's race to be the No. 1 company in his industry would take him.