In 1965, Phil Knight, then head of fledgling Blue Ribbon Sports, was sending out typed-up letters to coaches around the country—hoping to interest them in purchasing the sneakers he was selling at the time. While much of the letter is typical salesman banter—testimonials and product details—Knight found it important to include a quote from a runner who had taken on Knight's products:
"The only people who will be left wearing German shoes will be either uninformed or idiots," the quote stated, clearly firing directly at the German powerhouse adidas. But the sendoff is something that has Knight's fingerprints all over it, and reflects much of what Nike's products remind the consumer—even today:
"You are no longer uninformed."
There are several reasons why Nike holds the title of the "World's Most Powerful Apparel Brand," and all of them lead back to one man: Phil Knight.
The co-founder of Nike announced on Tuesday that he'll be retiring as chairman of the board at Nike, leaving big shoes to fill at one of the world's most iconic brands. Succession talk seems be speaking a little too soon, but he'll likely be replaced by current Nike CEO, and target of Kanye West's ranting, Mark Parker. On his succession, Knight said through a Nike press release:
"I have long felt a great responsibility to provide clarity and certainty for the long-term governance and leadership of Nike and for my ultimate transition as Chairman. I have worked closely with the Nike Board in developing this plan and in identifying the most qualified person to serve as my successor in this role. I believe Mark is the best choice to succeed me. He has been an outstanding CEO for the past nine years, and has demonstrated time and again his love for this Company and his clear vision for capturing the tremendous potential Nike has to innovate, inspire, and drive growth. For myself, I intend to continue to work with Nike and look forward to contributing to its future well after my chairmanship ends.”
But for the greatness that Nike has cemented for itself today, Knight's departure warrants a retrospective look at his time with the company.
It really begins in 1957, when Knight first met Bill Bowerman, then a coach for the University of Oregon track team. Fast forward to when Knight was earning his MBA at Stanford University. Taking on a class assignment, Knight ultimately drafted up the very first incarnation of Nike—a project that would eventually be called Blue Ribbon Sports (BRS).
The concept was to import sneakers from Onitsuka Tiger in Japan and sell them at higher price points in the States. This plan would be firmed up when Knight traveled to Japan, to talk with Onitsuka Tiger execs, ultimately securing a distribution deal and coincidentally, the name of his brand. When Knight was asked by the Japanese execs whom he was representing, he said the first thing that came to his head: Blue Ribbon Sports.
With the distribution firmly in place, the duo—Knight and Bowerman—dropped $500 each to properly establish BRS. The story moves forward slightly, with much remaining the same at BRS. They distributed Onitsuka Tiger running shoes in North America until 1971. Between 1964 and 1971, Blue Ribbon Sports opened retail locations in Santa Monica and Eugene, Ore., selling over $1 million worth of product in 1969. That's a far cry from the $3,240 BRS made in its first year in business.
While the reasons vary on Blue Ribbon's next move (some believe it was over contract negotiations with Onitsuka Tiger, others believe that Knight and Bowerman just wanted to improve Tiger running shoes), the end of 1971 saw BRS cease distribution and move into sneaker production. But in Nike's case, the key success was innovating ahead of the competition. As Knight explained to Harvard Business Review in a 1992 interview:
"In the early days, anybody with a glue pot and a pair of scissors could get into the shoe business, so the way to stay ahead was through product innovation. We happened to be great at it. Bill Bowerman, my former track coach at the University of Oregon and co-founder of the company that became Nike, had always customized off-the-shelf shoes for his runners. Over the years, he and some other employees came up with lots of great ideas that we incorporated. One of Bowerman’s more legendary innovations is the Waffle outsole, which he discovered by pouring rubber into a waffle iron. The Waffle Trainer later became the best-selling training shoe in the United States."
Knight's not kidding either. Much of Nike's established success should be laid at the feet of Bill Bowerman who, to his credit, has eight registered patents and is responsible for early Nike classics like the Cortez in 1968. As mentioned in a Stanford University profile, Knight said: "We didn't invent [the sneaker], but we ratcheted it up several notches."
But before anyone produced a sneaker under Nike's logo, there was the issue of changing the brand's name. Knight himself favored the name "Dimension 6," but found no support amongst the brand's roster of 45 employees. Ultimately, friend and running fanatic Jeff Johnson suggested the name Nike—the name of the Greek goddess of victory. The name is as iconic as its trademark Swoosh logo, which Knight commissioned in 1971 from Portland State University graphic design student Carolyn Davidson at the steep price of $35.
From that point, Nike's been firing off hits left and right—particularly when it came to Knight finessing athlete sponsorships. But for the numbers? Those speak for themselves. Starting with $3.2 million in sales in 1972, the company would see doubled profits "each of the next ten years." When the company went public in 1980, Nike toppled adidas, becoming the North American industry leader ahead of the German sportswear brand. For the record, Swoosh designer Carolyn Davidson received a gracious bonus from Knight in September 1983. Knight invited her out to lunch, and ended up giving her a diamond Swoosh-engraved ring and an envelope containing an undisclosed amount of Nike stock.
It's appropriate they're in Oregon, because Nike was a trailblazer in so many areas.
But while much of that success is tied to the brand's innovative product, there are two factors that cemented Nike's place in the pantheon of sportswear: great advertising, and athlete sponsorships. When it came to advertising, ironically, Knight was hesitant at first.
"I used to believe that a good product sold itself," says Knight. "When I first went to meet with Wieden and Kennedy [Nike's Portland-based ad agency], I told them: 'I don't like advertising.' And I'm still uneasy with it."
But for all of Knight's reservations, he was aware of the power that athletes and their reputations had—particularly when attached to a brand. As Knight said in a 1992 interview with Harvard Business Review:
" For years, we thought of ourselves as a production-oriented company, meaning we put all our emphasis on designing and manufacturing the product. But now we understand that the most important thing we do is market the product. We’ve come around to saying that Nike is a marketing-oriented company, and the product is our most important marketing tool. What I mean is that marketing knits the whole organization together. The design elements and functional characteristics of the product itself are just part of the overall marketing process."
Knight has always been aware of his brand's ability (and now, well documented history) of turning athletes into full blown idols. Knight himself has said: "Sports [are] like rock 'n' roll. Both are dominant cultural forces, both speak an international language, and both are all about emotions."
It makes sense that one of sports' greatest rock stars, Michael Jordan, began to build his own brand under Knight and Nike. While much of Nike's success in the basketball world has very much to do with "wheeler n' dealer" Sonny Vaccaro, Knight had the foresight to keep guys like Vaccaro and Rob Strasser (Nike's in-house counsel-turned-first-ever-"marketing guy") on the Nike team. Considering Vaccaro had helped hand-deliver Jordan to the good folks at Beaverton, it's decisions like tapping Vaccaro that helped build Nike into the giant it is today.
Complex's own sneaker writer, editor, and aficionado Russ Bengtson has much to say about the Jordan deal:
"Nike made the inroads they did not by trying to beat adidas and Converse at their respective games, but by coming up with entirely new games. It's appropriate they're in Oregon, because Nike was a trailblazer in so many areas. Converse, for example, they had a ton of NBA talent and personality—from Magic Johnson and Larry Bird to Julius Erving—but they never capitalized on it in the way Nike did with Michael Jordan. Knight may not have been the one to identify Jordan as the guy to sign, but he trusted the judgment of the guy who did enough to place Nike's entire basketball business in his hands."
Much of Knight's success also hinges on Jordan's sponsorship specifically. One of the first of its kind, the deal was truly the art of finessing the plug. Nike was competing directly with adidas for Jordan's name, and they were willing to do just about anything in order to lock him down. As ESPN notes, Jordan's arrival at Nike HQ was one akin to a red (and black) carpet:
Jordan was shown a highlight tape of himself to the Pointer Sisters "Jump," a song that had recently debuted. Moore showed him a red-and-black shoe design. Jordan said that one of the reasons he liked adidas was because they were lower to the ground than the higher shoes that Nike was making. Moore said he could tailor them to Jordan’s liking.
No one was doing that at the time. You were given what the company gave you.
"They really made a great effort of trying to have my input on the shoe," Jordan told me five years ago, adding that he had never put on a Nike shoe to this point in his life.
The story that follows is one familiar to anyone who grew up in the '90s. Thanks to Knight's foresight (and the advertising geniuses at Wieden + Kennedy) Michael Jordan went from a promising college basketball prospect into a gravity-defying one-man sports brand.
But for all of Phil Knight's achievements, what are the traits that allowed him to affect the game—even today? According to Bengtson it's Knight's inherently good timing. Nike was a fairly small and nimble sportswear company in the '70s, while adidas had already become a behemoth unto itself. Nike's lean size gave it a better ear to the ground in an American market that was fluctuating between a flourishing running business and a growing basketball business. Nike was able to ride both waves by not only catering to both markets, but carving new lanes within them.
Considering his ability to recognize when his running business was beginning to fail, Knight had the vision to move into other sports, and into lifestyle sneakers as well. While Knight has famously said that "We're not in the fashion business, we're in the sports business," he recognized that if he didn't broaden Nike's appeal and audience, he wouldn't have the success that Nike has today. Knight himself was upset at getting beat to the casual shoe market by Reebok in the '80s:
We went into casual shoes in the early 1980s when we saw that the running shoe business, which was about one-third of our revenues at the time, was slowing down. We knew that a lot of people were buying our shoes and wearing them to the grocery store and for walking to and from work. Since we happened to be good at shoes, we thought we could be successful with casual shoes. But we got our brains beat out.
...We reasoned it out. The problems forced us to take a hard look at what we were doing, what was going wrong, what we were good at, and where we wanted to go. When we did that, we came to see that focusing solely on the product was a great way for a brand to start, but it just wasn’t enough...We had to learn to do well all the things involved in getting to the consumer, starting with understanding who the consumer is and what the brand represents."
But Knight's ability to be flexible wasn't always a positive thing—particularly when it came to production. Knight understood that if his production was going to really expand, he would have to move things into Asia. The consumer that Nike courted became incredibly aware of Nike's connections to sweatshop labor—something that caught the public eye with pieces like Jeff Ballinger's 1992 Harper's article "The New Free-Trade Heel." Knight felt that because of his company's size, he was a prime target.
"Our business practices are no different than those of our competitors," he says. "But we are bigger, and thus more visible, so we get more flack."
But Nike was able to distance itself from the controversy, making commitments to change. It was clear that Nike wasn't the only one who engaged in sub-par labor practices. Nike ramped up its efforts to break free from the sweatshop associations in 1996 by establishing a department tasked with improving the life of factory workers, and helping found the Fair Labor Association in 1999.
With the good and the bad firmly in hand, what does a post-Knight Nike look like? Well, it possibly looks like Nike CEO Mark Parker. Even conservative industry analysts feel confident that the position is bound to go to Parker. Bengtson says that Parker's "effectively been running Nike anyway," so the succession seems natural.
Even if Parker isn't one of the founding members of the brand, he certainly has ingratiated himself as an integral part of Nike's DNA. He started with the company in 1979 as a footwear designer in Exeter, New Hampshire, and has been CEO since 2006. He has witnessed firsthand Nike's transition from upstart company to global juggernaut. It also doesn't hurt that Parker's name is attached to Nike's top-tier HTM collaborations, an abbreviation that stands for three Swoosh-affiliated sneaker heavyweights: Hiroshi Fujiwara, Tinker Hatfield, and Mark Parker.
The real question then becomes who will succeed Parker as CEO once his reign is over? Only time will tell.