Nike’s midlife crisis
Even cliches have their uses at certain times. I guess the oft repeated one in the case of corporate success stories is that the tough part for any business is not reaching the top but staying there for a sustained perio d of time. Nike is one of those companies that I respect but for irrational brand reasons don’t admire. Nonetheless, what they as a company have achieved and continue to achieve is nothing short of phenomenal. However its not been all as suave and smooth behind the scenes. Retail flooding, missing the lifestyle trend in footwear, lack of appetite from consumers for overpriced sneakers, emergence of K-Swiss, Puma, New Balance and other competitors all contributed to a mini crisis for the company in the earlier part of this decade. Another problem was the perennial curse that afflicts upstart firms when they grow big – how do they realign their overall strategy now that they are the “establishment” themselves?
This Business Week article talks about Nike’s restructuring behind the scenes which led them to be more innovative, responsive and also how they struck the right balance between their brashness and new found industry leadership status.Even though the article is dated 2004, I would still believe it is relevant in today’s context. Afterall certian truisms dont change in the business world. I couldn’t resist highlighting a few excerpts but the entire article is worth a read.
Nike’s new grown-up philosophy:
In the old days, Nike operated pretty much on instinct. It took a guess as to how many pairs of shoes to churn out and hoped it could cram them all onto retailers’ shelves. Not anymore. Nike has overhauled its computer systems to get the right number of sneakers to more places in the world more quickly. By methodically studying new markets, it has become a powerhouse overseas — and in new market segments that it once scorned, such as soccer and fashion. It has also beefed up its management team. And after stumbling with its acquisitions, Nike has learned to manage those brands — Cole Haan dress shoes, Converse retro-style sneakers, Hurley International skateboard gear, and Bauer in-line and hockey skates — more efficiently. Indeed, part of Nike’s growth strategy is to add to its portfolio of brands.
Nike’s management shake-up:
Knight made his boldest management move in 2001, when he named two longtime Nike insiders, creative brand and design wonk Mark G. Parker and operations maven Charles D. Denson, as co-presidents. With Grossman and Blair providing an outsider’s perspective and with Parker and Denson steeped in the company’s culture, Knight hoped to achieve a balance between the old and the new, the creative and the financially responsible. The unusual co-president structure was hardly Business 101, and many observers figured the new team wouldn’t last. Few believed co-presidents could survive the inevitable political maneuvering and clash of egos.
The nuts and bolts – Supply chain
Nike also overhauled its supply-chain system, which often left retailers either desperately awaiting delivery of hot shoes or struggling to get rid of the duds. The old jerry-built compilation strung together 27 different computer systems worldwide, most of which couldn’t talk with the others. Under Denson’s direction, Nike has spent $500 million to build a new system. Almost complete, it is already contributing to quicker design and manufacturing times, and fatter gross margins — 42.9% last year, up from 39.9% five years ago. Nike says that the percentage of shoes it makes without a firm order from a retailer has fallen from 30% to 3%, while the lead time for getting new sneaker styles to market has been cut to six months from nine.
I will resist the temptation to paste further snippets, but there are certain insights about how Nike refined its brand portfolio management strategy with Cole Haan, Converse et al which make this article one of those precious gems which looks at the sports business industry as a business and not just a pimped up world of athlete endorsements.
P.S: In case you were wondering, the guy at the top is indeed Eric Cantona. Legend.
