Case Study - portal.futurethink.com€¦ · CASE STUDY: NIKE A Marathon, Not a Sprint Nike has become one the world’s leaders in athletic footwear, apparel, equipment, and accessories

Case Study: Nike

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CASE STUDY: NIKE

The Four Innovation Capabilities FutureThink’s Innovation Case Studies are designed to provide insights on today’s leading innovators. For each featured company, we cover four key innovation capabilities: Strategy, Ideas, Process, and Climate.

STRATEGY: Set a foundation that defines innovation objectives and mobilizes your efforts. The notion of “serendipitous innovation” is dangerously outdated. The secret to success lies in crafting an action-oriented strategy. It means setting a vision for your company to follow, and viewing innovation as an expected result, not a lucky one. Innovation should be handled like any business initiative: with an eye on growth, results, and profit.

IDEAS: Think differently to develop original ideas that drive business value. In today’s economy, the ability to continually fuel innovation is what separates winning organizations from the rest. Idea generation should be managed, purposeful, and clearly linked to business objectives. Leading innovators succeed by balancing out-of-the-box thinking with sound management principles.

PROCESS: Create a streamlined and flexible approach to shepherd innovative ideas to market. The reality in every organization is that money is limited. To make sure you’re spending effectively, you must have a streamlined process for innovation. A good process will help to consistently identify your best projects and enable you to move them forward more efficiently.

CULTURE: Build a thriving work environment that drives innovation across your organization. We live in a world where the new replaces the old very quickly. Only organizations that keep pace with the shifting marketplace will be able to sustain an advantage. So how do the best companies adapt? They cultivate a climate in which employees are encouraged to innovate in a continuous and consistent manner. The companies that stay ahead have made innovation part of their DNA.

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CASE STUDY: NIKE

A Marathon, Not a Sprint Nike has become one the world’s leaders in athletic footwear, apparel, equipment, and accessories for a wide variety of sports and fitness activities. The company currently controls 44 percent of the U.S. market for all athletic footwear.1 While it’s hard to imagine Nike as a startup, this athletic empire began with a single, innovative pair of running shoes. The company continues its race to dominance with the mission to “bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.”2

The organization routinely awarded "best of" honors by a variety of organizations has humble roots.3 In 1964, entrepreneur and University of Oregon alumnus Phil Knight co-founded Blue Ribbon Sports (BRS) with Bill Bowerman, Knight’s former track coach at University of Oregon. Originally, the partnership served as the exclusive U.S. distributor for Tiger athletic shoes from Japan, and enabled Bowerman to outfit his college athletes with lighter, faster track shoes. BRS was renamed to Nike in 1971 and a few years later, debuted its first shoe, the Waffle Trainer—named for the waffle iron Bowerman used to cook up a rubber sole in his quest for spike-less traction.4

The Nike brand entered America’s consumer consciousness around 1976 after the company hired a Seattle ad agency. With aggressive marketing tactics, Nike gobbled up 50 percent of the market share in the U.S. athletic shoe market.5 The “Just Do It” campaign in 1988 was eventually coined as one of the top 10 ad slogans of the 20th century.6 The ‘80s and early ‘90s were a time of growth and prosperity for Nike, which moved its headquarters to Beaverton, Oregon in 1990 and opened its first retail store, Niketown, later that year.

Today, Bowerman’s waffle iron is showcased at Nike’s headquarters, and the sports apparel and equipment maker has more than 70,000 employees and brings in tens of billions of dollars in annual revenue.7 It has acquired and evolved brands like Converse and Hurley into global players. Its success can be attributed to its people, culture, and commitment to innovation. By galvanizing the company around innovation, Nike has been able to launch brilliant partnerships, overcome image setbacks, and consistently release top-notch products. The company invests in the early stages of product ideas and leverages partnerships and key consumer groups to help drive new demand and growth.

“ Design is about predicting the needs of the future. ”

— Tinker Hatfield, Nike Vice President For Design and Special Projects8

Competition is fierce in the sportswear category, and Nike’s main rival, Adidas, has become a major player in the sneaker wars. Nike usually boasts higher sales compared to Adidas, but in late 2017, Adidas outsold Nike’s iconic Air Jordan brand for the first time in history.9;10 In the coming years, Nike will need to accurately predict future needs, bring innovations to market faster, and create new collaborations that maintain its brand value with today’s younger consumer. Read on to learn how you can apply Nike’s innovative practices to your own organization.


CASE STUDY: NIKE

“Nike succeeds because we’re obsessed with innovation. We are relentlessly curious about our world and how we can make it better.”

— Mark Parker, President and CEO of Nike11

Vision Fueled by Innovation Nike is constantly evolving the definition of shoes—and the possibilities of a footwear brand—through strategy and process. Here, innovation is about elevating the athlete’s experience and performance by improving design and materials. It’s also about expanding its brand to include strategic partnerships, design collaborations, celebrity endorsements, and line extensions into athletic wear.

At Nike, the innovation process occurs in two ways: at the business unit level (where each sport group has its own product development team to come up with new or incremental ideas) and within a separate group called the Innovation Kitchen, a design team tasked with coming up with the next big thing.

The Innovation Kitchen is led by Tinker Hatfield, who is vice president for Design and Special Projects. Hatfield was brought into the organization in 1981 by Nike cofounder Bill Bowerman, who also coached Hatfield as a track athlete at University of Oregon. Hatfield began his career at Nike as a building architect, and moved into sneaker design in 1985 after realizing that his architectural skills could be applied to shoes. He went on to become the design genius behind such classic Nike sneakers as the Air Jordan III-XV, the Air Max 1, and the Air Safari.12

NIKE STATS: ● 37: Number of buildings on the Nike campus

in Beaverton, Oregon, named after legendaryU.S. athletes, including Serena Williams,Michael Jordan, Rory McIlroy, Ken Griffey Jr.,and others.

● 600+: The number of patents Nike has heldon average each year since 2009. Nike ended2015 with 5,060 issued patents, making thecompany the third-largest U.S. portfolio ofdesign patents and the largest in the footwearindustry.13;14

● $35: Fee paid to design student CarolynDavidson in 1971 for Nike’s original Swooshdesign. (She was later given a significantamount of stock in the company.)

● 1,182: Number of Nike retail stores locatedglobally.15

● 73,000: Number of Nike employeesglobally.16

● $38.7 billion: Revenue for the 2018fiscal year.17

● 46%: Increase in on-line sales, with $17.24billion earned from purchases made onNike.com.18

● $50 billion: Revenue target for 2020.19


CASE STUDY: NIKE

Innovation Kitchen also refers to the group’s working space, which is adorned with violins, Irish architecture, commissioned artwork, and relics of Nike history. In this setting, the most creative minds from across the organization collaborate on ideas, designs, and prototypes. Clear expectations for output as well as explicit permission to experiment are defined in Nike’s 11 guiding principles:

1. It is our nature to innovate.

2. Nike is a company.

3. Nike is a brand.

4. Simplify and go.

5. The consumer decides.

6. Be a sponge.

7. Evolve immediately.

8. Do the right thing.

9. Master the fundamentals.

10. We are on the offense—always.

11. Remember the man (the late Bill Bowerman,

Nike co-founder).20

Leadership is a Team SportCEO Mark Parker believes in being “open to ideas from different parts of the company, from different parts of the world. The biggest sources of opportunity are collaboration and partnership.”21 This kind of worldview helps keep Nike relevant after more than 50 years in business—and may be why Fast Company named Mark Parker “The World’s Most Creative CEO.”21 Parker joined Nike in 1979 as a competitive-runner turned- shoe-designer and he’s the employee who convinced Tinker Hatfield to apply his architectural approach to footwear. Parker’s career was elevated when a “little side project” he was working on became Nike Air, a hugely successful product for the company.21 He was named CEO in 2006—following a brief stint by Bill Perez—and became Nike’s third CEO. Under Parker’s leadership, Nike’s annual sales grew by 10 percent each year between 2010 and 2015.22

“Nike always tries to improve. They never say, ‘I’m No. 1, and I’m happy.’ They always say, ‘How can we get better?’”

— Serena Williams, World Champion tennis player23

Parker was also at the helm when Nike announced in 2016 that its golf division would transition out of equipment—clubs, balls, and bags—and focus strictly on golf footwear, apparel, and partner with “more of the world’s best golfers.”24 At the time of the announcement, Nike Golf had become the worst performing division at Nike, with sales down 8.2 percent for 2016.24

When an organization demands experimentation from its people, failures like Nike Golf must be accepted. And whether Nike is on a winning streak or it’s on the struggle bus, its leaders and employees are always looking for the next best idea. One of Parker’s fears is that Nike turns into a “big, slow, constipated, bureaucratic company that’s happy with its success. Companies fall apart when their model is so successful that it stifles thinking that challenges it.”25

The Art + Science of R+D Believing that every person with a body is an athlete, the company strives to serve humans at all skill levels across a wide range of sports. To this end, Nike’s business is organized by sport, not product type. Each division has its own product development team and these teams work only on products that meet the performance needs of their particular sport.

Data-driven. The Nike Sport Research Lab is the hub of development for all sport divisions. The 16,000-square foot facility contains state-of-the-art equipment, including 3D motion capture via high-speed video to collect data and insights that inform Nike’s products.26 Environmental chambers enable physiologists to recreate the heat of Rio de Janeiro or the frost of Antarctica in order to test products that lower athletes’ body temperature or reduce their energy expenditure.26 The lab’s data science team uses mathematical modeling and prediction to determine how Nike products will interact with athletes. The five key areas of research include data mining, mathematical modeling, data standardization, data storage solutions, and knowledge engine.26

“Data is really the new voice of the athlete,” said Matthew Nurse, Senior Director of the Nike Explore Team Sport Research Lab.27 “And by listening to that voice, we can challenge the current paradigms to do something previously unimagined: to change the game and to change the way athletes perform.”27


CASE STUDY: NIKE

To achieve this, Nike follows a four-stage process for research and development. First, researchers work with elite athletes across sports to understand the demands of their respective sport, and the environments in which they train and compete. Then, scientists explore advanced concepts that would alter performance, protection, and perceptions for athletes at all skill levels and sports. Next, the applied research teams evaluate the concepts and develop sport-specific innovations. In the final stage, the product concept is evaluated against Nike’s high standard for excellence.28

“The best innovation comes from inclusive work environments that foster diverse ideas, nurture people with diverse talent and backgrounds, and create strong relationships with diverse communities.” — Mark Parker, President and CEO of Nike29

Anticipating Needs. Nike understands that customers don’t always know exactly what they need. Working directly with athletes helps designers identify not only customers’ blatant needs, but their latent needs as well. A product that exemplifies this development approach is the lightweight Mayfly sneaker.

According to Nike engineers, for every 100 grams of weight you put on your feet, you’ll use 1 percent more energy.30 The average running shoe weighs around 283 grams, so Nike designed the lightweight Mayfly—named for the insect, which is light, nimble, and lives for only a few minutes.31 The Mayfly sneaker weighs just 136 grams and is designed to last for 100 kilometers—just enough for a marathon and its pre-event training— before being discarded.32

Nike’s AeroReact winter exercise apparel was derived from customer insights about running in the winter.33 Cold temperatures inhibit performance as the body strives harder to maintain thermal balance. AeroReact fabric adapts to the runner’s temperature as the body heats up, which eliminates the need for layers. Reacting with water vapor, it knows when to engage active cooling, which removes heat from the body. Nike’s thermoregulation apparel offers athletes the opportunity for optimal performance outdoors and protection against the elements.

Experiment + Iterate

Nike values experimentation— and its companion, failure. The company recognizes that in order to generate disruptive ideas, its designers must be encouraged to push boundaries, seek inspiration from obscure places, and constantly go back to the drawing board.

The Air Max. Launched in 1987, the Air Max was revolutionary both in design and function. A window

in the heel exposes an air cushion, making it the first sneaker to feature a visible air bubble sole.34 Its designer, Tinker Hatfield, took inspiration from the Georges Pompidou building in Paris, which shows its guts—pipes, elevators, structural beams—instead of adding a façade.

A former architect himself, Hatfield envisioned a similar application to footwear and got to work designing what became the Air Max. “It’s built on taking a risk for a good reason,” said Hatfield. “Which was to tell a story and to also make a better product.”35 Hatfield succeeded in making a better product, and the Air Max remains a perennial bestseller for Nike.36


CASE STUDY: NIKE

The Flyknit. In 2012, Nike launched the Flyknit, a shoe so innovative that it was named one of TIME Magazine’s “Best Inventions.”37 But Flyknit isn’t just a shoe—it’s a new way to make shoes.38 Previously, shoe construction involved cutting rolls of pre-woven material into pieces and then stitching and assembling them.38 But with Flyknit—which underwent 195 major design iterations—a shoe’s upper and tongue can be knit from polyester yarns and cables, resulting in 35 fewer pieces to assemble.39

Nike has since expanded its use of knit into its running, training, basketball, and soccer divisions. The second generation of this technology, FlyWeave, is designed to be a “bionic second skin” with a supportive fit that encourages maximum range of motion.40 A Flyknit sports bra was introduced in 2017, and in the future, Nike plans to include knitted technology in all of Nike’s shoe categories.41;42

The City Knife II. At the Innovation Kitchen, designers often use the deep-dive technique to explore enhancements and innovations to existing products. At Nike, this involves an in-depth study of a subject unrelated to athletic gear with the aim of finding ideas that can be translated to its products.43

After an origami deep dive in which designers were taught the ancient Japanese art of paper folding, they applied their learnings to sneaker design. Could they create shoes that would be collapsible and easily portable? Could a sneaker be made from one piece of fabric or rubber to cut down on waste? The answers were manifested in the 2009 creation of City Knife II, a foldable sneaker that built upon Nike’s 1998 Pocket Knife—a bendable rock-climbing shoe.44 In 2017, Nike released the City Knife 3, which also incorporates its Flyknit technology.45

Flyleather. In a quest to turn leather into a better performing material, Nike discovered a way to cut one of the largest sources of its carbon emissions. Flyleather uses at least half recycled leather, has a carbon footprint 80 percent lower than traditional leather, and uses 90 percent less water.46 It’s also lighter than leather, and more durable. During a typical leather-manufacturing process, up to 30 percent of a cow’s hide is discarded and often ends up in a landfill.47 To reduce this waste, Nike gathers the discarded leather scraps from the tannery floor and turns them into fibers. Then, those recycled leather fibers are combined with synthetic fibers before the finishing process. Nike Flyleather is produced on a roll, which improves cutting efficiency and creates less waste than traditional cut-and-sew methods for full-grain leather.47

Tech PartnershipsNike looks at every aspect of running—footwear, speed, distance, time, music, weather—and tries to make the entire act a more cohesive experience. As the role of devices and technology in consumers’ lives has expanded and shifted, so have Nike’s offerings for connected runners.

Nike+. Nike first attempted a wearable step tracker in the late ‘80s with the Nike Monitor. The sonar pedometer cost $225 and was a commercial failure, but it paved the way for a service that Nike would introduce a few decades later.48 Nike+ launched in 2005 as an Apple iPod step sensor and has evolved into an activity tracker app and smartwatch; digital community for runners; and free, members-only club with priority shopping.49

“Nike is the most connected, authentic, and distinctive brand in the industry.”

— Charlie Denson, Former Nike Brand President50

From its 2005 iPod partnership and 2012 launch of the now-extinct FuelBand to the current iteration as an app and branded Apple Watch, Nike is constantly adapting Nike+ to the latest technology. And it’s not afraid to phase out a product for a better-performing collaboration with a partner. In 2015, Nike retired its wearable FuelBand in favor of a Nike branded Apple Watch and a smartphone app. The decision indicated a return to its core competencies of athletic gear—and away from hardware manufacturing—which now enables it to collect and analyze consumer data about running behavior, providing invaluable product and marketing insights.51;52


CASE STUDY: NIKE

A 3-D Future. While Nike was conducting discovery interviews with football athletes, it observed players adjusting their speed and direction to compensate when their cleats couldn’t get traction. With a 3-D printer, Nike was able to address this issue by making multiple design variations in a matter of hours—which athletes then tested back-to-back. The ability to accelerate testing based on real-time insights enabled Nike to create the plates used on the Vapor Carbon 2014 Elite Cleats.53

It also compelled Nike to invest more deeply in 3-D technology and partner with print giant Hewlett- Packard (HP) and Prodways, a French 3-D printing company.54 Nike has held a patent for 3-D printed-shoe technology since 2015, and through these partnerships, it’s begun rapid prototyping of 3-D printed shoes.55 The 3-D experiments in manufacturing are being conducted at Nike’s Advanced Product Creation Center, a 125,000 square-foot lab that opened in 2017 at its Oregon headquarters.56 With its eye on automating the manufacturing process, Nike is moving toward a 3-D future.57

And a 4-D Future. Self-assembling parts are also known as 4-D technology, and in 2016, Nike achieved it. The HyperAdapt 1.0 are functional, self-lacing shoes inspired by the shoes in the 1985 film Back to the Future.58 Fitted with sensors, batteries, motors, and a cable system, the HyperAdapt 1.0 tightens automatically until it senses friction points.

After 28 years of brainstorming, eleven years of R&D, and innumerable prototypes, the automatic electronic self-lacing shoe became available to consumers for $720.59

Magic MarketingNike has gained sales and brand loyalty from consumers through emotional branding, high-profile endorsements, social media campaigns, and grassroot events. In the ‘70s, Nike had already grasped the sales potential of sponsoring professional athletes. From its first endorsement contract with Romanian tennis pro Ilie Nastase in 1973 to its current lifetime deals with several elite superstars, Nike leverages its cache and collaborative approach to dominate the celebrity athlete arena.

Michael Jordan. Nike’s most successful pro athlete endorsement began in 1985, when basketball player Michael Jordan was only one year into his professional career. Three other footwear companies were courting him, but Nike sealed the deal because “they really made a great effort of trying to have my input on the shoe,” said Jordan.60

The first release of the Air Jordan brand generated $100 million dollars in 1985, and even after more than 30 years in existence, the franchise produced $2.8 billion in annual sales in 2016.60; 61 The shoe’s popularity has outlasted Jordan’s own athletic career—which ended in his 2003 retirement from the Chicago Bulls—and has

arguably become the benchmark for style, performance, and design in the industry.

LeBron James. In 2015, Nike signed a record-breaking lifetime endorsement deal with American basketball superstar LeBron James. While the exact amount wasn’t disclosed, James’ business partner has suggested that it’s north of $100 billion dollars.62 James signed his first Nike deal in 2003, released his first shoe in 2005, and released the fourteenth version of his signature shoes in 2017, which generated an estimated $300 million in annual sales. 63

Cristiano Ronaldo. When this soccer icon inked his lifetime deal with Nike in 2016, he had reportedly worn 60 different kinds of Nike cleats as a Manchester United and now a Real Madrid player. 64 According to Nike, it approached Ronaldo for his talent, but also for his social media presence.65 Ronaldo reaches a growing 262 million fans across various platforms, and as of 2018, he’s the most followed person in Facebook’s history.65 A recent report indicates Ronaldo’s social media presence generated $474 million in value for Nike in 2016. If the momentum continues, it would take Nike only about two years to regain its $1 billion investment.65

Social Success. Nike’s use of social media to reach customers and sports fans is evidenced by the volume of user-generated content on behalf of the brand. Nike encourages its followers across the most popular social channels to share workout and training photos, as well as selfies in Nike gear. Users spread information about Nike and its products, serving as promoters of the brand to their own followers.66

With more than 79.5 million followers, Nike is the 3rd most popular Instagram account in the world.67 Instagrammers often post with the hashtag #nikerunning or #nikeplus, which results in more than 5,000 daily posted images.68


CASE STUDY: NIKE

On Twitter, @Nike interacts with users in real-time, often asking how their run went and even retweeting race photos from followers who use the brand’s hashtags. A separate handle, @NikeSupport, is dedicated solely to responding to customers who need help with Nike products. The result of Nike’s smart social strategy is a digital community of enthusiastic consumers across the world who are also brand ambassadors.

Basketball Around the World. In 2017, Nike became the exclusive uniform provider for America’s National Basketball Association (NBA)—and the first apparel partner to place its logo on every single on-court uniform. This eight-year deal cost Nike $1 billion, and gives the brand not just high-profile exposure, but enables it to track behavior and health data for players through technology embedded in uniforms.69

Adding to that partnership, Nike has signed an eleven year deal with the International Basketball Federation (FIBA), which is the global governing body for the sport. This agreement aims to develop players and raise international interest in the sport—just ahead of the 2019 Basketball World Cup in China. In this capacity, Nike continues to expand its global reach, notably in lucrative Asian markets with long-term potential.70

Experiential Events. From pop-up shops with tennis star Roger Federer and invite-only, custom-sneaker events for influencers, Nike knows how to generate

buzz, online and off. It also excels at connecting its consumer community of runners. One example was its “Fastest Day on Earth,” an international run event in August 2015 challenging runners to run their fastest mile ever. At the end of the race, Nike celebrated each participant’s fastest mile with a

personalized video that included the runner’s name, mile time, and clips from their route using Google Street View. The global event resulted in millions of

consumer interactions with the brand.71

Micro-Targeting. Nike’s current global marketing strategy is to focus on a certain sub-set of locations, instead of the entire world.72 In 2017, the company identified 12 cities—New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan—as its biggest growth opportunities.72 Nike expects 80 percent of its growth to come from this urban shortlist over the next three years.72

A recent example of this strategy in action is the short branded film Nothing Beats a Londoner from Nike’s longtime ad agency, Wieden + Kennedy.72 In the three-minute mash-up, dozens of sports are being played by London adolescents in Nike gear. The video captures the accents, slang, and regional references of London’s street culture through local kids and teens, not actors or famous athletes. If Nothing Beats a Londoner demonstrates Nike’s new approach, the company will use the energy and culture of youth in the 12 cities mentioned above—at the risk of excluding neighboring cities or countries—to gain regional dominance on a global stage.

On-Strategy SalesNike has evolved from a two-man operation selling a single pair of running shoes at track meets into a global empire with thousands of products. Its distribution channels include wholesalers, direct-to-consumers, and sales to global brand divisions.73 From digital innovations to brick-and-mortar concepts, Nike strives to deliver a sales experience that’s as memorable as its iconic sneakers.

NIKEiD Studio. In 1999, NikeiD.com invited consumers online to customize the color and material of sneakers according to their individual style.


CASE STUDY: NIKE

Sales were so strong that Nike built a handful of appointment-only studios for professional athletes, celebrities, and key influencers to design their own sneakers. At its New York City flagship in 2004, Nike introduced the first NIKEiD Studio open to the public. Today, Niketowns around the world feature NIKEiD Studios with professional guidance from onsite designers. Online personalization options at Nike.com have expanded beyond color and fabric to include custom fit and even college team logos or Chinese New Year graphics.

Direct-to-Consumer. In recent years, Nike has been laser-focused on its direct-to-consumer (DTC) strategy through its website and brick-and-mortar stores. In the first quarter of fiscal 2018, sales on Nike’s online store were up 19 percent while its retail locations recorded a 5 percent gain in sales.74

According to CEO Mark Parker, the company is obsessed with “making shopping more personal” on its own channels.74 He elaborates further:

We are committed to connecting digital and physical retail through our own channel, DTC. We made the move long ago to integrate brand, service, and commerce in a meaningful way for consumers. We brought this to life recently with Nike SoHo—a 55,000 square-foot, digitally connected store that is filled with immersive experiences. Consumers can test out products in the Nike+ Trial Zones, Nike+ members can book one-on-one appointments with trainers and stylists and, of course, it’s home to our most coveted products. This is a model we are hoping more will follow because we know there’s power in digital and physical retail coming together. Service and experience are not just for flagships, they are foundational.75

The company has also recognized that it can better control the sales experience (and product authenticity) if it sells directly to customers in online places like Amazon, Instagram, and Snapchat. In 2018, Instagram enabled “Shop Now” banners on Nike ads, which take users to an in-app shop.

At a VIP Jordan brand event over the 2018 NBA All-Star Game weekend, guests were invited to scan a QR code, which took them to the Snap Store, where they could buy unreleased Air Jordan III Tinker sneakers in-app.76 Users could also receive the shoes in less than two hours, thanks to Darkstore, a company that specializes in offering ecommerce companies same-day delivery. The sneakers sold out in 23 minutes.76

Masters of Merchandising. Nike’s successful strategy isn’t just marketing—it’s merchandising. It ships expensive, limited-edition sneakers to high-end boutiques; routes its stock Jordans to chains like Foot Locker, and sends its low-end product to DSW stores.77 Nike also understands the power of scarcity, so it produces its specialty shoes in small runs in order to remain a premium brand.78

In recent years though, it’s been releasing many more Air Jordans, including re-releases of vintage styles. Now, when Jordans are released, they do not always sell out instantly.79 This has eroded the brand value of Jordan, which has long-term implications for the company, according to Josh Luber, CEO of the sneaker-resale platform StockX.79

From Brand Crisis to Corporate Role Modeling When an activist published a 1992 report documenting sweatshop conditions at Indonesian factories of Nike’s subcontractors, the brand took a public relations hit.80 Nike reacted with a code of conduct for its manufacturers, but more media exposés followed, and awareness of Nike’s unfair labor practices in other countries resulted in protests around the world and brand boycotts.81

Nike remained on the defensive and eventually laid off workers due to stalled sales. But in 1998, a speech by then-CEO Phil Knight signaled a shift in Nike’s corporate responsibility. Knight admitted that Nike had “become synonymous with slave wages, forced overtime, and arbitrary abuse. I truly believe the American consumer doesn’t want to buy products made under abusive conditions.”82 He also announced that Nike would raise the minimum age of workers; significantly increase monitoring; and adopt U.S. OSHA clean air standards in all factories.82

From there, Nike created the Fair Labor Association, a non-profit group that combines companies, human rights and labor representatives to establish independent monitoring and a code of conduct. Nike pushed other apparel brands to join its association, and performed hundreds of factory audits between 2002 and 2004, including repeat visits to problematic factories.82


CASE STUDY: NIKE

Nike made a major mistake but instead of denying every allegation, it turned an unforced error into an opportunity to improve and bring greater transparency to its supply chain and a common set of standards for America’s apparel industry. The company continues to post its commitments, standards, and audit data as part of its corporate social responsibility reports.82

Environmental + Social ConscienceNike’s has announced a goal to double its business while reducing its environmental impact by half.83 It has set three strategic goals to achieve this: “minimize environmental footprint, transform manufacturing, and unleash human potential.”83

Toward its environmental goal, Nike’s recent achievements include converting 3 billion plastic bottles into recycled polyester for Nike Vapor football kits with Aeroswift technology; saving 20 million liters of water through dying processes that require no water; and recycling over 30 million pairs of shoes through its Reuse-A-Shoe program.83

At a huge distribution center in Europe, 99 percent of incoming shoes shipments arrive by canal instead of trucks, and the entire center runs on renewable energy.84 Six giant wind turbines produce as much power as 5,000 houses use; rooftop solar panels cover an area the size of three soccer fields. A thermal energy system stores warm water in the summer to use for heat in the winter, and reverses when the season changes.84 These steps toward a green future suggest that Nike could achieve its goal of using 100 percent renewable energy in company-owned or operated facilities by 2025.84

To accomplish its second goal—“transform manufacturing”— Nike is working with “fewer, better contract factories that are committed to transforming their businesses beyond a foundation of compliance to be lean, green, equitable, and empowering for workers.”85 By 2020, Nike’s aim is for 100 percent of contract factories to achieve total compliance.86

Progress on its third goal of “unleashing human potential” includes investments in research on how services, technology, and changes to compensation and benefits can positively impact workers inside and outside their workplaces.86 Its commitment to humans speaks to its stance on equality: in 2016, the majority of the company’s employees were minorities, and women made up 48 percent of Nike’s global workforce.87

“We see corporate responsibility as a catalyst for growth and innovation. It is an integral part of how we can use the power of our brand, the energy and passion of our people, and the scale of our business to create meaningful change.”


To unleash human potential on the community level, Nike announced partnerships in 2017 with Mentor: The National Mentoring Partnership, and PeacePlayer International, which is recognized for uniting divided communities.88 In 2016, Nike was awarded the annual Healthier Generation’s Corporate Hero Award for its commitment to teaching kids how to develop active habits by supporting sports and physical activities in schools.89 More than 10 million children have benefitted from Nike’s programs, increasing opportunities for long-term health through physical activity and education.89


CASE STUDY: NIKE

What’s Next for Nike?Expect this global organization to maintain its focus on technology in design, manufacturing, marketing, and retail. While other companies its size could fall to more agile competitors, Nike has a track record of market foresight and pivoting after missteps.

Sneaker Wars. With a 44 percent share (including the Jordan brand) of the U.S. athletic footwear market, Nike is leading the competition—though not by a comfortable margin.90 To dominate footwear in the future, Nike must speed up its production timeline. Slow production has been blamed for Nike’s failed attempts at on-trend styles, which has caused it to lose market share to Adidas.91 Adidas’ retro appeal, celebrity partnerships, and aggressive push into the U.S. market are already cutting into Nike’s: sales of the Yeezy—Kanye West’s collaboration with Adidas—surpassed the Jordan brand in 2017.92

Nike has historically designed shoes two years in advance to allow time for manufacturing. But since the completion of its Advanced Product Creation Center, 3D printing of prototypes and experiments in automated manufacturing are underway. In August 2017, the first facilities using robots to assemble footwear uppers began operations through Nike’s partnership with Grabit, a robotics startup backed by Nike.93 These robots take what would be a 10- to 20-minute task to arrange upper pieces into a 50- to75-second task, reducing assembly time by over 90percent.

Automation can shorten Nike’s path to market while reducing costs and increasing margins—but Adidas knows this too. In 2016, Adidas opened its own 3-D printing plant in Bavaria.94 With the competition closing the gap and Nike’s aggressive goals to reach $50B in sales by 2020, its speed from manufacturing to market is critical.95

Retail Focus. Over the next five years, Nike will scale down its 30,000 retail partners to concentrate on 40 or so “differentiated retailers” like Nordstrom and Foot Locker.96 Those retailers are willing to have a “special branded space for Nike product as well as dedicated salespeople for Nike product.”96

Amazon is one of the favored retailers, and Nike’s 2018 pilot program with the online giant is “going well” and will be extended, according to Parker.97 The company will also do a test run on Stitch Fix, the online styling service that curates apparel items for consumers based on their preferences. Nike is drastically ramping up its online efforts and hopes to get 30 percent of its revenue from e-commerce by 2022—up from 15 percent in 2017.98

“Innovation today is about leading the consumer, taking them somewhere new, but at the same time, it’s about listening and serving more completely.”


New Markets. Emerging markets will continue to be a focus for Nike, and China is a critical growth market for sports apparel. With the market worth about $31 billion, industry analysts predict Nike’s potential sales in China could grow by nearly 12 percent in 2019.100 The doubling of China’s gym and health club revenue since 2012, as well as strong government support behind programs promoting health and fitness, creates a fertile environment for industry sales to grow.100;101 To succeed in China, Nike will be fighting Reebok, which plans to open 500 stores in China by 2020 and is owned by Adidas.102


CASE STUDY: NIKE

With projections for the Islamic market at more than $5 trillion by 2020, Nike has been making a play for Muslim customers in the Middle East by opening stores in the region and launching a training app in Arabic.103 Ahead of the 2016 Olympics, Nike addressed Muslim female athletes by designing an athletic hijab and becoming the first large sportswear brand to manufacture a performance hijab.104

The product drew on the recommendations of such athletes as Emirati figure skater Zahra Lari; Egyptian runner and mountaineer Manai Rostom; and Emirati weightlifter Amna Al Haddad, all of whom participated in Nike’s wear-testing process.104 Nike is known for consumer discourse and testing in North America, and in order to avoid cultural missteps, it’s critical that Nike continues to bring Muslim female athletes into the design conversation for this market.

Nike is growing its retail presence in Russia, with stores in about a dozen major cities. In 2017, the brand opened its largest Eastern European store in Moscow, where the FIFA World Cup is being held in summer 2018. Nike faces a daunting set of challenges in this region—from the prevalence of counterfeit Nike sportswear to a lack of disposable income for many citizens.105 With Russians currently buying less than three pairs of shoes a year, Nike will remain vulnerable to footwear at lower price points until Russia’s economic situation improves.106

Female-Centric Future. In hopes of growing its women’s apparel category to $11 billion by 2020—and outpacing the Lululemon brand—Nike will explore more collaborations with female designers akin to its 2018 release of “The 1 Reimagined,” a sneakers series that reinterpreted the Air Jordan 1 and Air Force 1 for women.107

In its quest to own the athleisure category, Nike will seek to open hundreds of shop-in-shop spaces all over the world that exclusively cater to women. Called Unlaced, the concept will offer new products, personalized styling, as well as more unisex sizing on iconic collaborations.108 It will also aim to provide a platform for female voices to “break the sneaker community’s predominantly male status quo” and grow female-focused sneaker communities across such cities as Paris, London, Berlin, Milan, Dubai, Moscow, Barcelona, and Istanbul.109

Within its own walls, Nike must re-examine and better enforce its code of conduct to address harassment and gender parity among leaders. In March 2018, Trevor Edwards, Nike’s brand president who was once seen as a potential successor to the chief executive, stepped down after reports of inappropriate workplace behavior surfaced.110 Later that month, Jayme Martin, a vice president and general manager of global categories, also resigned among allegations of misconduct.111 “We’ve become aware of reports of behavior occurring within our organization that do not reflect our core values of inclusivity, respect, and empowerment at a time when we are accelerating our transition to the next stage of growth and advancing our culture,” said Parker.112

No Finish Line. In the next few years, expect the Jordan Brand to expand beyond basketball and into men’s apparel and female-centric products and experiences. It’s also likely that Converse will extend its range beyond Chuck Taylor to the Chuck 70, Jack Parcel, and One Star.113 Sustainability will continue to drive Nike’s decisions, so all of its new products will be focused on maximum athletic performance with minimal environmental impact. And as it continues building its online business, there will likely be responsible changes in packaging of the millions of shoes it ships to consumers each year. In a not-so-distant future, Nike’s capability to force positive change on its supply chain may just extend to the entire sports apparel and footwear industry.


CASE STUDY: NIKE

What Can You Learn From Nike? STRATEGY Set a foundation that defines innovation objectives and mobilizes your efforts. Nike’s innovation is rooted in its commitment to athletes and to protecting the environment.

● Going beyond mere products and services, what are the guiding principles that define innovation foryour organization?

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IDEAS Think differently to develop original ideas that drive business value. Nike believes eclectic skill sets, experiences, and interactions can spur groundbreaking ideas. It subscribes to the belief that ideas can come from anywhere.

● From where will you seek ideas and inspiration outside your organization?● What are your customers’ unmet, unarticulated needs? How can you delight them and generate value

for your business?

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PROCESS Create a streamlined and flexible approach to shepherd innovative ideas to market. Nike innovates at the business level and evolves fresh ideas through its Innovation Kitchen.

● How does your organization develop and implement innovative ideas?● What workflows do you have in place to move ideas forward?

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CULTURE Build a thriving work environment that drives innovation across your organization. Nike’s leadership actively participates in the innovation process, and encourages uncommon thinking and failure.

● In what ways do your leaders visibly engage in innovation?● How does your organization encourage smart risk-taking?

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CASE STUDY: NIKE

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CASE STUDY: NIKE

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CASE STUDY: NIKE

41 Groce, Nia. “Nike Uses Its Flyknit Shoe Technology on New Sports Bra.” FootwearNews.com. http://footwearnews. com/2017/focus/athletic-outdoor/nike-flyknit-technology-sports-bra-392682/ (accessed February 28, 2018).

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72 Ritson, Mark. “Mark Ritson: Nike’s Londoner ad is great creative, but is the city-focused strategy right?” MarketingWeek.com. https://www.marketingweek.com/2018/02/20/nike-londoner-ad-strategy/ (accessed February 27, 2018).

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CASE STUDY: NIKE

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Case Study - portal.futurethink.com€¦ · CASE STUDY: NIKE A Marathon, Not a Sprint Nike has become one the world’s leaders in athletic footwear, apparel, equipment, and accessories