Shoe Dog

By Phil Knight

SYNOPSIS

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The iconic Nike sporting goods company started over 50 years ago as a ‘crazy idea’ in the mind of a young runner in Oregon. Shoe Dog is Phil Knight’s personal memoir of the company that started with him selling running shoes he called Tigers out of the back of his car. Along the way, he learned the importance of assembling a team of brilliant, dedicated, like-minded individuals; of focusing on people before profit; and of not being afraid to stand up to challenges and face them on your own terms.

In the early days, the Nike management team, the Buttface team, identified strongly with each other and trusted each other. That spirit and ethos came to embody the entire company, where the focus has always been on the athletes and on building trust. The company’s “us against the world” approach helped them to overcome some formidable challenges: losing their main Japanese supplier, solving the problem of uneven supply and excess inventory, and even taking on the government over import taxes.

Sponsoring the runner Steve Prefontaine when he was at a low point in his life gave the young company a formidable spokesman and ambassador for the brand. Deciding to maintain his memorial after his tragic death was emblematic of the people-oriented company Nike was becoming. That connection with its athletes continues to this day.

The inventions of two of Nike’s iconic products—the waffle-sole running shoe and Nike Air—came from unexpected sources and went on to revolutionize the world of athletic shoes. There were disasters, too, like the much-hyped Tailwind shoe that literally tore itself to shreds. And there was controversy, particularly the allegations over the use of sweatshops in Asia.

Phil Knight and Nike turned each stumbling block into a challenge to do better, to achieve more, to keep winning the race.

 

SUMMARY

Today, the company that started as a ‘crazy idea’ in the head of a young running enthusiast in Oregon has become Nike, Inc., an iconic sporting goods company, selling shoes and clothes in thousands of stores worldwide and employing over 68,000 people. In its early days, the company was called Blue Ribbon, and comprised nothing more that Phil Knight trying to sell running shoes out of the back of his car. Called Tigers, the shoes were made at a factory in Japan, shipped out to Oregon in batches, and sold one pair at a time. The story of how Blue Ribbon became Nike, of the people Knight met along the way and the trials and tribulations they all faced, is both a personal tale of succeeding against the odds, and a case study in how to follow your dream to create something unique.

The following stories from Shoe Dog are presented from Knight’s perspective.

 

The Buttface Team

In early 1964 I got my first batch of the running shoes I’d ordered from the factory in Japan: twelve pairs of beautiful, creamy white shoes with blue stripes down the sides. I sent two pairs to my old running coach at the University of Oregon, Bill Bowerman, because right then I knew that this dream of mine wasn’t just about the shoes, it was about the people who were passionate about running. I needed to work with someone I could trust, someone who understood the importance of what runners put on their feet, and someone who knew me. Bowerman became my first partner, with a 49% stake in the fledgling company.

By 1976, that two-man operation had become a rapidly-growing company, and I had assembled a formidable, if eccentric, five-man management team. I think it was Jeff Johnson who coined our name: we were the Buttface team. As Johnson said, “How many multimillion dollar companies can you call out ‘Hey, Buttface,’ and the entire management team turns around?” We were certainly a motley crew: two morbidly obese guys, a chain-smoker, and a paralyzed guy in a wheelchair, and we sold athletic shoes? Yet we also had a great deal in common. We were mostly Oregon guys, we all had a deep-seated need to prove ourselves, and we also had a strong streak of self-loathing (which kept the egos in check). Any one of the team could claimed to be the smartest guy in the room but none of them believed it of himself or of the next guy. Years later a Harvard business professor concluded that we were lucky to have a team where more than half the members could think both tactically and strategically; in most businesses, you’d be lucky to have even one manager who could do both. I was lucky to have found four of them.

Buttface was also the name we gave to our periodic retreats in those early days—we’d reserve a bunch of cabins at an Oregon resort, and spend a couple of days shouting ourselves hoarse in a conference room. No idea was too sacred to be mocked, no person was too important to be ridiculed. I wasn’t exempt: my nickname was Bucky the Bookkeeper.

It was always us against the world: the guy who had been too fat to make partner at his old firm; the one who couldn’t cope in the ‘normal’ world of nine-to-five; the insurance lawyer who hated insurance and lawyers; and the guy who had lost the dreams of his youth in a freak accident. We were a bunch of born losers who identified with each other and who trusted each other. That was the spirit and the ethos, not just of the team but of the entire company.

This sense of “we’re in it together” was the glue that kept us going through all the tough times. It also played out in a lot of other ways. For example, by 1979 we had 300 employees, and needed to move to a bigger space. But, to make sure we stayed true to who we were, the company moved the way we had always moved: all 300 employees came in on the weekend, packed up their stuff in their own cars and, with the help of beer, pizza, and some of the guys from the warehouse, caravanned down the road to the new space. We were a team and everyone pitched in.

 

More Than Just a Business

For some companies, it’s all about pursuing profits; but for us the business was never about making money. I believe that if what you’re doing ever becomes just a business, then it’s a bad business. For us, it was about the athletes, and it was about trust. By 1972 Blue Ribbon had started developing a new line of shoes, called Nike, which we were trying to sell alongside the Tigers that we had been making. We had no idea how to get our customers to give these new shoes a chance; we weren’t even sure they were all that good. The Tigers were a known quantity, but Nike? What was that? At a convention that year we stocked our booth with Tigers and with Nikes, and were surprised when people actually placed orders with us for the new shoes, big orders. I remember Jeff Johnson was baffled—why were buyers willing to put down money for a new, untested shoe? A representative from one of our biggest accounts laughed at Johnson and said, “You guys always shoot straight. So, if you say this new shoe, this Nike, is worth a shot, we believe.” That trust was worth more than any ad campaign.

If a young person were to ask me for advice, I’d say, think about the next forty years and how you want to spend your time. Don’t settle for a job or even a career, look for a calling. If you’re following your calling, then the fatigue, the disappointments, and the lows will be easier to bear, and the highs will be like nothing you can imagine.

This ethos of being more than just a business informed everything we did. By 1977 we realized, people liked the look of our shoes, but they also liked our story: an Oregon firm founded by running geeks. They liked what wearing Nikes said about them. We weren’t just a brand, we were a statement.

 

Changing the Story

Our us-against-the-world story gave us the strength not only to face many challenges over the years, but to take those challenges and turn them on their head. In 1972, we hit a major roadblock—our main Japanese supplier, Onitsuka, the company that had been manufacturing Tiger shoes for Blue Ribbon, declared us in breach of contract for bringing out our own Nike shoes. This was a potentially devastating blow. Could the company survive?

I gathered everyone in the conference room and delivered the bad news to about 30 people. Everyone was stunned; they started slumping forward, sinking. I had to do something to turn this around. So, I cleared my throat: “What I’m trying to say is, we’ve got them right where we want them.” Everyone sat up straighter. “This is the moment we’ve been waiting for. Our moment. No more selling someone else’s brand.” It would be tough, it would be open warfare, but this was our chance to succeed on our own terms, with our own brand. I reminded everyone: we’d sold two million shoes the year before, and that was down to us, not to Onitsuka. I told them, this was our Independence Day. Later, Johnson told me that speech was my finest hour. But I knew what really mattered; I’d told the truth and I’d used it to change the story.

Another big challenge came in 1973: now, we were hitting major supply problems. Everyone wanted running shoes, but the supply was uneven. How could we significantly boost our supply without taking on huge inventory risks? The big guys, Adidas and Puma, they had the same problem; but for an upstart like us, getting the numbers wrong could tip us into bankruptcy. We struggled through the summer to come up with a solution. Then, in the fall, I had an idea: we’d solve our supply problems by changing the whole relationship with our stores. We told our biggest retailers that we were launching an innovative new program called Futures—if they signed firm commitments on large and non-refundable orders, six months in advance, we’d give them a hefty 7% discount. In one step, we’d have longer lead times, fewer shipments, and more certainty. The retailers resisted, but I kept telling them that they’d better get on board because this was the way of the future. Between my bold predictions and several eye-popping new shoes being rolled out, the Futures program slowly gained traction. Eventually, even the holdouts signed up.

Perhaps the scariest and most audacious example of changing the story started in 1977 with an envelope. It didn’t look like much, that envelope, but inside was something that started me shaking: a bill from the U.S. government for $25 million. The government claimed we owed three years of customs duties because of some obscure old duty-assessing method called the American Selling Price. If this was for real, we were in trouble; no way we could pay a $25 million assessment...

 

 

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