Shoe Dog - Anecdotes From Nike
Cover & Diagrams
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 - Anecdotes From Nike 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.
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. That was almost our entire sales number for the year; and even if we managed to find a way to pay the bill, we couldn't keep paying such hefty duties every year. Everything we had achieved would be destroyed. The ASP said that import duties on nylon shoes must be 20% of the manufacturing cost of the shoe; unless there's a similar shoe manufactured in the U.S., in which case the duty must be 20% of the competitors selling price. And that's what our competitors had done: make a few shoes in the U.S., get them declared "similar," then price them high to send our import duties soaring. We had to fight with everything we had. We put together a legal team, held endless meetings, went to Washington, DC to argue our case. The case dragged on and on.
Finally, in 1980, I told the team, we need to do something crazy: we need to 'American Selling Price' ourselves. We launched a cheap new running shoe, the One Line, a knockoff with nylon uppers and a simple logo, manufactured at a plant in the U.S. We priced it low, just above cost. Now, customs officials would have to use this 'competitor' shoe as a new reference point in deciding our import duty. That was the opening move to get the feds' attention. Next, we launched a TV commercial telling the story of the little Oregon company fighting the big bad government: a runner on a lonely road, with a voiceover talking about patriotism, liberty, and the American way. Finally, the closing move—we filed a $25 million antitrust suit in the U.S. District Court for the Southern District of New York, alleging that our competitors were using underhanded practices to try to drive us out of business. At that point, the government initiated settlement talks. In spring 1980 the lawyers agreed on a final settlement; $9 million. I hated writing that check, but it was the best deal we would get. More important, we'd managed to take on our competitors and the government, and beat them at their own game.
Run like Pre
Back in 1970, I'd heard about the fastest middle-distance runner in the world, a young Oregonian brimming with self-confidence, called Steve Prefontaine. At that time, we were still a small, struggling company called Blue Ribbon; importing batches of running shoes from Japan, trying to figure out how to get them distributed and sold, with no budget for sponsoring athletes. But I kept my eye on the young guy from Oregon who was coached by my friend and partner Bill Bowerman. By 1972 we had started making Nike shoes and Steve, now known as Pre, was a track and field superstar. He was a fluid, poetic runner, an extrovert who pushed hard to win, and I really wanted him as a Nike athlete. But at the 1972 Olympics, haunted by the terrorist attacks that hit the games that year, Pre came in fourth. After that, he was despondent, adrift, and above all broke.
So, in 1973, to give him a sense of purpose and get him back on his feet, we hired Pre as our National Director of Public Affairs. He was our second celebrity athlete endorser. Our first was a fiery young Romanian tennis player who tore his way through the Rainier International Classic tournament in the fall of 1972 in a brand-new pair of Nike Match Points. His name was Ilie Nastase. After the tournament, I got ahold of his agent and negotiated a sponsorship deal for $10,000.
Pre-was a phenomenon; he spent 1973 on a cross-country road trip, going to track meets, colleges, and state fairs. Everywhere he went, people wanted to meet him, and everywhere he went he touted our new Nike shoes. He was our star ambassador, holding clinics, serving as a model for new shoe designs, and sending pairs of Nikes to fellow runners with a note saying, "Try these, you'll love them." By the end of 1974 he was back in top form, smashing American running records and doing it in Nikes. The last time I saw him run was at a meet in Eugene in May 1975. As usual, he was incredible; going up against some of the best runners in the world he went into the final laps of the 5,000 meters in second place, then did what Pre always did best. He dug deep and pulled out some new reserve of energy, powering onward to win the race. The next morning, I got the call: on his way home from the postrace party, he'd lost control of his car, hit a boulder, and died. He was 24.
At the time of his death, Pre held every American distance record, from 2,000 to 10,000 meters, from two miles to six. But, more than an athlete, he was a legend who fired our imagination. He didn't just want to be the best runner, he wanted to break all the rules holding back amateur athletes, and help them realize their full potential.
Within days, the spot where he had died became a makeshift shrine, with people leaving flowers, notes, gifts, even Nikes. We decided the rock site needed to be curated. We didn't know how we'd afford to do something like that, but we all agreed: as long as we were in business we'd find the money for things like that.
Pre always said, "Somebody may beat me—but they're going to have to bleed to do it." And that became my mantra. Some banker, creditor, or competitor may try to stop me, but they're going to have to bleed to do it.
The athlete connection
Right from the early days, we knew that the key to success first for Blue Ribbon and then for Nike was not just getting athletes to wear our shoes and clothes, but forging real relationships with them. It's one of the things about Nike that I am most proud of. There's something very special that passes between me and most of the athletes that I work with. It's usually brief, but it almost always happens; a connection, a camaraderie. It's what I was searching for back in 1962. I'd graduated from the University of Oregon and then earned a master's in business from Stanford, and was trying to figure out how to realize my crazy idea. In a paper for a class on entrepreneurship, I'd laid out a plan for a company that used the nascent Japanese manufacturing prowess to make running shoes. But, I had no idea how to bring that plan to life. So, I spent a year travelling the world, searching for what might come next, and trying to make connections.
Years later, those connections, that camaraderie, would pay off in surprising ways. I was at some event, in July 2005, when LeBron James asked for a private word. He said, when he first signed with Nike he didn't know much about the company, so he'd been reading up on our history. He'd realized that I was the founder and that Nike as a company was born in 1972. "So I went to my jeweler and had them find a Rolex watch from 1972." And he handed me a watch. It was engraved, "With thanks for taking a chance on me." We didn't take that much of a chance, of course; LeBron was pretty much a sure thing. But in one sense he was right—it's always been about taking a chance on people, about being willing to find the connection.
In 2000 my oldest son, Matthew, died in a freak scuba diving accident in El Salvador. Within hours, the news was everywhere; my wife Penny and I shut ourselves away and fell apart in grief. And every Nike athlete, every single one, got in touch. They wrote, emailed, and called. The first call, at 7:30am the day after the news broke, was from Tiger Woods. Our athletes are part of our family.
Waffles and air
In 1971 my old coach and partner Bill Bowerman had started experimenting with a new sole for our running shoes, something that would grip the track but still be light and flexible. He was drawn to the grid pattern on his wife's waffle iron, and came up with a prototype that he thought could work. After a few more months of experimenting, in 1972 I filed patent application number 284,736 for a shoe with an "improved sole having integral polygon shaped studs…of square, rectangular or triangle cross section…[and] a plurality of flat sides which provide gripping edges that give greatly improved traction." We didn't know it at the time, but Bowerman had just revolutionized the athletic shoe.
By 1976, demand for Bowerman's waffle sole trainer was strong. With its pillowy midsole cushion, bright red upper, and fat white Nike swoosh, the shoe was drawing thousands of new customers to the Nike fold, and I wondered: what would it take to get people to wear this shoe everywhere, to class, to the grocery store, even to the office? Adidas had tried to do this with a couple of its shoes, but without much success. And that's when I had a moment of inspiration: make 'em in blue, to go better with jeans! It worked—the new blue waffle trainer was a huge hit, Nike became a household name, not just a brand, and finally we were seeing the kind of sales numbers that transformed our company. Later that year, we incorporated as Nike, Inc.
The following year brought the seed of another transformation from an inauspicious start. A former aerospace engineer, M. Frank Rudy, came into the office with his partner Bob Bogert, and pitched their Crazy Idea: injecting air into a running shoe. It sounded like something out of a comic book, but Rudy was persistent. Finally, I agreed to stuff one of his air soles into my own shoes and go for a run. Six miles later, I was convinced, and Rudy began working on prototypes for what became the Nike Air.
Learning from failure
In late 1978, we launched the Tailwind—a shiny silver shoe stuffed full of a dozen innovations, including Rudy's patented air soles. We hyped this thing to the heavens, with a splashy ad campaign and dreams of something that would eclipse even the waffle trainer. In a matter of weeks, the dream turned to dust. The Tailwind was a disaster. Customers were returning the shoes to stores, complaining that they fell apart. A shoe autopsy revealed the problem: bits of metal in that silver paint acted like razor blades on the shoe's upper, shredding the fabric. Half of the first generation of Tailwinds ended up in the recycling bins.
We were devastated. But, we'd also learned a valuable lesson: don't put twelve innovations into one shoe. It's just too much for a shoe to carry, and too much for a design team to pull off, too. Ultimately, we were able to move on. Fear of failure could not be our downfall as a company. We always known we'd fail at some point; we just had to have faith that we'd do it fast, learn from it, and be better for it.
Moving on from controversy
One of the worst periods for me, a time when I felt a deep sense of betrayal, was when Nike was attacked for conditions in our overseas factories. The media talked about sweatshops, but they never talked about how much better the factories were once we started running them, about all the improvements we made, not to mention the fact that we were only renters of those facilities, not owners.
Still, I handled the whole controversy badly—I was self-righteous, petulant, and angry, which was about the worst possible reaction. Eventually the company got past its emotional response and realized that whether or not we were being made a scapegoat was irrelevant. The fact was, we needed to do better. So, we decided to show the world just how much Nike could do, using the crisis of bad headlines to reinvent the way our products were made. We would go from being the target of factory reformers to a major player in the reform movement.
For example, the rubber room used to be the worst part of any shoe factory, full of the toxic fumes used to bond uppers and soles. Nike invented a water-based bonding agent that gives off no fumes, so eliminating most of the carcinogens in the air—and we gave the process freely to our competitors, too.
One key development that came out of the crisis was a major effort by Nike to help break the cycles of poverty in the poorest parts of the world. Partnering with the United Nations and other corporations, we created the Girl Effect — a massive global campaign to educate, connect, and lift up young girls. Why girls? Because the academics, and our own hearts, told us that helping the most vulnerable to thrive, i.e., young girls, would help everyone. The campaign creates safe spaces for girls to study, organizes against child marriage, and gives girls access to the resources that can change their lives.
There were so many things I could have done differently that would have prevented the whole sweatshop crisis; but it has led to something wonderful, both inside and outside the company.