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Shoe Dog

#### Introduction

## The tagline of Nike is, well, you already know it.

What you might not know, though, is how well “Just do it” captures the spirit of Nike cofounder Phil Knight in the early years of his company. Because it was never a straightforward path to success for Nike. Sometimes it was more like Knight fumbling his way forward, even though he wasn’t sure what “forward” even meant. So how do you grow one of the most powerful brands the world has ever seen in the face of million-dollar lawsuits and global scandal when you’re making it up as you go along? As we’ll see, the true story of Phil Knight and Nike is about the power of commitment and integrity.

#### Chapter 1 of 6

## Blink 1

It was 1962 and Phil Knight was fresh out of Stanford Business School. He had an idea for a business, but none of his professors, classmates or even his father thought much of it. But that didn’t stop Knight from following his vision. So he traveled across the Pacific to pitch his bold proposition to a room full of Japanese businessmen. Knight wanted to import Japanese running shoes to America. And he had his eyes on the Tiger brand that was manufactured by the Japanese company Onitsuka. Here’s the key message: Nike’s path to success started with a “crazy idea” and a trip around the world. Knight didn’t expect the pitch to be a success, but when the Onitsuka CEO told him that his timing was perfect and asked him the name of his company, Knight was stunned. Completely unprepared, he blurted out the name, “Blue Ribbon.” Onitsuka then agreed to send him 300 pairs of Tiger shoes to start him off. Over the next several months, Knight would sell the Japanese shoes out of the trunk of his car! After securing the deal with Onitsuka, Knight traveled the world. What he saw and experienced inspired him. Much of what he learned about the cultures he explored would influence him later on. For instance, Knight was particularly inspired by the Greek Acropolis. He found himself standing in front of the Temple of Nike, the goddess of victory, for hours on end. Years later, Knight came across a play written by ancient Greek playwright Aristophanes called “The Knights.” In it, a warrior gifts the king a new pair of shoes – in the Temple of Nike.

#### Chapter 2 of 6

## Blink 2

Many people have someone in their lives who inspires them, and whose respect they seek. For Phil Knight, this person was his former running coach, Bill Bowerman. Bowerman’s approval gave Knight the confidence he needed to carry on with his dreams. Bowerman, in turn, was a genuine “shoe dog.” A “shoe dog” is an industry term for someone who is shoe-obsessed. A “shoe dog” understands just how meaningful a shoe can be – a shoe can even give you confidence. The key message here is: Bill Bowerman modified the early Tiger shoes they received and put Blue Ribbon on the map. When Knight ran for Bowerman, he was his coach’s unofficial shoe guinea pig. Bowerman was always experimenting to see how small changes in footwear would affect his athletes’ performance. He would tear apart shoes and put them back together...and use whatever materials he thought could make shoes an asset and not a mere necessity. His primary goal was to make shoes as light as possible – a feature which would become a trademark of the Nike brand. Bowerman was so obsessed with this goal that he once used cod skin – like, from the fish – instead of leather to make a lighter pair of shoes! When Knight returned from Japan, he went to see Bowerman, and asked him to be his partner at Blue Ribbon. Bowerman agreed, and Knight got a big confidence boost. He began to believe that his “crazy idea” might amount to something. As it turned out, the partnership was hugely successful. Again, timing was key. When Blue Ribbon was in its infancy, Bowerman’s coaching career was picking up steam. He was even training future Olympians. As he altered the imported Tiger shoes for his star runners, Bowerman helped to give the brand more exposure, helping Knight sell more pairs. Knight also sent Bowerman’s first modified shoe prototype, the Cortez, to Onitsuka, suggesting that the company manufacture these new, performance-tested shoes. Onitsuka agreed, and Cortez was Blue Ribbon’s first sales success.

#### Chapter 3 of 6

## Blink 3

As Blue Ribbon grew, Knight put together a team of trustworthy people who, in turn, trusted him. But Blue Ribbon workers weren’t your run-of-the-mill corporate types. They were instead a bunch of brilliant misfits who formed a great team. The key message here is: Talented eccentrics made up the early Blue Ribbon team, and they all helped make key decisions. They may have worked so well together precisely because they were misfits. This fact allowed each team member to see past a coworker’s quirks to the genius within. No one felt he had to hold back. From the get go, Blue Ribbon employees all believed in Knight and his vision. The company’s first full-time employee, Jeff Johnson, worked tirelessly, designing innovative shoes alongside Bill Bowerman. To keep the Blue Ribbon team strong, a few times each year Knight would hold his version of a team-building weekend that he called “Buttfaces.” Everyone there had the opportunity to yell at each other before getting drunk. It was a reminder that no one was too important to be mocked. Yet drunken shouting matches weren’t the only way Knight maintained morale. He also involved his team in many company decisions. He followed General Patton’s words of wisdom: “Don’t tell people how to do things. Tell them what to do and let them surprise you with their results.” Knight, for example, never once told Jeff Johnson how to do his job. He never even gave Jeff a hard time for sending him countless letters, with subjects ranging from advertising questions to poems and even jokes. Knight included his team when bigger decisions needed to be made, too. In 1971, the company decided to stop selling Onitsuka shoes and begin making its own. However, the Blue Ribbon brand wasn’t suitable for this move. They needed to develop a successor company. Rather than branding this new business himself, Knight asked his employees to suggest names for it. Surprisingly, the name Nike came to Jeff Johnson in a dream. Knight went with it, remembering the impression the Temple of Nike had made on him all those years ago in Athens.

#### Chapter 4 of 6

## Blink 4

Successful entrepreneurs know that fame and fortune are always dogged by obstacles and pitfalls. For Phil Knight, it was two significant lawsuits. The key message here is: Lawsuits brought by Onitsuka and the government threatened Nike, but the company persevered. First, in 1973, Onitsuka attempted to sue Blue Ribbon in Japan for costs that had been incurred through a breach of contract – a breach that occurred when Blue Ribbon started producing and distributing Nike shoes. To defend itself, Blue Ribbon sued Onitsuka in the United States for breach of contract as well as trademark infringement. Blue Ribbon had an exclusive contract to distribute Tiger’s track-and-field line in America. Yet Knight had an informant at Onitsuka, who tipped him off that an Onitsuka executive was planning a trip to America in search of a replacement distributor. Armed with this information, Knight shifted his focus to building his new company, Nike. Eventually, the lawsuit resulted in a favorable judgment for Blue Ribbon. The judge said his decision was based on which of the two companies was more honest – and that in this particular case, Blue Ribbon was the most honest partner. Onitsuka was ordered to pay damages. This was just the first major threat to Knight and his work. The second came in 1977, when Nike was told that it owed the government $25 million. The trouble started when Nike’s competitors in America, Keds and Converse, worked together to uncover an obscure customs law called the American Selling Price law. According to the American Selling Price law, certain types of shoes would incur significantly higher customs duties. They accused Nike of violating it. But Knight wasn’t going to give up without a fight. He believed that Nike was innocent, so, of course, he wanted the government to drop its claim altogether. But he eventually took the recommendation of a trusted advisor and, as a diplomatic gesture, settled the claim for $9 million. Knight felt that if he fought the government’s claim tooth and nail, he’d never regain its goodwill, something Nike might need at a later date. Quote: “Don’t stop. Don’t even think about stopping until you get there, and don’t give much thought to where ‘there’ is.”

#### Chapter 5 of 6

## Blink 5

Clearly, Knight faced some obstacles on his rise to the top. It took a lot of hard work to keep going. So how did Nike grow to become the company it is today? Although he wasn't always sure what winning meant to him, Knight knew that he didn’t want to lose. This was partly due to a fear of disappointing his father and partly because he thought work should be both playful and meaningful. The combination convinced him that he had to avoid a passive life that just seemed to “slip” by. So while Knight knew that taking Nike public could solve some financial problems, his desire to keep his business playful and fun made him hesitant to do so. The key message here is: Knight feared an IPO would taint the unique culture at Nike, yet its spirit stayed strong. Basically, Knight ran his business according to the motto, “grow or die.” This meant that after the modest salaries he and his employees received, all profits were invested straight back into the business, helping it to grow. This financing strategy meant that Knight was reliant on banks, which often refused him the large loans he requested. Eventually, the government’s $25 million lawsuit pushed Knight into taking Nike public with an initial public offering. He worried that an IPO would cost him control of the company and its unique code of ethics. He worried Nike would be transformed into yet another corporate machine. Thankfully, one of Knight’s associates had an innovative idea of how to design the company’s share structure to prevent Nike becoming a faceless mega-corporation. Knight could ensure Nike remained in charge. To this day, the company prides itself on its integrity, to which it also attributes much of its worldwide success.

#### Chapter 6 of 6

## Blink 6

Since the beginning, Nike has approached setbacks with the same integrity and energy that Knight always demanded of each and every employee. It’s this attitude that has kept customers loyal through thick and thin. The key message here is: through improving factory working conditions and treating sponsored athletes well, Nike strives to stay true to its values. In the nineties, the company found itself at the center of a damaging report on the abysmal working conditions of Asian sweatshops. Nike rented workspace in these factories just like many other corporations did. Yet the report’s author knew that Nike’s name recognition would draw media attention, so the footwear company became the center of the story. Nike had worked hard to increase the wages of its factory workers, but was stopped in one country by a top government official who said that factory workers who earned more than doctors would be bad for the economy. But after the shameful exposure, Knight and his team knew they had to try harder. Nike is now working hard to set better labor standards for its factory workers. One way the company improved factory conditions was by inventing a water-based bonding agent to attach shoe uppers to the soles of a shoe. This was a huge development. The so-called rubber room was previously the most carcinogenic area in a shoe factory. Nike’s new bonding agent cut out 97 percent of the toxins found in the previous one. In fact, Nike even shared the new glue with its competitors, and they began using it in their factories. And Nike’s commitment to integrity doesn’t stop at the factory door. Knight treats all Nike’s sponsored athletes as real people and not just vehicles for selling products. Because of this respect, many of these athletes – people like Tiger Woods – have become Knight’s personal friends. When Knight’s son died in a scuba diving accident every single Nike athlete wrote or called to offer condolences.

#### Conclusion

## Final summary

The key message in this book: The story of shoe giant Nike is one of humble beginnings and “crazy” ideas. The company’s rise to world fame goes to show that if you believe in your ideas, think outside the box and stay true to your values, there’s no limit to what you can accomplish. Actionable Advice Surround yourself with believers. Starting a successful business requires surrounding yourself with people who believe in you and your idea – people who aren’t in it just for the money. Employees with real passion will be the most involved team members you can find, and they’ll stick with you when the going gets tough.
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