Shoe Dog by Phil Knight

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Phil Knight was a 24-year-old man who had just returned home to Oregon after graduating with a master’s from Stanford and serving in the US Army for a year, but he still felt like a child. The straight-laced young man was good at running, very good in fact, but not quite elite level. It was on one of his morning runs where he thought about his crazy idea that he’d formulated in Stanford Business School and decided to work on it and keep going until he achieved it.

It was 1962 and his idea had come from a research paper he’d written about how Japanese cameras had taken a significant market share of the camera market once dominated by the Germans. Knight proposed Japanese running shoes could achieve the same results. He and his classmate decided to go travelling the world… and Japan would be one of the destinations.

The first stop however was Hawaii. They loved the beaches, sea and beautiful girls and made up their minds to lengthen the visit by a bit. They both got jobs to fund their extended stay. When it was time to move on, his friend had met a Hawaiian girl and decided instead to stay. Knight continued alone, next stop Tokyo.

It was here he pitched his idea to a Japanese company, proposing to import their shoes to the US market. After agreeing to pay $50 for a sample of their shoes to be sent to America, he continued with his journey. His world tour continued through Asia and Europe before returning home back to America (1963). The shoes didn’t arrive. Knight returned to work, taking a job at an accounting firm. Finally, after a year since he was in Japan (1964), the shoes arrived.

He immediately sent a couple of pairs to his old track and field coach, Bill Bowerman. Impressed with the shoes, Bowerman wanted in on the deal and they became partners in a 51-49 split, giving Knight control of his company. The first order of 300 shoes was paid for thanks to a loan from Knight’s father and it was confirmed that Knight would be the distributor for the Japanese shoes in the West. He immediately quit his accounting job and began selling the shoes from his car.

Knight went directly to track and field meetings and spoke to everybody there. His belief in running and his shoes was evident and mainly through word of mouth, he’d sold the first batch in a few months. The first ever employee of Knight’s company, called Blue Ribbon Sports, was one of his younger sisters, who helped with the secretarial work (1965). Soon Knight hired a friend as a salesman as well. Sales for the first year of the company were $8,000 and increasing.

By the summer of 1966, Knight’s salesman on the West coast had met all his targets and Knight opened his first retail store in Santa Monica, California and put his salesman in charge. Sales had increased to $44,000 for the year, but there was a problem. A rival seller in the US was poaching Knight’s customers and also selling the same Japanese shoes. Knight flew to Japan to meet with the company and asked for exclusive distribution rights. After lying and saying that he had a store on the East coast as well as the West coast, he was given exclusive rights for three years. He ordered 5,000 more shoes, with money he didn’t have to be delivered to a store he hadn’t yet opened.

After hurriedly opening a store in Boston, Knight himself would work at another newly opened store in Eugene. He still could not rely on his shoe sale revenue as a full-time income though and took a job teaching at Portland State University. This was where he met his future spouse, Penny, who was first his student, then an employee for the company and finally in September 1968, a year after they first met, his wife.

Sales rose from $150,000 in ’68 to nearly $300,000 in 1969. Knight employed more reps on a commission only basis. It was only at this point that Phil Knight decided he could work at his company full-time and left his teaching job. By 1971, sales had risen to $1.3 million but Knight’s relationship with his Japanese supplier was faltering. They were giving Knight an ultimatum of buying a controlling share of his company or else they’ll look for other North American distributors. The shoe company needed a new supplier.

Knight agreed a new deal with another factory to produce their shoes. To distinguish themselves they created a new logo, a swoosh evoking a sense of motion and a new brand name, Nike. They got their first two athlete endorsements – Ilie Năstase, the top ranked Romanian tennis player in 1972 and Steve Prefontaine, the Olympic middle distance runner in 1973. By 1974, several more stores were open and sales were on target for $8 million. Knight’s tactic of “grow or die” resulted in significant progression but he was constantly straining their cash reserves and pushing banks to lend them as much money as possible to buy inventory. The following year tragedy struck as Steve Prefontaine died in a car accident at only 24 years of age.

The look of the Nike shoes was distinctive and helped them evolve from being worn not just for sports but for everyday life as well. Sales took off and the brand (Nike) and logo (The Swoosh) were known in households across America. Production was increased to match demand and manufacturing now took place in factories in Japan, Taiwan, Korea and Puerto Rico. The Olympic Games in Montreal had several athletes who wore Nike shoes. Sales doubled again to $14 million.

Nike began innovating too. After meeting with a shoe inventor and his business partner (1977), they began developing their creation, shoes with air injected into the soles. The increase in quality of their shoes prompted industry experts to write that Nike had finally created shoes better than Adidas, the company that still ruled the roost. To match Adidas, Nike needed to diversify, so they started selling clothes.

Nike was now big, which meant they also had to solve big problems. In 1980, a $25 million tax bill from the US government was settled out of court for $9 million. Nike broke into the Chinese market, striking a deal for Chinese athletes to wear Nikes as well as having their stock produced in Chinese factories – the first American shoemakers to do so for 25 years. They finished off the year by going public, in the same week that another now well-known company, Apple, did the same. Overnight, Phil Knight had become worth $178 million.

Fast forward to 2007 and Phil Knight is now worth $10 billion, having stepped down as CEO three years previously. He suffered tragedy when his eldest of two sons passed away while scuba diving, a few months before he stood down. Meanwhile, Nike sales topped $16 billion, eclipsing Adidas’ $10 billion. What advice does Knight have from his journey with Nike? Don’t settle for a job or profession, but instead seek a calling. Know when to give up but don’t ever stop. The better you get, the bigger the bullseye on your back. Luck may determine an outcome but the harder you work, the better your luck. Finally, and perhaps most importantly, have faith in yourself.


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