Nike’s CFO on Developing Necessary Leadership Skills

Thanks Craig for the nice introduction and thank you Dean Olian for inviting me to be here today. UCLA, it is awesome to be at this place and it's great to be back. My wife is here, also a UCLA alum, she's here with our kids who are all decked out in some UCLA gear, and we'll certainly be down in Westwood watching the Bruins beat USC tonight. Unfortunately, our dog, our in-house mascot Josephine Bruin, was not able to make the trip down from Oregon. So I have been fortunate over time to have spent time learning at three of the most highly regarded institutions in the world: UCLA, Disney, and Nike. When I met with... For me, I was, as I said, very fortunate to spend three decades at Disney and Nike. What I didn't realize was just how fortunate I was at the time. It's only when you reflect on the lessons that you've learned that you realize how truly valuable they are. What you'll find is that the learnings that you're gaining here at Anderson will actually serve as a foundation upon which you'll build throughout your career. I believe that over time, you build the capacity to lead, especially on a large scale, by consolidating the learnings that you get... those learnings. So where to begin? Leadership lessons: Bill Bowerman, who co-founded Nike with Phil Knight, once said something to Tinker Hatfield, one of our most highly regarded designers and innovators. He said, 'If you're going to be a leader, you better know where you're going if you expect people to follow you.' I assume that many of you here at UCLA have taken a strategy class, and unless the curriculum's changed, one of the first principles you learn in strategy is you have to have a clear mission statement. And then you probably start reading some of those mission statements, and then your eyes start to glaze over. Maybe you start to fall asleep literally in class. And there's a reason... by wearing our performance product on the playing field. Maybe you got inspiration from one of your favorite athletes or teams, like one of mine the Lakers, the Bruins. Maybe you're a little obsessed with cool sneakers like me. That's good too. We're happy to have you as part of the brand in that regard as well. The reality is Nike is, and has been for decades, one of the coolest, most authentic, most inspirational, and innovative brands in the world. And that doesn't happen by accident. It begins with our mission. Nike's mission is to provide inspiration and innovation to every athlete in the world, and we put a little asterisk on the word athlete... enterprise hope to bring to consumers inspiration and innovation. Those are our priorities, two of them, not a long list. Our priority isn't market share, it's inspiration, innovation, sport, which is clearly evident in our mission. Sport is our passion, and our mission taps into that emotionally. Our mission does another thing: it articulates how massive we believe our opportunity is. It speaks to, 'If you have a body, you're an athlete.' That's everyone. We literally aspire to help everyone in the world, all seven billion people of the consumers in the world, achieve their full potential. That mission doesn't just... leader, you better know where you're going. Why? Because we've got over 60,000 people that are looking for direction. All of those people around the world, via our mission statement, are bonded over a passion for sport and a desire to help others achieve their full potential. That was it. What is it that helps Nike stand the test of time, remain a leader, and continue to extend its leadership position? I couldn't possibly share with you all the lessons that I've learned on my path to leadership at Nike. I'd love to. Those who know me know I can talk and chat a bit, so if you had a few hours I would try. But the reality is that there are just a few that keep coming back to you, you keep reflecting on them because they're more powerful than the others. So I'm going to share a... lead. Often people think leaders are decision-makers. I think we've had a politician who once said, 'I'm the decider.' The reality as a leader is you're not often choosing between option A or option B or working through a checklist. What you're often challenged with is taking two objectives that seem contradictory and striking the right balance, or trying to optimize against both objectives. So let me start with a couple. First, one of the lessons I learned is you've got to master the fundamentals. Business is complex, and large enterprises are not just run based on common sense alone. We all kind of... But the second lesson is that you've got to become comfortable leveraging intuition. They seem contradictory: you've got to master the fundamentals. You're learning those fundamentals here at Anderson, from strategic frameworks to valuation to rigorous analytics. And at Nike, we leverage all of those concepts. For example, our growth strategy, which we refer to as the category offense, is a segment-to-grow strategy. It's a concept you learn in business school, and it's written about in a lot of business books. That concept applied at Nike, the category offense, takes our billions of consumers around the world and segments them down through the lens of the sports they love. And why do we do that? The same reason other companies use a segment to... paradox. At the same time, truly innovative ideas are not conceived on a spreadsheet. So my hunch is a number of you in this room prior to business school, or maybe even currently while you're attending, have had a job with the title analyst in it. And if you haven't, you're probably going to. And most of the jobs, if you go over to the recruiting center, probably say analyst, senior analyst, or some kind of analysis in it, certainly in the description. Unfortunately, what we all come to realize over time is that there isn't a supercomputer or algorithm that can take consumer insights and translate those through some kind of automated process into a relentless flow of new innovative products. It doesn't happen without... to do with what you were born with. Actually, most of what you learn that gives you that capacity to lead, you learn from others. I've been super fortunate, as I said, to be at some great institutions. But why am I fortunate? Not necessarily just because the brand on the door, it's because of people like Bob Iger, Tom Staggs at Disney, Mark Parker at Nike. People who have had unbelievable experience and then shared those experiences with me to help me leverage their intuition to build my own. A brief anecdote: when I was at Disney, I had a transaction that I was working on. It was actually selling one of our sports franchises, and we got into a really complicated situation, and Michael Eisner called me up to his office and he proceeded to tell me a story about Heaven Can Wait and Frank Wells... different context. And so I think just recognizing that you're going to learn over time from others, and that learning is going to help you develop the intuition that's required to accomplish great things. Your goal as a leader in managing that paradox is to marry those truly innovative ideas that are born from intuition into fundamentally sound strategic and financial plans. And those are the fundamentals you're learning here. As a CFO, I'm responsible for resource allocation across a fairly large enterprise. I hear a lot of fantastic ideas, usually because people want money, and I get a lot of proposals. And the reality is, actually most of the ideas are pretty fantastic. Certainly a... example this: we have an insight. Our insight was that we could create a more lightweight, comfortable, customizable shoe with all of the characteristics of a shoe that a runner needs: structure, support, cushioning, etc. And we believe we could do that with yarn. See the spool of yarn on the image, making the uppers essentially on a knitting machine. Had never been done before. It could be done, but it required significant investment from a manufacturing process. So we began with an idea, and frankly, we all got pretty excited about the idea. And the next step was getting our head around what we needed to do to bring it to life... frameworks you learn in business school that you apply against an intuitive idea to accomplish great things. Today, just a couple years after launching Flyknit, actually about three years after launching Flyknit at the London Olympics, we now sell millions of pairs of Flyknit shoes. So again, it was an idea, an idea that we couldn't prove would work. We had to use some intuition. We now sell millions of pairs of shoes across running, football, basketball, sportswear. But things didn't always go according to plan. And that brings me to another lesson: one of the most important aspects of being a leader is being an optimist. I learned that from Bob Iger at Disney about ten years ago as he was transitioning into the CEO role at Disney. In fact, I had the... those two leaders did that. Both companies are inherently companies that are fueled by creativity and innovation. So be an optimist. Why? The reason is because pessimism stifles creativity and innovation. You can always find a reason not to do something that's never been done before, but optimism finds a way and finds a solution. So I'd encourage you guys to keep that philosophy in the front of your mind as you elevate into leadership roles. Two more lessons that I feel are a bit of a paradox: first, business is a team sport. At the same time, you've often heard this from other leaders: you have to continually... the jersey than the name on the back, and you have to fuel that culture. Early in your career, you're going to feel a different pull. You're going to feel a pull to highlight your individual accomplishments because that's how you get ahead, that's how you move through the ranks. That is actually how you get ahead to some extent and move through the ranks early on. But that runs out on you because as you progress through the ranks, what you realize is that if you aspire to be a leader and you're working with other leaders, one of the most important skills they're looking for in you and that they value is your ability to use collaboration to drive alignment across cross-functional teams and large organizations. And there's some good news in there: it's not a sacrifice. It's not like you're sacrificing your own... and they go to the winners. At Nike, there is no other way. We actually structure ourselves so that is a fact of life, not a nice-to-have. Our organizational structures are matrix. You're going to learn about matrix organizations over the course of your time here at Anderson. You're going to hear pros, cons, people who've worked in ones that worked, people who've worked in ones that don't work. But the secret ingredient in the ones that work, and why it's so that skillset is so important to us, is that it requires collaboration and alignment. And we've purposely structured ourselves to get that because of that philosophy that it's more about the name on the front of the jersey than the back... numbers like LeBron James, like Kobe Bryant, and being recognized publicly and very openly as the best. At Nike, we aspire to be the most authentic, connected, inspiring, and innovative brand in the world. Think about that for a second. That's no small feat in the world. Think about the world: Russia, Brazil, etc. It reminds me of another anecdote. Many of you have seen the 'Most Interesting Man' advertisement. I think there's a quote in there that he speaks Russian fluently, in French. The reality is our mission actually kind of pushes us almost in the direction of being actually that dynamic. We can't... themselves on an individual level. Nike is bringing me that inspiration and innovation they promised. As Michael Jordan once said, 'Talent wins games, teamwork wins championships.' You need both. The best player in the world, the most talented player in the world, who frankly knows from experience, so talent can win games. He won some games by himself, but what he knows is you need both. He didn't believe that he alone could win a championship. Actually, we're seeing that all over the place in sports today. We're seeing incredibly talented individuals who, based on social media and otherwise, are actually getting even more recognition than players like Michael Jordan got. And what are they doing? They're trying to pull together a... room. So in that regard, it shouldn't be any surprise that over half of the NBA interns that we've hired at Nike over the last several years come from UCLA. And you might be thinking, you saw that picture of me and my wife and my kids and all our UCLA gear. Maybe I'm putting my thumb on the scale. I'm actually not. I love UCLA, and I'm always encouraging people to look to UCLA as a source of talent. I actually had that made evident to me from our HR organization, from scouring the MBAs that we've hired and saying, 'You know, there's actually a theme here as you're heading down to UCLA.' And that theme is UCLA. Again, I'm not putting my thumb on the scale, and I can't do that as a leader. I have to stay objective. But fortunately, Addie Olian and her... connecting with this student population in the way that we have over the last several years. And I know some of you in the room can't see everyone in the room, but I know some of you in the room spent the summer up at Nike. And some of you are probably coming back to... okay, two more lessons that also seem contradictory. They're actually more kind of mantras or philosophies that I've leveraged over time: 'Stick the landing'—you can kind of picture what I'm talking about there—and 'There is no finish line.' We've all probably watched gymnastics, probably in the Olympics. That's where we all probably watch it, right? But if we're being honest, many of us don't have any clue how difficult or amazing any of the elements... until that decisive moment. It's actually not all that different in business, particularly at the leadership level. Consider presentations to senior management or the board of directors or partners, or consider revealing a new product to consumers. A lot of work goes into those moments, if you will. You have to give yourself enough space to ensure that that final product or moment meets the audience's expectations or standards for excellence. Especially in situations where you have to solve a complex problem. In those situations, and I think unfortunately we've all been there before, some of these lessons make behind... figuring out how to show your homework. But in the end, showing your homework is never a substitute for a final product that fails to meet the expectations of the audience. In business, the goal is actually not to burden everybody with the complexity. It's to take the complexity and make it simple so that folks who don't necessarily have all the same context or expertise can align cross-functionally against what you're proposing. At Nike, we have a maxim that speaks to this. And actually, our maxims are very powerful at Nike. By maxims, we mean values or philosophies that drive us. And you're often in a meeting at Nike where someone will take a maxim and kind of verbally slap it on the table. There's a debate, and it's a circular conversation, and someone just goes, 'You know what, we got to simplify.' And that's actually one... that's most important. And there are three strategic imperatives or dimensions of that goal that we need to get after, and that's where we really start to get traction. So I said 'sticking the landing' kind of implies a bit of finality, finality or an end of the process. But the reality is that those milestones, those meetings, are actually journeys along the path toward what you're trying to accomplish or your full potential. At Nike, we continue to push ourselves based on that other philosophy: 'There is no finish line.' This actually is a picture from my office. It's on my desk. I look at this quote all day. It's one of my favorites. It actually dates back to the founding of Nike with Bill Bowerman and Phil Knight. And from a leadership... start to think that yourself. You've got to stay on the offense always. When you're a leader of an enterprise, someone always wants a little piece of what you've got. They want some of your market, they want to connect with your consumer, they'd love a little revenue, and then they'd be thrilled with some of your profit. But we... so what you've got to do is continually refine your game in order to extend that leadership position both over time and actually in terms of separating from the competition. So at Nike, like a runner who's just finished a race, we always believe and push ourselves to think that our personal best is not the record we just set. Our personal best is always something that's still out in front of... personal. It's sort of absurd when you think about it. People actually are the ingredient to create amazing results in a business. The reality is it's business and it's personal. In fact, you might even flip them: it's personal and it's business. It's business and it's personal. The phrase doesn't make sense. You need to understand what motivates your team and how you can deliver on that. You need to understand what people value, what their strengths are, and how you can enable them, showing their strengths and putting their strengths to good use. You need to help them avoid their derailers. In short, as a leader, it's critical that you develop a personal... something that's even a little more powerful. What's more powerful is when you push yourself to share that same dimension about yourself with the team. When you've got members of your team that actually have a pretty deep understanding of what motivates you, what your strengths are, and more importantly what your derailers are, and when you do that, the results are pretty phenomenal. Essentially, when you do that, you get a level of understanding and trust amongst your team that makes you unbelievably faster. It drives you to the results even faster than you can imagine. So with that, I want to thank you for inviting me back to UCLA. To the point about it's personal, I look forward to meeting a lot of you... as what I learned from all those people I've mentioned and more that shared their learnings with me over time. So with that, I think we'll transition over to Q&A.

Sure, I've learned a tremendous amount, but a few of the more salient things I've learned from them. I talked about how both Bob... just relatively two of them. I think actually if you look across leadership broadly, what you find is the notion that great leaders realize that the more inclusive they are of people's perspectives, the greater the ability they have to achieve what they're trying to accomplish in their full potential. And you find leaders from time to time in your career that have camps. So-and-so's in this person's camp, so-and-so isn't that person's camp. This is their trusted network, that's their trusted network. Those two leaders in particular, along with a lot of others, don't have camps. In fact, an anecdote I shouldn't probably talk too much about Mark. I know this ends up on video, but fortunately it's flattering, so hopefully he's pleased. But Mark has a... to who's technically responsible for this or that. He actually makes the rounds. He's known to do a lap and sit down with you and ask you the question and maybe talk to you about the issue. And frankly, sometimes you go away and you kind of go like, 'Hey, that's not even my job.' But he trusts me. He thinks I'm the one that's going to solve that. And then over the next few hours, you start chatting with your colleagues and you realize, 'Oh, he asked everybody that question.' And that kind of goes to a second one, which is asking questions. I think fundamentally, what motivates people, what really gets people inspired, is when they're able to do something that exceeded someone else's expectations. When you're able to autonomously create something that someone maybe didn't, couldn't... you didn't... sometimes they are purely just open-ended in terms of intellectual curiosity. But what he's really doing is leaving you that space to go answer it, even if it's directive or leading. You leave going, 'I'm going to go answer that question with my team.' And it's really empowering. And when you do and you deliver great results, you feel great about it. You don't feel like you just went and got a task done for somebody.

There's... and the fact that again, the name on the front of the jersey is much more important than the name on the back. And sometimes that name on the back is your name, sometimes it's your function. But you've got to really stay focused on the enterprise goals. And I think the best leaders actually embody what's called a T-type approach to leadership. The vertical aspect of the T is very deep functionally, but the ability to think broadly across other functions. And they develop that, they build that capacity over time by seeking out learnings and insights from folks in those other functions. Actually, one of my partners at Nike is a guy named David de Gracia, who spent some time here with the memes organization at UCLA marketing and finance. At a lot of companies, those two...

So I spoke a little bit about our mantra... in terms of no finish line. Our philosophy is that there's always a greater distance between us and the potential, or our potential, than there is between us and where we started, or us and our competition, frankly. And so where we start is with the consumer and the athlete. Develop increasingly more detailed and deeper insights on those consumers and grow the market, not take share. Again, back to the spoils go to the winner. And when you grow the market, you end up getting share along the way too. But it's really about that full potential and growing the market. And today, digital for example, has completely transformed the notion of segments to grow. If you think about it... one-to-one and personal at scale, ultimately across all seven billion. You've got to start somewhere. But again, back to 'there is no finish line.' To us, we look at something like that and say, 'Yeah, just like we thought: there's even greater opportunity than several years ago we might have thought if we just thought about share dynamics within an existing market.'

Yeah, it's a great question, and one we think a ton about from a strategy, a mid- to long-range planning... out with DreamWorks, understanding how we might be able to leverage their digital technology in a better way to earn an interesting way to... to state us in our design and creation product. It's certainly impacting to the positive how we connect with consumers, as I just talked about. And it's also impacting that third pillar strategy: the consumer experience in the market. And by that, I mean both bricks and mortar and digitally. It's becoming a more seamless market. You're not choosing between channels. You're leveraging digital to expand the market.

Yeah, it's two phenomena. One: we think digital actually helps you better serve consumers, that should grow the market. I... endless opportunities even in a market like the U.S. to dimensionalize it. And so we can look across our wholesale partners, our owned bricks-and-mortar doors, digital, and we're not... what we do is look at opportunities to further segment and differentiate those experiences so that when consumers interact with us at those points, we're not going to be everywhere. But our wholesale partners, bricks and mortar, and our digital business allow us increasingly so to be everywhere. But they also create so much capacity that we think there's an opportunity for everyone in the ecosystem to grow the more we connect at a category and consumer level.

Yeah, I mean, I'll take the last notion first. One of the things I talked about is us making sure... push themselves to be of those markets. And so we do, actually, with our athletes, spend a lot of time in those markets. Back to China: we're very mindful of the macro economics and the dynamics in China. How could you not? It's in the news every day. And as you noted, they do impact us on a macro-scale to some extent in terms of what's going on relative to oil or to foreign currency, which can impact our sourcing. At the same time, we believe China is a tremendous opportunity for Nike. We have significant momentum there now, and we do feel like we can sustain that momentum... government perspective has said growth in China economically will actually start to be more so fueled by consumption. That favors Nike. But what really favors Nike, and at the same time gives us an opportunity to fuel, is sport in China. The Chinese consumer has long been passionate about sport, and we've all heard about their passion for basketball, mostly from a fan perspective. Very in the past, very few people actually, as we would say, 'played with a whistle,' played basketball where there was a ref with a whistle competitively. Increasingly, we're seeing those numbers explode: sport participation in sports like basketball... over a billion people. There's over a billion people in China, and sort of like it's been a great source of momentum for us, but we think the opportunities even greater. But then from a currency standpoint, it is a softener for you in a sense by producing there, or how do you deal with the repatriation issues of the funds?

Yeah, it's... and I can do this with this group. You guys are a relatively technical group. So currency in general is an interesting dynamic. I think what we've become resolved to, so to speak, we prefer this isn't the case but it is, is that we're going to be in a pretty dynamic and volatile... a consumer-first perspective. We're capitalizing on the opportunities we see to serve a consumer and I guess not be diluted by the math around currency. But we're a Dow 30 company. We're a global enterprise that also has a mission, which is an objective to translate the value we create for consumers into shareholder value. So from a currency perspective, we have a couple of strategies that we use. One: we have a trading company, which touches on your point. I'll touch on a second, and then a very sophisticated hedging program. Our trading company takes those potentially offsetting risks and optimizes the offsetting of those risks. And China is certainly a market... the main point of our hedging strategy. A lot of people talk about hedging making earnings more predictable, etc., and that's certainly a benefit of it. For us, we think of it strategically. Our hedging strategy allows us to hedge volatile currencies out a year, maybe longer, and use those to ensure we're delivering appropriate near-term financial performance, but we're keeping our eye on the real ball, which is continuing to invest and fuel long-term growth. It gives us the time to pause, manage the levers that we can within our business to ensure we strike that balance.

Yeah. First, Nike will always be connected with the world's greatest athletes, teams, federations. And that's because athletes for us are an incredible source of inspiration and insights that help us innovate. And so that will always be core to our strategy. And it's actually in a way where our strategy starts. We often say it starts with the athlete. At the same time, you can't predict everything that's going to happen over time. You talked about contracts. Certainly our contracts are structured so they give us protections... materialized are different in terms of their nature, in terms of their magnitude. And so we push ourselves to analyze them on a case-by-case basis in the context of our goal, which is to continue to leverage that connection with the athlete to then translate it into innovation, inspiration that makes everybody better and helps them reach their full potential.

Really, there are two dimensions. One is contracts can give you certain protections in the event that you can't otherwise work your way through in a non-contractual or legal way. And so oftentimes that second avenue is where... if you don't mind, Dean Walters, when Kevin Durant came into the league, he was not much of a negotiator. And at 24, 25, he indicated that he was going to become business savvy. He came very close to leaving you last year. In order to retain him, did you or a colleague of yours give one of these inspirational speeches, or simply come out with the number that he wished to hear?

Ha ha, that's a good question. Actually, as I said, I think the most important element in our relationship... of us have an opportunity to gain economically as well. What we really focus on and pride ourselves on is the relationship with the athlete. And so I wouldn't necessarily say it's an inspirational presentation, but we do hope over time, and we do develop over time with athletes like Kevin Durant, Kobe, LeBron, and others, a deep personal connection with those athletes. And it's interesting: when you say they become savvy about business, it's actually part of that learning we talked about earlier. You can learn something from anybody. We learn a lot from the athletes. And what we actually often find is athletes, all of our athletes—Kobe is a great example—are often looking to us to help them think... perspective.

Great question. That is a great question. I would actually encourage all of you to... the shoe you mentioned. There's a video that's worth getting on the internet and looking at. A shoe that LeBron and our CEO Mark Parker—our CEO is actually our innovator in chief—our... potential. And again, back to that point of a mission. That's the kind of thing that grabs a Mark Parker. It actually grabbed another designer, a guy named Tinker Hatfield at Nike. One of the things you should know is those experiences actually push us. One of the things our innovators talk about is the more complex the challenge, it actually pushes us to create even more innovative solutions. So as Mark would say, if you listen to our earnings call, we're really excited about the pipeline. But he's often unfortunately left to just leave a little bit of a tease until we actually formally announce it. But I would tell you to rest assured that there's a lot of energy and focus at Nike on leveraging those unique... to interrupt for others. Technology has been a big part of Nike. And with technology, smart clothing, 3D printing, you're dabbling in all. And I can ask also, what's next in the technology arena, and how are you going to couple that with your mission?

Yeah, I think one of the things that's really... there's a quote, I think it's by a futurist or a philosopher, that says, 'The future is here, it's just unevenly distributed.' And that's something we push ourselves on at Nike because one of the things we push ourselves to do is innovate and create the future. And right now, a lot of that future that's... the opportunities frankly are pretty endless in terms of... and to give a little bit more specificity, one of the things we encourage people to do is 'do more.' I think if you've probably heard the phrase 'Just Do It,' it's part of our brand. Part of our brand is how do we invite people to do more? One of the ways you invite people to do more these days is community and connecting people and giving them insight into how they can do more. Another fundamental priority for us is how do we help people get better? Everybody wants to get better. I think there was a fan of the show Friday Night Lights. There's a quote on the show: 'Every day you get a little bit better or a little bit worse. Let's make...' services and in terms of products that we create or products that we partner with people to create still remains to be seen. I mean, obviously that will be core to what we do for decades to come. It's not just about what the next pipeline is, but certainly a huge opportunity for us.

Actually, one of the great things about Nike from a talent perspective is there's a synergy at Nike. Our consumer brand as well as... we have a chief operating officer, for example, who originally joined Nike as a controller from Price Waterhouse. Our head of global categories—so really where product, consumer insights, product and brand are conceived from a strategic perspective—was a tax guy at the big, probably Big Six at the time, and he came in as an MBA into a strategic planning role. So we use MBAs in a variety of ways. What I'm most proud of is that over the last several years, what we've said is let's find the best entry points for MBAs because we've seen them go on to realize that potential into very diverse roles in the company. Let's create more of an opening, and we've done that... like you're contributing right out of the gate. But the great thing again at Nike is we're always pushing ourselves to identify that potential. And then frankly, sometimes Nike's a bit of a free agent market. Once you're in Nike and you're delivering results and you show that you can work collaboratively as a team, those kind of general managers throughout want you on their team, and so you feel a pull market into pretty exciting roles.