CEO Talks de Stanford - Uma conversa com Phil Knight da Nike

Pretty good. Welcome home.

Yeah.

Well, thank you, but having stalked me for at least 40 minutes, I feel that there should be some payback. And I know that most of you know that Will's mother, Mags, has come all the way from Ireland to be here today. Having come such a long way, I think you should reveal something about yourself that she doesn't know.

Well, did you make your bed this morning?

Yeah, this could go back and forth a long time, that's right.

Yeah, I will, but I want to tell you first about coming back to campus after being gone for a while. You go out 20 years or so, and you haven't been back for a while, and you come back, and it's more about just sharing a moment with family and friends. It's for a moment you step back in history and remember when you had all the world light laying out before you, and you decided the things that you were going to find important, and it was really the start of you becoming what you ultimately became. When I come back, for just a moment, I always hear the voice of Frank Shallenberger, Bob Davis, Jim Porterfield, and I know that sounds sort of corny to an educated group, but I promise you that over half the people in this room, when they come back here 20 years from now, will have those same feelings. For me, I was the guy that thought an extrovert was a person that stared at other people's shoes. It was a time for me to kind of grow and chase what I was really going to become. And so, it was really a big transitional period for me in my life, and as I say, to this day, when I come back, I still get inspired and lifted up.

No, it was just a turning point in general for me. If I was honest, I'd say that my undergraduate career was really focused on track. And it got to be when I got to be a graduate student that I was really focused on what it was I wanted to be. And this was just the right school at the right time with the right inspirational professors, and it really doesn't get any better than that.

Yep. This is a time when Silicon Valley isn't even a phrase yet.

Well, I took the entrepreneurship class from Frank Shallenberger, and basically the project he had a term project where you either attach yourself to a company in the area, or for the purpose of the paper, made up a company and how it would succeed. Even in those days, a lot of my classmates were writing about electronics, which was certainly beyond me, since when I turn on an electric switch, the light bulb comes on, it's magic for me. But my old track coach was always working with shoes, and felt that lightweight shoes were something that was neglected by the major manufacturers, Adidas and Puma. And indeed, my senior year, Otis Davis won the Pacific Coast Conference championship in a pair of homemade Bowerman shoes, which were an ounce lighter than the other shoes. So, I kind of put those things together, and said, 'If you were starting a shoe factory, would you start it in Germany?' And I said, 'It's such a labor-intensive business, it makes more sense to start it in Japan.' Japan being the country that took German cameras and dominated the camera market. So, could they do the same thing in sports shoes? That's really the thesis of the paper, which ultimately I got caught up in, and here we are.

Okay.

If he'd ridiculed the paper, I don't know where we'd be today.

Well, if I didn't, I was going to have to be an accountant. Yeah, no, that's a scary thought. No, but it was when I wrote the paper, it just stayed in my head. At the time, I think the ratio was that 26 out of 27 new companies failed, but I really began to feel if I could do this, it would really be meaningful to me, and something that I would really have a lot of passion for. So, that's where it started, and away we went.

Well, obviously, there were a lot of doubts, but I enjoyed what I was doing, and I really thought that I was bringing a product to the world that was better than the other product, and so I believed. It wasn't too long before I had a bunch of other people that believed as well. And we just, through all the ups and downs and there were plenty of downs, we never stopped believing. A lot of people say why did you stay with it? There were a lot of negative moments and a lot of downturns, and I look back on those days as the most fun I ever had in business. It was every day, every Monday you went to work and you knew it mattered what you did, including whether you're going to meet payroll on Friday. But it was an exciting time, and Frank Shallenberger had done a wonderful job of preparing us for being an entrepreneur. Bob Davis, a marketing professor, said if you're going to be an entrepreneur, every day's a crisis and every Friday's a Jesus crisis. And that was kind of the way it was.

Well by the time I got there I believed, and so I believed that it was a good idea. I believed that if I could get a cooperative Japanese factory, I could make the idea work, and so I overcame the shyness to take certain chances. I was willing to do that. There were a lot of ups and downs, but ultimately it worked. At the end of the day, you got to believe, and that's what I did have maybe above everything else.

Well, he was a very unique person. He was probably the best track and field coach in the world for one thing. But he also had a certain command presence and a certain belief in certain leadership things. You know, he said he wasn't a track coach, he said he was a professor of competitive response. He had a way of having sayings that got your attention and really focused you on attitude. His strategy for running the mile was start out and run the first two laps at a very fast pace, run the third lap as fast as you can, and the fourth lap triple your speed. He said the cowards never started and the weak died along the way, that leaves you and me. That's him getting at your attitude. His best one for me was always, 'Do right and fear no man.' So he had a big influence on my life, certainly the biggest influence other than my parents. He was always working on attitude. This is a man that had seen combat in World War II, fired a gun and been fired at. He had seen competition at its most extreme level. And he thought his job as a professor of competitive response was to get young men and young women ultimately to be ready for the toughest competition they can face. So he brought to me a certain attitude, which you can be an introvert and have attitude. That was sort of me, and he had a huge influence on that.

Right. And then there was a little hate that came after that, but he really kind of believed in hazing, and you had to prove that you wanted to be there, so he would make you go through hoops. Which I did, somewhat reluctantly.

Well, we did. The first four or five people in the company, we wound up calling each other 'butt faces,' which we don't do anymore. We're a more professional group now.

Well, first of all, they were a bizarre group to say the least, each in his own way. But they were very able people that really kind of didn't get along with society in general, so it was kind of a perfect fit. They complimented each other in terms of their abilities, and lastly, all of them believed. When we would hit a down period, nobody thought this is the end. We just said, 'Okay, we got to get together and find our way out of this one.' It was fun being in a foxhole with those guys. We basically loved each other and we were going to go through this come hell or high water.

Yeah, for sure.

Yeah. Well, you touched on a lot of things there. I do think that Nike's culture is a big part of its reason for success. The culture really was formed in the early days by the four people plus me, and it still exists to this day. A lot of people say if Phil had a dominant influence on that, and he didn't. I've often said many times Nike is young and irreverent and I'm neither. To use Bowerman's word, they came with an attitude. That was who we were. The culture's been modified some, which is a good thing, but it's still basically there, and I think it's a big part of its strength. I hope that culture is basically in place 20 years from now. It fits with our view then and now about what a brand is. It doesn't matter how many people hate your brand as long as enough people love it. As long as you have that, you can't be afraid of offending people. You can't try and go down the middle of the road. You have to take a stand on something, which is ultimately why the Kaepernick ad worked.

Timid, I wouldn't say.

Well, the story basically we had an agreement with Jimmy Mack, Jimmy Connors' agent, for him to wear Nike shoes. And he did, he wore them at Wimbledon. And the agent said as soon as he gets back from Wimbledon we'll get it signed. Well, he won Wimbledon. And as soon as he got back from Europe, he had summer matches. Then came the US Open and he said as soon as we get done with the US Open we'll get this contract signed. Well, he won the US Open. And then we got down to sign the contract and he said, 'I don't remember it this way.' That was Jimmy Connors' agent, not Jimmy Connors himself. But that was the end of our endorsement with Jimmy Connors. So the next year I was at Wimbledon, looking for the next great hope. There were a bunch of really good young Americans, 18 and under. They had Brian Gottfried, who was a great player, and Eliot Teltscher, who was a great player. The head of USA tennis was saying those are really great endorsements. 'Stay away from that kid McEnroe, he's too much of a hothead. He's playing over on court 14.' I went right to court 14. Basically that week he was playing the number 16 player in the world, Phil Dent. And he's 18 years old and hits his first serve in and the chalk flies up and the line judge goes out. McEnroe jumps over the net, puts his nose this far from the official and says, 'Are you sure of that call? Are you very sure of that call?' Wow. And I turned to the guy I was with and I said, 'This kid's not afraid.' I became a fan of his intensity and his competitiveness and his attitude. He did lose control sometimes, but I always remember Frank Deford's write-up of him in Sports Illustrated when he said a big picture of McEnroe and says, 'Why isn't this man smiling?' He said, 'Beethoven didn't smile much either.' That's fair.

Well, we named all the buildings after our heroes at the time, and he was one of them. That was where my office was.

Yeah, that makes me feel even better.

Yeah, it isn't something you can bottle. It's been truly one of the unique experiences in all of marketing. Obviously he had it all, and we pretty much knew that coming in. He was player of the year, he was handsome, he could jump, and he won the national championship with the winning shot. He had all of it. When we signed him, we signed him for more than any rookie had been paid before. We signed him for $250,000 a year. And Fortune magazine ran a little insert in another article saying there's no greater indication that Nike has lost its way than the fact that they paid Michael Jordan $250,000. But we combined it with what we thought was a really good shoe, a really distinctive shoe. It was red and black, not just white or black. Of course he wore it to great performances. Then we had the added benefit of David Stern banning it in the NBA. So we immediately combined it with what became a good ad, said 'Banned in the NBA,' and every kid in the world wanted that. It hasn't been straight uphill. It had a one year where sales actually went down, but overall that was what we got together with really good advertising which reflected his personality, which was strong. It's been an unbelievable success. When he quit playing, sales of Jordan brand product were $750 million. This last fiscal year they topped $3 billion, long after he quit playing. As I said to many people, imagine how much we'd sell if he'd never played.

Yeah.

Well, it's hard work. You have to work at it all the time. Our thing obviously starts with the product. The product is by far our most important marketing tool. So we're constantly working to improve product. The recent upturn is because we've had a really good product pipeline. The React running shoe is number one, but there've been a lot of others. That's been really important. Good advertising is critical. The Wieden Kennedy experience has been in many ways as dramatic as Nike's, and it's been alongside each other. When I first met Dan Wieden, I walked into the door of his office. He had three people besides himself sitting around a card table. He said, 'Welcome to Wieden Kennedy.' I said, 'Dan, I just want you to know one thing: I hate advertising.' He looked at me and said, 'Well, this will be interesting.' Obviously if I'd said that to Procter & Gamble, they'd take your $25 million advertising budget and go out the door. But they were a small firm, and he grew to understand that what I meant was I hate traditional advertising. He found ways to find out who Nike is or who Michael Jordan was and project that to the consumer. Not only did Nike succeed, Wieden Kennedy now has offices all over the world, over a thousand employees. It has Coca-Cola as a client, Honda, a lot of the world's most famous brands. They've been an enormous success. To this day they work hard at trying to find out who it is and who the athlete is and how to project them. I know we had Boris Becker as an endorsement pitch, and Dan Wieden said, 'We will find out who you are and project that to the world.' Boris said, 'How can you know who I am when I don't know who I am?' Dan just said, 'Well, we'll find out.' We didn't make the sale. So advertising and product are two of the really important things. Keeping the product fresh and advertising fresh is an ongoing challenge. We don't always hit it. A couple years ago we took a little dip. It's a very competitive business, every six months is a new life, and everybody has to be aware of that.

That's why we get along.

Well, introverted people have a tendency to listen, which good leaders do. When I was in school, they talked about autocratic leadership and democratic leadership. It was 15 years after World War II, and they had two of the great autocratic leaders ever, Douglas MacArthur and George Patton. They were looked on as being very successful. Then you have democratic style leadership, which is getting people involved and talking to people. It's probably almost impossible for an introvert to be an autocratic leader. But an introvert can be a democratic leader. As the idea of democratic leadership progressed, they started to use the term collaborative leadership, which is in my view the ultimate and only kind of leadership to this day. Autocratic leader doesn't work in this day and age. It can work temporarily, but it won't work long run. I hope the people in this auditorium don't get the idea that hero leadership means being autocratic. I obviously think Steve Jobs is looked at as one of the great leaders, which I believe he was. But I do believe at the end of his career he was beginning to modify his natural autocratic style, which got him fired his first tour around Apple. As he went through Apple the second time, there was a change in Steve Jobs. You noticed that from the commencement speech he gave to Stanford University. He hired Tim Cook and had a lot of give and take with Tim Cook. Tim Cook, who I know quite well, is very much a collaborative leader, and I believe a great collaborative leader. So don't equate hero leadership with autocratic leadership. The only style of leadership that will work in this day and age is collaborative leadership.

Yeah.

What type of skills are you talking about?

Oh, I think... if you read the book Shoe Dog, obviously I don't come across as a touchy-feely type. Neither were any of the top five. But there's lots of different ways of communicating. One of the things I don't like about the politically correct movement is that to me, politically correct has been founded by people that couldn't communicate, and they don't want you to communicate very well either. Because communication is an individual thing. Everybody has different fingerprints, different personalities, different emotions. The leader's job is to know who his team is. There's different ways to communicate with that team. We weren't touchy-feely in the sense that we were always patting each other back and saying how we feel. But you could say, 'How you doing today, you son of a bitch?' and mean the same thing. So there's just different ways to do that. I think we need to bring that into the chatter on campus these days.

Well, one of the things we didn't talk about in business school when I was here was the media. I think this group is probably much more aware of the media. But it's always there, more prevalent than it's ever been. And they're not always consumed by facts. So when the first charges came that Nike ran sweatshops, it's a really seductive argument to say this person only makes $4 a day and Michael Jordan makes $30 a year and Phil Knight's worth $2 billion, and isn't this awful? But our initial reaction was that we don't run sweatshops and you're wrong. I was the CEO at the time and that was my strategy, and it was awful. It didn't work. So after about a year of that, it became clear. We took another tack which says, 'You can criticize who wants, but this is what we're going to be, and this is how we're going to be a better company over the next 10 years. We're going to take these steps each year, and you come look at any of our factories anywhere in the world that you want.' We've been on that path ever since, and it's basically working. We have had lots of good comments that don't get much publicity. One of the good ones was a member of the United Nations saying Nike's the gold standard for all apparel companies and how they run their factories. It's a constant battle though, because we're always looking for new factories or changing factories. We have most of our shoe factories and good apparel factories with us for 20 or 25 years. But economics change, so you do change some on the periphery. So it's a constant battle to live up to the standards we have. We have a whole team at Nike that does that all the time, talking to people on the production line. I do think our factories are the best in the world right now for conditions. It's a basic truth that great shoes are made by great factories. You don't want a bad factory making your best shoes.

I think one thing that is left out is that you got to have a niche. You got to have a reason to succeed. My reason was that Japan could make shoes economically. But then the rest fit right into home base for me. If you're going to be an entrepreneur, it has to be something that you really love, because there will be a lot of dark days. As I say, we never hesitated in those dark days. I was fortunate enough to find what I thought was a niche to go with my passion. You need to bring those two things together. When you do, you're very fortunate, and take advantage of it.

You didn't warn me about this. You didn't tell me if you were going to mention me to mom.

No. Yeah, it's like asking which of your kids do you like better?

Rose Bowl.

2-hour marathon.

Oh, man. Tracksuit.

Just do it.

Hawaii.

Beatles. That was easy.

Probably The Sopranos, but that's tough.

Barefoot.