Phil Knight (born 1938) is the founder and head of Nike, Inc., the number one athletic shoe company in the world. Already a legend in the retail and marketing worlds, Knight has turned into something of a mainstream hero, the subject of admiring articles in popular magazines. It is a reputation Knight hasearned over the years as both a visionary businessman and a hard-nosed CEO.
The man whom The Sporting News named the "most powerful" person of the year in sports for 1993 was no athlete, coach, or commissioner. Rather, it was the man who for nearly 30 years has shod the great sports stars as well as the Saturday-afternoon "jocks"-Nike founder and CEO Philip "Phil" Knight. The former college track runner refers to Nike's world headquarters as a campus and runs it that way. "His every move is now scrutinized as carefully as the glamorous superstars who wear his sneakers," reported Frank Deford in a Vanity Fair profile.
Knight was born in Portland, Oregon, on February 24, 1938, the son of William H. and Lola (Hatfield) Knight. Oregon's only billionaire "forged his go-it-alone philosophy while growing up in Portland, the son of a domineering but loving father who was publisher of the now defunct Oregon Journal," noted Susan Hauser in People magazine. Though too small to excel in contact sports, young Knight took refuge in track. When his father refused to give him a summer job at his newspaper, believing his son should find work on his own, Knight went to the rival Oregonian, where he worked the night shift tabulating sports scores and every morning ran home the full seven miles.
New Running Shoe
That interest in sports-and especially track-gave Knight the impetus to study the way track shoes were being made and marketed in the late 1950s. For assistance he consulted his coach, the University of Oregon's famed Bill Bowerman, who himself would become a senior member of the Nike team. Together they determined that American shoes were inferior in style and quality, too heavy, and too easily damaged. The Japanese, on the other hand, were experimenting with new, trimmed-down styles fashioned in lightweight, hardy nylon. Knight wrote his Stanford business-school term paper on the subject, then a few years later got involved personally by visiting Japan and arranging to import new-design running shoes himself.
"Knight ran Blue Ribbon Sports [named for a beer label] out of a storefront hole-in-the-wall next to the Pink Bucket Tavern in a working-class section of Portland," noted Sports Illustrated writer Donald Katz. "From the beginning Knight's animating idea was to promote high-quality, low-cost Japanese shoes, at a time when high quality was rarely associated with Japanese products, and to eventually displace [rival brand] Adidas, the triple-striped German shoes worn by all serious track and field athletes at the time."
"In the early days, anybody with a glue pot and a pair of scissors could get into the shoe business," Knight told Geraldine Willigan in a Harvard Business Review interview. "So the way to stay ahead was through product innovation. We were also good at keeping our manufacturing costs down. The big, established players like Puma and Adidas were still manufacturing in high-wage European companies. But we knew that wages were lower in Asia." This fact has garnered criticism for Knight and Nike by those who point out the vast difference between the wages earned by a factory worker in Indonesia compared to the salary drawn by a Nike celebrity endorser. But Knight insisted in the Sports Illustrated article that "we're not gouging anybody. … A country like Indonesia is converting from farm labor to semiskilled-an industrial transition that has occurred throughout history. There's no question in my mind that we're giving these people hope."
Knight's reputation in the track and field world also helped him gain an early edge. "We just tried to get our shoes on the feet of runners," he said in Willigan's article. "And we were able to get a lot of great ones under contract-people like [distance stars] Steve Prefontaine and Alberto Salazar-because we spent a lot of time at track events and had relationships with the runners, but mostly because we were doing interesting things with our shoes."
Unique Image and New Technology
From the start, Knight's shoes sported their own look (including the distinctive "swoosh" logo that still appears today) and their own attitude. An early effort to promote the newly dubbed "Nike"-pronounced NY-kee and named for the Greek goddess of victory-included a now-classic advertisement set at the 1972 Olympic track trials in Eugene, Oregon. The copy boasted that four of the top seven marathoners wore Nikes. As a Time writer pointed out, the ads conveniently "neglected to mention that runners wearing [Adidas] shoes placed first, second and third."
By the mid-1970s Nike was at the cutting edge of workout-shoe technology. For instance, it was Bowerman, the former track coach, who poured some liquid latex into his wife's waffle iron, thereby inventing the famous sole that made the earliest Nikes feel like bedroom slippers. Nike didn't exactly burst from the gate in profit, though. Major sports stars demanded major compensation for wearing Knight's brand. A turning point came in the 1980s, when tennis star Jimmy Connors won Wimbledon in a pair of Nikes and John McEnroe "hurt his ankle, [and] started wearing an obscure three-quarter [Nike] model that had sold all of 10,000 pairs that year. Because of McEnroe's strained ligaments," noted a Vanity Fair writer, "the model sold a million two the very next year. It was about that time when Knight woke up one morning worth $178 million."
There was one area in which Nike made a serious misstep. Knight acknowledged in a Sports Illustrated article that his company "lost its way" when it came to aerobics shoes. The longstanding boys-club atmosphere of the Nike boardroom saw little promise in a lightweight shoe for women to wear to their exercise classes. In fact, the notion of aerobics was laughed away as just the conceit of "a bunch of fat ladies dancing to music," as Hauser quoted in the People article. That lack of insight opened the door for an upstart company called Reebok, which then virtually cornered the market in this burgeoning subsection of the athletic shoe industry. That was the beginning of a longstanding rivalry between Nike and Reebok for market dominance.
Though sales slipped and profits fell during the mid-1980s, Nike regained its place at the top of the market in 1984, when Knight returned from a fact-finding trip to Asia. Knight is a firm believer in the Japanese way of doing business and conducting life: "He often greets his secretary with a courtly bow or 'moshi, moshi,' the Japanese equivalent of hello, and pads around behind sliding screen doors in a pair of cotton slippers," reported Hauser.
Celebrity Athlete Endorsements
Known as a taskmaster CEO, Knight is also particular when it comes to matters of promotion. "Hi, I'm Phil Knight and I don't believe in advertising," was the way Nike's ad agency president remembered meeting his new client. Signing up perhaps the greatest basketball player of all time, the former Chicago Bulls' superstar Michael Jordan, was only one of the breakthrough strategies that made Nike-wearers the envy of schoolyard pickup games everywhere. Nike slogans-"Bo Knows," "It's Gotta Be the Shoes," and especially "Just Do It"-have entered the pop-culture lexicon. The Nike image has been linked closely with notable "bad boys"-names like McEnroe, Andre Agassi, and Charles Barkley-as well as icons like the Beatles (through Nike's controversial use of the song "Revolution") and Bugs Bunny.
But the world of sports endorsements is a brutal one, as the public learned at the 1992 summer Olympic games in Barcelona. America's basketball "dream team" swept the field to win the gold medal, but faced screaming headlines and heated debate when several members threatened not to appear in a medal ceremony unless they were wearing their Nike apparel-to the consternation of Reebok, the team's "official" sponsor. (Dream Team member Barkley ably summed up the controversy, said Katz in Sports Illustrated, when he told a reporter that he had "two million reasons not to wear Reebok.")
For all the controversy Knight has helped engender in his company, he points out that the tradeoff is an increased awareness by the media, whose stories about the shoes and those who endorse them are the kind of publicity that money can't buy. As he told Willigan, the athletic shoe industry, "and Nike in particular, gets a lot more press than many others because it's more fun to talk about us than about a company that makes widgets. On the one hand, we don't mind the attention; we like getting our name in the press. On the other hand, the company usually gets treated in a superficial, lighthearted way, which is not what we're all about. Nike is not about going to a ball game. It's a business."
A later addition to the business was sports management. Simply put, it ensured that Nike endorsers maintained consistency outside the company-most importantly, by not endorsing any other product that would interfere with the Nike image. Sports management was born after Knight caught Nike endorser Andre Agassi in a commercial for Canon cameras. While cameras themselves don't conflict with shoes, the message in the commercial certainly did. "When Agassi looked into the camera and said, 'Image is everything,' Knight flipped," says Katz. "It was 180 degrees from our imagery," Knight told the Sport Illustrated writer. "We work hard to convey that performance, not image, is everything."
Nike realized that image did count for something when it released a shoe displaying a logo that resembled the Arabic word for "Allah," or God. Many members of the Muslim faith were upset, and in June 1997 Nike recalled 38,000 pairs of the shoes and issued an apology. The company noted that the logo was an oversight and issued a statement saying they did not mean to offend anyone with it.
Asian Labor Issues
The company came under increasing scrutiny for its wages and working conditions in Indonesia, China, and Vietnam. United Nations Ambassador, Andrew Young, released a report finding no issue with Nike's factories, noting that facilities were "clean, organized, adequately ventilated and well lit," according to a Reuters Business Report article. However, human rights groups charged that Indonesian workers were incessantly striking over low wages; Nike workers received $2.46 per day in a nation that counted $4 per day as the minimum subsistence wage.
Independent filmmaker Michael Moore, whose 1989 documentary Roger and Me depicted a heartless corporate mindset at General Motors, turned his cameras on Nike, among numerous other firms. Moore addressed the issue of how Nike treats its workers and requested jobs for people in his depressed hometown of Flint, Michigan. Knight countered that American workers do not want jobs in shoe factories, but Moore was able to find a crowd of jobless workers in Flint who would be happy to make Nikes. For his part, Knight was the only CEO to agree to appear in the Moore film.
The uproar over the Asian workers dragged on for Nike, and they eventually raised wages a small amount. Some American women's groups, protested that female employees-the bulk of Nike's Asian work force-were still working 100 to 200 hours overtime at Nike just to pay their bills. They issued statements accusing Nike of corporal punishment and sexual harassment in the shops as well. By mid-1998, Knight announced in a speech to the National Press Club that Nike was "dedicated to giving American consumers assurances that the products they buy are not manufactured under abusive circumstances," according to a Gannett News Service article. He added that he had been branded as a "corporate crook," and defended his business practices, citing "misinformation and misunderstanding" as reasons for the media assault on Nike. Knight noted that a number of policies were going to be implemented in their production facilities, including raising the working age to 16 at clothing factories and 18 at shoe factories; using safer, non-toxic glues when possible; adopting stricter, U.S.-dictated air quality standards; instituting on-site education programs, and more.
In addition to the Asian labor issues, many people remained outraged over Nike's escalating costs, especially since a large market for the products are poor, inner-city youth. One shoe endorsed by basketball player, Anfernee Hardaway, was tagged at $180, and the Air Jordans touted by superstar Michael Jordan had always been priced at over $100. Perhaps this combination of issues served to cause a slump. Sales and profits fell in 1998, and Nike laid off 1,900 employees. However, the company remained the world's largest shoemaker. It won a lawsuit in early 1999 that had accused the firm of lying to consumers about "sweatshop" conditions in Asian factories. Human rights groups remained unconvinced.
When not at the helm, Knight enjoys the fruits of his success. He and his wife Penelope "Penny" Parks have two grown sons and one foster daughter. They live in non-ostentatious comfort in Oregon, with a gaggle of pets and Knight's "only personal concession to flash: [a] black Lamborghini (vanity plates: NIKE MN) and red Ferrari," as Hauser noted in People. The workplace is also the scene of fun and comfort: Nike World Campus features three restaurants, plus fitness center, beauty salon, laundry service, jogging facilities, a day-care center, and other amenities.
Knight can't help but see success in Nike's future, as the company expands its product line to include a wide range of apparel and accessories. As a Forbes writer noted, the man who built an empire on a pair of shoes still cherishes the words of his track coach: "Play by the rules, but be ferocious."
Further Reading
Strasser, Julie, SWOOSH: The Unauthorized Story of Nike and the Men Who Played There, Harper Business, 1993.
Forbes, August 2, 1993.
Gannett News Service, May 12, 1998.
Harvard Business Review, July-August 1992.
Independent, October 28, 1997, p. 15.
People, May 4, 1992.
Philadelphia Inquirer, October 10, 1998.
Reuter's Business Report, June 24, 1997.
South China Morning Post, February 8, 1999.
Sports Illustrated, August 19, 1993.
Time, June 30, 1980; February 15, 1982.
U.S. News & World Report, September 22, 1997, p. 48.
Vanity Fair, August 1993.
"Nike, Inc.," Hoover's Online, March 3, 1999. Available from http://www.hoovers.com.
