Nike and Their Approach to Product Innovation. It’s Not All About Team Riders

Nike recently came out with their 10Q for the quarter ended February 29th. I looked through it, read the conference call transcript, and sat down with the intention of doing my usual analysis.

Then I thought to myself, “Who am I kidding?” You want my analysis? They keep growing, make a lot of money, and their balance sheet is as imposing as the Death Star in Star Wars, but in a good way and with no exhaust vent for Luke to fire a proton torpedo into. There. Analysis done. You can see the 10Q here if you want to dig a little deeper.

What I want to focus on instead are President and CEO Mark Parker’s comments on how they constantly search for innovation and new products to “…create opportunities for everyday athletes to connect with NIKE, Inc. and each other around the world.”
 
He goes on to say:
 
“Collaboration is essential to how we innovate and grow. At NIKE, Inc., that always starts with insights from athletes, from the elite competitor to the everyday athlete. And it expands from there to include partners inside and outside our industry who inspire new ways of thinking; our retail partners, our manufacturing partners, universities, technology companies, NGOs, entrepreneurs and many more.”
“In our business, it’s collaboration and the ability to consistently innovate that create momentum and fuel long-term growth.”
 
Interestingly enough, last night I watched Sector 9 President and Co-Founder Steve Lake’s speech at the Transworld Snowboard Conference. Steve talked about constantly trying new things, reinventing his company every five years or so, and never standing still. Sector 9 probably isn’t quite $20 plus billion in revenue yet, but I bet he knows exactly what Mike Parker means. Go watch his speech here.
 
For Nike and Sector 9, doing something different is a core value. Standing still is dangerous and taking no risks is the biggest risk of all. I’ve said that a time or two myself and can’t resist pointing it out.
 
What struck me about CEO Parker’s comments is how their search for input and new ideas doesn’t stop (indeed, it barely begins) with elites athletes. We, on the other hand, too often won’t even consider something our team riders don’t like. Yet team riders aren’t our customers, get the product for free, don’t have that much in common with our average customer in terms of the comparative skill level and frequency of participation and, it occurs to me, might even have a vested interest in product not evolving.
 
We state proudly that our companies are “rider driven,” typically meaning, in my experience, that team riders have a disproportionate say in product decisions.  It looks to me like Nike CEO Parker would disagree with that approach.
 
Please don’t even try to use, “Well, we don’t have the resources of Nike” as an excuse. The issue is the ingrained way of thinking in action sports. It’s spending too much time talking to too many people who we’ve known for too long and who tend to share and validate what we already think. And I am as guilty as you are. I try and remind myself of that so maybe I won’t do it quite as much.
 
Here’s a link to an article about a company that looks for breakthrough ideas by seeking out and listening to “freaks and geeks.” They got together a group of Brazilian transsexuals to try and find out about hair removal products. To me that makes perfect sense. Nike, by the way, is one of their clients.
 
Nike CEO Parker goes on to say, “We consistently refer to 3 key components in our ongoing success: product innovation, brand strength and premium distribution. That’s what drives out growth.”
 
I think I’ve made my point about sources of product innovation. I’ve got nothing to say about Nike’s brand strength, as that’s self-evident. But isn’t it interesting that Nike, a brand available pretty much everywhere, talks about premium distribution?
 
That’s because distribution doesn’t stand alone. If you’ve got innovative product and a strong brand, you can have premium distribution in places other people can’t.
 
 Distribution, in a word, isn’t just about where your product is, but how it got there. And critical product innovations can’t just come from team riders, or at least that what Nike thinks.

 

 

4 replies
    • jeff
      jeff says:

      Thanks PJ. I’d always like to write something brilliant, but I’ll settle for getting people to think about the issue.

      J.

  1. Bob Hall
    Bob Hall says:

    If “standing still” is not acceptable to Nike (or adidas or other majors), then it’s clearly begging a fatal blow for the rest of us “small fry” to do so. It’s tough to ponder abandoning a hard-earned position of profit and market share, yet these very same majors will soon gobble up any decent market position established. If a major isn’t chalenging you, it probably means your position isn’t that interesting. “Be paranoid” is pretty good advice (credit to Jim Collins).

    • jeff
      jeff says:

      Hi Bob,
      I don’t think anybody is arguing for abandoning a good position. Rather, we all have to recognize that the market changes and we’ve got to change with it to maintain that position. In a perfect world, you try and lead it. But that feels risky and can be a hard thing to do as you say. “Everything is fine. Why should I do anything differently?”

      “Be paranoid” sums it up just right. And if you’re paranoid, maybe making the change isn’t so hard.

      Thanks for the comment,
      J.

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