“Great leaders are never too proud to learn.”
-CEO: John Donahoe (Designate)
Business Model Innovation
Direct to consumer
Nike has achieved cult status in the hearts and minds of individuals across the world. Whether you play a sport or not, owning a shoe or apparel made by Nike is a statement you make to the world.
For a company which has, for years, tried to learn the nuances of the human foot and body, the current transition to become a technology company has been a remarkable move. Digital transformation at Nike is a combination of digital product creation, consumer demand sensing, flexible and responsive manufacturing, and new consumer as well as commerce models.
The early effects of this transformation are beginning to yield results. This is having a profound impact on the way Nike has traditionally created value. Elevating consumer experience and the brand through better digital partnerships is Nike’s mantra for digital transformation. In fact, they are going so far as to describe themselves not as a sports apparel company but as a technology company.
Nike believes it is their understanding of the human body and motion that makes its digital solutions stronger. It is this understanding that puts Nike in a position more likely to find the right solution when others can’t.
At Nike, it starts with the consumer. In fact, consumers seek out relationships with the brand. This allows Nike to understand athletes unlike any.
Consumer Direct Offense
Recently, Nike launched the ‘consumer direct offense’ strategy which puts a premium on building unbreakable relationships with customers. In this case, Nike builds trust by solving problems that athletes don’t even know exists yet. This type of grounded problem-solving is digital’s true potential and Nike’s core success.
Neural networks, machine learning, artificial intelligence and augmented reality are all tools Nike is using not only to solve real customer problems but to make the human experience better, more intuitive, simpler and more elegant as well. Problem-solving is inherent in Nike’s mission and by their definition, if you have a body, you’re an athlete.
Nike’s evolution to become a tech company feels like a revolution. Looking at the numbers, they’re simply killing competition at godspeed. The investment in digital is leapfrogging Nike into an era of untapped opportunities.
The company’s CEO designate, John Donahoe, is an experienced veteran of the Valley. He was the CEO of eBay and is currently at the helm of Service Now, another technology company. Hiring a technocrat to lead an apparel brand sounds counter-intuitive but this strategy is aimed at cementing Nike’s position in the market as a ‘technology company’.
The Impact Thus Far
Nike ended fiscal 2019 with $39.1 billion in top-line driven by strategic investments in innovation and global digital sales growth. Nike’s direct-to-consumer revenues were $11.8 billion, up 16 percent on a currency-neutral basis, driven by a 35 percent increase in digital commerce sales. Direct-to-consumer now contributes 30 percent of the firm’s overall revenue.
Nike’s vision is clear. It aims to foster deeper direct customer relationships in addition to leveraging a barrage of technology, mobile applications and in-store personalization technologies to achieve this mission. We believe Nike’s sustained and continuous adoption of digital technologies to solve the key challenges athletes face will build more trust. It will eventually translate into higher growth, margins, and new product innovation.