016: 7 things I learned from the rise of Nike.
The importance of taking risks, embracing uncertainty, and building the right team.
An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge - Proverbs 18:15 (ESV)
As I’ve started the early phases of building my own company, I’ve become increasingly curious about how other companies started and grew. Since I’m currently building Design Your World, a lifestyle brand - I’m especially interested in companies like Nike, Lululemon, and Red Bull. These brands are all more than just their products. They relate to their customers by promoting a lifestyle.
Nike: Promotes an athletic lifestyle and reinforces self-discovery.
Lululemon: Focuses on living a balanced lifestyle, embracing movement, and leading healthier lives overall.
Red Bull: Promotes extreme sports, adventure, and high-energy experiences.
Here’s a post from Nike’s Instagram featuring LeBron James: “You never get used to pressure. You just learn to embrace it.”
This type of content really inspires my vision for Design Your World. Beyond just selling nice clothing & accessories, I want to build something that can really motivate and aid the visionaries. Nike sets a great example of doing that with athletes.
The Nike story.
Phil Knight, the founder of Nike, wrote a memoir recounting his experience of the early days of building the company. I knew I had to give it a read. What did it take to grow Nike from a scrappy startup reselling Japanese running shoes to the world’s biggest sportswear brand in the world?
Shoe Dog is a guide to starting a business and overcoming obstacles based on Knight’s personal experience. When I finished reading the whole book, I noticed how widely applicable the lessons in this story are. If you are a current or aspiring entrepreneur, this is a must-read story. Lucky for you, I’m sharing my takeaways here.
TLDR
Knight was willing to take risks and work hard. Phil Knight built Nike through bold action and risk-taking. He jumped into business deals before having capital, operated in debt until Nike's 1980 IPO, worked multiple jobs for five years while growing the company, and wasn't afraid to take on major legal battles. His willingness to act decisively rather than overthink helped transform Nike from a small shoe import business into a global brand.
Despite high sales, finances were a big struggle. Knight reinvested all his profits back into the business, never keeping a significant amount of money in the bank, and operated Nike in constant debt. Banks frequently pressured him to slow down. This led to Nike nearly going bankrupt in 1975 when a bank pulled their million-dollar credit line. Luckily, Knight found salvation through a Japanese trading company, Nissho Iwai, who provided funding in exchange for 4% of revenue. Despite Nissho’s funding, Nike’s financial struggles didn’t end until they finally went public in 1980.
Relationships can make or break your business. Knight's crucial early relationship with Japanese shoe manufacturer, Onitsuka, was full of challenges. Their partnership was strained by frequent leadership changes at Onitsuka that required constant relationship rebuilding, chronic late deliveries that affected Nike's cash flow, and Onitsuka's inconsistent commitment to Nike as their U.S. distributor. The relationship finally reached a breaking point when Onitsuka demanded Nike sell their company to them or lose distribution rights. This forced Knight to secretly seek other manufacturers while maintaining the appearance of a stable partnership.
Legal challenges lurked at every corner. Phil Knight faced major legal battles that threatened Nike's survival in its early years. One was with Onitsuka Tiger, who sued Nike over breaking their agreement when Knight started making Nike shoes, though Nike countersued and won. Another challenge came when competitors used an old law called "American Selling Price" to hit Nike with an unaffordable $25 million customs fee, but Knight successfully fought the government and achieved a much lower settlement. Nike also engaged in ongoing patent disputes with companies like Adidas over shoe technology and design innovations. Knight's determination to fight these legal battles rather than give in proved crucial to Nike's survival and growth.
Knight built the right team. Phil Knight assembled an exceptional team, starting with his former track coach Bill Bowerman who brought innovation and credibility, and first employee Jeff Johnson who excelled in sales and marketing. He called his core group the "Buttfaces" (yes, seriously) - passionate people who shared his vision and weren't afraid to take risks. Knight's leadership style focused on empowering experts to run their areas while maintaining open communication. This fostered innovation and helped transform Nike from a startup into a global brand.
Uncertainty is part of the journey. Despite building one of the world's most successful companies, Phil Knight struggled constantly with self-doubt and uncertainty while growing Nike. As a naturally shy and introverted person who dealt with nervous habits, Knight faced immense pressure competing against established brands while operating on the edge of financial collapse for nearly 20 years. However, his deep belief in his vision and sheer determination helped him push through these challenges and insecurities.
Knight followed his passion. An important quality that helped Phil Knight have so much success selling shoes was his passion for running and his genuine belief that these shoes would help people improve their performance. This led him to make $8000 in sales in his first year. In the past, he was a salesman for encyclopedias, but was really bad at that because he had no passion for encyclopedias at all.
If you’re interested in reading more, see the full breakdown at the bottom of this newsletter.
[Oct → Dec] My quarter in review.
Design Your World is evolving.
If you read my last newsletter, you know that I started a clothing brand called Design Your World. As I was working on getting sales for my shirts, it hit me that I don’t simply have a clothing brand… I have a business. I wasn’t thinking about it that way at first. I just wanted to wear clothes that embodied my values and thought it would be cool to let people buy them if they were interested. After all, it’s not the tech company I imagined creating.
But then I remembered that all startups begin with a problem. With Design Your World, I’m solving a problem for myself - not having anything to wear that embodies my value of being a visionary.
I remembered the golden piece of advice I got, “build a company that solves a problem you have yourself.”
Beyond just finding clothes that embody our values, I think there are many more problems that visionaries face — and I’m really interested in exploring what they are. So here I am, founding a startup with the nebulous mission of serving visionaries in some way, shape, or form.
Design Your World is evolving. While it’s beginning as a clothing brand, there’s a lot that it can turn into. It might even become the tech company I’ve been dreaming of building.
🏆 What I’ve accomplished.
$470 in early sales over the past 90 days.
Conducted my first Design Your World photoshoot.
Hired a digital marketing specialist.
Created a company LinkedIn page.
Logistics: Registered as an LLC, opened a business banking account, & registered to collect sales tax.
⏭️ What’s next?
Updating the Design Your World website.
Added 14 items to the catalog (crewnecks, hoodies, crop tops, socks, tote, & other accessories). These will be live by March! Stay tuned.
Diving deep into understanding my target audience and the biggest problems they face.
Creating a social media marketing / content strategy.
Teaching myself how to code with FreeCodeCamp.org
Learning more about AI. The next newsletter will be about this.
Happy new year! I hope 2025 is a game-changer year for you. Let this be your push to go all in on your goals and make your future self proud.
Shoe Dog breakdown.
Plot summary.
The story is told year by year from 1962 when Phil Knight came up with the business idea to 1980 when Nike became a publicly traded company. It’s worth mentioning that a lot more growth happened in Nike after 1980. A key contributor to that growth was the endorsement deal with Michael Jordan in 1984, and others like Cristiano Ronaldo and Lebron James later on. However, the journey from foundation to going public has the most applicable lessons for entrepreneurs.
Dawn: At the age of 24, Phil Knight previously earned a master’s degree from Stanford Business School. Phil didn’t yet know what he wanted to do with his life. Even though he graduated from Stanford, ran track competitively, and even spent a year in the US army, he still felt like a directionless kid. All he knew was that he wanted to be successful.
1962-1964: Phil Knight conceives the "Crazy Idea" to import Japanese running shoes to the US. After convincing his dad to lend him some money for his travels, he flies to Japan, secures distribution rights for Onitsuka Tiger shoes, and founds Blue Ribbon Sports with his former coach Bill Bowerman. Knight sells shoes from his car trunk. He sold 1,300 pairs of shoes and grossed $8,000 in his first year. Knight later hires his first employee Jeff Johnson, and opens their first retail store in Santa Monica.
1965-1971: Blue Ribbon Sports expands to the East Coast and faces growing tensions with Onitsuka Tiger. Knight navigates financial challenges, reinvests profits, and works with Nissho Iwai (one of Japan’s largest trading companies) for loans. The company begins developing its own shoe designs. Suspecting Onitsuka's plans to terminate their contract, Knight and his team start planning for a new company called Nike.
1971-1980: Blue Ribbon officially became Nike Inc. in 1971. The iconic swoosh logo is created, and Nike begins manufacturing its own shoes. The company signs its first athlete endorsements and introduces innovative designs like the "Air" technology. Despite legal battles with Onitsuka, Nike experiences rapid growth, capturing 50% of the US athletic shoe market by 1980 and going public.
Knight was willing to take risks and work hard.
One of the main things I noticed about Phil Knight in his story is that he didn’t spend much time debating whether or not he should do something. He just did it. He had a high level of risk tolerance and grit.
Shortly after coming up with his idea to import Japanese running shoes to the U.S., he traveled to Japan to meet with executives at shoe manufacturing companies - all before he even had money or a real business.
He placed almost unaffordable orders from his suppliers with confidence that he would sell everything and operated his business in debt all the way until they went public in 1980.
Knight worked 1-2 other jobs until 1969 when the company hit $300,000 in sales. At this point, 5 years after starting his business, he felt comfortable paying himself a salary of $18,000 a year to work full-time on Nike.
Knight faced lawsuits from Onitsuka and the U.S. government, which he decided to fight in court.
Despite high sales, finances were a big struggle.
I thought getting a lot of sales was always a good thing, but sometimes businesses grow too fast for their own good. According to research, 90% of startups fail because of cash-flow problems.
Financial struggles plagued Nike’s early years. Being a fast-growing company, nearly all profits were reinvested back into business operations, creating a constant cycle of debt.
When Nike was coming up, venture capital (VC) wasn’t a well-known way to raise money, so Knight got his funding by taking out loans from banks. Banks, however, are very risk-averse. They consistently pressured Knight to slow growth and build equity in the business.
Equity shows how much of the business truly belongs to its owners or shareholders. It is essentially what remains of a company’s assets after subtracting its liabilities.
However, Nike regularly sold out of inventory, and Knight insisted on placing shoe orders so large from his suppliers that Nike could barely cover the cost. So even though the shoes were selling well, Nike frequently had no money in its bank accounts, usually after paying its bank loans or its suppliers.
In 1975, one bank decided to pull Nike's $1 million line of credit, nearly bankrupting the company.
To overcome these challenges, Knight looked for other funding sources. He formed a relationship with a Japanese trading company, Nissho Iwai. They offered to fund Nike in exchange for a 4% revenue share, basically saving the company!
Even with Nissho’s contributions, Nike continued to have financial struggles all the way until it went public in 1980. Once public, Knight was suddenly worth $178 million.
Relationships can make or break your business.
I noticed how much of Nike’s success in the early years came from securing distribution rights with Onitsuka. The success and failure of Nike depended heavily on getting shoes from Onitsuka and having permission to sell them.
But Phil Knight had a strained relationship with Onitsuka. A few things plagued their relationship:
Communication with Onitsuka was very spotty. Onitsuka was very slow to respond to Knight’s letters and sometimes didn’t respond at all.
Onitsuka changed leadership a few times. Each time, Knight had to form a relationship with the new leader. This led to confusion and repetitive back and forths. On multiple occasions, Knight had to either fly to Japan or invite Onitsuka executives to America to make the case for why Nike was the best fit to sell Onitsuka’s shoes in the U.S.
Onitsuka regularly delivered shipments late to Nike. These late deliveries gave Nike less time to sell shoes & made it tougher to repay its loans on time.
Onitsuka changed its position on Nike’s ability to sell its shoes numerous times. Each time reinforced to Knight that Nike was replaceable to Onitsuka.
Eventually, Onitsuka gave Nike an ultimatum. Sell their company to Onitsuka, or they would revoke Nike’s distribution rights and find other distributors. This forced Knight to start looking for other manufacturers while trying to maintain his relationship with Onitsuka for as long as he could.
Legal challenges lurked at every corner.
Phil Knight faced several significant legal challenges during the company's early years. Some of which had the potential to put Nike out of business:
The Onitsuka Tiger Battle: Nike got into a legal battle with Onitsuka Tiger. After Knight started creating Nike shoes, Onitsuka sued them for breaking their agreement. Blue Ribbon fought back with their own lawsuit and won in federal court.
The Customs Battle: Competitor companies conspired to take down Nike by lobbying for an ancient bill called “American Selling Price.” The rule resulted in Nike owing $25 million in customs fees - a fine that Nike could not afford to pay. Nike challenged the U.S. government over this bill. After a long battle, they convinced the government to settle for a significantly smaller fee, saving money and setting an important precedent.
Patent Wars: As Nike grew, they got involved in various patent fights, especially with Adidas. These focused on shoe technology and design, including disputes over knitted shoe technology (Nike's Flyknit vs. Adidas's Primeknit).
Phil Knight's willingness and resourcefulness in fighting these legal battles helped keep Nike alive.
Knight built the right team.
Phil Knight's journey of building a team at Nike illustrates the critical importance of assembling the right people to achieve success.
Knight started by partnering with his former track coach, Bill Bowerman, who brought innovation and credibility to the company. He then hired Jeff Johnson as the first full-time employee, who proved instrumental in sales and marketing.
As the company grew, Knight focused on surrounding himself with individuals who shared his passion and vision. He referred to this core group as the "Buttfaces," a team of dedicated people who believed in Knight's dream and were willing to take risks.
Knight emphasized the importance of letting experts run their respective areas while unifying them under a shared vision. This approach led to the creation of what could be considered an empowered team.
Throughout Nike's growth, Knight maintained a culture of open communication and trust. Team members were encouraged to share differing opinions and even ridicule each other's ideas, fostering an environment of innovation and experimentation without fear of failure.
By assembling a team of passionate individuals who believed in the company's mission, Knight was able to transform Nike from a small startup into a global sports brand.
Uncertainty is part of the journey.
Phil Knight's journey in building Nike was filled with uncertainty and self-doubt.
Knight was shy, introverted, and often insecure. He was prone to nervous habits like snapping rubber bands on his wrist during stressful business negotiations.
As a small company, Nike struggled to compete in a market dominated by established brands like Adidas.
Knight operated on the brink of financial ruin for nearly two decades. He was perpetually in debt, reinvesting all profits back into the company and living on credit.
Knight dealt with delayed shipments from Onitsuka and sometimes questioned whether or not he would ever receive the shipment.
Despite these things, Knight’s determination and unwavering faith in his crazy idea helped him push through the negative self-talk and looming uncertainties to build a great company.
Knight followed his passion.
An important quality that helped Phil Knight have so much success selling shoes was his passion for running and his genuine belief that these shoes would help people improve their performance. This led him to make $8000 in sales in his first year. In the past, he was a salesman for encyclopedias, but was really bad at that because he had no passion for encyclopedias at all.
Such a great read and very fitting for today! Can’t wait to cop in March!
I can’t wait to see the growth of Design Your World! It has global brand potential for sure :)