[This blog is Part 3 of 4 posts on Phil Knight’s Shoe Dog:  A Memoir by The Creator of NIKE (New York, NY:  Simon & Schuster, 2016)]

CRAZY IDEA:

Phil Knight talks about what he calls his “Crazy Idea,” which was the germ of the concept that eventually led to the creation of NIKE.  He was a newly-minted university graduate who thought there was a market for Japanese running shoes in the US (this was in the early 1960s). 

Knight talks about “this one comforting certainty, this one anchoring truth that will never go away.  At twenty-four I did have a Crazy Idea, and somehow, despite being dizzy with existential angst, and fears about the future, and doubts about myself, as all young men and women in their mid-twenties are, I did decide that the world is made up of crazy ideas…So that morning in 1962 I told myself:  Let everyone else call you idea crazy…just keep going.  Don’t stop…Whatever comes, just don’t stop.” [5]  His Crazy Idea evolved into NIKE. 

Of course, there are always naysayers.  Despite his dad’s important financial assistance in getting Knight stated, his initial response: “Haha, Crazy Idea.  Fat chance.” [13] 

PASSION 

Entrepreneurs typically have great passion for their product, with great examples being people like Steve Jobs and Elon Musk.  In Shoe Dog, we are introduced to the near-fanatical pursuit of the perfect shoe for runners.  Phil Knight himself was a runner and he started the predecessor to NIKE, which was called “Blue Ribbon”, with his former track coach at Oregon, Bill Bowerman.  

Through Knight’s storytelling the reader clearly sees are number of dynamics of the entrepreneurial process:  passion for perfecting a product (far beyond what most consumers would expect); Knight and has partner Bill Bowerman were truly experts in their product; and, with Bowerman, there was an obsessive and competitive desire to build the world’s greatest shoe.  

Knight was not able to exercise his passion at the start.  He tried a number of things to make money.  He failed at selling encyclopedias. “So why was selling shoes so different?  Because, I realized, it wasn’t selling.  I believed in running.” [55].  He had found something he believed in.  He realized that he was a “shoe dog.”  What’s that?  

“Shoe dogs were people who devoted themselves wholly to the making, selling, buying, or designing of shoes.” [186] 

STARTUP CAPITAL 

NIKE presently does $30 billion per year in business and has 68,000 employees around the world.  The swoosh logo is recognized throughout the world.   Phil Knight is worth $27.3 billion.  How did it start?  Not with $10 million in investor funding!

The predecessor company, Blue Ribbon, was bankrolled by a bit of money from Knight’s father (who is regularly maligned in the book) in addition to his father’s financial standing with a local bank.  And the help of his mother.  In 1964 his mother bought a pair of shoes for $7.  Knight explains that, ”Probably because he didn’t want any trouble with my mother, my father loaned me the thousand bucks.” [55] 

Later, Knight wanted to order more shoes from Japan.  Knight explains that, “On the strength of my father’s reputation, and nothing more, the bank approved the loan.  My father’s vaunted respectability was finally paying dividends, at least for me.” [57] 

So, like many great entrepreneurial success stories, grow was financed largely from cash flow, rather than a pot of money at the end of the rainbow. 

GROWTH & FINANCES 

One challenge for entrepreneurial companies is to successfully navigate the shoals of disaster and go from startup to true growth company.  Knight explains that, “Our problems were unprecedented.  Or so it seemed.  I was also partly to blame, of course.  I refused to even consider ordering less inventory.  Grow or die, that’s what I believed, no matter the situation.” [257] 

The challenge is that Knight kept selling more product but then using the revenue to keep ordering more—a seemingly never-ending cycle in which no money is set aside for reserves.  The bank constantly harangued him about having too little equity in the business.  

At out point they needed more financing, and were asked to provide personal guarantees.  Knight explains, “Bowerman, however, balked.  Retired, living on a fixed income…he didn’t want any more risk.  He feared losing his mountain [where he had a property].  Rather than give his personal guarantee, he offered to give me two-thirds stake in Blue Ribbon, at a discounted price.  He was bowing out.” [283] 

Knight was at a different point in his life and saw things differently:  “As ever, the accountant in me saw the risk, the entrepreneur saw the possibility.” [77]  Knight forged ahead, driven by the desire to keep growing the company despite the clear risks:  “But the roadside was littered with cautious, conservative, prudent entrepreneurs.  I wanted to keep my foot pressed on the gas pedal.” [78] 

INNOVATION 

At the core of the entrepreneurial process is innovation.  Peter Drucker describes innovation as the sine qua non on entrepreneurship.  Innovation is a process, a discipline, and something that requires painstaking effort.  Knight is a great example of an entrepreneur who is constantly innovating to improve a product. 

Knight relays an interesting story.  His Japanese partner, founder of Tiger running shoes, said, “the inspiration for the unique soles on Tigers has come to him while eating sushi.  Looking down at his wooden platter, at the underside of the octopus’s leg, he thought a similar suction cup might work on the sole of a runner’s flat.” [86] 

Knight, of course, did plenty of innovating with his partner Bill Bowerman.  For example, in 1972 “I [Knight] filed for a patent on Bowerman’s waffle shoe.  Application no. 284,736 described the “improved sole having integral polygon shaped studs…of square, rectangular or triangular cross section…[and] a plurality of flat sides which provide gripping edges that give greatly improved traction.” [213] 

Of course, a company must innovate on an ongoing basis.  Of course, not all great ideas are generated within a company.  Knight relays a great story about the “air shoe” and what would eventually lead to the legendary “Air Jordan.”  The innovators who came up with the idea for air in shoes somehow finagled a meeting with Knight.  He recounts, “I wasn’t even sure how these guys reached us, or how they’d arranged the meeting.” [305]  His initial skepticism quickly led to seeing the value in the concept.  

Of course, not all innovations work.  Knight gives the example of one shoe launch.  They put out a new shoe in 1978 which met with initial fanfare—but ten customers were returning the shoes to stores.  “We’d learned a valuable lesson.  Don’t’ put twelve innovations into one shoe.” [332] 

The spirit of innovation was in the soul (or sole) of the company.  Knight explains, “No other company was trying new things, so our efforts, successful or not, were seen a noble.  All innovation was hailed as progressive forward-thinking.  Just as failure didn’t deter us, it didn’t seem to diminish the loyalty of our customers.” [311]

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