Two Lessons from Nike: Find Your First Passionate Users—and the Story of Air Cushioning

Two brief lessons from Nike on a Sunday evening 1. Pay attention to your first users. Robin: “Startups do not have the resources to build a broad platform for everyone. Remember, that is what large companies think about. You must pay close attention to your very first users. As with MUJI in the preceding post, MUJI focuses on customers who identify with its philosophy and values, not those seeking prestige brands.” As Silicon Valley startup mentor Paul Graham puts it: “For a new product, having one hundred passionate fans is much better than having ten thousand people who think you are merely okay.” Nike also began its rise by targeting users in a very specific niche. When Phil Knight sold his first batch of Onitsuka Tiger running shoes, he first approached local sporting-goods stores. The intuitive assumption was that larger channels or those serving a wider mix of consumers would produce better sales. But the stores rejected him with a seemingly respectable explanation: “There are already too many running shoes in the world. We do not need more.” Knight then drove to the Northwest, where track-and-field meets were frequently held. Between events, he chatted with coaches, athletes, and spectators while selling his shoes. Because Onitsuka Tiger shoes were technologically advanced and comfortable, they quickly found favor with professional athletes and coaches, who knew quality better than ordinary consumers. The shoes gained a foothold among professionals, initially entirely through word of mouth. Knight quickly sold the first batch, and the business began finding its footing. Reebok followed a similar path, targeting women and gradually gaining market share, at one point overtaking Nike. Under Armour later did the same, first winning over serious fitness enthusiasts before broadening its brand recognition. The latest hot example is Lululemon, which started with fashionable yoga clothing for women. Decades later, this entrepreneurial principle remains unchanged, whether in sports brands, consumer goods, or internet technology products. ---- The story of Air Max cushioning One of the most important technologies in Nike’s history is Air Max: its air-cushioning technology. Many Nike shoes contain a small air-filled unit in the sole. That is Air Max cushioning. The technology was actually invented more than forty years ago. Over those forty years, the Air Max range became a phenomenon and generated substantial revenue for Nike. The technology is also remarkable: it came from NASA and was originally used in space. In the early 1970s, former aerospace engineer Frank Rudy discovered that technology he had developed for NASA could be used on the ground as well as in space. Putting this air-cushioning technology in shoe soles could greatly reduce the reaction forces between the ground and the foot, reducing impact and sports injuries. His first instinct was to approach industry leader Adidas. Before missing out on Michael Jordan as an endorser, Adidas had already missed out on Air Max. Rudy then approached a second company, Onitsuka, and was rejected again. Only in 1977 did he reach Nike and meet Phil Knight. At the Nike meeting, Rudy said, “I have a new technology that can inject air into athletic shoes.” Knight later recalled hearing countless foolish suggestions about shoes throughout his life; this might have been the most foolish of all. Footwear had seen relatively little technological change over hundreds of years. Italian shoemakers, for example, had achieved a high standard long ago, followed by only small improvements in craftsmanship and materials. People respected that tradition. Athletic shoes were similar. Most people therefore found the idea of pumping air into shoes highly implausible. Rudy also brought a prototype that looked large and heavy, with an odd pressurized air bladder in the sole. One glance made people reluctant to wear it. Knight nevertheless agreed to try it. He put on the shoes and ran ten kilometers. Returning, he said, “There are still many things to improve, but these shoes really make me feel as though I am airborne.” Nike’s deeply rooted spirit of innovation came into play once again. Knight decided to work with Rudy. Rudy, too, made what may have been the best decision of his life. Rather than asking Nike for a one-time payment to buy the technology outright, he requested a small patent royalty for every pair of air-cushioned shoes sold. Air Max shoes subsequently became one of Nike’s best-selling ranges. #Dedao #ZhangXiaoyuClassicBusinessCaseCourse