75. Nike’s Phil Knight: How to sell without selling

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Hi, it's read as you may have noticed. There are now two kinds of Masters of scale episodes are classic episodes prove a theory about how companies scale and features surprise guests and original music. I've hosted 70 of these episodes since 2017 and they're designed to be timeless this year. We also launched masters of scale rapid response with host Bob. Safian. These are fast Focus interviews with leaders in the thick of massive change sharing insights.

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I grew up in the 80s and that was when Michael Jordan was in his prime

all the commercials in the visual

imagery of Michael Jordan dunking

shattering backboards

and crisscrossing over people. That was my impression. Of course, what shoes what's he wearing? He was wearing his Jordans and

His Nikes.

That's Eddie Lou co-founder of goat, the Online Marketplace for premium sneakers that every Sneakerhead knows as a child of the 80s and a basketball fan Eddie has Vivid memories of Jordan and his Nikes Jordan played his first NBA game for the Chicago Bulls in 1984 and signed his Nike endorsement deal the same year right away. He started making news making plays and Nike started making Air Jordans. Okay Sterner the price tag there $130.

The locker and I just I couldn't afford them like any kid. He wants something but your parents will buy you something that's comparable. So instead of the Jordans they would maybe would get me the penny hardaway's

or even the Charles Barkley.

You know another shoe that was won by iconic player, but they just couldn't justify buying the premium Jordans and I think that really helped fuel my passion and my Nostalgia for sneakers and even Jordans right to this day.

Goat stands for greatest of all time. We love sneakers Michael Jordan was our Idol on he was the goat goat now sells a hundred thousand unique styles of shoes of all kinds not just Nike and that passion that Eddie and his co-founder felt for Nike is still very real. It also didn't just happen that kind of lifelong brand loyalty is the product of a magical combination of aspiration authenticity true value and

Amp, it only works if buyer and seller feel totally aligned and what they value and what those values say about them.

That's why I believe you need to sell without selling great branding is about identity and matchmaking.

You got to have incredible Talent at every position. There are fires burning when you're going home

going to be amazing. There are so many easy ways. So so it's do I have no idea

what sorry I made a mistake. Would you have to time it right?

This is masters of scale.

We'll start the show in a moment after a word from our sponsor plaid

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I'm Reid Hoffman co founder of LinkedIn partner Greylock and your host and I believe you need to sell without selling great branding is about identity and matchmaking.

There's a little word game that one can play called. They could sell a blank to blank. It goes like this.

You could sell a glass of water to a drowning man. Well, she could sell sand in the

Sahara. They could sell a ketchup popsicle to a woman in white gloves in the middle of July. It's fun and it paints a familiar picture of what we often Envision sales to be we often conflate sales with Charisma and chromatic sellers like someone who could sell stilts to a giraffe or fuzz to appear.

Those Charmers do exist the problem with relying on charm as a sales strategy is that it's difficult to scale. It's not impossible. But when there's a mismatch between product and Market the bottom usually drops out.

Great selling is actually not about trying to force-feed customers an ill-fitting product. It's more about matchmaking first. Tell the world who you are and then do everything. You can to find a connect with your ideal customers who are these ideal customers the ones who respond to your authentic brand they'll be the ones who stick with you as you scale.

I wanted to talk to Phil Knight about this because no one is more qualified to talk about where authenticity and advertising meet as the co-founder and longtime former CEO of Nike. He oversaw. Some of the world's most successful brand Partnerships. He helped innovate a new model of athlete sponsorships endorsements and product lines. Oh and he commissioned one of the most iconic logos ever, but at the start of our story Phil was just trying to make a sale.

I never thought I was a sales personality.

An extrovert is a person that stares at other people's shoes. So I'm not really the typical salesman, but you know, eventually you got to sell something.

Phil was actually trying to make the hardest kind of sale. He and a friend were in Hawaii on the first leg of a trip around the

world. We got conned into be an encyclopedia salesman. They ran an ad in the Honolulu Advertiser about wanting some people for PR we went for the interview and we dressed up in a suit and tie and they said we wanted a couple PR guys to place encyclopedias and homes for free.

And we got a certain amount of money for a replacement we made well when we got done with the training which lasted about two hours they said but you also have to sell the yearbook which cost $400 and I said, oh boy, we walked into that

the scam was revealed but Phil and his friend still tried to unload the free

merchandise selling encyclopedias. Door-to-door is a bit of an overstatement since I didn't sell a single one.

But I did try it for a week before I quit

it wasn't by choice. But Phil learned a valuable lesson selling by deception is harder than it looks it feels bad to trick people into buying a product you don't believe in and they don't want it gives selling a bad reputation. It places customer and salesperson in it was Zero some match that only one of them can win and frequently they both lose.

luckily Phil's brief foray into the encyclopedia carts was merely a side quest to his main mission that had started back when he was a student at the University of Oregon

ran on the track team coached by Bill Bowerman the Hall of Fame coach and he was always experimenting with shoes in those days all the really great Runners were wearing either Adidas or Puma shoes and it was a real eye-opener for me when Otis Davis won the Pacific Coast Conference Championship and a pair of Barman homemade shoes

if you're having a hard time picturing up,

Of homemade track shoes. They're a little Frankenstein ish with leather uppers cut by hand and glued to rubber and metal Souls Bill Bowerman was so obsessed with making lightweight racing spikes for his Runners. He even studied with a cobbler each new prototype was an experiment often performed on Phil

himself. He tried it out on his own as he called his hamburgers before I put it on his Elite athletes. He felt that getting lighter shoes was important

those Bowerman homemade shoes.

Who's left their imprint on Phil's mind it stay there when he went on to business school at Stanford.

I wrote a paper in the entrepreneurship class. Can Japanese shoes due to German shoes with Japanese cameras did the German cameras and the teacher gave me a good grade and I got kind of excited about it and away we go

Phil wasn't trying to build shoes like his old track coach. He just wanted to sell them and he had an idea of where the Innovation was happening. He headed to Japan with that one brief encyclopedia fields.

Up in Hawaii along the way.

Phil managed to score a meeting with Executives from the own it's car company who manufactured an exciting new running shoe called the tiger. It was the kind of lightweight performance shoe Bill Bowerman had been trying to make from scratch Phil wanted to sell it in the US now he needed to sell on its key on himself

at the end of the day. It was a sales experience, right? I gotta sell them on letting me be a Distributive the tiger shoes

Phil improvised the name for his non-existent company right there on the spot.

Blue Ribbon Sports the name might have been made up but his enthusiasm for the tiger was honest. So was his diligent market research and his strategy to capture market share from Adidas his passion and preparedness convinced onizuka to make Blue Ribbon Sports their American distributor. His sales pitch had worked now, he needed make good on his promises. He returned to the United States got himself some samples and got to work one of his first calls was to his old track coach.

I don't remember how many samples I got in but it was probably 20 pair. Maybe I sent a couple of them down to Barman and hoping that he would buy some for his team. He called me up and he said I'm going to be up in Portland for an indoor meet. Let's have lunch. That's when he proposed that we be partners and I was thrilled we shook hands and he agreed to put in $500 and that's what I had put in. And so there we go.

Philip come to the table looking to make a sale instead. He got a founding partner without even

Having the pitch Bowerman had immediately recognized what his former Runner was offering. It was a chance to create a future they both believed in full of featherweight sneakers that would help people run fast. The idea sold itself.

His deal was the world needs better running shoe. And these were people that made good shoes and were really responsive to ideas on making better shoes.

But as much improved as the tiger shoes were it didn't take long for Phil and Coach Bowerman to start tinkering with the

They said this is a great high jump training shoe and it had some cushioning in it. And I says, well, it's sort of silly for the high jump shoe, but cushioning for a running shoe makes perfect sense and it didn't make that much sense of Japan where they average Runner wait about a hundred twenty five pounds, but in the United States where the you know, a hundred and sixty pound Runner a running on the streets cushioning meant a lot Bowerman was Terrence shoes apart, which ultimately led to a shoe called de Cortes which was the first cushioned midsole running shoe, which really kind of got us going

partnership between Phil Knight Bill Bowerman and own it's could tiger clicked because of a shared goal improve functionality and quality while keeping their price point below that of Puma and Adidas to fill the value of the product was obvious if the shoe performed it would sell period and the proof was in the receipts.

We went eight years as a distributor and we got sales up to two million dollars, which in modern times doesn't seem like much but their total sales in Japan were 22 million.

Or so it was not bad.

It wasn't bad. But soon other Distributors started noticing and they wanted in on its go was Fielding competitive offers to help sell their shoes to American athletes.

They got besieged by different distributors in the United States saying, you know, we could do a lot better job with this and it was kind of seductive to them. They came to the conclusion that they'd be better off with established Distributors rather than this to bits in the wood outfit and Oregon so they basically

Ali jerked the contract and left us high and dry

and did you see it coming were you able to prepare

we had about a nine month notice their export manager came to us and he said we're going to set up the distributor's unless you sell us 51% of your company for Book value. And so I swallowed my tongue and said we'll think about it and then got on the next airplane to Japan to find another

Factory. It was a classic pivotal moment in the entrepreneurs Journey feel had to decide in that moment whether you could establish.

Identity for himself and his company without the partnership that had gotten them this far. It was a big risk, but it was also a necessary one the partnership between a necka and Blue Ribbon Sports had become a bad match standing in it wouldn't have felt authentic and it wouldn't have made either side happy within three months Phil and Bill had found a new Factory. This one would allow them to make their own product and not just to shoot someone else's it was a major change in strategy. They

arted with Bill bowerman's hybrid invention the Cortez

But without the name and reputation of an its category, they couldn't just rely on the quality of the product to drive sales. They would need to build a new brand identity to win customer trust. They needed a fresh start a chance to start building their branding story from scratch. It's at this stage that so many new companies falter to quote the legendary graphic designer. Paul Rand design is so simple. That's why it's so complicated and nothing highlights the need for Simplicity.

Quest for the perfect logo,

we hired a freelance artists a student at Portland State University paid her $2 an hour to come up with different designs and she came up with what is now known as the

swoosh. If you're an avowed Sneakerhead a hypebeast a connoisseur of kicks all terms by producers of assured me are real then you may already know this origin story. That's because the swoosh has iconic status the elongated check mark looks like a line in motion.

It stirs something in the Observer. It's an incredibly efficient design.

She came up with several different iterations. She didn't just draw it one day. I mean she spent Seventeen and a half hours on it. And we said modify this modify that the

way Phil tells it he didn't have any Grand Moment of clarity about when the swoosh was done. He just had to trust his team that they'd gotten it right

Miss kind of I don't know if I like it that much but we got to have something and that's the best we got

amazingly the same thing was true.

Like he's named after the ancient Greek goddess of Victory. It was a way to align the brain with winning either blatantly or subtly depending on how well, you know, your mythology. It also helped that the name Nike obeyed a couple of basic rules of

marketing on a trademark article that we all had read. It said good brand names are short. They have kind of a hard sign like Coke or Xerox or Kleenex that type of a

name the name Nike was submitted by the company's first employee.

Why Jeff Johnson, but it was far from the only suggestion in the mix.

We had 45 employees and they all put a name in the Hat. I put in the name Dimension 6 which I gave some thought to

and was the name in the Hat like you had a set of options and everyone voted or did

everyone know node only one vote the

counted and what made Nike resonate with you.

Well the others were so bad my comment at the time was I don't know if I like it that much but it'll grow on me. And of course it

has at its core great branding is about

Simplifying it's about stripping away the irrelevant details until only the essence remains imagine a sculptor chipping away at a block of marble until a statue beneath is revealed. That isn't just true of logos and names. It's also true of messaging your company's values must be just as identifiable as its font and signature colors in Nikes case what they valued most was Competitive Edge think back to Bill bowerman's Frankenstein shoes crafted to help as Runners win.

Now it was their job to tie that quest for victory to the brand. One of the things that I think is fascinating about the Nike store is that it starts with this intense focus on product. But it also then those will we can't just have the world's best product. We also have to be very brand conscious and as like, we didn't start out to be brand people, but now everyone in the world looks to us as the experts about how you establish brand and how you grow and treat a brand than you.

Connect that brand emotionally with customers. When did the brand part of the story begin to be something like okay. This is something we have to focus on

to originally the focus was on the product itself totally and then if we could get some good people to work it so it would get the attention of our consumers which were really the runners of the world and you know getting Steve Prefontaine to where the swoosh was a big big help of establishing a brand Steve Prefontaine American long distance Runner and competitor in the

72 Olympics coached by Bill

As Phil just told us Nike strategy relied heavily on its association with star athletes. Nike didn't invent the endorsement but they may well have perfected them going for world class competitors that captured the Public's imagination Steve Prefontaine Carl Lewis, Jackie Joyner-Kersee. If you want to run fast wear Nike if you don't take your training seriously, who cares what you wear, but there was a flaw in that plan to go all-in on the serious Runner the number of

People who aren't they had to find their target audience. So narrowly, they made themselves vulnerable to the

competition the 80s. We got our brains beat out by an upstart company called Reebok and they basically focused on women and they focused on what the shoes looked like and we hadn't really focused on the appearance of the shoes. We said If a shoe performs and a great athlete whereas it'll sell and so all of a sudden design became important to us because we were losing market share for bad design if you will

by the

Sneakers are well integrated into everyday fashion men wore them with suits to look a little rebellious women wore them in place of high heels on their way to the office and it wasn't just Reebok Nikes old Nemesis Adidas were also surging in popularity and clout after performing their song My Adidas at Madison Square Garden the rap group Run DMC scored a million-dollar endorsement deal on the spot. Nike was bleeding market share and there was no sign of it stop.

Beeping speaking only to the performance driven Market was not going to deliver a win. So Nike pivoted back to the swoosh or more precisely to everything surrounding

it. We went back and and got an emphasis on design. We had a young designer that we kind of put in charge of all those designers name was Mark Parker

freshening up the look of their shoes was a good start and style has been an integral part of Nike strategy ever since but it wasn't enough. They also had to Pivot their sales.

They needed to inform the non Elite athlete that Nike was for them

to and we said well, maybe we should try some advertising after all

if this seems like it should have been a no-brainer. Keep in mind what Phil told us at the start of this episode. I

never thought I was a sales

personality to fill their shoes shouldn't have to pass the fashion test if Nike was trusted by world champions. What else did you need to know? But even he had to admit it was time to connect the reputation to their

Branding and their branding to a wider audience what they did next would soon change. Everything will be back in a moment after a word from our sponsor

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We're back when we last left our guest Phil Knight had just accepted grudgingly there was time for Nike to change their approach to Brand strategy. He and his team went to meet with a young upstart advertising agency, very

upstart. We walked into an office that had four guys in a card table their names were David Kennedy and Dan widened

if those names sound familiar. It's because wieden and Kennedy is now one of the largest independently owned ad agencies in the

The first time I met Dan widen well walked into his office and I said I just want you to know Dan. I hate advertising and he says well it's interesting way to start

it was but what Dan Wyden said next made Phil evolve his

opinion one of the things they did and of course they were young and hungry too is that we have to know the client. We have to know the product we have to know who and what they are. We have to represent what they really are and what he began to understand really quite quickly. Wasn't that I hated advertising it was that I hated.

Traditional advertising

what did he mean by traditional advertising maybe something a little like this look here. So larium super galvanized rubber shoe soles provide 73 percent more satisfaction and comfort than shoes without other souls are too stiff fall apart in inclement weather adjust. Whoa, make your steps so full with Solarium super galvanized rubber shoe soles supplies last baby fussing.

Phil wanted something different for Nike something. I felt less like selling encyclopedias and more like an honest introduction to what Nike is all about something stirring kinetic something more like the swoosh was the design and the advertising the beginning of saying it isn't just the absolute best product for the athletes and for the people who want to run but it also has to be a way of connecting with them. So people understand that this product is the is the product that's for

For sure that was advertising message.

Why didn't Kennedy wanted to kick off a brand Revolution for Nike so of course, that's what they called it.

We have John Mcenroe swearing by it. And then we had Bo Jackson being able to play three or four different sports Michael Jordan jumping over the moon and it all came together and really looking back. It's maybe just in that first real campaign is one of the best campaigns we have ever had.

Springboarding off. The sheer star power of these athletes would become a staple of Nike

strategy

shoes were made with a best in mind and the proof was on the

The ad also used The Beatles song Revolution

that got a lot of controversy and a lot of publicity which we loved

why controversy well for one many people weren't comfortable with the idea of The Beatles selling out even though by then the rights their catalog had already been sold the record label Emi Capital own licensing rights while the publishing rights Belong To None other than Michael Jackson. It was a very strange time.

The three surviving Beatles sued Nike for the songs use but the controversy reinforced Nikes image as an iconoclastic irreverent company that wasn't afraid to show their

Edge. We just wanted to one wake people up and then be honest on who we were and it became edgy. We didn't say okay make it edgy. It just sort of reflected what we're trying to do.

You can find that original 1987 commercial online and however you feel about

The Beatles the ad is still electric not just because of the song or Mcenroe or Michael but because of the old couple speed walking in the park the little kid caught midair as he sails across the basketball court the exhausted marathoner collapsing under their foil blanket after the race the ad draws a direct connection between Ultra Elite athletes and the people who could be you you and the Great's exist side by side and the same sweaty.

Happy tribe.

This is what spot on branding can do. It does just showcase the best aspects of the product it lets you believe that you deserve them a slew of high-profile head-turning adds endorsements and sponsorships would follow

as Blackman and there's my main man Michael Jordan yo Mars Blackmon here with my main man, Michael Jordan's Charles Barkley the other boys and girls how you get fine Charles most of all for

fighting that out of wake up the country club

Mo knows baseball.

Knows football go new basketball team Bo you don't know

diddly. The revolution will be led by Jason Kidd Jimmy Jackson Eddie Joe Joe Smith and Kevin Garnett the revolution Michael

Jordan. Yo Mike what makes you the best player in the universe is the vicious don't know Mars. Is it the shoes? No, you sure it's not the shoes. I'm sure Mom. What about the shoes? No money's gotta be the shoes.

Also a little healthy controversy doesn't hurt either. Well, isn't it the case like the Air? Jordan was banned by the

NBA? Mmm. Yeah. That was great.

You heard that right Phil just said that being banned by the National Basketball Association on the court where the biggest celebrity athlete played was a good thing.

I mean we couldn't have paid David Stern for better publicity that he actually banned the original bear Jordans from anybody else in the NBA even Michael why couldn't wasn't supposed to wear

Of course that got huge publicity and every kid wanted it

Eddie lieu of coat was one of those kids he remembers this incident to Michael Jordan's banned commercial where he was getting find every single day for wearing his Jordan one Breads and that that commercial just so iconic where he's just bouncing that basketball and the announcer saying that these are the shoes that the NBA has banned from Michael Jordan from wearing Etc and all that stuff. Just creates more hype

By the way, those fines against Jordan came to $5,000 per day a Nike paid them

all we wanted them to ban it again, but he made him legal and next year

this commitment to controversy continued when wieden and Kennedy and Nike work together to unveil their new slogan in 1988. Just do it. The slogan was used in a 30-second spot about an inspiring eighty-year-old Runner

run 17 miles every morning.

People ask me how I keep my teeth from chattering in a winter time. I lead in my locker.

Just do it has since been used for just about everything Nike related to this day. It's a slogan that bats away excuses and says, the only thing standing in your way is you

you know, one of my favorite ads is Joe and Ernst was a great triathlete and she was in the early Revolution ads. She talked about how hard it was to do the two mile swim the 26-mile marathon and hundred mile bike ride. And she said this is what you got to do to got a train she goes through it and this is just do it side and then she looks into the

Says and I wouldn't hurt which quit eating like a pig either and so it's a completely different than anybody else ever said and it was just sort of us

Phil remembers as had finally but Nike also got a lot of hate mail over it especially from women part of the very demographic. They were trying to reach was this a case of Nike identifying their values or the choosing controversy over a chance to connect with part of their natural audience.

They decided to find out in the early 90s Nike work for the young female add writer at wieden and Kennedy by the name of Janet champ. She crafted a new print campaign for Nike women's fitness that read more like a series of poems all your life. You are told the things you cannot do all your life. They will tell you you're not good enough or strong enough or talented enough. They'll say you're the wrong height or the wrong type to play this or be this or achieve this

Oops, the ads featured female athletes, but often there were no Sports pictured at all instead. There would be a picture of Marilyn Monroe or an antique photo of a mother and daughter or just the word know they will tell you no a thousand times. No until all the other knows become meaningless

all your life. They will tell you know,

quite firmly and quite quickly. They will tell you no

and you will

tell them yes.

After Decades of explicitly masculine advertising. This was a seismic change in approach but contrary to what it might seem. It wasn't a change in identity. These new ads weren't soft and Flowery. They were tough and direct it sent a signal The Women written in a woman's authentic voice. Our shoes are for athletes and you are athletes to Nike started getting letters from women again this time in Praise of the ads that campaign was a resounding success.

access and a pave the way to endorsement deals with Superstar female athletes from Sheryl Swoopes to Michelle Wie to the goat of tennis Serena Williams, they started with athletes and they have all the best athletes in the world and it's funny because a lot of athletes they could get paid a lot more to work with other brands, but they stick with Nike because of

the level of excellence

in performance and the brand value then Nike has

once more Eddie lieu of goat with Nike they stuck

to their core values

and becoming truthful to what they stand for and having that point of view

is very

important. Remember great branding is about matchmaking risky or not. There's actually a benefit to letting your brand story to find not only who your audience is, but who it isn't like when Nike took a risk by making Colin Kaepernick the anchor celebrity of

To its 30th Anniversary campaign in 2018. Kaepernick had been the quarterback for the San Francisco 49ers until he started kneeling during the national anthem to protest police violence and racial inequality in America. When he signed on a Nikes campaign, he was and still is unsigned by any NFL team and Nikes add spoke to that believe in something Kaepernick said even if it means sacrificing everything

The ad first aired during the NFL season opener a not-so-subtle dig at caps former employer by making him the face of just do it. Nike wasn't just stirring controversy. There were taking a clear stand and a moment of extreme political division. They were picking a side it sounds easy, but it's hard for a lot of companies, right? But I think Nikes done a great job saying what are our core values that stick to them and let's have a point of view

and that's how people really create more affinity for the brand. They

With a lot of athletes and people in the community

that are affected by things that happen in this world. So I think it was great to see Nike share their point of view on important topics that affect Their audience and I think this next generation of consumers are really in tune with social justice and like you did a great job of supporting them in that way.

Nike decided it was important to double down on their values including the one that told them never to play it safe. They trusted that a love it would generate an athletes and fans would far away the anger it would raise and others and if you're wondering if this risk paid off Nike saw 31 percent increase in online sales in the ads immediate

It was basically a system where we said we don't care how many people dislike it as long as enough people like us

the Nike of today looks a lot different than the Nike of 1988 or 1971 including the fact that Phil is no longer CEO and is now chairman emeritus but despite all the changes. The core of the company seems intact Nike is still associated with high level performance shoes above all.

In fact, one of the most recent products the Nike Vapor was almost banned from the Olympics for giving its Runners too much of an edge. A lot of that innovation has gone a long way in making us appreciate that Nike pushes the envelope even to Now The Vapor Flies and allowing people to run the marathon under two hours. It's amazing as through my keys Innovation that has allowed them to get there. I asked Phil Knight about the lessons. He's learned and trying to keep that.

Energy of the company crisp and aligned with its audience while continuing to grow what are some of the areas where you found that the mistakes taught you about the brand so like I know that one of the things was well, you

know, we're before we're very focused on

Sports then maybe we're an apparel company. Maybe we'll have casual shoes, right?

You name two of the real good failures, right? Absolutely. We had a brand of casual shoes called IE and

it wasn't very successful and then we bought a company called Kohan which really was successful we sold it not because it wasn't successful because we thought our resources were better served in the other

areas those experiments may have fizzled but Nikes activewear lines have thrived especially as they've continued to expand their definition of who an athlete is and what she might look like recently. They launched Nike em, their first maternity collection saying mothers are the ultimate endurance athletes.