Nike Strategy: The Trial and Error Economy

Nike has implemented a major change in strategy, according to an interesting article in Forbes Magazine.

The company had previously advertised with a mass market focus.  Its "swoosh" logo was everywhere, as was it’s great motto, "Just do it."

The new approach focuses on specific sports markets: running, golf, soccer, etc.  Rather than having a footwear division and an apparel division, the company is now organized around specific sports and activities.  Is this another ho-hum moment in corporate strategy?  I’ve seen companies centralize to reduce costs, then decentralize to reduce costs, then re-centralize to reduce costs, each time taking a one-time special expense to pay for the reorganization.  I’ve become skeptical of corporate changes, but I like this one.

When the marketing focus is mass market, it’s hard to say what’s working.  If you are selling more Air Jordans, is it because of great design or the ubiquitous advertising?  Nobody knows.  And thus, nobody cares.  That is, without specific data, there is no specific accountability.

By working at the sport/activity level, the segment manager becomes responsible.  There’s no passing the buck to the advertising manager; the segment manager has her own subordinate responsible for segment advertising.  If the skateboard segment is doing poorly, the VP of skates cannot blame the central design department, but only his own senior designer.

Trial and error does not work well at the amorphous global corporate level, which means the key method of improving products, production, and thus profits, is lost.  However, trial and error works wonderfully in a single business line, even if the corporate honchos don’t understand exactly what they are doing.

Good work, Nike.