Knight, Philip

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Knight, Philip

(1938-)
Nike, Inc.

Overview

In less than a decade, Philip Knight converted a sneaker sales and manufacturing business into an international conglomerate. Nike shoes, equipment, and sports apparel are sold throughout the world and are endorsed by top athletes in virtually every sport.

Personal Life

Philip Hampson Knight was born February 24, 1938 in Portland, Oregon, the son of William W. and Lota (Hatfield) Knight. William Knight was the publisher of the Oregon Journal, a newspaper which has subsequently closed its doors. As a youngster, Philip Knight—nicknamed "Buck"—was too small to compete in contact sports, so instead, he became a runner. When his father refused to offer him a job at the paper, Knight found work at the opposing paper as a sports scores tabulator. Each day, he ran the seven miles from his job back to his house."

Knight's interest in running continued during his undergraduate years at the University of Oregon where he was a member of the track team. He distinguished himself as a miler, with 4:15 as his best time. It was at Oregon that Knight first met Bob Bowerman, the school's track coach and the man who would later help Knight design his famous Nike running shoe.

After graduating from Oregon with a BBA in 1959, Knight went on to earn his masters in Business Administration at Stanford University. While at Stanford, Knight wrote his master's thesis on running. If Americans become more oriented toward fitness, Knight surmised, a shoemaker could produce an athletic shoe which would find a market with both professional athletes and the public at large. This thesis would ultimately be the blueprint for Nike.

Knight graduated from Stanford in 1963 and worked for a number of years at the accounting firm of Cooper & Lybrand in Portland. During his tenure there, however, he remained interested in athletic shoes.

On September 13, 1968, Knight married Penelope Parks; the couple had two sons, Matthew and Travis, and a foster daughter. The children are grown and have moved away from home. Knight and his wife live in Oregon, along with numerous pets.

In 1982 Knight was named Oregon Businessman of the Year and was selected as one of 1988's Best Managers by Business Week magazine. He is a Republican and an Episcopalian.

Career Details

Unable to shake his preoccupation with running shoes, Knight finally contacted Bowerman, his former Oregon coach. The coach had been working for years attempting to develop a running shoe that could compete with those manufactured in Japan. After some talk, Knight and Bowerman became convinced they would market existing Japanese shoes to American athletes, and undercut the market, which had previously been dominated by European manufacturers, especially Puma and the German-made adidas.

While continuing to work for the accounting firm, Knight and his coach began to pursue their running shoe dream. Both men initially invested $500, and created Blue Ribbon Sports, named after the label on a popular beer bottle. The fledgling company was housed in a storefront in a working class section of Portland. Knight devoted his nights and weekends to the new endeavor, which primarily imported and sold Japanese-made Tiger running shoes. As the business grew, Blue Ribbon Sports was named the national distributor of Tiger. At that point, Onitsuka, the Japanese company, also demanded a majority share of Blue Ribbon and threatened to revoke its distributorship if Knight and Bowerman refused to comply.

Instead of bowing to the ultimatum, Knight and Bowerman scrambled to find a replacement shoe. Knight was able to find an equally low-cost manufacturing company in Japan and ordered production of the new shoes to begin. Needing a name for his new product, Knight picked Nike, after the Greek Goddess of Victory. It was he who suggested the addition of the "swoosh," which has subsequently become the company's trademark.

That year, the Olympic trials were held in Eugene, Oregon, and Knight and Bowerman convinced several of the marathon runners to try wearing the new Nike shoes. The runners wearing adidas finished in the first three places, but the Nike runners captured the next four slots. Knight touted this in advertising, which contended that "four of the top seven finishers" in the Olympics wore Nikes. Suddenly runners from across the country began asking for Nike shoes. Not only was this a boost for business, it also sold Knight on the importance of advertising and convinced him that the company needed to develop a shoe of its own.

It was Bowerman who first came up with the idea of the waffle design on the soles of running shoes—soon a Nike trademark. For years, he had tried to come up with a sole that would be both durable and provide the needed traction. His inspiration came one Sunday, when he saw the design on his wife's waffle iron and decided that this was the key to meeting both his design needs. This came after much trial and error, including putting holes through shoes, in an attempt to lighten the weight. The shoe caught on, and its development coincided, as Knight had predicted, with the increase in weekend runners and fitness advocates. Athletics had moved off the field and into mainstream life.

Nike sales dramatically increased in the period between 1972 and 1976, rising from $2 million to $12 million in those 4 years. But there seemed to be no leveling off after that, with profits rising to $200 million in 1979 and surpassing the $1 billion mark by 1984. The shoes had also far surpassed their biggest competitor, adidas, in sales. In order to meet the increased demand for products, Knight found additional suppliers in the Far East. In that period, more than 85 percent of the Nike products were manufactured abroad. This enabled Knight to keep a ceiling on expenses and overhead, but it resulted in sharp criticism from some who felt that overseas workers were being severely exploited, particularly in comparison with some of the endorsement prices that top athletes were being paid. Knight tended to brush off the criticism, contending that his company was supplying jobs to workers who might otherwise be unemployed.

Nike went public in 1980, in order to raise monies for capital expansion. Knight received 46 shares of Nike stock, while Bowerman was left with just 2 percent. At that time, the company began to expand its product line, adding sports apparel and children's shoes. But the company failed to anticipate the surge in women's exercise and aerobics which would come in the 1980s, and they didn't initially design shoes to meet that market. Aerobics would require a lightweight shoe with added cushioning and support in the toe area, as opposed to athletic shoes, which place that support in the heel. This lack of foresight, combined with a general decline in jogging, brought a halt to the meteoric sales the company had experienced. The aerobics oversight made it possible for Reebok to capture virtually the entire market, pitting that label in tough and long-standing competition with Nike. Knight did attempt to rally from this loss, finally turning his attention to aerobics and designing shoes to match the activity. The company also began to make shoes for people who were not exercisers or athletes—attempting to expand its customer base to people who walked and would wear the shoes recreationally.

By 1985, running shoe revenues fell sharply from $240 million in the previous year to $120 million. By 1987, Reebok's sales had surpassed Nike's. At this critical point in the company's growth, Knight boosted sales again with celebrity endorsements and an aggressive advertising campaign, which included slogans like, "Bo knows," "It's gotta be the shoes," and, certainly, "Just Do It." This last slogan continues to be used and has been adopted into everyday vocabulary. Company sales rebounded, and by 1988 Knight himself was worth an estimated $400 million.

In the early 1990s, Knight made structural changes in the company, including the promotion of general manager Tom Clark to company president. Clark had been a championship runner and had a strong bond with Knight. In the year and a half after Clark's promotion, Nike sales skyrocketed, with gross margins at record levels.

Social and Economic Impact

Early on in his excursion into running and athletic shoes, Knight discovered the power of advertising, which would ultimately bring the company back from its downward spiral in the 1980s. Beginning with those first Oregon Olympic trials, Knight had always sought professional athletes to both wear and endorse his shoes. Because of his own college involvement with running, Knight had a reputation on the track, which he used to secure runners like Steve Prefontaine and Alberto Salazar.

As the Nike line expanded from running to athletic shoes, Knight was just as persistent in garnering endorsements from nationally recognized athletes. In the 1980s, both Jimmy Connors and John McEnroe were wearing Nikes when they faced one another at Wimbledon.

Chronology: Philip Knight

1938: Born.

1959: Completed his BBA at the University of Oregon.

1963: Earned his MBA at Stanford University.

1964: Began importing athletic shoes; cofounded Blue Ribbon Sports.

1978: Changed the company name Blue Ribbon Sports to Nike.

1983: Became chairman and CEO, Nike.

At the 1992 Olympics, several members of the United States "Dream Team" refused to come to the medals platform to receive their gold medals, unless they were allowed to wear Nikes—this, despite the fact that Reebok had been the team sponsor on record. While Knight came under fire for this, sales of Reebok increased thanks to the visibility.

Certainly, the greatest advertising coup the company made was signing former Chicago Bull's basketball superstar Michael Jordon. His endorsement of Nike brought the company's basketball shoes into the inner city, onto playgrounds and into schools, elevating Nike from an athletic shoe to a status shoe in some circles.

Other Nike superstar endorsers have included Andre Agassi, Charles Barkley, Deion Sanders, Monica Seles, and Alonzo Mourning. Knight has certainly not been without his detractors. His company has continued to field criticism regarding Knight's pursuit of the cheapest labor possible and his use of overseas workers to meet that end. In 1998, this issue was raised pointedly in Michael Moore's documentary film, "The Big One." Moore had previously made a name for himself in the documentary film medium in 1989, when he made the film, "Roger and Me," in which he focused on the closing of the General Motors plant in his hometown of Flint, Michigan, and the subsequent loss of 30,000 jobs.

In "The Big One," Moore turns his attention to Knight, whom he followed around, on camera, for 3 weeks in 1996. In the 89-minute film, which was shown at the January 1998 Sundance Film Festival, Knight admits he has never visited any of his overseas manufacturing plants and also explains that he uses foreign labor because Americans would be unwilling to make shoes. According to Moore, Nike officials asked the filmmaker to delete several scenes in the film, especially one in which Knight admits to employing foreign workers as young as 14.

Overriding employment issues, though, is the fact that through his shoes and athletic clothing, Knight and Nike revolutionized the sports apparel industry, making name-brand sportswear a status symbol, on the track, in the gym, and on the street. The now-famous "swoosh" Nike logo can be seen in countries around the world and is an almost universally recognized clothing symbol.