Shoe Dog: A Memoir by the Creator of Nike. This book was written by the founder of the Nike sportswear company, Mr. Phil Knight. This book tells us about the tumultuous history of a startup that began with a $1,000 initial investment and later became a multi-billion dollar sportswear empire that everyone knows, which is the Nike company. The book is titled "Shoe Dog," This term refers to people who are crazy about shoes, who love shoes as much as their own lives. It refers to the founder of Nike, Mr. Phil Knight himself.
Speaking of Nike, it's not much different from Coca-Cola. Everyone knows this brand. Perhaps you even have a pair of Nike sports shoes or Nike sportswear that you use. Nike is the number one most famous sports brand in the world. In one year, it sells more than 100 million pairs of shoes, which amounts to over 30 billion dollars in revenue. This figure is more than the combined annual revenue of the sports brands ranked second, third, and fourth.
On top of that, just the Nike brand itself is worth up to 33 billion dollars. It was ranked 18th as the most valuable brand in the world, valued by Forbes magazine in 2018. It is worth more than BMW and Audi cars. Speaking of the founder of this company, Phil Knight is not as famous as his brand. However, he can also be considered a very famous businessman. In the United States, everyone knows him. In 2016, Mr. Phil Knight, who was 78 years old, stepped down from his position as Chairman of the Board for the third time. He had done this twice before but couldn't let go and kept coming back. He even fired the CEO he had personally chosen. The book "King of Shoes" was written before Phil Knight stepped down from his position as Chairman of the Board. The author compiled his history and stories and wrote them down in this book, from 1962 when Nike was just an idea, until Nike successfully went public with an IPO in 1980. It not only talks about the good stories, but this book also describes the dark history that you may not know about the Nike company. Through this work, you will understand in depth the situation of small businesses in the United States in the middle of the last century.
Below, we summarize two important key points from this book. First, how did Nike transform itself from a company that sold shoe bags with an initial capital of only $1,000 to become the number one sports brand in the world? Second, we talk about one innovation, two breakthroughs, and the three crises that Nike faced, as well as Phil Knight's important decisions. The one innovation refers to using Japanese manufacturing, "Made in Japan," to produce shoes that are cheap and of high quality, to capture market share from German products. The Nike company, which was a small company that produced and sold shoe bags, was able to negotiate the distribution rights from the famous Japanese sports brand Onitsuka Tiger and enter the sports shoe market and has continued to grow until now. The two breakthroughs are the discovery of two types of shoes: the crampon shoes and the air-soled shoes, which were Nike's special breakthroughs at that time. This caused Nike to grow rapidly, surpassing its predecessors Puma, Onitsuka Tiger, and Adidas. And the three major crises that Nike faced were with its supplier, with the bank, and a customs issue.
These three things almost bankrupted Nike several times. But Nike and its loyal team, who were willing to risk their lives for these shoes, not only managed to overcome those obstacles successfully but also took the opportunity to develop themselves and grow until they went public and became the leading sports brand in history. When he was young, Phil Knight loved long-distance running. He was also a man who was obsessed with sports shoes. While studying for his master's degree at Stanford University, he wrote a thesis. This thesis had a strong influence on his life, and his breakthrough was also a turning point in the sports industry. The thesis was titled: "Japanese shoe companies can capture market share from German brand shoes, just like Japanese cameras captured the world market from German cameras."
At that time, the world's shoe market was a market for German brands such as Puma and Adidas. These brands were mature and had captured almost the entire market, making it difficult to compete. After World War II, Japanese technology developed rapidly, and labor costs were low. In the camera market, Japanese camera brands quickly overtook German brands. Phil Knight predicted that in the shoe industry, Japanese brands could also seize market share from the hands of German brands. How to prove this assumption? As soon as he graduated, Phil Knight traveled to Japan to visit the most famous Japanese shoe factory, which was Onitsuka Tiger, which was later renamed Asics. In 1962, Phil Knight was only 24 years old. When he graduated from Stanford, he had no job, no money, and no business experience. He traveled to Japan and visited the Onitsuka Tiger factory. The president of the factory received Phil Knight as if he were a delegation.
This was because after World War II, the Japanese people were afraid and respected Americans. Combined with incomplete information, the factory president did not know that Phil Knight was just a university student who had just graduated. On the other hand, the Japanese brand Onitsuka Tiger also wanted to enter the Western market. And after Phil Knight took his thesis, data, and the pictures he had prepared to show the factory president, in just a few minutes, the factory president believed Phil Knight completely. When the factory president asked Phil Knight the question, "What is the name of your company in the United States?" At that time, Phil Knight did not have a company. He suddenly thought of the blue ribbons that they used to put at the finish line of a race and spontaneously said to the factory president, "My company is called Blue Ribbon Sports Company." Relying on his convincing words and trustworthy appearance, the Onitsuka Tiger company granted distribution rights to Phil Knight to sell the Japanese brand in the American market.
When he returned to the United States, Phil Knight collaborated with his running coach, and each of them put in $500 to create a company. And they named the company the same as what he had told the president of the shoe factory in Japan, which was called Blue Ribbon Sports Company, which later became the Nike company. When they first started, the two founders of Nike had no business experience. They had no capital, not even an office to work in. So Nike took the basement of his parents' house to use as an office. To support his livelihood and do what he loved, chasing his dream, Phil Knight went to work as a full-time accountant to earn a salary. After work, he would go to the basketball court and the sports field, everywhere, to get to know the coaches and talk to the athletes to have the opportunity to sell his shoes. He distributed promotional leaflets almost everywhere in the city. Compared to the German shoes that were already on the market, the Japanese shoes were of the same high quality and were cheaper. The first shipment sold out completely. The next thing was not difficult. Import more goods, sell more. Little by little, Phil Knight's company found its way. That is to continue to be a company that sells Japanese shoes. The above describes the history of the birth of the Nike company and its innovations.
Using the advantages of Japanese shoes, which are of high quality and low price, to capture the German shoe market on American soil. Phil Knight and his coach's dream did not stop there. Because what motivated the two of them to do this was not the profit from selling shoes. It was the spirit and the love for shoes. It was this love that made the two of them continue to do one more thing, which is to design shoes. They improved and added new creative ideas to the existing shoes on the market. And later, the company that imported Blue Ribbon sports shoes changed from a distributor of sports shoes to a company that produced and sold shoes on its own. The two major breakthroughs of this company were the crampon shoes and the air-soled shoes. Let's talk about the first breakthrough, which is the crampon shoes. When it first started, the Blue Ribbon company had two co-founders, didn't it? They were Mr. Phil Knight, who was in charge of general operations, and another person was his coach, whose name was Bill Bowerman. This person was the coach of an Olympic athlete. In the first half of his life, he coached more than 30 Olympic national teams and produced 12 American Olympic medalists. Speaking of the company, Bill was like a good advertising billboard. But what brought more value to the company than that was his creative ideas.
After training his team to run at a fast pace, what he did next was to take their shoes and modify them. He made them lighter and more flexible, so they could run faster. Bill used his experience and outstanding skills to apply them in creating new shoes. In his life, the most important breakthrough was the crampon shoes. In the past 50 years, no one has paid attention to creating new shoes. It wasn't until 1972 that, in order for the Olympic athletes to win in the Olympic games, Bill Bowerman modified the soles of the shoes for long-distance runners. One day, while eating breakfast, Bill discovered something remarkable. It was a waffle. Looking at the waffle, it had a shape that was perfect for making the sole of a shoe. Later, he took PU glue and poured it into the waffle mold to make the sole of a shoe. Because he didn't put anything as a liner, both the waffle and the waffle iron were ruined.
Later, he bought another mold and used a millstone as a mold liner, and then he poured rubber to make a shoe sole, but because the millstone was too hard and sharp, it cracked and broke into pieces. But Bill did not give up. He took stainless steel and cut it into the shape of a waffle iron and poured the viscous rubber into the stainless steel mold. He never imagined that something like this could be used to make the sole of a shoe. And it was really good. The athletes who used the shoes with the soles that Bill had modified really increased their speed in long-distance running in a remarkable way. Through many modifications and refinements, the shoe sole that was soft and flexible, combined with the waffle pattern that could grip the ground and prevent slipping, soon the newly created shoes received strong support. They were seen worn by everyone on the field, and it was a successful product of Nike, surpassing its original brand, Onitsuka Tiger, in a short period of time. It also competed head-to-head with the old-fashioned shoe brand from Germany, which was Puma. Another amazing breakthrough of Nike was the air-soled shoes.
Nowadays, seeing a shoe sole with a hollow inside is not a strange thing. But more than 50 years ago, no one had ever thought of something like this. In 1977, five years after the Nike company was established, Phil Knight met a strange aerospace engineer. His name was Frank Rudy. This person was also a shoe lover. Rudy was the one who created the shoe sole with a hollow inside for Phil Knight. Putting air into the shoe sole was a truly amazing thing. Phil Knight's original words were, "This pair of shoes is like shoes sent from the future." People started wearing shoes that have a history of more than 40,000 years, but there have been no significant innovations. The shoes with hollow soles are like something out of a fairy tale. But this aerospace engineer was able to create them. Later, they were named Nike Air. Although it sounded unbelievable, Phil Knight encouraged this person to produce them. And he wore them to run a distance of more than 10 kilometers to test the product. The result was truly amazing. After returning from his run, Phil Knight decided to collaborate with Frank Rudy immediately. For nine months, Phil Knight and Frank Rudy worked on producing shoes with hollow soles.
They created 12 different shoe sole models. When they were launched on the market, they received overwhelming support and sold out completely. This made Nike earn a lot of money and become famous. By 1979, Nike had captured the market share of the number one big brother in the sports shoe market, which was Adidas. To this day, Nike Air is still a very popular type of shoe among users. It can be said that it is the ace of Nike. If you think about it, the company that imported and distributed Japanese shoes, Blue Ribbon Sports Company, which later became the Nike company, grew so rapidly. It was not only because they could produce good and cheap products. What they did better was to make their products different from what was already on the market. They were always innovating. The creation of the crampon soles and the hollow soles were two breakthroughs that made Nike stand out from its competitors at that time. But Nike did not stop there.
The original words of the author of this book said, "Nike is not a shoe company, it is a technology company that innovates on shoes." These are the stories of the early stages of Nike, using its cleverness, getting close to the strong, the Japanese shoe brand Onitsuka Tiger, to expand its market to the United States. Using high-quality, low-priced shoes to capture market share quickly, and also creating two unprecedented breakthroughs. In a short period of time, Nike was able to stand on its own and compete on an equal footing with the German shoe brand that was over 100 years old, which was Adidas. Looking at the stories we have discussed above, you can really understand that Phil Knight's entrepreneurial journey was very smooth, with no obstacles. In fact, it was not as easy as you think. We are just highlighting the good stories first and talking about the bad stories later. The main direction is not different, but when you start doing it, you will encounter obstacles.
Every company that can continue to exist until today is a company that has gone through many obstacles that you may not know. In this book, the author describes the obstacles and the many wrong decisions that occurred in his entrepreneurial journey. Let's look at the three crises that Nike faced, and each crisis almost made Nike disappear from the world market. Crisis number one: the original brand, Onitsuka Tiger, decided to withdraw the distribution rights for its shoes from the Blue Ribbon Sports Company. There is a saying that says, "No enemy hates each other forever, and no friend is friends forever." It is only mutual benefits that can last for a long time. Blue Ribbon was the exclusive importer and distributor of Onitsuka Tiger brand shoes in the United States. They had a partnership relationship. Although the shoes sold well, in terms of capacity, capital, and the size of the company, Blue Ribbon could not capture the entire US market quickly. Often, Blue Ribbon would ask Onitsuka Tiger not to ship goods too quickly because they didn't have the money to pay for them.
The Japanese side was not very happy with this. In 1971, due to the expansion of the market and the distribution channels of Blue Ribbon, this Japanese brand became very famous throughout the United States. But the Onitsuka Tiger shoe factory wanted to get rid of this small distributor and do the market on its own. They prepared two plans: a bright plan and a dark plan. The bright plan was to offer to buy the Blue Ribbon company to get the exclusive distribution rights back. The dark plan, if Phil Knight didn't sell, was to find fault and find excuses to terminate the partnership. In this situation, Blue Ribbon had only two choices: to lose the distribution rights, close the company, and say goodbye, or to sell the company to them and become their employee, earning a salary. If it were you, which path would you choose? It was at this time that they saw the entrepreneurial spirit of Phil Knight and Bill Bowerman. The two of them did not choose either of those two options.
Instead, they created a third option for themselves, which was to create a new brand that was later named Nike. Phil Knight was not a fool either. He had already prepared a backup plan for himself. He had started contacting shoe factories that could put his own brand logo on them before Onitsuka Tiger was planning to withdraw the distribution rights. From then on, the logo of this Greek symbol was born. The first time they made their own brand of shoes, things happened so quickly that they didn't even have a name and a logo. Phil Knight went to a logo designer on the street and had him design a logo. The Nike logo from the beginning has not changed much. From the beginning, it was like this, a simple Greek symbol. This Greek symbol, if you look at it from behind, looks like a wing on one side. And this symbol also represents a word, which is "swoosh," which means "to fly." This logo cost only $35 to design. But to this day, this brand is worth more than $33 billion. The name Nike was also created by chance. At first, the staff were trying to think of the name of an animal to use as the name of the brand, such as Tiger or Eagle.
Later, they couldn't decide on a name, but because the factory required them to send a name and a logo, a staff member suggested the name "Nike." This staff member had a dream and saw the goddess of beauty in Roman times, whose name was Nike. At first, Phil Knight was not very fond of the logo and the name. But because he had no choice, he sent it to the factory to be used, and the name has stuck until today. Because of this, Blue Ribbon sold shoes for them and also created its own brand. By 1974, Onitsuka Tiger had withdrawn the exclusive distribution rights from the Blue Ribbon company, and Blue Ribbon had just created its first crampon shoes, which they launched on the market and received strong support, not losing to the old brand that they used to sell. Later, Blue Ribbon changed its name to Nike Sport, and after going public, it changed its name to Nike Inc. Speaking of Nike's marketing strategy, they didn't spend a lot of money on advertising on the radio, television, or large billboards. Instead, they hired famous athletes from around the world to wear their shoes. So that this Greek symbol would be present at every time and every place where there was a sporting event. Apple also copied Nike's marketing method. A pair of Nike shoes that you wear, which costs about $100, actually costs only about $5 from the factory, including labor costs. It can be said that you are not spending money to buy shoes, you are spending money to buy the Nike brand.
That's all for now. After overcoming the first crisis, the second crisis that Nike faced came. The company's cash flow had a problem and the bank had to close its account. After Nike split from Onitsuka Tiger, although they had more freedom than before, Nike still faced endless problems. Insufficient capital and a very small cash flow were Nike's problems from the very beginning. At that time, there were no angel investors or venture capital firms that came to invest with startups. And the banks at that time only cared about the big guys. Small companies that were just starting out like Nike had no chance of getting a loan. Even though from year to year, Nike's sales figures were increasing in sequence, sometimes even the CEO's salary was not paid in full by Nike. Because the money from sales had to be used to invest in the next batch of goods. There was nothing left in the company's balance sheet. What was increasing was the assets and the inventory.
For several decades before Nike went public, the company did only three things: borrow money, raise money, and pay off its debts. And they continued to borrow money. The bigger the company, the more debt it had. The banks became more and more afraid that Nike would not have the money to pay. The bank was always on Nike's tail. It wasn't until 1975 that the final crisis of Nike came. Because of the slow cash flow and no collateral, Nike did not have the money to pay the bank. So the bank decided to put them on a blacklist and announced publicly that, "We have sent a notice to the FBI. If Nike still does not pay the money within a specified period of time, the bank will seize all remaining assets and put Nike in jail." A few years ago, Nike owed a Japanese international trading company about one million dollars and had not paid it yet. Phil Knight was still brazen enough to go to the creditor company again and said, "I have no money to pay you. I came here to borrow another million." What we didn't expect was that the Japanese company not only agreed to extend the payment period for Nike, but also helped to pay off all the debts that Nike owed to the bank. This story can be understood. Nike's debt to the bank was not because of a business failure. It was just a short-term cash flow problem. This was also because Nike was expanding too fast.
The Japanese company thought that if they tried to seize its assets to pay off the debt, it would not be a good solution. So they should help them to get through this crisis, and in the future, they would surely receive a bigger reward. On the other hand, it also depended on the negotiation between Phil Knight and the Japanese side at that time. He showed his sincerity by speaking frankly that he needed help to convince the Japanese side. The second crisis that had just ended, the third crisis came. In 1977, the Nike company received a penalty notice from the US Customs Service, which fined Nike to pay an additional tax of 25 million dollars. This figure was more than the total annual sales of the Nike company. It was enough to make Nike go bankrupt and die on the spot. Phil Knight denied that he had any intention of tax evasion. This was probably due to the dirty tricks of his competitors who wanted to do him in. He requested a reinvestigation.
But the US Customs Service did not have time to negotiate. The law is the law. If you don't pay the penalty, you go to jail. Faced with this crisis, Phil Knight and his co-founder did two things. First, he went to a person from his hometown who was an expert in studying the customs and tax system. He knew everything about import taxes and related laws. At the same time, he filed a lawsuit in the Supreme Court, accusing his competitors of colluding with government officials to use dirty tricks to frame him, who was a private company that was established on American soil. Finally, the customs decided to reduce the amount of the penalty, and Nike did not want to continue the matter, so they agreed to pay a penalty of 9 million dollars, and the matter was closed. This was the third crisis that Nike overcame, which was the dishonesty of its business partners, the accusations from its competitors, the heartless attitude of the bank, and the pressure from the government.
But the problem of lack of money was still a problem for Nike until now. They never had any money left in their pockets. It was only later that Nike decided to go public and offer its shares for sale to the public. You may wonder why it's not a difficult thing to go public in New York. Nike was doing so well, they should have gone public a long time ago. Some tech startups like Amazon and Tesla lose billions of dollars every year, but they still receive the trust of investors on Wall Street. Why was Nike so miserable with money? This is also because when a company offers its shares for sale to the public, it means that it is a public company. Its operations and financial reports must have standards and transparency, and it is also easily influenced by shareholders. This can easily cause Nike's long-term vision to change. This opportunity to raise money, for a new startup that we call a new startup, is not something that should be done.
That is why Phil Knight refused to go public many times. He only issued shares and raised money from people he knew. It wasn't until 1980 that Nike finally went public. As soon as it went public, Phil Knight went from being a scruffy young man to a multi-millionaire. But he did not forget his roots. In the United States, they divide stocks into two different types, which are Class A and Class B. Class A is for the founders and the management of the company. And Class B is for public offering to the general public. By doing this, the holders of Class A shares still retain ownership and have a say in important decisions. And the holders of Class B shares just wait for their dividends, and that's it. The important points that are in the book "Shoe Dog" that I have summarized for you all above have come to an end. The important points that are in the book "Shoe Dog" that I have summarized for you all above are just this much. Let's review a little bit.
What made the Nike company, which started from a capital of $1,000, become a tycoon in the sports product industry with a value of nearly $40 billion, is firstly, do what you love. The two founders struggled until they achieved success like today because they did what they loved. Shoes were in their blood and DNA. No one loved shoes more than the two of them in this world. Second, break the rules. They did not do things according to the established norms. They said that if you want to get different results from others, you have to dare to do things that others don't dare to do. They created a third option for themselves. They dared to think, they dared to do, and they dared to accept. A small bag company, how could it get the exclusive distribution rights for the whole of the United States? How did they think of using a waffle mold to make the sole of a shoe? All of this happened due to risk-taking and the courage to fail that most people don't have. To fight without giving up is a quality of an entrepreneur. Even though the company that went public successfully, he himself became a multi-millionaire, but his soul was still attached to the company and the shoes of Nike.