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From Sweatshops to Sustainability: The Case Study of Nike, Inc

• November 2018

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Case Study | Inside Nike’s Radical Direct-to-Consumer Strategy

• Chantal Fernandez

In October 2020, in the middle of a global pandemic that had infected 188 countries, causing record sales damage across the retail sector, Nike’s share price hit an all-time high.

Like other retailers, Nike had been forced to close most of its network of more than 900 stores across the world, as had its key wholesale partners like Nordstrom and Foot Locker.

But the American sportswear giant’s performance during the pandemic, when its online sales spiked, signalled to many that Nike had the competency to prosper long term, in a future that will be increasingly defined by e-commerce and digital brand connections.

It was a validation of a strategy that Nike prioritised three years ago, dubbing it “Consumer Direct Offense,” but the seeds of the approach go back almost a decade.

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Above all, Nike is a marketing company. It doesn’t just sell sneakers; it sells the brand aspiration that imbues those sneakers with meaning. But to achieve the reach required to scale its business, Nike’s distribution strategy had long-relied on third-party retailers to sell its products, even if the consumer experience offered by those partners diluted its brand.

But in a future increasingly defined by e-commerce, fast-moving trends and, above all, the rising power of branding to drive consumer preference when competitors are just a click away, Nike realised that in order to thrive, it needed to take control of its distribution to better manage its brand and deepen its connection with consumers.

It was definitely architecting a new retail, and a bold, retail vision for Nike.

Such an evolution is easier said than done, especially for a business as large as Nike in a category as competitive as sportswear. But by radically cutting back on its wholesale distribution and raising the bar for brand experience with the third-party partners that remained; expanding its focus on content, community and customisation to keep customers close; investing in its data analytics and logistics capabilities; and rethinking the role of the store as a brand stage, Nike drove a veritable direct-to-consumer revolution.

When the pandemic hit, these shifts went into overdrive.

“It was definitely architecting a new retail, and a bold, retail vision for Nike,” said Heidi O’Neill, Nike’s president of consumer and marketplace, and one of the most prominent executives leading the brand’s new strategy in recent years. “But it started with our consumer, and we knew that consumers wanted a more direct relationship with us today.”

In this case study, BoF breaks down Nike’s pioneering direct-to consumer strategy and how it has worked to the brand’s advantage, propelling its share price to new heights during the global crisis of 2020.

Click below to read the case study now.

• Mark Parker
• John Donahoe
• direct to consumer
• athletic apparel

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• September 23, 2023
• AI Case Studies

Case Study: How Nike is Leveraging AI Across its Operations

Nike, a global leader in sportswear and athletic footwear, has long been at the forefront of innovation and customer engagement. In recent years, the company has made substantial investments in Artificial Intelligence (AI) and other emerging technologies to transform not just its products but also its customer experience, supply chain, and IT operations. This drive towards tech-enabled solutions has been especially significant in the face of the global pandemic, which pushed consumers and businesses more towards digital platforms. Nike has collaborated with partners like Cognizant to modernize its IT infrastructure, offering both onsite and remote support across a wide range of hardware and applications. With a focus on sustainability, customer engagement, and operational efficiency, Nike’s AI journey represents a compelling case study in corporate innovation.

Key Takeaways

• Nike employs AI to enhance customer experience through hyper-accurate shoe fitting, personalized offers, and virtual assistants.
• Advanced analytics and AI-driven strategies have been adopted in Nike’s supply chain to improve speed, accuracy, and sustainability.
• Collaboration with IT major Cognizant to bring in hyperautomation and AI into Nike’s technology operations, aiming for improved service productivity and cost savings.
• Challenges include data privacy concerns, achieving 24/7 customer service accessibility, and ensuring the sustainable use of technology.

Deep Dive: How Nike is Leveraging AI Across its Operations

Nike’s approach to AI is holistic, covering a wide array of applications from customer experience to supply chain management. In customer engagement, Nike uses AI-powered apps that offer hyper-accurate shoe fitting and personalized recommendations. The company also employs AI for deep customer analytics, aided by its acquisition of Zodiac, a data analytics firm. On the supply chain side, Nike has integrated AI and machine learning to predict product demand and to forward-position popular products, reducing lead times and improving service quality.

Implementation

Nike has been pragmatic in its AI implementation. Customer-facing AI solutions include an app that employs augmented reality and a 13-point measuring system for shoe fitting. In its supply chain, the company has opened multiple regional distribution centers fueled by AI algorithms to meet localized demand more effectively. Furthermore, through a five-year agreement with Cognizant, Nike is enhancing its global technology operations. This includes multilingual IT customer service, deskside and dispatch depot, as well as application and infrastructure support.

Nike’s AI initiatives have been quite successful. The AI-powered apps have not only improved customer relationships but have also provided valuable data for product design and inventory management. Nike has also tripled its digital order capacity in specific markets thanks to AI-enhanced supply chain operations. The collaboration with Cognizant is expected to bring new self-service capabilities, improve service productivity, and offer significant cost savings.

Challenges and Barriers

While Nike has seen significant gains from its AI investments, challenges do exist. Data privacy is a significant concern given the vast amount of customer data collected through various apps. The ambition for 24/7 customer service through AI tools like chatbots also poses its own set of challenges, including maintaining the quality of service. Additionally, the drive for sustainability requires Nike to continuously scrutinize its tech-enabled operations for environmental impact.

Future Outlook

As consumer behavior and technology continue to evolve, Nike is poised to further its AI capabilities. Plans likely include the expansion of AI in customer service applications, increased automation in the supply chain, and deeper collaborations with tech partners like Cognizant. Given its past performance and strategic focus, Nike’s AI initiatives will undoubtedly continue to play a significant role in shaping both the company and the broader retail industry.

Nike’s journey in AI represents a well-rounded strategy that touches multiple facets of the business, from customer experience to supply chain and IT operations. By focusing on delivering personalized experiences, optimizing operations, and tackling challenges head-on, Nike serves as a textbook example of how AI can be effectively implemented in a large, global enterprise. Its efforts in AI have not only improved its bottom line but have also set the stage for future innovations that will likely continue to redefine the retail landscape.

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Sources: Cognizant To Drive Nike’s Efforts In Hyper-Automation, AI In 5-Year Deal Nike and Cognizant expand their relationship into technology Nike building its global ‘digital first’ supply chain’ with 1,000 picking robots How Nike Leverages AI for an Exceptional Customer Experience

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Nike: An Innovation Journey

• First Online: 29 November 2017

Cite this chapter

• Michelle Childs 5 &
• Byoungho Jin 6  

Part of the book series: Palgrave Studies in Practice: Global Fashion Brand Management ((PSP:GFBM))

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Nike is an American multinational company that has evolved to become a global leader in athletic wear with annual sales exceeding $21 billion in 2016, more than half of which is attributed to international markets. Since its inception in 1964, Nike has been an innovation leader in product development, marketing and consumer experience. Due to a dedication to continuous innovation, Nike has been able to sustain a competitive advantage within the athletic apparel and footwear marketplace. This case highlights key points in Nike’s journey of innovation and examines how Nike has successfully emerged as a global champion within the athletic wear industry. Based on these analyzed strategies, this case provides implications that are relevant for practitioners and academics.

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Childs, M., Jin, B. (2018). Nike: An Innovation Journey. In: Jin, B., Cedrola, E. (eds) Product Innovation in the Global Fashion Industry. Palgrave Studies in Practice: Global Fashion Brand Management . Palgrave Pivot, New York. https://doi.org/10.1057/978-1-137-52349-5_4

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Global Sourcing at Nike

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Home » Management Case Studies » Case Study of Nike: Building a Global Brand Image

Case Study of Nike: Building a Global Brand Image

Brand history.

The idea of Nike began way back in the 1950s. A track coach by the name of Bill Bowerman was at the University of Oregon training his team. Bill was always looking for a competitive edge for his runners, like most of us today look for any advantage we can get. Bill said he tried using different shoes for his runners as well as trying other things to try and make his athletes better. Bill tried to contact the shoes manufactures in attempt to try out his ideas for running shoes. This however failed. In 1955 a track runner by the name of Phil Knight enrolled at Oregon. Phil was on the track team under Bill. Phil graduated from Oregon and acquired his MBA from Stanford University. Phil went on to write a paper that talked about how quality shoes could be made over in Japan and they would be cheaper. Phil called a company in Japan and became a distributor of Tiger shoes in the United States of America. Phil sent some pairs of shoes to his old track coach trying to get Bill to buy the shoes. Instead of buying these shoes Bill offered Phil a partnership to create better running shoes. In 1964 Bill and Phil shook hands and formed Blue Ribbon Sports. The companies’ first move was to order three hundred pairs of shoes from the company in Japan. While Bill examined these shoes and tried to make them better Phil was out selling the shoes. Bill had his track team at Oregon try out his new creations. This became the foundation of Nike. Due to the fact that Bill and Phil still had a full time job, they hired Jeff Johnson as their first full time employee. Jeff soon became a invaluable utility man for the company. In 1971 Jeff created brochures, marketing materials and even shot photos for a catalogue. The very first Blue Ribbon store was opened by Jeff. Meanwhile the relationship between Blue Ribbon and the company from Japan was starting to deteriorate. Bill and Phil made the jump to manufacturing and designing their own footwear. The trade marks swoosh which was introduced at this time. The Nike line of footwear was unveiled in 1972, during the U.S. Track and Field Trials. One pair of the shoes had a huge impression on a dozen multiple runners that wore the new shoes. These shoes incorporated a new style of soles that that had nubs on them that resembled the ridges of a waffle iron. These shoes were also a lot less heavier than most running shoes at the time. With the new image Nike started looking for athletes to wear, promote and elevate the new shoes. The first athlete they found was Steve Prefontaine. Prefontaine never lost a race that was over a mile in distance in his college career between 1969 and 1973. Prefontaine challenged Bill , Phil and their new company to stretch their talents. In turn Prefontaine became an ambassador for Blur Ribbon Sports and Nike. In 1975 Prefontaine died at the age of 24, but his spirit still lives on within Nike. Prefontaine became the “soul of Nike”. When 1980 hit Nike entered the stock market and became a publicly traded company. Once this happened many of the people that started the company moved on with their lives. This included Phil Knight who resigned from his president spot for over a year. In the mid-1980s Nike started to slip from top of its industry. This started to change when Michael Jordan released a new shoe through Nike. When this happened Nike’s bottom line got a boost. In 1988 the slogan that we all know today “Just do it” was introduced as a way for Nike to build on its momentum from their “Revolution” campaign. The Just do it campaign included three advertisements in which a young athlete by the name of Bo Jackson was involved in. By the end of the decade Nike was at the top of their industry once again. The 90’s brought a series of outreach for Nike. At this point in time Nike deepened their commitment into others sports such as soccer and golf. In 1995 Nike signed the whole World Cup wining Brazilian National Team. This also allowed Nike to create jerseys for the team. Nike also landed contracts with both the men’s and woman’s teams for the United States. The biggest thing that Nike was criticized for was when they signed a young golfer by the name of Eldick “Tiger” Woods for huge deal. All of the competition said this was a dumb idea till Tiger won the 1997 Masters by a record 12 strokes. In 2000 a new shoe was introduced. This shoe went by the name of the Nike Shox. This shoe combined more than 15 years of dedication and perseverance. Nike is still the industry leader in their markets and continues to grow more and more each year around the world. This company will have much more to offer in the future.

Brand Equity

Having and holding customers is likely to be a competitive battle which each brand tries all efforts to win. They compete for functional attributes, distinctive services or innovative technologies. So what are emotional and functional benefits which Nike provides for their customers?

Since Nike was set up by someone who has a deep passion for athletics and running, it should come no surprise that product is important. Products that are comfortable, authentic, functionally innovative and uniquely designed. The innovative technology is considered as one of the defining dimensions of Nike’s brand identity and corporate culture.

The simple driving concept has led to some impressive innovations which is considered as one of the defining dimensions of Nike’s brand identity and corporate culture. The first highlight was Air cushioning, using pressurized gas to cushion impact and new materials such as Urethane, that was used first with the Air Max running shoes. More recently, to obtain maximum performance, Nike Sport Research laboratory has discovered the innovative technology such as Shox, which are made mostly of rubber and spring back adding more power to a runner’s stride and Total 90 Concept, a range of equipment to help players perform over 90 minutes of a soccer match. Such innovative technology which Nike has used has gained the strong hold in consumers’ perceptions.

Clearly, functional benefit is the fundamental and classical features to communicate with customers. However, if Nike just provided high quality running shoes to enhance athletic performance, Nike would not be strong brands. Big brands need to be beyond the purely functional relationships. They should create a more strong emotional attachment with core consumers because emotional benefits add richness and depth to the brand and the experience of owning and using the brand. Nike offers emotional benefits which are “the exhilaration of athletic performance excellence; feeling engaged, active, and healthy; exhilaration from admiring professional and college athletes as they perform wearing “your brand” – when they win, you win too”.

Associated brand with the top athletes, Nike tells story of brands which the main themes is sportsmanship and unrelenting effort. These are the story of Michael Jordan who won a record 10th scoring title and was selected as one of the 50 Greatest Players in American’s National basketball association championship. Lance Armstrong survived and won a second straight Tour de France while Tiger Woods completed the career Grand Slam, ensuring his place in golf history at the age where most of us are still wondering what we will do when we grow up. The most three prominent athletes has generated the inspiration for young and next generation of athletes. Nike has succeeded to transfer their inspirations to every single purchaser. Wearing every pair of Nike shoes is to engage a passion for excellence and encourage to do your own thing. “Just do it” – the tagline could sum up all the greatest values of brand which is.

“Just Do It” Campaign

Products are no longer just products, they move beyond the functional meanings. Nowadays, they are definitely social tools serving as a means of communication between the individual and his significant references. Products are considered as a symbol of individuality and uniqueness, and also symbol of affiliation and social identification. It is particularly trued with the fashion brands. Fashion brands such as clothes, bags, shoes and etc satisfy opposing functions, both social identification and distinction among individuals.

Nike must have understood the recipe well. The “Just do It” campaign in the early 1990s would be a perfect example. Losing ground to archival Reebok which was quick initiative on designing “style”, “fashion” aerobics shoes in 1980s, Nike responded dramatically and forcefully by launching the “Just do it” campaign which was mainly focused on person wearing on products instead of product itself.

Purchasing an athlete-endorsed product is one means of symbolically and publicly demonstrating aspirations to be a part of the group and such behaviors are directly influenced by the extent to which a fan identifies with an athlete endorser. Heroes and hero worship was being built as the main themes of advertising. Celebrity endorsements such as Bo Jackson, John McEnroe and Michael Jordon appealed to the consumers sense of belonging and “hipness”. In other words, Americans consumers were convinced that wearing for every part of your life was smart (the shoes are designed for comfort) and hip (everyone else is wearing them; you too can belong to this group). “Just Do It” campaign succeeded (Nike increased its share of the domestic sport shoe business after launching this campaign in America from 18 percent to 43 percent, regained the leader position) because it could fascinate customers in both separating ways. Wearing Nike as a self fulfilling image declaration – “if you are hip, you are probably wearing Nike”. But perhaps most importantly, it could create the desirable needs -“if you want to be hip, wear Nike” .

Brand Loyalty

Luring by good shoe with innovative functionality and athletic aspiration value, Nike has indeed come to mind and heart of its customers. By the mid of 1990s, 77 percent of male Americans from the age of 18 to 25 chose Nike as their favorite shoe. The figure still remains stably despite of that “up” and “down” year Nike has been experience, gaining the high score of customer satisfaction at 79 percent rated by The American Customer Satisfaction Index Organization .

It could be said that loyalty to the Nike brand is driven by many external and internal factors such as brands’ subjective and objective characteristics and loyalty building programs. One visible example of creating innovative method to capture the strong relationships with Nike users is that creating Joga.com, a social network site for foot ball fans. Launching quietly in the early 2006, the site became an instant hit, peaking at 7.5 million viewers when Nike showed Ronaldinho video clips. More than 1 million members from 140 countries signed up by mid July. In this site, fans can create their personal blogs, build communities around favorite teams or players, download video and organize pickup games. By enrolling consumers in building and shaping the content of the website, Nike pulled their loyal customers closer, nurtured deeper bonds of loyalty and advocacy.

Brand Awareness

Brand awareness is the first and crucial stage of consumer’s preference. It refers to the strength of a brand’s presence in the consumers’ mind. Nike has been successful in building awareness. The “Swoosh” symbol has been appeared everywhere, on shoes, hats, billboards and soccer balls across the globe too remarkably to such extent that one author used the title “The Swooshification of the World” on Sports Illustrated column that imaged a future in which the swoosh could surpass sports to become a letter of the alphabet and the new presidential seal, among other things. True be told, the recognition of the ‘swoosh’ is extremely high.

As of 2000, 97 percent of American citizens recognized the brand logo, as the strong brand penetration. Nike could be recognized consistently without identification of brand name, even by the youngest group (aged from 4 to 6 years old). This perhaps may reflect the general level of advertising and promotion that children are exposed to.

How has Nike done to build brand awareness? Sponsorships, advertising and experience focused retailing (Nike town) are three vivid channels that Nike has applied to enhance its brand image and awareness. Among these strategies, athlete endorsements could be considered as the most significant success of Nike brand.

Nike has been invested millions of dollars to associate their brand names with easily recognizable athletes with the aim of brand image building. Athletes at the top of their respective sport such as Micheal Jordan, Tiger Woods, and Lance Armstrong who are well – liked and respected by members of the brand’s target audience are chosen as endorsers to associate the Nike brand with the athlete’s celebrity image. This strategy has been paid off, for example, since Tiger Woods and Nike cooperated, annual sales for Nike Golf have exceeded to nearly $500 million dollars with an estimated 24 percent growth per year in the first five years of the agreement.

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Sunday, October 16, 2022

• Labels: Case Studies , Project Failure , Project Success

Case Study 16: Nike’s 100 Million Dollar Supply Chain "Speed bump"

“This is what you get for 400 million, huh?” 

Nike President and CEO Phil Knight famously raised the question in a conference call days before announcing the company would miss its third-quarter earnings by at least 28% due to a glitch in the new supply chain management software. The announcement would then send Nike’s stock down 19.8%. In addition, Dallas-based supply-chain vendor i2 Technologies, which Nike assigned blame, would suffer a 22.4% drop in stock price.

The relationship would ultimately cost Nike an estimated $100 million. Each company blamed the other for the failure, but the damage could have been dramatically reduced if realistic expectations had been set early on and a proper software implementation plan had been put in place. Most companies wouldn’t overcome such a disastrous supply chain glitch or “speed bump,” as Knight would call it, but Nike would recover due to its dominant position in the retail footwear and apparel market.

In 1999, two years before Knight’s famous outburst, Nike paid i2 $10 million to centralize its supply, demand, and collaboration planning system with a total estimated implementation cost of $40 million. Initially, i2 was the first phase of The Nike Supply Chain (NSC) project. The plan was to implement i2 to replace the existing system and introduce enterprise resource planning (ERP) software from SAP and customer relationship management (CRM) software from Siebel Systems.  

The goal of the NSC project was to improve Nike’s existing 9-month product cycle and fractured supply chain. As the brand experienced rapid growth and market dominance in the 1990s, it accumulated 27 separate order management systems around the globe. Each is entirely different from the next and poorly linked to Nike’s headquarters in Beaverton, Oregon.

At the time, there wasn’t a model to follow at the scale Nike required. Competitors like Reebok struggled to find a functional supply chain solution specific to the retail footwear and apparel industry. In an effort to solidify its position as the leader in sportswear, Nike decided to move forward quickly with i2’s predictive demand application and its supply chain planner software.

"Once we got into this, we quickly realized that what we originally thought was going to be a two-to-three-year effort would be more like five to seven," - Roland Wolfram, Nike’s vice president of global operations and technology.

The NCS project would be a success, and Nike would eventually accomplish all its supply chain goals. However, the process took much longer than expected, cost the company an additional $100 million, and could have been avoided had the operators or both companies taken a different approach to implementation.

"I think it will, in the long run, be a competitive advantage." – Phil Knight

In the end, Knight was right, but there are many valuable lessons to learn from the Nike i2 failure.

I f you are an executive sponsor, steering committee member, or a non-executive board member and want to learn what you need to do so that your project does not land on my list with project failures? Then my  (Non)-Executive Crash Course  is what you are looking for. If you want to know where you are standing with that large, multi-year, strategic project? Or you think one of your key projects is in trouble? Then a Project Review is what you are looking for. If you just want to read more project failure case studies? Then have a look at the overview of all case studies I have written here .

So, before we get into the case study, let’s look at precisely what happened...

Timeline of Events

1996 - 1999

Nike experienced incredible growth during this period but was at a crossroads. Strategic endorsement deals and groundbreaking marketing campaigns gave the company a clear edge over Adidas and Reebok, its two most substantial competitors in the 80s and 90s. However, as Nike became a world-renowned athletics brand, its supply chain became more complex and challenging to manage.

Part of Nike’s strategy that separated itself from competitors was the centralized approach. Product design, factory contracting, and order fulfillment were coordinated from headquarters in Oregon. The process resulted in some of the most iconic designs and athlete partnerships in sports history. However, manufacturing was much more disoriented.

During the 1970s and 80s, Nike battled to develop and control the emerging Asian sneaker supply chain. Eventually, the brand won the market but struggled to expand because of the nine-month manufacturing cycle.

At the time, there wasn’t an established method to outsource manufacturing from Asia, making the ordering process disorganized and inefficient across the industry. In addition, Nike’s fractured order management system contained tens of millions of product numbers with different business rules and data formats. The brand needed a new way to measure consumer demand and manage purchasing orders, but the state of the legacy system would make implementing new software difficult.

At the beginning of 1999, Nike decided to implement the first stage of its NSC project with the existing system. i2 cost the company $10 million but estimated the entire project would cost upwards of $400 million. The project would be one of the most ambitious supply chain overhauls by a company of Nike’s size. 

i2 Technologies is a Dallas, Texas-based software company specializing in designing solutions that simplify supply and demand chain management while maximizing efficiency and minimizing cost. Before the Nike relationship, i2 was an emerging player in logistics software with year-over-year growth. Involvement in the Nike project would position the company as the leading name in supply chain management software.

Nike’s vision for the i2 phase of NSC was “achieving greater flexibility in planning execution and delivery processes…looking for better forecasting and more profitable order fulfillment." When successfully implemented, the manufacturing cycle would be reduced from nine months the six. This would convert the supply chain to make-to-order rather than make-to-sell, an accomplishment not yet achieved in the footwear and apparel industry.

Predicting demand required inputting historical sales numbers into i2’s software. “Crystal balling” the market had substantial support at the time among SCM companies. While the belief that entering numbers into an algorithm and spitting out a magical prediction didn’t age well, the methodology required reliable, uniform data sets to function.

Nike decided to implement the “Big Bang” ERP approach when switching to i2 for the supply chain management. The method consists of going live where the business completely changes without phasing out the old system. Nike also opted for a single instance strategy for implementation. The CIO at the time, Gordon Steele, is quoted saying, “single instance is a decision, not a discussion.” Typically, global corporations choose a multi-instance ERP solution, using separate instances in various regions or for different product categories.

By June of 2000, various problems with the new system had already become apparent. According to documents filed by Nike and i2 shareholders in class-action suits, the system used different business rules and stored data in various formats, making integration difficult. In addition, the software needed customization beyond the 10-15% limit recommended by i2. Heavy customization slowed down the software. For example, entries were reportedly taking over a minute to be recorded. In addition, the SCM system frequently crashed as it struggled to handle Nike’s tens of millions of product numbers.

The issues persisted but were fixable. Unfortunately, the software was linked to core business processes, specifically factory orders, that sent a ripple effect that would result in over and under-purchasing critical products. The demand planner would also delete ordering data six to eight weeks after it was entered. As a result, planners couldn’t access purchasing orders that had been sent to factories.

Problems in the system caused far too many factory orders for the less popular shoes like the Air Garnett IIIs and not enough popular shoes like the Air Jordan to meet the market's demand. Foot Locker was forced to reduce prices for the Air Garnett to $90 instead of the projected retail price of $140 to move the product. Many shoes were also delivered late due to late production. As a result, Nike had to ship the shoes by plane at $4-$8 a pair compared to sending them across the Pacific by boat for $0.75.   

November 2000

According to Nike, all the problems with i2’s supply chain management system were resolved by the fall. Once the issues were identified, Nike built manual workarounds. For example, programmers had to download data from i2’s demand predictor and reload it into the supply chain planner on a weekly basis. While the software glitches were fixed and orders weren’t being duplicated or disappearing, the damage was done. Sales for the following quarter were dramatically affected by the purchasing order errors resulting in a loss of over $100 million in sales.

Nike made the problem public on February 27, 2001. The company was forced to report quarterly earnings to stakeholders to avoid repercussions from the SEC. As a result, the stock price dove 20%, numerous class-action lawsuits were filed, and Phil Knight famously voiced his opinion on the implementation, "This is what you get for $400 million, huh?"

In the meeting, Nike told shareholders they expected profits from the quarter to decline from around $0.50 a share to about $0.35. In addition, the inventory problems would persist for the next six to nine months as the overproduced products were sold off.

As for the future of NSC, the company, including its CEO and President, expressed optimism. Knight said, "We believe that we have addressed the issues around this implementation and that over the long term, we will achieve significant financial and organizational benefit from our global supply-chain initiative."

A spokeswoman from Nike also assured stakeholders that the problems would be resolved; she said that they were working closely with i2 to solve the problems by creating “some technical and operational workarounds” and that the supply chain software was now stable.

While Nike was positive about the implementation process moving forward, they placed full blame on the SCM software and i2 Technologies.

Nike stopped using i2’s demand-planning software for short-and-medium range sneaker planning; however, it still used the application for short range and its emerging apparel business. By the Spring of 2001, Nike integrated i2 into its more extensive SAP ERP system, focusing more on orders and invoices rather than predictive modeling.

What Went Wrong?

While the failures damaged each company’s reputation in the IT industry, both companies would go on to recover from the poorly executed software implementation. Each side has assigned blame outward, but after reviewing all the events, it's safe to say each had a role in the breakdown of the supply chain management system.

Underestimating Complexity

Implementing software at this scale always has risks. Tom Harwick, Gigi Information Group’s research director for supply chain management, said, “Implementing a supply-chain management solution is like crossing a street, high risk if you don't look both ways, but if you do it right, low risk.”

One of Nike's most significant mistakes was underestimating the complexity of implementing software at such a large scale. According to Roland Wolfram, Nike’s operators had a false sense of security regarding the i2 installation because it was small compared to the larger NSC project. "This felt like something we could do a little easier since it wasn’t changing everything else [in the business]," he says. "But it turned out it was very complicated."

Part of the reason why the project was so complicated was because of Nike’s fractured legacy supply chain system and disoriented data sets. i2’s software wasn’t designed for the footwear and apparel industry, let alone Nike’s unique position in the market.  

Data Quality

Execution by both parties was also to blame. i2 Technologies is on record recommending customization not to exceed 10-15%. Nike and i2 should have recognized early on that this range would be impossible to accommodate the existing SCM system.

Choosing a Big Bang implementation strategy didn’t make sense in this scenario. Nike’s legacy system data was too disorganized to be integrated into the i2 without making dramatic changes before a full-on launch.

Poor Communication

Communication between Nike and i2 from 1999 to the summer of 2000 was poor. i2 claimed not to be aware of problems until Knight issued blame publicly. Greg Brady, the President of i2 Technologies who was directly involved with the project, reacted to the finger-pointing by saying, "If our deployment was creating a business problem for them, why were we never informed?" Brady also claimed, "There is no way that software is responsible for Nike's earnings problem." i2 blamed Nike’s failure to follow the customization limitations, which was caused by the link to Nike’s bake-end.

Rush to Market

At the time, Nike was on the verge of solidifying its position as the leader in footwear and sports apparel for decades to come. Building a solid supply chain that could adapt to market trends and reduce the manufacturing cycle was the last step toward complete market dominance. In addition, the existing supply chain solutions built for the footwear and apparel industry weren’t ready to deploy on a large scale. This gave Nike the opportunity to develop its own SCM system putting the company years ahead of competitors. Implementing functional demand-planning software would be highly valuable for Nike and its retail clients.

i2 also was experiencing market pressure to deploy a major project. Had the implementation gone smoothly, i2 would have a massive competitive advantage. The desire to please Nike likely played a factor in i2’s missteps. Failing to provide clear expectations and communication throughout the process may not have happened with a less prominent client.  

Failure to Train

After the problems became apparent in the summer of 2000, Nike had to hire consultants to create workarounds to make the SCM system operational. This clearly indicates that Nike’s internal team wasn’t trained adequately to handle the complexity of the new ERP software.

Nike’s CIO at the time reflected on the situation. "Could we have taken more time with the rollout?" he asked. "Probably. Could we have done a better job with software quality? Sure. Could the planners have been better prepared to use the system before it went live? You can never train enough."

How Nike Could Have Done Things Differently

While Nike and i2 attempted to implement software that had never been successfully deployed in the global footwear and apparel industry, many problems could have been avoided. We can learn from the mistakes and how Nike overcame their challenges with i2 to build a functioning ERP system.

Understanding and Managing Complexity

Nike’s failure to assess the complexity of the problem is at the root of the situation. Regardless if the i2 implementation was just the beginning of a larger project, it featured a significant transition from the legacy system. Nike’s leadership should have realized the scale of the project and the importance of starting NSC off on the right foot.  

i2 also is to blame for not providing its client with realistic expectations. As a software vendor, i2 is responsible for providing its client with clear limitations and the potential risks of failing to deploy successfully.

See " Understanding and Managing Your Project’s Complexity " for more insights on this topic.

Collaborate with i2 Technologies

Both companies should have realized that Nike required more than 10-15% customization. Working together during the implementation process could have prevented the ordering issues that were the reason for the lost revenue.

Collaboration before deployment and at the early stages of implementation is critical when integrating a new system with fractured data. Nike and i2 should have coordinated throughout the process to ensure a smooth rollout; instead, both parties executed poor project management resulting in significant financial and reputational blows.  

See " Solving Your Between Problems " for more insights on this topic.

Hire a 3rd Party Integration Company

Nike’s lack of understanding of the complexity of SCM implementation is difficult to understand. If i2 had been truthful in that they did not know about problems with their software, Nike could have made a coordinated decision not to involve the software company during the process.

Assuming that is the case, Nike should have hired a 3rd party to help with the integration process. Unfortunately, Nike’s internal team was not ready for the project. Outside integrators could have prevented the problems before the damage was done.

Not seeking outside help may be the most significant aspect of Nike’s failure to implement a new SCM system.   

See " Be a Responsible Buyer of Technology " for more insights on this topic.

Deploy in Stages

A “Big Bang” implementation strategy was a massive mistake by Nike. While i2 should have made it clear this was not the logical path considering the capabilities of their software and Nike’s legacy system, this was Nike’s decision.

Ego, rush to market, or failure to understand the complexities of the project could all have been a factor in the decision. Lee Geishecker, a Gartner analyst, stated that Nike chose to go live a little over a year after starting the project, while projects of this scale should take two years before deployment. In addition, the system should be rolled out in stages, not all at once.

Brent Thrill, an analyst at Credit Suisse First Boston, is on record saying he would have kept the old system running for three years while testing i2’s software. In another analysis, Larry Lapide commented on the i2 project by saying, "Whenever you put software in, you don't go big bang, and you don't go into production right away. Usually, you get these bugs worked out . . . before it goes live across the whole business."

At the time, Nike’s planners weren’t prepared for the project. While we will never know what would have happened if the team had been adequately trained, proper preparation would have put Nike in a much better position to handle the glitches and required customizations.

See " User Enablement is Critical for Project Success " for more insights on this topic.

Practice Patience in Software Implementation

At the time, a software glitch causing a ripple effect that would impact the entire supply chain was a novel idea. Nike likely made their decisions to risk the “Big Bang” strategy, deploy in a year without phases and proper testing, and not seek outside help because they assumed the repercussions of a glitch wouldn’t be as catastrophic.

Impatience resulted in avoidable errors. A more conservative implementation strategy with adequate testing would have likely caught the mistakes.

See " Going Live Too Early Can Be Worse as Going Late " for more insights on this topic.

Closing Thoughts

One of the most incredible aspects of Nike’s implementation failure is how quickly the company bounced back. While Nike undoubtedly made numerous mistakes during the process, NSC was 80% operational in 2004.

Nike turned the project around by making adjustments and learning patience. Few companies can suffer a $100 million “speed bump” without filing bankruptcy, but Nike is in that position because of its resilience. The SAP installation wasn’t rushed and resumed many aspects of its original strategy. In addition, a training culture was established due to the i2 failures. Customer service representatives receive 140 to 180 hours of training from highly skilled “super users,” All employees are locked out of the system until they complete their required training courses.

Aside from the $100 million loss, the NSC project was successful. Lead times were reduced from nine months to six (the initial goal), and Nike’s factory inventory levels were reduced from a month to a week in some cases. Implementing a new SCM system also created an integration between departments, better visibility of customer orders, and increased gross margins.

While Nike could have executed far more efficiently, Phil Knight’s early assessment of the i2 failure turned out to be true. In the long run, the process gave Nike a competitive advantage and was instrumental in building an effective SCM system. 

In a nutshell: A failure to demonstrate patience, seek outside help, and rush software implementation can have drastic consequences.  

> Nike says i2 hurt its profits

> I2 Technologies, Inc.

> How Not to Spend $400 Million

> i2-Nike fallout a cautionary tale

> Nike rebounds: How Nike recovered from its supply chain disaster

> Scm and Erp Software Implementation at Nike – from Failure to Success 

> I2 Says: "You Too, Nike"

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Research Case Study Report on Nike Inc.

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Tram Dang Ngoc

Hina Brohi , Rizwan Raheem Ahmed , Arslan Hussain Bhutto , Rabel khubchandani

This report is all about to show a Marketing plan for Nike’s products; with reference to older offerings the report shows the plan that how can Nike offer new products in the market. With respect to this the report contains comprehensive marketing plan components including company analysis (Nike’s current and future status), situation or market analysis and competitors analysis; the report shows the Nike’s objectives and marketing strategies in terms of its 4ps that is it is shown that Nike can offer and increase its product range by offering other related products as aerobic products to its customers and set value-based pricing strategy accordingly, and for new offerings it can increase its other media other than commercials that is it can focus more on social media to promote its new products and it may expand its business in other countries as China, Middle-East etc. Beside this, the financial budget of this marketing plan has been discussed which is been forecasted by reviewing Nike’s previous years revenue and marketing expenses figures. Also execution plan as well as contingency plan has been shown which is thoroughly depends upon Nike’s senior management and team work which would make its objectives possible new offerings.

Vanessa Spindig

The user has requested enhancement of the downloaded file. All in-text references underlined in blue are added to the original document and are linked to publications on ResearchGate, letting you access and read them immediately.

Madeeha Kanwal

Strategy is about the most crucial and key issues for the future of organizations. Strategy is also important to explore several strategic options, investigating each one carefully before making strategic choices. The study incorporates a rigorous and systematic effort to uncover the strategies and its impact on the company's performance by analysing case studies, articles and the annual report of Nike Inc. and Adidas Inc. The study attempts to find out the relevance of the strategies adopted by these companies, which are globally successful athletic apparel companies in the context of Bahrain. The findings of the study highlight Nike's strategies which focus on innovation and emphasis on its research and development department, provision of premium pricing for its customers, broad differentiation strategy, market Segmentation Strategy and Closed-Loop strategy. The Adidas strategies focus on the broad differentiation, innovation, trying to produce new products, services and processes in order to cope up with the competition. It embraces a multi-brand strategy, emphasis on expanding activities in the emerging markets, continuously improving infrastructure, processes and systems, foster a culture of challenging convention and embracing change, foster a corporate culture of performance, passion, integrity and diversity. These strategies coupled with its resources and unique capabilities form the basis of sustainable competitive advantage for both the companies. INTRODUCTION: The strategy is a path towards achieving the optimum goals of individuals, groups and organizations. In addition, it leads to a best use of companies' available resources and it also guides the company to stay in a business successfully and continuous improvements for its processes. The definition of strategy could be differ from one author to another, but the most common definition is that the strategy is long term plans and approaches towards the intended visions and objectives. It is a general framework that specified the organizations' plans, policies and approaches to meets its objectives, goals and end results. The way an organization used to shape its strategies could be differentiate from other organizations in order to make its products unique and remarkable. Globally, companies formulate their strategies based on their visions and reaching the satisfaction of customer's needs, requirements and expectations. Subsequently, they use those strategies as a baseline to compare their actual performance with planned ones, to evaluate the end results and ensuring the continuing organizational excellence. There are many kinds of strategies that are pursued by the companies; Such as cost leadership, differentiation and the focus strategies (Porter, 1985), services strategies, growth strategies. Based on the goals, the companies form those strategies and they rank them upon the priorities. It is more than important for any organization to put strategies and not any strategies; the correct strategies which are formulated after a long time of studying and after numerous number of brainstorming among the top management members. Therefore, those strategies then to be implemented by converting the organization's plans and policies into real actions through the best use of available resources such as: human resources, budgets and technological advance; in order to enhance the organization's performance, productivity and sustainability.

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TELZY DENNIS V. NIKE, INC., No. 23-55360 (9th Cir. 2024)

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What We Know About the Global Microsoft Outage

Airlines to banks to retailers were affected in many countries. Businesses are struggling to recover.

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By Eshe Nelson and Danielle Kaye

Eshe Nelson reported from London and Danielle Kaye from New York.

Across the world, critical businesses and services including airlines, hospitals, train networks and TV stations, were disrupted on Friday by a global tech outage affecting Microsoft users.

In many countries, flights were grounded, workers could not get access to their systems and, in some cases, customers could not make card payments in stores. While some of the problems were resolved within hours, many businesses, websites and airlines continued to struggle to recover.

What happened?

A series of outages rippled across the globe as information displays, login systems and broadcasting networks went dark.

The problem affecting the majority of services was caused by a flawed update by CrowdStrike , an American cybersecurity firm, whose systems are intended to protect users from hackers. Microsoft said on Friday that it was aware of an issue affecting machines running “CrowdStrike Falcon.”

But Microsoft had also said there was an earlier outage affecting U.S. users of Azure, its cloud service system. Some users may have been affected by both. Even as CrowdStrike sent out a fix, some systems were still affected by midday in the United States as businesses needed to make manual updates to their systems to resolve the issue.

George Kurtz, the president and chief executive of CrowdStrike, said on Friday morning that it could take some time for some systems to recover.

How a Software Update Crashed Computers Around the World

Here’s a visual explanation for how a faulty software update crippled machines.

How the airline cancellations rippled around the world (and across time zones)

Share of canceled flights at 25 airports on Friday

50% of flights

Ai r po r t

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Dhaka Shahjalal

Minneapolis-Saint P aul

Stuttga r t

Melbou r ne

Be r lin B r anden b urg

London City

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