Like Apple, fashion retailer Nike has long been “masterful at making product breakthroughs and engineering cultural movements”, say Kim Bhasin and Lily Meier in Bloomberg Businessweek. It revives a classic design, customers go wild for it and the company monitors product flow carefully, putting enough out to keep the product circulating but still scarce. Last year the firm posted record sales of $50 billion.
Nike’s 48-year success story has, however, been put into question by “the man who made Nike uncool”, say Bhasin and Meier – none other than the outgoing CEO John Donahoe. Donahoe, now 64, a veteran technology executive and consultant, became boss in 2020, picked by the board of directors to transform the company’s digital strategy.
He was an outsider who knew nothing about Nike, its products or culture, and was charged with revolutionising the company’s “selling machinery for the modern age”, cutting out middlemen and selling directly to the customer to make better margins from each sale.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Donahoe ended relationships with more than half the firm’s retail partners – a strategy that “seemed to be working until it didn’t”. The Nike-shaped hole on the shelves was filled by rival products, which started to eat away at Nike’s market share.
Latest Videos FromMoneyWeek
In December, the company slashed its revenue forecast and Donahoe was forced to unveil a $2 billion cost-cutting plan, which involved getting rid of 2% of the workforce. In the process, he lost support from fellow workers and investors. On 28 June, Nike had its worst day in the stock market since going public in 1980. Donahoe will now be replaced by Elliott Hill, 60, a longtime Nike veteran.
Where did John Donahoe go wrong?
Donahoe made four big mistakes, says Mark Ritson in Marketing Week: he lost focus on the all-important product, went for short-term gains at the expense of long-term success and saw digital transformation as an end goal rather than merely one means among others for making sales. He was also one of those who “lost the plot” during Covid, telling us the world had changed forever.
The reality was that things eventually returned to normal, as they do. Donahoe “built a strategy for a future that never was”. He will have to console himself for his failure with the more than $100 million he earned in his four-year tenure.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
