I’m currently reading “Shoe Dog,” Phil Knight’s memoir on the creation of Nike Inc. It’s a fantastic read, not only because it depicts the rise of one of the world’s most dominant companies, but also because it shows just how rocky creating a venture from the ground up can be. The lessons for leaders are invaluable. And, because you’re reading it from Knight’s perspective, from the cofounder himself, you’re able to get what appears to be a revealing and personal take on the struggle of it all — the sacrifices, the late nights, the disappointments, the failures, the emotional roller coaster.
One of the most interesting lessons I’ve taken from reading the book thus far came from a chapter recalling one of the company’s earliest and, perhaps, darkest challenges. It has to do with the power of embracing obstacles and using them as a rallying cry to motivate and inspire employees.
In 1972, Blue Ribbon, Knight’s shoe company that had just recently launched the Nike brand, was facing a crisis. Before the creation of Nike, Blue Ribbon had operated mostly as a U.S.-based distributor for Japanese shoe company Onitsuka, maker of the Tiger brand. Knight had spent most of the 1960s scaling a decently sized distribution operation for Tigers in the U.S.
But by the end of the decade, Knight feared that Onitsuka was going behind his back and talking to other potential distributors. To hedge the possibility that Onitsuka would find a new distributor and break his contract with the company — which, according to Knight, would end his business in a heartbeat — he started a brand of his own: Nike. However, when Onitsuka found out about Nike, its leaders became enraged, arguing that by creating his own shoe brand Knight, not Onitsuka, was in breach of contract. Onitsuka threatened to file a lawsuit (they eventually did, as did Blue Ribbon).
At the time, Blue Ribbon was a small, 30-something person operation. A lawsuit from Onitsuka would be crippling. Nike was still an upstart brand, with quality problems and little certainty of success. Losing Onitsuka’s contract — and a lawsuit to boot — would be a steep hill to climb for a small company already struggling to pay off its debts. Adding to the potential crisis was a flagging U.S. economy under then-President Richard Nixon. A recession, rising unemployment, political gridlock and the Vietnam War didn’t help the situation.
One morning, after his usual six-mile run before work, Knight gathered all of Blue Ribbon’s employees in the company’s conference room. What I admire about Knight here is that he didn’t conceal or sugarcoat the extent of the threat. He gave it to everyone straight. “We’ve come, folks, to a crossroads. Yesterday, our supplier, Onitsuka, cut us off.” He went on to explain the extent of the situation. Everyone’s jaw dropped. It seemed like the end of times.
What Knight did next was surprising — perhaps, it appears in the book, even to him.
Instead of admitting defeat and letting his sunken spirits overtake the room, Knight spun the development into a rallying cry to motivate his employees. “This is — the moment,” he writes in the book. “This is the moment we’ve been waiting for. Our moment. No more selling someone else’s brand. No more working for someone else. Onitsuka has been holding us down for years. Their late deliveries, their mixed-up orders, their refusal to hear and implement our design ideas — who among us isn’t sick of dealing with all that?
“It’s time we face the facts,” Knight went on in the book. “If we’re going to succeed, or fail, we should do so on our own terms, with our own ideas — our own brand.” He went on to admit that going it alone, without Onitsuka, with its own brand, was going to be hard. And as Knight stopped speaking, he wrote that he could see a “wave of relief swirl around the table like a cool breeze.” Everyone felt excited, motivated, emboldened by their leader’s honesty and spirit. They spent the next hour as a group strategizing a new course for Nike — which today is the most valuable sports brand in the world.
With the benefit of hindsight, Knight’s tactic of turning a negative situation into a positive motivator for his employees may seem intuitive. But, the more I think about it, the more I feel like many leaders in a similar situation would follow a different track. Some may have never revealed the extent of the threat to their employees at all. Others may have let the bad news overtake the moment, cementing it as an inescapable defeat. Who knows: Had Knight not instinctively turned that grim situation into a motivator, perhaps Blue Ribbon — and, by extension, Nike — would have died then and there.
Thanks to Knight’s perseverance, honesty and entrepreneurial spirit — as well as his unique ability to recognize the need to rally his employees to confront the situation with a shared purpose — Nike lived on in a way that probably seemed unimaginable at the time.
The lesson here isn’t just that leaders facing difficult business circumstances need to be entirely transparent with employees. It’s that, in some instances, the best course of action is to take a seemingly dark situation and use it as a way to motivate your talent to find a way out of it. Sometimes the power of shared purpose is enough to get over whatever challenge stands in the way.
It’s a risk, to be sure — but it’s a risk, as Knight’s example shows, perhaps worth taking.
Frank Kalman is Talent Economy’s Managing Editor.