-Nike_50 Most Innovative Companies_Innovation

7/29/2019 -Nike_50 Most Innovative Companies_Innovation

1/8

f

J

r 1ri

f

1Il

I

PHOTOG RAPH BY JASON PIETRA


2/8

f{

Nike

BY AUS TIN CARR

"This is the raw Stuff."Stefan Olander, he ad of N ike'sthree-ye ar-old Digital Sport divi-sion, is watc hin g a group of hisengine ers hack an exper iment.They're using a pair of N ike trainerswi th embe dded sensors . The sen-sors me asure pressure created whe nthe shoes, which h appe n to be onthe feet of a lanky product mana ge rname d Brandon Burroughs, strikethe g round. The data are collectedand the n fed wirelessly to an iPhone;the iPhone is plugged into a Mac-Book; the MacBook's scree n featuresa program that is busi ly imitating a1987 N intendo video gam e calledixazV.& V'xa IL Which brings us tothe o stensi ble goal of all this ma d-ness : fmding out i f new-age sensorsand wireless devices work with anancient v ideo game .

That's why B^urroughs, who isoutfi tted head to toe in Nike atti re ,is crouched in anticipation like arunn er before a starter pistol isfired. Suddenly, a whistle scre amsfrom th e MacBookit's the game 'ssignal that a steeplechase "race"has begunand Burroughs startsspri ntin g in place. It isn't pre ttyHe's panti ng heavily. He's t)een a tthis for a while and is clearly spe nt.His feet thud against the carpet l ikea clumsy drumroll as his crudeavatar lurches forward on screen.And he's doing all this in a big,clean, stark corporate lab fuliof e n-ginee rs, which isn't very glamorous.But the expe rime nt is working, sortof: As his avatar nears the first hur-dle. Burrough s leaps too late.


3/8

5 0 M O S T IN N O V A T I V [ C O M P A N I E S

T H E i W F A C T O R

F U E L B A N DNike embedded120 LED lights into th eFuelBand. modelingthe display aftera retro Scoreboard.

Knit threadingand supp ortive cables(think suspensionbridges) allow theFlyknit Racer to weighjust 5.6 ounces.

C O N T I N U E D FR OM PAGE 89leading his digital self to trip and tumb le into a pixelatedpool of water. "Anrmr!" yells B urroughs. "Come on!"

Olander, who bears a distracting resemblance to Mat-thew McConaughey and looks fit enough to have clearedthat hu rdle with ease, jokes that the only problem here isthat Burroughs "is not very fast." He actually loves thatthe group is "just mucking about an d having fun," as heput s it. "Really cool stuff can come from th e opportunityto test without constraints." And that, in sum, is innova-tion, Nike-style: a messy, exhaus ting process culled frommyriad options and countless failures.

In 2012, Nike's experimentation yielded tw o breakouthits. The first is the FuelBand, a $150 electronic brac elett ha t me a su re s you r move me n t s th roughou t th e day,wheth er you play tennis, jog, or just walk to work. Thedevice won raves for it s elegant design and a clean interfacethat lets users track activity with sim ple color cues (red forinactive; green if you've achieved your daily goal). Press itsone button for a scrolling stock ticker of how man y caloriesyou've burned, the num ber of steps you've taken, and yourtotal NikeFuel poin ts, a proprietary metric of activity th atNike encourages you to share online. T h e FuelBand is th eclearest sign that Nike has transformed itself into a digitalforce. "Nike has broken out of apparel and into tech, data,and services, which i s s o hard for any compa ny t o d o , " saysForrester Research analyst Sarah Rotman Epps.

The other innovation is the Flyknit Racer, featherlightshoes th at feel more like a sock atop a sole. Created fromknit threading rather than multiple layers of fabric, itrequired a complete rethink of Nike's man ufacturing pro-cess. The result is a shoe that 's more environmentallyfriendly and could reduce long-term production costs."Flyknit could turn the [shoe] indus try on its head," saysNike sustainability V P Hannah Jones.

T o produce even one of these innovations in a givenyear is a rarity for any company, especially on e with 44,000employees . But Nike C E O Mark Parker knows he can't justrely on celebrity endorsements and the power ofthe swooshwhen confronted by big-name competitors such as Adidasand u pstar ts like Jawbone and Fitbit. "One of my fears isbeing this big, slow, constipated, bureaucratic companythat's happy with its success," he says. "Com panies fallapart when their model i s s o successful that it stifles think-in g that challenges it. It's like wha t the Joker said'Thistown needs an enema.' When needed, you've got to applythat enem a, so to speak. "

Every C E O says this kind ofthing (minus the enemapart). The difference is tha t Parke r delivers. Last year, Nike'sannual revenue hi t $ 2 4 billion, up 6 0 % since he took overth e reins as C E O in 2006. Profits are up 5 7 % , and Nike'smarke t ca p has more than doubled. This story is about

how he has achieved that growth, and how he has drivencomm itment into the company's culture. Nike is a businesswith much corporate lore, that lovely, misty story of howa bunc h of renegades w ith a waffle iron bucked th e systemand revolutionized an in dustr y But a close exam inationofthe developm ent of Flyknit and th e FuelBand, based oninterviews with top Nike executives, current and formerdesigners, engineers, and longtime collaborators, revealsfour distinc t rules that guide this company, that allow itto take big risks, that pus h it to adapt before competitorsforce it to chan ge.

R U L E # 1 : T O O I S R U P T , Y O U M U S T 0 0 A L L - I Nwh at makes Flyknit so truly disruptive is that i t isn 't ashoeit's a way to make shoes. As the team mem berswho spent four years developing the technology like tosay, they're "breaking the sewing machine." The old Nikemodel involved cutting rolls of prewoven material intopieces, and then stitching and assembling them. Butwith Flyknit, a shoe's upper an d tong ue can be knit frompolyester yarns and cables, which "gets rid of all the un -necessary excesses," says Ben Shaffer, stu dio director atthe In novatio n Kitchen, Nike's R&D center. The FlyknitRacer, one ofthe first shoes in the Flyknit line, i s 5 . 6 ounces,roughly an ounce lighter than its counterparts. Nike usesonly as much thread as i t needs in production, and theshoe can be micro-engineeredtightened here, stretchedthereto improve durab ility and fit.

Parke r clearly has big expecta tions for Flyknit, tellingshareholders it "is one of those technologies that ha s in-credible potential, not only within ru nning , but acrossmultiple categories." That's a massive bet given Nike'sdominance ofthe athletic-shoe business, where, for ex-ample, it owns half the runn ing m arket and a whopp ing9 2 % ofthe U . S . basketball shoe business . And Nike hasgone all-in on that bet, building a whole new manufactur-ing process around the product. "Does this change ourbusin ess model in som e cases, or our supply chain? Ab-solutely," Parker s ays.

Shaffer shows me som e ofthe 1 9 5 major iterations theFlyknit werit throu gh a s we tour the iCitchen. Some appearas rudimentary a s a ballerina's slipper. T h e prototype tha tmara thon r unn er Paula Radcliffe mark ed with scribblesnow looks like a rejected Project Runway design . Nike's

90 FASTC0MPANY.COM MARCH 2013 PHOTOGRAPHS BY ART STREIBER


4/8

"ONE OF M Y FEARS IS BEING T HSLOW, CONSTIPATED, BUREAUCCOM PANY THAT'S HAPPY WIT H ITS SUCEO MAR K PARKER


5/8

5 0 M 0 S I I N N O m i V [ C O M P A N I [ S

am bitio ns for Flyknit can be seen in th e trays full of feetthat live in tall carts around th e Kitchen. The disembo diedwooden lumpsmost generically sized and others mad eby scanning som e of the actual feet of the thousan ds ofprofessional athletes that the company sponsorsareall waiting to be fitted, like Cinderella, with the perfectprototype shoe.

"Flyknit is a platf orm ," Nike's Jones says. "We're rei-mag ining the upper, the bottomsthe whole caboodle."In addition, as materials such as rubber become harderto come by because of overharvesting or climate change,"we're going to be able to navigate the volatility of theseresources," she adds. Then, perhaps rem inded of the fiercecom petition Nike is in with Adidas over knit sh oes, f onesstops sho rt and w avers, "I can't say anymo re."

R U L E # 2 : A N T I C I P A T E A P R O O U C T ' S E V O L U T I O NBefore the FuelBand, a product called M agneto w a s , briefly,Nike's next big thing . You'd tape magne ts to your templesand then clip futuristic eyewear onto it "Perhaps we wenttoo far with tha t idea, because we actually started to m akeit," admi ts global brand EVP Trevor Edwards. Parker decidedthe product w as impractical, and he killed it

That sou nds like an obvious call, but Parker reputedlyapproved Flyknit after being sho wn only a tube sockstitched to a rubber sole. Early on, great ideas can re-semble bad ones: They both sound ridiculous. "Steve [Jobs]ha d a good bullshit meter, but also an open mind," P arkersays. "It's that bu llshitfilter hat says, 'Really? Is this reallycompelling?' W e kill a lot of ideas."

Parker says he often feels like Tom Hanks in Bigakid at a toy company whose job is to approve only theproducts he has fun with. In the FuelBand, Parker sawwhat athletes would instinctively value. As a "smart"version of the already popular Livestrong bracelet, theFuelBand would give users their own digital coach tomotivate them. They could connect with other users an dwith their friends and family via social media to cheerthem o n , whether ifs to lose weight or train for a m arathon.Nike would benefit from th is commun ity, thanks to theongoing connection with its custom ers, as well as everyuser prom oting Nike with each post or tweet of their activ-ity report. Plus, people were already com fortable withwearing a silicone wristband, unlik e, s a y , face magnets .

As if to prove the point, wh en P arker and I meet, he'swearing a FuelBand on each wristexactly do uble w hatany user needs. "I don't normally we ar two," he says,beaming, "but I have to admit, I'm obsessed." The companyis now working to extend that obsession to others. InDecember, Nike partnered with the startup mento ring

92 FASTC0MPANY.COM MARCH 2013

For nearly a deca de, tennis s tar Serena Williams hasbeen one of Nike's m ost visible athletes. (In M arch, in fac t,her core wor kou t w ill be released on the Nike TrainingClub app.) But she's also a serious entre pren eur: Herclothin g line Signature Statem ent is on HS N.com, andher business investmen ts range fro m skin care to techstartups to part ownership of the Miami Dolphins. Andshe credits Nike for se tting her business standards.

I I l i l i l l l l l l l l l l l l l lSerena Follows Nike's Playbook


6/8

1 A L W A Y S O F F E R S O M E -T H I N G N E W"You look at w here Nikestarted, from the '80s untiln o w , a n d it's such a hugedifference," Williams says."I wonder, like, how wereathletes a ble to play backthen? Every time I turnaround there's som ethingnewpants with ventilation,seamless fabr ic. They actu-ally invent fabrics, which isreally cool for m e , with myfashion background. I alwaysu s e them in my line, i'mlike, 'So what a re the colorsfornext season?'"2 T H E I N V I S I B L E I SA S V A L U A B L E A S T H E V I S I B L E"When I f i rst came toNike I said, 'I don't carehow I feel; I just w ant to lookgood.' And they said, 'We'regoing to make y o u look good ,and we're going to make itcomfortable.' Last year atthe French Open, my dressw a s almost like a Herv LgerLbandage] dress, reallytight fabric. But I w a s able toperform, I w a s able to move.It w a s really functiona l,but it w a s also bringingdesign and style."3 C O N S I D E R Y O U R S E L FA N U M O E R D O G"I'm not disrupting mybrand enough. I need to doit m ore. Nike always tries toimprove. They never s a y ,'I'm N o . 1 , and I'm happy.'They always s a y , 'How canwe get b etter?' Beyond acompany, beyond entrepre-neurship, you c a n reallytake that attitud e in yourlife, like, i want to be a greatmother, or a great student,or a great doctor.Whatcan I do to be better?" /A s told to Whitney Pastore/c

firm TechStars t o w o o entrepreneurs to launch companiestha t will build on top of Nike's digital platform. Nike hasalready announced games bu ilt on Fuel points.

This three-steps-ahead thinkin g is important for anyproduc t. Flyloiit is not only valuable because it s technologywill help Nike make a ll ldnds of lighter, better-fitting s hoes,but also because it fits into the company's global growthinitiatives. With Brazil hosting bo th the 2014 World Cupand 2016 Summ er Olympics, Sterne Agee analyst SamPoser believes Flyknit will help Nike reorient how it makesan d sells shoes in such an important internationa l market." T h e duties imp orting from China [where Nike does muchof its m anufacturing] to Brazil are absolute crazinesswaytoo cost-prohibitive, and the [manu facturing] in Brazil isso expensive," he says. "But Flyknit is much less laborintensiv e. If they can go into Brazil and set u p [knitting]machines, they w i n . " Poser goes further, imagining thatFlyknit will one day allow custom ers to digitally personal-ize shoes to m atch th e exact shape of their feet.

Parker wouldn't b e blamed if he had passed on Flyknitafter seeing a modified tu be sock, but if Nike doesn't beton crazy ideas, its rivals will. "They're like sharks," saysPoser. "If they stop sw imm ing, they d i e . " Adidas, also afterfour years of research, launched its Primeknit line onlymo nth s after Flyknit's. Nike then dragged A didas to courtover patent-infringement claims related to laiit technology.

R U L E # 3 : D I R E C T Y O U R P A R T N E R SStefan Olander has barely ushered me into his neatly ar-range d office w hen he invokes FuelBand lore. He has anearly prototype at the ready, the very one that his t eamused in 2010 to pitch the idea to CE O Mark Parker. "Wepulled up [our sleeves] and revealed this," he says, slidinghis fingers over the white leathery Velero bracelet markedwith green calculator-like num bers. "Mark is so consumer-driven tha t instinctively he said, 'G o do this now ' His firstquestion w a s , 'How fast can you build this? ' "

T h e tale is burnished to a high gloss, which is a shame,because an idea a s b i g a s the FuelBand does not get cookedup in a single l a b . It doesn't become a sophisticated, beau-tiful product just because Parlcer admired a leatherywristban d. Nike doesn't like to discuss the gritty detailsof how som ething like the FuelBand gets made, but thereal story shows how m essy true innov ation is.

In a world of rapid disruption , comp anies no longermustor canown all the skills required to thrive. Justas Google needed Android to attack mobile and Appleneeded Siri to give it a foothold in search, successful busi-nesses need to constantly evolve, either through partner-ships, n ew talent, acquisitionsor all three. "You can'thave a barrier or restriction," says lead Nike engineerAaron Weast. For the FuelBand, Nike ha d to open it s doors.

The FuelBand's road to reality began in March of 2 0 1 0 ,when a three-person Nike team flew to San Francisco toshare their idea with the indus trial design firm Astro

Studios. "They had this con cept of a tennis sweatbandwith an electronic watch," Astro design EVP Kyle Swenrecalls, as he sits in the same third-floor conference roomwhere the meeting took place. "They wouldn't even leaveus the pitch; it was superconfidential." Nike also consultedengineering firms Whipsaw and Synapse, and long timedigital m arke ting ag ency R/GA.

This team of outside partners created hu ndred s ofprototypes, imagining concepts for displays that resem -bled an Amazon Kindle screen; bands that fully illuminatewith color; ones that fit over your leg or upper arm; andeven a fastening system modeled after a gas nozzle."Everything was custom, custom, custom," says Astrodesigner Anh Nguyen.

Olander played the shephe rd. " Y o u will never get goodwork o ut of anyone if you h and over a brief and go, 'Wehave no clue what we wan t, but why don't you just do itforus,' " Olander says. During the FuelBand's development,for example, Nike's specific reques ts to partn ers includedits red-to-green color scheme; the idea of Fuel points,which Olander felt would encourage competition amongusers regardless of their sport; and a dead-simple interfacewithout excessive metrics. The team learned that lastinsight from its experience with Nike's earlier digitalproducts, for which 3 0 % of users turn off calorie tracking.

Nike's role was b etween a coach and a traffic c o p . Nikedesigner am ian Cobbett describes it as an "ebb and flow."Astro's Swen relates how enginee rs from other par ts ofNike's assembled team would see what the designers hadin mind: "They were like, 'N o fucking way,' " he says, laugh-i n g . "But that's innovation: full th rottle, hit the brakes; fullthrottle, h it the brakes." The effort produ ced several break-

GREAT IDEAS HAVE SOMETHINGCOMMON WITH B A D ONES: EARLYTHEY BOTH SOUND RIDICUL

through s, such as when Whipsaw em bedded 120 LEDlights in the bracelet (t o look like an old-tim e Scoreboard)and Synapse developed a curved lithium battery Both arekey features of the final product.

R / G A was tasked with th e interactive experience andtoyed with making Fuel points spendable. "We had con-

C O N T I N U E D O N P A C E 1 5 6 :

M A R C H 2 0 1 3 F A S T C 0 M P A N Y . C O M 9 3


7/8

Nikecontinued from page 9 3versations around racking up points and spend-ing them o n Nike socks," says Ian Spalter, whowas then R/GAs product design VP and who nowserves a similar role at Foursqu are. The agencytinkered with tabulating Fuel points in aggregateforpublic causesthe digital equivalent of char-ity runs . Several sources say Nike consideredselling FuelBands synced in pairs (so spousesor best friends could track each other's progress),and it even explored using the system to createcampfire momentsthat is , lighting up all theFuelBands in the world at a particular time toconnect with its community, such as when theOlympics commenced. In the end, the pull ofgetting a s mall shot of electronic serotonin fromchecking your progress all the time, the sameway many people incessantly refresh em ail andsocial media statuses, proved more than addic-t ive. "There 's something about dipping intofeeds," says Nick L a w , R/GAs chief creative of-ficer, "wh ether it's fantasy football. Twitter, orInstagram."

A s the product rounded into shape, "editing[then] becomes critical," Parker says. Olanderadds, "It was like, 'What if we know your h eartrate and have galvanic skin response, or add agyro and magnetometer? We could know ev-erything.' But who's going to do all that stuff?It's this interaction between des ign and engi-neering that keeps the experience refined."

And during that process, "Nike was the ul-timate creative director," says Spalter. "What'smore importantthe people who cook up all theoptions or the people who curate and make thedecisions? For a company ofNike's size, they keepthe num ber of editors to a pretty damn short list"

R U L E # 4 : F E E D C O M P A N Y C U L T U R EI am sitt ing in a Winnebago, parked in themidd le ofthe Innovation Kitchen. The teampurchased it on Craigslist for $750 to use as aconference room . There's plenty of mee ting space

elsewhere, but a s legend has it, Nike cofounderPhil Knight first sold shoes in the back of an R Vlike this o n e . S o here we are.

Nike's campus is full of odd talismans likethis, a living museum of itself, a container oflegends and oral historie s. The waffle iron tha tcofounder Bill Bowerman ruined making rubbersoles in the 1970s? I t ' s enshrined on cam pus likethe Liberty Bell. In fact, with s o man y bits of lorearound, anything can be mistaken as symbolic.T h e clock inside the Winnebago reads 2 : 5 9 eventhough it's barely past noon. My PR handlermak es a point of asking abo ut the s ignificanceofthe clock's tim e. "I don't even know," Shaffersays, "but there's always something superdeepin things like tha t" Adds my handler, "That'sthe kin d of detail people obse ss over herelittlethings like this have a story behind it. O r, well,maybe it just means the battery is dead."

If Nike treats its past w ith reverence, it rep-resents it s present in a different but equally honedway: as "top secret." In Parker's office, he sh owsme a pink run ning shoe that he says will reinventNike's man ufactur ing processes yet again. (Itfuses Flyknit technology with a new, peculiarhoneycomb-like sole.) "You might be the veryfirst person outside of Nike to see this," he says.

In fact, I'm repeated ly dipped into the com-pany's inexhaustible supply of secretsso m uchso that I won der if Nike labels ideas "secret"the way the government broadly labels files"classified." I nside a garage on the o utski rts ofcamp us, behind a day-care center and a secu-rity firm, with its door simply marked "A," Iwitness two toned athletes lunging in front ofa pair of Xboxes. This is the Sparq performan cecenter, which w as key to developing the analyt-ics behin d the FuelBand an d other d igital Hikeproducts. At one point, Sparq performancedirector Paul Winsper insists, "We don't w antanybody to know about this." And as I enterth e Z o o , ano ther of Nike's "secret" facilities, anengineer confides, "S ometimes you want to benice and hold the door for someone behindyou, but you just never know."

A ll of this surely has s ome level of truth : Nikedoesn't w ant full d etails of its R&D leaked out,nor does it want, say, some Adidas em ployeewandering i n t o snap photos. (Ahem: "Hell wouldfreeze over before w e copied a p roduct," Adidasdesign lead James Carnes tells me.)

But like an action movie, the s tory isn't builtto withstan d serious in quiry I'm told, for ex-ample, that only a few dozen employees haveaccess to the Zoo and the Innovation Kitchen.Y e t there are clearly more tha n a few dozen em -ployees inside both, which, mind you, are on

thefirst loor ofthe M ia Hamm building, behindonly slightly tinted windows through whichpassersby can clearly see :om th e camp us side-walk. A t one point when I walk b y , a door to theKitchen is propped open, u nsupervised.

S o what's with all the hush-hush? Culture.Employees internalize their own storiesthattheir work is imbued with a value worthy ofsecrecy, vaul ting Nike into the lofty h eigh ts ofphilosophical (and sometimes self-important)corporate cultures alongside only Apple andDisney. Wh en I bum p into Nike coach and three-time New York City Marathon winner AlbertoSalazar, in between the cam pus's Olympic-sizeswim ming pools and sky-high climbing walls,even he tells me, "This place is likeDisneyland."

That cohesive culture begets tangible ben-efits, such a s talent r etentio n. At Nike, you're arookie if you've been at the co mpan y for lessthan a decade. Workers quote the company'smaxims like the Ten Commandments. Morethan a dozen tell me, independently and un-prompted, " B e a sponge" and "If you have a body,you're an athlete." "We can almost finish eachother's sentences," Parker says. "But not in adrinking-the-Kool-Aid, cultlike w ay"

That self-image is infused into every market-ing message and product release, and trans-ferred to a public eager to finally be let in on thesecret. The more exclusive the presentation ofthose products and brands, the more they aredesired. Parker borrowed more than a bullshitmeter from Steve Jobs. N o wonder consumersand media line the block for both Apple andNike product launch es.

"There's a halo effect of being s een a s an in-novative company," says Forrester's S arah Rot-man Epps. "It's har d to overstate how importantit is that Apple C E O Tim Cook is seen wearingone of your products onstage ata n Apple event,"as he was with a FuelBand during th e iPad Minilaunch last October. Never min d th at Cook sitson Nike's board. The cool kids are sittin g at th esame table, and you're invited.

After leaving that secretive garage on thecorner of campus, the one labeled A , I'm told Iwon't be able to locate it again. It's that h idden,my handlers say, like a witch's cabin that van-ishes into the woods.

It seemed like a challenge. S o the next d a y , Igo hunting . I search in the rain for 45 minutes ,down endless little roads. Finally, there it is unguarded, intact, no laws of physics denied.

Another Nike myth busted? Perhaps. But Ican't go in; the garage is empty The lights areturned off The building is there, but the ideasinside are gone. The secret is kept

156 FASTC0MPANY.COM MARCH 2013


8/8

Copyright of Fast Company is the property of Mansueto Ventures LLC and its content may not be copied or

emailed to multiple sites or posted to a listserv without the copyright holder's express written permission.

However, users may print, download, or email articles for individual use.

-Nike_50 Most Innovative Companies_Innovation

Documents

Transcript of -Nike_50 Most Innovative Companies_Innovation