EXISTENTIAL THREATS BIRTHS NEW CAPABILITIES Pt 2 By Ifelola Olaleye

The forceful birth of Nike Inc.

Phil Knight, a self described timid?Oregonian athlete would graduate with an MSc in business administration from Stanford university. The son of a civil servant, Phil's father expected his son to get a decent job with his respectable degree from one of the best universities in the world. Unknown to him, Stanford a university founded by an entrepreneur, with the intent to create entrepreneurs had sown seeds of entrepreneurship into his son.

After graduation, Phil would take a grant from his father and travel the world for the first time in 1963. Air travel was just becoming popular in those days. In his trip, he would encounter great cultures, traditions across Asia. He'd also visit the temples of Athena and Nike.?On stop at Japan, he'd witness athletes running with very nice shoes. As an athlete himself, Phil marveled at the quality of shoes made by a Japanese company - Onitsuka Tiger Ltd (now known as ASICS) founded in 1949.

He thought Americans could really value this product. He'd later approach Onitsuka tiger, convinced them there was a market in the USA and proposed becoming the sole distributor.?Onitsuka reluctantly agreed to do business. But once they agreed, Phil flew back to the US, registered a company - Blue ribbon sport Inc. He'd take a loan in bank guaranteed by his dad. He wired the money straight to Japan and made his first order of pairs.?

Initially, he thought he had been scammed as the shoe didn't arrive on schedule. His father gave him a piece of his mind telling him to go get a job and stop the joke of a business.Alas the shoe arrived in the US. He excitingly unbagged the shoes, showed other athlete friends and his coach, Bill Bowerman who upon using it felt it was very good.?

Coach Bowerman soon became an investor in Blue Ribbon with a $500 investment. His friend would agree to manage sales of the shoe across the eastern coast. And a distributorship business was born. Phil's coach would begin to modify the shoes once they arrived, to make the shoes more lighter and shock absorbent for American athletes.

Phil took more loans from bank, so his father stopped guaranteeing the debt.?In five years the business struggled under the weight of loan repayment. Phil decided to take part time lecturing job at another university to support himself. There he'd marry one of his students and start a family.

Once the business could marginally sustain him, he dumped lecturing and faced business squarely.?He'd explore other financing options as the American banks started pulling out of his business. He was lucky to find a Japanese bank with a high appetite for risk. There he took more and more loans in years to come.

In time Phil's company, Blue Ribbon was doing huge numbers for Onitsuka, against Adidas (founded 1948) and Puma (founded 1948) in the US, to the extent that Onitsuka struggled to meet orders placed by Blue ribbon.?He'd repeatedly complain to Onitsuka to deliver products faster. They began responding along the lines "Japan first, America second."?

What Phil didn't know was the belligerence in Onitsuka responses was a symptom of a larger distrust for him by the company's executives. Secretly, Onitsuka was afraid of the numbers being done by Phil and the fact that he was the only distributor in America. Smelling mischief in the air, Phil traveled to Japan to smoothen things over. The company, Onitsuka assured him all was well. Though during his visit he became friends with a staff whom he bought a gift for.?

Once he got back to America, the staff would start sending unsolicited mails to Phil warning him of the conspiracy against his business by Onitsuka executives.?Phil was alarmed, felt betrayed, but began to prepare for the worst. He thanked the staff and continued receiving more secret letters about the plans of those executives.?

Sooner, he received an official letter from Onitsuka telling him of their desire to send an executive to inspect his business.?From his secret letters, he knew this was a sinister visit.?

The executive would come, hosted by Phil's family and complained about all and everything. During one of the office visits, the executive requested to use the toilet to pee.?There, Phil and his team locked the door. Took his bag, opened it and went through all the files in it. There it was steering them in the face. A bold plan by Onitsuka to rid Phil's company of the large part of the US market and replace him with another distributor.?

What followed was bouts of depression, sense of betrayal. This was an existential threat to Blue ribbon. Phil had committed all eight years to selling and telling the story of only Onitsuka. Now, he was going to lose it. Frantically, he ran to Japan to save his business. Onitsuka management made it clear he'd be cut off totally if he fought the new arrangement.?

Phil did fight. He sued Onitsuka to a US court for breach of contract and Onitsuka countered sued for espionage, spying & document theft and cut his business off the supply chain (Onitsuka had also found out about secret letters and correspondence?and how Phil went through company files illegally during the inspection visit)

Phil passionately plead in court explaining to the judge why he went through files illegally. Eventually, he would win the case and fine was awarded against Onitsuka.?Compensation collected, business ruined and more depression set in for Phil.

Phil's co-founders, wife and friends began cheering him to forget Onitsuka and instead they could manufacture their own shoes. They pointed out the fact they did the modification for those shoes to be suitable for the US athletes anyway.?

Phil agreed and they began scouting for small shoe makers in China, Japan, Taiwan, Mexico and Vietnam to make shoes according to given specifications. They would then rent small dilapidated and abandoned factories in those countries to house the shoe makers.?After a day of confusion trying to rename?blue ribbon into a more suitable name, his co-founder in charge of eastern coast distribution called states away and said he saw the word NIKE in his dream a night before. Everyone just went with that.?

Phil then contracted a student graphics designer, Carolyn Davidson to develop a logo for his new brand. The designer returned with a simple swoosh symbol??as Nike's symbol and was paid $35 (That symbol is now worth $26 Billion as a trademark).?

To supply his new shoes, retailers were initially skeptical about NIKE but obliged to store it based on existing relationship with Phil. But sales didn't pick up.?To market, Phil and his team began courting US Olympic athletes to use NIKE shoes for competitions and get paid. A few agreed and as soon as Olympics began, American tennis players were swinging ball to victory with the swoosh sign affixed to their foot.?

Track athletes were doing meters with these shoes and everyone began to notice. Unusual publicity began to trick in. However, a game changer occurred much later when Michael Jordan agreed to adopt NIKE as his official wear. Phil and team quickly seized on this and created a sub brand, AirJordan. From that moment on, it was phenomenal rise for NIKE.

Other shoe makers seeing the meteoric rise conspired against NIKE by telling US customs how Phil and team had imported and not paid the right tariff. The US govt fined NIKE with $20 million. He employed someone to help him deal with the govt as NIKE would crumble if he paid that fine. Courted Oregon state senator to also help him out.?

US customs pressured by Phil's contacts and a threat of lawsuit, agreed to lower to $9M. With great discomfort he paid the fine. This pushed him out of the lending market.?The gang up forced Phil and team to consider taking NIKE public only two years after rebranding, just to raise money. So they filed!

He slept the night before the IPO depressingly with a financially stressed company. He would wake to calls from his cofounders. He and co-founders had turned billionaires! With his ~40% majority stake, his equity was then in 1974 valued by the stock market at $10 billion (He's worth $50B in 2021).

Then he rested, the journey onward was better. In his memoir, he shares jokingly how he went for an event following the IPO and saw Bill gates and Warren buffets - people he revered from afar but had no access to.?Both walked towards Phil and invited him to take a walk with them. Shocked that they knew his name, but it quickly clicked that he was also now a member of the billionaires club and Nike was getting popular.?

Why is the story of Phil knight so important??

For Phil and team, they had been comfortably doing business as distributors and would never have dreamt of owning a competing brand save for the betrayal of Onitsuka.?However, seeing their company dying before their eyes, everything crumbling to the floor caused them to reinvent and there, the capacity to become a manufacturer was born. I say they found destiny through grief.?

Again, the most difficult times in the life of a person or population immediately presents fear, depression, tears, grief and doubt.?There are however opportunities in every trial.?These trials present us with opportunities to force out hidden capacities.?One can decide to sink into hopelessness as life throws lemons or one can choose to make lemonade with it.?

NIKE today, is the most valuable shoe and apparel maker ahead of Adidas, Puma, Onitsuka (ASICS)