What can Nike in 2025 learn from Starbucks' turnaround of 2008?

Officially 2 weeks into the new year, my final book of 2024 and first completed book of 2025 was 'Onward: How Starbucks fought for its life without losing its soul,' the story of returning founder Howard Schultz who came back to lead the company in the midst of the great recession of 2008.

Reading the story and taking notes on Schultz’s strategy for the turnaround, I couldn’t help but notice the many parallels between the Starbucks strategy and what could / is planned on being applied at Nike under new CEO, Elliott Hill. An industry vet like Hill knows what he’s doing, and has the support of what seems like the entire company, but I am curious to see how his plans unfold throughout 2025. What, if anything, can Hill learn from a Seattle coffee chain?

First, in business, there is no silver bullet to fix all problems. During Starbucks' decline, Schultz recognized that there would be no single solution for the company's issues. He wrote, "Our success would be won by many. Transforming Starbucks was a complex puzzle we were trying to piece together, where everything we did contributed to the whole. No single move, no product, no promotion, and no individual would save the company on its own."

Over the last few years, decisions made by Nike's executives have led to three main issues: a loss of purpose, a narrow focus on select product lines, and a lack of brand marketing. These issues have eroded the Nike brand, as a short-term orientation took hold, causing the sportswear giant to lose market share to an ever-increasing number of competitors - big and small. Relationships with consumers became transactional as the brand shifted to a Direct-to-Consumer (D2C) heavy model, and sport fell out of the heart of the product.

Starbucks faced similar struggles in regaining their sense of purpose. Their function was to serve as the "third place" for people to connect outside of home and work. Between Schultz's departure in 2000 and his return in 2008, Starbucks' leadership focused on business growth by opening thousands of stores without first innovating in the coffee space or updating their store designs. They also began selling unrelated goods, like Teddy Bears, that only served the bottom line detracting from a coffee and community core. These decisions led to the watering down of the Starbucks experience and the commoditization of the brand. While these growth-oriented decisions may have been appropriate at the time, they ultimately diluted the Starbucks brand's look and feel, like how Nike's focus on short-term gains affected its brand.

For Nike, recognizing that previous decisions aimed at growing the bottom line detracted from their core purpose is essential. Nike's purpose is to serve as the medium to the athlete's "third place" – the field, track, court, etc. The brand's short-term strategy under Donahoe focused on repeated sales of hyped silhouettes, typically lifestyle shoes, with mild color-way tweaks that were rarely accompanied by a meaningful story. By only satisfying existing demand, instead of attempting to create new demand, this strategy would eventually lead to the silhouettes going out of fashion with nothing new to fill the gap. To make matters worse, the termination of wholesale contracts left Nike with excess inventory that had to be put on sale, damaging their premium brand image.

Under Hill, Nike is planning on overhauling its product portfolio - driven by athlete insights. Learning from Starbucks, Nike should continue experimenting and try utilizing athletes' personalities and creativity. They may also want to consider loosening design guidelines and fostering out-of-the-box thinking to help spur innovation in product as well as marketing. As Schultz noted, "the best returning CEOs understand that 'this is the way things have always been' [thinking] isn't always the best strategy to move forward."

Another area where Nike can take notes from Starbucks is within the realm of decision-making power. Under Donahoe, Nike centralized its operations to its Beaverton headquarters. While this gave the top more control and visibility over what was happening on the ground, regional teams began to stagnate as they waited for direction from WHQ.

To combat this, Nike should follow Starbucks' approach and adopt a lean framework for on-the-ground teams, giving them the freedom and flexibility to connect with their athletes and audiences in their own, localized ways. Schultz received a letter from one store manager that resonated with the issue of centralized decision-making: "Our partners are looking for leadership. And our customers expect more… We will deliver! Thank you for having a vision, sharing it, and allowing us to carry it on." This highlights the importance of empowering employees to take initiative after a vision is communicated by leadership.

The best strategy to authentically connect with consumers and keep employees happy is by giving them the space and freedom to be creative when opportunities arise. Nike should apply this practice to their regional teams and build upon initiatives like Nike hiking ‘gear exchanges’ in mountainous regions and free coffee promotions for runners in highly competitive geos.

Ultimately, Nike's decision to go purely D2C left many retail partners scrambling to fill the void in their product selection - opening the doors (and shelves) to competitors. This move also made Nike vulnerable to putting the brand on sale for the sake of the bottom line.

For Starbucks and Schultz, the word "Onward" emphasized "forging ahead with steadfast belief in ourselves while putting customers' needs first and respecting the power of competition." During Nike's decision to go full D2C, they moved forward with utmost confidence but caused isolation by abandoning their wholesale partners. Now that Nike is starting to rebuild these relationships, it's best to adopt a new mindset under Hill's leadership, inspired by Schultz, I’d like to call "Finish the race together." This approach celebrates, learns from, and doesn't hide from mistakes – as Schultz emphasizes in his book.

Nike should take extra steps in the next year or two to repair relationships with the bottom two links of the vertical chain. First, it's important to ask what led to going full D2C to uncover biases toward making such a decision – and set up guardrails so that a short-term orientation is mitigated. Is there a metric that could be removed from the D2C equation to reduce the 'all or nothing' attitude? Or is the problem that the economics of the wholesale channel are unsustainable from a margin growth perspective? If so, what are ways to increase margins with wholesalers?

To mend relationships with retailers and customers, Nike may want to consider giving retailers access to more 'heat' inventory and exploring retail-exclusive product color-ways of higher quality. These exclusive releases can create wins for the retailer, the brand, and the consumer: higher demand for the retailer, new limited and unique pairs for the brand, and a higher quality product for the consumer. They could even return to in-store-only releases to reinforce a culture of fairness over online lotteries and bots, and to cultivate the experience of meeting like-minded people waiting in line for a product they love.

Over the course of the next year, there will be a lot of changes and uncertainty throughout social spheres, financial markets, environmental groups, and many other ensembles. Outside of reading this analysis, Hill will have a lot of tough decisions to make. Overall, and I think Howard Schultz would agree, it’s important to take the time to redesign the Swoosh’s turnaround with high regard to the environment and the people along the supply chain. Today’s consumers deeply care about social responsibility when they are choosing to make their next purchase. And while the apparel and footwear manufacturing industries aren’t known for being the most environmentally friendly - making strides in an authentic way, and putting sustainability inside of the core of the product and business cycle can do a lot of good.?

Onward.?