Small Business Articles

The Willful Abuse of Positive-Thinking

by Esther Smith

Here I am again with another story. I was reading about Admiral James Stockdale, highest ranking officer in the "Hanoi Hilton" in Viet Nam as written by author Thomas Barnett. Stockdale spent eight years as a prisoner of war in Hanoi and was tortured numerous times by his captors. Four of his eight years were in solitary.
Mr. Barnett writes: "Stockdale tells the story of the optimists who never survived their time in Hanoi simply because they clung far too much to their dreams of release and in doing so couldn't handle the brutal realities of what it took to survive the day to day."
He goes on to explain how they tended to cling to the hope that they'd be home by the next holiday. When that day came and went, their spirit sank to a new depth. Over time, they died because their courage had been done in by the reality of their present circumstances. Stockdale believed that while you must always believe that you will prevail in the end, it should not be confused with current reality, whatever that might be.
Suddenly, I paralleled Stockdale's theory with Internet entrepreneurs; the extreme optimist. We are prime targets for zealous salespeople who promise residual slam dunks to starry-eyed prospects. While the result won't be unspeakable torture in our quest for wealth, it's sad to realize that ninety-five percent of us will fail simply because we never anticipated the obstacles.
If we are what we think, then most of us walk into a competitive program with "success" stamped on our forehead. We've already witnessed our sponsor turning his bank account into a "cash machine" - it can't be that hard, right? And when you think about it, today a million bucks seems more like a living wage than a small fortune. Millionaires are a dime a dozen: nearly 5 million households in America have a net worth of at least that much.
The most powerful drive in our country is the desire for more. It has become the DNA of democracy and therefore inherited by every American. Brainwashed in guru-jargon that claims nobody wants to be a nobody, we begin to believe the dream "nothing can bring me down". I'll run with the big dogs, join the new wave, use this "can't miss" strategy.
Consumed with "positive thinking" the decision path begins: I've done this before. This one pays more. I can do this. I can begin now. I will do this. Say it again and make it your own: I can. I will. Let's dance.
Fast forward a month or two, and Stockdale's theory materializes. No progress has been made in spite of the fact that this new kid on the block was well versed in return on Investment (ROI), understood the importance of Search Engine Optimization (SEO) and had written his own Articles on the hidden order of MLM du jour. Spirits drop. Attitudes go sour. He puzzles which should come first; getting it right, or getting it going?
Out of ideas, out of a plan and out of money, common sense now seems to get suspended. He falls into a Marketing Coma and the rest is history.
Winners are really losers who got mad. Get mad or stay employed.
© 2006 Esther Smith
Smith Publishes a weekly syndicated Newsletter and has authored over 40 Articles on Sales and Marketing. A firm advocate of multiple money streams, her latest website offers entrepreneurs choice mini-sites, each created with individual pages that are product specific.

The Story of Phil Knight and NIKE

told by Josef Schinwald

What an opportunity for those who understand change, focusing on what counts.

When Phil Knight graduated from business school, he had neither capital nor knowledge of shoe manufacturing, but he was determined to become the main distributor of sport shoes in the U.S. Therefore, he flew to Japan to visit a company that was making shoes branded Tiger, and he introduced himself as the CEO of Blue Ribbon Sports, but refrained from mentioning that Blue Ribbon only existed in his head. This idea of his evolved from a paper he wrote during his time at Stanford. The book Masters of Enterprise, written by H. W. Brands, recounts that Knight remembered the assignment as a turning point in his life, I had determined when I wrote that paper that what I wanted to do with my life was to be the best track and field shoe distributor in the United States.

When Onitsuka Company sent the samples from Japan, Phil Knight immediately had to incorporate a company, and he found a business partner in Bill Bowerman. They each put down $500 and with a handshake. Blue Ribbon Sports, which would later become Nike, was born. Bowerman proved to be crucial in the success of Nike, and he would become the main innovator for most of Nike's shoe designs. As a result, the naming of Bowerman as the coach of the American Olympic team was all that Knight needed to be able to swoosh the Nike logo on the footwear of top finishers who were seen all over on national TV.

The Nike athletic machine began as a small distributing outfit located in the trunk of Phil Knight's car. Nike emanated from two sources: Bill Bowerman's quest for lighter, more durable racing shoes for his Oregon runners, and Knight's search for a way to make a living without having to give up his love of athletics. Bowerman coached track at the University of Oregon where Phil Knight ran in 1959. Bowerman's desire for better quality running shoes clearly influenced Knight in his search for a marketing strategy. Between them, the seed of the most influential sporting company grew.

Most entrepreneurs are familiar with the sayings "timing is everything" or "being in the right place at the right time." The inner thought is meaningful to the outer event and the outer event is meaningful to the inner thought. Such synchronistic events surpasses the probability of chance, they occur when the external and internal worlds affect one another, creating meaningful experiences that change our lives. We see this happen over and over again when studying the lives of the grand masters of enterprise. Microsoft's founders Bill Gates and Paul Allen. In today's business press and literature, the success of a company is frequently described as the great intellectual composition of a single person, whose strategic brain worked wonders. In reality, however, if one really takes the time to investigate the earliest beginnings of a company, one will discover over and over again that intuitive and syncronistic factors had been highly crucial for the success of a company. This was the case with Nike.

As consumers lost interest in traditional advertising, eye-catching stunts became fashionable, and consequently, brands were screaming ever louder than ever to be noticed above the rest of the noise. Recognizing this change in the advertising paradigm, Phil Knight soon put super-runners, tennis stars, famous football players, and basketball supernovas on the payroll, and they put Nike shoes on their feet. Knight's best weapon in his battle to beat competitors like Reebok and Adidas was a basketball player who proved to be the greatest of all time: Michael Jordan. Knight's strategy was to make Jordan's feet stand out during basketball games and his spectacular aerobatic plays. A Nike official went as far as to say,--on this rock we will build our church. To no-one's surprise, the Air Jordan line sold more than $100 million in its first year.

The company became a true pioneer of new paradigms, and they moved beyond the traditional 60-second ads for their shoes to 60-minute celebrity product demonstrations--Michael Jordan in basketball, Tiger Woods in golf, and Ronaldo in soccer. The crusading spirit of a company to swoosh the world, similar to a fraternity house in college propelled the company to nearly triple-digit growth rates in the 70s and 80s. Nike personified its shoes, and appealed to the emotions of its potential customers rather than the product itself. The ownership of Nike shoes became a statement in and of itself: you also can get up and run, just do it. Their new approach to advertising was not to create ads. Instead, they created an atmosphere and made a connection with the newly emerging culture of America, fitness everywhere. Taking advantage of this boom in America, they created a need where one had not previously existed.

The more Nike's sales volume grew, the richer Michael Jordan became as well. Today, with an estimated net worth of $398 million, he best exemplifies the notion of an athlete as a businessman. From the very beginning, Jordan and his agent sought a stake in the companies he endorsed. Jordan's first major deal, with Nike in 1984, tied his compensation to the sales of the shoe that bore his name. There is now an entire Jordan division at Nike, from which he receives a percentage of sales. According to Fortune magazine, Jordan earned a minimum of $10 billion for his career as a basketball player. However, being the personification of the brand is very different from celebrity sponsorship or endorsement--Michael Jordan was a sixty-minute soaring example of Nike and not just a sixty-second talking head for it.

Tiger Woods might surpass Jordan, since golf retirements usually occur much later in life. He has already signed deals with Nike, American Express, Buick, and others, and his net worth is over $200 million. Earlier this year he renewed and extended his contract with Nike in a deal that could be worth $100 million over the next five years. Following the footsteps of Michael Jordan, Woods' earnings are also tied to the sales of Nike products. In 1995, the year before Woods signed a $40 million contract with Nike for five years, the company earned roughly $40 million in revenues from golf products; however, in 1996, the year following Woods' endorsement, Nike Golf pocketed $300 million in revenues.

Nike transformed itself from a shoe distributor into a well-oiled marketing machine, and it knew what it was doing--designing the product, distributing it, and marketing it. For Nike, the key patterns for superior profitability were outsourcing and new branding. Together with other value chain specialists such as Intel, Nucor, and Microsoft, it took a 180 degree turn from what integrated oligopolists did decades earlier in the diverse industries of steel, chemicals, autos, airlines, computing, textiles, plastics, aerospace, banking, consumer packaged goods, publishing, and oil. Nike exploited the economics of specialization, spectacular design, distribution, and canny marketing. As a result, Knight accomplished his dream and Nike has become the leader in the U.S. athletic shoe industry.

Almost all of its manufacturing is done out-of-house. After starting out with shoes made in Japan, Knight found new producers in Korea, Taiwan, Thailand, China, Indonesia and Vietnam. Nike's scouts looked for inexpensive labor as well as stable currencies and governments. They were so successful at correctly picking these locations that financial analyst soon devised a Nike indicator of emerging economies, and, in fact, many other multinationals followed Nike's lead. By outsourcing the actual manufacturing of shoes in countries where they could be inexpensively produced and with people in the U.S. increasingly buying more than 3 pairs of athletic shoes per year, Nike's revenues were soon running at $6 billion annually. In 1996, Forbes magazine listed Knight as the sixth wealthiest individual in America.

The company's success is based on the fact that it underscores key activities in the value chain--such as its differentiation and brand image--and outsources the rest. This formula has been generating financial and intellectual capital for differentiation as well as a powerful brand image around the globe. Eventually, so it seems, there will be an entire sports channel devoted to supernova players put on Nike's payroll and with Nike's shoes on their feet.

Powerful new paradigms of advertising are showing up on the strategic horizon of today's brand managers and some are already putting on a new set of lenses, since the rules have once again changed. The media has fragmented into hundreds of cable channels, thousands of magazine titles and millions of Internet pages, which for those who understand change and keep their focus on what truly counts, is a vast ocean of opportunity.

Barker, Joel. Paradigms. Harper Business, 1993.
Becklund, Laurie, and Strasser, J. B., Swoosh: The Unauthorized Story of Nike and the Men Who Played There, HarperBusiness, 1993.
Bedbury, Scott. A New Brand World: Eight Principles for Achieving Brand Leadership in the 21st Century, Viking Press, 2002, pp. 13-14.
Charan, Ram. What the CEO wants you to know, Random House, 2001, pp. 35-45.
Drucker, Peter F., Innovation and Entrepreneurship, HarperBusiness, 1993, pp. 134 - 136.
Greenberg, Keith Elliot. Bill Bowerman & Phil Knight: Building the Nike Empire, Blackbirch Marketing, 1994.
Slywotzky, Adrian. The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits, Times Books, 1998, pp. 18-24

Josef Schinwald is consultant in Performance Measurement and professor in Business Strategy at the University of Belgrano, Buenos Aires, Argentina. He also runs several online stores, one of them sells Neon, Neon Signs, Neon Lights, and Neon Clocks. His didactic material must not be replicated without the given permission to do so. Copyright © 2003-2005 Business Design Innovation.
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