Friday, February 22, 2013

How Nike Used Its Strengths to Become a Software Company

Nike made its mark as a footwear company. Michael Jordan's "It's Gotta be the Shoes"commercial in 1988 with Spike Lee says it all. Although Nike is an iconic footwear and apparel brand, it is being lauded for transforming itself to take advantage of opportunities in the digital age. Fast Company ranked Nike number one in its list of the 50 most innovative companies in the world for 2013. Nike won praise for development of FuelBand, and electronic wristband that tracks energy output. It is not Nike's first digital product, but FuelBand symbolizes the strategic direction that Nike plans to take going forward.

If the decision to move away from a core competency like designing footwear and venture into a category that has greater risk such as software-based products is puzzling, consider what Nike CEO Mark Parker says about strategic planning. Parker maintains that core competencies, skills or abilities that a firm possesses that are key to growth, are less relevant in a rapidly changing business environment. In Nike's case, the core competency of design need not be abandoned. What is changing is that Nike no longer limits application of its core competency to designing footwear and apparel; it is applying its expertise in product design to developing technology-based products like FuelBand,

In Chapter 3 of Sports Marketing, application of the strategic planning tool SWOT analysis is discussed. Specifically, translating SWOT analysis findings into marketing strategies is explained using the acronym MAC-Match, Avoid, Convert. Match is a strategy for coupling a firm's strength with an opportunity in the external marketing environment. Nike accomplished this with FuelBand by matching its expertise in product design with opportunities to incorporate technology into personal fitness products and meet athletes' desires to support their training efforts with technology-enabled products.

Nike will not stop making shoes any time soon. In fact, another innovation cited in recognition of Nike as the most innovative company in the world was its design of the Flyknit Racer, a featherlight shoe. But, Nike has effectively adapted to the external marketing environment my leveraging its strength as masters of product design to expand into new product categories. Growth through new products is not as much about entering new categories as it is utilizing expertise to meet customers' needs. This mindset likely means that Nike will not stop at technology-based products as it plots its future growth strategy.