Nike is arguably one of the world’s most innovative and valuable sports brands, a position achieved through purposeful and sustainable approaches to business growth. In this episode of C-Suite Growth Talks, Christiana Shi and Stuart Hogue, former senior executives at Nike, speak with McKinsey’s Brian Gregg about the strategies that enabled them to lead productive teams in the retail sector. The conversation touches on the importance of nurturing talent, building diverse teams, and identifying opportunities for individual and organizational growth.
Cindy Van Horne: You’re listening to C-Suite Growth Talks, a podcast by McKinsey. Here we’re speaking with top growth leaders about the challenges and opportunities on the road to sustainable and profitable growth. We’re excited to have with us today Christiana Shi, former president direct-to-consumer (DTC) at Nike; Stuart Hogue, former vice president, general manager at Nike; and Brian Gregg, senior partner at McKinsey and North America leader for Growth, Marketing & Sales, to discuss the growth initiatives and objectives driving the world of business.
Brian Gregg: Thank you, Cindy, and welcome, Christiana and Stuart. Thanks for joining us on the show. Before we dive in, could you tell our listeners a bit about your backgrounds, and the role that growth has played throughout your careers?
Christiana Shi: I was in consulting for a long time, focused on retail and consumer, and Nike was one of my clients for at least ten years. When I decided it was time to move more directly into the retail sector, I joined Nike as the chief operating officer for DTC. It was a small part of the brand then but I moved from running the back of house for all DTC channels to leading dotcom during a time where we completely repositioned both the role and technology of the business. From there I became the president of all of DTC, which at Nike includes the full price stores, Nike.com, the apps, and the Nike factory stores.
Growth has been a central theme in most of the work that I’ve done—both in consulting and at Nike—because either you don’t have enough or you have more than you can handle. It’s a problem and an opportunity at the same time, and it truly has been an exhilarating journey to get to work on all sides of the issue.
Brian Gregg: Stuart, let’s head over to you.
Stuart Hogue: I’ll focus on the Nike portion of my career. I worked there for 15 years and was part of the Nike Foundation, the team that launched an initiative focused on the idea of the “girl effect,” which invests in adolescent girls as one of the best ways to fight intergenerational poverty. Then I met Christiana, who hired me to be her head of strategy. It was an honor and privilege to work alongside Christiana and learn from her; she’s one of the best mentors I’ve ever had. That role really trained my focus on transforming the retail footprint.
From there I went on to lead the Marketplace Development team at Nike. This was a global team that focused on working with our retail partners on their consumer experience (both online and in their stores). As part of it, I led Nike’s new and emerging partnerships with digital marketplaces; a fascinating growth story at the time for the company. After that, I led the Foot Locker business in North America, which is Nike’s largest commercial wholesale account and team.
Brian Gregg: You could argue that Nike has become the global leading innovator in the world of sport. We’re looking at a company with close to 80,000 employees and 1,000 stores worldwide. Clearly, growth is something that Nike knows well, and you have both been at the center of that. What role does growth play for Nike and how has that changed over time? Christiana, it would be great to get your sense of the historical approach to growth at the company.
Christiana Shi: I first observed growth at Nike in 1998. Nike identified then, and still identifies, as a growth company. In fact, if you go to the investor relations landing page at Nike, you’ll see a photo of Serena Williams with the phrase, “Nike, Inc. is a Growth Company.” That’s core to the identity of the brand, as well as to the aspirations of the leadership team. And it isn’t growth with a little “g”; it’s growth with a big “G.” It’s how Nike creates value for all its stakeholders.
But the way Nike grows has changed a lot. In the past, Nike, like a lot of start-ups, grew haphazardly. If Nike could expand into a new geographic market because there was a wholesale partner that wanted to carry or stock Nike, it did. If Nike could launch a category, it did. That led to a lot of growth, but it was diffused. From a strategic point of view, it was hard to know where the priorities were at any point and where to invest behind that growth. It also led to uncoordinated technology systems, isolated supply chains, and investments in people and capabilities that probably didn’t have the potential Nike wanted. The change from that to today is a much more purposeful and strategic approach.
Stuart Hogue: When I think about Nike and its growth potential, I go back to the company’s mission statement, which is, “To bring innovation and inspiration to every athlete in the world.” (And they add, “If you have a body, you’re an athlete.”) If you think about it in those terms, there are still a lot of underserved consumers with whom Nike can grow. That’s been the secret formula of Nike’s success: to serve consumers. The biggest growth pursuit for Nike now is less around category and market expansion—it’s more around having a stronger relationship with their consumers, being more engaged with them, and being there for them on a daily rather than a yearly basis. This creates more frequency and, ultimately, more wallet share.
That’s been the secret formula of Nike’s success: to serve consumers.
Christiana Shi: One of the big differences is that those opportunities require significant sustained investment. Nike leadership realized that it wouldn’t be able to do that unless it was willing to collectively make trade-offs that were aligned against a goal. That’s where the strategic framework became really important.
Brian Gregg: Christiana, part of your initial role was to look at the back-office and back-of-house operations. What had to change, operationally and strategically?
Christiana Shi: The short answer is that everything had to change: a shift to digital, a shift in the marketing model, a shift in the way Nike communicated with its consumers, and a shift to direct (meaning a larger percent of Nike’s business was going to go through its own channels, such as Nike.com, the apps, and the stores).
One of the toughest changes I observed was around the supply chain, because from an end-to-end perspective, if you are vertically integrated in apparel and footwear, you can set up your supply chain all the way from materials management through to distribution to the consumer. You’re able to track one to one. These are processes done on a smaller scale where you understand distributed geographic footprints.
Nike had one big distribution center (DC) in Memphis. When push came to shove and capacity was constrained, Nike DCs would prioritize the orders for the wholesale partners. However, this negatively impacted consumers as orders were being delivered late. After introducing new warehouse management systems, forecasting allocation and distribution systems, and digital tools, the consumer-direct supply chain is now becoming a competitive advantage for Nike. Compared to other brands I work with currently, Nike has gone from being out of the game to being one of the best.
Stuart Hogue: When I reflect on my time at Nike, the only thing that was constant was change. The organization is constantly transforming. Some people love that and want to be part of it, but it’s harder for others. It self-selects a certain type of individual and types of teams who have high resilience and adaptability. This came from Phil Knight identifying market opportunities and wanting to transform the company constantly to meet opportunities. Nike started out as a footwear company and realized that there was huge potential to create growth in apparel. That worked until it realized that it was divided by product lines and wasn’t serving consumers holistically.
In 2008, Nike recognized that it should shift to the category model to serve runners or basketball players head to toe—in other words, to serve the consumer completely. That was a great growth strategy, until it wasn’t. Until consumers wanted to be served not just as a runner, but, for instance, as Christiana who runs, does yoga, trains, loves Air Force Ones, and has a son who likes a certain sport team. That challenged Nike to fundamentally transform the business model: not to a siloed, segmented category organization, but to an organization tuned to serving consumers in a one-to-one way.
That’s a big, sweeping idea. You can only imagine the amount of organizational change it takes to enable that, as it’s a shift toward digital and direct, and developing analytics and new marketing capabilities. The sales force had to transform and play a complementary role. In other words, a massive change in terms of Nike’s scale, and it’s still unfolding. I think Nike will be on this change journey for forever.
Brian Gregg: If I’m a listener trying to change and transform, what should I do first?
Christiana Shi: Transformation is an ongoing process because the bar keeps moving. When I first engaged with Nike, it was a portfolio company. Not a very balanced one; it owned Bauer Hockey, Umbro Soccer, Cole Haan, Hurley, and Converse. The only brand Nike still has that it bought externally is Converse, and it has also developed and grown Jordan as a unique brand. But that’s all, because along the way Nike realized, “We’re not good at that. We know what we want to do. We want to be authentic and rooted in sports.”
This brings me to one of the most important actions: when you’re starting on your next wave of transformation, what you stop doing is probably as important as what you start doing. I have seen that multiple times as Nike has gone through different strategic eras. When moving from being a portfolio company, they steadily sold off the parts of the business that were not core, which allowed more money to be invested in Converse, Jordan, and Nike—significantly more. When Nike shifted to being DTC, it began to prune its long tail of wholesale accounts. It stopped selling to some of them or it revised and narrowed what it was willing to distribute through those partners. Again, that focus then shifted to a greater focus on a global set of priority accounts.
Finally, when Nike decided to expand digital, it prioritized so there was still a large subset of geographies that the company served more indirectly. Finding solutions to do that is important for growth continuation.
When you’re starting on your next wave of transformation, what you stop doing is probably as important as what you start doing.
Brian Gregg: When looking at sustainable growth, what role does growth play in Nike’s push toward zero carbon and zero waste?
Stuart Hogue: When I joined Nike 15 years ago, sustainability was an emphasis for the company and oriented around how it made product and ensured that it limited as much waste as possible. Then when I started working with Christiana, we really focused on the retail footprint, realizing that as you grow retail and manage 1,000 stores, the energy requirements grow. We began to think about Nike’s impact on the environment and what it could do to make real change. Things have only accelerated since then. The correlation between sustainability and growth is in service of the consumer. Sustainability used to be something that companies did because it was the right thing to do, but now it’s something consumers demand. In fact, it’s often the first or second read for consumers. That’s why sustainability is one of Nike’s top five priorities.
One of my favorite shoes is the Space Hippie, which is about 90 percent recycled. The sole is made from Nike regrind. The company positioned the Space Hippie as one of the coolest sneakers that the company has and created a real consumer energy around it. It’s a symbol of what’s to come for Nike: the correlation between sustainability and cool, and the importance that it plays for our consumers.
Brian Gregg: What challenges do you see as companies continue to pursue growth?
Christiana Shi: I’ll speak specifically to challenges related to pursuing growth enabled by digital. Many companies are trying to harness digital in some way, whether it is on the manufacturing and production side, the insight or marketing side, or in a DTC context with e-commerce.
One of the biggest hurdles is that whatever you invest in digital at the start of your transformation, you will have to continue investing in for years two, three, four, five, and into infinity. That is often an unpleasant shock to a leadership team or board. For example, when Nike was re-platforming, we knew that it was going to cost a boatload of money. And it did. Three years later, we needed to move to the cloud, so we had to re-platform again. And as we were doing that, we were launching apps. Each of those apps had to get wired back into the core tech stack and work on a global basis. Anyone who is going through a digitally led transformation must understand that the commitment needs to be sustained, because, if not, you will fall behind the adaption curve, consumers, and the most efficient and cost-effective technologies.
You also have to continue to find room in your profit and loss (P&L) to afford to invest in those technologies. Even as you’re driving transformation and focused on new strategic initiatives and growth, you want to make sure that you’re holding your teams accountable, you continue to look for operational efficiencies and those things in which you don’t need to invest, and to focus your dollars where they matter.
Brian Gregg: If the investment opportunity is there, how do you find the investments or ensure that P&L fits with the growth avenues chosen?
Stuart Hogue: Probably the biggest change that Nike has gone through was the shift from working with retailers to DTC. There were large investments generated from having big retail partners who can serve consumers at scale, so there were opportunities to invest in digital while keeping the business growing in a healthy way. It was important to consider how fast to grow, how to keep the balance right, and how to support the team that operates with really important retail partners.
Many digital capabilities are required to do that. People think of digital as a department that needs growing, but the sooner you move out of that mentality and instead see digital as a way of operating and serving consumers, the better you are able to evaluate which opportunities have the greatest ROI.
Christiana Shi: If you can find ways to make one dollar work in two places, you afford the transformation. In Nike’s case, that meant that when it was investing in digital capabilities in DTC (for instance, better photos of the product), it could make those available to wholesale partners. If it was investing in new tools for its sales force and developing training, Nike could also share that training with its partner retailers. If you can look for ways to make your investment work twice as hard, that will help you afford transformation over the long haul.
Brian Gregg: Christiana, you’ve been on boards in the consumer space your whole career. What bold growth moves should other consumer brands be looking at right now?
Christiana Shi: Building direct relationships with your consumers at scale is one of the most important opportunities for a consumer brand. In the past there really wasn’t much opportunity, unless you were a digital start-up, to build these relationships directly with consumers. But the technology is now here, the marketing channels, and the social-outreach vehicles; particularly in some Asian markets, where the consumer expects to have a direct conversation with you. But conversations don’t work unless you listen. If you don’t put together the marketing, strategic, and technology capabilities to have a dialogue with your consumers, you’re going to miss out. You don’t have to sell directly to consumers—that works for some brands, but not others—but divorce the notion that a direct relationship with the consumer means you have to have a direct consumer commerce business. Instead, think about it from a relationship and an ecosystem point of view. How will you leverage that relationship and those insights to benefit the business and consumers’ satisfaction?
Brian Gregg: Christiana, you have extensive experience as a speaker and author on women’s leadership and career development across the board. Given the challenges in the workplace right now, how do you expect the workplace to change to bring more women in leadership positions?
Christiana Shi: This is one of those multivariate equations where many things have to change at the same time—for any improvement in the diversity of a leadership group, whether it is gender, ethnic background, sexual orientation, or geography. Statistics show that the more diverse a leadership group is, the better the outcome for shareholders. Studies have also shown that the more women there are in leadership, the better the financial outcomes. We don’t need the data anymore. I hope that we are past asking ourselves whether it’s worth it; we should now focus on how to make it happen. This is about continuing efforts to raise awareness, bring in new sources of talent, upskill and identify talent that needs additional support to be successful, and review retention advancements or promotion processes for hidden biases. That’s what it’ll take to get more women in the C-suite.
Brian Gregg: Stuart, in your time at Nike, what did you observe happening to advance equitable opportunities for a diverse workforce?
Stuart Hogue: As with many companies, Nike looked at the composition of its team and how it manifested its culture. There’s a huge emphasis on promoting women and people of color, and attracting new talent into the leadership ranks at the company. This will lead to leadership change, which then translates into inclusion. You get the culture right when you create an environment where people feel like they can say what they need to say, and be their best selves at work.
A specific example of Nike’s commitment to inclusion is that they offer every vice president the opportunity to go through a graduate level program on authentic and inclusive leadership—a semester-long graduate program where people go deep into how they’re showing up at work and really understand the nuances behind creating an inclusive environment. I have been impressed by Nike’s willingness to take a clear look at where they are today and what needs to happen for the right change to occur.
Brian Gregg: Christiana and Stuart, I want to wrap up our time together today by asking a few rapid-fire questions. What’s the biggest myth about leadership and growth that you have come across?
Christiana Shi: It’s not about how you make the big decision some of the time; it’s how you make the small decisions all the time. There are hundreds of decisions each week that you’re asked to make, and your strategy is determined by those thousands of smaller decisions that you and the people all the way down to the frontline are making.
It’s not about how you make the big decision some of the time. It’s how you make the small decisions all the time.
Stuart Hogue: Growth is not a strategic plan and it’s not more investment dollars. It’s fundamentally about culture, leaders with vision, and teams. It’s about the humility to know that you’re not perfect and to be relentlessly self-critical about where you are today and what it takes to grow for tomorrow. It’s ultimately the never-ending ambition to serve people better. It’s not about revenue; it’s about customers.
Growth is ultimately the never-ending ambition to serve people better. It’s not about revenue; it’s about customers.
Brian Gregg: What’s the most important lesson you have learned as a leader?
Christiana Shi: I always say that you can’t lead unless you show up. The busier I got and the more senior I became, the more places I was supposed to be at the same time. In my first year at Nike, I co-hosted the annual holiday party for our division. I showed up about 15 minutes late. When I looked at my phone later, there was seven messages from my boss and other administrative folks saying, “Where are you?” It was my party and I was supposed to be there to welcome everybody. Or people would send me emails announcing a new store opening, and there would be 30 other people on the email. When I first got them, I thought, “Well, I don’t need to answer, 29 other people will.” What they really wanted, though, was for me to acknowledge that this was pretty cool thing you guys pulled off, and I can’t wait to see it. Those are the kind of things that I call showing up. It doesn’t always mean physical presence; it can be virtual. But if you don’t show up, you’re missing the opportunity to develop a face, a personality, a voice, and a spirit as a leader.
Stuart Hogue: Christiana taught me that and it became a mantra for our team: we show up. It’s also about checking in on yourself and making sure that you’re in the right place to be the leader you need to be in that moment, that you’re present, you’re listening, and you’re there to help coach and serve people.
Brian Gregg: What’s on top of your reading list right now? Any book you’d recommend and might be gifting?
Christiana Shi: I loved both Michelle Obama’s biography, Becoming, and Barack Obama’s books. I find it fascinating to listen to people’s perspectives on a very public life. The other book that is a perennial top book of mine, even though it’s not one I have just read, is called The Checklist Manifesto by Atul Gawande—a Renaissance man who uses more of his brain than any of us ever have. He’s a surgeon, he writes for The New Yorker, and he’s a policymaker. The Checklist Manifesto was a book that he wrote after he created the surgical checklist that is now used whenever anyone goes into surgery. This book elevates the importance of a simple checklist and how it can literally transform the way any work gets done. I always recommend it when I’m starting with new teams.
Stuart Hogue: I’m famous for being a book nerd and I constantly give them to my team. The most influential book for me and my career is not a new one. The book’s called Shine by Chris Barez-Brown who’s a friend and mentor. Chris runs a company called Upping Your Elvis, which believes that everyone has creative potential within them. It takes effort and focus to get to the place where you can bring energy into a conversation, and I think the best leaders are energy givers. They’re the ones who create an environment where people want to be part of a team. His book is about what you can do to get into the right physical and mental state to be the best you possibly can be.
Brian Gregg: Thank you both, Christiana and Stuart. It’s been a pleasure spending this time with you on the topic of growth. I’m Brian Gregg, senior partner at McKinsey. Thanks, everyone.
Cindy Van Horne: That was Christiana Shi and Stuart Hogue, both former senior executives at Nike, and Brian Gregg, senior partner at McKinsey. I’m Cindy Van Horne, global director of communications at McKinsey. Thanks for listening to this episode of C-Suite Growth Talks. Be sure to subscribe wherever you get your podcasts. We’ll see you next time.