How Nike's CEO Shook Up the Shoe Industry

By Ellen McGirt September 1, 2010

Nike's Mark Parker brings together extreme talents, whether they're basketball stars, tattooists, or designers obsessed with shoes.
"It still has moon-dust on it." Mark Parker sounds like a happy kid as he points to an astronaut manual from the Apollo mission inside his glass-topped desk at Nike's Beaverton, Oregon, headquarters. Over his shoulder, Keith Richards, at least the version of the Rolling Stones guitarist by German artist Sebastian Krger, feigns a boozy disinterest. "And here," says Parker, swinging around in his chair, "is Jimi Hendrix's guitar." It is astonishing to see this shoe designer turned CEO in his natural habitat, surrounded by artwork he has commissioned or collected, mixed in with bits of Nike history, such as the boots Michael Keaton wore in the 1989 hit Batman. Next to Keith Richards is a bas-relief by Missouri sculptor Kris Kuksi. Parker owns three of his pieces, one a blank-check commission. "He just said, 'Do something huge,' " says Kuksi, who met Parker at a gallery show in Philadelphia. "Being a designer," says Parker, "a lot of the people I hang out with are creatives. I like the eccentricity, to be surprised." Whether artists or athletes, he says he's attracted to people who are "intense, maybe even obsessed." He regularly hosts dinners for about 25 artist friends to just talk and kick around ideas. One that emerged from a get-together at his friend Lance Armstrong's house was "Stages," a recent show of more than 20 commissioned artworks that he and Armstrong cocurated in Paris to benefit the Lance Armstrong Foundation. Another friend, artist Tom Sachs, delighted the crowd with "Lance's Tequila Bike for Girls," a modified Trek bike that dispensed tequila in scatologically named shot glasses. "Irreverence inspires me," smiles Parker, sounding decidedly un -- CEO -- like. And no, he doesn't check Nike's share price daily, fret about 10-Qs, or try to game the news cycle, no matter what messes his athletes get into. Obsessed people make messes. It goes with the territory. Obsession comes naturally to Parker. As a champion teenage marathoner, he routinely modified his own running shoes in search of better performance. Now, the designs he once called his "delicate creations" are so deeply embedded in the success of the company that he's lost track of the number of patents he holds. One is for Visible Air technology, which he created as a side project; it helped catapult Nike out of the doldrums in the mid-'80s. John McEnroe, Kobe Bryant, Olympic athletes, and your high-school's cross-country star -- he's shod them all. Bryant, fresh from the Lakers' play-off victory and his MVP award in June, describes meeting Parker, then Nike copresident, in 2003 and watching him whip out his notebook to sketch while they talked. "I knew right from that that we were on the same page," Bryant says. "He's not doing things just for innovation's sake. He truly wants to optimize my performance."

Parker isn't an attention-seeking sort of CEO, so until now it has been hard to get a sense of him. But the imprint he is making as CEO is turning out to be as meaningful as his design work. Putting his stamp on Nike as forcefully as the much splashier cofounder Phil Knight did, Parker has reorganized the company into units based on particular sports, "a conscious decision to sharpen each piece of the business so we're not some big fat dumb company," he says; reshuffled its regions to put new emphasis on China and Japan; streamlined the reporting process and removed regional middle management; handled a rare round of layoffs; and weathered yet another scandal involving a high-profile endorser. The company came out of the recent downturn with strong revenue numbers and earnings up 53% for the most recent quarter. I met with Parker in Beaverton just a few weeks after he and his executive team impressed shareholders and analysts in their first public investor meeting in three years. Parker used some big talk -- "Nike's infinite marketplace" -- to set some big goals: increase sales by more than 40%, to $27 billion by 2015; meet a set of equally ambitious sustainability benchmarks; grow earnings 7% a year; and keep 33,000 employees thinking as nimbly as possible. "It's like a framework as opposed to a process. We need that organic-ness to be an innovative company that's continually challenging itself," he says. He characterizes his challenge as a struggle to mix his right- and left-brain strengths: "It's about balance." But the sketchbook is never far away. "Always, always, the elite athlete" -- the Jordans, the Bryants, the Armstrongs, whose unparalleled abilities make them ideal lab rats for new products -- "still leads our design. What we learn from them is who we are," he says. Mark Parker, collector, CEO, cobbler to the gods. Parker is sitting in on a product meeting in Nike's secretive Innovation Kitchen, a think tank for designers where athletic ambition, art, and a bit of mad science are cooked into the stuff that has made Nike the dominant player in sport shoes and apparel. The Kitchen is a freerange creative playpen, with every type of tool, material, machine, toy, instrument, software, game, and inspirational image at the ready. Nike Free, the training shoe that mimics the benefits of running barefoot, was born here. So was Flywire, the ultralight thread system inspired by a suspension bridge that has changed the way shoes are constructed. The Kitchen is so secure that most employees aren't allowed in. The Kitchen and its earlier R&D iterations are also where Parker spent most of his time before he became CEO. "I think his heart is still here," says Michael Donaghu, director of footwear innovation. "He still likes to just pop in and start talking to people about stuff that's on their desks, particularly their side projects. He can't help himself." On the table in front of Parker is an abundant display of shoes, sandals, gear, and what might be a digital Etch a Sketch that you stand on; at the head of the room, under a drape, waits a shiny prototype of a new image-transfer gizmo that will allow the swift customization of shoes at retailers and special events. Unveiled, it lurches to life after a few false starts; a mildly acrid smell fills the room as the machine's mother shyly explains the process and affixes some art to a sneaker. "It looks like the fortune-teller machine from Big," someone jokes. It does. Parker and the team applaud good-naturedly when the demo actually works. Although the alarm on his watch prompts him to leave after an hour, Parker continues to listen raptly to each presenter, asking questions and studying their wares. Afterward, as I continue the Kitchen tour, I spot him, now very late, perched on the desk of a designer, chatting happily and poking through a pile of midsoles and uppers. "I told you," says Donaghu.

Though Parker later tells us that not everything he saw at the meeting will get a green light, he's careful not to shut people down at meetings. "I prefer to let people share what they're working on. And I don't like to embarrass anyone." He repeats a mantra I hear early and often: Edit and amplify. "I'm trying to amplify the innovation agenda further, and short-list the things that will make the biggest difference. That's an art and a science."

Back in 2003, Phil Knight passed over Parker for the top spot, bringing in an outsider, William Perez, from S.C. Johnson. It was a move that was widely misread as a snub. "It didn't upset me," says Parker, who was part of the team that vetted CEO candidates. "It wouldn't be honest to say that I didn't think about it, though. I trust and respect Phil, so I decided to learn from it." Knight explains that he thought it was time for an outside look. "I'd been CEO for almost 40 years. The company worked around my idiosyncracies so much that they didn't know that they were idiosyncracies anymore." But Nike's unique culture chewed up Perez in less than 18 months. Sandy Bodecker, now VP of Nike global design, was so unhappy on Parker's behalf that he says he "made a vow never to actually meet the guy." They once presented on the same stage -- Perez exiting left as Bodecker entered right. They even stood shoulder to shoulder at the urinals in the men's room. "I chose not to introduce myself," Bodecker smirks. Ultimately, Knight says, "Yeah, it was a mistake. We're not for everyone." Parker came by Nike honestly, the way that all the early employees got there, as a "running puke" -- "even more extreme than a running geek," he says -- lured by the siren song of an unlimited supply of revolutionary shoes. In the mid-'70s, he was a champion runner for Penn State, part of what was then one of the most scientifically managed track-and-field programs in the country. At 6-foot-4, Parker brushed the scales at 130 pounds. "I looked like a praying mantis," he says. He customized his own shoes by cutting the soles and experimenting with foam and homemade sock liners. He turned, ironically, to sheets of Nike-made waffle-sole material that he got from local shoe-supply shops. "I might run in an Asics Tiger shoe and put a waffle bottom on it," he says. "The cushioning was so much better." He sounds wistful as he recalls his first pair of Nikes. He got them by mail order. "Waffle trainers, red with the white swoosh. I put them on and ..." he trails off.

The fourth of seven kids, Parker grew up in a busy household in Stamford, Connecticut. His father was a lifelong IBM engineer, his mother a psychiatric nurse. "I was a pretty independent kid," he says, but not particularly artistic. "I thought maybe I'd be a veterinarian or an environmental lawyer." After he graduated from Penn State in 1977 -- he majored in political science because "I had to pick something" -- he was hired by Jeff Johnson, Nike employee No. 1, and "took what was basically an avocation, design, and turned it into my life." He worked in the company's dusty R&D facility in Exeter, New Hampshire, testing products and enjoying the brotherhood of athletes cum shoe dogs, trying to figure out what they and Nike were going to be when they all grew up. Bodecker, the now legendary codesigner of Flywire, was a broke ski racer in 1980 looking to get his hands on cutting-edge training shoes when he agreed to try the only pair available, two-and-a-half sizes too small, to get into Parker's testing program. ("I had no idea the shoes didn't fit," says Parker.) Former pole vaulter Tinker Hatfield was working as an architect at Nike when Parker spied some sketches of shoes on his desk and pointed him toward R&D. Hatfield is now the father of some of the most iconic shoes ever made, including the Air Jordan. Parker's own success at Nike has had much to do with his philosophical alignment with the company's other cofounder, Bill Bowerman, the very first cobbler to the gods. In 25 years as track coach at the University of Oregon in Eugene, Bowerman had only one losing season and trained 31 Olympic athletes. Subjecting his athletes to rigorous study in the service of making the perfect sneaker, he famously cooked up shoe soles using his wife's waffle iron. His sketches, brought to Japanese manufacturers by his new partner and former student Phil "Buck" Knight, became the first Nikes. His quirky, bespoke creations were worn by Nike's first famous elite athlete, Steve Prefontaine, the explosive three miler who broke all existing records before he broke hearts with his early death in 1975. Bowerman was famous for brutalizing young designers bearing prototypes, whipping out a scale and mocking the weight or construction. He greeted interlopers from Nike's East Coast outpost with rugged bluntness. russia has siberia, nike has exeter read a sign over his desk. Parker largely escaped Bowerman's wrath, partly because he was an actual athlete, but mostly because he was that good." I witnessed more of the brutality than felt it," says Parker. "There was no filter from his brain to his mouth. I found it really refreshing to know what he was thinking." Parker's unusual ability to remain calm in the face of passionate exchanges has helped him thrive in an environment filled with highly competitive people driven to succeed. But Bowerman's coaching technique -- he created personalized training programs for each athlete, unusual back then -- informs Parker's management style to this day. "I spend a good deal of time coaching executives now," he says. "Each person needs something different to succeed. It's a Bowerman approach." He also mentions Margaret Wheatley, author of Leadership and the New Science, a meaty exploration of Newtonian physics, chaos theory, and business: "Her premise is that the energy in an organization is a product of the relationships between people" -- not creating an org chart and then putting people into the boxes, which "I think is exactly backward." The '80s were a mixed bag for Nike. Parker describes the early '80s as a frantic time, with the company going through "some choppy water within a general industry malaise." Knight puts it more starkly. With net income down 75% year over year in 1985, "Reebok had just gone by us in a fairly big way," he says. "It was serious. We didn't like that." And Nike wasn't the high-tech R&D emporium it is now. When Parker arrived from Exeter's Siberia in 1981, it was more of a shoe shop. Donaghu, then a college runner, interned for Nike in 1988. He remembers joining a small team that relied on mimeograph machines and still telexed

handwritten instructions to the factories in Asia. "I finally brought my little Apple that I used in college just for documents," he says. "It was the first computer in the design part of Nike." With Reebok breathing down the the company's neck, Darwinian battles were waged for resources and support. While the company cast about for ideas, Parker, Hatfield, Bodecker, and a few others hunkered down to skunk-work a new generation of shoes. Their nickname inside Nike was the "Speed Group," but Parker recalls, "We also called ourselves the SWAT Team." Working under spartan conditions, Parker pulled off a miracle -- a technology called Visible Air. The concept was simple on paper: Take the cushioning element embedded in Nike's existing Air series and cut a window in the sole so that people could actually understand the effect. The trouble is, the window kept popping. "I was working on it as a side project," says Parker, along with developing a cross-training shoe with Hatfield. By 1986, Parker had a prototype ready, and Knight let him show it to the board. In 1987, a suite of shoes called Air Max -- running and basketball models and Parker and Hatfield's cross-training shoe -- debuted at a trade show to tremendous buzz. "Parker made a terrific product," Knight says. That same year, Nike teamed with ad agency Wieden+Kennedy to make a splashy ad called "Revolution," set to the original Beatles song. The choppy, fast-cut black-and-white commercial mixed images of everyday people and Nike athletes, and outraged Beatles purists. "But it really made a complete campaign," says Knight. "Nike Air relaunched the whole brand. It was a huge moment for the company and for Parker, too." At the same time, an unexpected audience for Nike was developing. Hip-hop artists, DJs, designers, and other influentials were using the shoes that Parker and his team were creating to compete for nothing else than style points. The Air Force One, which arrived in 1982, turned the heads of uptown scenesters. "It looked different from any other basketball shoe, white on white," says Dan Cherry, currently the managing partner and director of brand strategy for the marketing firm Anomaly. (While at Wieden+Kennedy, Cherry worked on the 25th anniversary of the iconic Air Force One.) Then came the Air Jordan series. In 1985, the shoes were such a colorful deviation from the basketball norm that Michael Jordan was fined $5,000 by the NBA for wearing them. A cult following was born, expertly stoked through marketing. In 1988, Mars Blackmon, director Spike Lee's alter ego, started appearing in a funny series of ads starring Michael Jordan and directed by Lee. The next year, Lee referenced the fierce earnestness of sneaker culture in Do the Right Thing when a character melts down after his spotless Air Jordan Cement IVs are defiled by a clumsy Celtics fan. By the time Jordan dazzled on the 1992 Olympic Dream Team, the world wanted to be like Mike. There was no one better poised to amplify the sneaker's aesthetic appeal than Parker. "That was part of Mark's genius," says Cherry. Parker found a natural source of inspiration in his artist network, including graffiti artists Stash and Futura 2000, artist and toy designer Kaws, and even rapper Kanye West. The company began churning out artist retakes of classic Nike shoes, all highly collectible, deftly creating scarcity by meting out limited supply to small specialty stores and ultrahip fashion retailers. Parker's own top-shelf designs for HTM, a collaboration with Hatfield and Japanese designer Hiroshi Fujiwara, can sell to collectors for as much as $1,000 a pair. As the rich, famous, and fashionable began to sport colorful Nikes, clothing designers began to retool their collections to accommodate the sneakerhead lifestyle. Fashion designer Alexander McQueen owned 150 pairs.

The relationships with artists that Parker has built as a collector and fan have had an added benefit. For the better part of this decade, Nike had been trying to make inroads into action sports, particularly the highly insular skate market. "Our reps, especially, kept hearing from people that we couldn't be relevant here," admits Parker. Acquisitions -- Hurley for surfing in 2002 and Savier for skateboarding in 2004 -- were not enough. "The mom-and-pop specialty shops in particular had a tough time believing a big corporation had any business there. And we struggled, and it embarrassed me. We weren't authentic." To build credibility with skaters, Bodecker and Parker tapped artists such as the Los Angeles graffiti-and-tattoo-design star known as Mr Cartoon to design limited-edition shoes, logos, and apparel. "I used to fly to Japan in the '90s to buy the Air Forces and Jordans you couldn't get here," says 'Toon, who has inked Eminem, 50 Cent, and Christina Aguilera. "And now I make them." Nike has allowed him to create a platform, holding specialty events in the United States that advocate design and self-discovery to Latino youth. "We did 50 last year alone," he says. Os Gmeos, twin Brazilian street artists, painted huge murals in Europe for the 2006 World Cup for Nike and created limited runs of shoes. Their work appeals to the very crowd Nike is trying to impress. No overpriced marketing grunt could pull off this kind of authenticity. "It's not the kind of thing where you say, 'Get me something cool to debut for the tattoo community in the third quarter,' " says Cherry. "Mark gets the irreverent beauty of real artists and real subcultures." Parker refuses to take credit for Nike's hipster appeal. "I think it goes back to Hayward Field," he says, referring to the early days when Bowerman's home track at the university was the best R&D lab Nike had. "We used to make the wildest-looking shoes that you couldn't buy," he recalls, and people would crowd around the athletes as they queued up for a race to ask about their shoes. To this day, he says, athletes understand the psychological advantage of the aesthetics of what they wear. "It's what people wanted then -- to feel like they were special. And that's grown into a whole global culture." For all the hush-hush design thinking and fashion lust its products generate, Nike has had some not-so-secret problems, among them disgraceful working conditions, including child labor, in the Asian factories that produce the goods. Add on energy use and carbon inefficiency, and the need for innovation is clear. Parker ticks off a laundry list of opportunities, all related to design: "Materials, componentry, construction methods, manufacturing methods, the whole digital revolution. Knitting technology that allows you to make completely sustainable design and footwear without any cutting and stitching, without any archaic manufacturing processes. We're embedding all that thinking into the product." But never at the expense of performance. "The entire process becomes sustainable; it's not just a 'green' footwear line." Hannah Jones, Nike's vice president of corporate responsibility, is Parker's frontline commander, sitting a few doors away and reporting directly to him. Her first audit discovered some $800 million a year in wasted materials. Working with Parker and product designers, Jones and her team -- which now numbers some 130 -- examined all processes for efficiency, toxicity, energy impact, and safety. What has emerged is an evolving series of metrics, the Considered Index, that helps determine the environmental impact of each item Nike makes. The company is now focusing on the supply-chain and manufacturing elements that impact working conditions in the 20% of its contractors' factories that produce 80% of its goods. By 2011, Parker has promised, all shoes will meet a minimum standard. "But it's a never-ending challenge," he says. "There's no finish line."

Nevertheless, he is delighted that the index has inspired a new creative tension inside Nike. A software tool based on the index allows designers to see the environmental impact of their design choices and gives them a benchmark to shoot for. They compete with one another as they work. "We're not creating a green product for the sake of doing it," he says. "We're creating a whole new way of design." And the company is sharing what it is learning. In 2005, Nike debuted a sneaker without the toxic solvents long used to bind the sole to the shoe; the formula for the new adhesive is now available through the Green Exchange that Parker announced at the World Economic Forum in Davos this year. And in 2006, after a decade and a half of research and millions of research dollars, the company removed a greenhouse gas known as SF6 from its famous Air pockets. There was no announcement. Parker has become a visible champion for sustainable thinking and a quiet star at Davos, leading conversations with CEOs from giants such as General Mills, Kaiser Permanente, Renault-Nissan, Swiss Re, Telstra -- even Facebook and Hunch. "Populations are exploding. Emerging markets are getting more power," says Parker. Disruptive change is on everyone's mind. "There's this internalization of how critical it is to deal with sustainability. As we're out here trying to wave the flag, it's very satisfying to see that." "And why the blankety-blank are you now in the MP3 business?" Parker is telling stories at dinner, this one about a call he got from Apple's Steve Jobs. We are in a private dining room at one of Parker's favorite Portland restaurants. The waiter, also a bit of a pal, pops in periodically to check on us. And to chat up Parker. The waiter has six marathons under his belt, and he's feeling hinky about the seventh. "San Francisco next month," he pauses. "Hills." He feigns a shudder. Parker smiles. That his world shifts easily from waiters to Mr Cartoon to Lance Armstrong and back says a lot about the man. He is open, curious, and wanting to connect with people doing their thing. "You'll do great," he says. They talk strategy. Facing Jobs, however, Parker conceded defeat. Nike had partnered with Phillips in 2003 to make an MP3 player that would help connect a runner with music and his or her own workout stats -- distance, speed, calories, and so on. "Nobody remembers it, but it was a best seller at the time," says Parker. (One look back at the online reviews explains why nobody remembers it.) Jobs called Parker and didn't mince words: "Why are you doing this? It's not your core business!" Parker flew down to Cupertino for a face to face; what resulted from the meeting was Nike+, a nifty sensor that goes in the bottom of a running shoe and feeds workout stats to an iPhone or iPod and through social networks. Today, says Trevor Edwards, Nike's VP of marketing, social features allow millions of people to feel they're part of the planet's largest running club. "We now have 3 million members who have run 182 million miles," he says. It took 18 months, and Nike spent a rumored $1.6 billion on the launch. But Parker saves the best part of the story for last. Jobs -- a New Balance wearer who typically shows up for only his own product extravaganzas -- joined Parker onstage for the Nike+ debut in 2006. "Oh, he wore Nikes," says Parker. He smiles. When the conversation turns to Tiger Woods, though, Parker gets serious. "I learned about it the way everyone else did," he says of the messy swirl that became Woods's downfall. Parker, part of the Nike full-court press that recruited Woods as he turned pro, clearly likes him. "He sat right there," Parker says, pointing to my chair. "I knew his dad." Still, when the news broke, Parker trod lightly. "We made efforts to connect with him. He went really quiet, shut himself off from everybody; so it was difficult."

Ultimately, he says, Nike handles issues like this on a case-by-case basis. "What does what's happening mean to what we should be doing? And, yes, character also matters." But, he says, "we didn't want to convict him through the media." And as Woods reemerged into his professional life, Parker didn't shy away. Nike released an ad with a silent and contemplative Tiger and a voice-over from his now-deceased father. It was instantly polarizing. "I knew that it would be controversial. Some people thought it was creepy," he says. "It was the voice of the athlete, and we're committed to that." For Parker, the elite superstar may be the lab rat of choice to start the design process, but his heart remains with the everyathlete. Paula Radcliffe, the British marathon star, describes watching the CEO and his wife, a world-class runner who is now a high-school track coach, at the national high-school cross-country championships that Nike hosts every year. Elite athletes are invited to race with the kids and spend the day mingling with them. Despite the rainy Oregon day, the Parkers eschewed the VIP tent. "They were going wild, and they seemed to know everyone by name," says Radcliffe. "They were as inspired by the kids as they were by any of us." "There's a certain energy and purity and passion in the relationships between the parents, kids, and coaches, and the love of team," Parker says. In their way, these folks are as obsessed as a Kobe, or a Radcliffe. "It's as important for me to be there as with record holders and Olympians. These are the people we're serving." Parker has made sure that everyone knows that. Nine years ago, he recalls, "Phil wanted us to work on a new mission statement." The previous one -- "To be the No. 1 sports-and-fitness company in the world" -- was old news. Parker's choice: "To bring inno-vation and inspiration to every athlete in the world. (And if you have a body, you're an athlete.)" He also put together nine maxims, quirky guiding principles for Nike. The one he thinks about most is No. 6, "Be a sponge. Curiosity is life. Assumption is death. Look around." It's a nod to his grandmother Helen Parker, who spent hour upon hour with her quiet grandson, walking in the woods, sharing her observations about the world. "She was engaged and learning new things until she passed," Parker says. "That was always her advice to me. And it really worked."