This Week In Blunders – Sept. 27-Oct. 3
“This one goes to 11.” – Nigel Tufnel, “This is Spinal Tap.”
The board of directors at Nike decided to put a tech guy in charge of its iconic athletic-shoe business in 2020.
John Donahoe was one of those professional management types that boards think can master any industry. He’d run Bain & Co. He’d also served as CEO of eBay and ServiceNow and chairman of PayPal.
He had a great idea: Let’s dump some of those third-party retailers selling our shoes. Let’s zap Zappos! Let’s ditch Dillard’s! Let’s deep-six Big 5 Sporting Goods!
“We are in the privileged position of being in consumers’ pockets and on their home screens or their phones,” Donahoe gushed on a June 2023 conference call. “That’s cherished real estate.”
Never mind that everybody else was in everybody’s pockets, too. Nike was giving up a different kind of cherished real estate: shelves in stores where people could actually try on its shoes.
Yes, it was the great digital transformation. And the company named after the Greek goddess of victory has been delivering shareholder losses ever since.
Nike shares have lost nearly half their value this year. At about $34, the stock is scraping 12-year lows and has plunged roughly 80% from its 2021 peak.
Nike decided to “retire” Donahoe, effective October 2024, replacing him with company veteran Elliott Hill.
Hill has spent the past two years trying to rebuild Nike and restoring many of the retail relationships that his digitally minded predecessor decided didn’t matter.
To be sure, Nike made plenty of other missteps under Donahoe. It lost footing in China, leaned too heavily on aging franchises such as Dunks and Air Force 1s, and let upstarts such as Hoka and On eat into its market share. But deliberately walking away from retailers that had spent decades selling Nike shoes was the kind of disruption tech guys brag about without considering the consequences.
Donahoe thought Nike could sell more shoes by controlling the customer relationship itself. What he underestimated was what those supposedly unnecessary middlemen actually did: They put shoes on people’s feet.
Nike’s board might as well have hired a self-absorbed dope like Nigel Tufnel, the lead guitarist in Rob Reiner’s classic rock mockumentary, “This Is Spinal Tap.”
Asked what he might do if he weren’t such a big rock star, Nigel said he could be a salesman. He imagines asking a customer his size, checking whether the store has it and, failing that, offering him something else.
The scene goes like this:
Nigel Tufnel: A salesman, like maybe in a, uh, haberdasher, or maybe like a, uh, um... a chapeau shop or something. You know, like, “Would you... what size do you wear, sir?” And then you answer me.
Marty DiBergi: Uh... seven and a quarter.
Nigel Tufnel: ‘I think we have that.’ See, something like that I could do.
Marty DiBergi: Yeah... you think you’d be happy doing something like-...
Nigel Tufnel: ‘No; we’re all out. Do you wear black?’ See, that sort of thing I think I could probably... muster up.
Marty DiBergi: Do you think you’d be happy doing that?
Nigel Tufnel: Well, I don’t know - wh-wh-... what’re the hours?
Nigel Tufnel didn’t want to work too hard, but at least he understood something Nike’s highly paid management consultants, technologists and directors somehow missed.
Shoes can be hard to fit, especially for athletics. And who loves shipping them back when they don’t?
How not to get rich quick: Dial 900
He sold the American dream on late-night cable TV informercials. It ended in a nightmare. Please welcome Don Lapre to The Business Blunders Hall Of Shame.
A con artist in the can
A quick update on last week’s post about The Fake Andy Warhols: Miami art dealer Leslie Roberts’ 15 minutes of Andy Warhol fame has now resulted in nearly four years in prison.
A federal judge sentenced Roberts on Friday for selling fake Warhol paintings and ordered him taken into custody immediately. Roberts had failed to show up for his original sentencing a week earlier.
The exhibition is now closed.
Public assistance for bankers
Nobody called Dubya a socialist, but what else can you call this massive redistribution of wealth? Public assistance should be reserved for the needy, not the greedy.
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The Nike board would have been better off if any of them (doubtful) had ever read O.Henry's short story: "Shoes."
https://americanliterature.com/author/o-henry/short-story/shoes