Can Nike’s new chief executive restore the soul of ‘the swoosh’?

When John Donahoe stepped in as Nike's chief executive in January 2020, two months before the Covid-19 pandemic struck, the appointment looked like a masterstroke. His background in Silicon Valley, having served as chief executive of eBay and chairman of PayPal, seemed perfectly suited to the extraordinary setbacks Nike faced as the world shut down.

Bricks-and-mortar retail was collapsing, supply chains were upended, and consumer behaviour was pivoting towards e-commerce. In response, Mr Donahoe accelerated Nike’s shift to direct-to-consumer sales, betting big on digital channels that seemed to make perfect sense in the upheaval.

At the time, it worked. Nike’s digital sales took, with full-year 2021 revenue climbing 19 per cent to $44bn. Nike Direct revenue came in at $16.4bn, up 32 per cent year-on-year.

Nike was praised for its nimble response during the pandemic, standing out as competitors struggled to keep up. But success can breed complacency, and what worked in the short term has turned into a long-term problem for “the swoosh”. In pushing so hard towards digital, the company lost something else: its soul.

Nike’s fall from grace serves as a warning for any company struggling to balance innovation with staying true to its roots, offering important lessons for them.

Nike has always been more than just a company selling training shoes and sportswear. With its ground-breaking marketing campaigns, partnerships with athletes and cultural influencers, it has created a real sense of community that connects with athletes and young buyers alike.

Campaigns like “Just Do It” and endorsements from sports stars like Michael Jordan, Serena Williams and LeBron James turned Nike into a symbol of athletic excellence, empowerment and self-expression. In the Middle East, Nike adopted localised strategies, offering special Ramadan products, designs featuring traditional attire like abayas, and campaigns like the "Victory Swim" collection that align with local values.

But as the company shifted its focus to online sales, it began pulling back from its traditional retail partnerships with outfits like Foot Locker, DSW and Urban Outfitters. Independent shops, skate stores and small boutiques that had long been the arbiters of what was cool in youth culture were suddenly cut out of the equation as well. Sidelining these partners weakened Nike’s ability to connect with consumers on a global scale.

In their place, Nike doubled down on its own digital channels and direct-to-consumer strategy. The short-term results were great for sales, but they left a vacuum that Nike’s competitors were all too happy to fill. Brands like On, Hoka, Adidas and New Balance eagerly snapped up the shelf space Nike left behind, quickly gaining traction with customers who had once been Nike loyalists.

The shift in Nike’s strategy was not just about distribution. Internally, Mr Donahoe leant heavily on efficiency at the expense of creativity. He eliminated some product categories, organising them by gender rather than sport.

This shift diluted the brand’s expertise in areas like basketball, tennis, or track and field, leaving room for competitors to fill the gaps. Nike products began to feel more generic, less cutting-edge.

At the same time, the company’s marketing lost some of its spark. The brand, once known for powerful, emotive storytelling, moved towards a more data-driven, analytical approach. The over-reliance on programmatic marketing and the de-emphasis of human creativity may have looked good on a spreadsheet, yet ultimately, it failed to resonate with many consumers in the way Nike’s iconic campaigns once did.

This created inventory problems. By focusing so much on direct-to-consumer sales, Nike misjudged demand and found itself sitting on a mountain of unsold goods – inventory shot up from $6.5bn in November 2021 to $9.7bn by August 2022.

To sell its goods, Nike resorted to aggressive discounting, which only hurt its image further. The brand that once embodied premium athletic gear was now regarded by some as overstocked and overpriced. In key markets like China and Europe, sales have stagnated or declined.

What had been a lean, mean digital machine during the pandemic had become a bloated operation within a couple of years. By June 2024, Nike’s stock plunged 20 per cent in a single day, wiping out $28bn in market value, after the company issued a weaker-than-expected sales forecast.

This is a harsh lesson not just for Nike, but for any business trying to balance growth with maintaining its identity. It is easy to get caught up in the chase for new technologies, streamlined operations and fatter margins, but companies need to remember what made them successful in the first place.

Nike’s pivot was not a mistake – it was necessary for survival during the pandemic. But it went too far, cutting too deep into the heart of the brand and alienating the very people who gave Nike its edge.

Now, the group is trying to make a course correction. Mr Donahoe has stepped down, and Elliott Hill, a 30-year Nike veteran, has taken over as chief executive. Mr Hill’s return signals a shift back towards Nike’s roots. As someone who started as an intern and spent decades immersed in the brand’s culture, he should understand the importance of reconnecting with Nike’s base.

He has seen the highs and lows, and there is hope that under his leadership, Nike can regain its footing. His job will not be easy. He will need to rebuild ties with independent retailers, rekindle product innovation and revive Nike’s emotional storytelling – all while preserving the digital progress Mr Donahoe put in place.

For Nike, the future depends on balancing the old with the new. It is not about going back to the way things were – it is about integrating the best of both worlds. The digital foundation Nike built during the pandemic is a huge asset, but it needs to be paired with the cultural authenticity that once made the brand a cultural mainstay.

Nike cannot afford to be just another tech-savvy company. It needs to be Nike again – the brand that athletes trust, that children look up to, that defines cool.

For other companies watching Nike’s evolution, the lesson is clear: innovation is critical, but not at the cost of losing your identity. Moving too fast, too far, can alienate the very customers and partners who made you successful in the first place.

The challenge is to stay curious, embrace change and scale up – but always keep a firm grip on what makes your brand unique. Because in the rush to the future, it’s all too easy to leave your soul behind.

Howard Yu is Lego professor of management and innovation at IMD and leads the Centre for Future Readiness at the business school