After a lot of mistakes, this is the ‘only direction’ Nike can take

A former intern at Nike started his new role as CEO the week of Oct. 14. Elliott Hill took over the top job after CEO John Donahoe's surprise retirement, but Hill's path to return Nike to its former glory is an uphill climb.

Nike is facing a major sales downturn and struggling share price. As of Thursday, the stock was down 53% from its 2021 high. That decline all happened on Donahoe’s watch. Will 1988 intern Hill, who spent decades climbing the company ladder, spark a turnaround?

A stark difference between Donahoe and Hill is Donahoe was an outsider, previously CEO of eBay and software company ServiceNow, while Hill is an insider coming out of retirement to lead the company.

"Nike is a religion," leadership expert Gautam Mukunda said. "Nike drew back on its heritage and said, 'What made Nike great was the special commitment of its people, its executives and its customers to Nike. Let's get one of the people who was crucial in creating that and crafting it and let's go back to that, to where we were.'"

After Donahoe took the job in 2020, he shepherded the company through the pandemic and focused on transitioning the company model to selling directly to consumers. The short-term changes Donahoe made at the company led to a stock surge, but the result was short-lived and the stock and company began its precipitous decline.

"The particular decisions that led to this disaster for Nike, it's not retrospective to say that they look bad," Mukunda said. "People in Nike, people in the industry, were saying at the time, 'Wait, this does not make sense.'"

"There are lots of crucial ones: cutting back on innovation, not doing new products, taking successful old products that they've re-released and essentially riding them into the ground," he continued. "But if you're to pick one thing [where] you're sort of, 'Wait, what's going on here?' One of Nike's biggest strengths was its dominance of the retail chain."

Mukunda, a research fellow at Harvard Kennedy School's Center for Public Leadership, said Nike's decision to pull back from selling in places like Foot Locker opened shelf space for competitors.

"Foot Locker wasn't going to leave its shelves empty," he said. "It was going to find all these new entrants. And now those entrants are established. They have their own fans, they have their own brands, they have their own cultural cachet. It's not clear to me that [Nike's] extraordinary level of dominance is ever coming back, really."

This is the state of the company that Hill now inherits. Before Hill started the job, Nike's leadership said the company was going to move away from relying on retro styles and lean into innovation.

"It makes sense as a proper direction because it's kind of the only direction, right?" Mukunda said. "The specific product that drove Nike's revenues into the ceiling and then crashed was the Panda Dunk ."

Nike took the once-popular black-and-white Panda Dunk sneakers and continued restocking them until the allure vanished. They are now considered one of the "most hated" releases among sneakerheads.

"We cannot perpetually recycle our old things," Mukunda said. "So we got to new, and that means innovation. But innovation in this case, it's not just technology. What made Nike special was not just that the shoes were better. What made Nike was the storytelling. "

"It is something you do when you live, eat and breathe the culture of sporting goods," he added. "You have got to be immersed in that to be able to do that properly. And bringing Elliot Hill back is bringing someone back who is that. You've gotta love the fact that his LinkedIn starts with 'intern.'"

For more on Nike's challenges to regain dominance in the sneaker and apparel space in an age of stiffer and more vast competition, watch the full interview with Mukunda in the video above.

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