Mark Jones
If you want a harsh lesson in leadership hubris, look no further this week than one of the world’s truly iconic brands: Nike.
News of Nike’s planned layoffs dominated the marketing press last week. At the same time as it lifted brand spend 5 per cent to US$1.3bn this quarter, it announced a restructuring program expected to cost around US$1bn in charges, mostly people costs, on top of US$300m in severance already booked. The goal: US$2.5bn in savings over five years.
Two things stand out.
First, it’s better to think of that spending as the cost of poor decision-making. A leadership tax, if you will.
Second, it’s a story nearly 10 years in the making. In this age of ‘change faster than ever’, it’s a remarkable counterpoint. A long-running false narrative inside an organisation can wreak long-term damage in surprising ways.
And the point of this story is a simple one. The stories leadership teams tell themselves and each other are vastly underrated as a strategic driver of growth – or of value destruction.
It’s a timely reminder of storytelling’s power in the AI age, when good and bad decisions scale quickly.
A quick recap
Back in 2017, Nike launched its ‘Consumer Direct Offense’, pulling back from around 30,000 retail partners to focus on 40 ‘strategic’ ones. It also doubled down on its own stores and apps.
One lesson stood out in my early days as news editor for Australian Reseller News: mess with the channel at your peril.
Then, from 2020, chief executive John Donahoe accelerated the strategy as the pandemic hit. Long-time wholesalers were cut, the company reorganised away from sports into ‘Men’s, Women’s and Kids’, and it moved into digital-first mode.
At first, things looked good. Direct sales had grown from US$3bn in 2011 to US$12.4bn by 2020, 35 per cent of sales. Donahoe set a target of 60 per cent direct sales by 2025, with 40 per cent through Nike’s own digital channels.
Too good to be true? Yup. The pandemic accelerated the inevitable. As Thomas Hale and Gregory Meyer reported in the Financial Review, “Retailers cut off by Nike reacted by filling their stores with trainers and tracksuits from other brands, giving them oxygen to grow”.
Post-pandemic customers went back to their old shopping habits. An amplified grab at normality, sure, but behavioural science predicted the outcome of Nike’s decision.
Around two-thirds of people’s everyday actions are triggered by habit rather than conscious choice. That’s a key finding of this study by Amanda Rebar and her colleagues, which also found roughly 88 per cent of those habits are done on autopilot.
So by 2022, Nike was sitting on a pile of excess inventory. It’s not a stretch to join the dots on it being a vision to reality gap: customer habits didn’t yet include Nike-owned stores.
The cracks were unmistakable by 2024 when Donahoe admitted Nike had ‘over-rotated’ away from wholesale. Last year, it returned to Amazon after six years away.
By then, US and global retailers filled the gaps on their shelves with brands like Hoka, On, Adidas, Brooks, New Balance, Reebok, Asics and Skechers. Across its global network, including Australia, Foot Locker cut Nike from 75 per cent of its purchases in 2020 to a late-2022 target of 55 per cent, DSW restocked with other brands across its US stores, and at US retailers such as Dick’s Sporting Goods, Swiss brand On openly set out to fill the void left by Nike.
Closer to home, Accent Group, owner of The Athlete’s Foot and Hype DC, became Hoka’s exclusive Australian distributor in 2021. By 2023, Hoka’s local sales had been growing 20 per cent a year.
What’s perhaps surprising is that Nike didn’t anticipate retailers would find other products to drive growth. In my experience, big brands often default to casting themselves as the hero in strategic planning and sales forecasts. In technical storytelling terms, the hero dictates or drives the story to its scripted destiny.
Nike perhaps forgot that the customer is always the hero.
Limiting beliefs
Whether you’re in B2C, B2B or any other sector, there are some choice lessons here about the limiting beliefs that blindsided Nike’s leadership team.
My personal take on the story that Donahoe and his teams were likely telling themselves:
- ‘Wholesale partners are just a channel – we can do that ourselves and bank the margin.’
- ‘Data and analytics are better than judgement – our core sports heritage story is not measurable.’
- ‘Customers love us more than the retailer. They will seek out our new owned stores even if it takes extra effort.’
Former Nike marketing executive Massimo Giunco’s insider account of those years is worth a read.
The B2B story is clear. You can’t cut out your partners, industry events and field sales and keep the status quo, regardless of what digital then, and now AI, promises.
It feels smart, efficient and progressive. But customers like you and me are emotional, habitual beings. Many of us still love the in-store experience, or simply browsing before choosing our favourite anyway (like me in an ice cream shop, looking at all the flavours before going back to mint choc chip). Introduce too much friction and we’ll default to the path of least resistance. We just (won’t) do it.
Final word: the Vision Reality Gap
Nearly a decade into its leadership story, Nike bet the power of its brand would overcome inconvenience, for customers and retail partners. It couldn’t. The pandemic didn’t help, of course. As soon as doors to the outside world were open again, people wanted to reclaim old habits. And their belief in the Nike brand wasn’t strong enough to change that behaviour.
One of the strategic storytelling models I teach in my HEARTS, MINDS & WALLETS keynote and workshops is the Vision Reality Gap. The full IP is in my first book, a B2B brand storytelling playbook called ‘Beliefonomics: realise the true value of your brand story’. The gap exists between how well an organisation’s internal story about the future (belief) aligns with the harsh reality of what customers do (behave).
In other words, what do customers actually believe about your story? The smaller the gap, the bigger the sales, basically – with the inverse being equally true, as Nike experienced.
Storytelling is one of the most powerful agents of change in the world. I’ve built a career on it, from a young journalist to keynote stages around the world. But stories cut both ways.
And brand marketing is one of the blunt instruments being used to remedy the situation, along with the restructuring. But it’s a tax that will only increase with time.
Why? Because Nike’s internal narrative created an opening for the likes of Hoka and On, which grew from combined sales of roughly US$1bn in 2020 (Hoka, On) to almost US$6bn in 2025 (Hoka, On).
Customers have moved on, so brand marketing has extra work to do. The next generation has picked up new brand stories that are driving retail demand.
All this comes against a backdrop of economic and social pressures, plus the reputational hit that comes from mass layoffs – 775 distribution centre roles and 1,400 technology roles already this year, with more to come.
Meanwhile, all this serendipitously drops during Mental Health Month, so it’s also pausing to call out the humans in this story.
Thousands of Nike employees are paying for this story. It’s easy to glaze over the big numbers involved. But under the restructuring program, many people won’t know where they stand until decisions begin in 2027. That kind of uncertainty takes its toll on them, their families and the colleagues who stay. For me, that alone is a core reason to sharpen our narrative intelligence as leaders to measure and reduce any gap between what we believe, and how the world behaves.
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