Simone Del Rosario: A former intern at Nike started his new role as CEO this week. Elliott Hill took the reins after the surprise retirement of CEO John Donahoe.

Nike’s facing a major sales downturn and struggling stock price. It’s 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?

I want to bring in Gautam Mukunda, leadership expert and author of “Indispensable: When Leaders Really Matter.”

Gautam, Elliott Hill started up this week. First of all, I just wanted to ask, what did you think? What did you think of the hire?

Gautam Mukunda: I think he was great. Um, Nike is a special company. The the there was the line in, in sort of sporting goods, was that other companies make shoes, and Nike is a religion, um, and so as, as a dedicated non runner, I’m I, I’m definitely an atheist in this religion, but I recognize the power of the brand. And so Nike drew back on its heritage and said, What made Nike great was the sort of 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 say that, let’s go back to that, to where we were.

Simone Del Rosario: I wonder if they had offered Elliott hill the job in 2020 Do you think Nike would have had the four years that it had?

Gautam Mukunda: It’s hard for me to imagine. My guess is they would not have had the initial short term spike that they got when they bumped up their when they sort of bumped up their short term numbers with all the different ways that they did, because he would not have done that. But then, equally, they would not have had the crash that followed when those tactics stopped working. I imagine most Nike shareholders would take the net, net of that and went out and just, I’ll say, like the evidence there is the particular decisions that led to this disaster for Nike. It’s not, it’s not retrospective to say that they look bad. People in Nike, people in the industry, were saying at the time, wait, this does not make sense, right? So the crucial if there are lots of crucial ones, you know, cutting back on innovation, not doing new products, taking successful old products that they re-released, and essentially writing them into the ground. But if you’re going 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, where, if you went into, for example, a Foot Locker or the most important shoe retailer in America, most of the shoe, maybe not most, but a huge plurality the shoes you were going to see would be Nikes. This was enormously important, right? But essentially, there were all these new entrants into the industry who were trying to get into this business, and they didn’t have shelf space because footlock was just more popular to sell Nikes, more more profitable. Fort Lauder sold Nikes. So when, when Nike chose to pull back from these retailers to open up the shelf space, right? The theory somehow was that customers would follow Nike, and they would buy on the website, and Nike would be able to sell at higher margins. I’m like, nobody. Very few people who are actually in the industry thought that made any sense. They thought people are gonna go to footlocker, and yeah, you’ve got your hardcore people who would never wear anything but a Nike, but that’s not most of them. And Foot Locker wasn’t gonna leave its shelves empty. It was gonna 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 that extraordinary level of dominance is ever coming back, really

Simone Del Rosario: Let’s talk about that, because before Hill, you know, took the reins officially. Obviously, that just happened this week. They got on the call and told people that they were going to stop relying so much on their retro styles and really lean into the innovation factor at Nike. Do you think that that is the proper direction? Of course, this wouldn’t be a direction that hill specifically has talked about, because it was before he entered I assume it’s something they talked about in the interview space.

Gautam Mukunda: I mean, I’m sure, but it, I mean, it makes sense as a proper direction, because it’s kind of the only direction, right? So the specific product that that drove Nike’s revenues into the ceiling and then crashed was the panda dunk, which is truly a wonderful name, right? It was a, it was a black and white sneaker that had been very popular in the 80s that they reissued and became huge. It was sort of on it was on the feet of influencers all like you basically couldn’t open on Instagram without seeing people wearing panda dunks. The Nike issued model after model, version after version of this to the extent that I think less than three years after the reissue, a sneaker Convention voted the panda dunk, the worst sneaker of all time, right? I mean, in a weird way, this is an achievement, but it’s probably not an achievement that Nike. So that strategy clearly had not, you know, not just hit its limits, but they crossed so far beyond its limits that. They were that those part. So what’s left? Right? You can’t we have demonstrated that we cannot perpetually recycle our old things. So we got to go New, and that means innovation. But innovation in the case, it’s not just technology. Or what made Nike special was not just that they had better. You know, it’s not that the shoes were better. Again, I’m not a runner. I have no idea. Like, that’s the story they tell you, what story every company tells you. But what made Nike was the storytelling, right? That Nike meant something in the in the 90s, when Michael Jordan was the face of Nike and the face of sports and whatever, I remember reading that the back of Michael Jordan’s head was more recognizable around the world than Bill Clinton’s face, right? That this was that is how iconic he was. And you cannot imagine Michael Jordan without Nike as just as you cannot imagine Nike without Michael Jordan. So that level of cultural dominance may be impossible in the modern world, but the ability to tell those kinds of marketing stories about who we are and who and what we’re special, right? That is something that Nike wasn’t able to do, that no one else that in a way that no one else could, but it is something you do when you live, eat and breathe the culture of sporting goods. You have got to be that. You 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? Who’s made it? You gotta love the fact that his LinkedIn starts with intern.

Simone Del Rosario: I love it. Yeah, yeah. No, great. I ended when we reported on him getting the job. I had said, you know, the stock is up on news that Nike is hiring its 1988 intern to be to lead the company. Are there a lot of successful non founder CEOs who have spent their entire careers at one company?

Gautam Mukunda: Oh, yeah, sure. So Boeing spent. Boeing spent a long time where, with the promoting CEO after CEO who were like that, GE up until Jack Welch. You know his Jack Welch’s predecessor, Reginald Jones, was considered the greatest CEO his generation. He was a career, career GE guy for most of his life. In fact, most great, long lived, great companies operate this way, in general? Well, the business, the academic research on sort of companies that live for a long time is they hire almost exclusively internally, because hiring external people is a risk, right? Whenever you do it, you’re taking a big risk because you don’t know them as well as you might otherwise. Will. Both of my, both of my first two books are actually on this question of why it is when you’re choosing leaders, should you go on inside or outside, or what happens when you do outside? You do outsiders? And so, yes, I want to know, right? If you think about the companies that have lived forever and have defined America, you know, a lot of American capitalism, think companies like McKinsey or Goldman Sachs or, you know, like there is no path to being CEO that doesn’t involve being an insider. It simply does not exist. They, you know, if you said, if you asked McKinsey if they were going to make their next Managing Director, they’re going to hire their next managing director from Booz Allen or Bain or BCG, like, it’s not that they would laugh at you. They wouldn’t be able to comprehend the question, right? But like that is so foreign to the DNA of the company, that they would do it. And it is not an accident. It is those companies like that, because they have such a powerful story and a culture that makes them who they are, that never make that choice.

Simone Del Rosario: It’s interesting, you know, you talk about these huge companies that have shaped the fabric of the America corporate landscape, and Nike is certainly one of those in the apparel business. But at this point, we’re seeing it be lapped, in some ways, by much smaller, more nimble companies who are taking, you know, working with a lot less resources and kind of doing the most with it. We look at, you know, how Hoka and on are the go to running shoes for run clubs all over the country. It’s not Nike. We look at viori on the apparel side of things, where people are gravitating toward that, and that was really boosted by a lot of social media influencers. How does Nike who is such a it’s such a well known brand. Everybody obviously knows who Nike is. Has preconceived idea about what the company is. How does Elliott Hill reinvent Nike in this new age of consumerism?

Gautam Mukunda: So I think what you said is exactly right, but it’s both a is both a threat to Nike and also its advantage, right? But everyone knows what Nike is. Nike means something to people, and that means something is Hoka can be the shoe of choice for running clubs, but Hoka doesn’t mean something in the same way. Yet. I’m sure they aspire to that, but they don’t have the history yet to have that sort of emotional, emotional ties. You know, one of my best. Friends, a serious runner, things like that. She will never wear anything but a Nike right? Because her whole career is running. That’s what she’s that’s what she thinks of. So what I would say, what Ellie knows are saying, is, when you think about Nike, sort of doing what made it such a successful company, that doesn’t mean doing the same things that it did. It means doing things in the same spirit that it did. So if you’ve got the resources that those other companies don’t, right, you can use those resources to develop technologies that they cannot and actually create products that are performance based better than them. That is within Nike capabilities, because we know that, because it’s done it before, right?

Simone Del Rosario: You can use your marketing it now with the marathon shoe. So that’s right,

Gautam Mukunda: Right, and which are genuinely right, like objectively, genuinely higher performing shoes that are able to cut marathon times right? That’s not just a marketing story. That is actually technology story. You are able to get the sort of globally iconic athletes who other companies probably cannot get right that matters. These, the major, major athletes are sort of the only, might be the only figures right now who kind of transcend popular culture. You know, Taylor Swift and LeBron James are probably the only two people in America who are universally recognized and have, you know, very positive Q scores. So I’m pretty sure Taylor Swift is not going to endorse Nike, but they got LeBron. And so that matters, and that is the story they can tell themselves about they not themselves, but the market, about how, yeah, you can be a niche player. You can be, you know, you can be a niche player with one of these shoes. And that’s fine. They may not have the gigantic, you know, concentrate, market concentration that they had in the past. But if you want to associate yourself with the people who define sports, that’s still Nike.