How Nike’s Success Became Its Biggest Problem

On October 12, 2019, Eliud Kipchoge stood on a bridge in Vienna, Austria. He was preparing to do something no human being had ever done before. The 34-year-old Kenyan was already the greatest marathon runner in the world. He had won Olympic gold in Rio, set a world record in Berlin, and won nearly every major marathon he’d entered. At the time, the average marathon finisher took about four and a half hours to run 26.2 miles. This morning, Kipchoge would attempt to run it in two.

Everything had been arranged to give him the best possible chance. The course was almost perfectly flat. The weather had been carefully selected: neither too hot nor too cold. A car drove ahead projecting a green laser onto the pavement, showing the precise pace that Kipchoge needed to maintain. Teams of elite runners took turns shielding him from the wind. And then there were the shoes. That morning, Eliud Kipchoge was wearing an experimental pair of Nike Alphaflys, incorporating revolutionary foam and carbon-fiber technology designed to help runners go faster without expending more energy.

When Kipchoge crossed the finish line, the stopwatch read 1:59:40, twenty seconds ahead of his goal. He threw his arms into the air as thousands of spectators erupted in celebration.

Still, Kipchoge’s achievement sparked no shortage of controversy. Because he ran under such controlled conditions, his achievement couldn’t be recognized as an official world record. Some runners argued that Nike’s new shoes provided an unfair advantage. Critics called them “technological doping.”

World Athletics introduced new regulations a few months later, restricting prototypes and limiting sole thickness and the use of rigid plates. And yet, the larger point was hard to ignore. Nike’s innovations had helped push the sport to reconsider the boundaries of acceptable shoe technology. For decades, the company had built its reputation by creating things that changed what athletes could do. Its innovations left competitors racing to catch up. It’s therefore all the more concerning to see that, just seven years later, Nike is the one struggling to keep up.

Running Into Trouble

The last few years have been incredibly challenging for Nike. Its annual revenues fell from $51.4 billion in fiscal 2024 to $46.3 billion in 2025, and were essentially flat in 2026. On October 1, the company reported another 4% decline in quarterly sales, including a staggering 26% drop in Greater China on a currency-neutral basis. Nike’s stock has lost more than two-thirds of its value since its peak in 2021. That’s an astonishing reversal for a company that spent the last four decades as one of the stock market’s great success stories.

Meanwhile, a new generation of competitors has been eating into its business. Hoka has attracted legions of runners with its distinctive oversized cushioning and an emphasis on comfort and performance. The Swiss running-shoe company On grew its sales 30% last year. And while these companies are still much smaller than Nike, they’re attracting loyal fans in categories that Nike once dominated.

Nike seems to be losing its cultural relevance. Its once-iconic Swoosh has become so ubiquitous that people barely notice it anymore. In 2024, GQ magazine published an article asking, “Is Nike Still Cool?”

Much of the conventional advice about Nike’s recovery comes down to one simple idea: Nike needs to become cool again. And while that’s easy to say, it’s also pretty lousy advice.

The Problem with Being Cool

To turn the business around, Nike replaced CEO John Donahoe two years ago with Elliott Hill, a company veteran brought out of retirement. Hill has been putting considerable energy into Nike’s marketing. Shortly after he took over, the company started doing Super Bowl ads again for the first time in 27 years. Hill has been investing in new campaigns, reenergizing its relationships with athletes, and trying to recapture some of the cultural energy that made the brand famous in the first place.

Recent partnerships suggest how far afield Nike is willing to go. Its 2025 Super Bowl campaign was narrated by Doechii, the Grammy-winning rapper whose provocative style has made her one of the most talked-about performers in music. Nike has also launched NikeSKIMS, a partnership with Kim Kardashian’s shapewear company. Kardashian isn’t an athlete, but she’s built an enormous business around her celebrity.

The hope is that these partnerships might help Nike become cool again. After all, Nike helped invent the modern business of celebrity endorsements, turning its relationships with famous athletes into one of the most powerful marketing engines in history. If that approach worked before, perhaps it can work again.

There’s something backwards about that logic. You don’t become cool by partnering with cool people. You become cool by doing cool things yourself. Adidas learned that the hard way when it partnered with Kanye West. While the Yeezy business initially generated enormous sales, the partnership eventually collapsed when Kanye self-destructed in a torrent of antisemitic mayhem.

Nike became cool because it kept inventing amazing things, year after year. The company started with Bill Bowerman, the University of Oregon running coach who famously experimented with rubber soles using his wife’s waffle iron. Nike went on to develop Air cushioning, Air Jordans, Flyknit, and eventually the Alphafly. Its commercials didn’t just have famous people in them; they were acts of creativity in their own right.

Coolness can’t be borrowed. It’s something a company earns over time by continually creating things that people find extraordinary. That requires a culture focused on experimentation, invention, and insight. And it demands an openness to change.

Exploration and Exploitation

James G. March spent much of his career studying how organizations learn. March was a professor at Stanford University and one of the most influential organizational theorists of the twentieth century. He was fascinated by a peculiar problem: why do successful organizations sometimes become so resistant to change? After all, successful companies generally have capable leaders, substantial resources, and years of experience.

In 1991, March published a paper called Exploration and Exploitation in Organizational Learning. He described two fundamentally different activities. Exploration involves experimentation, discovery, invention, and the search for new possibilities. Exploitation involves refinement, efficiency, execution, and making the most of what an organization already knows. Both are essential, but exploitation produces more immediate and predictable returns.

Cultures that are great at exploitation tend to be good at managing existing situations. They value collaboration, alignment, coordination, and getting people to work together. These are the companies that have forty people on a Zoom call and make sure there’s a meeting before the meeting. It’s easy to make fun of this behavior, but it serves a real purpose. If your job is to take something successful and keep it going, you need an extraordinary ability to coordinate people and activities.

Cultures that focus on coming up with something new tend to operate quite differently. They can look like a bunch of thirteen-year-old boys on a playground, constantly challenging one another and trying to one-up their friends. People are competitive, argumentative, and endlessly curious about what somebody else is doing. Meetings start twenty minutes late, and occasionally nobody shows up because they’ve found something more interesting to work on. These places can be exhausting, even cutthroat. But at their best, they create an environment where the excitement comes from making something nobody has seen before.

The Fragility of Invention

Unfortunately, cultures of invention are also surprisingly fragile. As March described it, there seems to be an inevitable pull towards exploitation. As organizations become successful, they naturally invest more in exploiting what already works. Those investments make exploitation even more productive, strengthening the case for doing more of it. Eventually, the organization can become extraordinarily good at managing its existing business while its capacity for exploration gradually atrophies. Think of the problem as a trip to a casino.

Imagine walking into a room filled with slot machines. You have a pocketful of coins, and you’re trying to make as much money as possible. You start by experimenting. Put a coin into one machine, then another, then a third. Some pay out more than others. Eventually, you find a machine that seems particularly generous. The more money you put in, the more comes out. So you settle in and start playing. And you stop trying other machines. After all, why would you? Every coin you put into your favorite machine gives you another chance to win. But somewhere else in the casino might be a machine that pays out twice as much. You’ll never discover it if you keep playing the one you already know. Over time, you get better and better at exploiting the seat you’re in.

Many cultures of invention don’t survive the departure of the founders who created them. Sony once seemed to invent the future every few years. Under Akio Morita and Masaru Ibuka, the company helped develop the Trinitron television, introduced the Walkman, and worked with Philips to bring the compact disc to market. But over time, Sony became more focused on managing its existing businesses.

Apple faces a similar question today. Steve Jobs created world-changing inventions like the iMac, the iPod, and the iPhone. Tim Cook dramatically scaled the business, but he also left people wondering when Apple’s next game-changing invention would appear. The appointment of former hardware chief John Ternus as CEO is an encouraging sign.

Elliott Hill seems to understand that challenge. When he returned to Nike, he declared that the company had lost its obsession with sport. One of his most consequential decisions has been to reorganize Nike around individual sports rather than consumer demographics. After all, a team responsible for selling more shoes to young men is likely to spend its time studying their tastes and developing marketing campaigns. A team trying to help marathon runners go faster has a very different problem to solve. The first team gets better at selling shoes. The second might invent an entirely new kind of shoe, like the Alphafly.

Returning to Invention

Of course, reorganizing the company is only the beginning. Rebuilding a culture of invention requires creating an environment where unconventional people can pursue unconventional ideas. Where experiments that don’t immediately produce revenue are allowed to continue. And where people are rewarded for challenging existing products rather than simply making them more profitable. Hill’s challenge is to restore the distinctive abilities that made Nike extraordinary, while continuing to run one of the largest consumer businesses in the world.

But that doesn’t mean Nike shouldn’t evolve. The world keeps moving, and even the most distinctive abilities need to be recast in new ways to meet new challenges. Nike shouldn’t be trying to recreate the company that Phil Knight and Bill Bowerman built in the 1970s. It needs to find new ways to apply their obsession with helping athletes perform better. It needs to tell brave new stories in compelling ways. Coolness will come later.

Some years ago, a Swiss triathlete named Olivier Bernhard worked with a Swiss engineer to develop an unconventional running shoe with a new kind of cushioning technology. He had been a Nike-sponsored athlete, so he took the idea to Nike. The company wasn’t interested. Bernhard and two partners went on to found On, which has since become one of Nike’s fastest-growing competitors. Nearly forty years after Bill Bowerman started experimenting with new shoe soles, another athlete with an inventive idea had to go somewhere else to make it happen. That’s the core of Nike’s problem, and a watchout for the rest of us. The greatest threat to a culture of invention isn’t failure. It’s success.