A Journey of Rediscovery: How Adidas Uses the Past to Innovate
October 5, 2015 | by Chris Kalaboukis
How does a company cope with change? It’s a question that looms large for many executives who are struggling to keep up with the breakneck pace of business. Those who fail to answer it may face loss of market share, or, in extreme cases, financial ruin. All too often, companies respond to these pressures by fixating on the future, not realizing that their greatest strength could be hidden in their past.
In the case of Adidas, founded in 1924 managers, innovators, and designers pore over company history, discuss its relevance, and determine what to discard and what to keep. In a process full of both continuity and change, they reach back to the lessons of the past and stretch forward to adapt to the changing needs of athletes and consumers. The results speak for themselves: Adidas has transformed itself from a consistent loss maker in the late 1980s and early 1990s to a brand with a market cap of US$17.1 billion.
In 1989, with the company at a crossroads, then CEO René Jäggi decided to invite two ex-Nike managers, Peter Moore and Rob Strasser, to visit Adidas. Moore had been creative director of Nike and the designer of the Air Jordan brand, and Strasser had been Nike’s marketing director.
Moore and Strasser believed that over the years since company founder Adi Dassler’s death in 1978, Adidas had lost confidence. Consequently, instead of looking to its own capabilities, the company was foundering and looking over its shoulder at Reebok (a brand that Adidas would acquire in 2005) and Nike. This, Moore and Strasser believed, was a mistake. A brand like Adidas had to lead, not chase. Free of cultural blinders, Moore and Strasser used the marketing skills they had developed at Nike to draw selectively from Adidas’s history. Initially as consultants and then as the creative director and CEO of Adidas America, respectively, they defined a new strategy and approach to innovation that guides the company to this day.
In looking to Adidas’s past, Moore and Strasser recognized two unique capabilities. First, they saw that the core of the company had been Adi Dassler’s hands-on approach to innovation — his philosophy of industrialized craftsmanship. Dassler’s closeness to athletes and his intimate understanding of their needs had created a stream of innovative products that enhanced athletic performance. When the company lost its connection to athletes, quality suffered.
Moore and Strasser recommended renewing Dassler’s approach, and developed a new product line called Adidas Equipment. For Equipment, which was launched in 1991 and later evolved into Adidas Performance, Moore and Strasser created branding rules that emphasized product quality. For example, they placed restrictions on the color, sizing, and placement of the logo, and initially even on the colors of the shoes themselves. They wanted consumers to focus on the quality of the shoe, and not be distracted by other features. They wanted to make the product the hero, just as Dassler would have done. “The idea of Equipment was that it was a model that you could build the whole company around,” Moore told us. “The model was to go back to what Dassler had tried to do all his life, which was to make the best products for the athlete to compete in.” Reconnecting in this way was emotionally uplifting — especially for those who had worked with Dassler — and helped restore employees’ confidence. Today, Performance represents the core of the Adidas brand and accounts for more than 75 percent of its sales.
Second, Moore and Strasser understood that Adi Dassler’s approach to design, which emphasized functionality over style, had created a portfolio of timeless, authentic shoe designs. The shoes were no longer cutting-edge in terms of their athletic performance (the technology had moved on), but they had a strong emotional appeal, especially in the burgeoning street-wear market epitomized by the Adidas-wearing hip-hop group Run DMC and its fans.
Adidas had struggled to create a leisurewear line, but it seemed the company unknowingly already had one. In a brief memo to the Adidas board, Moore set out the idea for a new brand of street-wear shoes. The suggestion was to take some key models from the past and modernize the quality, comfort, and fit. Rather than blurring the clarity of Equipment, Adidas recognized that this new line should have a separate name, “Originals,” and a distinctive presentation. As a testament to the success of the approach, Originals is now a $2.8 billion business. All of the shoes selected for updating at the launch of the initiative are still produced today, including the Stan Smith tennis shoe, 60 million pairs of which have been sold.
Although Adidas looks to its past, it doesn’t live in it. Adidas is not simply a retro brand reworking old models. Rather, it uses its capabilities alongside insights into consumer behavior to create contemporary and innovative products. Embracing its history doesn’t mean being limited by it. It means being innovative in ways that are in line with the capabilities that were developed from the beginning.
It’s an important lesson for companies facing rising competition and uncertainty, and wondering how to distinguish their brand. The answer may be hiding in plain sight. Look beneath the surface to uncover the deeper insights that have driven innovative thinking before, and then think about how to integrate them into the company’s strategies. As Dassler himself once wrote, “Come to work every day as if it were the first time. This will prevent you being blinded by routine.” The past should be a source of inspiration, not constraint. It should be used selectively when it has the potential to add value.
See also “The History Behind Adidas’s Success – In Pictures" for a visual look into Adidas’s past.
Adapted and reprinted with permission from “How Adidas Found Its Second Wind” by Nicholas Ind, Oriol Iglesias, and Majken Schultz from the Autumn 2015 issue of strategy+business. © 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. www.strategy-business.com
- Nicholas Ind is an associate professor at Oslo School of Management.
- Oriol Iglesias is an associate professor at ESADE Business School in Barcelona, and director of the ESADE Brand Institute.
- Majken Schultz is a professor at Copenhagen Business School.