Organizational Change
Nike could have avoided the downturn had it been more receptive to ongoing change. One of the things it could have done differently was to "periodically analyze the organizational environment and identify forces for change." It is evident that Nike did not do this until it saw its sales slump. There were several underperforming divisions, and more importantly there were several untapped new product areas. An environmental scan would have allowed Nike to identify those much sooner, and perhaps respond more quickly. By being slow to respond to its external environment, Nike put itself in a more vulnerable position. Nike was forced in the to embark on revolutionary change, rather than evolutionary, because of its slow response. Ultimately, it could have adopted the revolutionary approach by being in tune with its environment, and by creating an organizational culture that was in general more receptive to change.
That said, even when Phil Knight recognized the need for change, he had trouble creating the motivation for change. Nike had a strong track record, and there were still many things that the company was doing right. As such, the designers in particular were resistant to change. They were set in their ways, believed their own hype, and essentially were slaves to organizational inertia. An organizational confrontation meeting -- or a regular series of these during the revolutionary change described above, would have helped Nike be more open to change. One of the most important traits of an organizational change meeting is that it is forward-looking. The company and its people are challenged to look to the future, rather than to continually examine the past. The mindset of the Nike managers, the idea that they were successful in the past and that was good enough, was toxic for the company during this period. If these designers and managers had been continually thinking forward, they would have recognized the trends earlier, been more receptive to change, better embraced the company's role as design leaders and possibly even pre-empted the arrival of some of the new competitors.
Ultimately, the issue for Nike was that it had such a long, sustained run...
Its market power and its design talent were great in terms of ensuring that Nike was always the industry leader, but they failed to recognize at an organizational level that every company was aiming for them. So if there was a new trend or a new concept that Nike was reacting slow on, any niche in the market where Nike was assailable, these new companies were going to exploit that. Nike's designers had essentially stopping working as hard -- they got comfortable. Ultimately, this allowed other companies to do better than Nike and Nike then had to re-learn about being the best. The company was left with a change process that was more revolutionary, because it had to make up ground quickly, and fight back against the competition.
The organizational life cycle is a means of understanding where a company is. Nike had essentially settled into a mature stage of the cycle, where it was consistently profitable and held a dominant market share. But one of the things about the company life cycle, is that the theory does not allow for the renewal that actually occurs with many companies. There is not necessarily a flatline plateau, but a mature company can still find ways to innovate and grow. Nike was headed for decline at the point in time of the case. They were in that tired stage of maturity, and this was reflected in the organizational mindset. The reality is that they needed to renew themselves by thinking more entrepreneurially.. They needed to think a bit more like a growth company, when they are not necessarily one. But if they think like a growth company, they will be able to grow, and avoid the decline part of the company life cycle.
Mattel's managers were slow to change their decision making for a couple of reasons. The first is that the company was generally in a mature stage, where profits were stable. The stability of the business and the fact that the customer and product had changed little over time basically attracted the types of managers who preferred that sort of environment. The organizational culture was a strong driver of the lack of change at Mattel and Barbie at the time; people were averse to change. In…
