In our previous article, I explored the meanings of bias and heuristics using the example of mountain climbing. This time, I’ll delve into their business impact through the lens of Nike and Adidas. Drawing from my firsthand experience at both companies’ headquarters, I’ll share insights based on market data and the unique cultures within these brands. While not every point may apply universally, understanding and empathizing with these insights is crucial for driving innovation and leading the industry.
Until around 2012, Nike and Adidas were neck and neck. However, since the pandemic, the gap between the two has widened significantly. Key factors behind this shift include digital transformations in operations and brand strength. For Adidas to reclaim its market share, it must adopt a more proactive, market-leading approach than ever before. Without this, the chances of regaining its position are slim.
Market Data Insights
Nike and Adidas both have humble beginnings, with Nike originating in Portland, USA, in 1964, and Adidas starting in Herzogenaurach, Germany, in 1949. While it’s often thought that the first to market has the advantage, Nike, the later entrant, has outpaced Adidas in sales and market share. By 2023, Nike’s sales are more than double those of Adidas. What accounts for this significant discrepancy?
One key factor is Nike’s proactive approach to innovation. Nike launched its e-commerce site in 1999 and introduced the customization service Nike ID the same year. In contrast, Adidas didn’t debut its e-commerce platform until 2006, even later than Foot Locker, and started its customization services much later. This pattern continues across other areas, such as sneaker and apparel material development, where Nike consistently leads with first-to-market innovations.
While being first doesn’t always guarantee success, the experience and insights gained from early adoption are invaluable. These accumulated experiences have undoubtedly contributed to Nike’s consistent market leadership.For Adidas to regain its market share, it must adopt a more proactive, market-leading approach. Without this, reclaiming its position remains a challenging feat.
Adidas lags behind Nike and Footlocker not only in online sales volume but also in product variety. Although managing a larger product range is more challenging, it’s evident that offering a broader selection provides a significant sales advantage.
How Did Nike Get a Head Start?
Let’s explore this market fact through a heuristic lens. Nike, headquartered in the United States, and Adidas, based in Germany, are both globally successful with diverse workforces. However, key decisions about new ventures are primarily made by upper management at their respective headquarters. These top executives often bring their local business experiences and cultural heuristics into decision-making. American heuristics heavily influence Nike, while German heuristics shape Adidas, clearly reflected in Adidas launching its e-commerce site much later than Nike.
In Germany, digital marketing has traditionally developed more slowly, and retail market competition isn’t as fierce as in the U.S. Consequently, the sales and marketing strategies in Germany are less intense and sophisticated. By “weaker,” I mean that their scope and approach are narrower, more singular, and classical. This applies not only to advertising campaign ideas and implementations but also to various sales and marketing necessities, such as delivery logistics and in-store shopping experiences. In a project I worked on at Adidas, I encountered shockingly outdated tech solutions, making me wonder why such developments were happening so late.
Fundamentally, if consumers aren’t seeking something new, there’s no incentive to venture into new business areas. This also means that new insights into products or services are introduced to the market much later. Additionally, in Germany, various businesses are protected by law, making it challenging for new businesses to enter. This results in slower acquisition of new knowledge compared to American companies.
For instance, the liberalization of long-distance bus services in Germany began as recently as 2013. Until then, there were no new methods like buying long-distance bus tickets via mobile apps. From a UX design perspective, the implications of this should be evident.
In many countries, long-distance bus services have been a competitive industry for years. This competition has driven operators to implement various improvements, such as innovative seating arrangements, Wi-Fi availability, and mobile app services. However, German bus operators still lag behind in adopting much of this expertise.
Which Market Shaped You and What Did You Experience?
Generation Z has grown up immersed in digital tools, giving them a vastly different perspective compared to previous generations. This difference is also evident across locations, as seen with Nike and Adidas. Whether launching an e-commerce site or introducing customization services, it’s crucial to involve individuals who have been exposed to competitive markets and innovative methods. Without this experience, it becomes challenging to gauge how intensely products or services should be improved in a competitive landscape. This parallels the mountain climbing analogy used to explain bias and heuristics: those who have climbed lower mountains (less competitive markets) versus higher mountains (highly competitive markets) inherently have different perspectives.
Until around 2010, with the relatively recent advent of the smartphone in 2007, sales and marketing approaches, as well as the proliferation of new products and services, appeared similar across countries. However, technological advancements in Blockchain, AI, and VR, along with smartphone evolution, have significantly diversified the types and delivery methods of new products and services by country and region. This has led to a divide between markets using outdated methods and those leveraging high-tech solutions. For instance, Japan’s persistent use of paper-based administrative services and the limited penetration of Uber are partly due to the heuristics of older management who haven’t experienced the benefits of technology in real time.
While such divides are inevitable, understanding the reasons behind them can help companies take proactive steps, much like Nike’s approach. By comprehending the backgrounds and experiences that shape different markets, businesses can better anticipate and respond to changes, ensuring they remain competitive and innovative. This insight into market evolution is crucial for leading in any industry.
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