“First: never oppose strength with strength. Second: maximize leverage.” First two principles of Judo
“The art of war teaches us to rely not on the likelihood of the enemy not coming, but on our own readiness to receive him, not on the chance of his not attacking, but on our own readiness to receive him… know thy enemy and know thy self, and you can fight a thousand battles, and win a thousand victories.” Sun Tzu.
When we entered basketball, we were in the very crowded premium athletic branded footwear and apparel space. Our competitors were multi-billion dollar companies with decades of brand equity and large design and marketing teams. We couldn’t beat them playing the game on their rules.
We couldn’t beat them in head-on battle.
No start-up can, but many look to fight this way. A start-up is not a smaller version of a big company. A start-up can’t win by having a similar product or even a product that is 20% of 30% better or 10% cheaper. A start-up has to ‘change the game.’
AND 1 had to look for something different and unique, a position they didn’t want or couldn’t afford to occupy. The three pillars of our competitive positioning became a) basketball only, b) in-your-face attitude, c) iteration and market testing and d) value.
First, we were basketball only. That meant that every time Nike ran a cross-training or running or baseball ad, they were weakening their competitive position with hard core basketball players against us. At the time we designed our very logo, we were claiming the position of ‘in-your-face.’ There are tens to hundreds of millions of playground players. Nike owned the NBA courts. The multi-billion dollar brands were fighting it out there. We wanted to own everything else.
When we first entered T-shirts, we took on the position of trash-talking. Our large competitors didn’t want to be ‘edgy or street’ – because they sold across categories, sports ages and nations. They couldn’t afford to alienate people by people ‘in your face’ or ‘talking smack.’ They didn’t believe these ‘niches’ mattered. But, these niches were the largest volume segments of the business.
That is why likewise, when we entered shorts – we used better materials and more ‘African-American” and inner city cuts and stylings. Nike had a 7” inseam (short leg length), and never went longer. The kids in the inner cities were wearing 10” and 12”. We made a 9” inseam.
And when we entered shoes, we looked carefully at the market. The ‘best’ shoe companies in the world put their best designers on the most expensive ‘prestige products.’ They viewed these products as setting the brand’s upper value.
But they sold the most shoes in the $65 to $80 range, a place where they had only their most junior designers. So, we did the opposite. We hired the best designers we could find, and put them to work designing the highest volume products.
And we conceptually changed how shoes looked. Before AND 1, basketball shoes were big and bulky – they had lots of rubber, weighed a lot, were made of leather almost exclusively and were built around ‘support.’ We decided to make low, mid and hi-cut ‘running shoes for the court.’ We used lightweight materials and meshes, reduced rubber and cut out a lot of weight.
Next, we redesigned how we developed shoes – and to do this we moved sampling to Asia. The biggest companies had a rigid development process that took a long time (typically over a year for a ‘regular style’) and didn’t allow for product iterations. They would design a ‘few’ styles, pick one at the drawing stage, and then develop it as well as possible.
As one Nike designer told me, “we tell people what’s cool.’ We produced 100’s of low-cost prototypes each season and market tested them relentlessly.
We would develop 100’s of drawings and hundreds of ‘samples’ through an innovative process of sampling only the ‘upper’ part of the shoe while re-using the bottoms. We would then fly to the 5-6 major US ‘fashion setting’ markets and set up show in dozens of stores, talking to 100’s of consumers each round, as well as the buyers at our five ‘best’ accounts. We would do at least 2-3 rounds of this before releasing a line of just our very best 5-10 styles.
Finally, the biggest companies had very high margins. Their stock prices were dependent on these. So, when we went into footwear, we decided to put $5 to $10 more ‘value’ into every shoe at each price point by lowering our margin targets from >40% to 35%.
These were all calculated strategies to enable us to win by being smart.
Start-ups are like rocket ships. There is huge ‘gravity’ pulling you back to earth and you need momentum and scale to escape business failure.