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Fast Company


How Nike Built a $35 Billion Cognitive Shortcut

By Jeff Rosenblum for Fast Company

A brand is not an esoteric concept. It is a tangible asset that can be worth billions of dollars. So, what exactly is a brand? Is it a symbol? A story? An economic model?

In a world with more than 500,000 brands competing for attention, where humans are exposed to 5,000 brand messages per day, where the human brain consumes 11 million bits of information every second, a brand is a shortcut that helps people process and understand the meaning behind logos. That cognitive shortcut is a business’s most important asset. It can be worth billions of dollars. How those brands are valued has gone through revolutionary change in recent years.

The story of Nike, a brand now worth $35 billion, highlights the difference between the old way of branding, and how it has changed. It reveals that brands are no longer built based on how they are portrayed. Now, brands are built based on how they behave.

Early on, Nike was not a flashy brand. It created a functional product that was used only by expert runners. Then in 1987, Nike invited the ad agency Wieden+Kennedy to pitch it on a new campaign. The night before the big pitch, Dan Wieden came up with Nike’s legendary tagline. He grabbed a stiff drink and turned on his TV to relax. On the news was the execution of Gary Gilmore, who had been convicted of killing two people in Utah. Gilmore’s last words before facing the firing squad were “Let’s Do It.” The line broke through the stress and ignited something in Dan’s mind. He shifted a couple of words and decided on an 11th-hour pivot to “Just Do It.”

Since then, Nike has turned Just Do It into a multibillion-dollar asset. But that road has not been without its rocks. In fact, Nike almost lost it all in a moment that highlights how transparency has changed the game from the old image-based world of branding to the new world of behavior-based branding.

In 1997, Nike commissioned a confidential investigation by Ernst & Young that found atrocious conditions in the overseas factories that supplied its sneakers. The report was leaked to The New York Times and then made headlines everywhere. Nike didn’t own the factories. 

The company outsourced all of its manufacturing to vendors around the world. But consumers didn’t care and held the brand responsible. As a result, the company’s stock price tanked, and Nike lost 50% of its market cap virtually overnight.

Nike’s products are just rubber, cloth, and stitching. The Swoosh, “Just Do It” slogan, and superstar endorsements create cognitive shortcuts to the company’s values and its promise of integrity and quality. Suddenly, those shortcuts were telling a different story. Who wants to be associated with a brand that hurts women and children?

But here’s the part of this story that I love: Nike changed. The company completely overhauled its supply chain. In 2005, Nike embraced transparency and released a global database of more than 700 factories. This wasn’t required by law; it was a proactive step that signaled a dramatic shift from the brand’s previously opaque supply chain. Nike decided to take a leadership position in ethical outsourcing in the industry.

Soon, Timberland, Puma, Adidas, and Reebok followed the brand’s lead, ultimately shining a light on their supply chains and the treatment of their global workforce. Environmental impact statements soon followed. Nike’s brand and financial value recovered and then grew exponentially, proving that you can’t use PR or advertising to get past a brand crisis—you actually have to change your behavior.

"Brands don’t need to please everyone. They need to be true to their values and core audience."

- Jeff Rosenblum

Nike also proved that successful branding in the age of transparency isn’t simply about strong ethical behavior; it’s about marketing with a point of view. In 2018, the brand ran ads supporting Colin Kaepernick, the San Francisco 49ers quarterback who was the first professional sports player to protest racism by taking a knee during the national anthem before games—and consequently found himself without a job, shut out of the league. Those ads, which featured the stirring tagline “Believe in something, even if it means sacrificing everything” stirred up as much controversy as Kaepernick himself.

Nike lost about $3.5 billion in market cap in the immediate backlash from its Kaepernick endorsement. Media pundits declared that the brand would suffer severe long-term damage. But its core audience—younger, more diverse, more progressive—quickly rewarded Nike for demonstrating bravery and supporting racial equality. Within weeks, Nike’s stock had more than rebounded. The risk paid off because brands don’t need to please everyone. They need to be true to their values and core audience.

Consumers today see right through attempts at obfuscation, duplicity, and superficial messaging. Brands must find the nexus of what they stand for and what their audiences really care about. Nike’s market cap is now twice as high as when the Kaepernick ad came out and seven times higher than when the brand started to clean up its supply chain. Brand behavior and marketing with a point of view break through the enemy of incrementalism and drive exponential results.

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