World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 88

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of the size difference between us and
Nike comes back to the difference in our
North America businesses. Years ago, we
sent over European executives who didn’t
understand American sports. We didn’t
know baseball, basketball, and American
football; we didn’t appreciate that sport
in the U.S. originates in high school and
college instead of in clubs (as it does in
Europe). We created products that were
great for Europeans but not necessarily
for Americans.
We had already begun to change this
before I arrived. But I looked at it
again and concluded that we needed
to overinvest in America over a longer
period of time, to ensure that we could
build market share and margin.
In other regions we have different
strategies, because we have different
goals. We’re trying to defend a high
market position in Europe; in China,
we’re trying to grow a strong market
position but defend our margin.
Focused Execution
It sounds like your strategy
is oriented toward long-term
investments.
RØRSTED: There is no long term
without the short term. You need to get
both right. You can be oriented toward
quarterly results and still have long-
term goals. Our management board
compensation has two components:
long-term incentives based on our 2020
targets and short-term incentives. It’s
like being in university; you have to pass
every exam along the way. You can’t
just wait until the last quarter and try to
catch up.
Not every decision can be long-term.
If a market suddenly slows down, as
Europe is right now, you need to act [in
a way that’s] relevant to that change. I
think a lot of companies underestimate
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the importance of getting the daily
job done in a way they can be proud
of. Leaders think they get famous for
strategy, and they don’t really focus
on the everyday execution, because
they think you don’t get famous
for that. But unless you have good
execution in place, you will struggle
with growth, because the operational
foundation on which you grow is
fragile.
For example, we have outgrown our
infrastructure in the United States.
During the second half of last year,
we missed revenue because our
distribution system simply couldn’t
keep up with our demand. In a sense,
this was a self-created problem. We
saw it coming, and nobody dealt with
it. It’s cumbersome to create new
warehouses. Then, suddenly, we had
a problem. That’s why operational
excellence — our One Adidas initiative
— is so fundamental for our company.
It helps us avoid creating problems for
ourselves.
What’s involved in the One
Adidas initiative?
RØRSTED: Our company has always
been very good at generating top-line
[results], but without leverage over costs.
We added €9 billion (US$11.6 billion)
to our top line between 2008 and 2016
with no change in operating margin. One
Adidas is about improving operational
excellence, so we get scale into our
business model. And we are building
consistency into our data sets.
RUNAU: Adidas historically operated
through strong country-based
organizations. It grew basically from
the bottom up, and each country
created its own systems. We are
bringing them together. Thus, for
example, in 2014, we had more than
50 different intranet sites around the
globe. Now we have one.
RØRSTED: If I have a message to send
employees, for example, to describe a
decision the board has made, I send one
message globally. In 2014, our system
couldn’t do that. Back then, employees
didn’t really know what was coming
through the system.
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