Further Disaggregation Potential 62 

Nike has long been held up as an example of an early “disaggregated enterprise” (Katz, 1994: p.10) with extremely low capital expenditures (Goldman & Papson, 1998: p.13). Various types of disaggregation and outsourcing are now common in many sectors of the global economy. Given that Nike was founded with a business plan that relied on disaggregation – and that all the major firms in the industry are more-or-less disaggregated – it is useful to consider to what degree these

companies will continue to explore the potential advantages of further

disaggregation, given the growing ability of ICT to enable such disaggregation.

7.2.1 Advertising & Marketing

While the management of advertising and marketing has, in the past, has been considered a part of the core corporate strategy (Aaker & Joachimsthaler, 2000), and these nodes are considered core to value creation in the buyer-driven commodity chain (Gereffi & Korzeniewicz, 1994: p. 99), there are signs that this control could be shifting, given the steep learning curve associated with new implementations of ICT technologies in business.

In researching Nike’s digital strategy, what becomes notable is that increasingly, it is the new media firms and other collaborators who have introduced marketing and advertising innovations to Nike. According to one Nike executive:

"When we start going to meetings with Apple Computer, or the guys that did the Nike ID site [R/GA Media Group Inc.], it's not that they're pitching our advertising business, but they're directly or indirectly solving our advertising needs with their ideas."(Thomaselli & Cuneo, 2007).

Our earlier review of Nike and Adidas’ consumer-focused ICT and OSN initiatives reveal the scope of their dedication to strategically engaging the consumer using new media technologies. What is less clear, however, is who is actually

developing and deploying these technologies – and associated ones such as the sensor and software used in the Nike+ and miCoach systems. R/GA, a leading multi-media advertising firm based in New York, has developed many of the software and web applications central to Nikes online presence.

What’s notable here is not that this “advertising” firm is based in New York, but that they are actually performing functions for Nike that would seem to go far beyond advertising, such as developing an online retail presence and developing and maintaining a number of online social networks which feed data back into Nike’s corporate structure. Other ICT technologies, related to logistics, production, and marketing are increasingly valuable to the competitiveness of firms in this field, and are being provided largely by outside contractors (Nike annual report, 2007).

7.2.2 Design

Ryz Wear is a shoe firm “founded by a group of ex-industry sneaker geeks” and based in Portland. Rather than using in-house designers, and paying a per-shoe commission to athletes or musicians for endorsements, they pay a commission to designers who upload fashion-oriented designs to their website as part of a

continuous contest cycle. The best designs win inclusion in the Ryz product lines, and a per-shoe commission for each pair of shoes sold (Ryz Website).

Another industry development that suggests that some design aspects of the business are shifting is the growing number of small athletic shoe companies who are directly sub-contracting the design of entire shoe lines or specific shoe models to independent design firms. Columbia Sportswear, Keen and Merrill are three firms who currently outsource some or all of their shoe design jobs to independent design firms (Fontanarosa, 2009).

In addition, the development of relationships between several athletic shoe firms and well-known fashion designers has created a differentiated category of high fashion niche products that command premium prices. The Adidas relationships with Japanese fashion designer Yohji Yamamoto and British designer Stella McCartney are a prototypical example of this practice (Adidas annual reports). The move towards increasingly flexible production already has a long history at this point. Gereffi, writing in 1994, presents it as a foregone conclusion (Gereffi & Korzeniewicz, 1994: p.106). Just how far that movement has come can be seen in the mass customization model of the Mi Adidas and NIKEiD product offerings, and in the business models of companies like RYZ footwear.

The customer as active designer or the company as conduit for design are two ways in which design, one of the areas most directly controlled by the corporate core in buyer-driven commodity chains (Greffi & Korzeniewicz, 1994: p.7; p.260) is being externalized by certain firms who choose to focus increasingly on fashion,

marketing and branding.

According to industry experts, the core shoe design functions of the largest and most performance-oriented companies, like Nike and Adidas, generate significant intellectual property for these companies, which they rely on in their competition to gain market share amongst serious athletes. Due to the value of this intellectual

property, these firms’ core design functions are not likely to be outsourced, and could be considered an integral node that must be directly controlled (Johnson, 2009).

However, if the integration of electronics and ICT, such as the Nike+ system, become the dominant form of innovation driving the shoe industry, it would

represent a paradigm shift that could see the control over what could potentially be the most value-added part of the commodity chain shift to the outside companies who can develop those new technologies.