Research And Development Business Case Study

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Product development from concept to consumer

Nike is the world's largest sports and fitness company, earning $US14 billion in revenue. The company, with one of the world's most identifiable logos - the 'swoosh', is a leader in sports equipment research and development (R&D). Nike identified a gap in the sports shoe market - a shoe which mimics barefoot running in order to strengthen runners' feet and legs, giving them more power and speed while reducing the risk of injury. After extensive R&D, the shoe, Nike Free, was developed. Nike Free was given an initial, strictly controlled, limited 12 month release before being promoted to consumers worldwide. After reading this Case Study, students should be able to:

  • Demonstrate and evaluate the stages involved in the product development, from conception of a product, through the research and development stage, to design, production, promotion and market release
  • Understand what is meant by product or brand positioning and analyse market research methods
  • Identify promotion strategies and their application as they apply to Nike Free and other Nike products.

Introduction

Nike's 'swoosh' is one of the world's most identifiable logos and, in just 32 years, Nike has grown to be the industry's largest sports and fitness company.

Anticipating the needs of the consumer

Innovation is what sets Nike apart in the industry.

Research and development

How does Nike develop its products and decide what does and doesn't make the cut when it comes to innovation?

Ensuring correct product positioning

Nike was conscious that Nike Free needed to be positioned as an additional training shoe in your kit bag, not necessarily as a replacement to your traditional running shoes.

Reaching the consumer

Advertising is synonymous with Nike. In partnership with its advertising agency, Nike has created some of the world's most attention-grabbing advertising.

Conclusion

Nike aims to bring inspiration and innovation to every athlete in the world - and it considers everybody to be an athlete!

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Learning Area(s):
  • Business Environment | Mission and Objectives
  • Entrepreneurship/Innovation | Fostering innovation within business
  • Entrepreneurship/Innovation | Innovative business
  • Entrepreneurship/Innovation | Product/service innovation
  • Marketing | Market research methods/analysis
  • Marketing | Marketing analysis and segmentation
  • Marketing | Product development
  • Marketing | Promotion strategies and their application

Research and development

How does Nike develop its products and decide what does and doesn't make the cut when it comes to innovation? The Nike Sports Research Laboratory (NSRL) is located on the Nike campus in Portland, Oregon in the United States of America. The research and development (R&D) centre's role is to identify the physiological needs of athletes. The NSRL works directly with Nike's design teams and has established partnerships with major universities throughout Asia, Europe and North America.

To research and develop products, the scientists have an incredible array of measurement and analysis tools. Their data collection includes virtually every variety of muscle sensor, pressure platform, breath analyser, foot scanner and thermal imaging device. There are high-speed video cameras that capture soccer kick data at 1,000 frames per second and a scanner that produces, in just seconds, a perfect 3D digital image of your foot.
But it does not stop there! There are testing surfaces, such as a huge section of regulation basketball hardwood, artificial soccer turf, a 70-metre sprinters' track runway and endless field testing that takes place outdoors in various terrains.

The NSRL takes an idea, and researches and prepares a design brief. The brief is then passed over to the company's Innovation Kitchen - an incubator for new projects.

In the first phase of developing what was to become Nike Free, the 'cooks' in the Kitchen took the NSRL description of 'natural technology' and started asking what sort of shoe people might be looking for next. In the process of talking to athletes and coaches, the designers spoke to Vin Lananna, then the track coach at Stanford University, who told them about his unusual training method - having athletes run on grass without shoes. According to Lananna, the athletes were stronger, healthier and less injury-prone. This was a great idea but contrary to Nike's business - making and selling sports shoes.

However, the idea led to an extensive biomechanical research project to see exactly what happens when we run barefoot. Sports shoes provide a certain amount of control or cushioning based on the notion that they are needed to complement the natural action of the foot. Nike researchers wanted to know why Lananna's athletes, who ran barefoot in training, raced faster.

The researchers brought in 10 men and 10 women to run barefoot on grass to see exactly how the body reacts without shoes on. They were videotaped with high-speed cameras to capture their movements; they had reflective markers attached to their joints to allow easy calculation of joint angles during their stride, and wafer-thin pressure sensors attached to the bottoms of their feet to measure their impact with the ground. At the end of the experiment, Nike had the most comprehensive picture of the biomechanics of barefoot running ever developed.

The challenge was to translate that barefoot experience, which promotes good biomechanics for runners, into a shoe.

Researchers developed prototypes, using any materials which could closely copy the barefoot. Next came the challenge to build the shoe. A shoe is built on a model of the foot, called a last, allowing the upper and outersole to be built around it. Researchers had to develop a brand new version of the last in order to copy the way a bare foot operates. This resulted in the shoe's upper being designed in a mesh that has small holes in it, allowing the foot to be encased but feel free. There is no heel counter; instead the heel fits snugly in the shoe as the inner sole allows the foot to sit naturally in a neutral position. The key is the outersole which can move and flex independently with each section being sliced so that the foot is allowed to move as naturally as possible in the shoe. The shoes are meant to be used in tandem with other training and racing shoes. The goal is to use Nike Free to help strengthen the feet in addition to using more traditional, supportive running and training shoes.

Testing the prototypes

Independent testing

Before Nike Free was known to the athletic world or commercially released, Nike undertook extensive independent testing. The company used elite athletes as well as everyday runners and a few sports journalists, i.e. people who exercise and run regularly, to undertake product testing. In a six-month trial, 110 every-day runners used the shoe. One group, consisting of 30 men and 27 women, wore the Nike Free shoes for four 30-minute runs, four times a week. The control group - 30 men and 23 women - used their regular personal training shoes. Outside the four 30-minute runs a week, both groups continued their usual workout schedules. All participants were tested at the start of the six-month period on their abilities in a number of physical areas - shuttle runs, lateral running short sprints, and leg strength - and were tested again at the end of the six months. These tests measured qualities such as speed, development, coordination and optimal speed.

Researchers found some slight improvement in the control group, registering a little more speed and a little more coordination - but not enough to be statistically relevant. However, the test results from the group wearing the Nike Free shoes showed improvement in all the parameters measured, and improvements in speed, lateral movement, and coordination were significant - in the 10 to 20 percent range. That is a significant improvement considering the shoes were worn only two hours a week over a six-month period. An improvement of one percent in speed could mean a metre's difference in a 100-metre sprint - often the difference between first and fourth place.

In simple terms, Nike Free was acting not only as a running shoe, but as a training technique! Athletes in the test group using Nike Free were found to be stronger and more flexible. One of the researchers put it this way: "Nike Free is a gym for your feet."

Source: Review of Nike Technology by Larry Eder Summer 2004 ATF Resource Guide, Vol. 11.

Nike's challenge:
"Nike had developed a product that measurably improved athletic performance but flew in the face of all conventional thinking."

 

Learning Area(s):
  • Business Environment | Mission and Objectives
  • Entrepreneurship/Innovation | Fostering innovation within business
  • Entrepreneurship/Innovation | Innovative business
  • Entrepreneurship/Innovation | Product/service innovation
  • Marketing | Market research methods/analysis
  • Marketing | Marketing analysis and segmentation
  • Marketing | Product development
  • Marketing | Promotion strategies and their application

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