John Donahoe will become only the fourth CEO in Nike (NKE) history on Monday. The former eBay (EBAY) and ServiceNow (NOW) CEO will inherit a profitable company that also comes with cultural challenges that will carry over from Donahoe’s predecessor, Mark Parker.
At first take, Donahoe might seem like an odd choice to replace Parker as CEO. The former eBay CEO has a background in technology, not retail and sportswear. Unlike Parker, Donahoe doesn’t have a shoe design background — but then again, Nike already knows how to design shoes.
Industry experts tell Yahoo Finance that Donahoe’s tech background is precisely the reason he was chosen to become CEO of the world’s largest sportswear company. He is someone who can take the retailer exactly where it needs to be in the digital space. Jay Sole of UBS says that Donahoe, unlike Parker, has experience in the sort of tech that Nike wants to advance in.
“Nike started with a very large pool of candidates, and they narrowed that down over a period of quarters. They finally came to a decision on which person was the right one to lead Nike forward, and it makes sense. They pick someone who has a lot of digital commerce, e-commerce experience, and technology experience. He’s succeeded as a proven CEO,” Sole said.
In its latest earnings report in December, Nike revealed that digital sales rose 38%, largely due to its Nike and SNKRS apps, which is something Donahoe will likely push further.
“He obviously has tremendous experience in e-commerce and software. Nike realizes the future is going to be very digital. They have an incredibly bright future within digital and e-commerce and, in particular, with the SNKRS app. And scaling as fast as the app is, I think Donahoe will bring a lot of domain expertise in that area of the business,” John Kernan of Cowen Equity Research adds.
While Donahoe may have the tools to lead Nike into its expanded tech era, outgoing CEO Parker’s contributions to the Swoosh brand cannot be discounted.
Under Parker’s direction, Nike distanced itself from the pack when it comes to dominating the digital direct to consumer landscape. A big part of that success was the implementation of the “Triple Double strategy,” which promised to double its speed to market, double its “direct connections with consumers and double its cadence of new innovation platforms.”
“Mark played a significant role in the ‘triple-double strategy’. The subsequent top-line acceleration they went through. It was a function of a tremendous, very creative product cycle,” Kernan tells Yahoo Finance.
That productive cycle also extended into international markets. In its last earning report in December, Nike revealed that sales in China jumped 20%.
“Nike has never wavered from the importance that it places on creating cool, good looking products for people to wear, especially on the footwear side,” Sole says.
Nike’s stock has gone up tremendously from around $11 a share to $100 a share since Parker took over as CEO. During that time, the Swoosh the company joined the Dow Jones Industrial Average and the Fortune 100.
But the company that encourages all to “Just do it” is not without its problems. Parker stepped down after almost 14 years, the last of which were dogged by a number of controversies including allegations of unfair labor practices, NCAA payoffs, and violating antidoping rules. In 2018, The New York Times reported that a revolt by women fed up with Nike’s “toxic” culture had spurred an exodus of male exeutives, including the president of the Nike brand and the head of diversity.
“I think on the negative side of the ledger are a lot of the cultural problems that have come up in the last year and a half. Those are part of Parker’s legacy as much as the financial success,” says Matthew Kish, a reporter at the Portland Business Journal who has covered Nike extensively.
Despite those controversies, Kish still believes the former CEO’s legacy is a good one.
In his new role as Executive Chairman, Parker will be there to guide Donahoe as Knight guided Parker. Knight himself has noted in the past that he and Parker can finish each other’s sentences. While it is not known if Donahoe has that same rapport with the Nike co-founder, it’s clear that Knight has a tremendous amount of esteem for him.
“Donahoe is one of the four directors on Swoosh LLC, which is the entity that holds the majority of Phil Knight’s and Nike stock. That speaks to a tremendous amount of trust and respect between Knight and Donahoe,” Kish says.
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.