World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 89

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You mentioned wanting to be
“best in class” in operational
excellence. What’s an
example of something you’d
want to be known for?
RØRSTED: That takes us to our fourth
accelerator: digital. We called out digital
as an enabler because we did not have
enough of a company-wide focus on
it, or frankly the right competencies
on board. So we created a digital
leadership team to look at all of the
projects across the company. We did not
want to have one comprehensive digital
agenda. Instead, we split the digital
agenda into important projects that we
could execute quickly and meaningfully.
If you try to build Rome all at once, it
never happens in time.
Digital has a tremendous impact on the
way that you can tailor your product
to individual athletes. You can have
a customized midsole in your running
shoe, adjusted for the shape of your
foot. This type of customization will
grow more popular over time, starting
at the high end. We produced 5,000
pairs of those customized shoes in
2017, and we’ll probably make almost
100,000 in 2018. Eventually, we’ll be
producing a million a year.
Will you use 3D printing to
produce shoes to order, sold
right from pop-up digital
factories? And if you don’t, are
you afraid that a competitor or
a retailer might?
RØRSTED: You’ll see that technology
coming up more and more, but consider
the numbers. We made 402 million pairs
of shoes in 2017. Our Speedfactories,
when they are fully running, will make
500,000 pairs each, annually. Local pop-
up factories will happen, but they will
be marginal in the bigger picture. I don’t
think new competitors or private labels
will be a threat for branded athletic
wear. People still want the three stripes
and the swoosh, and I don’t think that
will change.
Given the growth of platform
manufacturing, will the
factory and the brand split
apart, with operations shared
across the industry?
RØRSTED: That’s almost happening
today. All our manufacturing is
outsourced. And if you go to Vietnam,
you will find the same suppliers making
products for us and for Nike and other
sports brands. The value creation takes
place in design and in the materials and
functionality. Less in the physical build
of the product.
We are also improving consumer
experience. We launch new products
every week, and the most effective way
of launching products is through digital
media. We’re particularly interested in
mobile devices. We have to be world
class at that; if we’re not, we can’t win,
because at the end of the day, we are
a consumer company. And our primary
engagement vehicle is the smartphone.
We gave our e-commerce group — the
group that manages Adidas.com and
Reebok.com — a target. We had sold
€700 million (US$777 million) through
our site in 2015, about €1 billion
(US$1.1 billion) in 2016. We set a target
of €4 billion (about US$4.6 billion) in
annual revenues by 2020. To meet that
target, the team has control over its
hiring, organizational structure, and
compensation system. We don’t know
if it is achievable, but we know that by
putting a very aggressive plan in place,
we will drive the right mind-set.
In 2016, we said publicly for the first
time that our online store was our most
important store globally — period.
This made it clear to everyone in the
company that we were changing our
priorities. We would start deliberately
cannibalizing our own infrastructure.
It also provokes conflict with partners.
We sold the World Cup jerseys this year
exclusively on Adidas.com for the first
two weeks. Our wholesale partners were
shouting: “Why are you doing this?”
The answer, of course, was that it was
necessary: We have to be where the
consumer is — and this is online.
In general, the clearer we can be in
formulating and articulating our strategy,
and the clearer we become in saying,
“Here is what ‘good’ looks like,” the
easier it is to go through this change. For
example, any new product now must be
launched either online by itself or online
in combination with our six key cities.
Not everybody will like this.
It sounds like you see the
company’s chances for
success as less a matter of
external threats or trends,
and more a matter of your
own decisions and execution.
RØRSTED: We know the sports apparel
industry will continue to grow. Sports
are increasingly popular around the
world. The need to combat obesity is
driving people to be more athletic. And
there are trends toward leisure and
more relaxed clothing in the office. In
contrast to other sectors, we are not
seeing consolidation; we’re seeing
accelerated growth. If we were in
another industry, growing 2 percent
per year, we would need to raise our
leverage and look for a larger market.
But if you’re in an industry that is
growing 5 percent or more, like ours,
then your biggest opportunity is to get
your company in top shape, because the
market will be there.
Interview by: strategy &
supported by EUROBAK
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