Nike (NYSE:NKE) CEO Mark Parker is stepping down as head of the world's largest sportswear brand. Though that decision likely came as a surprise to Nike investors, the real news is who's replacing Parker. Nike is turning to a career tech executive, John Donahoe, to be just the third leader in the company's history.
Donahoe has served on Nike's board since 2014 and is the current CEO of ServiceNow, an enterprise cloud-computing company whose shares fell 9% after hours on the news. While Nike may have little in common with a cloud company, Donahoe also served as CEO of eBay from 2008 to 2015 and is the current chairman of Paypal Holdings, making him a seasoned executive in online retail and payments. Parker will stay on as executive chairman.
Doubling down on digital
Nike's made no secret of its aspirations in digital as it sees technology as the key to innovation, speeding up production, and reaching more customers more quickly. Parker explained the move, saying of Donahoe, "His expertise in digital commerce, technology, global strategy and leadership combined with his strong relationship with the brand, make him ideally suited to accelerate our digital transformation and to build on the positive impact of our Consumer Direct Offense."
The consumer direct offense has become Nike's core strategic framework and is the primary reason the stock has nearly doubled since the company announced the initiative in 2017, which promised to double the company's speed, innovation, and connections with customers.
Nike increasingly sees its future in the digital marketplace, driven by apps like SNKRS and its own Nike app, as well as through its website. In the company's most recent quarter, digital sales jumped 42% as the company continues to shift away from its traditional wholesale business with brick-and-mortar retail chains. On the earnings call, Nike repeatedly talked up its digital transformation.
Last quarter, it acquired Celect, a demand forecasting firm, to add data science and cloud-based analytics to its capabilities in finding customers and meeting their needs. COO Eric Splunk explained the move, saying: "As demand for our product grows, we must be insight-driven, data-optimized and hyper-focused on consumer behavior. This is how we serve consumers more personally at scale."
Given the range of Nike's ambitions in technology, it's not surprising to see the company tap someone like Donahoe, who can guide its digital strategy in areas like retail, marketing, and innovation, along with leveraging assets like Celect to give the company a competitive advantage.
A proven track
Nike isn't the only consumer-facing company to look to the ranks of the tech world for a new leader. In 2016, Starbucks (NASDAQ:SBUX) said Kevin Johnson would replace Howard Schultz, the coffee chain's longtime chief, as CEO. Johnson had served as Starbucks' COO since 2015, but prior to that had been the CEO of Juniper Networks and an executive at Microsoft. Like Nike, Starbucks has increasingly built the future of its business around technology, investing in its app, rewards program, mobile order and pickup, and delivery. Since Johnson took the helm, Starbucks shares are up 43%, and the company has posted strong growth in recent quarters.
Chipotle Mexican Grill (NYSE:CMG) has also found success under a tech-focused CEO. Brian Niccol took over the burrito chain while it was in turmoil following a series of food-safety scandals. His focus on the company's app, digital ordering, and delivery has helped the stock triple since he was named as CEO.
Parker is going out on a high note, as Nike stock is at an all-time high and the consumer direct offense has been a success. Nike isn't in need of a turnaround, but a CEO fluent in technology can help the company extend its lead over the competition and guide innovation for the next generation of digitally native customers.
Donahoe will take over in January.