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In order for a company to grow, it must be highly innovative. Many mature companies tend to be pleased with their success, which then leads to their downfalls. Nike (NKE 0.38%) doesn't fit into that category. In fact, Nike CEO Mark Parker stated, "One of my biggest fears is being this big, slow, constipated, bureaucratic company that's happy with its success."

That's exactly the kind of attitude a big company like Nike needs. Parker has proved to be a big success. While the popular recent news is the potential of a power-lace shoe coming out in 2015, you need to look a little deeper at what's taking place at Nike if you're considering an investment in the company.

Not as innovative
When a story includes Nike, Under Armour (UAA -1.04%), and Lululemon (LULU 1.09%), you would assume that one of the younger, faster-growing companies would be the leader from an innovation standpoint. While Under Armour and Lululemon shouldn't be underestimated by any stretch, they don't hold up to Nike in regard to innovation. 

You can immediately scratch Lululemon from being even close to Nike on the innovative playing field. Sure, Lululemon designs and sells unique and high-quality yoga apparel and other active-wear for men and women. It also sells the same kinds of merchandise to girls ages six to 15 via its Ivivva brand. However, it has no innovative standout products.

Under Armour has managed to change the playing field with its moisture-wicking fabric. It also made a splash with several more innovative products. For instance, in 2013, it launched the Armour 39 -- a fitness-monitoring system that measures your heart rate, calories burned, real-time intensity, and WILLpower (which scores your workout). It also launched its Spine Venom running shoes -- with lightweight cushioning and flexible support. Impressive to a degree, but Armour 39 was an attempt at an enhanced version of the Nike+ FuelBand, and while Under Armour has its Spine Venom, that's not likely to hold a candle to Nike's Flyknit Racer.

This isn't to say that Under Armour shouldn't be considered for investment purposes. Its recent "failures" at the Olympics likely provide a quality entry point for investors looking to side with a company that's being worn by the masses -- including all age groups and both genders.

Under Armour is growing faster than Nike, but Nike's innovative superiority should allow it to maintain or increase its top-line growth. Nike is also trading at 24 times earnings, which makes it more affordable than Under Armour at 71 times earnings. For the record, Lululemon is trading at 27 times earnings. There's another reason Nike has an edge over these peers, but let's first take a quick glance at its recent innovative successes.

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Innovative leader

The Nike+ FuelBand is an electronic bracelet that measures your movements throughout the day. This includes calories burned, steps taken, and Fuel points earnings. If you don't meet your daily goal, it will turn red. If you meet your daily goal, it will turn green. This innovative product was evidence that Nike was the first company in this group to enter the technology market.

Nike's Flyknit Racer is a feather-light shoe that's just 5.6 ounces. It's also environmentally friendly and cheaper to produce than traditional running shoes. Nike Vice President Hannah Jones stated, "Flyknit could turn the industry on its head."

Of course, there's the power-lace shoe that might be launched in 2015. Nike hasn't confirmed this, but according to Sole Collector, Nike designer Tinker Hatfield said, "Are we going to see power laces in 2015? To that, I say YES!" 

If you're not familiar with power-laces, check out this clip from Back to the Future II:

There's another reason why Nike should maintain its innovative lead. That reason is simple, and it's called capital. Over the past year, Nike generated $2.71 billion in operating cash flow, much more than Under Armour and Lululemon, which generated cash flow of $120.07 million and $261.68 million, respectively. 

The Foolish takeaway
Don't get the wrong idea. Despite a recent misstep, Under Armour is fiercely hungry and immensely popular, which gives it the potential to eventually catch Nike as the biggest apparel and footwear company. However, this would take a long time. Also, Nike is still striving to improve.

From an investment standpoint, this comes down to whether you want to go with the growing underdog that's likely to see many bumps in the road but has much greater upside potential, or the established and fiscally superior company that continues to innovate to maintain its lead. This depends on your investing strategy and time horizon. Please do your own research prior to making any investment decisions.