The other week, I came across this AdWeek article about Nike’s marketing team’s restructuring, which inevitably piqued my interest. The article linked to a post by Massimo Giunco, former Nike Brand Director, who shared his take on how Nike’s CEO, John Donahue, and Nike’s President of Consumer, Product and Brand, Heidi O’Neill, decided to enact a series of changes between August 2020 through March 2021 to eliminate all categories from the organization, focus entirely on D2C (direct-to-consumer) divesting from wholesale, and shift the marketing model to prioritize digital content generation over brand narrative. According to Giunco, going all-in on this strategy led to record-low performance over the last few quarters, and now that the market cap is at its lowest since 2018, the company is reversing its approach.
While it’s somehow evident that Massimo Giunco has personal issues with Nike’s leadership, his narrative allows us to draw a parallel with the question we often grapple with: how can we invest in something that may yield long-term value like brand building but doesn’t offer good short-term measurability or certainty for success?
This question is familiar to many companies that seek to measure the impact of their marketing effort by relying on measurement methodologies that connect back to financial outcomes like MMM and incrementality studies, but they often limit the measure of impact to a three-month window. By relying solely on these tools to make investment decisions, it’s clear how favoring digital content generation over brand narrative may seem reasonable. However, if we look at the Nike story or similar brands, it becomes evident that building iconic brands that create a competitive advantage requires continued investment over the years, which are not palatable in an environment that favors short-term quantifiable returns.
A few notable exceptions exist, like hardware and infrastructure for AI, where the markets have shown tolerance for (over) spending in 2023 and the first half of 2024. But this tolerance doesn’t usually extend to brand or marketing investments.
Some argue that the genuine opportunity to yield disproportionate returns lies in what can’t be precisely measured, which often means building a brand over the years. This argument is rationalized by explaining that in a world with an abundance of data where many things are measurable, the only place to gain a competitive advantage is where others wouldn’t dare to go because it’s too risky or is hard/impossible to measure.
Ultimately, companies risk failing whether they are too aggressive or too conservative in their approach. As Bill Taylor stated in this HBR article, “Executives and entrepreneurs face two very different sorts of risks. One is that their organization will make a bold move that failed — a risk they call ‘sinking the ship.’ The other is that their organization will fail to make a bold move that would have succeeded — a risk they call ‘missing the boat.’
Ultimately, this isn’t a conversation about data versus creativity or calculation versus intuition. It’s about recognizing that to “beat the market,” we must take calculated risks and hope our bets pay off.
So, what’s the best way to do that? Like in the financial markets, the best marketing or corporate approach is to ‘hedge your bets.’
In finance, “hedging your bets” refers to reducing potential risk by taking offsetting positions or measures to protect against possible losses. Essentially, it means taking steps to limit risk exposure, especially when an investment or decision presents a high degree of uncertainty. The broader idea is to mitigate risk, so if the original investment doesn’t perform as expected, the hedge provides some compensation or protection.
Similarly, in the corporate world, it’s not about investing solely in the future while disregarding the present reality or uncertainty of the future. It’s about creating enough momentum in the short term and maintaining enough optionality throughout the process to offset the long-term investment risks.
To do so, companies may need to temporarily focus on the short term to build a “war chest.” Once the company’s profitability is established, they’ll need to tap into their margins (and maybe forgo the “rule of forty” = top line growth+ profitability margins >= 40) to invest in the long term (and things that where we can’t easily calculate a net present value). This may imply making themselves less appealing to financial investors for a few quarters or years, but if a solid plan to meet near-term goals is coupled with a strong narrative and long-term strategy, the right long-term investors will likely see the value in the vision laid out by the company executives.
This balanced approach recognizes a pre-building phase, a build phase, and a growth or competitive phase while leaving room to adjust and iterate through the process. The ability to adjust and respond to market conditions or feedback on what the company is building is as critical as the initial idea itself. In the Nike story, a sign of changing market conditions could have been the post-pandemic slowdown in e-commerce sales and the rebound of “physical retail.”
At the end of the day, CEOs need to build strategies that play out in years, not quarters, and require skills to balance short-term pressure with the need to create the necessary runway for future growth. They may still not play out in the long term, and hindsight is always twenty-twenty, but by being methodical in calculating the risks in the strategy, smart in hedging your bets with alternative plans, and by being flexible in adjusting your approach over time, you can maximize our chances of success.
On second thought, if you calculate your risks, hedge your bets, and are flexible in your go-to-market approach, you’re not betting at all; you’re building your company’s future.
