One-on-One with Jim Davis, CEO, New Balance Athletic Shoe Inc.
As CEO of the privately owned and close-knit New Balance Athletic Shoe Inc., Jim Davis has defied convention and conformity in building his brand. While worldwide
Davis bought New Balance in ’72 after deciding med school wasn’t for him.
As the athletic shoe with a soul, New Balance remains dedicated to domestic manufacturing, to performance and fit over fashion and to an “endorsed by no one” philosophy while nurturing its retail partnerships and supporting grassroots initiatives. Davis spoke recently with SportsBusiness Journal New York bureau chief Jerry Kavanagh.
Hometown: Brookline, Mass.
Education: Bachelor of science degree in biochemistry, Middlebury College, 1966
Favorite music: The Rolling Stones
Favorite movie: I’m not big on movies.
Favorite quote: Anything that refers to tenacity, to never giving up, I strongly believe in.
Favorite vacation spot: The north shore of Boston.
Typical day off: If I’m not doing something with my family, I’ll be fooling around with my cars. I collect cars.
Best business call: That’s a tough one. I think it goes back to making certain that we look for the best folks that we can find — building a strong team.
Business advice: To have mutual respect within the organization. To make certain that everybody feels comfortable and that the person on the factory floor is no different from the person occupying an office in the executive wing.
How did you go from biochemistry to making sneakers?
Davis: I had aspirations to be a doctor, but I realized I hated school. It was coincidence. I was selling equipment having to do with biology and chemistry. I went to buy a small company, and New Balance was the first one I looked at. I just passed, though. I knew a little about sporting goods but nothing about footwear. But a year later, it was still available, so I bought it.
New Balance has come a long way from that day in 1972 — the day of the Boston Marathon — when you bought the company. Worldwide sales increased from $210 million in 1991 to $1.3 billion in 2003. What’s behind the success?
Davis: It’s always the organization. We’re very fortunate to have a group of managers that have been with us a long, long time. We have virtually no management turnover and, as a result, there’s a lot of stability in the organization and we get to know retailers very well. And through that we get to know the consumer.
It’s a whole amalgam of things, but primarily we have a great team, our factories are run extremely well, we have great people in the factories — they’ve been with us on average well over 10 years — and, so, I think that’s what makes us a successful organization.
Peter Drucker, the author of numerous books on business management, wrote, “There is only one valid definition of business purpose: to create a customer.” How does New Balance create a customer?
Davis: Through product and customer service. We have by far the strongest customer loyalty of any one of our competitors. Once a person starts wearing New Balance, they very seldom will go away. In large part, it’s due to the fact that the shoes fit very well. We’ve been making widths for years, which has forced some of our competitors to do the same thing. But they really don’t do it to the same degree that we do.
Wells Fargo Securities analyst John Shanley wrote last year that “Nike and Reebok are fascinated with capturing [the]
Davis: I wish it was. To a large extent, he’s right. It’s a simple concept, but it’s not that easy to achieve. Obviously, we have to take fashion into consideration to some degree, but not necessarily to the same degree that our competitors will. They’ll chase things whereas we probably would not do that. We’ll stick to our guns and make a product that, first, performs and fits properly. And then, if it looks great, that’s fine.
Function over fashion?
Davis: Right. We’re fairly consistent in that.
That philosophy is contrary to that of your competitors. It’s a nonconformist approach, isn’t it?
Davis: Yeah, I guess. The endorsement of athletes, domestic manufacturing, or the mere fact that we are a private company makes us a little bit different, too.
What does New Balance’s “endorsed by no one” stance mean?
Davis: We don’t endorse athletes.
The shoes speak for themselves?
Davis: That’s the whole idea. In other words, the amount of funds that you might pay an athlete go into building better products.
In 2003, New Balance controlled 11 percent of the sneaker market. How do you compete with Nike and Reebok, which spend millions on marketing, advertising and celebrity endorsements?
Davis: We try to attract a more discriminating customer. We would target you before we’d target 14-year-old kids. And those guys — that’s where the endorsements work. But you don’t care who wears the shoes as long as it performs well for you. That’s your main concern. A kid wants to be cool and wear, you know, what Michael Jordan used to wear. That’s the main difference in our approach to the marketplace.
Sporting Goods Intelligence said New Balance is “the easiest company to do business with.” Why is that?
Davis: We make it a point to try to customize programs for the retailer. We will work with them as much as we possibly can to accommodate them. We think that’s important. And if we make it easier for them to work with us, they’ll sell more of our products.
What percentage of your manufacturing is done in the U.S.?
Davis: About 25 percent.
New Balance is the sole major U.S. sneaker brand still manufacturing to some extent in the United States. What are the advantages there?
Davis: We started out as a manufacturing company. It’s always been part of our culture. We’ve always
Davis says fit and function come first. “And then, if it looks great, that’s fine.”
New Balance also emphasizes a grassroots approach, targeting high school and Division III teams. How successful has that been?
Davis: Let me give you a little anecdote here. We’ve been trying to introduce basketball for a long time and it’s very difficult, especially in that sport, if you don’t endorse athletes because a kid is not going to go into Foot Locker and buy a shoe unless there’s some big name behind it — in most cases. So, we thought we would approach basketball the same way we approached running 30 years ago, by working very closely with teams. And we were more successful doing this than we thought. I think the product was well-received. The coaches feel comfortable with New Balance, and our competitors, strangely, are more interested in Division I teams than they are in high school teams. So, to answer your question, it’s worked out very well for us.
You have a relationship with Major League Lacrosse. How did that come about, and where are you with that?
Davis: We’re one of the primary sponsors of the sport. And we also made an acquisition in lacrosse, a company called Warrior, which is the premier lacrosse company in the country. There’s something about lacrosse. It’s not like the other sports, and if we’re smart, we’ll keep it sort of pure, the way it is now, and not get caught up in what’s happened in the major leagues in general.
Look for more of this conversation in our sister publication, The Sports Business Daily, located at www.sportsbusinessdaily.com.