How Adidas wiped out a chunk of its own management to drive growth

In the last year, Adidas has pulled off a massive turnaround and seen its share price go up 250 percent. Much of that success, said the company, is due to an internal reorganization of the brand that directly affected sales.

Adidas was losing market share to Nike and Under Armour. In 2015, in recognition of this fact, it laid out a five-year plan that included manufacturing robots and a focus on athlete endorsement. The brand had to “reset itself” with a new operating model, said Eric Liedtke, global CMO at Adidas in Germany.

“We had grown into a big complex company that was built around functions, not the customer,” he said. The brand had focused too much on internal processes, unwittingly creating silos along the way, and ultimately losing sight of “who we are,” he added.

The first thing Adidas did was to take out an entire management level in its marketing team. That was potentially the most radical step, and one that was immediately visible to employees. The effect that had was profound. Liedtke said that the biggest challenge for the heritage brand was that it was simply too slow. Responding to anything, whether it was customer feedback or an internal meeting, was taking up way too much time. Taking out an entire hierarchical level reduced internal politics and also let people feel confident enough to speak up quickly.

Next came Futurecraft, a sneaker project first teased last year and finalized in February that promises customized, 3D printed soles to meet the needs of runners. “Tailored fiber” is still in the prototype stage, but Liedkte points to it as proof that Adidas can reposition itself as a “creator brand.”

That repositioning had to get through to Adidas’ 55,000 employees before it could be externally communicated, so the company also implemented an internal program that rewarded people for coming up with ideas, with bonus points if they were collaborative.

“Their business was struggling,” said Nigel Morris, CEO of Dentsu Aegis, Adidas’ longtime agency. “Most businesses need a push to transform; if you’re doing too well, there’s an inertia to change.”

Adidas, based in Herzogenaurach, Germany, embodies in some respects a German culture of bureaucracy and hierarchy. As Digiday reported in a Berlin spotlight last year, agencies often complain that overly hierarchical clients are often too afraid to innovate.

That was perhaps the biggest change for Adidas: getting everyone to believe in the company meant getting everyone to be creative. Each time someone came up with a new idea, the executive team made it a point to reward and acknowledge that behavior, and act on it. There were also constant feedback loops implemented so people could see what was happening to their ideas.

By May last year, the company experienced profit growth; in March this year, it reported a 12 percent increase in fourth-quarter sales compared with the same period last year. In a release in March, North America president Mark King said it was happening because the company was “challenging everything old and moving with speed.”

“We knew we needed to build a culture of people that help and ask for help,” said Liedtke. “A culture of people who are confident to take some risks.”

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