Nov 11, 2014
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Rising stars make Adidas more American, less soccer-mad

Nov 11, 2014

HERZOGENAURACH Germany - A new generation of more international Adidas executives is trying to loosen a hierarchical structure that has held back creativity at the venerable German sports brand as it tries to retaliate against Nike.

But that is a tall order for a company of 52,500 employees still based in the small Bavarian town where it was founded in 1949, now struggling to keep pace with the fast-changing whims of the urban teens who are its target clientele.

"The whole organization is run so Germanically and is not fast and agile where everybody is empowered," said Erich Joachimsthaler, head of strategy consultants Vivendi Partners.

As disappointing performance, particularly in the U.S. market, has hammered the share price of late, long-serving Chief Executive Herbert Hainer, 60, has promoted a raft of younger managers ahead of his own expected retirement in 2017.

Leading the new guard are 47-year-old American Eric Liedtke, global brand chief since March, and Roland Auschel, the 51-year-old German named as sales chief a year ago.

Forced to ditch ambitious targets set for 2015, Liedtke and Auschel are working with Hainer on a new five-year strategy to be presented in March, but they are taking action already.

Adidas and smaller sportswear rival Puma are still based in sleepy Herzogenaurach, Germany, where they were founded by two brothers who fell out with each other after World War Two.

Liedtke has moved several executives to the firm's U.S. base in trendy Portland, home to Nike, as he seeks to reverse the brand's decline in the world's top sportswear market, important not only for sales but also for defining global cool.


Despite buying U.S. brand Reebok in 2006, the German firm that is strongest in soccer has struggled to break into sports like basketball and American football, recently slipping into third place in the United States behind Nike and fast-growing Under Armour, founded only in 1996.

Its distance from the U.S. market and top-down structure have contributed to missing trends pioneered by Nike like its "FuelBand" fitness device and "Free" barefoot-feel running shoes, as well as being slow to catch on to the "Athleisure" trend that has seen sports leggings becoming the new denim.

Liedtke, a former American football player who joined Adidas in 1994, has therefore revived the role of global creative director, and appointed Paul Gaudio to the post in Portland. Gaudio also plans a creative studio in Brooklyn to be led by three former Nike designers.

America has long been an obsession for the Herzogenaurach sportswear firms. "The American market is about cool things that work. It's a blend of sports and lifestyle, sports products that also have a street appeal and that is what we also see developing into Europe," said Bjorn Gulden, a former Adidas executive now trying to revive Puma as CEO.

Liedtke and Auschel have named 12 new direct reports in recent months, including Mark King as new North America head - the first American in the job for a decade. American, British and French executives now far outnumber Germans in their teams.

More products for the U.S. market will be developed in Portland in the future, while Adidas has signed top basketball players and celebrities like Kanye West and Pharrell Williams.

Even when Adidas is ahead with an innovation like the "Boost" cushioned shoes that Liedtke helped develop in his previous role, it has not done enough to follow through with Nike-beating marketing, a failing it is now addressing.

Liedkte and Auschel have also shifted reporting lines to foster cooperation between the different parts of the business, for example encouraging the Originals fashion line to seek inspiration from the basketball division.

To speed up decision making, heads of categories like running, soccer and basketball have also been put in charge of their own marketing and future product innovation.

Hainer said the new structure would be "more consumer-focused, brand-driven and agile" with clearer accountability.


Though there are now more non-Germans, women and non-soccer players in the top ranks than before, Adidas watchers are sceptical of fundamental culture change as long as Hainer - CEO since 2001 - is still at the helm.

Germany's Manager Magazin reported in September that hedge funds were considering buying stakes in Adidas to push for sweeping changes, including a Reebok sale and Hainer's removal, but few current shareholders have spoken out against the CEO.

Adidas declines to comment on reports that an investor group plans a $2.2 billion bid to buy Reebok.

Joachimsthaler, who has consulted for Adidas for years but is currently working with Nike, knows Liedtke well but doubts he will depart radically from the course set by Hainer.

"Even under Eric Liedke, I have not seen that openness to experimentation, to tap into the Zeitgeist," he said, adding that Adidas's traditional structure had slowed it down when he was trying to help it catch up with the Nike Plus running app.

While Nike works with many outside agencies, Adidas prefers to develop ideas in-house, Joachimsthaler said, adding that Nike executives have more autonomy than at hierarchical Adidas.

"You need somebody external for a radical strategy shift," said one fund manager who holds Adidas shares and declined to be identified.

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