TURF WAR.(Nike takes business away from Callaway Golf as well as others)

I n the nineteen-nineties, a tin-pot West Coast company turned itself, almost overnight, into an industry superpower, eclipsing incumbents and increasing its sales by two thousand per cent in four years. This company had nothing to do with microchips or with Silicon Valley. It made golf clubs. Ely Callaway, a former textile executive and vintner, had founded it in 1982, to amuse himself in his golden years. In 1991, Callaway Golf introduced the Big Bertha, a metal driver with a giant head, which made it much easier to hit the ball well, both for the duffer and for the pro. Soon every golf company was hawking high-tech clubs of its own, and Ely Callaway was being hailed as the Thomas Edison of the links. Meanwhile, Callaway kept making bigger Berthas, and by 1996 it was the largest golf-club manufacturer in the world.

A few years later, another West Coast company--Nike--decided that it wanted to take over the golf-equipment business. Nike started not with clubs but with balls. Sales of Nike's Precision Tour Accuracy ball took off once Tiger Woods began using it, in 2000. Then Nike unveiled a new line of clubs, which David Duval, one of the world's top pros, used in winning the British Open. Little wonder that the golf industry began quaking in its spikes.

But the Nike juggernaut shouldn't scare anyone. What you've got here is a novice company running up against one of the most competitive and technologically demanding industries in America. Nike may have deep pockets and snappy salesmen, but what Ely Callaway discovered a decade ago still holds: to dominate, you must innovate.

Nike itself is living proof of that principle, which might seem odd, since the company is widely considered the ultimate example of the power of branding. Logo-loathing lefties and brand-worshipping B-school grads may disagree on most things, but they share the misconception that Nike rose to prominence solely on the basis of clever marketing and the mystical allure of the swoosh. Actually, Nike, like Callaway, was built on technological innovation, not marketing tricks.

In the seventies, Nike was an up-and-coming manufacturer of running shoes. The market was still small, and it was dominated by Adidas. But Nike had the waffle sole, which its co-founder, Bill Bowerman, the track coach at the University of Oregon, had invented (so the story goes) by pouring urethane rubber over a waffle iron. The waffle sole made Nikes lighter and gave them better traction. Then, in 1979, just as the popularity of jogging was exploding, the company introduced the Tailwind, which featured Nike's patented Air system-- a bubble sealed in the polyurethane of the sole, to cushion the foot. Nike never looked back.

Around the same time, Nike took up basketball. In the ...