(FORTUNE Magazine) – The run-up in Nike's stock has stalled recently, but its long-term performance has been remarkable, averaging a 47% annual total return for the past ten years. But it's not just shoes that propel the Beaverton, Oregon, company; it's new passions--a strategy of continuous reinvention. Says CEO Phil Knight: "We're constantly reviewing how the world has changed and how we're reacting to it."

Passion No. 1: the shoes. It all started with the shoes, which were designed for serious athletes and imported from the Far East. Pitched to iconoclasts frustrated with the lack of innovation in athletic equipment, Nike shoes quickly became market leaders.

Passion No. 2: the athletes. Advertisements generally push a product or at least mention a company's name, but Nike's ads often do neither. Instead, they come across as demonstrations of a passion for sport, as spoken by athletes like Michael Jordan. Take the company's recent Tiger Woods ads, which remind viewers that no matter how good a golfer he is, he still can't play some courses because of the color of his skin. "We're not manipulating him into saying any of these things. This is who he is," says Knight. "From there, we don't think it's a big leap to connect the athlete with the product."

Passion No. 3: not just the shoes. Great marketing can only take a company so far. When growth stalled in 1993-94, Nike realized it had goofed by limiting its product line. Says Knight: "We decided we're a sports company, not just a shoe company." Nike refocused on apparel--and solidified its hold on the national sports psyche. Says Knight: "If you watch Arizona play basketball on television, you see their shoes about 10% of the time, but the uniform logo is visible about 75% of the time."

Passion No. 4: not just the athletes. From signing up individual athletes like Michael Jordan, it wasn't such a leap to signing deals with college teams, the Dallas Cowboys, and Brazil's national soccer squad. Next up: producing Nike events, from soccer matches to golf tournaments. "We promote our athletes and the brand while at the same time making money on the event," says Knight. "It's pretty nice synergy." And pretty nice strategy.

--Ronald B. Lieber