Baby boomers and Harley-Davidson motorcycles. The combination of these two delivered a plethora of profits.
I was upgrading my Mac OS and while I waited, I read magazines. First it was “Baggers” then “BusinessWeek.”
Skimming the BW magazine I notice an article about business book guru Jim Collins. He wrote “Good To Great.” Collins was brought to West Point, where he chaired a discussion amongst military men and civilians. Had America lost its greatness, was it in decline? The attendees were split as to America’s future, half optimistic and half pessimistic. But what fascinated Mr. Collins was an observation from a CEO during a break. The dude stated: “I’ve been thinking about your question in the context of my company. We’ve had tremendous success in recent years and I worry about that. So what I want to know is: HOW WOULD YOU KNOW?” This question formed the basis of Collins new book, “How The Mighty Fall.”
Harley-Davidson has been quite mighty. But they broke the first rule of Mr. Collins’ book. Which he labels Stage 1: “Hubris Born Of Success”. “Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place.”
Bingo! Harley-Davidson and Baby Boomers. H-D execs actually believed they were geniuses, who’d found the golden formula. Dealers marked up everything from t-shirts to baggers. From then on, motorcycle model after model would all sell thousands of bikes, there would be untold profits! Rather than questioning their success (“We might have been just really lucky/we’re in the right place at the right time…”), they believed they were entitled to it. And ultimately blamed this decline of their fortunes on the economy.
Stage 2 of Mr. Collins’ theory of corporate decline is “Undisciplined Pursuit Of More”. Here we have H-D catering to image buyers… selling sizzle, style and fashion over function paradigm. With spokespeople like Marisa Miller. If TV sells motorcycles, let us find the least amount of clothing and the most telegenic performer and craft a message about lifestyle for TV/print consumption!
Stage 3 is “Denial Of Risk and Peril.” That’s the beginning of the end. “Those in power start to blame external factors for setbacks rather than accept responsibility”. It’s like the music industry saying the Internet ruined it’s business! It’s the economy’s fault, we couldn’t get bank funding at HDFS, etc. But what’s Harley’s business? Manufacturing premium (overpriced?) priced one-dimensional products and marketing them for sale on TV and print magazines to the ‘boomers’, the young, minorities and to women? No difference in product just marketing messages.
Stage 4 is “Grasping For Salvation”. “The critical question is: How does leadership respond? By lurching for quick salvation or by getting back to the disciplines that brought about greatness in the first place?” We’ve got Harley-Davidson heavily invested in MV Augusta and embedding advertising space in video games (UFC). A non-motorcycle riding enthusiast at the helm. Is that their core mission? And we’ve got dealers exiting the business. All the while the motor company works to protect a business model of an overexposed limited product to reap giant rewards. Dealers are up in arms that corporate got rich and the locals did not… But once again, what was each entity’s core mission? Dealers were made to expose. The motor company were made to..? MAKE! That’s what manufacturing companies do. Making motorcycles is their core competency. It’s their defining MISSION! But that got lost in the shuffle of incredible profits during the nineties. Harley started selling branding, lifestyle, sizzle, fashion and even some premium priced motorcycles!
Stage 5 is “Capitulation To Irrelevance Or Death”. Some would argue that’s where the motor company is today. “In some cases the company’s leader just sell out; in other cases the motorcycle institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright.” How long until Harley-Davidson chops up the parts and sells it for catalog value?
What is the future? Not the past.
“Never give in. Be willing to kill failed business ideas, even shutter big operations you’ve been in for a long time, but never give up on the idea of building a great company.” It’s clear. Looking for an instant success like the old Michael Jackson days of MTV ultimately render instant irrelevance. The company needs to be about MOTORCYCLES! Today’s execs seem only interested in tonnage. They could be selling anything! They are not necessary. Harley needs to find unique talent and nurture it. Leverage independent blogs? Motorcycle artistry/development isn’t finding more people to buy a plain stamped out bike, it’s a creative arc, over a period of iterations, wherein the motorcycle grows and more and more people come along for the ride.
That’s what you need to survive…”to build an enterprise that makes such a distinctive impact on the world it touches (and does so with such superior performance) that it would leave a gaping hole – a hole that could not be easily filled by any other institution – if it ceased to exist.” Everyone knows that real motorcycle enthusiasts are the indies. The commercial crap from the majors is about commercialism more than artistry. Today it’s about manufacturing cookie-cutter stuff and yelling at the public to buy it, all the while bitching that the economy is failing. This is a recipe for disaster.
Rather than whine, be the company that accepts reality, that notes change and adapts to it. That doesn’t mean charge huge upfront fees for anybody who wants a CVO. Or clothing attire marked up to the point that celebrities question the essence of imported fabrics. Your average Joe consumers are your partners, they’re the ones who are going to make you money.
If you lose your core, you’ve lost everything!
Photo courtesy of Newsweek.
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According to a SEC, Form 8K filing, Harley-Davidson (i.e. acting CEO Jochen Zeitz) promoted Lawrence G. Hund to chief commercial officer and will be responsible for the global sales function including the company’s motorcycle Parts and Accessories, General Merchandise and Harley-Davidson Museum businesses effective today.
The eastern slope of the Sierra Nevada mountains offer motorcycle enthusiasts an interesting blend of motorcycle rides and some of the best scenery in the west.
Not to buzz kill the summer riding season, but the current recession is the longest we’ve seen in the post-war period. 
Due to the declines in retail motorcycle sales, the Company has lowered its 2009 shipment expectations by 25-30%. Because of the lowered shipment volume, H-D announced further headcount reductions of approximately 700 positions in the hourly production workforce and 300 positions in non-production, primarily salaried headcount, including some at HDFS. This is in addition to the previously announced reduction of ~1200 positions bringing the total reduction to approximately 2,200. H-D started the year with 10,100 employees and of course H-D shares rise on news of the additional layoffs.
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