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First was a slam about H-D imitating and going down the General Motors path.  Then there were calls for a Lazarus-like resurrection!

Not my words, but direct from Mr. Keith E. Wandell (Harley-Davidson CEO and President) who states; “Look in a mirror – Harley was already so far down that same (GM) path it wasn’t even funny.” More talking point nuggets from his first in-depth press interview HERE and HERE.

I’m not sure about you, but I’ve never thought of my Harley as a “Chevy” and I own both!  Never mind that many GMs are made in Mexico or Canada.  The public perception of GM is that it stands for overlapping product lines with bland differences and the “bigger is better” mantra is followed to extreme, and then a crash diet when fuel prices soar.  This has lead to a sea of monstrosities as well as a few genuine moments of clarity and even a hint of brilliance.  But in total, the brand is most often marred with an indifferent quality perception and inexpensive or cheap label.

I don’t hang on Mr. Wandell’s every word, but his point above is an interesting way to send a condescending comment to the Harley-Davidson employees and buying public.  Does the Harley Chief really want his current customers to associate their recently purchased premium ride with GM?  It seems disingenuous to compare GM to the state-of-state at Harley-Davidson or use them as the poster child for everything wrong at H-D.  Wasn’t it just a little over a year ago that H-D management and the board approved what many would consider the equivalent of GM buying Ferrari (H-D acquires MV Augusta)?

Keith E. Wandell - CEO Harley-Davidson

The implication from the CEO interview is that H-D, like GM is a fading American industrial might, one that offered up a motorcycle to feed every market segment which has since degraded into exuding minimal coolness from contrived models.  Many others with little identity and somehow you’ve been duped into paying a premium price for indifferent quality.  This doesn’t seem intellectually honest or make for good PR!

The mind-set reminds me of an article in yesterday’s Wall Street Journal about plastic corks and how they’ve made major inroads into the 400 year-old world of wine-corks.  One quote rang especially true and reminded me of the Harley motorcycle business.

“By the 1990’s, retailers and wineries were clamoring for a solution to wine taint, but the cork industry didn’t respond.  No industry with 90% market share is going to see its propensity to listen increase – and that’s what happened to us,” stated Mr. Carlos de Jesus (Head of Marketing, Amorim Group (largest cork producer in Portugal)).

The bottom line is corks didn’t work that well and wine ended up contaminated/bad because of cork deficiencies.  No cork manufacture believed there was a problem and didn’t see the opening for an entrepreneur.  In less than 10 years, plastic corks account for about 20% of the bottle stopper market.  They changed the way winemakers think about making and closing wine.

Lessons for Harley?

  1. Never lose focus on your core mission.  Which is bringing great quality motorcycles to the public.  Some motorcycle manufactures have tumbled into the abyss because it became more about hip-hop star alignment, brand marketing, finding a tiny niche and filling it, oblivious to the point most of your market just doesn’t care.  Oldsters and hipsters are both confused.
  2. Don’t be inured to nostalgia or old technology.  The public is more open to innovation than the supplier.  People are not married to the old ways, they’ll embrace new ideas even if not every innovation triumphs.
  3. Success breeds complacencyAll most innovation in the motorcycle business is by the independents or custom shops doing it outside of the system.  To say you need a major motorcycle company to triumph is to say plastic cork suppliers can’t win unless they align with real cork suppliers in Portugal, who after all are fluent in distribution and have pre-existing relationships with wineries.  But, the plastic cork guys went it alone.
  4. Efficiencies and price. We’re not talking virtual here, corks are physical whether real or plastic.  The future is lower priced motorcycles and the cycle time for new models can’t be like harvesting cork from a tree every 9-to-10 years.  The fundamental measurement of lean manufacturing is cycle time.  It doesn’t matter how many “Kaizen” events or “six sigma” projects a company holds. Cycle time is to lean what weight is to a dieter.  You can get all the bean counters to measure inches lost or reductions in calorie intake, but at the end of the day the bottom line is determined when you step on the scales.
  5. Multiple answers. There is always more than one answer which can take hold.  Screw caps are triumphant ‘down under’ in Australia and New Zealand.  Who will develop the next “screw cap” for the motorcycle industry?

The point is not to be weighted down by your presuppositions.  Don’t think that you’re operating in a world of immutable laws.  And to realize that trying to hold back the future is a losing proposition.  The only way to maintain your share is to improve what you’ve got. Concentrate research dollars on fewer models, pack them with the latest features and technologies, manufacture them in low-cost, U.S. factories (non-union?) and update them relentlessly on rapid fire engineering design cycles.

Schematic photo taken at H-D Museum; Keith Wandell photo courtesy of Tom Lynn/JSOnline.

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Many of us have experienced EDT and not known it!

Mix that with better, cheaper, faster… a common corporate mantra these days, and you have a catchphrase that leaves out a significant element.  Better, cheaper and faster for whom?  Long term business success means the “whom” must ultimately be your customers yet isn’t it odd how often the existing customers are forgotten in the rush of daily business.  Sales and marketing are about bringing potential new customers into the dealers.  Operations are working to be efficient and fill orders.  Service is busy putting out fires.  Meanwhile existing customers are walking unnoticed and uncared for out the side door.  Customer retention at H-D exceeds the motorcycle industry average, but people will stop patronizing when they feel like their business doesn’t matter to the company.

And that’s my point.  Repeat-purchase loyalty or the erosion (the proportionate fall in repeat-purchase loyalty) at the local dealership.

Even if the Harley dealer does everything right – transforms into a lifestyle destination, offers up camaraderie beyond the parking lot, mixing with customers, first-name greetings, pancakes and music on the weekends, working hard at providing a friendly, at-home atmosphere, low-pressure sales – is there any doubt that a key determining factor for a repeat customer at that dealer during this economic environment be anything other than price, Price, PRICE?  How much more are you willing to pay for the dealer experience?  I would suggest none.  Personal relationships do matter, but over paying to maintain that business relationship is obsolete.

For example below is a repeat-purchase story from a riding buddy (edited for space and used with permission) who just put a new 2010 Street Glide in his garage:

“This purchase was one of the simplest things I’ve done. I called the Sales Manager (Moshonda) at Albany Harley-Davidson (AMC) and asked her for a price. I was really expecting to hear MSRP or maybe $500 discount on a $20.5K price. When she told me $18,519, I said “I’ll take it”. We did some of the transaction over the phone and I went down a couple days later and picked it up. I put down 2/3 cash and financed a third. They made that easy with a good interest rate. They didn’t even try hard to up-sell me on the extended warranty. Simply asked, I said no and we signed.

Went down yesterday and rode it home. Weather cooperated and it was nice having cruise control and 6th gear. The radio is awesome! Candidly I did struggle on not talking to Paradise H-D where I’ve previously purchased.  Bottom line, I sincerely doubt they could or would have even tried to get down to the AMC price. Granted I didn’t give them the chance, but I’d bet Paradise H-D was $1500 over MSRP to start off and now we’re talking about a $4k difference to spend time haggling over. Ultimately I felt that if I challenged Paradise H-D to get down to this price and if we couldn’t and I had to walk there would always be this friction when I went into the dealer.  Frankly I don’t need the stress.  It’s unreal that I paid almost the same amount for my Road King 10 years ago as I did on this new Street Glide.  Clearly it’s a good time to deal!

AMC is definitely a small town laid back feel. No pressure.  I’m fairly certain the knowledge base at Paradise H-D is better. AMC sales didn’t strike me as deep experts. Remember these are the folks who didn’t think the Oregon bikes had catalytic converters.  Yet, it’s a good store and I liked how they promote themselves to “the working man”.  As you’ve said on your blog, Harley may be pricing themselves out of the market with those CVO’s. When you can draw a price correlation between a motorcycle and a Lexus, well then the issue speaks for itself. At the end of the day, it is just a motorcycle.

The other advantage at AMC for me is they seem to have perpetual sales on accessories.  I don’t think it will cost me an arm and a leg to do the  customization I want. I had a little sticker shock on the quote for Vance & Hines pipes, which looks to be all you can get for the 2010 right now at $1475. Too high, but it included a number of items (fuel tuning/dyno etc.) in addition to the pipes themselves.

Looking forward to summer!”

I’m not advocating one dealer vs. another.   But, the economy is changing the way riders interact with dealerships.

Photo courtesy of H-D.

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