Category Archives: Powersports Dealership Business Practices

The ‘Motorcycle’ Innovator’s Dilemma

The ‘Motorcycle’ Innovator’s Dilemma

In his business classic, “The Innovator’s Dilemma”, Clayton Christensen identifies that the reasons well managed organizations fail managing disruptive innovations. Ironically, those reason are the same reasons organizations are successful managing sustaining innovations. Christensen explains, “paradigms of sound management are useless – even counterproductive, in many instances – when dealing with disruptive technology.” Honda’s entry into the motorcycle industry in the United States is used as a primary example to demonstrate disruptive technology principles in Christensen’s book that help the reader understand the principles of and how to manage disruptive technologies.Honda Supercub Ad
Honda’s Big Mistake and Little Miracle
Honda brought three employees to Los Angeles in 1959 to set up shop and compete against Harley Davidson. They started distributing the “Honda Dream with similar features to the Harley”. Like other well operated companies, Honda researched the US market, listened to what customers wanted and executed well. The well researched strategy failed to meet management expectations even though 500 new Honda dealers embraced the idea. Honda needed a disruptive technology to enter a market dominated by Harley.
As Honda discovered their disruptive technology, the smaller, off-road capable Supercub; business erupted with unpredictable and unplanned new growth. Christensen states, “Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.” He goes on to explain that, “Small off-road motorcycles introduced in North America and Europe by Honda, Kawasaki and Yamaha were disruptive technologies relative to the powerful, over-the-road cycles made by Harley-Davidson and BMW.” Japanese workers brought little Cub motorcycles for personal use and realized that they were a blast to ride in the foothills of southern California. This little miracle was the beginning of the launch of a little motorcycle that would totally disrupt the Harley dominated motorcycle market. Honda had a disruptive technology, now they needed to find customers.
When Listening To Dealers (Your Customers) is Bad
Honda’s dealer network did not embrace the new little Supercub. “Once the small-bike strategy was formally adopted, the team found that securing dealers for the Supercub was an even more vexing challenge than it had been for its big bikes.” As Honda management had assumed previously, their dealer network felt like they needed something that would compete with Harley, and to the dealers, the Supercub was a inferior product.
Listening to customers in an established value network works for launching new sustaining innovations. Researched based forecasting, listening to customers, established manufacturing processes and go to market strategies that are used to successfully launch sustaining products does not work to manage disruptive products. Christensen proves that “…paradigms of sound management (like listening to customers) are useless-even counterproductive, in many instances-when dealing with disruptive technology.”
It’s a good thing Honda didn’t listen to their dealer network that rejected the Supercub. The emerging small motorcycle market had to be launched in a totally different and less significant distribution channel for the motorcycle world, a small group of sporting goods stores.
Dealers are Barriers to Disruptive Technology
Honda’s customers (their dealers), became a barrier to disruptive technology because they were focused on taking share in the existing motorcycle market of large, over-the-road bikes. These dealers had processes and cost structures that required price points with certain margins. Established customers do not recognize the potential of disruptive products because “…when they initially emerge, neither manufacturers nor customers know how or why the products will be used, and hence do not know what specific features or the product will and will not ultimately be valued”
Honda’s entry and creation of the off-road motorcycle business would have been stopped if they had not sought an alternative distribution network by selling to Sporting Goods stores. Christensen teaches, “…the successful entrants find a new market that values the technology.” The little off-road capable motorcycles started a revolution that grew the American motorcycle market to 5 million sold per year by 1975.
The business models of Harley dealers were aligned with Harley’s established high end motorcycle business. The Harley dealer network became a barrier to Harley Davidson entering the disruptive off road motorcycle market. Christensen noted “…a primary cause of Harley’s failure to establish a strong presence in the small-bike value network was the opposition of its dealer network. Their profit margins were far greater on high-end bikes, and many of them felt the small machines compromised Harley-Davidson’s image with their core customers.” Even today, more than 50 years after the launch of the Supercub, Harley Davidson has zero market share in the off-road motorcycle market. The dealers were the barrier because they told Harley no, and Harley listened.
The Dilemma Resolved
Managing disruptive technology is counter-intuitive to to great organizational management. Christensen observed, “successful companies populated by good managers have a genuinely hard time doing what does not fit their model for how to make money.” Honda had a break through because they resolved that dilemma. Honda’s example shows that disruptive technology should be pursued as a learning and discovery pursuit instead of the traditional execution principles used for sustaining innovations. Honda employees discovered and learned by riding them and watching how their friends responded to them which became the beginning of an emerging market.
Being prepared to fail and not give up during the learning process is key. Christensen reveals that managers must first understand these conflicts, then create a context where the market size, organizational size and values and cost structures are aligned with a smaller emerging market just as Harley missed out on and Honda ultimately succeeded in resolving. – Jared Burt

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Worn Out Tires and Peace on Earth

The Riding Experience1928 Indian Scout

Robert M. Pirsig described the powersports experience best in his book, “Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values”, when he states; “In a car you’re always in a compartment, and because you’re used to it you don’t realize that through that car window everything you see is just more TV. You’re a passive observer and it is all moving by you boringly in a frame. On a cycle the frame is gone. You’re completely in contact with it all. You’re in the scene, not just watching it anymore, and the sense of presence is overwhelming.”

That sense of presence is the common experience of riders of all types of powersports vehicles on the open road, the windy forest trail or the snow powdered mountainside. Small machines, built for one or two riders, enable us to feel the surface beneath us, to smell the scents of our surroundings, to feel the breeze and fluctuations of temperature in our bones and to see the world we are in. I love the scent of campfires, the brisk air when passing by a brook, the sights seen in the open air environment. Being “in the scene” as Mr. Pirsig puts it, can be enjoyed on a motorcycle, dirt bike, snowmobile, or an ATV/SXS.
So, why do so many motorcycles and ATV’s get stored away in the corner of a garage collecting dust? What can the powersports industry do to ensure utilization?
The Manufacturers Mission
The design and manufacturing process of powersports vehicles is fundamentally based on the mission of creating the ultimate user experience. Mr. Pirsig continued, “The test of the machine is the satisfaction it gives you. There isn’t any other test. If the machine produces tranquility it’s right.” The first Indian Scout, the Honda Dream, the Suzuki Hayabusa and thousands of other “satisfaction machines” have passed the test. However, building great machines is not enough to achieve the desired experiences. Manufacturers that establish a strong dealer network will win.
The Dealers Responsibility
Motorcycle ShopFinal execution of the mission to give “satisfaction” and produce “tranquility” is delivered at the motorcycle shop.  The dealer is the face of the brand. Unfortunately, there are some ugly faces in powersports. It doesn’t even matter so much if the face is small or large. What matters most is a buying experience that matches the motorcycle mantra. The motorcycle buying process largely determines the ownership and riding experience.
I will be delighted with my motorcycle to the extent that I repeatedly have good rides. If the sidewalls on my tires start cracking before my tread disappears, it has sadly become an ornament in the garage. Dealers have a responsibility to instill confidence in buyers so they want to ride often. This can be accomplished by engaging the buyer in six ways.
  1. Sell the right machine based on needs and desires after a consultation and test rides.
  2. Set up the motorcycle for the specific rider and terrain.
  3. Teach the rider how to utilize each function of the machine well.
  4. Instruct the rider on the proper break-in procedures, pre-ride inspection routine and maintenance requirements.
  5. Ensure the rider has opportunities to participate on group rides and/or receives riding resource information.
  6. Provide continuous, befriending service support.

If the dealer fails to execute any of these, the rider will be less likely to make riding a priority, losing interest. Confident motorcycle owners become passionate riders. Passionate riders experience satisfaction and demonstrate fierce loyalty. Passion is the ingredient that separates the auto industry from the powersports industry. It’s the magic potion of powersports.

Peace on Earth
Motorcycle manufacturers drive innovation to create the ultimate user experience. This is derailed in the retail channel when bad buying experiences bleed into the ownership experience. The six dealer/rider interactions will inspire confidence if executed. The results are simple: worn out tires and peace on earth. – Jared Burt
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