Category Archives: Powersports Manufacturer Business Practices

Arctic Cat Acquires Motorfist

Arctic Cat Acquires Motorfist

Chris Metz, new CEO for Arctic Cat (ACAT) made good on his promise from earlier this year. He announced in front of a group of over 400 Arctic Cat Dealers plus employees that Arctic Cat acquired Motorfist, a premium mountain snowmobile clothing Arctic Catcompany headquartered in Idaho. This is a strategic bolt-on alliance that representMotorfists a new era for Arctic Cat. Christopher Metz, Arctic Cat’s new CEO, announced in January, “We currently are developing our strategic growth plans. However, I can say with confidence that we will seek to spur growth through additional . . . small bolt-on acquisitions that quickly enable us to expand our expertise and capabilities, and drive even faster product innovation.” Of the marriage between the two, he stated that this is an example of “one plus one equals three” and that “[Motorfist] is a highly exciting brand”.

Motorfist’s Short Story

Motorfist was founded in 2009 by Brad Ball, an avid snowmobiler and brilliant entrepreneur with a mission to enhance the lives of snowmobilers. He accomplished this by recruiting an all-start team to help him. One of those key people is Josh Skinner, the product development managScreen Shot 2015-03-01 at 6.00.04 PMer for Motorfist. Skinner worked with Ball in 2001 when the Ball launched the Alticity Snowmobile Films series. Alticity snowmobile movies chronicalized the best of what mountain snowmobilers did to have fun in the mountains from a bone stock King Cat to a Apex Turbo. Motorfist was later born out of these early evolutionary mountain riding years. Ball knew from his experiences in the backcountry what riders needed before we knew we needed it. Because of previous experience in the textile business, he had a vision for how to deliver new innovative products.

A Great Team

Arctic Cat’s core values are a close match to Motorfist’s – they are snowmobilers and their passion for snowmobiling drives their decisions. They are both the underdog – smaller and more agile than their competitors. This move elevates the image and Brad Ball Jared Burt Arctic Cat Acquisition of Motorfistexpertise of Arctic Cat and provides them with a substantial new growth opportunity. Arctic Cat will benefit Motorfist internationally with its extensive global distribution network.

Today, Arctic Cat was a new company. Metz is a breath of fresh air. He looks at this business as a challenge and a turn around opportunity. The company has already made big changes in their business practices, helping dealers eliminate aged inventory. Motorfist is a great example of a company that takes care of their dealers to build a strong network. Arctic Cat has realized they need a stronger dealer network and they are doing something about it. Now, their first of what will be many more acquisitions is a step forward, a sign of good things to come for Arctic Cat.

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Karate Kid of Powersports

Average vs Great Businesses

Average companies and great companies have a great vision, develop innovative strategies, set goals, become accountable to budgets and execute relentlessly. However, what separates the average from the great is focus and fight.

Focus in an organization is the ability to align the vision, strategy, the wildly important goals, budgets andKarate Kid Mr Miagi execution. Fight in an organization is the ability to fall and get back up every single time. Polaris Industries provides an example of both.

Polaris Karate Kid

Tom Tiller was the Karate Kid of the powersports business. During the summer of 2003, I was sitting next to Tom Tiller, Polaris CEO, on a shuttle to ride the new ATV’s that Polaris was introducing at their manufacturing facility in Roseau, Minnesota. Just as he would for any inquirer, Tom clearly described his vision, goals and plan to execute to me. (the 10 minute version) He always had a story with a vision. He knew exactly where he wanted to go. He would fight until he succeeded. Anyone that heard him share his vision could hear the conviction in his voice. His goal: Be a 2 billion dollar business by 2006. Part of their strategy would include acquisitions.

Faced with Failures

2006 was a year of setbacks. In 2005, Polaris posted an impressive 1.9 billion in sales. However, with a poor snowmobile season, Polaris missed the mark under performing it’s prior year sales for the first time in 24 years with less than 1.8 billion in sales that year. In addition, Polaris was pursuing the acquisition of KTM. They purchased a 25% stake in KTM in 2005 as a stage 1, but stage 2 never came and the partnership unraveled prematurely at the end of 2006.

Going Global with Acquisitions

The setback in revenue retraction in 2006 was a catalyst for a revised plan. Dealer News reported, that Tiller and his management team put together a revised three year plan that mandated, “$150 million in net income…on $2.2 billion in sales.” Behind the wildly important goal to achieve 2.2 billion in sales, was a new vision and an aggressive strategic plan to go global and become the leader in powersports.

Goupil Small Electric Vehicle

Goupil Electric Vehicle

Although the KTM deal never materialized into a full blown acquisition, it helped Polaris prepare for several successful acquisitions in the coming years. The best result from the KTM deal was the framework that was established for Polaris to be a company that executes successful acquisitions.

Successful Polaris acquisitions in just the past four years include Global Electric Motorcars (GEM) from Chrysler in 2010, Indian Motorcycles and Goupil in 2011, Eicher Motors (a joint-partnership) and Klim in 2012, Aixam Mega in 2013, Koplin in 2014. Besides gaining acquisitions experience, the KTM deal helped Polaris expand operations in Europe propelling their expansion into a global company. After 2006 Tiller and his leadership team learned from the setbacks and established a framework for the future.

No Fear Fight with RZR

Throughout 2006 and lasting a few years, Yamaha got beat to a pulp with lawsuits and media attention over roll over accidents in their popular recreational side by side, the Rhino. In the summer of 2007, one of our sales guys actually took a customer for a demo ride. The salesperson decided to impress the customer by spinning a cookie behind the Rexburg Motorsports facility.

Jared Burt riding Polaris RZR at St Anthony Sand Dunes

Jared Burt riding Polaris RZR at St Anthony Sand Dunes. Dealer News published the story in July, 2008.

The customer stuck his leg out as it started rolling over, and snap. The ambulance came and hauled him away. It was a mess. The settlement between his attorney, Yamaha and our insurance company wasn’t resolved for four years. This was only one of hundreds and hundreds of cases filed against Yamaha. Later that year Yamaha released an update installing doors and wheel spacers on all Rhinos, but it just made the lawsuits come in even faster.

How does Polaris respond to this adverse market risk? Do they pull their similar Ranger vehicle off the market because of the risks of lawsuits? No, they fight! In 2006, Tiller and his leadership team finalize plans (in the peak of the national Yamaha lawsuits) to launch the all new sport Ranger RZR. (They obviously weren’t looking for advise from their legal department.) The RZR is a faster, more sporty and aggressive version of a Rhino that came to market mid-2007. The Polaris RZR has been wildly successful and today Polaris dominates the side by side market in both the utility and sport segment. RZR became metaphorical “crane kick” that propelled Polaris past the recession. (See Karate Kid crane kick video)

The antithesis of the bold RZR launch was the death of the Rhino. Yamaha pioneered the recreational side by side market starting in 2004. They had the manufacturing capability to launch innovative sport side by sides that would have been difficult for Polaris to compete with. Instead, Yamaha’s sales took a nose dive because they decided not to fight with new sport model introductions and discontinued Rhino production last year.

The Results of Focus and Fight

By 2013 Polaris revenues increased to $3.7 billion, the fourth consecutive year of 15% growth in both revenue and earnings. Polaris also eclipsed Harley Davidson as the new global powersports leader. Tom Tiller is long gone from the organization, having turned the reigns over to Scott Wine and Bennett Morgan in 2008. The setbacks and failures in 2006 were the turning point which necessitated more intense focus. The courageous response of Tiller and his team had set Polaris up for tremendous success.

A New Fight with Focus

The setbacks and courageous decision to get back up and fight in 2006 resulted in a plan with aligned vision, strategy, wildly important goals, budgets and execution. The KTM deal gone sour helped them prepare for future acquisitions and develop a distribution network in Europe. They deployed strategy to create new product segments and acquire companies including entry into the global small electric vehicle market. Polaris has updated and upgraded their wildly important goal. A business journal recently reported “[Polaris] sees 2020 revenues around $8.0 billion, representing a 12% compounded annual growth rate. This should be achieved by 5-8% organic growth, with another $2 billion revenue contribution from acquisitions. Net income should increase towards $850 million, as net profit margins should increase above the 10% mark.”1 The goal is aggressive, and they will probably have some setbacks on the way. The good news is that this company has an incredible amount of focus and fight. Don’t be surprised when they succeed in achieving this audacious goal.

Being Great

Polaris introduced the new Victory Magnum bagger at their 60th Anniversary Meeting in 2014.

Polaris introduced the new Victory Magnum bagger at their 60th Anniversary Meeting in 2014.

Polaris became great because of DNA within the company, leadership and culture to focus and fight. Guided by a strong vision, they pursued their principles in the face of failure. Too Frequently, there is a disconnect in a leader’s vision with the goals. Often, the budget does not reflect strategies that are being implemented. Executing effectively and decisively requires focus; aligning the vision, strategy, budget and wildly important goals. When results don’t go as planned, there is a set back, or mistakes are made. Learn from Polaris’ example, get back up, focus and fight!

1 Seeking Alpha, Polaris Industries – Great Long-Term Investment, Has Seen Runaway Momentum In 2013

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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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