May 10, 2006 by Paul Hogendoorn
In my last column, I reflected on the demise of the British motorcycle industry – how they lost sight of who their customers were and what their future customers really wanted, and how, when their world changed, they resorted to management-style decisions and tactics when it was leadership and vision that was truly needed.
In 1969 when Honda introduced its CB750, suddenly every other company’s large displacement motorcycle became nearly obsolete. When your world changes that significantly – and suddenly – management alone simply won’t do. The company’s objectives – and even its very reason for being – have to be re-examined, adjusted or re-affirmed. After surviving a scary false start in this regard in the late 1960s and into the 1970s, Harley-Davidson’s leadership took the company through this process and into arguably the most successful period in the company’s history.
In 1969, the company sensed the motorcycle industry was no longer what it used to be. With its future in doubt, Harley-Davidson merged with American Machine and Foundry (AMF). Long-time Harley enthusiasts view this period as one of declining product quality, eroding customer confidence and growing alienation. The change was, in effect, a management change and not a leadership change. Then, in February 1981, with its future still not certain, 13 Harley-Davidson senior executives demonstrated their confidence that they could lead the company to better times by signing a letter of intent to purchase the company from AMF. By June of that year, the deal was completed and a new chapter of Harley-Davidson began.
Many articles and stories have been written about the company’s turnaround, identifying numerous factors and reasons for its success. But all of them can be attributed to the new leadership’s early decisions, and the course and direction they set out for the company.””””
In the early 1980s, chairman Vaughn Beals demonstrated he understood the value of learning “best practices” by visiting Honda in Japan. Upon his return, he was quoted as saying that it was “hard to believe we could be that bad [in comparison], but we were.” He went on to acknowledge that the Japanese were better managers who “understood their business and paid more attention to detail.” From this story, we see two” examples of good leadership. The first is that Beals was willing to accept that others were doing things better, and that Harley-Davidson could learn from its competitors. The second is that Beals was not afraid to identify the company’s managers and leaders as one of the problems and barriers to success and growth. Effective leadership knows that you cannot correct a problem that you are unwilling to candidly identify.
Another key early decision the leaders made was to get back in touch with the company’s customers. In my last column I commented that the British motorcycle manufacturers seemed focused on each other and themselves, even though the landscape had completely changed. Harley-Davidson, on the other hand, learned that it didn’t have to be faster, cheaper or more modern than its competitors. It just had to be better at building its own particular style of motorcycles, and better at assuring the continued satisfaction of its customers.
Willie G. Davidson is the grandson of one of the company’s founders and is widely credited for creating the style, or as some say, “capturing the heart and soul,” of the Harley-Davidson brand. But there is far more depth to the company’s conviction to restore its relationship with its customers than just styling. For instance, in 1983 the company started the Harley Owners Group, or H.O.G. for short. By 2000, this group of loyal customers numbered over 500,000. In 1987, the company offered an innovative “buy back” sales program, which offered a full trade-in value for up to two years on any 883 Sportster traded in to purchase the company’s larger FL or FX models, effectively guaranteeing a high resale value for its customers.
In 1983, Harley-Davidson successfully lobbied the government to impose import duties on heavy motorcycles for a five-year period to “give them some breathing room.” Then in 1987, the company made American business history by petitioning for early termination of these tariffs, demonstrating to the world it was confident that it could compete.
Since going public again in 1987, Harley-Davidson stock has split five times. Its market cap value now exceeds $13 billion US, with sales growing over $5 billion US per year and net profits nearing $1 billion US.
Although I have never actually ridden a Harley, I can certainly say that I am a great admirer of the company itself.
Harley-Davidson identified its biggest assets and built on them. The company identified its weaknesses and then adopted the proven practices learned from competitors. The company also asked for help, but only after it was helping itself.
In times of challenge and change, finding the right course and choosing the right direction is the true test of a company’s leadership. It is the reason that Harley-Davidson is revered as a market leader today while Norton Commando is remembered as a nostalgic classic.
Paul Hogendoorn is president of OES, Inc. and chair of the London Region Manufacturing Council. He can be reached at firstname.lastname@example.org. For more information about the LRMC, visit www.manufacturinglondon.com.