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How Harley-Davidson Got Back Basics
If there was ever an American
icon of the highways it’s the Harley-Davidson motorcycle. 2003 is the
year the company celebrates its 100th anniversary with a series of
motorcycling events around the world.
The company also announced record revenue and earnings for its second
quarter ended June 29, 2003. Revenue for the quarter was $1.22 billion
compared with $1 billion in the same quarter of the previous year. The
U.S. dealer network sold more motorcycles in this quarter than in any
other quarter in its 100-year history.
It may seem hard to believe now,
but not that many years ago the company was on its way out the door.
The story of how Harley-Davidson went from being a loss-making relic of
the American motorcycling past to a profitable company that now holds
its own against fierce competition from overseas manufacturers is both
inspirational and educational.
In the early 1980's Harley-Davidson was selling every bike it could make
- but at a loss. Japanese motorcycles were taking over worldwide markets
and setting better quality standards. Harley loyalists kept the factory
alive, but the market was really going elsewhere.
Harley had speeded up their production volume to meet the Japanese
challenge, but as output went up quality went down. The challenge soon
became about technology and quality more than production volumes.
As a classic example of manufacturing failings, the 1976 model Cafe
Racer had so many faults that it cost over $100,000 just to get the
first 100 bikes ready to ship to dealers.
Existing Harley-Davidson customers stuck with the brand despite its
faults. But even if the antiquated production facilities could produce
more bikes, there would be little growth against the Japanese makers
until a new customer base was developed.
It took a Harley designer, the now-legendary Willie G., to redefine
Harley-Davidson. He changed how the bikes looked, how they were made,
and more importantly how they met the needs of Harley's customers,
particularly those who had never before owned a Harley.
William G. Davidson was the grandson of one of the company's founders.
He "found himself" with Harley, and established a rapport with their
customers that enabled him to design a new generation of red-blooded
American motorcycles that sold more units and finally generated profits
for the company.
Willie G. designed Harleys that broke the mould and opened up whole new
markets. As a talented designer he still managed to retain the
Harley-Davidson image in all his models.
Everything Willie G. did was based on his personal contact with Harley
customers. As he put it: "Our customers really know what they want on
their bikes...Harley riders see their bikes as art objects and they want
them to look a certain way."
Harley-Davidson also initiated employee involvement in company planning,
inventory control, and ways of measuring output per employee. Giving the
customers both quality and the products they wanted became corporate
goals.
Harley formed riders' groups to establish closer bonds with its
customers. The company was able to translate the findings from rider
groups into product improvements that found their way onto the market in
a remarkably short time.
One of their most important findings from mixing with their customers
was that Harley riders put a lot of money into customizing their bikes.
If Harley-Davidson could build these customized attributes into their
factory models they'd get a better price and greater customer
satisfaction.
Throughout the early and mid-1980's Harley-Davidson went through many
trials and tribulations, especially in the financial field. At one stage
in 1981 they were just one week from bankruptcy, but by 1987 their
restructuring had paid off and they were back in the black, this time to
stay.
The showroom of a typical Harley-Davidson dealer will have many
different models on display, each appealing to a different segment of
the motorcycle-buying market. Customers can range from executive types
to hard-core bikies.
What's really important is that these models appeal to the customers -
not to factory accountants or production planners. That's why they sell.
Harley-Davidson got off-track producing what they wanted to make and not
what a world full of potential customers wanted to own. Now they're
doing better than ever against the stiffest competition in the world
because they found out what their customers wanted and gave it to them.
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