| Business is more complicated than many people | | | | Like athletic shoes and sports apparel, bicycles have |
| realize. Sometimes you are just lacking one or two | | | | become more of a fashion item and more specialized. |
| elements to become much more successful. For | | | | Bike use is also diversifying to reflect new |
| example, have you ever developed a very fine new | | | | technologies, and new concepts of what bikes can do. |
| product but were unable to get anyone's attention to | | | | As part of this change, Huffy no longer produces its |
| consider purchasing it? A brand name or a powerful | | | | own bikes, relying instead on faster, less expensive, |
| distributor might have solved that problem for you. | | | | and more versatile foreign suppliers. Huffy has also |
| If you don't have those resources available inside your | | | | extended its product line to include more brands. |
| company, partners should be able to provide what you | | | | An early success with this differentiated |
| need. But, you have to know what you need and | | | | customer-facing approach was in rapidly adding an |
| secure it in a timely way. | | | | in-line scooter in 2000. Huffy had had a scooter which |
| Sometimes, a company's business model will inhibit it | | | | usually sold 200,000 units a year. As sales of the new |
| from being able to expand where the opportunities | | | | scooter took off, Huffy was rapidly able to expand its |
| obviously lay. In such a case, a new business model | | | | supply. Yet the capital expenditure budget for this rapid |
| must be forged that not only permits a company to | | | | ramp-up was zero. Under the old business model, |
| expand into other opportunity areas, but does so in a | | | | most of the gains would have been missed while the |
| way that provides consumer and competitive | | | | investment would have been significant. |
| advantages. | | | | In the process, the company's focus has gone from |
| Let's head for the bicycle shop to see how this was | | | | inventory risk management to rapid trial of promising |
| done by one manufacturer. For over 50 years, Huffy | | | | new concepts. |
| Corporation focused on designing and manufacturing | | | | How did the company find the opportunity to make the |
| one brand of bicycles, and selling them mostly in the | | | | transition? |
| United States. For over 40 of those years, that | | | | First, Mr. Graber had long experience in the international |
| business model worked well. When it stopped working, | | | | group at Black & Decker, which gave him a good |
| the company was slow to react. | | | | sense of what international manufacturers can do |
| Under the old business model, Huffy had to guess how | | | | today. When Huffy's operating leaders reported that it |
| many bikes of what sort would be sold. If too many | | | | was cheaper and better to make bikes within the |
| parts were ordered and shipped as bikes, the | | | | company, Mr. Graber requested that trial orders be |
| company could lose a lot of money. The company had | | | | placed in competitive quantities in order to find out |
| to be conservative in its estimation of future demand. If | | | | what costs, quality, and delivery would actually be. The |
| sales took off that was too bad, but it was better than | | | | results exceeded all expectations, and the company |
| having inventory losses. | | | | never looked back. |
| This business model also discouraged trying to add | | | | As helpful as those cost and investments savings |
| new items. If the new bikes failed to sell, the losses | | | | were, Mr. Graber was far more interested in being |
| would be terrible. At the same time, the other | | | | able to do a better job for bicycle consumers. |
| controllable area was cutting manufacturing costs. So | | | | Because bicycles are a smaller category than many |
| a lot of attention was paid to the factory operations. | | | | other consumer goods, it's not practical to launch large |
| Many competitors had moved offshore years earlier | | | | television-based advertising. The company seeks to |
| to access their bikes. Huffy's people looked into this, | | | | use promoting new bicycle events, word of mouth, |
| but couldn't see any way that the costs, quality, and | | | | Web sites, and specialized advertising as a substitute. |
| delivery could be competitive. | | | | As skill develops, the business model will expand |
| Under Mr. Don Graber, the company made a rapid | | | | further in this direction of low-cost branded marketing. |
| transition into a new, customer focused business | | | | With more listening to consumers, the company's ability |
| model for bicycles. Huffy now operates more similarly | | | | to identify opportunities for new products and brands |
| to Nike, the footwear and apparel marketer, than a | | | | should also improve. |
| consumer products manufacturing company. | | | | |