Innovations at Harley Davidson
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Case Code: BSTR093 Case Length: 19 Pages Period: 1903 - 2003 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.500 Organization: Harley Davidson Inc. Industry: Automobile Countries : USA Themes: Innovation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Harley-Davidson - Background Note
H-D was one of the few companies that had been managing its innovation processes even before the days the concept became formally popular. The company's history can be traced back to 1903, when William Harley (Harley) and Arthur Davidson (Davidson) opened a small motor-shed in Milwaukee. Innovation was an essential part of H-D from the very beginning - the idea behind the business was to find a way that would ease the physical efforts needed to ride a bicycle. In 1903, they built the first H-D motorcycle (essentially a bicycle with an engine) to make going uphill easier. Needless to add, the motorcycle was an instant success. By 1905, H-D was regularly producing these bikes nicknamed the 'Silent Gray Fellow.' With money loaned by an uncle, the duo built their first 2,380-squarefoot shop. Two years later in 1907, H-D was incorporated as a company, producing 150 motorcycles in the first year. Inspired by the success of their initial efforts, the twosome assisted by other family members, developed an upgraded version of the motorcycle in 1909...
Harley-Davidson: Back to Innovation
Given the above circumstances, US President Ronald Reagan's decision to increase tariffs on Japan's motorcycle imports in 1983 (from 4.4% to 49.4%) to revive the US motorcycle industry, came as a positive development for H-D. However, the new tariffs were to be effective only for five years and would reduce annually thereafter. The company had to make considerable improvements in its business processes to sustain itself in the market in the long-run. The H-D management accepted the challenge and embarked on what analysts called the path of adopting innovation as a tool to improve the company's performance at all levels - marketing and customer relations, organizational changes, product, process and manufacturing...
Manufacturing Practices
As mentioned above, prior to the 1980s, H-D was not able to meet its production targets. The company's manufacturing plants were designed to use a batch process flow of materials on the plant floor. As a result materials (parts) were tooled in large batches at different locations in the plant and workers had to make use of forklifts to move the materials around the factory. This resulted in high set up times; consequently, product output rates were very low...
Making the Organization Conducive to Innovation
In the mid 1980s, the management realized that its traditional command-and-control culture did not foster healthy relationships among employees at all levels. Identifying this as a factor that could hamper productivity and innovativeness, the company decided to make the culture more open and participatory. H-D now began interacting more with the employees at the shop floor and this, in turn, aided the management in implementing new practices. The management shared the importance of the company's values with its employees. This way, it was able to instill high moral values in them and emphasize its commitment towards its employees. As a result of the above, H-D was able to develop a harmonious relationship with its worker unions based on trust, respect and communication...
New Product Development
All the above changes at various levels of the organization laid the ground for innovation in new product development (NPD) as well. H-D believed that NPD was not just about engineering, but a creative process where consistency in approach was critical. The company also believed that technology should be used only to fulfill this creative process..
Innovating for a Total 'Customer Experience'
H-D's formal approach towards NPD through CPPDM methodology enabled it to introduce successful and innovative products consistently. As a result, the company was able to post impressive growth in earnings and revenue between 1986 -2001 (Refer Exhibit VI). In the early 2000s, 80% of H-D sales came from new products (models less than five years old). According to industry observers, the positive results of H-D's innovation philosophy was attributable to the fact that it used technology and engineering to support the processes that aimed at enhancing the overall customer experience. The company worked on the premise that the customer's experience transcended the product. Products were no doubt the core, but H-D sold its customers a total 'H-D riding experience...'
Exhibits
Exhibit I: Some of the World's Well-Known Corporate Innovators
Exhibit II: The Process and Barriers to Innovation
Exhibit III: New Product Launches at Harley-Davidson
Exhibit IV: The Swirl Model
Exhibit V: Types of Bins
Exhibit VI: Harley-Davidson - Key Statistics (1986-2002)
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