In the world of Physics, Einstein’s General Relativity and Quantum Field Theory are duking it out for the exalted title of Theory Of Everything. According to Wikipedia – “A theory of everything (ToE) or final theory, ultimate theory, or master theory is a hypothetical single, all-encompassing, coherent theoretical framework of physics that fully explains and links together all physical aspects of the universe.” Something like this comes to mind when mulling over the dramatic effects that emerging technologies are having on the powersports industry.
In powersports we offer a product and experience rooted in the physical world, but we must find a way to design, develop and deliver it with digital tools. We must harness the beast of technology while at the same time fiercely opposing its insatiable appeal to millennials that could consume the sport itself. In order to understand how new tools like CAN, Virtual Reality and 3-D Printing can be harnessed, I’ll present some thoughts on a hypothetical business model I’ve conceived. It is globally scalable and could completely transform the industry if realized. It is much more than 3-D printing aka Additive Manufacturing (AM). It is much more than e-commerce. It is more than Virtual Reality. It’s more than a CAN bus. It’s more than a great ride. It’s the fusion of them all. Perhaps with this attempt at our own Grand Unifying Theory some derivative ideas can be used by manufacturers in the real world. The new approach involves creating LRMs and DFLRM – not that we need any more acronyms.
Before I define these two terms, consider that centralized final assembly (CFA) has been around since Henry Ford – some would say since the time of the pyramids. Market forecasts, supplier selection, lead times, retail pricing, mechanical layout, quality control – practically everything we do today is limited by the assembly line as we have known it. Tools like E-commerce, social media and engineering software have changed certain areas of the powersports business model but manufacturers are still adding water to the soap (as it were), wringing out all of the productivity they can from their CFA approach. The luxury of the CFA is that highly complex materials from hundreds of suppliers can be adapted to optimize things like weight and performance. The approach drives centralized planning and forecasting which gives company managers a modicum of control. The downside of CFA is the onerous complexity and sheer vulnerability of it. With CFA, one supplier missing a delivery can shut down an entire assembly line. One bad design or missed quality control measure will be multiplied by the 100s, 1,000s or 10,000s before being caught — incurring extreme fault-correction costs that are driven from dealerships all the way back through the supply chain. Because of CFA, one losing gamble with a product plan could put a company out of business.
In my theoretical powersports future we create a motorcycle business model where every new ATV or motorcycle, including accessories, is built exactly to customer requirements and delivered in between 4 and 48 hours. Amazon has similar plans for consumer goods: http://fortune.com/2015/02/27/amazon-3d-printers/. I’ll call the approach Design For Local Rapid Manufacturing. Local Rapid Manufacturing centers (LRMs) would likely be independent entities using AM “printers,” serving multiple markets and having tightly-controlled quality standards. DFLRM would alter or eliminate many professions but strengthen others. LRMs align with the movement toward supporting local economies and they reduce transportation costs and emissions. A rigorous adoption of DFLRM would allow OEMs to adapt their product requirements at a granular level including pollution standards, colors, powertrain, model names and so forth. How earth-shaking is the new business model? It will change what vehicles look like, it will change how corporations are structured, it will change how engineers are taught (and elevate their importance), it will change Marketing’s purpose, it will transform dealerships, it will require new quality certifications, it will transform Industrial Design and it will drive adoption of materials and processes.
It's safe to say that the powersports LRM model would require higher precision and complexity than what Amazon is going to do for the masses. However, there are many advantages to developing a powersports LRM approach or piggybacking onto a similar approach for other complex assemblies. Product plans can be modified in real time. OEMs could own dealerships dripping with branding and equipped with Virtual Reality experiences – primarily for product and feature selection purposes. The dealerships would have a limited number of actual vehicles and some might have none at all. The VR stores can be located wherever OEMs want to, and they are as clean as an Apple store. Brick and Mortar shops including family-owned ones become stronger and more important as hubs for service, repair and non-LRM accessories. There is no haggling between dealers, OEMs and finance divisions about unsold inventory because there is no unsold inventory. Suppliers with the most capability will rise and cronyism between suppliers and buyers will become obsolete. All transactions throughout the value stream are fully paid electronically within a few days (besides entities holding the funds to collect daily interest). Startups have equal opportunity to compete with established brands purely on merit as long as government certifications and validation testing hurdles are cleared. Vehicles and accessories are assembled locally and provide local jobs — anywhere in the world. Above all, the customer gets exactly what they want including personalized styling cues. Tons of cash gets freed up because end-of-season promotions, unsold inventory, interest payments, blanket purchase order obligations and other non-value-added operations are eliminated. R&D investments accelerate and this becomes the chief area of competition. Intellectual property becomes crucial but not just in the conventional sense because open-sourcing abounds and designs are building upon each other. The entire sales channel becomes “pull” rather than “push” oriented and brands can operate while carrying no inventory at all once LRM is fully implemented. Exhilarating, isn’t it?
To read Part Two of Gary Gustafson's new Theory of Everything, click here.
Gary Gustafson, keynote speaker and powersports industry consultant, is president of G-Force Consulting Inc. G-Force provides New Business Development strategy, OEM account management and custom market research on topics as diverse as ATV winches, UTV power steering and the Canadian snowmobile/UTV market.