The land of opportunity – April 24, 2006

It wasn’t the rags to riches stories that drew Ducati North America CEO Michael Lock back to the United States. It was the spirit behind them. The energetic, can-do mentality that throws aside nagging doubts and fiscal hand-wringing and simply concentrates on the what-if.
What if Lock ditched a good job in a great motorcycle market in 2003 and came to the land of opportunity? Forget the job exists at a subsidiary that Lock once characterized as a “self-inflicted tragedy.” Forget the dealer network there was so upset that they openly called for his predecessor’s firing. Forget the dismal parts service, the questionable vehicle supply chain, the depressing sales figures.
Forget all of it. Concentrate on the prevailing, enthralling attitude that Lock, a British citizen, sensed in America: that everything, everything is possible.
Possible perhaps, but at what risk? And at what cost?
In February 2003, Lock left behind those questions, so prevalent in the United Kingdom, and took over the North American branch of Ducati, a role that three others had tried and relinquished in the past four years.
“People (in Europe) are always looking at risk and threat before they look at opportunity,” Lock said during a recent interview with Powersports Business. “That just seems to be something in the culture over there. Where over here, it’s in stark contrast, particularly in the bike business. People are looking for what they can achieve.”
Like an Oregon motorcycle dealer who had absolutely no historical precedence for succeeding and yet has in surprisingly strong fashion. Or a New Mexico dealer who had more experience selling guitars than motorcycles but has increased sales by a staggering percentage. Lock compares these everything-is-possible stories to fairy tales, except these Ducati stories of achievement are true.
What tops those success stories is Lock’s own. In 2005, Lock and company posted their highest retail vehicle sales ever while also reducing noncurrent supply to an all-time low. In accomplishing these sales feats, he and his crew vastly improved the company’s parts distribution and bike supply chain.
For achieving so much in such a short period of time, Lock has been named Powersports Business’ 2006 Executive of the Year.
A Ducati fairy tale come true
Bend, Ore., is a little blip on the map in the central part of the state. Lock could tell you that because he was forced to look for it after a husband and wife team, Kathy Jo and David Porter, repeatedly approached Ducati North America (DNA) about opening up a franchise in the high desert area. “They wouldn’t go away,” Lock said, laughing. Lock gave in and last April, the company, Bend Euro Moto, opened its doors. In a little more than six months, the company sold 40 Ducati bikes. “I could give you 10 stories across the United States over the past two years where we’ve created successful businesses in partnership with entrepreneurial people where they just didn’t exist before,” Lock said. “And there was no evidence they were ever going to. So that’s what I like. It’s the can-do (attitude). It’s the anything’s possible.”
The decision
Before Lock’s tenure at DNA, the difference between Ducati’s North American and Great Britain subsidiaries was almost comical. In fact, Lock admits there were times as managing director of Ducati U.K. that he looked over U.S. sales reports and breathed a sigh of relief that he wasn’t dealing with that “imploding” market.
That would all change in the early part of 2003.
At the time, DNA was in the midst of a serious sales slump. Its parts distribution service was suffering, with fill rates in the ghastly 50-percent neighborhood. And to make short-term matters worse, the company had lost a number of employees when it moved its U.S. operations to the West Coast from the East Coast.
In February of that year, Federico Minoli was appointed Ducati’s CEO. By March 3, DNA had a new director. “Federico sat me down and said look, ‘These are the raw numbers, these are the problems, this is the scale of the challenge, and I need somebody over there that I can trust,’” Lock said. “And I thought that was an honor actually.”
The possibility of leaving England came at a good time for Lock. The year before he had married and his new wife, Suna, liked the idea of living in the United States. Plus, his grandmother, the “matriarch of the family” who had resided in London, had recently passed away.
“She had gone, and I had felt a sense of release that we could do anything,” Lock reflected.
Still, the change in business climates would be a radical one.
“It was a bit sleepy,” Lock said of working at Ducati U.K. “Year in and year out, we sold a lot of bikes. The dealer network was stable and the business was stable. And the press loved us.”
Lock knew that sleepy, cheery feeling would not follow him across the Atlantic.
“I knew (the dealers) were not happy because they felt the place was being run incompetently,” he said, “but also there was a huge opportunity gone begging. I knew that if we could galvanize the dealer network, we could do anything. I thought it was fixable.”
A Ducati fairy tale come true
Albuquerque, N.M. had been a sore spot. The multi-line dealer there was having strong sales, but not with Ducati, selling only nine to 12 bikes a year. Enter P.J. LaMariana, a relatively new Triumph-only dealer in Albuquerque who had spent the bulk of his business career marketing musical instruments. “He started relentlessly pursuing us,” Lock said of LaMariana. A deal was struck so the Ducati franchise could be transferred to LaMariana by June 1, and the unlikely happened. He sold about 60 bikes in the second half of 2005, the weakest part of the year. “That’s the kind of success story that is around every corner here. I know it is,” Lock said. “This country is enormous. (There are) so many pockets of untouched potential.”
The to-do list
When he arrived in America, Lock had a lengthy list of fixes, and marketing certainly was one of them.
“There’s something deep down in the psychology here that if it’s Italian, it’s beautiful, it can be patted on the head and patronized a bit, but it’s not really serious,” Lock said. And that can be a business-killing perception when brought to the showroom floor. Lock saw too many examples where the biking community linked Ducati with its $35,000 world superbike replica and not the rest of its more affordable models.
“That’s quite a challenge to convince people that we are really anything more than an expensive and fragile toy,” he said.
To dispel that notion, Lock switched marketing tactics, going away from “impersonal” print advertising and national promotions to event marketing, which focused on getting Ducati in front of the public and getting people to sit on the bikes. By doing this, Lock said, consumers quickly realized Ducati is not “a piece of sculpture that costs $40,000.”
AMA racing offered another marketing possibility that Lock seized.
When he arrived in 2003, the Ducati AMA superbike team comprised of one rider who was racing an out-of-date model. “There was a huge disconnect between what was happening in racing and what was happening commercially,” he said. “And there was no contact” with DNA officials.
Equally appalling to Lock was DNA’s reliance on world racing tours to generate interest in its brand in the States. “This is a country that looks inward for its sporting heroes, not outward,” Lock said. “If we wanted to be taken seriously as a superbike manufacturer over here, particularly a premium superbike manufacturer, we had to put our money where our mouth was.”
Lock brought his message back to Bologna, Italy, and to Ducati CEO Minoli. “Sure enough, he understood completely what we were talking about,” Lock said. “Racing is in our blood. It’s the core of what we do, and in any country where we have a powerful presence, we have to be at the heart of racing. That was the message I wanted to get across. And we did it.”
Last year, with a two-man team, including world champion Neil Hodgson, Ducati was the lone manufacturer other than Suzuki to win an AMA Superbike Championship race.
Equally important, Ducati made its presence felt off the track with its hospitality areas. Ducati bike owners were invited at each race to come to the company’s compound and have a free lunch and, at times, sit in exclusive areas. The approach, although expensive, accomplished two things, Lock said. First, it reaffirmed to customers that they made the right decision to buy a Ducati. And second, it potentially raised some eyebrows from non-Ducati buyers who no doubt took notice of the racetrack perks. “That’s how you build a boutique brand in a country like this,” Lock said. “It’s a word-of-mouth thing.”
Parts and manufacturing
Also poised on the 2003 list of to-dos for Lock was tackling the company’s distribution of bikes.
Ducati makes about 40,000 motorcycles a year for its worldwide markets. Before Lock’s arrival, the European market took what it wanted from that pile and the United States got the leftovers. As a result, bikes shipped to the United States sometimes came with the wrong specifications or color or even the wrong model mix.
In Lock’s first year, he changed that by moving up the annual national dealers meeting to August. At the dealers meeting, Lock outlined the new model lineup and then gave dealers six weeks to plan their orders for the following year.
“That certainly got (the) attention at the high table at the factory that I could go and slap down 6,000 advance orders,” Lock said.
The advance orders allowed DNA to get a higher priority at the factory and resulted in far fewer mistakes in model color and specifications and a reduced non-current inventory. “If a dealer sits down and orders 80 bikes in advance because that’s what he can thinks he can sell, guess what?” Lock said. “Normally he sells them.”
The advanced ordering system has been tinkered with and improved over the past two years.
“Now our relationship with the factory is better than ever,” Lock said. “We’re the most reliable customer they’ve got in the world now. If we want something, we get it.”
Plus, as retail sales in the United States have climbed, Lock has used his standing with the factory to fill orders.
“If demands drops 20 percent in the United Kingdom, guess who gets those bikes?” he said. “I’ve got my hand up first. I’m at the front of the class saying, ‘Can I have those please?’”
And dealers have noticed.
“It’s a world better than what it used to be,” said Bill Nation, owner of Pro Italia Motorcycles, Los Angeles. “The supply and demand was out of whack.”
Now, Nation said he’s getting better margins on his bikes, and he’s noticing the resell of the brand is staying up.
With the improved bike supply came an overhaul to DNA’s parts distribution system.
When Lock arrived in 2003, the parts fill order was in the mid-50s, according to a Powersports Business article. To address that, Lock first closed the DNA warehouse and used an independent company to distribute parts. Fill rates went up, but costs doubled. That led to more discussion and a new plan, one that debuted last October. North American dealers now electronically place their parts orders directly to the Bologna, Italy, warehouse, which then packs and ships their orders back to the dealer. The dealer-direct air service turns around orders in two days to major cities and three days to other destinations.
“We, for once on logistics, are at the cutting edge rather than the trailing edge,” Lock said.
Thanks to the new system, which is more cost-effective than the previous one, fill rates have climbed in the past year from the mid-80s to the mid-90s.
“It’s the rise in business over here that gave us the opportunity to do that,” Lock said of the air service. And that rise in business has been in both PG&A and vehicles.
Sales in the first quarter of 2006 were up 75 percent in apparel and 38 percent in accessories compared to the previous year.
For vehicles, 2005 was DNA’s biggest unit retail sales year ever and marked a 43-percent increase from 2003. The trend of vastly improved sales continued in the first quarter of this year, with bike sales up 20 percent over 2005.
A Ducati fairy tale come true
Alvarado, Texas, is located an hour south of Fort Worth and typifies rural Texas with its vast oil fields and, as Lock puts it, “cows with really big horns.” It’s also the site of another unlikely Ducati success story. Jeff Nash, a former roadracing champion, has turned Advanced Motorsports, once a tuning and performance shop, into one of the top Ducati dealers in the United States in just three years. Lock said Nash’s penchant for making sales fun and exciting has enabled him to have “gone from having nothing to contemplating” an additional dealership in Dallas.
“What we’ve found is you certainly need to establish a business principle — that there is business possible,” Lock said of sizing up potential new dealers. “But much more important than that is people’s motivation, people’s energy, enthusiasm and optimism.”
Looking inward
Possibly because his three-year reign has resulted in such a terrific rebound, Lock inwardly at times returns to his British roots of focusing on potential risks rather than possible rewards.
“Very often you need to point out the risk and threat yourself because people just don’t want to consider it,” Lock said of the American bike industry.
And there are justifiable concerns for Lock and DNA in the future. Can Ducati keep up with the recent increase in demand? (Lock says the possibility of expanding manufacturing is currently being discussed in Italy.) What impact will the company’s new majority shareowners have on Ducati North America? (Lock isn’t sure, but will meet with the new owners this month in Bologna.) And will greater DNA sales result in future Ducati motorcycles being more oriented to the American market? (Lock thinks that will be the case in two or three more years.)
All of which means there’s more than enough to keep Lock’s British worrisome nature intact, even if there’s plenty of reasons to sit back and get caught up in the everything-is-possible attitude.
“The last six months the business has gone so extraordinarily well,” Lock said. “We had a fantastic dealer meeting in August of last year in Chicago. And that was the rallying call. Ok, we’re tired. We’re tired of being small and weak. And it’s not inevitable that we’re going to be this tiny boutique manufacturer that only ever sells to the same people that we’ve always only sold to. We are now in a position to break out of that, and to be profitable and significant in the United States.” psb

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