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How Indian Got Its Vroom Back

How Indian Got Its Vroom Back

In an unusual step for a small manufacturer, the company decided to buy a full-blown, $1.3 million ERP package.

* Learn how a business is building processes around technology.

* Determine how strategic alignment positions a company for success.

* Hear the lessons a company has learned from others' mistakes.

You hear it before you see it. A thunderous growl announces its arrival. Heads turn. People stare at the sleek, valanced fenders, the gleaming chrome and the classic Indian Motorcycle logo that 50 years ago stood for what some people call the best motorcycle ever made.

Is this a ghost? After all, the company died in 1953 from its reliance on Army contracts and a crumbling dealer network. Well, Indian is back, and the revived company and its current bikes have a new rumble wrapped in a style and a brand from the past, recovered by a $1.3 million investment in technology systems.

Frank O'Connell, the new Indian Motorcycle Company of America's CEO, says the company has used this investment to build a dealer and consumer franchise in a way that companies with legacy components cannot. "We intend to be experts in designing and engineering and building our brand," O'Connell says. "Information technology will allow us to be flexible in terms of assembling bikes that consumers want without being strapped with huge manufacturing facilities, big plants and tooling."

The new Gilroy, Calif.-based Indian is building its business processes around a set of heavyweight ERP applications. In the process, it has built a computer-savvy network for dealers and encouraged them to link to the company's extranet for communications, bulletins and account references.

Indian's new chiefs have a brand panache and evocative nostalgia that has earned them devoted fans. "Indian was held in highest esteem and through the early 1950s had one of the foremost reputations for quality motorcycles," says Mark Mederski, executive director of the American Motorcycle Heritage Foundation (which operates the Motorcycle Hall of Fame Museum), based in Pickerington, Ohio. "The brand has never gone away. The motorcycle itself had a reputation for quality and such character with those dark, skirted fenders, flowing lines and beautifully painted metal."

Allan Girdler, amateur historian and author of The Harley-Davidson and Indian Wars, unabashedly gushes that the original Indian Sport Scout was "a revelation, a complete knockout that some people still consider the best motorcycle ever made."

Even with all this brand affection, the 21st century Indian Motorcycle Company of America faces many speed bumps on its road to rebirth. As it builds its current business, it has to design an entirely new line of motorcycles with a completely new engine. At the same time, it has to build interest in the bikes made today while convincing a semiskeptical motorcycle public that its big plans for the future are worth paying attention to-even if the company's current bikes aren't held in the highest regard.

ON THE ROAD AGAIN

Another of the new company's challenges is that the allure of a reincarnated Indian has burned the motorcycle world once before. Almost 37 years after the beloved original Indian company folded in 1953, a colorful entrepreneur named Philip Zanghi said he had a plan to revive the teepee-shaped plant in Springfield, Mass., and start building new Indian motorcycles. Several years later, investors realized his plans were a sham, and in 1997, he was found guilty of securities fraud, tax evasion and money laundering.

This led to a 1998 Colorado court decision that a Canadian company could have the brand as long as it actually manufactured motorcycles under the Indian name. This company teamed up with the California Motorcycle Co.-a small builder of Harley-Davidson-style clone bikes based in Gilroy, Calif.-to begin making new motorcycles in the old classic style. Indian Motorcycle Company of America was reborn.

In an unusual step for a small manufacturer, the company decided to buy a full-blown, $1.3 million ERP package, Oracle 11.03, on which to run the new business. Making this investment at such an early stage forced the company to become a real business with real business practices, says Frank Wagenseller, Indian's vice president of IT.

"Getting those [application] modules dictated everything from how we would receive products and treat suppliers; certify, inspect and move items to the work line; open and close work orders; and receive transactions," Wagenseller says. "As most companies develop, they define their business practices and then they go out and search for a piece of software. We did it completely opposite. We said, 'Here's how the software works, so this is how we're going to do business.' Having a centralized database and centralized demand planning gives us a much better ability to react quickly to demand and make changes to forecasts and sales orders. The whole idea is to get lead times down, reduce costs and reduce our inventory carrying, and having all of these integrated processes together allows us to do that."

The company also set up a B2B extranet for its dealers based on Oracle's Web Customer product. Every Indian dealer is connected to the system. More than 50 percent use it regularly to manage orders and accounts, look up product availability and check out new specs. They can also import data into their own Excel spreadsheets for further analysis.

As Indian got rolling, O'Connell liked what he saw. "The new company was built on the backbone of a fully integrated system with financial supply, dealer networks and all the elements needed to provide the right kind of information at the right time to make the right kind of decisions."

"It's not like we're bleeding edge here," says Wagenseller. "The idea is that you've got to change the culture of the organization and really map out the actual business processes to what's going on in the system. That was the significant challenge here-getting the kind of people who understood how to run a business and then getting them familiar with the applications themselves. The challenge has been really mapping the physical processes to what's going on in the system."

Indian's full-bore ERP investment is both uncommon and innovative, says Kevin Prouty, research director of automotive strategies at AMR Research in Boston. "It's farsighted to take the approach of thinking of systems first and building the way you do business around them from the start. Not that many companies start that way, but it allows you to scale up and grow, so it makes a lot of sense."

HAIL TO THE CHIEF

In 2000 the new Indian company began to quickly turn out motorcycles with styling that echoed the classic 1948 Indian Chief model, but the guts of the new machine didn't exactly impress the motorcycle world.

"Their first Chiefs have been a necessity of invention to satisfy the court mandate. They had to turn out things quickly, and that's what they've done," says David Edwards, editor in chief of the Newport Beach, Calif.-based motorcycle bible Cycleworld. "It has the feel of a kit bike, which in essence it is. It's not a stem-to-stern conception as a bike should be."

The company will need to cater to the motorcycle crowd, according to Don Brown, a motorcycle industry analyst at DJB Associates in Irvine, Calif.

"Their belief is that people will beat a path to their door to buy a motorcycle that has an Indian name, but that's just a piece of a very complex puzzle," he says. "They have fancy brochures and talk a lot to the press about what they're doing, but eventually they will have to come out with legitimate products and sell them to real motorcyclists in order to be successful."

Edwards summarizes the motorcycle public's wait-and-see attitude. "If they just continue to turn out Harley clones with Indian fenders, I think they'll be seen as a pretend motorcycle company. But if they come out with a completely new engine on an improved chassis with improved bike dynamics, that's a different and much more interesting story."

FALSE START

This isn't the first time someone has tried to crack the cruiser motorcycle market by reviving a historic name. In 1993, David and Dan Hanlon, two brothers from Belle Plaine, Minn., relaunched the Excelsior-Henderson motorcycle brand that had been dead since 1931. They raised nearly $100 million through private funding and a public stock offering, built a state-of-the-art manufacturing plant and began producing brand-new Excelsior-Henderson cruisers. Analysts said the growing market seemed to have room for more manufacturers, but in December 1999, only eight months after the first bike rolled off their assembly line, the Hanlons filed for bankruptcy. Excelsior-Henderson hasn't made a motorcycle since.

Terry Fiedler, a reporter at the Minneapolis Star Tribune who covered Excelsior-Henderson's rise and fall, says the company suffered from a mix of hubris, facility extravagance and poor planning. "They didn't bootstrap well," says Fiedler. "They built a $50 million to $60 million facility before they knew what demand would be for their bikes and hardly marketed themselves at all. Their motorcycles were technically sound, but they didn't develop a solid dealership network to help them drum up demand. In the end, they sold very few bikes."

Industry watchers say Excelsior-Hender-son had spent a lot of money on the manufacturing facility before it was sure the model would be a success in the marketplace. "I don't think the Hanlons did their due diligence. They believed that people would buy their machines instead of Harleys, and that simply didn't happen," says Brown. "They didn't seek the best business advice or the best design advice and insisted on their own view of what the design should be. But they were a legitimate motorcycle maker, and they took their shot at a life's dream."

Wagenseller says Indian's executives (several of whom cut their industry teeth at Harley-Davidson) followed the Excelsior-Henderson story closely to analyze why that business failed. "We heard and read a lot of descriptions of their Taj Mahal manufacturing plant, especially the [$8 million] powder-coating facilities, and we've been very careful about where we're spending our dollars. We're spending it on technology and building brand awareness instead of on a mammoth vehicle manufacturing structure."

Wagenseller feels success also boils down to the appeal of the bike itself. "Sell-through is extremely important, so we've set up our systems to carefully track which bikes are selling in which markets and how long they're staying on the floor," he says. "Our bikes are selling. In the end the Excelsior-Henderson just wasn't that pretty, so it didn't sell. The Chief is a beautiful bike."

The new Chief's luxuriously sweeping fenders and dazzling muscular chrome wows onlookers, which makes a great brand impression. "I can't remember when I've ridden a motorcycle that generates as much sidewalk attention as one of these new Chiefs," says Cycleworld's Edwards. "People will pull you over to the side of the road to ask about it. This motorcycle makes a statement-people love the way it looks."

That visual dazzle helped sell more than 5,000 of the $24,000 Indian motorcycles last year, and the company expects to increase those numbers by 20 percent in 2001. The real moment of truth will come this fall, when, O'Connell says, the company unveils its first designs for the completely new model. By the end of the first quarter of 2002 these new bikes should be thundering down the streets.

KICK START

One industry insider scoffs at this timetable. "At Excelsior-Henderson, it took three years and a dream team to design an engine, validate its performance and start building them," says a former Excelsior-Henderson insider who spoke on condition of anonymity. "So you can't just design a new engine and put it in the present bike; everything has to change. Absolutely everything-and there just aren't many ways to speed up that timetable."

O'Connell (who owns and rides one of the few Minnesota Excelsior-Hendersons, as well as several Indians) scoffs right back and says Indian can cut that time in half by designing the engine and new motorcycle in-house, but outsourcing the engine's manufacture and testing. Meanwhile, Indian will continue to manufacture the frames and sheet metal components, and provide the powder coating, painting and assembly. He also points to Indian's technology strength as another key to this timetable.

Wagenseller agrees. "The power of our applications gives us a handle on our manufacturing processes, specifically time to production, by controlling how components are handled within the organization and fed to the final assembly area. These are all pieces of business functionality that many companies struggle to accommodate quickly, but we have under good control," he says. "We learned how important it was to put a business process system in place that allows you to grow quickly and intelligently. We picked a good system early, got it in place quickly and put the right people in place to use it."

Cycleworld's Edwards says the proof will be in the pudding, but Indian's sales and efforts have been a pleasant surprise so far. "They turned a lot of people's ideas around with their dedication to building a cycle with what they had on hand. If they are able to come out with a new Indian, designed from the ground up to be a new Indian all of one piece...I think they could be well on their way to being a long-term player in the American motorcycle market."

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