CW Interview: Matt Levatich, Harley-Davidson President & CEO

Date :

May 06, 2015

CW Interview: Matt Levatich, Harley-Davidson President & CEO

CW: We know, via efforts such as Project Rushmore, that Harley has its finger on the pulse of its buyer, heavily emphasizing Voice of Customer in product development. What have you been learning lately?

Matt Levatich: There’s nothing specific we’re hearing from the customer, but what I’m most impressed with is the internal excitement about getting it. What I think product development was in the last decade was—because I was intimately involved with it—it was more “voice of the executive.” We think we know because we are riders.

There was a great moment with Rushmore as we took all these competitive bikes out on the track and learned what everybody had to offer. We had this passenger insight: Eighty percent of our bikes are touring bikes in the United States. Eighty percent are purchased by couples who ride two-up. And there was only one person in the whole product development leadership team who’d ever been a passenger. Because, early on in her life, she used to ride with her husband as a passenger. She’s a full-fledged rider right now, but when I asked after Day 1’s activities, how many people had ever ridden as a passenger on a motorcycle, one hand went up.

So I said, okay, put away the cellphone cameras fellas because we are riding two-up tomorrow. And there are no pictures of this. It’s a great story. You can imagine all the discomfort in the room. We think we know, and we don’t. So let’s go ask. And we’re not design-by-committee. We’re not letting the customers design the motorcycles. But we’re eager to ask what they think about our product, what they think about the competition, lend our own spin to what a Harley is and isn’t. How we’re going to solve the problem or capture the opportunity. What I’m excited about is how excited everybody is to be interested in the Voice of Customer.

CW: Is there a danger in listening too much to the customer? Like a politician following polls instead of leading?

ML: We are not going to do design by committee. We’re going to make informed decisions. But we’re going to make the decisions. On what it’s going to be, and what it isn’t. And this is where we have the talent and passion of our industrial designers and styling who know what a Harley looks like and what it doesn’t. The engineers who work on the components, the supply base that we have that helps us get to where we need to go in technology. It’s the difference between design by committee versus an informed direction. And the customer informs our direction, but it’s our direction.

CW: How significant is China in Harley’s future?

ML: You know, China is a huge motorcycle market. We entered it, I think, in 2005. We have a subsidiary there now, and I think something like 14 or 15 dealerships. There are a lot of very interesting commercial barriers to our growth in China that we’re systematically addressing. One is, in certain cities, you cannot get a motorcycle license plate anymore. They are a fixed quantity, and they’ve been distributed. And it applies to concentric rings in big cities like Beijing. In the inner two or three rings, you can’t get a license for a new motorcycle.

These sorts of rules vary by city, there isn’t a sort of a national campaign that we can do. It’s very much a grassroots, on-the-ground sort of campaign to address some of these things that were put in place to control the growth of scooters. Anyway, what we’re finding as we grow our business in China is that the customers are now participating in helping the government change their mind and open their minds.

It’s really helpful. Early buyers have typically been wealthy and influential people in their community, and they want to ride their motorcycle to their home in the center of the city. They don’t want to leave it on the outskirts, and they’re complaining. And slowly but surely these policies are being sort of challenged and addressed. So, long-term, China is going to be very important to us. It isn’t one of the markets where we are seeing the kind of growth that we have like in India, which is ready-made and right away ready to go. But all of Asia is proving to be a tremendous growth opportunity for the company.

CW: Harley’s traditional Core customer has been a male Baby Boomer. How much longer do you think you can rely on this customer and how do see your customer base evolving as the Boomer recedes?

ML: We love our customer profile. I’ve talked a lot about how Core is critical. Core is not a baby boomer definition. Core is white males 35 and up. Half of the Core population is now Gen X and Gen Y. So Boomers will cycle out of that definition of Core. That will happen. It’s nature.

But the beautiful thing, if you look at census data, is this: There are 50 million Core customers today—white males 35 and up. Thirty years from now, there will be 50 million white males 35 and up. I don’t know if 30 years from now there will be any Baby Boomers left. There won’t be many. And we’ll still have 50 million Core customers.

Why are they so great? There’s a reason. People kind of re-enter the sport. And in particular Harley. They’ve got more time. Their kids have grown up. Maybe their kids are out of the house. They’ve got more money. As their careers get established, they rediscover life after family. They want to do the things that excited them when they were young. And motorcycles have been a part of that.

We’re working hard on what we call the “incoming side” with young adults. And I think this an obligation and an opportunity for the whole industry, including for you guys, to help young people understand how cool motorcycling is.

One statistic that I love, which gives me good confidence, is this: We are selling more motorcycles to young adults today than we were selling to Baby Boomers when they were young adults. You put all that together—50 million for the next 30 years, and getting better everyday at appealing to young adults—and I feel very good about our profile and our focus on the segment reach that we have, both Core and Outreach, in the US.

CW: How do you, as an engineer, see Harley-Davidson pleasing the traditional Harley owner while embracing the future?

ML: I think this is a great art that we have as a company. I understand the technology, and I really appreciate what our engineers do. For example, it’s not technology for technology’s sake. Think of something like ABS. There’s no big tone ring and a sensor that’s visible. It takes a little bit of a trained person to actually identify which Harley has ABS and which Harley doesn’t. We have a fantastic brake system, fantastic ABS. World class.

The linked system in Rushmore is world class, arguably the best braking system in motorcycling. It’s not something you see necessarily, because it’s not technology for technology’s sake. It’s technology to help the rider have a better experience and a safer ride. I like the way we approach technology. It isn’t front and center, but it’s all about the rider and all about the rider experience. Same with the radio system in Rushmore. You can do everything you need to do without taking your hands off the grips or your eyes off the road. It’s not about turning a wheel and typing in stuff; it’s about the rider, and how do we enhance their experience and keep their hands on the bar and their eyes on the road.

The integration of GPS technology into our product was what we brought to it. Because we’re riders. Things like when the gas light goes on on your bike, there’s a communication signal sent to the GPS that flags and directs you to the nearest gas station. This is what we bring to new technology.

When we launched Rushmore in Denver, we had a lot of motorcycle press there, and I think some of the folks from your magazine were asking me: “Oh my God, liquid-cooled. It must be that you are doing the Ultra as just air-cooled because you’re worried people won’t like liquid-cooled Harleys. No, that’s not why we’re doing it. We’re giving people choice. Just like we did when we moved from carburetors to EFI. And I shared with him at the time: “No customer has ever come up to me and said, ‘Gosh, Matt. I really would love it if you would bring back carburetors. I really would like for my bike to wait  for my bike to warm up for 15 minutes before I go off for a ride. I really liked how it didn’t work in the mountains like it worked at sea level. You know, I miss that.’”

Nobody says that. We understand that customers have to “get it.” We allow them the path to get there. We’re confident they’ll get there. Why wouldn’t you want a motorcycle that performed better because it had liquid-cooled heads and less heat rejection onto your legs? Why wouldn’t you want that?

CW: What do you see as the biggest challenge facing Harley-Davidson?

ML: We have the short-term issue with currency, but we encounter those sorts of headwinds from time and we’ll get through them. We always have. For all of us, not just for Harley-Davidson, it is the vitality of motorcycling. And making sure that people understand, and want to cross that bridge, and join our sport. We, as a leader in the industry here in the United States and globally, recognize our role in that. I think the press, you guys, have to recognize your role. How do we help people understand how cool this is, and why they should want to do it. And make sure that we collectively work together to preserve the rights and the freedoms of motorcyclists.

CW: The heavyweight American cruiser landscape has changed with the reintroduction of the Indian brand by Polaris. Their sales numbers are small compared to yours, but does Harley-Davidson rate them as a competitor long-term?

ML: Let me just generally say that there are a lot of great motorcycles out there. There are varying degrees of brand strength. I love the competition. We are not making any excuses about what we are here to do. We have to make great bikes. The more there are great motorcycles out there that are attracting our competitors, the more excited and spurred on we are about stepping up our own game. And we have. And we are going to continue to do that. It’s very much of an attitude from my standpoint from product—bring it on. We’ll get better. And I don’t mind the impetus to do so.  I want to have the best motorcycles, period.

And, then you talk about brands. And brand images. Harley has the most powerful brand, not just in the motorcycle industry, but arguably in consumer products. Globally. That’s great. It’s an asset. We’re investing to make sure that that continues to have the same meaning to people that it has had historically.

Then the third thing, which is typically not considered enough in my mind, is distribution. What’s it like to walk into a Harley dealer as young adult or as a woman, or as a Core customer, and get treated with respect and dignity by people who know about this product, this brand, and are passionate and excited about it? Versus, like I commented earlier, walking in to find out the motorcycle you just bought is worth $3,000 less now. And it’s sitting amidst five or six other brands And there’s a salesperson, because of his commission, who all he really cares about is moving a piece of metal to a warm body today.

The distance that we have at retail in our industry is incredible, and we’re investing to put even more distance. Because customers experience Harley-Davidson at the dealership. And they’re not just doing a transaction. They’re not just going to buy a bike and leave. They’re coming back for rides on the weekends, for events, for bike nights. The dealership is the clubhouse. The epicenter of the community of Harley riders. That doesn’t exist anywhere else in the industry. That’s an element in the mix to me. It puts distance between us and the competition, and we’re investing to put more distance on every one of those things—product, brand, and distribution.

CW: What did you learn as Managing Director of MV Agusta?

ML: Number 1: It’s very difficult to make money at that volume. We learned it with Buell. We learned it with MV. Product development is expensive, whatever product you’re doing, whatever brand it’s got. It’s a bit more for Harley, in a sense that we tool up for higher volumes. But the actual testing and development and engineering requirements for a brand-new MV Agusta aren’t all that different from a brand-new Harley. And it’s hard to make money at that volume. That’s what MV has struggled with since it became no Cagiva, no Ducati, just MV. And I think they’re still struggling.

That was the challenge with Buell. I suspect it’s the challenge with every company that’s trying to get by on 15,000 to 20,000 motorcycles a year. It’s the profit challenge. That aside, the more exciting thing I learned at MV is that our industry is still filled with people who love what they do. So it had much the feeling that Harley has, of people who love what they do. This is a business. At the end of the day, people don’t really need a motorcycle, they want one. And they want it because of an emotional, passionate desire. And in the whole industry, at Harley and MV and Buell, that passion exists in the companies.

CW: What one thing do you want to tell the Harley-Davidson customer as the company’s new boss?

ML: Thank you. Thanks for your trust, your loyalty, your passion for Harley. We’re working hard to continue to earn it.