Once upon a time, Hollywood rebels, actors like James Dean and Marlon Brando, reflected the Harley Davidson market appeal.

“In the late 1950s, this roster expanded to include young “Elvis types” attracting dates with their Harley motorcycles.” (Hbs.edu, 2007)

Unlike today, a handful of media channels at the time controlled the allure and distribution of Brando and Dean around the world to promote brands. Harley Davidson grew Sales as a result — it was like shooting fish in a barrel.

From the 1950s to the 1970s, while Harley bikes were leaking oil on showroom floors, here’s what was happening behind the scenes:

“In 1959, Honda accidentally uncovered a large untapped customer base of older males and younger women — a segment not well suited to the “tough” Harley motorcycles.” (Hbs.edu, 2007)

By 1980, Harley Davidson tinkered on the brink of collapse, but survived, leaving behind lessons for future generations.

This article is about that journey, mistakes and what Startups can learn from Harley Davidson’s recovery in order to grow their business.

Factors That Lead to Harley Davidson’s Decline

There were seven factors that led to the demise of Harley Davidson during this time, namely:

1. Departure from Quality — In 1969 AMF (new owner) drove a dramatic increase in production which saw Harley Davidson's output increase from 15,475 to over 70,000 by 1973 (Hbs, 2007). This explosion in output led to poor quality due to hasty planning. One such planning oversight was the employment of unskilled workers in an effort to meet growth expectations. Amazingly, cardboard was laid beneath Harley bikes on showroom floors to soak up oil leaks, a highly visible indictment of Harley's decline.
2. Short Term goals — Burdened with high debts AMF initiated an ambitious growth strategy to satisfy stakeholders and investors. In doing so, AMF compromised Harley Davidson's core values in order to meet this short term objective of a rapid return on their investment.
3. Management team — The leadership and management team at AMF failed to recognize key indicators during this period. They behaved in a detached manner from the market and their customer base. Proof of this was illustrated by negative growth wherein sales were increasing but domestic market share had all but collapsed, down from 100% to 23%. Additionally, an ill-fated marketing strategy diverged from their ‘Easy Rider’ profile, geared towards competing in non-traditional small bike markets. This diluted the Harley brand and consumer opinion. The net effect was alienation from the long-standing consumer demographic.
4. Employee relations — Poor employee relations arose from a command and control style of leadership as the norm, coupled with poor inter-company communication, employed by AMF. Morale was consequently low amongst workers and rising tension with union representatives was not recognized as a barrier to achieving their lofty ambitions. This proved to be an expensive oversight.
5. Inventory Management and cashflow — A disadvantageous supply chain model of bi-annual bulk buying and storage costs caused high inventory, tying up valuable cash reserves and limiting Harley's agility in responding to shifts in market demand. A failure to move towards a ‘just in time’ procurement model meant that Harley could not react as efficiently as their highly innovative Japanese competitors.
6. Strategy — Unsuccessful diversification attempts towards non-traditional markets magnified Harley's financial burden. This strategy exhibited brand dilution symptoms by poor sales and was damaging on multiple fronts.
7. Market threats — Complacency towards foreign competitors was demonstrated by AMF’s failure to acknowledge Japanese influence on the market as a threat. Competitors such as Honda applied previously successful methodologies allowing them seamlessly diversify in penetrating other markets. As a result, the Honda Goldwing’s 1974 entry into the ‘big bike’ blindsided Harley Davidson. Furthermore, the Goldwing was acknowledged as the most sophisticated bike of its generation coinciding at a time when Harley Davidson’s dip in quality control had become apparent.

By departing from long-held values and established brand identity AMF had inadvertently contributed to the demise of Harley Davidson. This freefall effect was amplified by failing to reinvent the organization.

Leadership Style During Transformation

Following the management buyout (from AMF) in 1984, command and control leadership was deployed, temporarily.

Command and Control Leadership

Unilateral decision-making enables crisis-focused steps to stabilize a company in the short-term by reducing operating costs. Two immediate actions that were enforced witnessed i) a reduction in staff and ii) production volume.

This was about survival.

Command and control leadership is not effective in the long term as it can have devastating effects (Glazer, 2019). That said, given certain circumstances, it was the only option at the time for Harley Davidson.

This leadership approach is not beyond risk but when an organization is on the brink of collapse like Harley Davidson was in the 1980s, it’s absolutely necessary for immediate survival.

Decisive (yet divisive) leadership proved hugely beneficial during Harley Davidson’s transformation, buoyed by company communications in “creating a sense of urgency.” (Kotter, 2011)

Harley’s People

When immediate pressure was relieved at Harley Davidson the company began to grow market share. A stable financial footing was realized. The next phase to sustain this momentum was to empower and motivate employees, those who contributed to the company’s survival.

Leadership challenges remained.

A shared leadership or “participative leadership” style emerged, phasing out ‘command and control’ (HBR, 1973). New workgroups were created. In this environment, groups thrived, innovative concepts and ideas were encouraged and implemented — solidifying the transformational journey.

“An extroverted, sensitive leader who openly shares decisions and authority with subordinates — this is the profile that emerged when 318 executives were asked their opinions on the characteristics of participative leadership.” (Harvard Business Review, 1973)

Leadership traits to cultivate this new environment were promoted — High emotional intelligence (sensitive), effective communication, and listening skills ensured confidence, flexibility, decisiveness, trustworthiness, courage, and capacity to motivate amongst the ranks.

Empowerment Through HOG

The empowerment of employees was nourished at this point.

Empowerment involved the development of quality workgroups whereby employees were given ownership of production quality. This mutually beneficial profit-sharing scheme had a direct influence on the company’s success.

The Harley Owners Group was born — HOG

By reducing the management hierarchy and embracing change Harley Davidson devised a way to motivate employee behaviour for a common goal.

Relationships between management, unions, staff, and stakeholders had a positive effect. A partnership type relationship with the unions evolved, replacing the old confrontational communication seen in previous decades.

Respect for all stakeholders was nurtured, a clear vision and company values were agreed, shared and mutually embraced. Relationships flourished under this new regime.

Ironically, Harley “adjusted in part by adopting Japanese management methods”. In the years that followed Harley Davidson grew at an incredible rate (Kristof, 1985).

Final Thoughts

For Startups and Entrepreneurs, there are seven lessons to take away from Harley Davidson’s demise and near collapse:

1. Departure from Quality —Ignoring quality is the equivalent to a “two-finger salute” to your customers, just don't do this, ever (Times Higher Education, 2005). Quality trumps quantity.
2. Short term goals — Simon Sinek wrote in the “Infinite Game” that a finite Leadership approach is a weakness, so think long-term (Sinek, 2019).
3. Management team — People invest in people, so get this right. “Whether subordinates become followers depends on whether the executives act like leaders.” — John Gardner.
4. Employee relations — “The strength of any team is held by its followers. There can be no leaders without followers” (Myers, 2020), so get the right people on the bus.
5. Inventory Management and cashflow —Your supply chain and your cash are your lifeblood, so keep a close eye on both and plan accordingly.
6. Strategy — These “are the manifestation of your ideas, the ones that you’re trying to prove through your Startup venture.” (Myers, 2020). So know it and stick to it, but be prepared to change or pivot with the market.
7. Market threats — Do your research and after that, do it again and again until you know every inch of your market niche. (Porter, 2008)

Harley Davidson revealed seven focus areas, seven mistakes, a list of what not to do when growing a Startup. All of which can be actioned by any Startup at any time.

There is no secret sauce, secrets are visible from past mistakes, all Startup founders have to do is look and learn.