This past week, two things happened that were relevant to the disruptive world of electric bikes. First, the Ebike Future Conference out of Europe ran through five days of sessions, and second, Harley-Davidson spun off its electric bikes into a separate company, Serial 1. The two are more directly related than they appear on the surface.
My keynote presentation was on the disruptions to transportation that electric bikes are bringing to cities globally. For that, I leaned, as usual when talking about innovation, on Christensen and Raynor’s model of disruptive innovation, where market leaders have feature-rich and price-heavy products that meet the requirements of their most demanding customers, and then are hollowed out from below by cheaper new technologies. I explored this in detail in a 2018 piece for CleanTechnica as part of a roughly 20-article assessment of the industry. That became the core of my keynote, which you can watch by signing up for the free portions of the conference via the link above.
The second day I was on a panel with a couple of the other faces in the lineup above. First was Don DiCostanzo, founder of Pedego Electric Bikes with its 140 retail locations across North America. He’s a serial entrepreneur having founded various businesses, and he’s currently co-owner of his local Zero electric motorcycle dealership as well. The second was Scott Montgomery, former President of Cannondale Europe and Japan, founder of a couple of other cycling related firms along the way, and now principle of CrankTank Consulting, providing his expertise to global clients in retail and cycling industries. As a note, anything I ascribe to them is from notes I took after the discussion, and any errors or misattributions are completely on me.
One of the topics the three of us discussed with Stefan Ceman, the conference organizer and another cycling entrepreneur, was what it would take to start an electric bike company today, and how it might be structured. The relevant parts of that were related to supply chain and brand.
From a supply chain perspective, Don is living the global ebike boom and is seeing one-year fulfillment times. Scott’s perspective was similar, that it’s not a great time to try to start an ebike company because locking down manufacturers is almost impossible without a track record.
I had a somewhat different take, while agreeing completely about the supply chain challenges. My take was that an ebike entrepreneur who could bring an existing major brand together with suppliers could create a new aligned brand expansion for the major brand, and with the power of that brand, lock down manufacturers. The brand would typically have existing distribution channels as well that could be leveraged. An off-the cuff example I suggested was Hermes, the French luxury goods manufacturer, with stores in some of the most prestigious shopping districts of the world. I posited that a Hermes-aesthetic and branded ebike with Hermes saddlebags would fit nicely into Hermes boutiques, and that it would sell.
That was just an example of how to approach the market, one that could overcome the supply chain and brand profusion challenge facing the ebike market today. But where this becomes relevant is this week’s spinoff of Serial 1 from Harley-Davidson.
I published an extensive review of Harley-Davidson’s electrification challenges a couple of years ago. The first piece, in CleanTechnica, dealt with Harley-Davidson’s deeply problematic brand alignment with electrification, its aging ownership, and why people interested in electric motorcycle riders wouldn’t be looking for them from Harley-Davidson. The second, in my Medium TFIE publication, dealt at length with something that is obvious to most people who don’t own Harley-Davidsons but pay attention, the longstanding subset of Harley-Davidson riders who have deeply problematic views on a number of subjects, including race.
My point a couple of years ago was that Harley-Davidson is probably going to die. Its challenges have been compounded by COVID, as Steve Hanley pointed out earlier this year in CleanTechnica when they laid off hundreds and fired executives. The company is at the end of the line for its motorcycle brand. They are far too expensive, the company has serious brand alignment problems, they won’t be able to pivot to electric with it, and their riders are aging out. They, like everyone else in the motorcycle industry, are being disrupted by electric bikes and urbanization.
This year, the annual Sturgis rally, which is always very skewed to Harley-Davidson, was a massive COVID superspreader event. That’s kind of a kiss of death for HD in two ways. One, a bunch of their customers are dead now and there are even more secondhand HDs on the market, and two, their brand is now even more tidally locked with a dwindling demographic in the US, the one that’s on track to lose the White House, the Senate, and even more of the House, the one that’s seeing this kind of result.
For the record, Harley-Davidson itself stayed completely away from Sturgis this year, recommending socially distanced rides in various parts of the US to its members, something that about 500,000 riders ignored in favor of the ride to South Dakota.
In the panel discussion, Harley-Davidson’s lack of brand alignment with electrification was a throwaway side topic, something at least Don and I were nodding together about, and he’s a former Harley-Davidson owner. As he said, he loved his Harley-Davidsons and will never own one again.
And so, off to Serial 1. The new company is doing exactly the right thing in a difficult period. It has a growth market product, but it was stuck inside a company whose brand and customers were toxic to it. It was a disruptive product stuck inside a company that refused to be cannibalized by it. It’s riding a very fine line between leaning on the Harley-Davidson brand and corporate buying power for supply chain contracts, and avoiding the long tail of Harley-Davidson’s misalignment with electrification.
As such, it doesn’t look like a Harley-Davidson, it isn’t going to be forced to make annoying noises as the LiveWire was to try to please its customers, and it doesn’t have the Harley-Davidson logo anywhere on it. Serial 1 has a nod to its history that no one will care about or know, so it will dodge that linkage while making the Harley-Davidson parent think it’s about the heritage. Its retro aesthetic is aligned with the nostalgia theme prevalent in a subset of urban electric bikes, something deeply attractive to urban hipsters, another theme I explored in the series. At present it has “Power by Harley-Davidson” printed on it, but I expect that will diminish in size and prominence rapidly.
It will mostly be sold to people who would never own a Harley-Davidson. They will probably sell it direct to consumer, something Scott Montgomery spoke about at length in his discussion on the opening day of the conference. A few may be displayed in the remaining Harley-Davidson retail outlets, but probably won’t move through that channel.
The business trick for surviving a company which has been disrupted by innovation is to get money from it, get out of it, and let the original company sink. Good on the folks who left H-D to shift to Serial 1. I wish them luck.