Kellogg School/Business Week leadership forum gets revved up with Harley CEOBy Raksha Varma
10/2/2003 - Harley-Davidson Inc. Chairman and CEO Jeffrey L. Bleustein recently brought his leadership insights to the Kellogg School of Management, when he addressed the importance of attracting younger consumers and running a market-based company during a special event cosponsored by the Kellogg School and BusinessWeek.
“Harley-Davidson stands for ‘Americana,’” said Bleustein at the “CEO Leadership Forum with America’s Best B-Schools.” Chief of correspondents for BusinessWeek, James E. Ellis, directed questions to Bleustein before more than 100 attendees, including many Kellogg School MBA students, at the Tribune Auditorium in the James L. Allen Center on the Evanston campus.
Bleustein fielded questions about why the Harley-Davidson brand is vital to sustaining profitability.
“Our company’s brand is a promise to the consumer,” he said. “We fulfill the dreams of our customers. We aim to exceed their expectations.”
The Harley-Davidson brand is targeted to 35- to 54-year-old men, who comprise some 60 percent of the company’s consumer market, Bleustein noted.
Although Harley-Davidson is the leading American manufacturer of motorcycles, Bleustein, who joined the company in 1975, said it took “a lifetime” to build the brand’s reputation. “After I participated in the buyout, I had my work cut out for me,” he said. “It was risky at the time.”
Despite the challenges posed by an 80-to-1 equity ratio and the 17.5 percent interest rate that existed when the coup was consummated, Bleustein and others managed to raise $80 million to purchase Harley-Davidson in 1981 from its parent company, AMF.
“Bleustein has clearly demonstrated that his career is not just about taking risks,” said Karen Raviv, a first-year Kellogg MBA student, who attended the forum. “It’s about taking smart ones.”
Taking a smart risk was clear in Bleustein’s choice to include union input in Harley-Davidson’s decision-making processes. He spoke about the importance of “working together” with the unions to produce mutually beneficial strategies.
“If we include the unions in our decision, I know we can boost productivity and generate more job security,” he said.
With the help of about 1,300 dealers, Harley-Davidson produced more than 260,000 bikes in 2002. The Electra Glide, Sportster and Fat Boy are three of the company’s 28 models.
In addition to the need for union relations, Bleustein spoke about the importance of producing marketing strategies targeted to younger consumers. “Companies should concentrate on strategies that appeal to Generation X and Y,” he said. Harley-Davidson uses focus groups to test the potential of future products. Programs, such as “Rider’s Edge,” are offered by the company to educate 11,000 to 12,000 beginning riders yearly.
“Our company has adapted a long-term focus,” Bleustein said. “Programs must have a clear connection to the product line and future profitability.”
He also increased the company’s profitability with the addition of internal financing. Not only are losses exceptionally slim, but customers and dealers mutually benefit from this arrangement according to Bleustein. “Internal financing of our products is very profitable,” he said. “Customers are willing to pay a premium for the quality experience our company provides.”
After commenting on profitability, Bleustein ended the forum with highlights from Harley-Davidson’s 100th anniversary. “Our company’s anniversary was a celebration of freedom,” he said, adding that his visit to the Tomb of the Unknown Soldier reinforced his dedication to his customers.
Many audience members acknowledged that Harley-Davidson’s customer focus was one of the company’s true strengths.
“Bleustein is compassionate to the needs of his customers,” said Richard P. Miller, 53, of Miller & Associates, a Chicago-area firm that works in electronic commerce. “Harley-Davidson’s strategies are clearly linked to real people.”