Sometimes my personal interests lead me to discover very good companies. I’ve been a serious cyclist since I was 13 (it’s been a long time), and I worked as a bicycle mechanic a long time ago, and I am a mechanical engineer – so I know all the different manufacturers that have followed one another in this sector.
As we headed into this year’s cycling season a few months ago, I wondered about SRAM LLC. Today, they occupy a solid second place in the premium bicycle component market, behind industry leader Shimano. The bicycle components market is difficult to pin down, with the complexity of parts sales versus complete bicycle sales and OEM sales versus aftermarket, but my analysis indicates the total is around 4. billion dollars a year, of which Shimano is half and SRAM is just under 20%. No one else is near.
SRAM was founded in 1987 on the basis of a single product, the Grip Shift, which was first released the following year. And I’m here to tell you that back in the day you just weren’t using American parts on your bike if you were serious. You’ve chosen either the old Italian art masters, Campagnolo, or the aforementioned, newer and more technologically advanced Japanese powerhouse, Shimano. (If you were impecunious like me, however, you might be stuck with Shimano’s poorer Japanese cousin, Suntour.)
How the hell did a group of American cycling enthusiasts come up with the idea of challenging these incumbents? It all started with a combination of challenge, genius, disobedience and luck. “A lot of people have told Stan and the team not to do this,” said SRAM CEO Ken Lousberg with a laugh.
Back then, the preferred way for riders to change gears was to use down tube shifters, levers mounted low to the frame that required the rider to remove their hand from the bars to change gears. Then-triathlete Stan Day thought it was dangerous and was determined to find a better way to change gears. He teamed up with Sam Patterson and came up with a design, then teamed up with a few other friends to form SRAM (an acronym made up of the initials of their names).
Then they started trying to get the runners to use their equipment. “They would go to events and go to riders and ask, ‘Can we put a hole in your handlebars? “To go up the gear levers,” Lousberg said. “They did everything to get them to try Grip Shift. But the breakthrough never came in road cycling.
That’s where disobedience and luck came in. Stan Day’s younger brother FK kept pushing him to introduce Grip Shift into the new realm of mountain biking. Stan continued to resist, instead trying to keep the young company focused on its business plan and road products. Finally, FK did what most younger brothers do – he ignored his older brother and went ahead and did it anyway. MTB took off, as did Grip Shift and SRAM.
As the company rides the wave of having a hot new product in a hot new market, it has also turned to another way to drive growth: acquisitions. Sachs was their first. “Our founders went to this behemoth, looking up and saying, ‘We want to buy part of you,'” Lousberg explained. ZF Sachs AG was a German industrial conglomerate founded in 1896 to produce bicycle hubs and bearings, but which over the decades became known for its motorcycle engine and auto parts business. SRAM was able to purchase the Bicycle Parts Division in 1997, adding key business elements and production capabilities and bringing their business internationally in the process. “This has brought us tremendous new expertise, in metallurgy and transmission technology,” Lousberg said.
Other acquisitions would follow. SRAM bought RockShox, a leading manufacturer of bicycle suspensions, in 2002, followed by brake producer Avid and transmission maker Truvativ, both in 2004. They bought wheel maker Zipp in 2007 and manufacturer of Quarq power measurement cranks in 2011. The acquisitions of Avid and Truvativ have given SRAM the ability to market complete component groups, a core capability for OEM bicycle parts suppliers.
Today, however, acquisitions are not a primary focus. “Growth through acquisitions is not part of our strategy,” said Lousberg. “But if the right thing happens, of course – we’re great at bringing new team members and pieces into our business and into our culture. “
Instead, the company is focused on improving the user experience. “Our strategic focus is product innovation,” Lousberg explained. “For example, one thing we recognize is that once we put people on the disc brakes, they won’t back up. And now electronic gearshifting is the same thing – it’s a big opportunity. The company has continued to offer revolutionary innovations, whether it is its 1×11 XX1 MTB gearshift system in 2012, its RED eTap electronic wireless gearshift levers in 2015 or the latest AXS groupsets that allow interchange of mountain and road electronic components.
Another area of interest is security. Growth in the road cycling industry has stabilized in recent years, and SRAM executives have not forgotten that distracted driving is a key cause. “We recognize the impact on sport,” Lousberg said. “A lot of people just don’t feel comfortable driving with distracted cars and drivers. Our industry can be a great catalyst for safe cycling, whether by supporting dedicated bike lanes and lanes, or by making our own equipment safer and easier to use.
A final area of interest is the application of Lean principles to the whole company. Lousberg, hired as COO of SRAM in 2017 and replacing Stan Day as CEO earlier this year, brought a solid continuous improvement (CI) background to his time at Trane Inc., where he was discovered the Toyota Way, as well as Genie. , Terex and Delta Point, an IC consulting firm. “We use continuous improvement techniques in all aspects of our business, from new product development to our payroll process,” Lousberg said. “I would even say that some of the biggest breakthroughs we’ve made are in non-manufacturing areas. “
That being said, manufacturing is a primary application place for CI principles. “It’s about generating flow in our factories and eliminating waste,” said Jeff Winterkorn, vice president of global manufacturing. “Ken has brought a lot of great experiences to CI – it’s great to have a leader who understands her. “
A common theme is that practices must put people first. “With Value Stream Mapping, for example, it’s about seeing how material and information flows, but it’s for the purpose of making things easier,” Winterkorn said. “It’s about tapping into the knowledge of this 30-year-old employee to empower our workers to solve problems. In the past, we focused too much on tools. Now we focus on people – their ideas, their training, etc. The tools come after.
“Our people are a strategic advantage,” Lousberg said. “The innovations they offer are huge, and our culture is one of our secret weapons, and our secret sauce is our people.” Winterkorn agreed. “I travel the world and tell people our products don’t make SRAM great, but our people do. “
Everything seems to be working. In a fairly flat overall market, SRAM has seen consistent double-digit percentage growth over the past few years. “Cycling has changed incredibly,” said Lousberg. “The bike you rode five years ago is not the bike you will use today. We’ve made improvement after improvement, all designed around the human form. It’s about making people more comfortable and having fun.