Tradition Is Not A Business Model: Brammo

10/11/2009 @ 2:25 pm, by Jensen Beeler17 COMMENTS

A problem derived using game theory, the Prisoner’s Dilemma was first put forth by Merrill Flood and Melvin Dresher. Adapted over time, the classical prisoner’s dilemma goes like this:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects from the other) for the prosecution against the other and the other remains silent (cooperates with the other), the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

Making the most rational decision, and acting solely for themselves, the best option for both prisoners is to defect. Under any circumstance, betraying their partner by ratting them out will generate the best possible aggregate result for the prisoner. However, because the choice to defect is both prisoners’s best move, it assures that the outcome will be a 5-year sentence for both of them.

Flood and Dresher’s problem illustrates the challenges involved in acting beyond one’s own personal gain, choosing instead to act for the good of the group. If everyone acted in this non-selfish manner, the group would thrive more richly than it would acting solely in their own individual best interest. But, because of the issue of free-riders, and as this game theory problem illustrates, there are significant hurdles that must be overcome in order to achieve these non-self-serving results.

One of the biggest challenges facing electric motorcycle manufacturers comes in the form of customer education. These companies must wrestle with not only how they convert current internal combustion engine (ICE) motorcyclists to electric motorcycles, but also how they will bring current non-motorcyclists into the industry. Not an easy task to begin with, the problem is compounded by the nearly non-existent marketing budgets these companies operate on. There is no question that there is a need to putt forth the argument for electric motorcycles in the industry, but with making that case comes a marketing decision that exemplifies our Prisoner’s Dilemma problem.

Who will take on the burden and challenge of educating an industry centered around the internal combustion engine, when doing so surely means a great investment in capital and resources, and also when the desired affect will bring no exclusive benefit to the company? That is to say, what company is going to take the time and money to begin changing the way motorcyclists think about motorcycles, and develop a market for electrics, when the return on that investment helps them just as much as it helps their competitor?

Each company in the electric motorcycle scene is not un-like the prisoners from our earlier problem. Acting for their own individual interests, logic would dictate the move of choice would be to let another company commit to undertaking this marketing problem. In the best case scenario, a non-acting company can ride the coattails of the company that takes action, benefitting essentially for free. And in the worst case scenario, the status quo remains, with no company taking the lead on this initiative. Regardless of what the other companies do, the non-acting company is virtually assured to be in the same boat as its competitors, but retains their resources and capital.

In talking to all the electric motorcycle startups, it became painfully obvious that the Prisoner’s dilemma was alive and well in the motorcycle industry. I’ve already talked about how the Japanese Four and other major manufacturers are content to sit on the sidelines and wait for this concept to be proven in the marketplace, but even within this small sub-sect of the industry there is a game of chicken being played on who will take the plunge and make the case for EV’s on a large scale.

Making the trek up to Ashland, Oregon, I got a chance to examine this problem further with Brammo CEO, Craig Bramscher. Talking about the state of the motorcycle industry as a whole, Bramscher explained that the big picture going on in the motorcycle industry is the way we view motorcycles in relation to our culture.

“Motorcycling is seen in Europe as transportation and in North America it’s seen as recreation. I think we’re starting to see…at least whenever gas goes up you start to see people shifting that and thinking of it in terms of transportation. So what we’re hoping is that some of the contraction that’s going on in the motorcycle industry, in North America, is recreational related. When the economy is bad, recreation gets cut off…especially higher ticket items. So we think that’s a challenge, and you don’t see like Harley & Honda making a lot of investments in the industry.”

Seeing the need for Americans to approach motorcycles in a more pragmatic way, Brammo has taken an interesting core philosophy. Instead of trying to convert current motorcyclists over to the dark-side, the company takes the approach that there is an untapped market here: the consumers who don’t ride motorcycles.

For us specifically we’re really focusing on helping growing the market and the number of people that ride bikes. A lot of our customer base is people that have said, ‘I’ve always wanted to but…,’ and we’ve created a great entry point to the two wheel world.”

Perceived by many as the harder path to walk down, focusing on non-motorcyclists does have its advantages; most notably, these consumers have no preconceived notion of what motorcycle should be like. By targeting this group of non-motorcyclists, Brammo is in the unique position to start with a clean-slate in how a motorcycle should feel, look, and operate. And while they’re at it, maybe even influence how these new consumers use and view their motorcycle.

Marketing to theses motorcycle heathens comes with greater challenges, and raises the ante on our Marketer’s Dilemma. Because Brammo’s target purchaser is essentially a clean-slate when it comes to motorcycles, it means there’s that it takes much more effort  in order to bring the consumer around to the concept of not only buying a motorcycling, but buying an electric motorcycle. To do this, you need market education, and you need to have a game plan to educate that market. Luckily for Brammo, they have a seasoned management team, and were willing to think of partners outside of the motorcycle industry:

“Education is a huge part of our business plan, and is one of the reasons we chose Best Buy is because we’ll get in front of a lot more people than traditional motorcycle dealerships. If you’re already enough into motorcycles that you’re going to go in, and buy one in the motorcycle store, you’re already convinced at some level that you need one. Whereas, we think that market growth can be all those people that have thought about it, they like the concept…but it’s a little bit intimidating. It seems like the cooler the motorcycle store, the more intimidating it is to walk in to. We tired to design something that was not intimidating, and that’s why we’ve got to do some educating. That’s why our website, some of the tools that we’re coming out with for the iPhone will help people understand what a huge impact driving an electric motorcycle is on the earth and how much fun it is and how easy it is.”

Because of these goals, Brammo has perhaps the largest uphill battle when it comes to getting people to buy their motorcycles. Realizing the problem that his company and others face, Bramscher acknowledge the lack of a unified effort amongst the electric motorcycle startups in tackling the large problem of indoctrinating riders.

“Motorcycle companies aren’t dumb people, they don’t want to spend a lot of money proving a market that doesn’t exist, so that’s where entrepreneurs come in and we come and fight the hard fight, and then they come along and take the easy cream.”

Framing what is essentially the Prisoner’s Dilemma, Bramscher and Brammo find themselves besieged on either-side of the market with companies who are either unwilling, or unable to educate the community on electric motorcycles.

“We do talk to other manufactures, there’s the Plug In America Coalition that’s helped get the tax credits, I don’t know if we’re organized enough as a group. You know most startups it’s hard to really participate outside of your day to day operations. I think our approach is that we’ll just take the burden and go for it. I hope that evolves into something that’s bigger than us as quickly as possible. But I think we can’t wait around, we’ve got to create cool tools for teaching people, website stuff, articles and press.”

For Brammo, there is no option to sit and wait. Their business plan centers around changing the way we view the modern motorcycle, which also means their business centers around the concept of market education. Because of this, we see also a change in the consequences and rewards in our Marketer’s Dilemma. Because not acting actually produces a negative consequence that the other manufacturers will not have to face, there leaves little room but for Brammo to take the lead on educating the market on electric motorcycles.

It is interesting that in my talks with all the CEO’s in the electric motorcycle sector, Bramscher is the first CEO who has even expressed the willingness to take on the role of being the electric motorcycle champion in the industry. The argument laid out in this article, suggests perhaps that Brammo has little choice but to take the lead, but I think its worthy to note the level of moral obligation that doesn’t cross-over in the quotes. Brammo is very much a company that is centered around the notion of changing the motorcycle industry, and the motorcycle itself. The innovation that comes out of Brammo is not only one of technology, but also of sociology.

A two-pronged business plan, Brammo approaches the problem of oil dependency, consumption, and a legacy for our children as being intertwined concepts that relate to how we approach commuting and personal travel. This requires not only a new product, but a new way of thinking. When we talk about corporate innovation, we usually think of the concept as dealing with new technologies and products, but Brammo makes the strong example that innovation can also touch on the human element. A company can innovate and change the way a society thinks and acts. For Bramscher, values like these outweigh the consequences of breaking the Prisoner’s Dilemma.

  • RT @Asphalt_Rubber: "Tradition Is Not A Business Model: Brammo – #motorcycle"

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  • Asphalt and Rubber article on Brammo. Interesting perspective…

  • @BrammoCraig @shockingbarack You get kudos for being bold. Support you we do!

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  • RT @BrammoCraig: Asphalt and Rubber article on Brammo. Interesting perspective.

  • Brammo’s willingness to do the trailblazing in this industry has always appealed to me. And sure, they want to make a few bucks along the way, but the message I have gleaned from the early appearances of the Enertia up until the present is that Brammo’s shift from ICE-powered super cars to where they are now was driven by the moral imperative of making the world habitable for our children.

  • Tradition Is Not A Business Model: Brammo

  • Oscar

    Great. Now, why does it have to be so damned ugly? The one they raced at the TTX looked great.

  • jar_o_flies

    Prisoner’s Dilemma? Green thinking, paradigm shifting, educational, corporate altruism? Wow, all from an electic vehicle?

    Firstly, there is no prisoner’s dilemma here. Such a state would require a market void of electric two wheeled vehicles, and such a state does not exist. Yamaha (Passol, EC-02) and Honda (EVE-neo and electric Cub!!??)are both two cells down, next to Trek and Schwinn, and the host of “convert a bike” web folks, blabbing to anyone who will listen. Their stories are a bit different, focused more on the scooters and bicycles as products, however their technology is certainly driving and contributing to a single point of convergence, a full on electric motorcycle.

    While Brammo may espouse the Green feeling, “responsible”, “for the kids”, save the environment mantras, the fact is they are trying to sell a product (at $12k), to a market saturated with less expensive, higher performing alternatives. I’d push an ideology too, if facing such a situation – heck if HD can push “it’s a Lifestyle” and convince people to fork over $20k for a lumpy, air cooled antique, more suited for a tractor than a motorcycle, why should EV’s not follow a similar path?

    Paradigm shift? Where and how? The problem here is Brammo fails to understand their customer, and at the same time underestimates that same customer. They are not targeting motorcycle folks for the simple fact motorcycle folks wouldn’t see their product as a “motorcycle”. They’ve priced the product beyond the reach of most sympathetic “green” folks. The design that is neither electric motorcycle nor electric bicycle has left even bicycle guys looking for alternative transport scratching their heads. The sell is that the vehicle is easy to operate, no shifting, no trans, no greasy bits – as if such attributes are the only ones considered prior to purchase, all nice to haves, surely, but I’ll pass on most products that seem to say, “it’s soooooo easy, even a moron like you could handle it”.

    In order to accomplish a fully effective shift in paradigm, the product and its use must offer an order of magnitude improvement over existing like similar product or be completely new. The Ipod is often offered up as a product that accomplished such, the pod, its derivatives, and its knock-offs achieving a ubiquitous nature likely only matched by cell phones. The combination of a device and file type that would allow a user to maintain a vast library of skip free, high quality, audio in a package not much larger than a credit card, instantly became a gotta have – completely changing the way most listen to, purchase, collect, and use audio fare. Where are such values with the Enertia? Am I expected to plunk down $12k because I love the environment so much that I’m committed to only polluting through coal fired electric or nuclear plants? I can enjoy impressive sprints to 60mph, maybe once or twice per charge? I ride 40miles (in surely a most conservative fashion), then must cool my heels for 4 hours waiting for a charge? Americans are selfish – a paradigm shift will not, cannot occur, unless the product and its use delivers the cake, and allows us to eat it too (same simple reason EV cars have not become a fixture on our roads).

    I will say, I like the product. I think it looks reasonably appealing, seems to have a bit of attitude without being intimidating – which I’m sure was the plan. I think the “innovation” here, for Brammo, is on the retail side – teaming with Best Buy for sales distribution is a unique thought. I still wonder about service, however, does the Geek Squad provide roadside assistance?

  • Tagger

    Jar’o’flies, exactly. $12k for a bike aimed at new riders isn’t visionary, it’s delusional.
    Brammo looks like vetrix again, a good spiel for investors, and no understanding of the market.
    An entry level bike needs to be $3-4k, tops.
    The big three haven’t enter the market with force because the vehicles that can be built with
    todays tech just arn’t very good. EV’s are still in the ‘price,range or power-pick one’ mode, and heck I’m not sure which one brammo picked here, it looks like they didn’t.
    If a Paradigm shifts in the forest, and there is no one there to hear it, did it make the sound of one hand clapping?

    KTM is coming into the market next year, with an off-road EV product, there is a true paradigm shift, silent dirt bikes. If they sell.

  • Make electric motorcycles. Great!

    Take the lead on marketing electric motorcycles. Great!

    Sell your bikes at Best Buy to capture the non-motorcycling market. Great until you realize that because these people aren’t going into the motorcycling world through traditional paths you’ve created an even wider segment of the community that has no idea what they are doing when they get on the road than already existed.

    Now your enlarged the hazardous portion of the population that hasn’t taken the MSF classes, doesn’t read about riding technique, and thinks that this is easy-breezy and rides into the side of an 18-wheeler on the freeway wearing flip-flops and a tank top.

  • jar_o_flies

    Tagger –

    I was going to touch on where the big 3 (4) are at regarding E-products, but was running a bit long anyway.

    That said, I agree completely with you – Brammo and the like have the luxury of “no reputation”, it affords them a bit of safety when producing a “motorcycle” that forces the consumer, to as you said, “price, range, or power” pick one. If Honda dropped an electric motorcycle and asked the consumer to do the same, we’d be here bashing a product that was launched prematurely.

    Which is interesting when you look at what they are doing – take a spin through Honda and Yamaha’s global sites, and see what they are bringing to the Tokoyo show – their E-two wheelers are along the bicycle/scooter lines, which to me indicates that’s what they feel the techonology is compatable with at this point.

    Brammo and the others seem to be attempting to run before they can walk, and stumbling along the way.

    Matthew makes a valid point as well, but one that is already illustrated so well by the guys rolling on $800 chinese scooters, barely clipping 35mph, on my way to work.

  • It seems to me that a lot of these companies are getting the cart before the horse. They are all working on building a complete bike before there’s a good solution to the motor, battery, and controller. Seems to me that the smart investment would be to have a company focused on the “powertrain”, build up a huge portfolio of IP, and then license the designs or sell the system to the companies that can then build the bikes around them.

    Basically an S&S for EVM’s… :)

    Get the drivetrain into the hands of people that know how to build bikes.

    It’s obvious that none of the EVMoto companies (based on online and in person comments) have the ability to style a motorcycle that appeals to hardly anyone outside of design school graduates.

    Comments at the Laguna GP outside Zero’s display were all pretty much along the lines of “god, that’s ugly.”

    The core issues of highly efficient motors, ultra-smart controllers with the ability to handle kinetic energy recovery (i.e. engine braking converts the motor to a generator to put charge back into the battery), and of course the huge invisible elephant in the room, batteries that can allow a decent range and performance that are not based on Star Trek technology.

    It seems to me that those three challenges are MORE than enough for any one start up to handle without the extra complexity of building a complete vehicle/unit (safety issues, regulation, registration complexity, other systems issues etc. etc.)

    I’d love to see a real market for EVM’s build up, but none of the ones out there now “smell” right to me.

    Nice series. I look forward to reading more!

  • Tagger

    Yeah, honda has shown a two-wheel drive scooter at one of the bike shows, no real release dates, if they do bring it to market I am sure that it will be priced like other scooters.
    Range and power will likly still suck, because reality is harsh.

    I like zero’s approch better than brammo’s, there is no pretensions, they are not out to save the world, just build some bikes and perhaps make a living. They made the mistake of going street/motard, stick to dirt, the expectations are lower. $7.5k is almost cheap enough to have a real impact, but they are building their street bike for $10k, you can buy alot of bike for that.

    It will be interesting to see where KTM prices their bike, if it comes to market. If they come in at $5-6k, and the power is good(it can’t have range, again Reality), it may tempt off roaders to ‘see the light’. Two out of three(power/price) ain’t bad.
    Silence, at least, is a feature no gas bike can have.

    The real problem is batteries, 3-4kwh is just not very much energy, a gallon of gas is about 33kwh and weighs about 6lbs. 3kwh of high tech battery weighs 60-70lbs.
    Batteries need a ten to twenty-fold increase in energy-to-weight to start to be close to gas.
    That may happen in our lifetime, but I stopped holding my breath.

    I always forget kawasaki in the big 4…

    Motorcycling is dangerous, and nothing about riding every day is easy, you have to realy want to ride. This is the biggest miss that I see in the quotes from brammo.
    Motorcycles are intimidating because of the death and dismemberment, not styling or design. No amount of iphone apps will make a suv not drive you off the road. Casual motorcyclists are just not a market, in the states. Europe, asia, sure, everybody(or 20-50%) rides, but the car rules in the USA. Capturing non-motorcycling market is imposable in the states, there is none. Although scooter class vehicle sales have been increasing, it is one of the smallest segments (less than 120,000 sales per year, or thereabouts). Going after non-motorcycle-rider is no-brainer, you need to remove your brain think it will work.

  • jar_o_flies

    Todd will get no argument from me, regarding the “framer” aspects of how the E-vehicle (in particular e-motorcycles) will likely move toward. The motors and battery packs that will eventually come, resulting in a viable motorcycle construct, will surely be supported by numerous electric motor and battery companies already in existance.

    Want to build an ICE motorcycle company today? What powertrain do you choose to build your company around? Build your own? Can you say insane capital expense, not to mention the cost on the certification side. Very few opportunities exist to purchase a ready made powertrain, a chinese or korean outfit perhaps? S&S, Rotax, or HD? Maybe get lucky and pimp Suzuki for a powerpack?

    Electric motors and their manufacturers are far more prolific, far more competitive, and far more accesible when the time comes. Noise and emissions compliance are a moot point. I can see “mail in service” for anything regarding tear down/build up (dump the motor in a box and ship it), after running diagnostics with easy USB communication with the bike itself and emailing a file in for further diagnosis.

    Emotorcycles, when the time comes, will most certainly radically change how we enjoy our two wheeled vehicles……