Tradition Is Not A Business Model: Brammo

Google+ Pinterest LinkedIn Tumblr

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.