Kings of the Hill

A new market with big competition may make it hard for this start-up to make its product an industry standard.

Tweet

In a new market with big competition, the cofounders of Switch Manufacturing are racing to make their product the industry standard. They'd better win

Erik Anderson and Jeff Sand sat their butts in the cold snow just once too often, and a new business was born.

In December 1991, at the end of another killer snowboard run at California's Squaw Valley, the two friends sat -- yet again -- to remove their boots from the large, bear-trap-like bindings holding them to their boards. As they released their feet from the plastic straps, it occurred to them that there had to be a better way to attach boots to a snowboard. Since between the two of them the pair had more than 30 years of design experience, they knew that if they could devise that better way -- say, a step-in snowboard binding -- there might be a pretty good business in selling it.

The two thirtysomethings couldn't have picked a cooler sport -- or a hotter one. With equipment sales expanding at better than 30% each year, snowboarding is the fastest-growing winter sport in the United States. Total industry sales in 1996 should hit $750 million. And there's plenty of room for more growth. Snowboarding currently represents only 18% of total snow-sport participation. Insiders project it will grow to approximately 40% by 2000, when industry sales should top $2 billion.

Anderson and Sand had met while both were working on the design of a San Francisco retail store. They found that in addition to design they shared an interest in snowboarding. Both had grown up skiing, so they knew that alpine skiers had been using step-in bindings for more than 20 years. But snowboarding was less than 15 years old, and its chief enthusiasts, teenage boys, didn't worry much about ease or convenience. On the other hand, a step-in system might attract more older people and women to snowboarding, especially from the ranks of experienced skiers, thus sending the sport's growth rate even higher.

The numbers were enticing, but before Anderson and Sand could capture their share, they needed a product, some way to make it, and enough cash to finance development, manufacturing, and marketing. They also had to contend with an impending avalanche of competition.

Out of the Starting Gate
In the spring of 1992 the new partners began two years of evening and weekend research and development, funded for the most part by $200,000 in loans from family members and friends. After full days of working on design projects as diverse as flatware, stores, and exhibits for the local zoo, Anderson would meet Sand at the job shop Sand ran in a small warehouse in San Francisco. There the two built computer models and fashioned jury-rigged prototypes. Their goal was to make a product that would eliminate the pesky straps and high-backed plastic frames of conventional bindings, yet provide enough support to preserve control and flexibility. The design they came up with featured a steel rod on either side of the boot to hold it and the rider tight to the board. But because the new binding did away with the high-backed frame, the boots would have to furnish all the support, which meant that Anderson and Sand's newly formed company, Switch Manufacturing, would have to produce not only the Autolock binding but its companion Flexible boot as well.

These two moonlighting designers weren't the only people to spot the step-in opportunity. In early 1995, when Anderson and Sand brought their pioneering product to market, the American ski-manufacturing giant K2, in partnership with the Japanese bicycle powerhouse Shimano, also introduced a step-in system, called the Clicker. At about the same time, two other step-in systems, Device and T-Bone, appeared, and there's more and bigger competition on the way, including systems from snowboard titans Ride, Burton, and Airwalk and from ski-binding overlord Salomon.
So even though the Autolock was early to market, Sand and Anderson have had little time to exploit that advantage, which is why they were quick to bring in Tony Guerrero, a longtime friend of Sand's, to head up Switch Manufacturing's sales effort. Guerrero had been director of sales and marketing at a skateboard-equipment manufacturer. That experience was invaluable, since snowboarders consider their sport to be not so much a variation on skiing as a seasonal extension of surfing and skateboarding.

At first Guerrero came in after work and made sales calls, but he quit his day job after a few months to sell for Switch full-time. Shortly thereafter, Sand and Anderson also made the full-time plunge. None of the founders took a salary until late 1994. Currently, Anderson, Sand, and Guerrero each take out $65,000 a year, and own 33%, 33%, and 17% of Switch's equity, respectively.

Step-ins today represent about 5% of the snowboard-binding market. Anderson expects them to account for 95% within three to four years, but retailers won't stock a dozen different kinds of step-ins, and that many choices would just confuse consumers anyway. It took alpine skiing nearly 20 years to settle on a single binding standard, but Anderson doesn't think it will take that long in snowboarding. Within three to four years, he sees room for three, maybe four systems. So, he says, success for Switch depends upon its being one of the leaders: number five in a four-system market is nowhere.

To be a leader, Switch has to persuade consumers to buy its system and retailers to carry it. The company has tried to reach consumers through ads in snowboarding publications, snowboarding-event sponsorships, sponsorship of a professional snowboarding team, a roaming product-demonstration van, and a Switch page on the World Wide Web. Anderson says that because those marketing components are vital to Switch's success, he's planning to spend 8% to 10% of sales on advertising and promotion -- which is relatively high for the industry. The biggest chunk of money will be spent on print advertising. Switch has plans to run about $300,000 worth of ads for the upcoming season, 90% of them targeted toward consumers and the rest toward retailers. And since consumers often decide what to buy based on the advice they get in stores, Switch has tried to win over salesclerks through instructional videos on how to sell the benefits of a step-in system. The videos have met with only marginal success, Anderson says. "Retail buyers can see the commercial viability of step-ins, but the actual salespeople have been harder to convince." They'll become real believers, he hopes, as Switch's competitors take up the education process as well.

 1 | 2 | 3 | 4  NEXT 

Read more:

Sign-up for our Small Business Success Newsletter

Email Address: