Kings of the Hill

Concept: Create and produce a step-in snowboard binding; achieve wide distribution through licensing partnerships with boot manufacturers

Projections: Revenues of $19 million in 1997, with a pretax profit of $2.8 million

Competitive advantages: An improved product and a head start

Hurdles: Gaining enough market presence to establish its brand as an industry standard; surviving lawsuits

THE FOUNDERS
Erik Anderson, president, age 37

Jeff Sand, director of design and manufacturing, age 37

Tony Guerrero, director of sales and marketing, age 33

Family: Sand, married; Anderson and Guerrero, single
Education: Anderson earned a degree in fine arts and industrial design at Rhode Island School of Design in 1982. Sand earned a degree in industrial design at San Francisco State University in 1982. Guerrero has a high school diploma.

FINANCIAL SUMMARY

*Projected

LICENSED TO GROW

By licensing its step-in-binding technology to a large number of boot makers, Switch Manufacturing hopes to establish the Autolock binding as a de facto standard in the exploding snowboard industry. Licensing a technology to establish early market share in an emerging product market is a time-honored strategy that's been executed by a number of well-known companies:

? Licensing arrangements helped the IBM-compatible PC crowd Apple's computers into a small piece of the market.

? Microsoft used licensing to establish MS-DOS as the preeminent computer operating system.

? Adobe Systems developed PostScript, a computer language to transmit pages to a printer, and licensed it to other manufacturers to establish it as the industry standard.

WHAT THE EXPERTS SAY

Observer

Anthony Warren
President of Technology Management & Funding, a technology-commercialization business in Princeton, N.J.

The founders may have erred in not selling 25% of the company to that one industry player. Switch's licensing partners would have stayed with it so long as it was providing a profitable product. In fact, Switch could even have offered the private placement as part of the licensing deal -- say, $50,000 for the license and $50,000 for 1% of the company. Or make the license free but charge $200,000 for 1% of the company. Doing so would solidify the relationships, since partners would see some of the upside potential.

Observer

Michael Treacy
Managing director of Treacy & Co. LLC, a management-consulting firm in Boston

This is going to be a tough uphill fight. Switch should consider licensing the binding technology as well as the boot technology. It's far more important at this phase to win the standards war than to make money. Licensing the binding to one or two strong competitors will give the consumer a choice. Then Switch can beat the guys it's licensing to by continuing to innovate within the standard.

Switch's marketing so far has been pretty standard: snowboard teams, sponsoring events, magazine ads. It needs more of a guerrilla mentality, more selectivity about where it focuses its limited resources. It should go after the highly influential user -- target some Generation X Hollywood types who are heavy-duty snowboarders. Get the binding on MTV or ESPN2. Focus on the dozen or so ski areas that are snowboard meccas. And there's a big opportunity to use K2's and Burton's big names against them. The average snowboarder doesn't like big companies or traditional approaches, and Switch could use its counterculture mentality to its advantage.

Financial analyst

Mark Leslie
Vice-president and research analyst at Dane Bosworth, an investment-banking firm in Minneapolis

Switch has established itself as a technology leader to date, although the technology itself is still in question. The fact that Switch has done so well against K2 without K2's brand name and broad distribution is evidence that it has a successful product. To ensure its continued success, Switch could affiliate with an existing snowboard company to leverage its distribution. The founders could sell equity, perhaps even becoming a part of a larger company or selling out entirely. Or they could create a distribution agreement.

Customer

Steve Klassen
Current world extreme snowboarding champion and owner of Wave Rave, a snowboard retail store in Mammoth Lakes, Calif.

Step-ins are definitely the future of snowboarding. As soon as I find a step-in binding that equals the performance of the strap systems, I'll switch myself. Switch's current design, which has metal bolts hanging off the side of the boot, won't become the standard. But that's not to say that Switch might not come up with the right system in the future. None of the step-ins available last season came as a finished product. With the Autolock, the retailer had to cut holes in the bottom of the boot, and that was a pain. Supposedly that problem is fixed now, so we have ordered Switch again this year.