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Elan: parabolic fun makers face a bumpy ride
To the uninitiated, a ski’s a ski. But for many ski bums, technology in skis has raised the heights of pleasure, thanks to Elan. Elan, a mid-sized Slovenian company, was founded in 1948 by Yugoslavian soldiers, returning from the war. Now owned by a Croatian Bank, it is the only well-known Yugoslavian brand name to have survived the break-up of the country. Against the shark-toothed wall of the Julian Alps, its factory looks rather nondescript. However, Elan boasts a glittering history. Back in 1977, Ingemar Stenmark, arguably the greatest-ever ski racer, had his skis made there, putting the little Slovenian business on the map. And it was here that the parabolic ski, the most significant innovation in skiing for many decades, was invented.
Elan’s big breakthrough came when, in 1988, the company decided to invent the skiing equivalent of the over-sized tennis racquet – a ski that would enable skiers to have more fun on the snow without falling over. This was a shaped ski called SCX (side-cut experimental) which was introduced into the North American market in 1993. The ski was named ski of the year by the trade press and rival firms soon followed with the introduction of their own versions of shaped skis. Today, shaped skis of one form or other account for 70 per cent of ski sales.
There are, however, problems ahead for Elan. Its success in the past lies in its flair for technological innovation. The ski business is, however, changing fast. Becoming more like a fashion than manufacturing business, industry players are churning out new products rapidly. But most of what passes for innovation is gimmicky and marketing. Like fashion houses, ski makers are repackaging their products every autumn, persuading skiers that last season’s wonder boards are nothing compared to this year’s marvels. A so-called breakthrough is often nothing more than a new colour or a sheen of titanium. Others, more dazzling, claim to have ‘piezo-chips’, the same technology used by the US Department of Defense to dampen vibration on the wings of fighter planes.
Fast imitation by competitors also presents problems. Unless they are proprietary technology, most new products that take off are soon copied by competitors, particularly the big firms. Moreover, the ski industry is in maturity and has consolidated, resulting in a few big players with resources to out-compete minnows such as Elan. The big companies such as France’s Rossignal and Head from Austria can spend more on advertising, million-dollar endorsements of ski racers and product-placement in retail outlets. Their sales are also doing well after a slump in the 1990s. Many are also growing by gobbling up smaller companies.
Some medium-sized manufacturers have survived by diversifying their business as in K2, an American company that now makes sports equipment – roller blades, bicycles, fishing poles and backpacks – as well as skis. Elan has tried diversification, but without much success. For now, small, vulnerable and undercapitalised, Elan strives to survive through innovation. It’s latest offering? The short, shaped ski.
Markets do not stand still. When customer wants or technology changes, companies, big or small, must create new products to keep abreast of such changes in the marketplace. While new technology creates new products to fit with customer requirements, management must recognise that it gets tougher as they go on – customer and market needs are continually evolving, and products and marketing methods must follow suit.[i]
Questions
1.Firms survive through product innovation. How do firms identify and develop new-product opportunities?
2.What role does marketing play in new-product development?
3.As the new product ages, how should the firm adapt its marketing strategies in the face of changing tastes, technologies and competition?
[i] Adapted from ‘Once more, with Elan’, The Economist (11 December 1999), p. 93.