Fragmentation to integration

Dusty McCoy has a dream.

In it, husbands and wives stop fighting while docking, fishermen spend less time driving the boat and more time fishing, and cruisers move without worry from port to port, even in bad weather.

Experienced boaters focus on what they love most about getting out on the water, leaving behind the hassles and the stress that often compromise their experience. And new boaters find far more reasons to stay in boating than to leave.

The key to making this a reality is product integration, according to Brunswick Corp.’s CEO and chairman.

“Everything that makes boating at times either difficult or a bit frightening can be removed with a fully integrated product,” McCoy states.
He defines product integration as the state in which all boat components and systems work together to support one another in a seamless fashion. It sounds relatively simple, but it’s still somewhat new to the fragmented boating industry.

Today, there are more than 1,000 boat builders in our industry and at least 750 suppliers. The average runabout contains products made by more than 100 different suppliers, few of which collaborated on the design of their products with each other or with the boat builder.
Pursuing the concept of product integration requires the industry to change.

At a minimum, boat builders must form closer relationships with their suppliers, developing products that look and function like they were made for each other. And in all likelihood, suppliers will have to begin to find ways to work together as well, offering boat builders families of products designed to work together, physically and aesthetically.

“There is just so much integration [boat builders] will be able to pull off on their own unless they rely on their supply base,” says Rich Hipp, general manager of Southco Marine.

And as the marine industry delivers higher quality products with fewer performance issues, style will become increasingly important as a tool for manufacturers to set themselves apart in the eyes of their customers.

“For example, when you buy a new house, most of us won’t crawl under the foundation. We assume that is good,” says Hipp. “What we end up looking at is whether the trim is perfectly joined and whether the spackle shows through.”

If a movement toward product integration is successful, not only will the industry build better products that improve consumers’ experiences, boat builders will be more comfortable offering end-to-end warranties, which will improve their relationships with dealers. With the industry focused on making the Grow Boating Initiative happen, it’s unlikely that product integration will get much attention. But the two are linked.

“Integration is one of the keys to growing boating,” says McCoy. “It affects ease of use and quality, important building blocks that will permit the industry to move from a stagnant growth rate to a much more upward curving rate.”

Integration translation
There are actually two types of product integration — performance and design, according to Hipp. Refining product performance usually comes before product design. The boating industry, however, is not typical.

“When we buy a car as a consumer, we don’t think for a moment that it’s not going to run,” Hipp explains. “Design becomes more and more a competitive element once the basics are done right. In the marine industry, we’re trying to improve in both areas. The companies trying to work it on both sides will be the winners.”

On a big boat, performance integration might mean being able to access all of the vessel’s electronics from the cabin through a single system. A passenger could control the radio, TV, CD player and lights and view the helm and transom through the television. Not only would this eliminate the use of multiple remote controls, it would allow the user the comfort of knowing what’s happening on other parts of the boat while relaxing.

McCoy says this actually is available today on a Hatteras 64, but there are many other types of integration Brunswick is still working on.
Today, someone at the helm of a 20-foot outboard boat who wishes to troll for fish has a lot to think about. They have to control the throttle, steer and pay attention to water depth. But in the future, the captain will be able to set the course, depth and speed, walk away from the helm and focus on fishing, McCoy predicts.

These are the types of ideas that are coming out of Brunswick’s High Performance Product Development program — an in-house highway for pursuing product integration. The program was used last year for “select products” at Attwood, Boston Whaler, Brunswick New Technologies, Mercury, Sea Ray and US Marine as a kind of test, but the company is aiming to implement it across all its marine businesses this year.

“HPPD is essentially a set of processes that examines market and customer needs and determines how the product’s independent components will interface with each other to form an integrated product that meets and exceeds those needs,” the company explains.

So far, the industry has focused most of its energy around integrating the boat and engine. Yamaha’s engines, for example, utilize the NMEA 2000 protocol so that they can be linked together with other marine electronics that “speak” this common electronic language.

“What this means essentially is a boat’s navigation, GPS, radar, etc., will be able to talk to engine management systems so the consumer can get more information that he could previously,” explains Phil Dyskow, president of Yamaha Marine Group. “If you want to carry this theory one step further and link it to a telematic system, that would mean that if I were a consumer at home, via my laptop, I could access my boat information system and check my battery level, fuel level, find out, is there water in my bilge?”

While this is a “wonderful vision of the future,” he says it’s just starting to develop. Many manufacturers are producing NMEA 2000 compatible components, but integration of them is still in “a primitive stage.” Just how primitive varies from one boat builder to another, according to Dyskow. “Builders who want to keep the price down are less likely to embrace integration.”

Mercury has adopted a different approach, as evidenced by its SmartCraft technology. It speaks a unique electronic language and therefore is incompatible with devices that use the NMEA 2000 protocol. The way Tom Burkard, Mercury Marine’s general manager of control and rigging systems, explains it, SmartCraft was developed years before the NMEA 2000 protocol was created. By that point, the company had too much invested in SmartCraft to abandon it.

Instead, it created the SmartCraft Network, a group of SmartCraft-certified partners whose hardware has been validated by and who license the SmartCraft technology from Mercury. Members include companies like Faria, Dometic and Kohler.

Design integration also is a work in progress for most boat builders, and like product integration, it tends to be furthest along amongst high-end builders. Its biggest hurdle is that it often requires boat builders to convince many of its hundreds of suppliers to design their products around a central design scheme.

Under Southco Marine’s strategy, boat builders have some unique opportunities. Though it manufactures locks and latches, the company can offer boat builders a wide range of products through the rep firm it owns. And Southco is increasingly working with the manufacturers whose products it represents to develop families of products with matching designs.

Such is the case with a suite of products it displayed at the International BoatBuilders Expo and Conference. The display consisted of a sink and faucet designed by Opella, a matching light fixture designed by Integrated Illuminations Systems (I2S) and a matching latch and lock designed by Southco.

This suite of products, which would give any head or galley its own unique look and feel, demonstrates what design integration can ultimately deliver from one end of a boat to the other.

A lot at stake
The marine industry has a long way to go before it reaches complete product integration.

“I’m 56 years old and been lucky enough to boat since I was 15 or 16 years old,” says McCoy. “If you look at the instrument panel of the boat, not a lot has changed in the last 40 years. I would invite you to sit in a car today and look at a 1956 Plymouth. We’ve not gone nearly as far in the boating industry.”

McCoy estimates that the boating industry is a 3 or 4 on a 10-point scale in which 10 represents complete integration. The auto industry is about a 9, he says.

How fast the industry is able to close that gap has major implications for its future. With consumers using their automotive experiences as a gauge, the industry must catch up if it’s going to grow beyond its current base of loyal customers or even maintain that level as the baby boomers age.

Also at stake is the future of companies like Southco Marine. As a self-proclaimed “one-stop-shop for design integration,” its survival depends on it. One of Southco’s biggest challenges is that producing a boat with an integrated design can cost more upfront than buying mismatched components from separate manufacturers.

In the end, the investment in an integrated design scheme pays off and then some as the boat builder can charge more for their product and thus achieve higher profit margins. But it takes a company with a long-term outlook to realize those benefits, according to Hipp.

Right now, the high-end boat market is integrating much faster than the entry-level market. The challenge for Southco is to build its volume so that it can secure its own future in the industry.

Ironically, it is thus dependent on companies like Brunswick, which also has quite a stake in product integration. If Brunswick’s ownership of companies like electronics manufacturer Navman and accessories manufacturer Attwood don’t give its products an advantage in the market place, millions of dollars of investments will have been for naught.

“At the end of the day, it comes down to companies like Brunswick saying, ‘We see the value in [product integration], and we want to go with Southco Marine,’” Hipp explains. “Otherwise, we won’t be here.”

While Brunswick has been very consistent with its message about the importance of product integration, “their ability to pull it off comes down to whether the boat builders under them can work under that same message and goal,” says Hipp. “It’s going to take more time than I think they’re giving it credit for.”

This may be especially true now that Dusty McCoy has been promoted from Brunswick Boat Group president to Brunswick Corp. chairman and CEO. As of press time, the company had yet to name a replacement or a timetable for doing so.

While Brunswick has downplayed the importance of filling this position in interviews, even NMMA President Thom Dammrich says it will play a role in the company’s future: “A strong leader for the Brunswick Boat Group will be critical to their continued success and their ability to execute on their strategy and plans.”

Sidebar:
Product integration
vs. vertical integration
One doesn’t necessarily imply the other.

To integrate is to bring together different parts, whether of a supply chain or a product.

Product integration is central to Brunswick Corp.’s long-term strategy in the marine industry — and one of the reasons Brunswick has pursued what many would call a vertical integration strategy, acquiring companies at different stations along the supply chain. If product integration requires boat builders to have close working relationships with their suppliers, then perhaps a boat builder buying up those suppliers (vertical integration) makes sense.

Many independent builders and suppliers disagree, however. The boating industry has a long tradition of entrepreneurialism, and what some see as Brunswick’s effort to control the industry is often heavily criticized as unhealthy.

In addition, some industry executives speculate that Brunswick has a bigger challenge in producing fully integrated products than some of its independent boat builder competitors.

“All boat builders see integration as an important issue,” says Rich Hipp, general manager of Southco Marine. “It comes down to their ability to implement it. I’m starting to feel that the independent boat builders have an easier job because of the complexity of bigger companies.

“If you’re an independent with one boat in one type of segment, you’re closer to the voice of the customer. The decision-making process is quicker.”

In addition, independent builders are often spared the decision of when it makes sense for boat brands to feature the same products from the same suppliers and thus achieve cost savings vs. when it makes sense to use products to differentiate between brands. Conversely, the smallest independents may not have the economies of scale to integrate their products quickly. Those best set up to integrate are probably the larger independents, Hipp says.

Volume certainly is a key component in a company’s ability to integrate, according to Dusty McCoy, CEO of Brunswick. In fact, that’s a central reason why the auto industry is so far ahead.

“It may be that until the industry coalesces a little more and builders begin to acquire a certain mass so they can afford the capital, the people and the time, it may be hard for the industry to reach a level we would all like to reach,” McCoy says.

In the end, regardless of the challenges they face, both the independent boat builders and the conglomerates that are pursuing integration have the same objective.

“When we deliver [an integrated product] to the customer, we achieve higher levels of satisfaction,” explains Yamaha Marine Group President Phil Dyskow. “[Brunswick is] doing it by buying the companies. We’re doing it by partnering with the independents.”

Sidebar:
More expected of suppliers
Taylor Made is working more closely with its boat builder customers than ever before to meet their rising expectations.

The boating industry is following in the auto industry’s footsteps, at least when it comes to manufacturer-supplier relationships.

Boat builders are reducing the number of suppliers with which they do business, demanding more from those they retain. Taylor Made Systems, a boat windshield and canvas supplier, is one company that says it is rising up to meet those demands.

“As a Tier One supplier, you’re expected to do a lot more than supply bits and parts,” explains Dennis Flint, president of parent company Taylor Made Group. “Boat builders are looking for imaginative engineering, styling, use of materials and ease of assembly.”

Taylor Made Systems now begins working with many boat builders years before they release a new model, which has a number of benefits over trying to make a product fit an existing boat design.

For one, it allows a supplier the opportunity to modify its current products or to develop a new product altogether to fit a design concept. If the products are designed to fit together, their quality and reliability are likely to be much higher.

In addition, it helps keep expenses down as boat builder and supplier can work to develop an end product that is simple for both parties to manufacture, for example. This has been especially important lately, with the sky-high cost of many materials.

Finally, as consumers’ expectations rise, manufacturer-supplier collaboration early on helps boat builders deliver innovative products with more features that are differentiated from the competition with unique styling.

Technology has been driving some of this early collaboration. Boat builders can now share CAD files with their suppliers and vice versa.
A close working relationship later in the process is also beneficial. Taylor Made now conducts on-site manufacturing of windshields and canvas within a number of its customers’ boat plants, which helps it identify and address any integration problems immediately.

“Everyone today wants hassle-free boating,” concludes Flint. “With closer manufacturer-supplier relationships, the end consumer gets a better product.”