Cobalt’s New Cause

Cos Constantinou hasn’t had an easy year.
While you wouldn’t know it from his smiling, soft-spoken demeanor, there’s no doubt the Cobalt Yachts president has been under a lot of pressure. He has been tasked with leading the effort to bring the tradition of one of the industry’s most highly respected brands to a new facility with new employees serving a new segment of the marine market. And the initiative has fallen well behind the timeline the company had initially constructed.
The first Cobalt Yacht models were supposed to be unveiled at the Miami International Boat Show this past February. Instead, the first major boat show they’ll be displayed at will be the Fort Lauderdale International Boat Show in November.
“We’re disappointed with where we are today,” said Paxson St. Clair, Cobalt Boats CEO, in early August. “We underestimated the project, what was ahead of us. Our timelines were certainly way too aggressive. We had plans to hit the 2007 model year with a number of our 46 and 37 models out in the marketplace, and we’re just now having boats come off the production line.”
This initiative is a big, expensive undertaking for “a small company from Kansas,” St. Clair suggests, and there’s a lot at stake, including, most significantly, the Cobalt brand’s reputation. Cobalt Yachts was designed to give Cobalt Boats’ customers new, bigger models to move up to as their boating lifestyles evolve. These customers know better than anyone the promise of the Cobalt brand. If the Cobalt Yachts experience doesn’t live up to their expectations, it will put both businesses at risk.
Despite the setbacks Cobalt Yachts has experienced, Cobalt insiders have a lot of faith in the project and in Constantinou. Ultimately, the outcome of any initiative depends on the people behind it, according to Cobalt.
“Cos understands big boat manufacturing, and he’s very smart,” says Cobalt Yachts dealer Joe Harwood, owner of Arrowhead Yacht Club & Marina. “Couple that with his business ethics and discipline, and you know Cobalt Yachts will do well and set a standard in the cruiser boat market. That’s what I predict.”

Keeping its distance
Certainly, a lot of boat builders have taken on similar initiatives. And many have paid a high price. Their success or failure often comes back to the extent to which they experience what one Cobalt employee termed, “Flagshipitis.”
While its name may sound silly, this disease can be crippling for manufacturers and dealers alike, bringing brands that once towered over their competitors to their knees.
A typical case goes like this. A successful boat builder recognizes the opportunity offered by a healthy big boat market and decides it’s time to act. To create a new, larger product line, the company puts an addition onto its current facility and starts building its first big boat. The excitement of this new venture washes across the plant, inspiring all the employees, who are eager to contribute. Soon, the entire company’s attention is focused on this new line, and its core business begins to suffer. The commitment to quality and attention to detail on the smaller boats decline, efforts to keep the old product line fresh are diminished, and no new small boat designs are introduced. In addition, without the presence of big boat experts on staff, the new designs end up looking and functioning like oversized runabouts. Pretty soon, small boat sales are down, big boat sales aren’t hitting projections and rather than benefiting from its new venture, the company’s foundation has begun to crumble.
In an effort to protect itself from this, Cobalt has made what appear to be bold and even risky moves in entering the yacht market.
“Big projects that are always bigger than anticipated on the front end have a tendency to suck a lot of your core resources,” explains St. Clair. “What we wanted to avoid is a scenario where we would invest a lot of time, capital and resources here [in Kansas] in a yacht or express cruiser line and turnaround and have our runabout line or our core products not as fresh and dialed in as they should be.”
Therefore, Cobalt Yachts, a division of Fiberglass Engineering dba Cobalt Boats, has been formed in Vonore, Tenn. — next door to MasterCraft Boats, a Sea Ray manufacturing plant and several other boating businesses — and some 800 miles from Cobalt’s Kansas home. This means that while the new company’s more than 100 employees certainly have the support of Cobalt executives Pack and Paxson St. Clair — who have been visiting the Tennessee facility on a “darn near weekly basis” — they must interpret the brand at quite a distance from the company’s epicenter. It also means Cobalt has taken on the added cost of a 375,000-square-foot facility and the responsibility for a completely new group of employees, whose livelihoods are at stake.
The Cobalt executives have also gone outside the organization to choose a leader for the new venture. While Constantinou spent nine months at Cobalt Boats’ Neodesha, Kan., headquarters as its senior vice president of sales and marketing before launching Cobalt Yachts, for the majority of the past 15 years he has worked for Sea Ray, helping the Cobalt competitor grow its business overseas. This leaves him with years of exactly the kind of big boat expertise Cobalt was seeking, but not a long history of intimacy with the Cobalt brand.

From pain to gain
Despite these challenges — or perhaps because of them — Cobalt Yachts seems to have successfully adopted the most important pieces of the Cobalt brand and culture.
For example, while serving as Cobalt Boats senior VP of marketing and sales, Constantinou made it a priority to form strong relationships with Cobalt’s dealers.
“It was critically important to garner their trust and respect,” he says. “Our success hangs on the success of our distribution.”
Trust and respect are the backbone of Cobalt’s relationship with its dealers. In fact, Cobalt Boats is considered an industry leader when it comes to the most divisive issue between manufacturers and dealers: written contracts. After years of relying on the power of Pack St. Clair’s handshake to seal the deal, in 2004 Cobalt created what many believe is the most fair and balanced written dealer agreement in the industry. (See “Leading the Pack” in Boating Industry’s November 2004 issue for more information).
Cobalt Yachts’ dealer agreement is similar. But more importantly, the philosophy behind the agreement drives the way the company does business. Pack’s guiding principle — treat employees, dealers, consumers and suppliers the way you would like to be treated — on which Cobalt Boats’ business is based, has helped the Cobalt Yachts president make some of his most critical decisions. As a result, the launch of the yacht company has been in many ways a collaborative undertaking.
In fact, the idea for Cobalt Yachts came from Cobalt’s dealers and customers. Though the idea has been floating around since the mid-90s, Harwood, of Arrowhead Yacht Club & Marina, remembers the Cobalt 20 Group meeting in 2003 during which members decided it was time to ask Pack St. Clair to take the Cobalt brand into the cruiser market. In fact, it was Harwood who drew the short straw and was chosen to call Pack himself.
“I called Pack and told him we were behind them and wanted to see them go into the cruiser market,” says Harwood. “If they would do it, the orders would be there to buy the product, and they are.”
The numbers support Harwood’s assertion. Cobalt Yachts production is already sold out through the end of the year, according to Constantinou.
Before Cobalt Yachts entered the cruiser market, those Cobalt boat owners who wanted to move up to yachts 35 feet and larger had no choice but to defect to other brands. This defection not only dismayed many loyal customers, it put Cobalt Boats dealers in an unfortunate situation, and some reluctantly took on competitive brands to avoid losing customers. Now dealers and customers alike are relieved.
Cobalt not only has entered the 35- to 60-foot express cruiser market — allowing those Cobalt dealers that can handle a yacht line to remain loyal to Cobalt and invest more in the brand as it becomes a larger percentage of their overall business — it has done it the Cobalt way. Harwood, for example, applauds the company’s efforts to ensure it isn’t distracted from its core products. As Harwood explains, those products are Cobalt dealers’ bread and butter.
“In my opinion, they are certainly addressing it the right way, with a different plant, different employees and a different management team,” he says. “[They had] the commitment to form another company to make sure they weren’t going to become distracted in Neodesha. I’ve been waiting for this my whole life.”
In analyzing Cobalt’s dealer network, Constantinou says about a third of Cobalt Boats’ more than 100 dealers were determined to have the sales and service capacity to handle a yacht line. Twelve dealers were initially chosen to take on Cobalt Yachts products, and others will likely be added in the coming years as the company ramps up production, introducing new models. Cobalt Yachts forecasts it will take at least another two years to reach full production, at which point it expects to employ 350 workers and manufacture 200 yachts per year.
Another example of Cobalt Yachts’ collaborative approach to business came in its consultation with dealers over the design of its first two models. Not only did the company invite its 10 U.S. dealers to the plant soon after they were chosen, the dealers were asked to vote on many of the boats’ features, such as electronics, wood cabinetry and fixtures, according to Dan Lemieux, president of Cobalt dealer East Coast Flightcraft.
“That is what Cobalt does,” he says. “Not enough manufacturers today listen to their dealers, but Cobalt still does. That’s the difference. Other companies are losing market share because they think they know it all.”
Lemieux points out that any time a new boat is launched, there are bound to be a few bumps along the way, but he has “all the confidence in the world” in Cobalt Yachts. Not only does he believe “they absolutely have the right man for the job” in Cos Constantinou, who has “an amazing attention to detail,” he knows the company will take care of its dealers and its customers.
“If we see something wrong in the field, they have the infrastructure in place to do something about it right away,” says Lemieux. “I really applaud the way Cobalt does business. A lot of companies could learn from it.”

A little piece of Kansas
The same philosophies that have gone into forming strong bonds with its dealers have been used to form the base for Cobalt Yachts’ relationships with its employees.
In considering how to embrace the “Cobalt Way” in his new business, Constantinou says he spent some time defining it.
“It’s centered around respect, which is upheld through the treatment of others,” he explains. “We search for those values in our employee interviews. And I personally participate in every employee orientation.”
After immersing himself in the Cobalt Boats culture in 2004, Constantinou understood the value such an experience offered. Therefore, shortly after he completed his first wave of hiring in early 2006, it was an easy decision to invest in sending his first production associates — the Cobalt Yachts “nucleus” — to Kansas for eight weeks to train alongside Cobalt Boats’ employees and experience the Cobalt Way up close.
While the trip had a very practical purpose — Cobalt Yachts was soon going to move production of Cobalt Boats’ largest model, the 343, to Tennessee — of equal importance, according to Constantinou, was the less tangible benefit of becoming “Cobaltized.”
“As Pack stresses, no job is any more important than any other job,” explains Paxson. “If you don’t believe that, take one job out of the equation and see how happy our customer is with that product. Whatever department it is in, whatever job you have, it’s critical. You’re an important piece of the team. Communicating that to those people is something we do on an everyday basis in Tennessee.”
Paxson also points out that while transferring the Kansas culture is an important step, “it would be naïve to think we could have the exact same culture in Tennessee. In fact, we wanted some differences. There were some things we do in Kansas that we wanted to do better in Tennessee.
“It’s not a scenario where we’re trying to teach a group of 100 people in Tennessee what we’re doing in Kansas as a best practice, it’s a two-way street. We’re back and forth with different people on a weekly basis. We’re learning as much in Tennessee that we can bring back to Kansas as Tennessee is learning from us in Kansas to take back to Tennessee.”
Some of the most significant things Cobalt Boats has learned from its Cobalt Yacht sister company relates to its bigger boat lines. The yacht company’s big boat expertise has led it to adopt fixturing, jig and headliner procedures that Cobalt Boats has employed with many of its models, resulting in significant improvements. The biggest benefits, however, have come in a different form.
“I certainly think that the success or failure of any project, especially in a scenario like this where it’s a long way from home and a very large investment for a company like us, it all boils down to people,” says Paxson. “No matter how good your designs are or what you have in terms of distribution out there ready to go or how strong the market forecast is, it all boils down to the quality of people you have in an organization.”
Cobalt Yachts’ successful adoption of the Cobalt brand perhaps shines through most clearly in the handling of its biggest challenge to date. When the countdown to the Miami show began early this year and Cobalt Yachts found itself behind on the development of its first model, it could have rushed to bring the product to Miami. But Constantinou says cutting corners is not the Cobalt way. Therefore, the difficult decision was made to postpone the unveiling.
“There’s a responsibility to the promise of the Cobalt brand,” Constantinou says. “Our decisions are driven by that standard. We’re a few months behind, but we feel we did the right things, given the legacy of the brand.”

Can you relate? Cobalt might as well have served as a case study for a new book on branding, which underlines the importance of relationships.
There’s no mention of the marine industry in Scott Deming’s new book, “The Brand Who Cried ‘Wolf.’” But there might as well be.
If the author was familiar with Cobalt Boats, it’s hard to imagine he would have passed up the opportunity to make it his book’s central case study.
In it, Deming argues for a new definition of brand, one that has more to do with customer, employee and dealer relations than with a type of product or an advertising campaign.
“Branding … is not about manipulating people to buy a product or service. It’s creating a genuine experience and developing an authentic relationship between you and another person,” writes Deming. “Get into the mind and soul of your customer and find out how to provide for them the things they would really love.”
Putting yourself into your customers’ shoes is actually at the heart of Cobalt Boats’ founder’s central business philosophy: treat others the way you’d like to be treated. Pack St. Clair also brings this concept to the company’s interactions with its dealers and employees, something Deming believes is an important part of successful branding.
“If corporate leaders inspire their employees to take command and have an objective to make each individual happy, each employee then has the freedom to make things happen,” explains Deming. “They are the brand. After all, they’re the ones interacting with customers of all stripes, be it buyer, distributor, reseller and so forth. The leader of a large company can’t be effective touching every person, but they can make sure that everyone below them buys into the vision and culture of the brand and then applies it to their groups.”
If you wonder whether Cobalt’s dealers and employees truly buy into their leader’s values, just ask them. Joe Harwood, owner of Arrowhead Yacht Club & Marina, has watched Cobalt Boats grow and develop since the very beginning of his career. In college, he worked for one of Cobalt’s very first dealers and today his business is both a Cobalt Boats and a Cobalt Yachts dealer.
“Cobalt has been an absolute leader in the small runabout market,” he says. “They’ve set the standard for years, and they’re wonderful people who do business with ethics, morality and honesty.”
When asked to define the Cobalt brand, Harwood not only highlights the products’ excellence — the company is a six-time J.D. Power and Associates award winner — he emphasizes what he refers to as “the best warranty in the country” — in essence, a pledge of the manufacturer’s commitment to product quality and to its customers.
Cobalt achieves its reputation for excellence, in large part, by asking for and then responding to dealer and customer feedback. It followed this same path in the creation and development of its new company, Cobalt Yachts.
“[Cobalt Yachts President] Cos [Constantinou] and Cobalt have been very proactive in soliciting information from their dealers through surveys, conference calls and plant visits throughout the entire process,” says Tom G. Whowell, owner of Gordy’s Marine. “They understand that we, the dealers, are the ones on the front line with our customers and know the needs of our customers very well. Cobalt looks to the dealer network for direct, honest input and feedback constantly. They have proven to be excellent listeners and business partners.
“Cobalt is dedicated to exceeding the requirements set forth by their discriminating customers. We are seeing that same dedication to quality applied to the yacht line. Their focus on customer and dealer satisfaction is key to their success. They continue to make sure their customers are 100 percent satisfied with the end result, each and every one. The Cobalt way of doing things right is ingrained throughout every step.”
This is exactly what Scott Deming is referring to when he writes about the trust which underlies the most accomplished brands.
“The most successful relationships are those built on trust. That trust is achieved through the memorable, positively one-of-a-kind experiences you create for your customers. You’re able to create these for your customers not only because you continually step into their shoes, but also because your beliefs, values and identity are what define your brand. They are expressed through the way you truly listen to your customers and seek to transform the moment for them in positive ways they never expected. Your brand promise is inextricably tied to your reputation, and you want to make a big enough splash that delivering on your promise ripples indefinitely.” — by Liz Walz

Cobalt Yachts By Paxson St. Clair, CEO, Cobalt Boats
The vision
“We’re not looking to be the biggest. We certainly understand that a small company like Cobalt probably won’t put a dent in the business of the big guys at this end of the market. We’re focused on being the very best. We’re going to build a boat that’s certainly a little more expensive than what the others have to offer. But the quality of materials and workmanship will certainly be the very best. We’re going to stay in our own little niche. The volumes are not going to be big. We’ve designed it so we don’t have to go after the volume end of the business. And just keep doing what we’re doing.”

The brand
“We don’t do a lot of advertising. In fact, we do very little advertising. Our brand has been developed through more of a word-of-mouth process and making sure we take care of our customer base and develop a dealer network that is the very best out there. As a result, you are much more protective of a long-term brand development company to where you recognize that anything that you do that damages the brand is something that you have so much invested in vs. maybe more of a marketing-driven company that can quickly overcome any hits to the brand.”
The experience
“We’re an experience driven company. We live and breathe by what our customers experience out there in the world. Anytime a customer has a negative experience, we’re very, very conscious of what that does to the brand. As Pack has told me on a number of occasions, we’re going to have problems. When we have a customer that has a problem with a Cobalt or is dissatisfied, we have an opportunity to have a better customer than if that problem never happened. That’s the way we need to approach it. If somebody calls in and says, ‘I’m a customer, I just bought a Cobalt and it’s had this problem, it’s broken down, or I’m extremely upset and I want to talk to the owner or the founder or the president,’ boom, that receptionist is sending that call right through. It’s not going to a secretary or to the customer service department. By golly, we need to know about it, and we recognize that customer paid more for a Cobalt to not have those problems and we need to be there to resolve it. That approach is certainly the way we operate at [Cobalt Boats] and will certainly be the way we operate at [Cobalt Yachts] as well.”

The pace
“We’ve certainly had some frustrations in the last five or six months in not getting boats ramped up as quickly as we would have liked. But with that pain comes long term gain. We made some decisions to back up on numerous occasions and say, ‘Hey, it’s just not quite there yet. This needs to be changed. This isn’t quite as we thought it would turn out.’ Rather than rush hard and get into production a little quicker, we elected to back up on numerous occasions and dial things in. Although it has been painful, we feel very good about the future as a result. Our banks might be a little bit disappointed with us right now, but better them than our customers down the road.”

The test
“We survey every Cobalt owner in the first year of ownership a few times. I have an in-basket full of stuff here, and when I see the surveys, I always dig down and pull the surveys out first. That’s one of the things I enjoy looking through more than anything. On occasion, I get a survey that isn’t maybe as enjoyable. But what I love to see is that survey that comes back that says, ‘Hey, this boat is more than I expected, it’s been the best investment in my life, and we’re enjoying the heck out of the Cobalt Boats experience.’ When I get that survey back for Cobalt Yachts that’s along those lines, then I’ll know it’s been a successful venture.”

The impact
“Strengthening the brand is a big piece of it. If you look to the automobile business and use Mercedes Benz as an example, the S class is probably what strengthens the brand more than anything. In many ways, this product is our S class or flagship. When you have a product at this level, it does nothing but strengthen the brand throughout and give us the opportunity for higher levels of brand recognition, which will sell more 22 foot runabouts or 26-foot runabouts going forward.”