In the 1960s the U.S. motorcycle market was dominated by a small number of companies including Harley-Davidson and Triumph. To penetrate the market, Honda attempted to copy the competition by producing large bikes but offering them at a lower price point. Japanese labor, which was inexpensive at the time, provided an opportunity to compete on price (or so they thought).
The decision almost killed Honda. The market didn’t respond positively and, worse, the bikes leaked oil on long highway drives. Lacking the resources to fix bikes in the U.S., Honda incurred the cost of air-freighting them back to Japan for repairs. Despite this, Honda persisted with the strategy even as the U.S. division lost nearly all its cash.
Honda also sent a few of its smaller models to Los Angeles. Known as the Super Cub, it was popular in Japan for urban deliveries on narrow roads. No one at Honda expected U.S. consumers to purchase many, and as cash continued to plummet, the company let employees use the Super Cubs to run errands around the city.
One took a Super Cub into the hills of West Los Angeles for a joy ride and found the experience incredible. The next weekend he invited colleagues to join him. Bystanders asked where they could purchase one of these “dirt bikes.”
“Soon after, a buyer for Sears spotted a Honda employee riding around on a little Super Cub and asked whether Sears might sell it through its catalog. Honda’s team was cold to the idea, because it would divert them away from their strategy to sell the larger bikes – a strategy that was still not working.”
Ultimately, Honda’s management realized that a better strategy had fallen right in their laps. They had discovered an entirely new customer base. The rest, as they say, is history.
Abandoning a strategy can be difficult, even when it’s failing. But any plan, especially one developed in a vacuum, should be reevaluated as new data becomes available.