Q) How did Ducati become a profitable motorcycle maker despite its small scale?
Before its takeover by the American private equity firm Texas Pacific Group (TPG), Ducati went from being one of the top manufacturers of the high performance sport motorcycle industry to being on the verge of bankruptcy. TPG identified Ducati as a high end product with enormous potential for growth but realized that serious change was required if Ducati was to ever fulfill this potential. TPG decided to appoint Federico Minoli, an expert in turnaround management as the CEO of Ducati.
When Minoli arrived he saw that the company had no distinct overriding strategy, there was no management structure and no set goals to guide the direction the company would take. The first thing that Minoli did was revamp the entire management team, he looked for personnel that were not only talented but would also be passionate about Ducati. He believed that these characteristics, combined with very little internal rigidity would lead to creative decision making by his management team.
Ducati had everything that it required to be successful in its market niche of high performance sports motorcycles; It had a top notch uniquely beautiful product, a world class team of passionate designers and engineers and a brand name with very strong potential. Its customer base was one of the most loyal in the motorcycle industry with about 56% expressing repeat purchase intentions. All Ducati needed was a direction.
Minoli set 2 targets; double digit growth and to reach Harley’s profitability levels - the highest in the industry. At that point Ducati faced two alternative strategies it could either focus on its product or focus on the Ducati brand. The first strategy would mean designating all of Ducati’s energy on producing a better, faster and more powerful product. However Minoli deliberated that Ducati was not about having the fastest bike with the most powerful engine; it was about the...