POLARIS IS BLAZING NEW TRAILS FOR EXPORTS

CEO Scott Wine leads the charge through employee swaps and global guerrilla marketing

[ By William Lobdell, GlobalTrade Magazine, January, 2013 ]

Uncharted territory: Focusing on an international approach to growth, Polaris is reaching sales unprecedented in its history.

Nestled on the bluffs of the St. Croix River in Wisconsin, Osceola’s main attraction is a quaint downtown with historic brick buildings dating to the 1880s and a 25-foot waterfall. The town of 2,568 has one high school, no colleges and a mono-ethnic population (96 percent white). Bordering the Land of 10,000 Lakes, it markets itself as “The Bridge to Minnesota.”

Nowhere in Osceola’s DNA are indicators that the town provided the perfect setting to illustrate how one decidedly American company embraced the Gospel of Globalism and is now sending a sizable band of missionaries to the ends of the Earth to spread the Good News about its products—and posting record international sales in the process.

Osceola is home to a 200,000-square-foot Polaris Industries factory, where more than 500 workers manufactured parts for snowmobiles and all-terrain vehicles before the company announced in 2010 that it would be moving the plant’s operations to Mexico within a few years.

But when setting up the factory in Monterrey, Polaris officials encountered problems with a computer-aided, tube-bending machine. Operating the device, it turned out, was more of an art than science, and only a handful of Osceola-based employees had the artistry to teach their counterparts in Mexico.

So the American workers were recruited to be global trade envoys. For more than four months, they’d skip choir practices and children’s soccer games in Wisconsin to fly to Monterrey each Sunday and come back to Wisconsin late in the week.

“Some of these people had never stepped on a plane before,” says Suresh Krishna, vice president of Global Operations and Integration at Polaris. “But we needed them desperately.”

Though the workers were basically training their replacements in Mexico, they soon turned into international business converts.

“They just enjoyed the fact that they could teach people new things and in new settings,” says Krishna, adding that the company ended up retaining the U.S.-based employees and keeping the factory open because of booming business, including international sales. “Now they can’t wait until we open up a factory in Europe.”

Preached by Chief Executive Officer Scott Wine, this Gospel of Globalism has transformed Polaris—manufacturer of off-road vehicles and snowmobiles—from a U.S.-based company that happened to export to a global leader in the power-sports market.

Driving Global Sales
CEO Scott Wine’s “Gospel of Globalism” helped Polaris tally a record $424.3 million in international sales in 2011.

In 2011, it tallied a record $424.3 million in international sales, a 39 percent increase over the previous year, and for the first half of 2012, Polaris saw an eye-opening 45 percent sales jump in the Asia-Pacific market. The $2.7 billion company has projected its aggressive global initiatives—it has hired 1,200 new international employees over the past two years—will nearly double foreign sales (to 33 percent of Polaris’ total revenue) by 2018.

“Several years ago, we began a concentrated effort to grow international sales,” Wine says. “Our 2011 international performance reflects the success of that initiative: a record 39 percent sales increase with growth in every geographic region.”

In the beginning (1956), Polaris made snowmobiles. Over the years, the Medina, Minnesota-based company evolved to include the manufacturing of ATVs, off-road side-by-sides and on-road vehicles such as the iconic Victory motorcycle. While annual sales reached into the billions, Polaris didn’t put a significant amount of resources or energy into its international operations.

But in 2008, Wine arrived at Polaris like a prophet from the desert to preach the Gospel of Globalism and make converts of the company’s employees. A Naval Academy graduate who majored in economics and French—with an MBA in finance from the University of Maryland—Wine had worked at several top-tier international companies overseeing both domestic and foreign operations.

It didn’t take long for the 45-year-old to assess Polaris’ international operations: no manufacturing plants outside the U.S., few foreign partnerships, little or no presence in many major foreign markets, including China and India, and only 15 percent of the company’s sales coming internationally. He vowed to lead the company as quickly as possible to the Promised Land of export-generated profits.

“We want to be a global company—to think globally and act locally,” Wine says, in a phone interview from China. “It does take leadership, focus and resolve. There are numerous challenges, it doesn’t go as fast as you want and there are more problems than you anticipate. It all comes down to people.”

First, he had to get some fellow international evangelists to help him spread the word and change Polaris’ corporate culture, which was rooted deeply in an American mindset.

Wine began by recruiting some globally minded executives within the company, such as Michael Dougherty, who was vice president and general manager of the ATV Division and now is vice president of Asia Pacific and Latin America. Wine tapped Matthew Homan, then vice president of the Off-Road Vehicles Division, to be vice president in charge of Europe, Middle East and Africa operations.

Wine also brought in executives with international gravitas such as Krishna, whom he had worked with at UTC Fire & Security. There, Krishna was responsible for the company’s operations in the U.S., China, Mexico and Europe. Earlier, he had led strategic sourcing and supply-chain organizations for Mitsubishi, ABB and Diageo.

“When I arrived at Polaris, I saw a lot of raw material and brilliance,” Krishna says. “But the company needed a leader [with an international vision], and people who can actually execute the vision.”

Next, Polaris needed to start acting like an international company. Its products were big and bulky, making them expensive and time-consuming to ship overseas. So a manufacturing plant outside of the U.S. made financial and logistical sense, but Polaris had never taken the plunge.

“Mentally, as a company, we could not make the leap that we can set up something outside of the U.S. and get the same quality product,” Krishna says.

The company began to look at manufacturing parts in Mexico for a variety of reasons: cost savings, Monterrey was in the same time zone as the company’s Minnesota headquarters, it took only a six-hour plane flight to get there, and the location could serve Polaris’ business in the southern part of the United States and its expansion in Central and South America.

(The company picked Monterrey because it was known as a safe city, about 80 miles southwest of the U.S. border. During construction of the plant, the Mexican drug cartels brought violence to Monterrey, causing Polaris to spend significant money to upgrade security for its facilities and employees.)

But many people at Polaris were not sold on the idea of a factory in Mexico.

“There was huge discomfort for most people in the organization,” Krishna said.

To create believers in the Monterrey plant, Wine flew down the executive team for a weeklong tour of Mexican factories run by U.S. businesses, including Caterpillar, John Deere and Bombardier.

“We showed them the quality standards and the complexity of the products being produced,” Krishna says. “It gave them the sense that this international push can happen.”

Back at the company headquarters, the team leading the Monterrey initiative met with small groups of employees to talk about similar case studies and recount the first-hand experiences of the global experts who Polaris had recently hired.

“We needed to make sure we had enough buy in, and eventually, those people became our advocates,” Krishna says.

The opening of the 425,000-square-foot Monterrey plant was one of the turning points for the company’s aggressive exporting plan, proving that the company could produce the same high-quality products in a foreign land. And it also showed that Polaris was serious about its commitment to the international market.

“We started putting money where our mouth was for long-term international growth three to 10 years from now” as opposed to the next few quarters, says Dougherty, a longtime Polaris executive. “Our first factory outside of the U.S. was a huge step forward for Polaris.”

In its first year, the assembly plant produced 22,000 vehicles, 19,000 engines and the company projects more than $30 million in savings by the end of 2013.

Infusing a global viewpoint into the once-insular Polaris culture meant taking other bold steps, such as flying the entire executive team of nearly two dozen on a weeklong field trip to China to tour factories, meet with the Chinese media and get a sense of the potential market for off-road vehicles among the upscale Chinese.

Wine calls the decision for the mass corporate field trip “an easy decision to make,” and the result was a corporate team committed to an aggressive expansion in China. The company has since established headquarters for its China subsidiary in Shanghai, opened 16 dealerships and was profitable in its second year there.

The field trips have worked in reverse, too. From the company’s recently established European headquarters in Switzerland, Matthew Homan decided his team members weren’t connecting well enough with their counterparts in Minnesota. So he scheduled a three-day meeting with the operations folks in Minnesota.

“We talked about what needed to be done and where there was waste,” Dougherty says. “We came away with a collective vision for both teams, and we’ve made significant progress since. Little things like that made a big difference. We are now a tight-knit team.”

Some field trips can be longer than others. Polaris has started a worker exchange program, where a key employee from the Monterrey factory and his family moved to the Polaris plant in Roseau, Minnesota, for a year and an American worker from that factory and his family headed south of the border to Monterrey. These are not token positions. The employees work in the No. 2 spot in the factories. In the U.S., the Polaris manager from Monterrey oversees 400 employees.

Krishna says the result has been that both factories have been infused with another culture and, when the employees return to their home plants, they will bring their foreign experience with them. Another benefit? The town of Roseau (population 2,633) has its first ice-skating and snowmobiling Mexican national whose wife provides the local school its first native-speaking Spanish teacher.

“This has increased sensitivity to different cultures as we spend time with one other,” Krishna says. “We have our Polaris culture, and we need to respond and react differently to local cultures.”

Polaris’ new culture needed to produce true-believer missionaries because of how it has to drum up business in new markets. The company’s vehicles—from snowmobiles to ATVs—don’t lend themselves to mass-market advertising. During its initial foray into China, Polaris spent a considerable portion of its budget on a major trade show that didn’t get much bang from the buck.

Instead, Polaris has found success in guerrilla marketing that identifies and engages those who might be drawn to off-road pursuits.

“It’s not easy, but you need to find a team that is willing to be missionary, working weekends, going to races, holding road shows,” Dougherty says. “You can’t just do it from a corporate office. It’s a grassroots kind of marketing.”

In many cases, that means developing the power-sports market literally from the ground up. In India, for instance, the Polaris team has constructed off-road racetracks in each state as a way of attracting potential customers and dealers. In China, the company has set up demonstration rides with the media, celebrities and potential off-road enthusiasts. If a new market already has some off-road events, the company’s team members will crash those and give the enthusiasts an opportunity to check out Polaris vehicles.

And the company has used social media, especially Facebook, to scour the market for potential customers—for instance, those who love their Jeeps.

“Social networks are becoming a big part of our marketing,” Dougherty says. “In countries like Brazil and India, most of the marketing effort is through the social sites. People share their riding stories, share videos. It develops a community atmosphere.”

Polaris executives also have aggressively pursued joint ventures in foreign countries to expand their product line, including investments in the global on-road small electric/hybrid vehicle industry. In 2011, Polaris bought Global Electric Motorcars (GEM) from the Chrysler Group, giving the company a line of compact, low-speed electric cars that are popular overseas. The same year, it also made a

$26 million investment to become a partner of Brammo, manufacturer of electric motorcycles.

Later in 2011, Polaris acquired Goupil Industrie SA, a privately owned, France-based manufacturer of on-road, commercial electric vehicles.

And last summer, Polaris announced a 50-50 joint venture with Eicher Motors Limited, a leading manufacturer of commercial vehicles and motorcycles in India. The joint venture will develop and market new products in India and other emerging markets. The overall investment is expected to be approximately $50 million, shared equally between the partners over a three-year period.

Eicher has a dealer network with more than 400 locations in India. In contrast, Polaris—which operated an Indian subsidiary in 2011—has about a dozen dealers.

“This agreement instantly expands and enhances Polaris’ presence in India and supplies access to additional emerging markets around the globe and leverages Polaris’ strength in product innovation and vehicle development,” Wine said when making the announcement. “Eicher’s financial strength and rich history as a leader in the Indian market makes them the perfect partner for Polaris in India. This joint venture represents an incredible opportunity to develop new vehicles and realize global growth.”

With so many global balls in the air, Wine continues to travel internationally as often as possible. It’s what missionaries do, and his globetrotting sets the example for his fellow Polaris evangelists, who may find it difficult to break away from the daily demands of office life to travel internationally.

As Mike Dougherty notes, “If he has the time to do it, why don’t I do it, too?”

And so the company employees continue to get a heavy dose of global trade religion.

“I tell them they are evangelists, and seriously, they are,” Krishna says. “They have to spread the word. They are people going on a mission to countries they have never been before” to spread the word about Polaris products.

Amen.

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