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You start to make these lower-cost bikes.
How do they do? How does your sales do?
Not very good. It's not who we are.
It had an influence on the riders that were buying specialized and the retailers.
It was kind of a breach of trust.
It looks great on paper or if you were to do a case study, you go, oh, that looks like a really brilliant idea.
But it wasn't a brilliant idea and it wasn't who the brand was.
So it wasn't working at all.
It was an absolute failure.
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
I'm Guy Roz and on the show today, how Mike Sinyard started out in the bike business by importing parts from Europe and then built specialized into a world-class brand which helped put mountain biking on the map.
I'm sure you've heard business aphorisms that make you think, well, isn't that obvious?
You know, things like define your mission or gather your team around a shared value or always recalibrate towards your North Star.
I've heard this stuff thousands of times.
So have the founders who've been on this show, so have you.
And yet, many of us still ignore it.
Now, the reason I'm pointing this out is because some of the most fundamental and even transformational changes a business can make come out of these very obvious and simple ideas.
And today's story is a very good example of this.
It's the story of specialized bikes.
The founder, Mike Sinyard, is a pioneer in the world of cycling, especially mountain biking.
He started his business in the mid-1970s and originally the company just sold parts for bicycles.
But by the late 1970s, specialized was making bikes.
And by the mid-80s, it was becoming a major force in the booming sport of mountain biking.
Now all that growth and success would eventually push Mike to make decisions that, as you will hear, almost put specialized out of business.
And it would take a very simple but pivotal decision to help turn the company around.
And that decision, again, is about basic values, core principles, things that almost every brand and business need to reckon with.
Today, specialized is one of the leading bicycle brands in the world, but to get to where it is now involved a lot of upheaval, which, again, we'll get to.
For now, what you need to know about Mike Sinyard is that he grew up in the 1950s and 60s in San Diego.
His dad was a machinist who worked for the U.S.
Navy. And the family didn't have a lot of money, but as Mike remembers, they tried to be self-sufficient.
Yeah, looking back on it, my sister and I always felt like the hillbillies in the city, you know, and we were, my sister and I, a little bit like outcast, right?
My mom would clean people's houses and my dad and I would paint houses or whatever was needed.
And we'd fix things. We'd put the plumbing in the house.
Whatever needed to be done, we would do it.
We'd never call any. So when I was growing up, because we didn't have much money, we never went out to eat once.
And my dad would say, you know where the best restaurant is?
To my sister and I, we'd go, oh, where?
Because we thought we were going out.
He goes home. So we learned a lot.
We were almost kind of raised like Quakers, if you will, in a very simplistic way.
And at the time, I didn't think much of it.
And now I look back and really appreciate that.
Mike, when you were, I guess when you were a teenager in 16, you decided to drop out of high school.
What did your parents think of that decision?
Yeah. So when I was going to school, I did very poorly in school.
I had ADHD, but I didn't know, they didn't say it was ADHD back in the day.
Right. They didn't know what that was.
They didn't know what it was.
They didn't know what it was.
They didn't know what it was.
And I was like, oh, I'm in the 60s.
So it was just like, oh, you're stupid.
And I couldn't complete things.
I couldn't follow through with things.
And so I kind of celebrated doing poorly in school.
Instead of being ashamed of it, I just kind of celebrated it.
And then I moved out and I dropped out of school.
And my parents go, what are you doing?
This is a big mistake. So they were very unhappy, but I had also moved out at that time.
So they couldn't do anything about it.
So you moved out of the house at 16, and what did you do to support yourself?
So buy things at the flea market, sell things like that.
But plus at that time, there would be four or five of us renting a place.
And so the cost was like nothing.
Even after about a year, I decided I was going to go back to school.
So I went back to continuation school and I did finish there.
I know that eventually you went to San Jose State University.
What do you remember about that time?
This is the early 70s. And what were you interested in maybe doing with your life?
Do you remember? Yeah. Well, I did go to a college, La Mesa College.
It was a junior college.
And I had to then take remedial everything.
We called it Bonehead, Bonehead Reading, Bonehead Math, Bonehead English.
And at the same time, I got a job at the airport fueling planes and things like that.
And I thought, oh, that's pretty interesting.
And then I thought, well, maybe I'll work to be an airline pilot.
And then I went to San Jose State, applied for that program there and started in the aviation program.
And before that, I had got a pilot's license, which I thought, that was if, you know, kind of from how unaccomplished I was before that felt like, hey, I actually did something.
OK, so you were a student of San Jose State.
And did you, what point did you start to get into cycling?
And to just be a casual cyclist?
Well, I was a little bit of a rider early on.
And I always liked the two wheels thing and the balance of it.
And in fact, one of the things I could add that might be relevant to this that was really formative for me is since my dad was a machinist when I was a kid, we'd come up with these crazy ideas for things and he would make it.
We'd make it together because he was very good at that or buying old junk bikes and fixing them up.
And actually, as I was going through school, one of the ways to earn money, kind of going back to what my dad would do, I go to the flea market and buy these old bikes.
It was kind of fun picking through and finding the good ones and then taking all these parts and putting the bike together.
And I love painting the bikes and coming up with something that would look pretty good.
So that was really the spark of the interest in bicycles.
What was the pro? I mean, were there?
But did you notice an issue with the bikes that you were biking?
Was there a problem? Did you feel like they weren't very good?
What I discovered as I started getting into bikes, there was like the basic bikes that were made in America, swim bikes and other things that were not very inspirational.
And then there were bikes from Europe that were to dream about.
And there weren't for many of those bikes in the USA, and I realized, well, what a gap.
And my thinking was, hey, if these bikes were available or parts were available in this country, it would be really big.
So I guess while you were a student, you start to notice maybe there might be an opportunity to import bicycle parts from Europe because they were better quality than parts from available in the US.
Yes. In fact, I had this one professor who is a marketing professor who is amazing, inspired us all.
And he always said, every problem in the world is an opportunity to do something better.
So I thought, well, here's a problem, and this is such a great opportunity.
So from what I understand, you would basically buy bicycles, secondhand bicycles that were kind of in disrepair, you'd repair them and then sell them at a profit.
Yes. That was initially how you were making money.
Yeah, that was. And sometimes it wasn't just the bicycle, it was just like a frame here, a part there.
And sometimes I would even see like an old bike locked up in front of somebody's house for a long time, and I would go there and go, hey, do you want to sell that bike?
I've seen you haven't used it for a long time, and I would buy it and then fix it up and sell it.
But I guess you start to think about maybe bringing in parts, bike parts from Europe and selling them to people who really care about bikes.
Like you already were thinking about that before you graduated?
Yes, I was, and I was kind of already doing those kind of things.
And I graduated at the end of 72.
Yeah, and I was already thinking about that.
And I had a year out of school, and I thought, well, what am I going to do?
Yeah. You notice that thing when you're a young person, you go, oh, geez, now I'm supposed to know what I'm supposed to do.
And sometimes you realize not knowing what you want to do is really powerful because then you can kind of explore and expand.
And I was a janitor for a while at a high school.
I probably cleaned more classrooms and more toilets than almost anybody.
And it was a pretty good job.
It was kind of more money than I had ever had before.
And when they changed some of the janitorial things around, they let me go.
And I was disappointed at the time, but I thought, well, that was the best thing because I probably would have kept that for a while because I was appreciating having that kind of income.
Yeah. All right. So you, I guess, around 74, you decide to take a bike tour through Europe, to go to Europe, take a bike tour.
I mean, presumably this was kind of for fun and to see Europe and adventure.
But was there also in your mind this maybe to see if you could figure out how to make connections in roads with cycling companies in Europe?
Yes. That's right. Everything in Europe seemed deeper and in some ways more exotic.
So the idea was some friends to go over.
And I called that adventure capital instead of venture capital.
And so, you know, one of the biggest places for cycling gear was in the UK.
So then I went to the UK and contacted some of the suppliers there.
And in talking to some of the suppliers there, I realized, well, I can't just be going in here and going, yeah, hey, I'm Mike from California.
I want to buy some stuff.
So I kind of made up the thing which was true, but exaggerated that I had contact with all the best riders in the United States.
And so I made a few purchases there.
Yeah. And really the big breakthrough was Milan in Italy.
I had an appointment to visit those suppliers and I thought, I better buy some clothes so I don't look like a bum.
So I bought some clothes in Milan and then went to visit some of these suppliers.
And they were interested to sell to me because of my passion.
And as soon as I bought the product, I thought, ooh, I don't have any money.
Now I got to go home and sell this.
So all right. So you managed to make inroads with some of these bicycle parts manufacturers in Europe.
The idea being you would import what, like handlebars and what else?
Yeah. Handlebars and stems, gears and pumps, all the really good things that were hard to get.
Got it. Okay. So you would come back to the US and import them and then resell them how you would just go door to door to bike shops and… Yes, that's right.
I knew some of the best stores and they go, wow, where did you get this?
And I go, well, I've got connections.
And so then I sold those products.
I sold the $1,500 worth of product for probably $2,000 or $1,800.
But that wasn't much, right?
And so to get more, then I told the bike shops, I said, look, if you pay in advance for the product, I'll give you even a better price.
And so I got advance money, bought those products.
And with the profit I made, I bought more product and sold those at a higher price.
And that was the start. I think the first year the sales were $64,000.
Wow. That's amazing. How did you find the bike shops?
Because presumably you were back, I think you were back in San Jose, but you couldn't… I mean, were you just selling two bike shops in the Bay Area?
Well, so I sold the bike shops in the Bay Area.
And then at that time, of course, there was no internet.
So I went to the library and looked at the yellow pages for bike stores in New York and places like that.
And I would send each of them a letter and say, hey, I've got these parts.
And so that's how I got it started, because the suppliers weren't about to give me credit.
The first credit I had was from the Bank of America.
I came upon this European banker.
He goes, I'll tell you what, we'll give you a loan against your… I lived in that little mobile home, date by 30 trailer with two roommates.
He says, we'll give you a loan against the trailer.
And you give me the pink slip to the trailer.
And he made me do all of these incredible cash flow projections, which actually I realized I was pretty good at.
And I paid the money back.
So that was kind of the starting.
So you were… I mean, see, initially, I'm assuming you were financing… You financed this by buying the parts with cash and then selling them but getting paid immediately, right?
I think you… At the time, you would probably do cash on delivery when the bike stores got the parts.
Yeah. Yeah, absolutely cash on delivery.
And remember, people would say, oh, you don't need to worry about us.
We're a well-established company and we'll pay you.
And I said, that's great.
Then pay me now because I don't have the ability to finance it.
And by the way, you called the company Specialized because you were selling specialized bike gear, right?
Equipment. Right. Right.
Parts. Yeah. And in Italy, people that were really into what they were doing, frame builders and that, they were specialists, you know, specialists.
Yeah. And so I thought, I'm going to call the company Specialized.
I guess, so the first kind of two years, I mean, if you're one, you did 64,000 sales.
You're to $128,000 in sales.
That's right. Which is amazing.
I mean, so there was really interest in what you were doing.
And by year three, you started to make your own product.
You actually made a tire for bicycles.
Before I ask you how you did that, why did you land on that as a product that you would make?
Because you were essentially an import company.
Yeah. Import export, yeah.
Yes. And the third year, I made the Specialized tire.
And at the time, I was importing some tires from a company in Italy and they would get bubbles in them.
And I remember reporting it to the factory and they go, oh, that must be you because nobody else has this problem.
And I thought, well, that's not right.
And I thought, there's no choice but to make our own.
We can make a regular clincher tire with a separate tube in a way which could be really high performance and available to people.
How did you make your own?
Like, where did you even start?
Well, you know, I contacted the commercial consulate in San Francisco.
I knew some of the best makers of tires were in Japan.
And so I contacted the Japanese commercial consulate in San Francisco.
And those consulates are there to promote the business in that country.
And so through the contacting the consulates, I got the list of those tire companies there.
And I just sent them a letter saying I wanted to make the best tires in the world and admired what they were doing and like to make our own tires.
You I mean, did you have like a formula or a certain kind of ingredient?
Could it have a rubber? Well, you know what?
I didn't really know. We had landed on this one configuration of rubber compound that was good.
And at that time, I knew this one guy in Portland who was a big, big cyclist and he was riding from Portland all the way down to Panama.
And his name was Jim Merse.
And I sent him the tires and he goes, these work pretty good.
He goes, well, I'm going to be going on this trip.
And if you send me the tires, I'll ride them and I'll give you a test report.
And so that was that was the first of doing those tires.
And many years later, I hired him as the first engineer.
And that's how we developed the first tire.
So at what point, Mike, because I because, you know, you start this business in 74 by 79, you are going to begin building your first bike that you are going to make and you are going to brand as a specialized bike.
What from the beginning, did you anticipate doing this?
Or was there a moment in those early years where you realized, hey, we should be making bikes?
Yeah. Initially, I thought that we would stay to things like the tires and components, which were simpler to do, which we could really make a difference in the capital required was less.
And then later, I realized there was a lot of need for making bikes in a different way.
And at that time, touring bikes were very, very big.
And there was custom bikes being made that were appropriate for this, but there was no production bike.
So I knew at that time that, hey, why don't we make a bike on a more production basis that has all the nuances of a custom bike?
So that was the first bike we made.
So you basically start to produce bikes and you're getting them manufactured in Japan initially.
Yes. That's where you get them done.
And tell me how they were received.
I think your first bike was a road bike.
Right. Racing bike, the LA.
Yeah. That was the LA and the Sequoia.
But not too long after you released your first mountain bike, the Stumpjumper.
Right. And I want to kind of dive into this for a moment because mountain biking, really, it begins in the sort of the 60s and 70s as kind of this informal activity that teenagers in Marin County, California are doing.
There's a group called the Lake Larks for Mountain Biking Gang or something.
And they would ride up and down Mount Tamal Pius.
So people know the Bay Area.
It's one of the tallest, it's the tallest mountain in Marin County.
And that's really where mountain biking begins.
But it wasn't until I guess the mid-70s that a mountain bike was actually manufactured and put on the market for sale.
Like before that time, people just took bikes and modified them and they did this thing called mountain biking.
That's right. Yeah. In the early days, people would take an old beach cruiser bike, modify it a little bit and that was a mountain bike.
The real innovation was needed because the use and abuse of those bikes, those bikes weren't standing up to the needs of the riders.
Yeah. At that time, I think the guy who's kind of widely believed to be the first one to market or sell mountain bikes is Gary Fisher.
I don't know if that's true.
You may have a different view on that.
Were you in at least informal communication with people like Gary Fisher and some of these other mountain bike producers, makers?
Yeah. There was a few producers.
The main one was Tom Ritchie, who was a maker and one of the best makers, and Charlie Cunningham and Steve Potts.
So there were a few makers around.
And at that time, because I imported the different parts, the frame tubing and brakes and that, so I supplied all of them a number of parts.
But there were some mountain bikes.
This was starting to emerge.
There was a community of people starting to make these bikes by the mid-80s.
Yeah. There was a few people that were making them for friends and things like that, but it hadn't evolved yet.
But when the first bikes came out, the first ones that we made, most of the stores said, well, Mike, what are you doing with the big kids BMX bikes?
We don't want that at all.
We are only interested in selling serious adult bikes.
I said, this is a serious adult bike.
And I said, you know, just shut up for a second and let the ride decide.
And you'll see this isn't just a new bike.
This is an all-new sport.
When we come back in just a moment, Mike is proven right.
Mountain biking really does take off.
But later, he makes one of the worst decisions of his career.
When experts give him some advice and he takes it.
Stay with us. I'm Mike DeRoz and you're listening to How I Built This.
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Hey welcome back to How I Built This.
I'm Guy Razz. So it's 1981 and Mike Ciniard has built one of the very first mountain bikes on the market.
And he starts to shop it around the Bay Area.
I could see it right away when I go riding, you'd see a young kid and go, the young kid would go, oh that is rad.
That's like my BMX bike, I could relate to that.
And then you'd see an old person go, hey, you know, I used to ride bikes like that when I was a kid on the dirt road.
So I could see immediately the appeal, the emotional, cultural appeal of this bike was so broad, it really hit a chord.
So when you first put these into stores in 1981, did it take off or were customers looking at these skeptically?
Did they sell right away?
It did not. I mean, a few stores that were into it was, I mean, we sold 500 the first year, but it wasn't easy.
It wasn't easy and the sales were not, it was slow and people were very skeptical.
Right. I'm curious, you were making road bikes, essentially bikes for people in cycling gear and really like, riding fast.
These are bikes designed for roads.
They generally have smooth tires, you lock in.
You were making those kinds of bikes and then you shift to mountain bikes, but you continue to make the road bikes.
Was it risky at the time?
Was there a view that like, hey, you either do this kind of bike or that kind of bike?
There was quite a division, a cultural division between mountain bikers and road bikers.
Probably back in the day, like you had seen snowboarders and skiers.
Most snowboard companies didn't make skis and vice versa.
Now of course, a lot of the ski companies do make snowboard, but back then they wouldn't do that.
Right. So it was culturally quite different.
And in fact, you think about the road bikes, kind of the rules of Rome for racing bikes.
And at the same time, you think about the mountain bike was much more of a free spirit.
And what I saw is our advantages.
We used a lot of the ideas from the racing bikes, which are really strong and light to make the bike really strong, light and durable.
I mean, I guess in 1981, when you started, you made about 500 of these stump jumper mountain bikes and they were really designed to be ridden on trails that people probably used to hiking on.
Do you remember when you started to see traction with these bikes?
Well, I would say the first year was slow and then the second year, I remember being at the bike show and there seemed to be more interest in that.
And then things started to develop.
And who was buying mountain bikes?
You know, and I would say the people that were buying the bikes were probably people between 16 to 50.
Even some older, but mainly in that area and probably in the beginning, much more men than women.
And at the time, I mean, in the 80s, right, bikes were still generally made out of steel.
Maybe some of them started to be made out of aluminum.
And so what was the difference between engineering a road bike and a mountain bike if they were both steel?
Did you have to, I mean, was there a risk that a steel frame could crack on a mountain bike?
Yes. In fact, a lot of the early mountain bikes were breaking a lot and not bragging, but I would say that's where we felt like we had an advantage because I had a frame builder, Jim Merz, who had personally built thousands of bikes over the years.
And he was a great machinist and a very practical person.
He always would err on the side of safety.
And so when we made the bikes, any bike that had a problem came back to us and we saw where it cracked and we would fix that.
So it was just like continuous improvement all the time.
I guess by the late 1980s, this was a booming market for you.
Was there ever a point where you thought, well, let's just focus on mountain bikes because we're in California and as goes California, it goes the rest of the country and the rest of the world and that would happen with mountain biking.
Did you ever think this is where you should just put all of our eggs in this basket and focus on mountain bikes and not road bikes?
Yes. And what I liked about the mountain bikes is the mountain bikers were open.
If we have a new idea and it would work, they're open to it.
Whereas the road bike was not open.
So we didn't get out of road bikes, but we shifted the energy more towards mountain bike components.
And that would persist for many, many years.
Now, of course, you still make road bikes and you make electric bikes and we'll get there and all kinds.
But I guess by the early 90s, there's a lot of competitors start to get into space, track Cannondale, Schwinn.
Actually the first mountain bike I ever had in 1991 was a Schwinn.
We didn't have the money to buy a specialized at the time.
So sorry about that. That's what my parents could afford.
But that started to cut into your sales at the time, right?
That actually started to hurt you guys a bit.
Yeah. Well, a lot of people came in and then at that point I thought, you know what?
We don't have the money to compete with all these volume guys.
Let's just move up and make better and better bikes.
So go more premium. Yeah.
Go more premium. Like we always had the thinking no matter what we make is going to stand up to the use and abuse of the rider.
So in other words, if somebody buys it, they're not going to buy it and be disappointed later.
They're going to be continually amazed at how well it holds up.
That was always the thinking.
This is now, we're hitting the 90s.
You made it through the 70s as a kind of bicycle component part seller and then you started in the 80s making and selling your own bikes and then you get it and you're growing and you get into the 90s.
And from what I understand, this is really, this is when your education as a leader begins.
Like I think up until that point you were, because you described yourself as a bottleneck.
Somebody who, you said you were fanatical about quality, about design and the process was very slow, the production process, the design process, because you were so focused on making something really, really excellent, which isn't a bad thing.
But it seems like when you look back on it, you would have done it differently today.
Yeah. It's always good to think about what you know and how you would do it differently.
And at some points, we kind of grew more than I thought we would ever grow and I thought, that's fine.
We don't need to grow anymore to do a good job.
What were you do, were you profitable by the early 1990s?
Yeah, we were. In fact, we always had to be profitable.
Starting off with no money, I thought everything I do has to increase cash flow.
I'm not going to do one thing which decreases cash flow and operating very cheaply, even when I operated the business out of that little trailer park trailer, I would ride my bike with a little trailer over to the Safeway dumpster and get all the boxes.
So I wouldn't even buy boxes.
Just everything really minimalist.
In some ways, it didn't seem that foreign because that's the way I grew up with my parents.
Yeah. And do you remember in the early 90s, what your annual revenue was roughly?
I think in the 90s, it was probably 60 million or something.
Wow. So you were really, really...
Yeah, it was a lot. It was a lot.
Yeah, okay. So you hit the mid-90s and you are an established bicycle brand, but I guess something around that time, you felt like you needed more help managing the company.
You started to look for executives, professionals who had a management experience in other industries.
Tell me first of all, why you felt that way.
What was happening that you felt that you weren't capable of really running the company in the right way?
Yeah. As the company grew, I realized everything I was doing, I was doing it for the first time.
So it always reached out to other people to see what I could learn, and I knew that I didn't know very much how to do different things.
And so I thought, wow, I feel like I'm really holding the company back.
And if I hire somebody who's really kind of a finance operations person and then somebody who really is a marketing person, the company can really develop.
So then I brought in some really key people.
One came from a leasing company, was a finance expert.
Another person came from marketing, worked at a ski company before and then worked at Citibank and I thought, oh, they could really help level us up.
But it didn't work out. That was probably my first lesson.
It's not about the skills that somebody has, but it's about the culture and the belief they have.
From what I understand, these executives, they had extensive experience in consumer products and they had a playbook, which was, it was like, hey, it doesn't matter if it's bicycles or razors or whatever you're selling, it's the same playbook.
We're going to help you scale this thing.
You're focused on, the brand is called Specialized, you're focused on a very small narrow market.
We can turn this into a billion dollar company by going big, by really mass producing and focusing less on the long innovation process, the long development process that you have here.
Let's just focus on making a good enough bike.
That's essentially what they said.
What was wrong with that?
There's some elements that make sense, a good enough bike that most people could afford.
Let's get them, let's bring the price point down.
It's sell them in places like Costco, which is what you did.
What was the problem with that?
The problem with that is it's not who we are.
It looks great on paper or if you were to do a case study, you go, oh, that looks like a really brilliant idea, but it wasn't a brilliant idea and it wasn't who the brand was.
When you get into those things of just offering something in the Red Sea, a commodity, you can never be low enough.
It also diluted what the brand specialized was.
That was a big mistake. How did it affect sales?
You did get into Costco.
You start to make these lower cost bikes.
I think they're called Full Force.
Yeah, that was the name.
How did they do? How did your sales do?
Not very good and it had an influence on the riders that were buying specialized and the retailers.
It was kind of a breach of trust with customers.
They felt like you had sold out.
Everything just kind of diluted down the brand and also the culture of the company.
It was a failure. It was an absolute failure.
When we come back in just a moment, how Mike brings the company back from nearly going bankrupt.
Stay with us. I'm Guy Razz and you're listening to How I Built This.
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Hey welcome back to How I Built This.
I'm Guy Riz. So it's 1996 and specialized as having an identity crisis.
This put out a new line of lower cost bikes, but it's loyal customers.
They feel betrayed. And the executives who advised Mike to put out that line, well, they start to backpedal.
As things got more difficult, those executives that came in were like, oh, this isn't working.
We're going to move on to something else.
So at that time, I wrote an apology to retailers.
To bike stores? You wrote an apology letter?
What did the apology letter say?
Apology letter said, look, we created this brand of the full force.
We lost focus. We weren't taking care of you and your riders in the right way.
And we're closing this and I appreciate you to consider forgiving us for this and we'll make it up.
I think by the end of 1996, you had lost about 30% of your bike store business.
And your sales had declined.
So essentially, you go to these independent stores.
You had had relationships for a long time and a great reputation, right?
Specialized was a great brand.
And you said, we're really sorry.
We made a mistake. And did most bike shops say, OK, accept the apology.
We're going to work with you?
Yes, they did. I mean, in different levels for different ones, but overall, yes.
I think people knew that we were sincere about it and we had got out of it.
And we said, well, let us earn back the position with you.
We don't expect you to give it to us.
Let us earn it. And over time, we did.
How many years did it take for you to regain the trust of your traditional customers and the retail shops?
Probably over three years, just kind of steady.
Of course, some people never forgive you.
Right. Right. I guess by the late 90s, your sales started to stall again.
They started to slow down.
And I guess around that time, you decide to seek advice from a guy named Peter Moore, who had worked at Nike.
Who is Peter Moore? How did you even know about him?
Why was he somebody you wanted to meet?
So Peter Moore, he was the original creative director of Nike, created the Air Jordan brand and really created the brand and the brand standards.
And then he went on to Adidas and was the CEO of Adidas.
And I read this article that he'd ride his bike to work every morning at five o'clock in the morning.
And I read this and I was so inspired.
I sent him a letter and I sent him a helmet and I said, wow, it's impressive what you do.
And I said, I'd like to visit you sometimes.
And he goes, come on up with a few people.
We went up and talked to him.
And I said, Peter, how did you take Adidas that was kind of just lost its soul, at least in this country, and bring it back to a clarity?
And Peter goes, I created this brand book and I got key people involved and here's what it is.
And we were so inspired by it.
And at that time, we were really in trouble.
And we said, Peter, we're going to work on this.
Could we use the framework?
Could we copy what you did?
He goes, sure. If you want some help, I'll give you help.
And so we dug in and did it.
And we created the first brand book, gosh, like 25 years ago.
It was so powerful. It was basically, what do we believe, really believe, not about how much we're going to sell or how much we're going to make.
What do we as people believe about what we're bringing to the world?
What is our conviction?
If we do the right things, the profit will follow.
So Peter suggests you write, you put together a brand Bible for the company.
This is in 2000. This is 25 years after you start the company to actually put down.
And I'm going to read some excerpts from it.
But basically, you've got a bunch of rules in there.
Rule one, the writer is the boss.
Number two, seek to understand.
Number three, innovate or die.
Number four, adapt immediately.
Number five, simplify and go.
And it goes on like that.
And this was a booklet that was designed to be given to every employee so they really understood what specialized was about and how they represented that.
That was the idea. Yeah.
It was to give to every person.
And when we would look at decisions, we would say, when we're doing something, hey, the writer's the boss.
Is this going to satisfy the writer?
And when you handed that to people who had worked at the company for 10 years or more, were they puzzled?
Were they like, what is this?
Yeah, a lot of people are like, well, what is this thing?
And we go, look, this isn't something new.
This is what we've always done when we're at our best.
This is what we strive for.
And we're going to hold ourselves to this.
And that's something that we use even today.
Yeah. In 2001, you guys were in a bit of a financial whole challenge, right?
I mean, to the point where it's not quite clear to me how you got to this point, but from what I understand, you guys were close to bankruptcy.
What was going on? Well, we had a negative net worth.
How did that happen? How did you go from $50 million, $100 million in sales just a few years earlier to being almost out of business?
Bad decisions, again, trying to grow and trying to offer the bike shops lower price product, but then also selling it to them at a very low margin.
Good intention, but really put us in a very tight situation.
And then we ended up having a lot of inventory.
And we had got into such a trouble.
We were in the workout group of the bank.
That's when the bank transferred me to kind of the bankruptcy group and they make you report the information every day.
And at that time, I was able to get this guy, Mike Haynes came in, and he was a really calm, smart guy.
And when the bank was pushing on us like that, Mike, who was a saint of a person, would never accost or anything, but he told the bank, look, if you're going to be after us like that, come here and get the fucking keys.
And at that point, they backed off.
And I would say we worked to get in good shape.
I guess in 2001, you were in a, you really needed to be bailed out.
And I imagine you start to look around for potential buyers or acquires.
When you found one in Merida bikes, a Taiwanese manufacturer, and they had already been making your bikes, their factories, they bought almost half of the company for $30 million, which, wow, that's about, now it looks like a bargain, right?
I mean, you guys were, I mean, you had really, I mean, just a few years earlier, it might have been three or four times that amount.
But I guess that was, that gave you guys a second chance at surviving.
That's right. We took that investment from Merida at that time, and they were a good trusted partner as far as a manufacturer, and they made that investment in us.
And since that time, we bought down that investment.
And so now they're a minority, more like a third.
And they've been very good, very trusting of us, and we've delivered on that trust.
Them as a minority investor.
But yeah, that was a pivotal moment.
And so that investment in 2001, I mean, you were still, you know, now you've got this cash on hand, but now the company really begins to turn around and shift in a positive direction.
Just a few years after that infusion of cash, that 30 million, you guys, your revenues hit half a billion dollars.
So it was clearly like there was a combination of things.
It was kind of a realignment of values, the brand Bible, and then getting, of course, getting bailed out, and then returning to focus on quality and on design.
That's right. And I kind of liken it like the company to growing up, kind of like going through adolescence, if you will.
And there was always the discipline principles there, but we got off course.
And so I would say it was like, Mike Haines brought this real practical thing to us of like serving the customers, getting them the inventory on time, making things easy to work.
And it was really back to basics.
One of the things, Mike, that is interesting to me is that, you know, reading about you, you are just consistently described as being relentlessly committed to quality and innovation and the best possible products, but also obsessive to the point where, you know, I'm going to read a description of you by, you know, it was an anonymous employee, but it's interesting.
And I think it can be seen in multiple ways.
I actually read it and I kind of admire you after reading this.
It says, you know, Mike isn't quite human.
When he would go out for a drink after work, we'd refer to him as a combination of Steve Jobs, Howard Hughes, and the devil, you know, that he was just so driven to work.
And I understand that it was your company and your business.
Do you hear that description and feel like that's harsh or are you proud of that?
I guess I would say it's real and I would say, yeah, determination.
I definitely had that from my parents.
And also being a kid with the ADHD and never doing well at something.
I always had to work harder.
So when I could see the success, I just really wanted us to achieve it, right?
And I would say that's probably accurate.
By the way, I mean, there's tons of examples of this like Steve Jobs or Reed Hastings and Netflix, like they're notorious for absolutely demanding the best work from their people and not, you know, and getting rid of people that weren't prepared to be hardcore.
Yeah. You know, within the bike business is a complex business.
You know, people think bicycles are simple, but they're actually very complex.
And having people that are really obsessed about what we're doing and passionate about what we're doing, that's why we have been able to be successful over all these years.
Because if you look back, how many companies have went out of business, right?
We did almost a few times as well.
Yeah. And I would just say, you know, one of the things that I have seen over the years is how much the bicycle brings to people, whether for me or my son or other people with ADHD and how it really calms your mind.
And I never knew about that until later.
But I'd say then it makes you more driven than ever to get more people on bikes.
Yeah. The, there's been a slight, maybe not slight, but not an insignificant slowdown in the cycling business.
And we know this from other conversations we've had with founders of, you know, bike brands.
Do you think that is just a cyclical trend or because it's not insignificant?
Yeah. Well, no, we do see a slowdown, you know, going through the pandemic, the bike boomed like crazy.
Yeah. And I liken it to whenever the world gets stressed, people return to the simpler things in life.
And the bicycle is definitely one of that.
Yeah. And I would say it went so much that it had to adjust down.
I think it's a natural adjustment and at the same time, the long-term outlook for riding is more positive than ever.
You stepped down as the CEO of the company just in 2022.
I mean, you really, and you spent all of the 2000s as the CEO, really, I guess, coming to the realization that you needed to run the company, that when you outsourced it to other executives, decisions were made that didn't align with the values that you had for the business.
Tell me about, you know, where you sort of imagine this brand going.
I mean, do you see this as a 100-year brand or beyond?
Yeah. I imagined that specialized going on forever.
I often thought, like when I started working on bikes, I thought, I don't care how much or how little money I make, I want to do this because I believe in this.
So I would say more and more, I see the activity of cycling, the whole mobility, the EV of the future is the two-wheel bike, not the 8,000-pound vehicle.
I see that that's the future.
Mike, when you think about the journey you took and where you started and where you ended, how much of that do you attribute to the work you put in and how much do you think had to do with just timing and luck and the fact that you rode this early wave of mountain biking and its success?
Well, I would say a lot of it is luck.
Just fortunate, kind of serendipity of meeting different people in the world.
The fact that I'm not such a smart guy, I ask other people their views and I encourage other entrepreneurs just to ask people.
Ask people you admire. Ask them what would they do?
How do they look at it? Often say that life and business is an open book test.
But I'd say I've been very lucky.
A lot of the things I've done is because I personally am interested in that.
I learned like if you're doing things just for money, it doesn't work.
If you're doing things because you believe, you can do anything.
That's Mike Cignard, founder of Specialized Bicycle Components.
By the way, specialized bikes have shown up from time to time at the Tour de France.
And in 2014, Italian cyclist Vincenzo Nibali won the race riding a specialized road bike, the Tarmac.
His model had a custom paint job.
It was black and painted near the head tube, the open jaws of a shark.
Hey thanks so much for listening to the show this week.
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This episode was produced by J.C.
Howard with music composed by Ramteen Ereblewe.
It was edited by Neva Grant with research help from Catherine Seifer.
Our engineers were Robert Rodriguez and Maggie Luthar.
Our production staff also includes Casey Herman, Sam Paulson, Kerry Thompson, Alex Chung, John Isabella, Chris Messini, Carla Estevez, and Elaine Coates.
I'm Guy Raz, and you've been listening to How I Built This.
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