How I Built This with Guy Raz - Specialized Bicycle Components: Mike Sinyard

Episode Date: July 29, 2024

Mike Sinyard helped put mountain biking on the map. In the 1970’s, he founded Specialized Bicycle Components to do exactly what the name suggests: sell high-quality bike parts. He eventually decided to make his own models, becoming a pioneer in the industry by designing the first mass-produced mountain bikes. By the 1990’s, Specialized was pulling in tens of millions of dollars in revenue, and Mike brought in outside experts to help grow the business. That turned out to be a huge mistake; Mike spent the next few years recovering from bad business decisions, and recalibrating the company after near bankruptcy. Today, Specialized has regained its reputation as an industry leader, and does around $500 million in sales per year.  This episode was produced by J.C. Howard, with music by Ramtin ArabloueiEdited by Neva Grant, with research help from Katherine Sypher.You can follow HIBT on Twitter & Instagram, and email us at [e-mail] Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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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. Yeah. You know, it looks great on paper, or if you were to do 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 Raz, 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 of the founders who've been on this show.

So of 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. 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 is a lot of. 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? You know, my mom would clean people's houses, and my dad and I would paint houses or whatever

it was needed, and we would fix things. We put the plumbing in the house. Whatever needed to be done, we would do it. Yeah. We never called 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 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. Yeah, it was 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 16, and what did you do to support yourself? sell, you know, buy things at the flea market, you know, sell things like that.

But plus at that time, you know, there would be four or five of us renting a place, and so the cost was like nothing. Then 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. Yeah.

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.

Okay, so you're a student of San Jose State. And did you, what point did you start to get into cycling and to just being 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. 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'd 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 a bike together. And I love painting the bike together. 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, I mean, were there, 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 is I started getting into bikes. There was like the basic bikes that were made in America, you know, swim bikes and other things that were not very inspirational.

Yeah. And then there were bikes from Europe that were to dream about. And there weren't very many of those bikes in the USA. And I realized, wow, 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, right, you were. 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 U.S.

Yes. In fact, I had this one professor who is a marketing professor who was 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 you would, 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 know, it's 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'd 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. 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 an 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 with 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 writers in the United States. And so I made a few purchases there. And really the big breakthrough was Milan in Italy. I had 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've 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, and what else? Yeah, there was 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 U.S. and import them and then resell them how you would just go door to door to bike shops.

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 advanced 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 in San Jose, but you couldn't, I mean, were you just selling to bike shops in the Bay Area?

Well, so I sold to 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 starting. So you were, I mean, 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 at the time you would probably do cash on delivery when the bike stores got the parts. Yeah, yeah, absolutely cash on delivery. I 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 call the company specialized because you were selling specialized bike gear, right? Equipment. Right, right. Parts. Yeah. And in Italy, you know, people that were really into what they were doing, frame builders and that, there were specialistas, you know, specialist. And so I thought, I'm going to call the company specialized.

I guess, so the first kind of two years, I mean, if year one, you did 64,000 in 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, an import company. Import export, yeah. Yes, in 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? Where did you even start? Well, you know, I contacted the commercial consulate in San Francisco. I knew some of the best makers of the time. 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 I'd like to make our own tires. I mean, did you have like a formula or a certain kind of ingredient? Kind of 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 Merce. And I sent him the tires. And he goes, he's worked 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 the first of doing those tires.

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 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. And 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, right? That's where you get them done. And tell me how they were received. I think your first bike was a road bike.

Right. And that was the L.A. Yeah, that was L.A. And the Sequoia. But not too long after you released your first mountain bike, the stump jumper. Right. And I want to kind of dive into this for a moment because mountain biking really, it begins in 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 like the Lake Larkspur mountain biking gang or something. And they

would ride up and down Mount Tamilpia so people know the Bay Area. It's one of the tallest, it's a 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 a single 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. Was at that time, I mean, you know, I think the guy who's kind of widely,

believe 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. But did you, were you in sort of, at least informal sort of 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, who was a maker and one of the best makers. And Charlie Cunningham. ham and steep pots. 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 they were, so there were some mountain bikes. I mean, this was starting to emerge, right? 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 rest of. ride to side. 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 Guy Raz and you're listening to How I Built This.

Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1981. and Mike Sinyard has built one of the very first mountain bikes in 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 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 and 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 same, and the sales were not, it was slow. And people were very skeptical. Right. I'm curious, you know, you were making road bikes, right? Essentially, bikes for people in cycling gear and really like,

you know, riding fast, right? These are bikes designed for roads. They generally have smooth tires. They're, you know, you lock in. I mean, you were making those kinds of bikes and then you shift to mountain bikes, but you continue to make the road. bikes. What is it, was it risky at the time? I mean, was there a view that like, hey, you know, you either do this kind of bike or that kind of bike. Yeah. There was, there's quite a division, a cultural division between mountain bikers and road bikers. Yeah. Probably back in the day, like you had seen snowboarders and skiers. Yeah. Yeah. Right. And most, and most snowboard companies didn't make skis and vice versa. Now, of course, a lot of them, a lot of the ski companies do make

snowboards, but back then they wouldn't do that. Right. Yeah. 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 advantage is 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 mountain, you know, on trails that people were probably used to hiking on. Do you remember when you start 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. Yeah. And 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.

Yeah, maybe steel. And so what was the difference between engineering a road bike and a mountain bike if they were both steel? Did you have to, 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'd say, that's where we felt like we had an advantage because I had a frame builder, Jim Mers, 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, you know, when we made the... 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 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, we 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. You know, 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. I mean, 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 in the space, track, Cannondale, Schwinn. Actually, that first mountain bike ever had, 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 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. And it's like we always had the thinking, no matter what we make, it's 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 in the 90s. You've made it through the 70s as a kind of bicycle component part seller. And then you start in the 80s making and selling your own bikes.

And then you get it, and you know, 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 know, you said you were, you were fanatical about quality, about design. And it, and the process was very slow. The production process, the design process, because you were so focused on, on making something really, really excellent, which isn't a bad thing. But it seems like you were, 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 and how you would do it differently. And at some points, you know, 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, were your, 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. And in some ways it didn't seem that form 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, you know, bicycle brand. But I guess something at around that time, you felt like you needed more help managing the company. And 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 I'd always reach 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, you know, 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, and it's not about the skills that somebody have, 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's 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. And let's just focus on making a good enough bike, right? That's essentially what they said. What was wrong with that? I mean, it's, I mean, some elements of that make sense, a good enough bike that most people could afford. Let's get them, let's bring the price point down. Let'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.

You know, it looks great on paper. Or if you were to do 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. And when you get into those things of just offering something in the Red Sea, a commodity, you can never be low enough. And it also diluted what the brand specialized was. So that was a big mistake.

How did it affect sales? I mean, you know, 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. Sold out, right? 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 Raz, and you're listening to How I Built This. Hi, Guy. This is Lindsay Steinberg from Augusta, Georgia, and I just wanted to mention how grateful we are to you and your team for all your inspiring work.

Our favorite episode was definitely the one with Ben Chestnut, where he talked about his experience growing up in Augusta and forming male chimps. And I want to let you know what a domino effect this episode had. One of our colleagues wanted us to it. We recognized how Ben Chesnut was a part of the community. We reached out, and he came and spoke to our students at Augusta University. So the domino effect your episode had on inspiring a ton of students at Augusta University for entrepreneurship and innovation, we really are tremendously grateful.

Thank you. If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is, and why? A lot like the voice memo you just heard. And email it to us at hibt at ID.Wondry.com. And we'll share your favorites right here in the ad breaks in future episodes. And thanks so much. We love you guys.

You're the best. And now back to the show. Hey, welcome back to how I built this. I'm Guy Raz. So it's 1996 and specialized as having an identity crisis. It's put out a new line of lower-cost bikes, but its 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. Right. So at that time, I wrote an apology to retailers. To bike stores? You wrote an apology letter? What did the apology letter say? The 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'd lost about 30% of your bike store business. Yes. And your sales had declined.

So essentially, you go to these independent stores. You had had relationships for a long time and our 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, okay, 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. 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. Yes.

Who was 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 standard. 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 5 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 have, you've got a bunch of rules in there. Rule one, the writer is the boss. Number two, seek to understand. number three, Innovator 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 that, 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 were 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 $150, $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, you know, 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 cuss 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. Yeah. 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 know, you really needed to be bailed out. And I imagine you start to look around for potential buyers or acquires. And you found one in Marita 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 a, now it looks like a bargain. Right. I mean, you guys were, I mean, you had really, I mean, just a few years earlier, you might have been three or four times that amount. But I guess that gave you guys a second chance at surviving. That's right. We took that investment from Marita 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, and 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 Hayes 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 the description of you by, you know, it was an anonymous employee, but it's interesting. And I think it's, it can be seen in multiple ways. I actually read it and I, 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. Yeah.

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? And 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. 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 writing 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 hundred-year brand or beyond? Yeah. I imagined the 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, you know, the fact that you rode this early wave of mountain biking and it's success? Well, I would say a lot of it is luck. Just fortunate kind of serendipity of meeting different people in the world. And the fact that I'm not such a smart guy, I ask other people their views. And I encourage, you know, other entrepreneurs, just ask people. Ask people you admire. Ask them, what would they do? How do they look at it? I 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 Sinyard, 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 Nabali 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. please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free.

And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyraz.com. This episode was produced by J.C. Howard with music composed by Ramtin Arablui. It was edited by Neva Grant with research help from Catherine Seifer. Our engineers were Robert Rodriguez and Maggie Luthor. Our production staff also includes Casey Herman, Sam Paulson, Carrie 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.