Research Proposal: Loops Are Cycles of Communication Within Companies

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¶ … Loops are cycles of communication within companies that bring information to management from which decisions are made. There are two main types of feedback loops - reinforcing and balancing. Reinforcing loops serve the function of encouraging the continuance of organizational behaviors. An action produces a result which promotes more of the same action in a reinforcing loop. A balancing loop is one in which two actions are brought into agreement (Bellinger, 2004). The actions come together to solve a problem, restoring organizational equilibrium.

At Harley-Davidson, feedback loops are most common in the physical architecture of their bikes. However, they do make use of some loops in their management systems as well. One such loop is the use of the Internet to receive direct feedback on customer satisfaction. Harley-Davidson cultivates its fan base and customers on the web, using sites such as MySpace and Facebook. They also monitor talk in Harley-Davidson forums. This provides the company with direct, honest and sometimes brutal feedback on their product and service offerings (Hayes & Malone, 2008).

This loop is critical to Harley-Davidson for a couple of reasons. The first is that it deals with Harley's greatest strength, its brand. Another reason this loop is important is that it demonstrates Harley-Davidson's commitment to keeping their marketing within the modern sphere. The company has a rich history and traditionally a slow pace of change. However, the enthusiastic adoption of this loop illustrates that Harley is prepared to compete on all relevant fronts.

This feedback is an example of a balancing loop. The loop is an emerging structure in that it is comprised of some systems that are under control of Harley-Davidson and other components that are out of the company's dominion. Harley-Davidson uses this loop to aggregate information about their products. It is not as scientific as direct customer satisfactions surveys but the relative anonymity of the Internet results in feedback that is more honest. Communities that have formed around the brand are known as "clouds" (Ibid.) Harley-Davidson, by virtue of the iconic status of its brand, has had some form of cloud in offline format for decades. The use of the Internet is a natural extension of that feedback loop. Harley-Davidson has long been able to tap their fan base for such direct feedback, but the Internet delivers that feedback in much greater quantity and, arguably, quality.

Harley-Davidson responds to the feedback gathered to help balance them on several key issues. One is with regards to product. Harley is not driven by major technological innovations, but they do make constant tweaks to their engine and design technologies. Such a balancing loop is powerful. Even a slow-moving company such as Harley-Davidson is able to move more quickly. If we consider the struggles Harley had during the 70s and 80s, we recall that the dealer network was one of the major issues because the level of consistency and customer service did not support the organization's customer base. As the customer base moved towards individuals driven more by image than by bike savvy, the dealers were unable to meet their needs. If Harley-Davidson had Internet clouds as a feedback loop during that era, they could have identified this area of weakness more quickly than they did. Today, we can see that despite a downturn in the company's fortunes in the past couple of years, their financial performance is still strong. That they have maintained strong performance in the face of sales declines and a slumping market indicates that faster responses to product and service issues can help avoid steep and prolonged performance declines.

In addition to balancing, this type of feedback loop also plays a reinforcing role. The clouds are by definition communities. While this type of community is not new to Harley-Davidson, the ability of Harley to transfer the sense of community traditional to its customers to the online setting has allowed them to maintain relevance in the Internet age. The communities are often self-governing, and therefore reinforce codes of behavior and images with which the brand is associated. Given that the strength of the Harley-Davidson brand is one of the company's most significant drivers of new and repeat business, such communities play a strong reinforcing role. In addition to helping both build and maintain customer loyalty, they also help to drive sales of licensed merchandise, one of Harley's most important revenue streams. Merchandise sales can help to insulate the company against the impacts of economic downturn. Customers who cannot afford new bikes can at least afford to continue with merchandise, providing a valuable form of revenue diversification for Harley-Davidson.

Another feedback loop used by Harley-Davidson is that of the traveling museum and demo (Funcheon, 2008). The genesis of this feedback loop was the realization during the crisis of the early 1980s that the traditional marketing that had focused on quality was not effective. Potential customers did not need to be convinced of Harley-Davidson's quality; instead sales were generated because of other factors. Lifestyle and image were two of the main factors. Therefore, Harley-Davidson adjusted their marketing tactics to reflect this. One outcome was the use of traveling demos, which evolved into the traveling museum and demo used today. Harley promotes its history and culture to motorcycle enthusiasts, and allows them to test new editions of Harley-Davidson and Buell products.

This is a reinforcing loop. Through this program, Harley-Davidson is able to interact directly with their customer base. This action yields the outcome of stronger customer perception of Harley's brand image. This in turn strengthens the brand, allowing for more interest in the travelling museum and demos. The customers feel good about the way the company solicits their input and then help spread and strengthen the brand through word of mouth. Every action in this feedback loop works towards the same common goal of building the Harley-Davidson brand. While Harley-Davidson does receive some feedback regarding their products from this road show, the primary function is to promote the brand and build customer loyalty.

This loop is critical because when it was created it helped to spearhead the company's renaissance. The relevance of this loop has been maintained as the loop has evolved over the past couple of decades. Furthermore, brand is central to Harley's success and this loop has become one of its most important reinforcing feedback loops.

These two loops demonstrate a high degree of organizational learning. During the crisis of the early 1980s, Harley-Davidson realized the degree to which its brand was key to its success. Since then, they have not only created strong feedback loops to that serve to strengthen that brand, but they have learned to keep up-to-date with their customer base. Just as overhauling their dealer network to provide better service to their middle-aged, non-biker customers they have been able to successful move into the Internet marketing sphere, creating a highly-successful feedback loop in the process. The organizational learning suggested by these loops is indicative of a company that has developed considerable marketing savvy.

There are further opportunities for learning, however. One is that Harley-Davidson can work to apply these types of loops to their customers and potential customers overseas. These loops are examples of why Harley-Davidson has been so successful in North America, but the touring museum/demos especially have not been applied in overseas markets. If they were, that would provide an opportunity to learn more about the specific differences between the North American and European markets. This knowledge can then be used to close the gap in market share between the two regions.

Another learning opportunity for Harley-Davidson that flows from these feedback loops is to attempt to apply these loops to other motorcycle riders. One of the most significant limiters to growth for Harley-Davidson is their inability to apply their successes outside of the superheavyweight segment of… [END OF PREVIEW]

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