Editor’s note– James Meyer’s company, Quarq ( now a part of SRAM LLC) is a customer of Ursa Information System, and a user of OpenERP. We met Quarq about 1 year ago, and were incredibly impressed with their product, and their staff. They are a great manufacturing company, making high end parts for the Bicycle racing community. Additionally, they are located in Spearfish, South Dakota, in the beautiful Black Hills.
Jim is Quarq’s co-founder and now Technology Director. Jim has an undergraduate degree in mathematics from Rose-Hulman Institute of Technology in Indiana. After Rose-Hulman, Jim attended the Massachusetts Institute of Technology where he gained a Master of Science in Mechanical Engineering and delivered a graduate thesis on racecar data acquisition.
Jim is a triathelte, and a three-time Ironman finisher, including the Ironman® World Championship in Kailua-Kona, Hawaii in 2004. Since 2007, Jim has focused on road racing and endurance MTB. He won the Solo 30 Men’s category at Breck Epic 2012 and finished second in the Open Men’s category at La Ruta de los Conquistadores.
To say that Jim is exceptional is an understatement.
Why did you decide to start a business in the Black Hills of South Dakota?
I grew up here. My father was a dentist. He and my mother drove into Spearfish on a sunny afternoon in June 1972 and then they never left and got carried over to me.
But mainly, I like the small town peace and not waiting in traffic.
We’ve got a lot of beautiful country around here. The other resources necessary for our business are either present or easy to get.
Can you tell me a little bit about what you make?
We build a power meter for a bicycle which is an instrumented bicycle crank set that measures the force that you’re putting on the pedals as well as the speed that the pedals are turning and that’s usual for training for neither professional cyclists but also for cycling enthusiasts… a measure of the training that quantifies your performance.
Have they been around awhile?
The first ones came out about 20 years ago, but then in the last 10 and particularly 5 years, they have become much more popular. 25 years ago, they were basically kind of a sports science tool.
What gave you the idea to start with this?
I actually went to buy a power meter in 2006. At the time, I was training for a Triathlon and I looked at the options that were available and realized that there was some market opportunities that were still available. That’s when I decided that I should try to fill that and build my own.
Was there something that you saw in the existing systems that you didn’t like?
There were several systems on the market but the 2 primary ones were SRM from Germany (another crank set system, similar to ours) and Powertap from Wisconsin and the Powertap system was in the rear wheel and that was unavailable to me because I had a set of carbon tri-spoke rear wheels and the Powertap system wasn’t compatible. So that meant that I needed an SRM but the SRMs were very expensive. So that led me to think that there was a hole in the market for somebody to build a crank set system at Powertap level pricing. That’s kind of the basic, original market hole that we went out to fill.
How long did it take you to develop it?
It took 3 months to build the first—to build and test the first prototype. In 3 or 4 months, it went really quite quickly from a prototype to something real.
It’s pretty amazing what you can do with a laptop and an internet connection. You can really learn and design a lot and get things made and done. From the time we tested that first prototype until shipping was 2 years
I think that was big lesson, because it’s a much smaller project to make one thing work once in one environment. It’s a whole other project to make all of them work all the same in all sorts of environment and that kind of shows the differences that 3 months to make a prototype versus 2 years to make a product.
The 2 year development was a lot about the actual—the design of the product itself and distributing out any production process that would be able to make it work.
How did you figure out manufacturing?
A combination of everything.
We originally have some partners that helped us with things which are great for some things because they bring in resources but then you know if you have outside partners there’s always knowledge that is outside of building them and so after we’ve gone, we brought more and more in-house and tried to capture and understand and kind of drive that knowledge internally within our organization.
As we’ve grown, we’ve hiring outside people, with new skill sets.
That’s an interesting pattern you’re bringing up. There seems to be two patterns for small manufacturers- the “I’m outsourcing everything” versus the “I want to try it internally.” How did you make the decision?
We just started with all the outside people and then the supply chain and the lead times involved get pretty long. We ran into problems where somebody is having a problem at one vendor that they don’t necessarily know how to solve and the solution is actually out of a different vendor and when those things are in different places with people that don’t talk to each other and they only coordinate through us.
It’s hard to find those solutions and so just from by necessity and practicality, we’ve kind of naturally stumbled into bringing more and more things in house, mainly because then you can chop out the waste and lead time between the steps, but then you also you get the learning where you watch what you’re doing in one step and see how that affects the next step; and of course that’s once you’ve developed the process and make it more efficient.
Where there times where you needed to redesign part of all or part of your product?
Yeah, there’s been a couple of times when we had to stop and regroup, I think that one of the reasons why we’re successful was the first version that we made was pretty good and so the first units that we shipped in 2008. We made one design change, but beyond that we went all the way around until 2012 before we introduced a full new ground from the ground up product.
That was pretty good result to get 3-4 years life cycle out of that first generation design before we switched to that second generation.
That is really exceptional. That’s hard to do and it says that you got your first one pretty right when you got it out the door.
Important topic for entrepreneurs– How did you find the capital to get started?
I saw a presentation once on “How to be an Olympian?” and it had 5 things you needed to do and I don’t remember what they were—work hard blah, blah, blah, but the fifth one was “Choose your parents right.”– And this is more important than other other factors put together.
My dad was a dentist and he started the business when I was young and he did well enough on that to sell it; so then when I wanted to start this, both my parents knew what it was like to start a business from scratch and they decided to help.
So you used the “family and friends” method which is the most common way I think people start businesses.
My dad didn’t have that advantage and so he went out and sold stocks to people in town, and these friends became involved in his first business.
And that’s what we would have done had the resources from them not been available.
Had my parents had not been available, we would have gone out and found some share holders.
If you could go back in time and talk to yourself at the beginning of this adventure, what would you tell yourself ?
There are a couple of things. One, we messed around with some vendors that weren’t entirely helpful to us. The more we brought in-house, the better off we were.
I summarize this as there were times when we had low leverage with our vendors and I’d really avoid that again. If you are using outside vendors, you want to be able to ask direct questions and get direct answers. If the vendor for whatever reason can’t or won’t be forthcoming about what’s going on in the process and how things work and if they’re not a partner in getting things solved then you kinda need to move on elsewhere, either bringing in-house or finding a new vendor; because if you got a vendor helping they really need to be a partner particularly really on– in a business.
How do you use technology?
We do a lot of CAD work for design and then we do a lot of automated data collection for testing and QA/QC. I think that we’re pretty data driven and that’s something that we want to do even more of as we develop the manufacturing further.
I’d like to get to be more structured in the way we do process control and really use a lot of those formal process controls and SPC tools to drive what we’re doing but from day 1 we’ve done a lot of automated data collection through all our testing and very early on, we built a data acquisition system—a database that could show test results.
So, over time do you see more of these tools coming in or you’re looking to automate more, what’s the right balance for you?
Well, we like to have data to make data driven decision but certainly it’s not really value added to be entering data into the ERPs to spend time entering data into the ERPs system so that time that you’re just purely on data entry is kinda waste.
So we do a lot to try to make ERP provide data input automatically within the process.
There are places where we take don’t automate, such as when we get the process lean enough that things are moving through the process very quickly. We have a physical model of being able to see what’s going on in the production flow either with Kanban or a fast enough production flow.
But of course, you can’t run the entire business that way. To me, the ideal use for the technology is to free people up to add value, but all the data and the reporting is available for analysis because the data was collected intrinsically within the process.
How do you innovate? When do you get that next great idea for a product or improvement and how do you make it real?
To me, the innovation piece really comes when you got a problem, and embracing the constraints when you’re stuck.
When you “can’t do this because of that and you can’t do that because of this” and once you start to kind of have those boundaries or you start to get boxed in, the problem drives the creative moment.
Once you get all those constraints, and think about what you’re really trying to achieve, generally, there’s some sort of base assumption that you realize is wrong. To me, that’s when the innovation happens, when the constraints are present.
So, are you a fan of Elihayu Goldratt?
James: Yeah, yeah I haven’t read “The Goal” in a long time but certainly—yeah.
When I hear someone who knows about the Theory of Constraints a little bit I—that perks up my ears.
Yeah, and of course you could think of it from a purely manufacturing stand point. But even Finance, when you get boxed in financially, you have to think “Okay, what are we really trying to achieve” and that’s when it really make you focus and try to maximize the results.
How do you connect with your customers and fans and how did you go about building this community of people interested in what you do?
We participated in forums directly from the beginning and we tried to talk to the customers as directly as we could. We had a big advantage on that and that our product was to generate the following and there’s a forum on Google of a bunch of bike nerds talking about power meters there everyday.
So we interact directly there and with basic posts and not trying to be really promotional but just having a conversation here of building a power meter and this and that and as we grew we found out that we had to interact less, mainly because we get our own fan base developing and they lay down their questions for us.
One of the things that I noticed from your website, is you are celebrating the victories and the whole career of your customers on your blog. You go out of your way to acknowledge the people out there who use your product.
Yup. That’s the important piece. We’ll hop in and say a word here and there and show that we’re watching, show that we’re listening, and that we care.
What’s the best advice that you have ever gotten?
I was getting coaching and mentoring from a trusted advisor. He encouraged me to raise our prices early on. We had more demand than what we have in supply and we were trying to keep the prices low to compete with Powertap price point.
We raised the prices and that turned out to be the best thing that we ever did.
Our advisor knew you need to understand that the price somebody will pay as related to the value that they perceive from the product and it’s fully unrelated to how much it cost to build the product.
The learning in there is to really make sure that you understand the value proposition that you’re creating and what’s that worth to people.
Let’s say you’re cost is $50, and you’re selling it for $100, if you can sell it for $120, you just made a lot more money on every sale and that’s the key thing to understand.
Where will your market and product and business be in 5 years?
We’d really like to grow into other products within the bicycle industry relating to data acquisition– other sensors or recording and display units or integrating into other components of the bicycle, that’s where we’re looking. Certainly Power is the big key product but then there’s more places to go.