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18 | Boating Industry | October 2015 www.BoatingIndustry.com [ 2015 Movers & Shakers ] from fixed costs during that time. "One of the first things we did, we made a decision that we wanted to be more profitable when the industry was closer to 200,000 units than when it was over 300,000 units," McCoy said, a goal the company has reached even before the industry hit 200,000 units. The toughest cuts were the workforce reductions. "It was the thing that we said as we started, if you don't lay awake at night as one of our leaders worrying about this … but if you can't pull the trigger, you can't be here," he said. "In other words, we're going to have to do it, but we have to be humane about it and focus on the employees whose lives we're going to impact and do everything we can to help them through the transition." Beyond survival But there's a big difference between surviving and thriving. To be successful as the industry recovered, McCoy and the rest of the Brunswick management team knew that product research and development was essential. No amount of lean, efficient op- erations could make up for poor products. That means funding it – something Bruns- wick does, with a goal of spending 3 percent of sales every year on research and development. The company also spends 4 percent of sales on capital, 70 percent of which is capital expendi- tures focused on growth, such as new tooling. It also takes talent to be a good pro duct company. "We've worked hard to recruit the very best talent from around the world in all of our businesses," McCoy said. "As I sit here today, our boat, engine and fitness business have never had the talent to keep bringing new product to the market that we do today." Finally, through research and its dealer network, Brunswick needs to understand what consumers are looking for in new boats and engines. "If we really know what consumers want and we design product [for that] rather than what some executive wants, product starts to be a lot more simple and more refined," McCoy said. An example of that is the Sea Ray 350 SLX, one of the company's most successful recent launches. The 350 SLX holds 18 people underway, with plenty of luxury features. The demand has been far greater than Sea Ray expected as consumers move away from cruisers to day boats. "If you compare the price of that in the market to a typical 35-foot cruiser, it's tens of thousands of dollars cheaper," McCoy said. "We began to discover that a lot of people want a boat that size but they don't plan to spend the night on it. What they really want is a boat to entertain family and friends, but only for the day." McCoy is also cognizant of the impact rising prices are having on the industry, pushing boat ownership out of reach for many people. With that in mind, McCoy set a goal that all new boats and engines the company brings to market should have a cost equal to or less than the product it replaces. "That won't change anything in a year, but in five or 10 years that will have a significant impact on the market," he said. "It used to be we could count on growth by raising price. Today, we focus more on better margin, taking share, more distribution, rather than just increasing price every year." During the first half of the 2000s, that was an easy way to keep profits flowing in the short term, but bad for the long-term health of the industry. "I ran our boat business before I got this job and I was as guilty as any- body in the industry," McCoy said. "I could make the numbers look good by just raising price every year. Ultimately, for all of us who did that, it did great harm to our industry and our businesses." One key design change has been a focus on platforming – designing and engineering products to have common parts, lowering costs and bringing products to market more quickly. "Every single engine, fitness equipment or boat that we bring out doesn't need to be designed and engineered as a completely new piece of product," he said. "It needs to be designed and engineered as part of a product line." One of the biggest product chances Brunswick has taken is to turn away from marinizing General Motors engine blocks to creating the first purpose- built sterndrive engine. "It was a big decision, a substantial investment," McCoy said. "Think of a $25 million, $26 million investment at a time when we knew that, for today, consumer preference is focused on outboard." The Brunswick team felt that, in order to protect its future, it was the best choice for Mercury and the industry. As GM was mak- ing changes to its engines to meet increasingly tougher CAFE standards, the company's en- gines would continue to get lighter and more complex. Those new engines were also coming out on a much faster schedule, making it dif- ficult for Mercury to plan for the future. "These engines needed to be more complex than the prior engines and we felt in the marine environment we would be introducing a complexity and more ability for the engines to fail or have problems for our consumers," McCoy said. Opportunities and challenges As McCoy looks forward, he sees great opportunity for Brunswick and boating, as long as those in the industry take a realistic view of the future. He sees a greater focus on family and simplicity, which can only be good for boating. "Boating is the greatest family activity in the world," he said. "We're one of the most perfect activities that can happen in the world for that type of thinking about life." At the same time, he is clear-eyed about the challenges facing the indus- try. "We have to be very realistic in the U.S. that our fundamental customer base is in decline," McCoy said. "There are changing demographics that are coming at us and we're not going to be able to change those." From bringing more Hispanics into boating to increasing female partici- pation, there are plenty of opportunities for growth and expansion. "We have got to, as an industry, really begin to address how we bring this changing demographic into the industry," he said. "To keep the industry the way it is and to think we'll be able to be healthy long term would be a big mistake for all of us." It's those type of challenges that still get McCoy excited about the job, he said. "My only regret is that I'm 66 years old," he said. "I wish I was 55 again. I just think for the industry and our company the future is so very bright and it's going to be a lot of fun to participate in." $400 MILLION » In fixed costs cut by Brunswick during recession