John Burke has held several roles during his tenure at Trek Bicycle. He took on his first job ever at Trek, packing bicycle parts for shipment. He worked his way up to President of the company, a role he took on in 1997 and has held ever since. In addition to his success at Trek, John has authored three books.
This week, I had the privilege of chatting with him about everything from e-bikes to what it takes to build a global bike business.
Believe it or not, Trek wasn’t always the customer-focused company it is today. There was a point in time when, in John’s words, “the people running the company didn’t like the customers, and the customers didn’t like them.” This led the business to deteriorate significantly, which caught John’s attention and made him realize the importance of building a customer-centric business.
John was then given the opportunity to put this customer-centric model to the test when his father fired the top managers at the company, and he was made the head of customer service. John made the decision that Trek was going to be the home of the happy customer. One of the first projects that he oversaw as head of customer service was the revamping of Trek’s owner's manual. When he saw that it was largely comprised of legalese, he decided to do something incredibly unorthodox; he offered up his own email address on the manual's first page.
He did this so that no issue with a Trek bike would go unsolved. If a customer exhausted all other avenues to have their bike issue fixed, they could turn to John, who would personally ensure that their issue was solved. To this day, John’s email is in the owner’s manual for every Trek bike, and he still receives a slew of emails when bike season starts up.
There are many companies that build great road bikes and mountain bikes, so it’s tough to stand out in the bike industry. However, there aren’t very many companies that are truly customer-centric in the space. Trek has become uniquely hyperfocused on building a customer-centric business to differentiate itself from the competition.
Although John putting his email in the manual may not seem like a big deal to some, it’s played a huge role in creating a customer-centric business. Any Trek bike owner can rest assured knowing that they can contact the company's president if they’re having difficulty solving their problem. Doing this, thinking of customer service as a form of genuine hospitality, and only building products that Trek genuinely loves has led to the company receiving a Net Promoter score of 93, which is almost unheard of in the bike industry.
John explained: “If you buy a Trek bike, you’re part of the Trek family, and we’re going to take care of you.”
John believes that a healthy company culture starts with healthy employees. Several years ago, many of Trek’s employees were physically unfit or otherwise unhealthy, despite working for one of the largest bike companies. This, in combination with a couple of his employees fighting serious health issues, led John to make some significant changes to the company’s health benefits.
First, he made health risk assessments mandatory for all employees; employees in good health would have more of their insurance premiums paid by the company, and vice versa for employees in poorer health. To ensure that everyone was on a level playing field, John made health coaches available to everyone and introduced healthy food options into the Trek cafe. These actions have made Trek employees considerably healthier over time.
One of John’s guiding principles is that people either bring energy or they suck energy out of a room. So, when the Trek team gets together, the requirement is to bring energy to the meeting, the work, and the culture.
Each week, I chat with some of the foremost experts in their fields, from executives in the commercial real estate space to leaders who have built global businesses like John Burke. If you want to hear the full interview with John, watch the full webcast.
Willy Walker: Good afternoon, everybody. It's a real pleasure to have John Burke join me today on the Walker Webcast. Let me dive into a quick intro first, John, and then we'll dive into our discussion.
John Burke has worn a lot of hats at Trek Bicycle since his first job packing parts when he was in high school. He's been the president of the company since 1997. He's the author of three books, Presidential Playbook 2020, 12 Simple Solutions to Save America and One Last Great Thing, a memoir about his father, the founder of Trek. He and his wife, Tanya, the CEO of Trek Travel, live in Madison, Wisconsin.
So, John, as I did my research for the webcast today, I realized that there are a lot of similarities between the two of us. We both grew up around family businesses. You went to undergrad in Boston, I went to business school in Boston. We both run the New York Marathon, the Boston Marathon. We both did triathlons. You've done an Ironman; I have not done an Ironman. We both did the Étape du Tour plenty of times. We are both extremely focused on culture at our companies and have both created businesses that are ranked by Great Place To Work® institute as one of the great places to work for many, many years. But then that's where the similarity ends because what you do is so cool.
John Burke: Hahahaha!
Willy Walker: I love my business, but it's not nearly as cool as building bikes. And as one of your Tour de France riders said he's now riding on a rocket ship. And so, you build these beautiful, sleek, technologically innovative rocket ships.
But I want to start here, John, and on December 19, 2017, you received an email from a rider in Northern California named Joe Shami and Joe had purchased a Trek Project One in 2003, and then ridden his prize trek bike up Mt. Diablo for 496 consecutive weeks. And he was 83 years old when he wrote you that email. Can you share the Joe story to the end because I think it says so much about you as a leader, about your company, and about Trek.
John Burke: Ahh, you're going to make me cry at the start. Joe sent me that email, and I thought, Wow, here's a guy, 83 years old, he's been up Mt. Diablo 500 consecutive weeks. Every week, he rode up that mountain. And, you know, some of the times it was closed, and Joe still figured out a way to get up to the top. He was an incredible cyclist. He had his Project One bike and he had, I don't know, some 90 thousand miles on it. And he sent me that email - I thought, what a great story. So, I emailed back, and I said, “Joe, when you make it to 100,000 miles, your next Trek is on me.” So, I just thought it was an incredible accomplishment. And so, over the next few years, Joe and I would email back and forth, and we were kind of pen pals. And Joe is coming up on his 100,000 miles. I was going to go up there and I was going to ride up Mount Diablo with him for that ride that would put him at 100,000 miles.
I got a phone call one morning from Joe's friend that Joe had been hit by a car in a roundabout and had lost his life. I'll never forget that phone call. That was a sad day for me. Joe had a friend, Colonel Al. Joe and Colonel Al figured out how to make safe cycling safe going up Mt. Diablo and so they had a ride there and they dedicated it to Joe, and I showed up for the ride and we rode up that mountain. And I've been in touch with Colonel Al. He achieved Joe's dream. They have these things called ways that you can pass going up Mt. Diablo. Cars can safely pass you, turn offs. And they got it done. And in fact, I gave Al an award. I gave him one of the first Oberstar Awards for Excellence in Bicycle Advocacy about a month ago in Austin. So that's a long story about Joe. But he was an amazing guy.
Willy Walker: Yeah, when I read that anecdote that you wrote on your website, and it just, I think, speaks volumes about the connectivity to you, the ability for people to just write an email to the CEO of Trek and get you to respond and engage. And then with someone like him who had done such an incredible feat of going up Mt. Diablo every single day and have that connection to you of going and doing that, that ride with him, I'm sure, it probably pushed him up there many times between that time he first started engaging with you, John, And when you actually, unfortunately got killed.
Let me back up a little bit because one of the things I find to be really interesting is you got out of college. And by the way, I see that BU is back in the frozen four for the first time in a while. And so, congratulations to BU on making it to the NCAA Final Four in hockey, a place they've been a perennial powerhouse. But you got out of BU and you went to work for track, and you were running the Rocky Mountain region and really got a sense of meeting with dealers and understanding the bike products. And you've talked, as I've listened to you about this great customer focus, and that the customer focus is really what's differentiated Trek from the very beginning. And as you and I both know, it's one thing every CEO and every company likes to talk about a customer focus. But there's a big difference between talking about customer focus and having a customer focused company. And as you think about product innovation, design and costs and supply chains and all that, how do you keep Trek of customer focused?
John Burke: Oh, wow. That's a great question. You know, one of the things when I started with Trek in May of 1984, Trek was kind of at its peak. It started in 1976. My father started it, and I joined the company, and I was a road rep. And I had like ten states and I drove my old Chevy Cavalier station wagon from one small retailer to another small retailer. And it was at a time that Trek really started to crumble. And my father was the money behind Trek, but he didn't run the day-to-day business. And the people who ran it really didn't like the customers and the customers didn't like them.
I sat there and watched the family business crumble in front of my eyes, and there was no greater education that anyone could ever have. So that's kind of how I got into caring about the customer, I saw what the opposite was. And then my father basically fired the top managers of Trek, and I think I was 24 years old, and they brought me in to be the head of customer service. And so now I could do everything I wanted to do. And my father grew up in the appliance distribution business, and he understood the dealers made the difference and that you really needed to take care of the customer. And I really learned that from him. But then I saw it through my own eyes, and I made the decision that we were going to be the home of the happy customer. And from an early point on, that was one of my guiding principles, is we're always going to take care of the customer before we do anything else. We're taking care of the customer.
There's this funny story about we were rewriting the owner's manual, and somebody comes in to see me, the legal department's there and they go, we're coming up with a new owner's manual. And I'm like, Oh, that's great. Let me see it and start paging through it. All this legalese to protect Trek. I go, this isn't an owner's manual. This is a legal manual. And they go, Yeah, but we have to do it because of this, this, this and this. And I go, okay, I go, Can I have the first page? They said, Sure. And so, my first page was: “Dear customer. Thanks for buying Trek. Welcome to the Trek family. If you ever have a problem with your trek, see your Trek retailer. If they can't help you, call Trek. Here's the number and we'll take care of you. And if you still aren't being taken care of, here’s my email and I will take care of you.” And to this day, I can tell you when the bike season starts because, I get a bunch of emails. But, you know, people see that in the organization, we focus on the customer and, you know, some companies do, and others don't, but it's something that's worked for us.
Willy Walker: So, in your mission statement, John, there are a couple of things that I find to be interesting. First of all, it's: “We build only products we love.” So, there are not many companies that only build products that they love.
John Burke: Yup.
Willy Walker: “We provide incredible hospitality to our customers.” So, for a second to talk about that, I'm assuming that there was a tremendous amount of work to pick that term “hospitality” because most people talk about how we provide great customer service and you're not in the hospitality industry. I'm in a hotel in Miami right now that is very clearly in the hospitality industry. But you purposely chose we provide incredible hospitality to our customers. Talk about that for a second.
John Burke: Well, you know, I love the car business, and I think the bike business is the poor man's car business. And, there's a lot of people who make great $40,000 cars. There's a lot of companies who make great $40,000 cars, so how do you differentiate yourself? And the same is true in the bike business. There's a lot of people who make great road bikes and they make great mountain bikes. And so how are you going to differentiate yourself? And I think one of the ways that we can differentiate ourselves is by providing incredible hospitality to our customers. And, one of the things we do as a company is, if you buy a Trek, you're part of the Trek family and we're going to take care of you. And whether it's me answering your email, whether it's our retailers taking care of you, we're there to take care of people.
We take a look at our Net Promoter score every day. Trek has a Net Promoter Score of 93. I mean, find a company that has a Net Promoter Score of 93. I mean, that's a high mark there. And we've got higher goals. We're going to push that number higher because we're going to continue to deliver more value and a better experience for our customers going forward.
Willy Walker: So, you have an incredible corporate culture, and you have fantastic employees as well. You have an ESOP, you have a profit-sharing program, you've got mountain bike trails around your headquarters. One of the things that I thought was really interesting and one of the ethos at Trek is to bring energy to every meeting. And I thought it was such an interesting thing as it relates to saying to your counterparts at Trek when we've got a meeting, bring in energy every single day.
John Burke: You know, I also think when people show up, they're either bringing energy or they're sucking it out of the room. There's no sitting on the sidelines, you're doing one of one of two. And I would much rather have you bring energy. We play in a competitive industry, and we need our best team on the field, and we need people bringing energy every day.
Willy Walker: So, your dad who started the firm, he was a great athlete, and he was a runner. He got turned on to running by Frank Shorter and the whole running wave of the 1970s then became a cyclist. He was fit as a fiddle when he tragically died after a heart valve replacement when he was 73 years old. And as you think back, John, on the transition of a family business from your dad to you. I've heard you say that when your father died, the culture at Trek didn't change because he'd done a great job of giving you the road to lead the company. And you've been leading it for quite some time when your father died. But in the transition from your dad to you, and I've gone through this myself and have some scar tissue, if you will, from the transition from my dad to me. Were there any foot faults that you made as it relates to stepping into a leadership role and assuming control of Trek that you look back on and say, I could have done a little bit better with my dad on this or that.
John Burke: It's a really good question. I always say that I play for a batting average. I mean, I'm not going to get all of them right. We've done some amazing things here and we've made some mistakes along the way. Somebody told me before he died that his body would die, but that his spirit would live on. And he's here every day. I mean, there's not a day that goes by that I don't talk to him. He and I have some great conversations and, any big issue that comes up at Trek, there's not a big issue that comes up that I don't think about: “What would the big guy do?” And I kind of run it that way. But there's nothing that really sticks out that I would go, that was a big error that he would not be happy with.
Willy Walker: Sounds like the two of you had an amazing relationship and partnership.
You mentioned, John, when you joined the firm that it was kind of at the height at that time. And I believe, as I heard you say, was about a $20 million revenue company at the time and stepped back to being about a $14 million revenue company and now is north of a billion. And I think from the rankings as it relates to largest bike manufacturers in the world, you're number three behind Giant and Specialized. Am I correct on that?
John Burke: Probably not.
Willy Walker: Okay. Probably not. Only because there are some brands that we don't know are those three consumer brands that might be the biggest or am I grasping for something by saying that?
John Burke: I think we're bigger than one of those two and not how we really keep score.
Willy Walker: I got it. Okay. But so, on that, you talked previously about the brand and the building of the brand and how you compete. And I believe Lance Armstrong's first Tour de France win was on a Trek bike, and you have a long history of sponsoring professional racing and I think are the only brand that actually sponsors one of the teams now, which I find to be interesting. What about just as an aside, what about the fact that countries are starting to sponsor teams? I mean, there's an Israeli team there. I mean, don't they have unlimited budgets? How hard is it going to be for private teams like yours to compete with these nationally owned teams?
John Burke: I really don't know the backstory there. But if you take a look at, who are those well-financed teams, but there are other teams that are really well-financed. So, it's hard for me to say.
Willy Walker: But talking about well-financed teams. I think there are 68 support staff of coaches and trainers and logistics behind your team, the Trek-Segafredo team. That's a significant investment. Yet Trek has always been there as a differentiator, if you will, as it relates to the pro circuit and being one of the few brands that really is associated with it. Obviously, you believe that that's been a great return on investment.
John Burke: Well, we're the only bike company that owns the team. And, we sponsored teams for a long time. And we get a lot of feedback from riders. Riders make products better. And by having the riders as your employees, as part of the family, we get feedback right out of the gate. We have a much closer relationship and it's just worked better for us. And, you know, one of the things I'm most proud of is we've owned the men's team, I don't know, for maybe ten or 12 years But four or five years ago, we saw what was going on in women's cycling, which was really kind of a tragedy. And we stepped in and said, we're going to do the same thing for women as we're doing for the men. And, Trek's had a huge impact on women's cycling. And the team that we have is just awesome. Racing's been a big part of Trek in the past and will be a big part of Trek in the future.
Willy Walker: So, I know you have, it may not still be called it, but you have an advanced concept group that you started in ‘98 before Lance won that. What kind of people join that? I mean, do you have metallurgists who join it? You have physicists, you have component specialists - who comes to work in your advanced concept group?
John Burke: Some really smart people who know a lot more than I do. You've got people from great universities, you've got people from great engineering companies. You have NASA alumni. There have been just some incredible people who work here at the bike company in the past and in the present. I mean, we've never had a better team on the field than we have now. And the stuff that we're working on now is amazing. I mean, we've come out with a lot of really great products in the last few years and our product pipeline is really full going into the future. So, I feel great about the team, and I feel really good about what we're up to.
Willy Walker: As you think about it as it relates to how you compete. In today's world, what's the most important? There's not one thing. It's not componentry. It's not the wheels, It's not the frame. It's not the frame weight. Whathave you. But as I ask that question, there's a little bit there where you have to sort of I'm assuming from a strategic standpoint, say if we're going all in on one piece of what makes a fast bike, makes a great bike, is it more in the frame materials? Is it more in the I mean, obviously the componentry comes from Shimano or from SRAM, and SRAM is your partner as it relates to your Tour de France team. But if you will, as you think about the future and I want to get to e-bikes in a moment, I'm talking about just human propelled bikes right now and racing specifically. What's the next frontier, if you will?
John Burke: It's really interesting. If you take a look at a bike, everything can be improved. And, you might say, well, you know, the biggest thing is materials. And yeah, that's true. There's a lot going on the material side and then there's a lot that's going on the design side. If you take a look at the new Madone that just came out, that's a super interesting frame design. If you take a look at the aerodynamics of that, it's pretty amazing. and then you take a look at wheels, a really important part of the bike. They're an important part of how fast that bike goes and the aerodynamics. There's a lot going on there. There's a lot that goes on with components. There's a lot that's happening with electronics and integration. So, if you go back and take a look at that bike that Lance won the tour on in 1999, and fast forward 24 years. If you look year by year, it looks like incremental innovation. If you take a look at it over a 20-year period, you will go, “That's unbelievable.” And we'll continue to move forward here.
Willy Walker: And on that, how much vertical integration do you think about in the sense that you just talked about varying pieces, wheels. Obviously, there are plenty of wheel manufacturers that are at the cutting edge of wheel manufacturing. I mentioned the two big component manufacturers. I'm assuming given your size and scale, there have been lots of thoughts as it relates to, if you will, more vertically integrating into the manufacturing of the entire bike from wheel to wheel, if you will. How difficult is that? Because, I mean, on the component side, for instance, SRAM and Shimano seem to have a duopoly, correct?
John Burke: Yeah. And, you know, those are some great companies, and they make some incredible products. And if you take a look, you know, we just go back to that mission statement: “Only awesome products we love.” And you know what you can buy from SRAM and where you can buy from Shimano today, they're really good at what they do. And there's a lot of ways that Trek can work with those suppliers and then bring about all the innovation that we can bring about and make some incredible products. We always look for ways where we can differentiate and where we can bring value to the rider and where we can really improve the product. And sometimes we'll look at certain pieces that we can vertically integrate. But, you have to have great partners and we like working with SRAM. We really like working with Shimano.
Willy Walker: And during the pandemic, when all outdoor activities had a huge boom, I'm assuming supply chain and supply chain management became a huge issue for Trek. Talk about that for a second.
John Burke: Yeah, that's a full book like six volumes - unbelievable time. I think the world shut down on March 12, somewhere around there in 2020, and we're putting together projections in here of sales being down 60% for the year. It was going to be miserable and on the first days of April, somebody walked into a meeting. We’re going through all the contingency plans and somebody is like, you know, I was on the phone with this dealer in Florida and they had lines around their store. I’m like, you're kidding me. And, you know, it started out and then two weeks later, there was like a global bike boom. It was unbelievable. So, it really stretched our supply chain. And we have some great systems here and we do a really good job on the IT side. And we have some amazing people working for Trek on supply chain and we like to refer to those years as our best/worst years ever. It was brutal, but we made it through. We did a lot of business, and we learned a lot of lessons.
Willy Walker: Do you manufacture your frames in the States or abroad?
John Burke: We manufacture frames abroad and we assemble bikes in Asia. We assemble a lot of bikes in Europe, and we assemble really high-end bikes in the US. It's a global company.
Willy Walker: Yeah. The direct-to-consumer model on the Canyons of this world who've come out and basically tried to go around the distribution network and the local dealers. It's very evident from your comments so far in this discussion that dealers are super important to Trek, and you treat them like your real partners. How much are you DTC versus through the dealer network? And how does someone like Canyon or others that are trying to do a pure direct to consumer model (DTC) present a competitive threat?
John Burke: Yeah. I think, you know, that's something the consumer's going to decide. You know, and you can get online today, and you can buy a Trek online and have it delivered to a dealer, you know, and let the dealer assemble it. I would not buy a bike online. That's me personally. A bike is a technical piece of equipment that really needs to be assembled properly. And I think retailers add a really good amount of value there. If you're a super technical person, you can assemble that bike. There's so many different ways retailers add value right now, and I think retailers have adapted to the market and it's all about can retailers provide value to customers. And if they can, then it makes sense for customers to buy bikes from retailers. And if they can't, it won't. But we have great relationships with retailers, and we think they do a really good job for customers.
Willy Walker: And has the number of retailers expanded since the pandemic, or have some gone away? I mean, was the pandemic I'm assuming it was a real challenge for you from a supply chain, manufacturing standpoint? It was also a big challenge for the actual retailers as it relates to just meeting clients’ needs, saying, hey, I don't have any inventory. And then also going from no sales because they didn't have the product to sell. Many of them just turned into service centers. And while that may be a place to make some money, my understanding from the retail standpoint is they really make money when they actually sell a bike. And so, have you seen a growth in the retail network, or have you seen a shrinking of the retail network?
John Burke: I mean, it's been pretty stable. It's been pretty stable. But, you know, retailers had a good bike boom, at least Trek retailers had a good bike boom. And those days are over. You're in a different situation now. There's plenty of inventory in the market. And now the game's kind of changing. And, you know, for sure, I say this all the time to the retailers, but retailers are going to have to run better businesses and retailers need to continue to focus on taking care of customers and how they can deliver value to customers if they want to survive.
Willy Walker: We've been talking mostly about human propelled bikes up until now, can we go to e-bikes for a second? Because I think that's an exciting growth opportunity and more than potentially on the manufacturing side, potentially even more for Trek Travel, which is the business that your wife runs. Because I mean, I went on a trip a couple of years ago where it was a bike trip with my family and we invited my parents to come on the trip with us because for the first time ever, my parents could get on an e-bike and do the routes with us, which made for an incredible family experience. Talk for a moment about how much of a growth opportunity there is in the e-bike category and then also into Trek travel.
John Burke: Okay, e-bikes can change your life. And I'll hold up a product that changed your life. And I'll still remember the first time somebody showed me an iPhone and they're like, “Look, you can take a picture and then send it.” And you're like, “Wow, this is amazing.” And everybody has a huge smile the first time they use an iPhone. And the only product I've seen do that since is an e-bike. Whenever anybody gets on an e-bike, they just have this huge, incredible smile. Everybody, 100%. And, it takes the hills away. You can keep up with your partner. The best places to ride a bike are up hills or up mountains and you can go wherever you want. It's absolutely amazing. And people are discovering this all over the world. We've got an incredible lineup of e-bikes, and I've seen it firsthand with friends, with people I track, with Trek travel customers. E-bikes change lives. It's that simple.
And your point of going on a bicycle trip and I would recommend to everybody who's watching this incredible podcast, check out Trek Travel, because if you want a vacation of a lifetime. You can go on a Trek Travel trip, and you can see the world and you can definitely do it with your spouse, you can do it with your family, and you can go on a regular bike, or you can get an e-bike. E-bikes, just like you and your family, can provide an incredible vacation for anyone. I've seen that happen with so many people. And it's not like, you know, 70% of people. 100% of people smile. It changes the lives of everybody who gets on any bike.
Willy Walker: Yeah, I have to say, without a doubt. The technology that's going in e-bikes is obviously developing quickly. I remember the first time I rode an e-bike, and it would be about 3,000 pounds and it's coming down significantly. But talk for a moment, John, about both the R&D and how you've had to change Trek as it relates to having an electronic side versus just a human powered side. And then I did notice that your high-end electric bike, your Fuel EXe, retails for just about $14,000. It is significantly different from the very, very highest in road bikes for racing, it's a very high price point for most consumers. How has that been as it relates to people affording to get into that experience?
John Burke: Yeah. So, if you just take a look at e-bikes, you can get a really good Trek e-bike right around $2,000. You can get into e-biking, there are financing programs available. But there are a lot of people who can take advantage of the e-bike revolution. If you take a look at mountain bikes, a new product, we've come out Fuel EXe. And if you look at that bike, you can't tell the difference between a regular bike and an e-bike. That bike is amazing. It won from one of the leading mountain bike magazines Technology of the Year for the motor and the battery system. Another magazine gave it E-bike of the Year. That's an amazing product. I think it starts around $6,500 and it does go up to $14,000. And you'd be amazed at how many bikes we sell above $10,000. People love bikes, and we make some incredible products here. So, I would recommend to anybody who hasn't tried out an e-bike, go to a Trek store, try out an e-bike. It can change your life.
Willy Walker: To your point, John, as it relates, you sell a lot of bikes, about $10,000. It's just funny. It worked perfectly with that little stat I had, which was when I went to your website, and I sorted it by costs, and I had to go down through 19 different models before I got to a bike that was below $10,000. I mean, you've got a lot of SKUs above $10,000 as and that's it's really quite something. One of the questions I had on that is my assumption in the automobile industry and you talked about biking in automobile industry, is that as you move up in price margins increase to the manufacturer and that a BMW seven series, they make more margin over a BMW three series, is that similar in biking or is it not?
John Burke: It was back to talking with my father again. But there's a difference between you can't take margin points to the bank. I mean, when you're selling those high-end bikes, the amount of gross profit dollars are really big, margins might be similar. They might be a little higher on high end bikes, but that's a big market. It's really big.
Willy Walker: Yeah. And as it relates to what you're looking at as it relates to growth with e-bike versus pedal bikes, I'm going to swag it, if you had projected that your sales would grow at 6% on just normal bikes and you add e-bikes in there, does it double the growth of a company like Trek or is it not that much of an add to overall sales so far?
John Burke: No. If you take a look at a ten-year timeline at Trek, e-bikes have significantly impacted Trek's growth rate. Because what you're seeing in the United States, Europe is way ahead of the U.S. in e-bike adoption. And so, if you go to Europe, since 2010, especially in the Benelux and the German markets, e-bikes have been doing quite well and they've been growing every year. And so, some people think, you know, the U.S., wow, this e-bike thing is amazing. You know, give it another two or three years. Because in Europe, a lot of times where people thought we've reached the plateau of e-bikes and it just keeps going. And I think the same thing will happen in the US.
Willy Walker: Will you do me a favor? You were talking about the fact that you sort of can't tell the difference between an e-bike, that mountain bike and a normal mountain bike. Will you put some type of, like, big orange sticker on your e-bikes? Because I was going up Maroon Bells last summer with my friend Chris Davenport, and we're cranking out like 270 watts and killing ourselves. And along comes this man who's like 65 years old, he cruises past us and my heart sinks as I'm sitting there going, I know. And then Dav turns me to go, and then he's on an e-bike, and I couldn't tell the difference between his bike and our bike. I didn't know it was an e-bike.
John Burke: It's unbelievable. And there that guy is having the time of his life.
Willy Walker: Boy is he ever, particularly smoking, the two of us.
Just as it relates to the development of batteries because battery and battery technology is so being fueled by Tesla in the automotive market, how much crossover is there in battery technology development between the automobile industry and the bike industry? Or are those big suppliers on the bike side completely siloed off from the automobile manufacturers?
John Burke: No, there's a lot of crossovers. I mean, one of our big suppliers is Bosch, and they're a huge automotive supplier. So you're seeing all those people who are into bike batteries are into car batteries and there's a huge cross-pollination.
Willy Walker: Yeah, I mentioned previously, John, that Trek is a great place to work, and you have this amazing corporate culture. One of the things that you started a number of years ago was a big focus on wellness. You were on the President's Council for Sport and Health under President Bush. I've heard you talk about the fact that Health and Human Services sits there and tries to throw billions and billions of dollars at health and wellness in our country and at Trek, you just got to a point where you just said a number of your coworkers had had health events that you sort of said, “I'm tired of having people not take care of themselves.” And I thought one of the interesting things was that you gave people a certain amount of time to get into the program, and then you essentially said, “If you're not going to commit to taking care of yourself, there's no reason I should pay for it.” That sounded like a reasonably aggressive thing to say. And at the same time, your health outcomes have gotten better and better. You maintained a great culture of a great place to work. How did you pull it off?
John Burke: So, I think people underestimate people. If you tell the story and there's something in it for people, they'll follow if it makes sense. And I was tired, and this was maybe 15 years ago, we had three employees who had serious health incidents, and a lot of it was because they were in bad health. All three of them were in horrible health. And so finally I told our HR chief, I said, Dude, I'm done. We got to change this formula because I don't want to go to any more funerals. And so, we mapped out a program and we said we're going to turn this into a healthy workplace and we're going to create a healthy workforce and we provide your health insurance. And if you don't care about your body, I'm not going to pay as much of your insurance. That's your choice. So, he got everybody together and I gave this message and there's like 800 people in the atrium and I give this message. And I said, “Listen,” I gave the three stories and I said, “We're not going to pay for your full health care if you can't pass a health risk assessment and you have to sign up for the health risk assessment.” And this health risk assessment is like a mini physical. And so, before I gave the speech. We had provided the health risk assessment and we had all the super fit people who would go to the optional health risk assessment because they wanted to know how low their body fat was and everybody else stayed away from it. So, then I said, Listen, it's mandatory for everyone because I care about your health. I want you to be healthy. Unbelievable. And we said, we're going to give you a year to get into spec and we're going to provide you with a health coach if you need it. We're going to have good food in the cafe and we're going to do this, this, and this. But you need to play here. And we have people play all over the place and we turned Trek into a healthy workplace. Over the last ten years, our health rates have not gone up. Who else can say that?
And so, one of the things that frustrates me is, you know, 42% of Americans are obese today. Their government is failing them. And we just keep doing it. And we have the highest health costs in the world, times two, and we get the worst health outcomes. If you live in Italy, you will live eight years longer than if you live in the United States. It's embarrassing. And I can say at Trek, we did something about it. I'll tell you; we have a 20-year club dinner every year. And the number one compliment I get every time is “Thank you for the health program. It not only changed my life, but it changed my family's life.”
Willy Walker: So, talk for a second about how David McCullough changed your life and got you to write two books?
John Burke: Well, I'm at my son's graduation, which I was thankful to be at because he was graduating, and David McCullough is the commencement speaker. And I love David McCullough - great American historian. And at the end, he talked about the importance of reading. He said: “Readers are leaders. You are what you read.” I'm like, “Right on,” because I'm a big reader. I love that. And he gets to the end, peers out over the audience to me and he says, “And at some point, do something for your country.” And that really stuck with me. And so, I was driving home that night and I thought, what could I do for my country? And I have certain opinions about what I think the government should do in the United States. And I think we fail to address a lot of big issues like the health issue that we just talked about. So, I wrote a book called 12 Simple Solutions to Save America. And that's how he's impacted my life.
Willy Walker: After you'd written that and I know as I said at the top, you and I think are similar in the fact that we're sort of both orphans from being either a Democrat or Republican and trying to find something that addresses both sides of the aisle. Did writing something that obviously talked about political hotbed issues, just like us talking about wellness and 45% of the population being obese. Did it impact you and your leadership or impact the culture at Trek at all by you getting out there and stating your beliefs on those issues?
John Burke: One of my favorite interviews. Somebody interviewed Tim Cook, like on the fifth-year anniversary of Steve Jobs’ passing. He said, “What was the lesson of Steve's life?” And Tim Cook didn't miss a beat. And he said, “You know, Steve believed that everybody lived their life in this box, in this small box, and they were capable of so much more.” At Trek, we have this saying: “Think bigger than the Barn.” Trek was started in a small barn, and it's become something bigger than that. And I think employers see that, I think bigger than the barn. And I think they appreciate that. And I think leaders and companies have an obligation when they see things that the country could be doing better. I think they have an obligation to speak up. I don't think, whether you're a leader of a company or not - unfortunately, I think we've reached a low level in this country of people yelling at each other about tribalism and feelings as opposed to facts, ideas, and plans. More sensible people. Somebody once said this to me, David Koehler, who runs the Koehler company, once said “I read your book and I agree with everything in it.” He goes, “If you get a bunch of smart people in a room and you put all the facts up on the board, 90% of the time they'll come to the same conclusion.” It's just the politicians who turn these things into political issues. I can go through any of these things, whether it's the environment, whether it's good government, whether it's the healthcare crisis, whether it's the legal system in this country. We've got big whopper issues that nobody's doing anything about. And if you put all the facts on the board and you put some smart people in the room, they'll solve them all.
Willy Walker: I thought that was one of the things that was so interesting about both of your books is just the fact that you focus on facts so much. You bring in so much data to these issues, whether it be the length of the tax code or whether it be the amount that we spend on defense spending versus everyone else on the base of the planet where you're putting these numbers forth that basically say, “Okay, here's the fact. Let's think about this rationally” rather than just, “Oh, if we were to cut a dollar out of defense spending, we're going to become weak.” When you realize that we spend more than the next seven countries combined on defense spending. And while clearly right now China is truly becoming a threat as it relates to their military prowess and strength, it's hard to think that continuing to outspend on defense spending, as you posit in your book, is going to get us, at the end of the day, better outcomes for our citizenry. But I find it to focus on facts, John, to be so refreshing. And I quite honestly think it has obviously to do with your business career versus your political career.
John Burke: Oh, yeah. I mean, it does. And, you know, one of the things, I have two big whiteboards in my office. And the way I start every meeting here is, what problem are we trying to solve or what's the issue at hand? And I get up there with my little marker and I get everybody's opinion. Just what do you think? There's a lot of smart people at Trek. There's a lot of smart people in this country. And if you focus on the facts. The answers become more obvious.
Willy Walker: I'm looking over your shoulder on your whiteboard. It says, How much effort does it suck up? And then it goes to the capital, etc.. So, you're clearly living by that whiteboard over your shoulder.
John Burke: Every day.
Willy Walker: It's great. So, as you think about Trek over the next 20 to 30 years and the growth that you see either domestically or internationally, bikes into e-bikes, into any other types. Does e-bikes get you into the scooter-moped-motorcycle business at some point?
John Burke: We love e-bikes, and we love bicycles as a mobility solution. If you take a look at the bike business over the next ten or 20 years, I think there's some huge trends that favor the bike business. I think if you take a look at health - sooner or later somebody is going to come to the conclusion that in order to improve health at a lower cost, people need to move. People need to walk. People need to ride their bicycle and governments need to help to make that happen.
If you take a look at the environment, if you think we have an environmental problem, it's ten times bigger than what you think it is. And we see that every year. It's just going to get worse and worse, and somebody is going to wake up and they're going to go, you know what? The bicycle is a simple, partial solution for this. We need to get more people on bikes. And then you just take a look at the amount of people in cities, and you take a look at congestion. So, I look at those three megatrends and I go, I think the future for bikes is really strong. And then I take a look at Trek, and I go, when we take a look at our mission statement, when we were putting it together, we kind of went back to my father's original mission statement and we said, why was that so successful? And it was so successful because basically we need to do these three or four things.
And we said, what are the three things we really need to do at Trek? 1) We need to build awesome products that we love because we have a higher standard than the consumer does. If we really love it, it's going to make a huge difference. And then we said, well, 2) We need to provide incredible hospitality to our customers. And that to me is the way you develop relationships, and you build a brand over a long period of time. Do you have this great relationship with your customers, and can we do that? And then 3) Can we change the world by getting more people on bikes? At Trek, we're huge believers in the power of the bicycle and there's a lot of tangible things we do. We don't just say it, we do it. And our ability to change the world by getting people on bikes, if we could do that stuff, I think the future is super bright.
Willy Walker: So, as you look out to the next couple of months and you engage with your clients by doing the Horribly Hilly, bike across Wisconsin, thé L'Étape du Tour. What do you have coming up where you're going to be out there engaging with your clients and also biking with your wife?
John Burke: Oh, well, Horribly Hilly will be on there. We'll do a couple of big rides in Europe. You know, we ride 100 miles every Saturday. So that's my wife and me. That's our relationship building event. We'll ride every Saturday, starting in mid-April or 1st of May. We'll do our 111-mile Saturday bike ride. So that's the one we always look forward to.
Willy Walker: And is it just the two of you or do you bring other people along?
John Burke: No, we bring other people. We drag some other people along for that.
Willy Walker: And I'm assuming you go over during the tour and go around and watch the races and have fun doing that as well, correct?
John Burke: We go over there, usually there the last week. We watch some of the races and then we usually watch the finish in Paris.
Willy Walker: Yeah, it's great. I know your bike won Paris-Roubaix. I think it's the Madone this past year. So, congratulations on having your bike be the chariot of choice in Paris-Roubaix. I have to say I'm just a huge fan of what you've done with Trek. Our mutual friend Jim Cope is what put the two of us together. So, I'm extremely thankful for Cope for connecting the two of us and hopefully the two of us can get out on a bike quite soon. I will tell you this, though. Either you need to bring a Trek for me or I'm going to admit to you ahead of time that I don't actually have a Trek bike and that you're going to see some other brand when I show up.
And it does remind me, once I was with Steve Jobs way back in 2003, before Apple had really gotten into the PC world. He and his wife wanted to see a picture of our newborn son. And I had a Sony Vaio computer, and I went to get my computer. I looked at Steve and said, “I got to admit to you, I have a Sony, not an Apple.” He said, “Just show me the pictures of your kid, dude.” I have to admit that I will show up without a Trek unless we go and rent one before coming to see you.
John Burke: Yeah, well, that means that you're a prospect and that we love all people who ride their bikes. And, there's a lot of Happy Trek customers out there. We hope to get you on a Trek someday.
Willy Walker: It's great. John, thanks for joining us. It was really a great discussion and congrats on all you've done with Trek. Thanks, everyone else for joining us today and we'll see you again next week.
John Burke: Awesome. Thanks so much for having me.
Willy Walker: Take care. Thanks.
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