Australia’s second largest seating supplier has swum in the ‘red ocean’ of business competition
Styleride Managing Director Noel Dabelstein has a strong disposition towards business philosophy to support his company’s decision making, and with good reason.
The bus and coach seating industry is a hotly contested marketplace, with three principal players jockeying for space, with more in the wings and competition omnipresent from foreign shores.
It creates a ‘red ocean’ environment, according to Dabelstein, who desires to swim in an ocean of blue.
First published in 2005 by W Chan Kim and Renée Mauborgne, the ‘Blue Ocean versus Red Ocean’ theory basically states that a blue ocean is an uncontested market place, while the red ocean is the traditional ‘blood in the water’ cut throat business environment.
“The red ocean is where everyone’s playing, it’s ‘me too’ and everyone tries to be cheaper,” Dabelstein says.
“Everyone is thrashing around eating each other and that leads to not much money being made by anybody.
“We’ve seen that to an extent with Malaysian and Chinese seats — me too and I’m the cheapest — so that’s the red ocean.”
With his business partner and inventor Matthew Lukan, Dabelstein believes if a business can be truly innovative and introduce features into products that allow differentiation from the customers point of view, then you might get paid a bit more and start to swim in the blue ocean where it’s a lot cleaner.
Dabelstein isn’t quite in the blue ocean yet, but sees his business swimming back in that direction.
“We have a good business and a good name, and we have built and staffed a separate research and development office which remains ‘top secret’,” he says.
The aim of the ‘top secret project’ is to put Dabelstein, Lukan and their staff at Styleride’s two Brisbane-based factories back into ‘blue ocean’ territory.
MOVING ON
Dabelstein and Lukan both worked for a seating company that no longer exists — Transit Seating —where Dabelstein was General Manager and Lukan was a seat designer.
Dabelstein says he left Transit for ethical reasons.
“I said that either I am the general manager with authority and accountability, or I leave,” he says.
“Actually it was expressed a little differently to that at the time, but that was the essence.”
The problem as Dabelstein saw it was that Transit was a bit slow to react to building a new seat which conformed to a government ruling relating to a series of bus crashes in the early 1990s.
He left Transit, taking Lukan with him and set out to build the perfect seat.
“We started testing, feeling that if we started with an upmarket recliner everything else we could build,” he says.
“The testing at the time was done at the crash lab in Sydney that everyone else used, and our first three tests were a failure.”
Dabelstein says that with ‘one shot left in the locker’ his partner Matthew Lukan came to the fore and delivered the design rule conforming seat on the fourth attempt.
“We came to the market with a reclining coach seat that was lighter, infinitely more comfortable with adjustable lumbar support with headrest, and it was inexpensive,” he says.
“We’ve proved ever since that we know how to back things up.”
But with their new seat, the prevailing view was that Styleride would be gone within six months, as the market was too crowded, even in 1996.
“The other seat makers had the blinkers on and left us to run the race unchallenged, and it was magnificent that they did that, and it helped us to quite a degree,” says Dabelstein.
“We took our first order from George Sampson and we did it in the driveway of Coach Design.”
With Sampson as the anchor client, Styleride was up and away, growing turnover to $1.2million in the first 1996-97 financial year.
The company has grown exponentially since, but has fallen back a little in the past few years, compounded by that ‘red ocean’ of Asian competition, and a few government policies which have gone awry, according to Dabelstein.
“In terms of turnover there are fewer buses because of the issues of tourism, constraints on the Australian economy, and through the investment allowance that triggered an enormous rush of buses,” he says.
“With one body builder we did 232 sets of seats in the year leading up to the end of the investment allowance (2010) and the next year we did 90 (2011) which tells you of the insanity of when governments mess around in markets — they always stuff it up.”
But one critical piece of government action that Dabelstein continues to applaud, and in fact was the basis for that seat designed and passed on the fourth attempt setting up Styleride’s future, was the creation of Australian Design Rule 68.
THE WORLD’S SAFEST SEAT
Australian Design Rule 68 requires a three point seat belt tested to withstand 20g crash force.
“It’s a wonderful piece of legislation that’s saved hundreds of lives,” Dabelstein says.
“You can’t sell a seat with a seat belt that isn’t ADR68, it has to comply.”
Dabelstein says designing an ADR68 seat isn’t easy, but a design feat his company has mastered, and which he believes leads the market.
“The legislation means that every bus or coach out on the highway has to have a high back seat, designed over a metre in height with a three point seat belt,” he says.
“We can keep people in the seat, but we also need to keep the seat in the bus, which is why we have an anchorage test to test that the seat will stay there, and an injury criteria test to make sure that if you are in the seat you will survive.
“And we believe we build the safest seat in the world.”
But, Dabelstein warns anyone wanting to build their own ADR68 seat needs to go through the pain of sorting out how to go about it.
“Then you will bring it out and fight for business between me and Denis [McConnell],” Dabelstein says.
“When we started McConnell was the benchmark at the time, but I feel we now lead in ADR68 design.”
The industry is dominated by McConnell in Melbourne with major client Volgren, and Styleride in Brisbane servicing the bulk of smaller body builders.
“It’s not a duopoly and there is no price maintenance whatsoever, but that competition between ourselves and McConnell and the freedom of customers to move around tends to keep a third player at bay,” Dabelstein says.
“Many people have tried to get into the bus seat business and failed, because they can’t get through the testing process — and we protect our intellectual property.
“So if you want to build a seat, do it on your own and go through the pain we went through.”
The seating market is a tough game, no doubt, and debts aren’t always honoured which is why Styleride keeps credit insurance, just in case a bus builder goes broke and can’t pay — which has happened.
But even the tough nature of business won’t deter Dabelstein steering towards blue waters, which could be tied to that ‘top secret’ project.
There’s no news on that yet, we will wait for an announcement, but given Dabelstein and Lukan’s track record for innovation, it could be worth the wait.