Apple Computer and Black Diamond, Brothers in Quality?


Post by WildSnow.com blogger | August 31, 2010      

Just in case I feel like doing an El Cap route one of these days, I’ve kept a bundle of Chouinard carabiners from my brief career as a wall jock stashed away and ready to rock. I was looking at those musty biners the other day and it occurred to me just how big the ride has been for Black Diamond Equipment, them having evolved out of Chouinard back in 1989 and now being a somewhat large, publicly traded corporation with a full line of backcountry skiing gear along with a ton of other stuff.

Ancient history, now Black Diamond.

Ancient history, now Black Diamond.

You see a corporate history like that, and you can’t help but wonder how the values that brought the company success can remain in place during such huge changes.

You can read about this sort of stuff and hear the rumors, but sitting down with the man in charge is always valuable. So, to get business philosophy from the source, a few weeks ago at Outdoor Retailer Lisa and I got together with Black Diamond CEO/President Peter Metcalf.

I’m not anti-capitalist or anti-corporate, but I have to admit at a smidgen of cynicism as to how ‘core’ a company can remain once it’s publicly traded and has to stay as profitable as possible in the short term.

That said, I’m also aware of huge companies such as Google and Apple that seem to do pretty well in terms of quality and innovation. So how does that happen?

Metcalf explained that first, we needed to know that with a business such as Black Diamond it was pretty much essential that they eventually go public. He explained that CEOs come and go, key employees come and go, and that it can tough to institutionalize the things those individuals provide, to “institutionalize the future” as he put it. He explained that doing what BD has done in going public is not necessarily perfect, but is the best way to accomplish consistency of management and values in days to come.

Conversly, Metcalf explained that “Just because a company is privately held is no guarantee it’ll retain its core values.”

I hadn’t really thought about that, but Metcalf is obviously correct.

Plenty of companies have sold out or fizzled, and whether they’re publicly traded or not is perhaps not even near being the defining factor for that sort of thing. For example, if you’re in the building trades you might know a local plumber or electrician who did good work and had a great reputaiton, but sapped every penny from his privately held business, never sank any money back into equipment or employee training, and ended up folding his tent with nothing to show for his run except a worn out motorhome and a failed marriage. Happens all too frequently in all sectors, including outdoor recreation.

Metcalf went on to explain that even as a public corporation you can keep qualities such as those that sustain BD going by doing things such as a “deliberate instillation of values” with careful hires and such. He made the point that just as people are fond of saying about democracy, capitalism is messy but it’s the best alternative, and he wanted Black Diamond set up with the most effective form of lasting corporate governance.

Now, I do drink my fair share of BD cool-aid, but the effects eventually wear off. I read up on the BD deal and it does involve a number of players, not just Metcalf and his BD associates. Thus, other factors besides BD corporate culture will influence the outcome. As a publically traded company BD’s monetary situation will be easy to watch, and their product quality will be scrutinized by the web as we know and love. So we’ll be keeping our eyes to the LCD and watch how all this plays out over coming months.

I asked Peter how the big decision felt now that it’s been in place since May. One wouldn’t expect anything but at least a public facade of optimism if a CEO was asked such by a blogger. But I know Peter and he’s a sincere individual, and his telling me “there is always some risk in a change like this,” but that it still “feels like the right thing” was enough for now. Time will tell, but I’d bet Peter’s take is as solid as those beefy Chouinard biners I used to dangle from on El Capitan.

What do you guys think? Will BD go down the tubes now? Or will they be even stronger and better?



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Comments

37 Responses to “Apple Computer and Black Diamond, Brothers in Quality?”

  1. The Grudge August 31st, 2010 10:14 am

    You know, I don’t consider myself anti-capitalist, but ever since BD went public I can’t help but avoid their products when shopping for new gear. In fact, I have yet to buy any BD gear since it happened. Bought some Metolius cams last month and will be buying G3 skis instead of BD ones for this season. While I didn’t go out of my way to avoid their gear, every time I’ve looked at a BD product I’ve felt this need to say no. Strange indeed, and yet I might not be the only person out there with this predisposition to avoiding corporate products, be it my issue or a real one.

  2. Lou August 31st, 2010 10:16 am

    We’d better watch out for the way we use the word “corporate.” BD was a corporation before it went public…

  3. tony August 31st, 2010 10:18 am

    Hopefully their new tele bindings work better than the iphone 4;) I for one will continue to buy their gear.

  4. The Grudge August 31st, 2010 11:08 am

    Quite right. There I go not proof reading. Public, not corporate. They were employee owned prior to this public move, correct?

  5. RB August 31st, 2010 11:24 am

    The good news is that as long as consumers stay diligent in how they spend their money, the game will play itself out appropriately. If BD stumbles, there will certainly be start-ups waiting to capitalize on the mistakes. A far better option than the government taking over and deciding what’s best for us, which certainly seems to be the trend of the day. I’ll take greedy capitalists on a fair playing field any day compared to a greedy, emotional dipstick in Washington with the power of law and force behind him.

  6. Rick August 31st, 2010 11:33 am

    Tony said: “Hopefully their new tele bindings work better than the iphone 4;)”

    You can use tape (plumber’s for bindings, duct for iPhone) to fix both!

  7. Dave Field August 31st, 2010 12:35 pm

    At the end of the day, we’re talking long term sustainability. What got BD and many other specialty providers there in the first place was a dedicated core of passionate individuals who were skilled and visionary and who were fixated on being the best. Call me a cynic, but I fail to see where constant growth and expansion is any guarantee of sustainability. It seems that the bigger an entity becomes the more likely that core dedication and single minded determination will become diluted and eventually the hard decisions that get made favor making money over providing a high quality niche product and we have one more commodity provider. Perhaps BD will continue to innovate and provide great products that cater to a specialty market but just as likely is that they will expand product lines and diversify into more mainstream good that represent “back country lifestyle” as opposed to a simple robust collection of specialty gear.

    Of course staying small and specialized is no guarantee of long term sustainability either as eventually other imitate your innovations and you lose your niche unless you constantly evolve and innovate ahead of the pack. I try and support those kinds of companies however at the end of the day I still decide based on value and function.

    We had a nice blast of snow up high in Alberta and I’m starting to feel the anticipation of a good winter season

  8. Patrick Odenbeck August 31st, 2010 12:47 pm

    One thing I have noticed in the last couple of years about BD products is that the first generation usually has some sort of issue with it. I am not sure if that is because the R and D program wants to rush things through before adequate testing is done. I have defineatly had to hold the trigger on a couple things. This is certainly a similarity that I have found between Apple and BD.

  9. John S August 31st, 2010 2:42 pm

    I have a ton of BD climbing gear, but no ski equipment, so I can’t speak to that end of their business. I am intrigued by their new line of much lighter skis.

    The problem is growth vs. being competitive. If BD uses their new found money to invest in their products, this can do nothing but benefit the outdoor enthusiast customer. If they invest it in reaching new markets and growing gross revenues, then that benefits no one but the owners of the firm.

    Why is the growth of revenues seen as the goal of most businesses? Because it is the way to increase the profits of the firm without cutting expenses. Cutting expenses can also cause revenue shrinkage (fewer employees, losing key employees, drop in quality, etc) so finding more people to buy your stuff is typically the best way to make more money.

    However, do we need to make more money all the time? What about other factors? I used to be the managing partner in a decent sized consulting firm, and once we reached a certain point, I failed to see the benefits in growing. I earned a very comfortable living and saw no gain in having to work harder to grow the firm and manage more staff and clients. Also, our clients loved the fact that they usually had at least one partner working their file.

    BD has not had time yet to alter their corporate DNA, and today, I continue to purchase their products without hesitation. Most of their gear is of high quality, is innovative, and priced very well to boot. Time will tell how they utilize their new structure, and I reserve judgment until I see what happens.

  10. Ptor August 31st, 2010 2:53 pm

    I hope they make bigger skiis!!

  11. Ed August 31st, 2010 3:28 pm

    Am I the only one who wants to go out and buy some BD stock?

  12. Lou August 31st, 2010 4:01 pm

    Patrick, ever since Chouinard’s first rigid crampons broke back in the 1970s, there have been what I’d call occasional but nonetheless real first-gen issues with Chouinard and BD gear. However, and it’s a big however, this really goes on with all sorts of companies, big and small, all over the world. My opinion is it’s basically part of what consumers need to consider and watch out for when they make the decision to buy first-gen of anything.

    When you see the inside of what it takes to bring something like a ski boot to market from scratch, you really understand how it’s an imperfect world and not exactly easy to hit perfection every time…

    I’m not saying I like this or condone it, I’m just trying to interject a bit of reality.

    And yeah, be it Toyota or Apple, stuff happens…

  13. Lou August 31st, 2010 4:02 pm

    I’d actually like to buy a small chunk of BD stock, but was wondering if that would be boarderline unethical for a blogger? I of course accept their advertising, but that’s not contingent on their products being successfull (at least in the short term). The worth of their stock is directly proportional to how successful their products are, of course, so?

    What do you guys think? Should I buy some or not?

  14. John S August 31st, 2010 4:13 pm

    I don’t see how anyone with a vested interest in BD’s success would have a problem investing in their stock. I suppose you could make a case that you’re favouring one advertiser over another, but given your reputation and past history of unbiased reporting, I don’t think anyone would see is that way.

    I’d rather that folks like Lou bought the stock instead of some big-assed mutual fund that has no interest in the future of the company, and is instead just trying to buy stuff that might not tank.

    But, from an investment standpoint, if you earn your living from the outdoor industry, you might want to buy some stocks that prosper in conditions when the outdoor biz is tanking…

  15. Lou August 31st, 2010 4:15 pm

    Good wisdom John, thanks!

  16. Ben W August 31st, 2010 4:29 pm

    A big part of Black Diamond’s current business model seems to be using the huge distribution that comes with their history of excellent climbing gear.to sell uninspiring ski gear and packs. What makes them special however, is that they also produce unique items such as Avalungs, Whippets and the Couloir harness. I hope the development of such niche products (which I would guess aren’t all that profitable) doesn’t cease. The new Efficency series (well, the boots anyway- what’s with the slalom sidecut on the skis?) suggests that they aim to continue to improve their products, rather than being to content to exist as little more than a bargain brand carried by REI and EMS.

  17. John S August 31st, 2010 7:00 pm

    BD has quite an eclectic mix of products, and they certainly have been innovative in terms of many of their products. I haven’t been too interested in their skis until recently, and the new boots are certainly worth a look.

    However, in the climbing gear section, they have some subtle products that are truly excellent. The OZ carabiner is superb, as is the VapourLock. The Sabretooth crampons are “the standard” for a general mountaineering crampon that can tackle steep ice and rock when thrown at you.

    I have a Squall tent, and so far, it seems to also be up to BD quality and value. I think that buying Bibler was a good move, keeping that brand strong.

    But, I wonder about how thin BD might have been spread until the capital infusion. Developing skis and ski boots is no easy feat (feet? :biggrin: ) and the talent to do this, keep advancing the climbing gear, reinventing the packs, coming up with new stuff like the Avalung (do we see an airbag pack in their future?) and so on can strain a small firm.

    This is why I am waiting to see what happens with BD. They talk about market share advancement by moving into Europe. I hope that this is not at the expense of product development and innovation.

  18. Biggsie August 31st, 2010 10:21 pm

    While I too have issues with growth for growth’s sake, you can’t argue with having access to greater to capital and providing flexible payment terms to the specialty retailers who are the “core” of this business.

    Looking at a seasonal business like climbing or skiing, as a retailer, you’re basically taking $500k at the beginning of each season and investing it in an assortment that you hope turns a profit. I can nearly guarantee that someone like K2 provides more flexible terms than some of the smaller mfgs….and this can’t help but drive sales.

  19. Christian September 1st, 2010 8:47 am

    Peter Metcalf is one of the smartest guys in the outdoor industry with a fantastic track record of growing revenues and market share through smart product line choices and quality design. That doesn’t necessarily equate to success in running a publicly traded company, but I would put my money behind him.

    The real question is what outerwear company are they now going to buy and absorb into the portfolio? Buying Patagonia would be a great twist to the Chouinard/BD history.

  20. Marti September 1st, 2010 9:44 am

    Are you thinking of taking WildSnow.com public? 😉

    “As a publically traded company BD’s monetary situation will be easy to watch, and their product quality will be scrutinized by the web as we know and love. So we’ll be keeping our eyes to the LCD and watch how all this plays out over coming months.”

    Right. Just like housing industry and Enron.

  21. Dave September 1st, 2010 10:18 am

    Hey Lou,

    This is off topic, but will you be getting your hands on the new Marker Tours for a review?

  22. Lou September 1st, 2010 10:20 am

    Dave, in the works!

    Marti, they’re a bit easier to watch than Enron!

  23. Marti September 1st, 2010 11:32 am

    True, they are probably about as easy to watch as North Face was when they went public for the first time… right before they went bankrupt.

  24. John S September 1st, 2010 1:02 pm

    When I see rap music artists with Black Diamond gear on, then I’ll know that BD is officially down the toilet.

  25. Frame September 1st, 2010 2:48 pm

    Lou,
    In relation to your query on purchasing stock in BD. I agree with John S comments. Diversification is a mainstay of reducing risk in investment.

    I also wanted to add that (and this assumes the US system is similar to the UK, apologies for geographical knowledge limitations) as a shareholder in BD you would be able to attend AGM’s and cast your vote in relation to certain resolutions / board membership / executive pay etc etc. Often it’s who turns up to vote (or sends in proxy votes) that gets a say in these things, the market tends to be a bit slack in going along (proxy voting), so it’s possible your vote would hold more weight when cast then the weighting it holds of total shares in issue. You may even get the chance to add your two pence/cents at a meeting, however I don’t think you would get far tabling Ptor’s request for bigger skis…. Being wine/dined by marketing as a valued stockholder would be your best chance on that one 😎

    Regarding your query on ethics, it is a little borderline I suppose, however it’s a free world, it’s your cash and you are always very upfront about acknowledging who you know, what involvement you have with whoever. I would keep reading if you posted blogs on the goings on at meetings, indoor blogging on the outdoor industry.

  26. Omr September 1st, 2010 9:53 pm

    All you hippy-wannabe’s are killing me. Do you really think a privately held entity will hold off on profiteering just to build your skis from recycled New Orleans, post Katrina waste? Riiiight!? Yvon Chouinard, currently, is successful because he knows when to cut corners and when to push an inferior product when it brings in big bucks. Sharks swim in fresh water! Black Diamond is innovative and puts out great gear. If quality declines due to the public offering they’ll merely descend to the level of the rest of the world, but somehow I don’t see that happening.

  27. Bar Barrique September 1st, 2010 10:10 pm

    I think that a specialty products company benefits from private or a majority shareholder ownership. Publicly traded companies (in this niche market) without the anchor of a knowledgeable controlling shareholder, are subject to risks from shareholders who do not understand the “market” of the company they have invested in. This can lead to a downward spiral. I have no plans to boycott BD products. At this point in time; many of them are attractive, however, I have no plans to buy the stock.

  28. Ao September 1st, 2010 11:25 pm

    Must make fatter skis!!!
    Must have fatter skkkkkiiiizzzzz!!!

  29. Wannabehippyskibum September 1st, 2010 11:34 pm

    I wanna be a smelly hippy ski bum this winter and I think it’s spelled chouinard
    Patagucci made an inferior product ?
    Well damn it’s clothing mainly

  30. Lou September 2nd, 2010 7:09 am

    I corrected the Chouinard spelling in Omr’s comment. Not sure if it was intentional or no on his part…

  31. ed September 2nd, 2010 10:07 pm

    who would have thought there was such a wealth of wealth management knowledge here (do you see what I did there?)

    The BD products I have owned have always served me well. From what I have seen and experienced with their winter packs, they are good quality and getting better. Since my income is not tied to the outdoor industry, at least, not directly, I may have to add some BD shares to my portfolio.

    Lou, as usual, I think full disclosure is necessary if you choose to purchase their stock, but it doesn’t seem like you have any problem with full disclosure.

  32. Joel Gratz September 3rd, 2010 10:17 am

    This country is on a mission (from the President!) to increase people’s participation in the outdoors. While is this a great goal, one of the most used phrases I’ve heard when people come back from a trip is “It was awesome out there…I didn’t see anyone else”.

    So how do you reconcile the two ideas: Wanting more people to get outside, but also wanting the trail to yourself?

    This reconciliation also comes into play when many outdoor enthusiasts look at companies. They want access to great gear, but from “local” or “small” companies. But can’t we have it both ways – great gear from big, successful companies? Can’t we still enjoy spending time outside even if we see some other people out there?

    I could care less about the legal structure of a company. If they make great gear and make responsible and ethical corporate decisions – good for them.

    From a market perspective, it’s actually interesting to see companies go public as there is more data about their business available to those outside the company.

  33. Patrick September 4th, 2010 3:37 pm

    Lou,

    I am in no way saying that the climbing line has dwindled at all in terms of the quality. I likely have a half ton or more of BD climbing gear. I feel this quality is achieved and maintained because of the testing and standards that must be passed for the equipment to be sold. I am more sceptical of other products they produce where the testing is more arbitrary. That along with the excellerated way that they enter new markets and product lines. You know the wham bam wow that looks cool man way of things. That being said the BD cool aid is sure hard to put down 😎 .

  34. ffelix September 4th, 2010 3:57 pm

    The problem with “great gear from big, successful companies” is that to be big, you have to sell a LOT more stuff. And BD’s core customer is a pretty rare duck, truth be told. There just aren’t that many trad climbers & backcountry skiers relative to the general population. And I can’t see BD undercutting existing companies to steal market share.

    We’ll see, but I really question the future of this new, larger corporate arrangement. How are current sales going to increase to repay the cash infusion & create a steady dividend? Where’s the economy of scale? They’ve already moved production to China, no potential savings there. Do they start ghost-producing for other companies?

    Seems to me that the most benign scenario is that we are likely to see a lot more high-profit BD branded clothing targeted at the vast pool of the fashion conscious: trendy, non-functional soft goods like those stupid bell bottom climbing pants Patagonia foisted on the market a while back, & “climbing” packs that are utterly useless for climbing. I think headlamps are currently one of their most successful & profitable items, so maybe also more emphasis on general-purpose accessories like that.

    As for expansion, it’s not like there’s some vast untapped market out there. BD is already in Europe where their products are considered desirable, but very, very pricey.

    Should be interesting.

  35. John S September 4th, 2010 5:34 pm

    Petzl has developed some interesting niche markets for climbing gear, including industrial safety equipment and now gear for firefighters. BD can think about some of those strategies. Just pondering…

    Yes, they should expand into Europe, but carefully. BD is a true American company, and they need to make sure they understand the European market before spending money trying to acquire market share there.

    Thinking back to the US/Canada, they play in a competitive market now. A surprising number of firms make backcountry ski gear, and I suspect that margins must be decent. I suspect that this segment is also growing, though it was accurately noted that as a total market, it’s minuscule compared to alpine skis.

    BD needs to steal market share from the existing players by introducing exciting and innovative products.

  36. Bogon September 5th, 2010 4:38 am

    I’m doing system administration to survive in .ua (i’d better do some system programming or networks, or HPC, but not here), and YMMV, but for me, every “new world” Macintosh PoS was nothing but a PITA. Their hardware really started to suck badly circa 1998 when they switched from SCSI to IDE drives (and next year(s) when IBM ceased to supply PowerPC CPUs in such a small numbers), and then sucked non-stop with the introduction of EFI firmware (intel’s tech) in 2006. I don’t even wanna talk about iPoo, it’s obvious.

    As a system programmer, i can tell ya Apple innovated nothing. They, like Blizzard Entertainment, just took other people’s ideas (and code), did some makeup on top of that (like fancy interfaces and proprietary extensions to open source software), removed or hid most “expert” features – and now they sell it retail claiming it is their innovation. How pathetic.

    But why did they took BSD, NeXT and Mach code in the first place? Because their previous OS (Mac OS 6…9, their invention, yeah) sucked badly in all terms – be it kernel, file systems, networks, stability, SMP, whatever. So they took it, added some open-source services with their own GUIs and dubbed it MacOS X. It worked, despite being all old technologies from 1980s.

    As for BD, i cannot see much innovation from them over the last couple of years. Maybe with exception of ice tools (but not picks – Grivel picks seem much more dependable; i’m talking shafts). Sure their older products, like cams, screws, crampons etc were kinda innovative – which year it was, again? Their ski technology tends to lag 1-3 years behind major players (well, maybe new 2011 ski will change that, dunno, didn’t tested them), and i’m tired to hear rumors about top secret uber-classified telemark uber-binding year after year after year.

    Chouinard days are long gone, and now it is just business as usual.

  37. Jon September 7th, 2010 11:28 pm

    Both are great at marketing.

    Apple Engineering > BD Engineering

    Apple Product Testing < BD Product Testing

    (just being funny)

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