SRAM: A Bike Parts Tour de Force

By all rights, Stan Day should have failed. Yet here he is, taking on the two longtime leaders in bicycle components, with a shot at breaking away

by Robert Berner

Twenty years ago, Stanley Day Jr. was out of work, bumming around the ski slopes of Utah with his best friend, when he came up with an idea for what he might do with his MBA.

Day cycled to train for triathlons. What bugged him about road bikes was how they forced riders to reach from the handlebars to the frame to shift gears. Why not create shifters at the end of the handlebars? he proposed to his friend, Sam Patterson, as they rode the chairlift. Patterson, an engineer, agreed, went home, and made a prototype in his garage. Along with Patterson, Day teamed up with his younger brother, Frederick, and three other pals to launch SRAM—an acronym of the first and middle names of three of the founders—in 1987. They called their first product Grip Shift.

It was a bust. Cyclists, loyal to the world's leading brands in bicycle components, Campagnolo and Shimano, didn't like the looks of it, even if the technology made sense. SRAM planned to sell 100,000 shifters its first year. "We sold about 800," Day says.

Rich Rivals

Since then, Day has turned Chicago-based SRAM into a manufacturer to be reckoned with in bicycle components—the gears, derailleurs, brakes, and other parts that make a bike work. After catching up with Shimano in the business of mountain-bike components, SRAM in 2006 vaulted into the rarefied parts market for road-racing bikes, the familiar sleek machines of the Tour de France. And last summer one Tour team used SRAM components for the first time. "Believe me, that's as difficult as getting an NFL franchise," says Alex Wassmann, SRAM's racing program head.

The privately held company's sales have risen at a 15% to 20% clip in each of the last five years, to $318 million for its fiscal year that ended last June 30, according to Day, SRAM's majority owner and chief executive. He declines to discuss profits, but says SRAM is in the black.

Against Japan's Shimano in particular, though, SRAM faces a competitor with deep pockets. The publicly traded company posted 2006 sales of $1.54 billion. It spent more than a third of SRAM's revenue—$122 million—on research and development and marketing alone. "They are not really credible yet," says Joe Vadeboncoeur, director of product development at bicycle maker Trek, producer of the frames Lance Armstrong rode to a record seven Tour victories—with Shimano components.

An Atypical Vending Machine

SRAM also competes at the high end with Italy's Campagnolo, whose stylish components have a decades-old racing pedigree. While Shimano is far bigger, its parts don't have as much design flair. The Japanese company would be the Lexus of the bike industry, to Campagnolo's Ferrari. Day knows SRAM's position in the hierarchy of desire: "We are Porsche."

You won't find many cars at SRAM's headquarters on the Near North Side of Chicago. Nearly all the office's 100 employees pedal to work, including Day, who is 51. Expensive road and mountain bikes clutter the place. Day himself doesn't work from a regular desk or office. Six-foot-three and fit, he uses a drafting table in the open. Walls, he says, would cut him off from co-workers. Or the beer vending machine, where employees can buy cold ones for 75 cents after 5 p.m. Or his view of the bike test track, which runs the circumference of the interior.

Day didn't set out to be in the bike business. After getting his master's degree from Northwestern's Kellogg Graduate School of Management in 1984, he went to work for electronics maker Molex as a marketing manager. He left in early 1987 to buy and run a company for his father's mobile-home business. But when that deal fell apart only a week later, Day found himself unemployed.