"Gun companies want to make profits, not create great products"

[GJM]

I saw reference to this in a thread today, and it comes up periodically.

Gun companies, like other companies, want to earn profits. That is what corporations do. The question is how do you best "make profits." Some think that the best way to maximize profit is to short change quality or not invest in new products. My belief, is that the best way to maximize profits is to make great products and continue to make new great products. When companies cut quality and fail to innovate, I view that as a failure of leadership, and not some crafty profit maximization scheme.

Thoughts?

[jeep45238]

I think a lot of people have unrealistic expectations, and haven't worked in manufacturing, marketing, and accounting.

End of the day, we tend to get a few categories of products that actually sell to the masses:

1) a cheaply price, fairly made product
2) a consistent product
3) an improved product, at a minimally incremental price

A single small part change can take months to years depending on how the company is setup, how many subcontractors are in the mix, etc.. This is why things are generally not revolutionary.

The truly revolutionary products don't really sell that well - Look at the Luago Alien or the Archon pistols, Lucid cars, etc. They're priced to keep the company afloat, but the initial investment hasn't been paid off yet, and the demand isn't there to start looking at higher volumes (which tend to reduce prices). This may come as a shock to some, but a successful company never pays for any of this initial setup, it spreads those cost out across it's customer base in the form of increased prices. Fewer customers = more price discrepancy per change.

What you or I want may not sell at high enough of a profit margin to keep the company afloat, because we can't provide enough profit margin to offset the tooling, R&D, engineering, marketing, etc., of the new product line.

The products that take a bit more of a generational leap, and are cheaply priced, tend to get ignored as there's corners being cut somewhere. The LCR used to be priced well below a J frame and regularly on sale, and now it's priced at or above a Glock.




If you have the ability to do market research, find an existing product that can be tweaked slightly, and provide an answer/product for an ignored portion of the population - you'll have a winner. And that's a lot harder than people think.

[MTP]

I agree.

But you are in a jam once ignorant shareholders (who only care about profiting short term) demand better profits NEXT quarter, not next year or five years from now.

[GJM]

I think a lot of people have unrealistic expectations, and haven't worked in manufacturing, marketing, and accounting.

End of the day, we tend to get a few categories of products that actually sell to the masses:

1) a cheaply price, fairly made product
2) a consistent product
3) an improved product, at a minimally incremental price

A single small part change can take months to years depending on how the company is setup, how many subcontractors are in the mix, etc.. This is why things are generally not revolutionary.

The truly revolutionary products don't really sell that well - Look at the Luago Alien or the Archon pistols, Lucid cars, etc. They're priced to keep the company afloat, but the initial investment hasn't been paid off yet, and the demand isn't there to start looking at higher volumes (which tend to reduce prices). This may come as a shock to some, but a successful company never pays for any of this initial setup, it spreads those cost out across it's customer base in the form of increased prices. Fewer customers = more price discrepancy per change.

What you or I want may not sell at high enough of a profit margin to keep the company afloat, because we can't provide enough profit margin to offset the tooling, R&D, engineering, marketing, etc., of the new product line.

The products that take a bit more of a generational leap, and are cheaply priced, tend to get ignored as there's corners being cut somewhere. The LCR used to be priced well below a J frame and regularly on sale, and now it's priced at or above a Glock.




If you have the ability to do market research, find an existing product that can be tweaked slightly, and provide an answer/product for an ignored portion of the population - you'll have a winner. And that's a lot harder than people think.

I agree with a lot of what you say. However, I would say that having "unrealistic expectations" is the mark of a great leadership team! The safe answer is generally "no," but great products and companies come out of figuring out how to transform no into some form of yes.

[LHS]

The majority of people want cheap. I can't count how many gun shop owners have told me that they sell a bajillion Tauruses and HiPoints to offset the Daniel Defense or KAC ARs that hang on the wall for months at a time before someone buys them. Same thing with just about any commodity. You don't see the average drinker buying 18-year MacAllan, they buy a case of Milwaukee's Worst or maybe Bud Light if they're feeling flush on payday. The same holds true for most consumer goods.

[jeep45238]

I agree with a lot of what you say. However, I would say that having "unrealistic expectations" is the mark of a great leadership team! The safe answer is generally "no," but great products and companies come out of figuring out how to transform no into some form of yes.

I'm splitting that into the separation of company management vs research and development.

A company generally wants to make a "good enough" product - not the optimum product for a small section of the population. R&D's job is to work ahead of that curve.

Might have an amazing idea, but manufacturing techniques can't make it without being absurdly priced yet.

The ability to additively manufacture, in addition to traditional machining, EDM, is going to drop pricing after the machines are large/fast enough to support production.

As an example - KOENIGSEGG can 3d print a complete, assembled turbocharger for a hypercar. That's amazing - and it's not cheap (yet). When will it be cheap? That's the billion dollar question.

[jeep45238]

I agree.

But you are in a jam once ignorant shareholders (who only care about profiting short term) demand better profits NEXT quarter, not next year or five years from now.

Those are speculators, not investors. Investors are there for the long haul of discounted future cash flows.

You can really see it if you look at the stock price charting of POWW vs RGR.





As clarification/disclaimer, this is not investment advice, I am not a finance professional, and I have long term holdings in RGR, SWBI, and POWW, of which are an incredibly minute portion of my investment portfolio.

[okie john]

I could bang on about this for hours. I’ve had the good fortune to work with some genius-grade C-level people in the last few years and I agree with you 100%.

In manufacturing, facilities can constrain innovation or they can enable it. I hate to see Remington leave Ilion for sentimental reasons, but a state-of-the-art factory will free them from a lot of infrastructure debt. If nothing else, Eliphalet Remington’s ghost won’t be looking over their shoulders as they try to solve problems.

In the video interview, the Lipsey’s guy said that they were able to make these revolvers essentially because some time had come up in the J-frame production schedule. That tells me that S&W’s production planning is badly constrained on how or when they can make upgrades, updates, and changes.

I see two reasons why this is happening.

First, the videos show a LOT of hand work forging frames, which could be completely automated in a more modern facility. If they’re hand-forging frames, then they’re also doing a lot of other hand work that could be automated. That tells me they’re not leveraging CNC machinery and computer-aided design the way a company like Tikka does as a matter of course. The ability to make a run of 500 pieces with this level of customization should be a core competency for the leadership, product, and engineering teams, and the marketing team should be telling them when it makes sense to do it.

Second, S&W isn’t just failing to innovate—it’s actively ignoring decades of progress in the custom sector. Smith semi-autos have worn Novak sights for decades. How tough is it to dovetail a revolver frame for those sights? Why did it take 40 years plus @Dagga Boy and @Lost River to make this happen?

Again, it’s leadership. When I was working in the field with clients trying to sell strategic technology work, I routinely ran into a generation of people at and just below the C level who were about to retire. They were loathe to rock the boat. They didn’t understand what we were trying to offer them and they didn’t want to. Our work could have pushed their cash-out packages through the roof, but they would have had to buckle down for a couple of years to drive it to completion.

A regrettable number of them chose to let innovation be the next generation’s problem. On their last day, I think that a lot of them straightened their monocles, put on their top hats, and got into their horse-drawn carriages for that last trip down the corporate driveway.


Okie John

[mmc45414]

Gun companies, like other companies, want to earn profits. That is what corporations do.

I tend to use the term Coin-Operated.
And people tend to bemoan sales (I work in sales) and marketing, but if the most wonderful product doesn't generate any sales it means bumpkiss when it is time to make payroll. But few firearm products seem to be developed with generating sales in mind. So you get things that must have been developed in a room with no windows with no concern for a target selling price, and then get thrown over a wall to a sales team that is expected to pull a rabbit out of a hat.

I think the market has a void for DA/SA pistols, that IMO would be great for new shooters, but the market keeps launching more and more striker guns. Honestly if I were in the business I would probably be supportive of producing valid variations of quality striker guns.

But the innovation seems too often be radical departures, but occasionally an enthusiastic product developer with an ear to the ground like @Ben_G gives us an evolutionary product like the A300-UP. They combined elements of several established products into a combination that hit a bullseye. The mold for the forend was a big expense, but otherwise just transferred some existing 301 stuff over to the A300 that was being made in Tennessee so 922r compatibility is simple. Seems like examples like this are rare.

ETA: I think Mossberg Optic-Ready shotguns are significant, and the cover plate with a peep sight is a great idea.

Surely Gaston Glock benefitted greatly from not being an industry veteran.

[1911Nut]

I saw reference to this in a thread today, and it comes up periodically.

Gun companies, like other companies, want to earn profits. That is what corporations do. The question is how do you best "make profits." Some think that the best way to maximize profit is to short change quality or not invest in new products. My belief, is that the best way to maximize profits is to make great products and continue to make new great products. When companies cut quality and fail to innovate, I view that as a failure of leadership, and not some crafty profit maximization scheme.

Thoughts?

I spent my entire professional career focused on product quality and customer service. And I spent that time in a career, that was, in my opinion totally devoid of it when I started in 1969 . . . mining. The attitude was that we were dealing in a commodity (copper and precious by-product metals) and it was worth the current commodity price, so there was little, if any value in making things better.

The mining folks dug the ore and waste out of the ground and either hauled it to a waste dump, crusher or a heap leach location for further treatment. The timing or specific placement of the ore haulage were never factors, although they were critical factors to their internal customer at the ore crusher or the leach pads. That was repeated by the crusher and the leach operations . . process the product as quickly as possible and "throw it over the fence" to the next internal customer, as the key performance indicators for them was to get the product out the door. With each progressive step, the quality became more critical, as eventually most of the produced product was headed for an OUTSIDE customer, and they (smelters, rod plants, electrowinning facilities and electrorefining facilities often had no 'fence" to throw their product over!

Things eventually begin to change in the late 70's and early 80's when mining folks began to compete against producers from South America and other parts of the world and when end users also began competing against "the world" and demanded higher quality copper-based product at lower prices. The automobile industry is a prime example of such customers, but there were many others, including the telecommunications industry.

Frankly, it is my belief that the mining industry was caught flat-footed by the changing world, international competition, and demand for quality. I was fortunate enough to be at the right place at the right time, with extensive experience in the parts of the industry that had no "fence" to throw subpar products over. So I was personally eager to learn as much as I could about what could be done to change the attitudes and approaches.

I am certainly not among the smartest folks in the world, but the recognition of the importance of quality in ALL parts of our daily work in ALL departments across ALL trades and skill sets, along with employee engagement and buy-in led to a quite successful 40 year career for me. And it was mostly common sense, but also convincing the teams I worked with over the years that there was true value in "doing it right the first time". I am completely certain that more than once, recognition of that fact saved many jobs and more than a few entire operations.

I could go on about this for literally hours, but suffice it to say, that I agree 100% with George. However . . . I also feel that other forum members who have observed that "folks just want cheap" are dead on, too. If they weren't we wouldn't have Walmart, Dollar Store, HiPoint, Ikea, Harbor Freight, et. al. We live in a disposable society today, despite the capabilities to make some of the best products in history (if we could only afford them). A benefit is that when one actually does come across a product or service that truly is of outstanding quality, that product or service really, really stands apart from the "accepted norm".