The Rise & Fall of TaylorMade – Part 1: Building an Empire

In the span of just a few short years, TaylorMade sales jumped from just over 330 Million to nearly 1 Billion. This is the story of how it happened.

Unless you’ve been in a cave for the past several months – likely longer – you know that TaylorMade is mired in its own private recession. Its two-year funk is the reason why adidas is on the cusp of disposing of what, not that long ago, was one of its biggest assets.

A few short years ago such a thing would have been unimaginable.

In 2013 TaylorMade was the industry’s $1.7 Billion juggernaut, the undisputed King of Metalwoods; churning out one #1 driver after another.

$2 Billion was in its crosshairs.

And yet, here we are. Three short years later, there’s a For Sale sign up at the Kingdom. The clock is ticking on TaylorMade as we know it.

Although the company remains a force in metalwoods, TaylorMade’s luster has most definitely faded, and nearly everyone has a theory as to why.

We’ll dive into that part of the story later. For now we’ll focus on how TaylorMade captured the throne in the first place, and how two monumental innovations permanently disrupted the golf industry.

The Making of TaylorMade

“We didn’t give a damn about social niceties.”

In 1999, TaylorMade was a copper-colored, bubble-shafted, third place also-ran. Within 3-years time it would transform itself into adidas’ shining star and the equipment industry’s undisputed top dog.

To fully understand that transformation, you need to understand the dynamic in Carlsbad from 2000 to 2002. You also need to know a little bit about the people who led TaylorMade to rapid, unprecedented growth, while at the same time permanently changing the way golf equipment is made, marketed and sold.

The decisions made, strategies launched, and products designed during that three-year period fundamentally changed the golf equipment landscape, and the impact of that change is still being felt today.

In 1999 TaylorMade’s annual sales were in the $330 Million range. The brand focused on a broad audience, selling moderately priced equipment to recreational golfers. New owner, adidas (which purchased TaylorMade and its parent company, ski & outdoors giant Salomon in 1997), brought a new management team to TaylorMade: Robert Erb as VP of Global Marketing, Mark King as President and Jim Stutts as CEO. In the months that followed, everything – and we mean everything – changed.

“The golf industry at that time was in this very predictable path,” Erb told MyGolfSpy. “TaylorMade was positioned as a mid-priced, game improvement club and we were a distant third behind Callaway and Titleist. So the question was ‘how do we shake this up?”

The strategy, which remains to this day, was all about moving metalwoods. Back then, business as usual for the industry was to first launch a metalwood line with titanium heads and then roughly one year later, re-release a steel-headed version of the exact same product. Steel clubs cost less to produce than titanium. The lower selling price made it an excellent value proposition for the budget-conscious consumer.

Rocking the Boat

With its competitors content with the status quo, TaylorMade’s new leadership team saw an opportunity to grow, and grow fast. For that to happen, boats needed to be rocked, and that’s exactly what TaylorMade did.

“There were all sorts of underlying assumptions that had to be challenged”, said Erb. Why are you doing this steel thing? Why not go from titanium to titanium? People were saying ‘because that’s the way we’ve always done it.’ But it’s getting you nowhere in terms of market penetration.”

Erb, who is now CEO and President of Schutt Sports (football helmets, etc), recounts that screaming matches, near fistfights, and long hours were the norm at TaylorMade back then. “We were the outsiders, coming in from adidas with various backgrounds and meeting up with authentic golf people,” Erb said. “Jim Stutts gets a lot of credit for creating a balance. It wasn’t 100% questioning everything, but at the same time there wasn’t something so steeped in its own nonsense and locked into traditions and respect that you couldn’t move.”

“There was screaming and yelling and throwing things, but in the end it led to giant leaps of innovation and growth.” – Robert Erb

That new energy and new creativity joined forces with a blatant disregard for the status quo. And that led to a bit of attitude.

“We created an environment where Callaway was the enemy,” said Erb. “We built a belief system that being number one in metalwoods was our birthright, and that it had been wrongly taken from us. We created a mythology that Ely Callaway was an evil man and had ripped this away, and the arrogance of Acushnet and their white jackets and that we were right and they were wrong. We were about success on the golf course and they were about social niceties. We didn’t give a damn about social niceties.”

That crucible of ideas, energy and attitude was ready to explode and knock the golf equipment industry on its ass.

Monumental Shift #1

In 2001, TaylorMade introduced the 300 series of drivers. The 300 is significant because it may very well have been the first time that marketing and retail channel sales strategies drove innovation and product development.

Remember 2001? There was still a ton of equipment being sold in on-course proshops – what the industry calls green grass accounts. In the time before big box retailers, the biggest threat to green grass was Nevada Bob’s, one of the original nationwide golf retailers. Bob’s offered a broader selection and better pricing, but couldn’t offer the same level of customization. The on-course guys focused on custom fitting, while off-course retailers were busy doing the titanium to steel two-step. Dick’s was just getting started in golf and the idea of internet as a viable sales channel was still mostly theoretical.

TaylorMade’s team read the tea leaves perfectly. They foresaw the slow decline of the on-course pro shop, the rise of big box golf and sporting goods retailers, and the coming omnipresence of the world wide web. To fully satisfy those channels, the idea of mass customization was born.

“The first thing we asked was ‘Why one head? Why one club?’ Why would one club be the solution when you have a barrel-chested guy or a pencil-thin 6’4” guy? Why would both be swinging, effectively, the same club when we had all this data that suggested the opposite, that they had different needs?” – Robert Erb

So by early 2001, two years worth of screaming matches, status-quo busting and a near-manic product development pace, TaylorMade had kicked-in the doors with the 300. The 300 series featured 3 separate models (300 Ti, 320 Ti and 360 Ti). Each distinct from the others; offering unique size, shape, weight distribution, lie angle, and shaft length.

Prior to the 300 Series, any level of customization and fitting was done by the on-course golf pro. Now, for the first time, a golfer could walk into a brick and mortar retail shop and, in theory, find a driver reasonably well-suited to his particular game. Before 300, you either went the full fitting route via the local pro, or you chose from the single retail model from your favorite OEM. The only choice was titanium or steel.

Could an OEM actually succeed by releasing three drivers at the same time, each aimed at a different type of golfer? As today’s standard practice, TaylorMade’s model may not sound particularly innovative, but one needs to remember, this had never been done before. It was crazy. It was radical.

And it was stupid successful.

The Stutts, King and Erb troika took over in ‘99 and by the end of 2001 they transformed TaylorMade from a $330 million industry participant into a $552 million technology and marketing leader. For those of you scoring at home, that’s a 66% increase in sales in a little over two years.

“It started to work,” says Erb. “Tour talent started coming on board. We gave up the sacred Bubble shaft, we started caring about what people thought about color in clubs. We got faster with graphics and we changed the logo, which was dusty and ugly and needed to be modernized. We shook up the sales force and we changed the way we went to market.”

Then came 2002.

Monumental Shift #2

The 300 Series was a radical departure from the sacred way things had always been done. So what does one do for an encore? You double-down on crazy. The industry expected TaylorMade would follow up with a steel-headed 300 at a lower price point. That’s what everyone in the industry was doing, because that’s what everybody – TaylorMade included – had always done.

The days of the doing the same ol’, same ol’ were over at TaylorMade. Instead of doing what was expected of them, the company took the bold step of skipping steel, instead introducing the R500 series; a completely new and innovative all titanium product line.

“That shocked everyone,” says Erb. “If you go back and read Golf Digest or all these other trade publications, people were outraged. Callaway was fit to be tied with this breech of protocol, this craziness.”

We did, in fact, go back and check some of those trade publications. This is from an October, 2002 edition of GolfWeek:

“Some retailers are still irate at TaylorMade for introducing the R500 when inventories of the 300 Series remain high. Several have accused TaylorMade of ‘loading up’ retailers with the older line as late as this spring and accelerating the R500 line so TaylorMade could continue posting impressive sales results. According to sources, TaylorMade offered retailers deals that were too good to pass up: a chance to buy large quantities of 300 series with numerous incentives, including a discount off the invoice, another discount for timely payments and a rebate to help pay for local advertising. After they placed their orders, retailers allege TaylorMade blindsided them with news of the R500 summer debut, rendering their recent 300 series purchase virtually obsolete.”

Does any of this sound familiar?

You can’t understate the significance of the one-year jump from the 300 to the R500. The R500 was a major leap forward in technology and innovation. TaylorMade introduced its Inverted Cone Technology, which expanded the sweet spot (work OEM’s continue to pursue to this day), and the R580 was TaylorMade’s first driver to crack the 400cc barrier.

At the same time, the market was flooded with discounted 300 series drivers. It was a buyer’s paradise – you could get last year’s technology at a relative bargain, or buy something that was actually demonstrably better, albeit at a higher price point.

“As you cascaded in price point,” says Erb, “you could narrow the product lines. The 300 series didn’t have to be full-range any longer. It didn’t have to be from 7.5 to 14 degrees on a driver. You could narrow that to a 9, 9.5 or 10-degree loft. You could tighten because now you’re going into mass channels where people didn’t have the time to be fit and your excess inventory could be liquidated in a variety of channels, including the internet.”

Cascading technology, or cascading pricing, is the practice of introducing new technology at full price while discounting – and liquidating – the previous year’s products. It’s the industry norm now, but in 2002 you couldn’t even call it heresy because it had never been done before. This monumental shift in business practice was very much the creation of the Stutts/King/Erb leadership, and what made it all possible was the fact that, at the time, each new club represented a measurable – and meaningful – leap forward in technology. TaylorMade kept coming out with must-have products; the result of aggressive, market-driven product development efforts.

“At its peak, that’s when things got crazy. All the other majors, as things start going wrong, they can’t follow. Cleveland starts falling off, Cobra is sold off and everybody decides they’re not really understanding what’s going on at TaylorMade. They just see product launches and they start throwing everything out there, too.” – Robert Erb

At that point, TaylorMade was playing chess while everyone else was playing checkers.

It’s Just Business…

In business, the bottom line is, well, the bottom line. You have to sell the product you make and when it comes to market share, you have to play offense and defense at the same time. For half a decade, nobody did that better than TaylorMade. The company’s sales jumped nearly 130% over that five year span. Sure, some of that growth is attributable to an expanding market, but a sizable chunk came directly out of the other guys’ hides.

TaylorMade’s early-century strategy didn’t just alter golf’s existing business model, it obliterated it; forcing competitors to either follow suit completely or, at a minimum, adapt to the new marketing reality. The alternative was the scrap heap.

Consider the fall-out from TaylorMade’s aggressive new model: Callaway went into a decade long profitability funk, Acushnet sold off Cobra to focus on the Titleist brand, and Nike, even with Tiger Woods and all the money in the world, was never able to establish itself as a serious player. Other perennial leaders, such as Wilson Staff, slipped into the shadows while smaller brands, such as MacGregor, disappeared completely.

The term paradigm shift is a trite business cliché, but in this case, it’s no hyperbole. By 2004 TaylorMade was the leader in metalwoods, not only in sales, but also in technology. Sales reached $775 million in 2004 largely on the back of the R7 Quad, the company’s first driver to offer movable weight technology.

“We created this machine – and it was a complex machine,” says Erb. “When I left (in 2004) we were at $775 million and heading upwards. The machine was hitting on all cylinders. Within a year of my leaving they were up over $1 billion. They were eclipsing adidas North America pretty quickly.”

And that’s when everything started going sideways.

In Part 2, we’ll examine how TaylorMade went from being adidas’ Adonis to its albatross. It’s easy to place blame – as many do – exclusively on rapid release cycles, but that would be an oversimplification and a mistake.

In the real world, it’s always a lot more complicated.

READ PART 2