How to Build a Pandemic-Proof Business: Lessons from Indiana
Uncertainty remains the dominant narrative in the American economy. While advances in technology had previously made more globalized operations possible, the COVID pandemic, unfortunately, revealed how unstable “lean” and “just in time” processes might be. Biden and Congress aim to incentivize and sustain reshoring, leaving American companies to decide if it’s time to reverse course. If they want to know how to do it, I suggest looking toward northern Indiana Amish country.
80% of all recreational vehicles are manufactured in Elkhart, a city with a population of about 53,000 some 150 miles north of Indianapolis. And, though not immune to material and labor shortages, RV manufacturers nonetheless shattered previous production records in 2021. Wholesale shipments of RVs in North America hit 602,200 units last year — a 40% increase over 2020.
Indiana has led the RV industry since the 1940’s, benefitting from Michigan’s nearby burgeoning auto industry and growing interest in domestic travel for leisure, as well as the vigorous efforts of several entrepreneurial individuals seeking to recreate the joys of the frontier wagon in the age of the car. By 1948, Elkhart had claimed the title of “Trailer Capital of the World.” Unlike the Michigan automotive sector, however, trailer and motorhome producers maintained their foothold in the Midwest.
Elkhart companies have since consolidated the market. Thor Industry alone owns half the market, and Forest River has about a third. Both northern Indiana brands benefit from operating in a state that remains the leading manufacturer of steel and second largest manufacturer of automobiles. One out of every five Hoosiers works in manufacturing of some kind. RV production alone adds $32 billion to state GDP annually, and that number is rising fast.
The industry had been showing sustained growth when COVID hit, which created new tailwinds for the industry: gas prices plummeted, travel by airplane or other public transit options was limited and generally undesirable, and lockdowns inspired millions of Americans to collectively yearn for the van life. Plus, being “Made in America’ also means avoiding significantly less time wasted waiting for products to clear the Port of Los Angeles and 9x price raises in ocean shipping.
And yet, RV manufacturers are not resting on their laurels. The regional continuity that enabled enduring success also instills a certain caution. Where wave after wave of competitive forces swept jobs in automaking, electronics, and apparel-making to increasingly far-flung locations, the stalwart RV workers of Elkhart weathered each boom and bust. Even when it was painful. Elkhart county had the third highest in the nation during the 2008 financial crisis.
To meet Americans’ growing desire to pack up in motorhomes, the industry will need to continue to adapt — semiconductor shortages and the future of work will certainly be challenges. But RV makers are dedicated to maintaining the critical features that allowed for sustained success during crisis and uncertainty. It requires a willingness to make difficult decisions and a ton of patience to build something that lasts.
Striking the right balance between transformation and consistency is an art and a science. In venture capital, it can sometimes be easy to get caught up chasing the shiniest products and hottest trends. Working closely with many of these types of Midwest companies, though, reminds us to keep an eye on the constants. Striving to improve techniques, processes, and products, to compete on a global scale is not the only guarantor of success. Business leaders must also be genuinely connected and committed to the values and needs unique to the localities in which they operate.
