From the Top Podcast: Building Canyon Bicycles

by Wade Wallace


In my latest episode of From the Top, I’m thrilled to be able to tell the remarkable story of how fellow VeloClub member, Roman Arnold, founded and built Canyon Bikes out of nothing to where it is today.

To most of us it would seem inconceivable to build one of the biggest bike brands in the world from absolutely nothing. Think of the capital it would require, the global distribution network, complex supply chains, logistics, manufacturing, sales, design … It’s a daunting endeavour and hard to imagine where you’d even begin.

Well, as with most things it didn’t start with all of those elements in mind. Roman simply started cycling as a way of competing for recognition and approval from his father over his three brothers. His father sold bike parts at his weekend races to help pay for the hobby. And the rest is history.

He started from humble beginnings, got his hands dirty, educated himself, and grew Canyon to be one of the largest cycling brands on the planet through baby steps, hard work, diligent spending and most of all, a true passion for cycling.

For a brand that feels so young and progressive, some might mistake it for an overnight success. But as you’ve now learned it’s been over 45 years in the making, one small step at a time with the resources that Mr Arnold has had right in front of him.

This is Roman’s remarkable story of how he build Canyon Bicycles.

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Transcript

Wade Wallace (CyclingTips):

Tell me about your background. How did you get into cycling in the first place?

Roman Arnold:

So when I was 14 years old, I started bike racing and the reason, before I started bike racing, I have to say, I did play soccer and other things, but the big difference in the end in bike racing was that only one guy can win, so when I came home, from my mom, from soccer, okay, my mom asked how was it today. Most of the times, hopefully, I could say we win, but when I started bike racing it was a little different, because they are 80 people, at this time there were 80 guys in a junior race and it took some time before I could say I win or I won the podium, but sometimes it already was good if you were in the Top 10.

But in the end, the story started that I want to show my father that I can do something, so it’s really very personal. So the relationship with my father started really when I started bike racing. So when I started bike racing was 14 years, the good thing was that I could spend more time with my father, because he was really supporting me, going on the weekend with me to the races and I saw that he was very proud when did something good there. We are three brothers, and all of us three brothers try to get the attention from the father and my father, a sales rep for a big American company and we didn’t see him during the week, because he was traveling around, we only saw him on the weekend.

So all three boys, try to get the attention from the father, and when I started bike racing, so I saw, “Wow, I get more attention from my father,” and if something was in the local newspaper, then he says, “Oh, Roman won,” or “He did a good race today,” so this made him very proud so this was really something that I as a young boy want to show to my father that he can be proud of me. This in the end remains a little bit like today, so when I was a good racer, but I never was good enough to go to the Tour de France, but I was good at a local level, so in [inaudible 00:04:24] I was one of the best riders.

I was able to go to some of these junior stage races like [inaudible 00:04:32] which was a famous one in this time, and I was also good enough that when I was 18 years old, when I was called by the military, I would have been able to go to the [inaudible 00:04:47] where I could cycle, so you only have to do the first three months and then they support you in cycling, because you are already in a certain support from the government but shortly after I did my Abitur, which I think is high school or so in the English system before you go to university, my father passed away.

Yeah, and before what I did, even during school, the thing was we didn’t had a bike shop before. My father was a sales rep. We went to the race and after we did this maybe for half a year, my father, said, “Oh, Roman, on one hand, the whole cycling is so expensive, and on the other hand, if we go to the race, it’s boring for me. I’m a sales rep and there was not so much supply on the special parts like Clement tires, there were the first ASSOS shorts, there was at this time, they were the first over shoes so they still wore jerseys. So we started to import things from Italy and sold these things at our trailer at the races, at the small races. So this was how everything started. I raced on the weekend and my father, and later my younger brother Frank and my mother, they sold the stuff on the race.

This is how the business started. Sometimes I took some days off in school, without of course telling the school guys, and I went with my father to buy those things in Italy and this was how everything started. So also my relationship, starting to get so much closer to a father who was never present because he was sales rep and we have to … with our mother. After he passed away and I just finished my school, there was, okay, I had the call from the army to this military cycling division, which maybe could be the next step to the next level, and I could go to university but then after my father passed away, we were sitting there and together with my godfather, decision was made, oh, I had to work in his company and to be a trainee on sales.

Something like this trainee on sales and import, export and in the evening, I did our small garage shed together with my brother and I did this for a while and I think, because for many years, I still want to satisfy my father that I can make something great, so company getting bigger and bigger and bigger. So from a small bike shop, we moved to a bigger bike shop to Koblenz, which was the next biggest town. So first our garage shop was in a town where there’s only 800 people and all from the area, they know, “Okay, here we can buy the custom made Italian bikes from [inaudible 00:08:13], from Pinarello. So we took the orders from our customers, we only had custom built bikes, but already in this garage, after a time I was able maybe to sell 300 custom built bikes a year.

In the evening, after I come home from this education as a sales [inaudible 00:08:34], and then in the next step I had an education as a bike mechanic, because my father had relationship with Mr. Fenda who was a mechanic for the German national team and he also at this time was a six days mechanic for [inaudible 00:08:57] and [inaudible 00:08:58]. So I was able to get a bike mechanic education in his shop. Again, I had to spend my time between this education and working at home and his shop was more than 100k away from my hometown. So I had to do these things.

Then the next step, we had a bigger shop in Koblenz and this also worked well and then after a while, we say, “Okay, we not only want to do retail, maybe we want to do wholesale.” One of my good friends, Jurgen Zack, Jurgen Zack was a famous Triathlete at this time from my hometown here. He was 30 years ago, he was second in Ironman Hawaii, and he was the fastest guy on the bike for a long time in this are. We founded together a company called RTI, which mean Radsport Triathlon Innovations. Radsport means cycling products and he was in winter time in San Diego training there and then we start to import things from there and at this time, we get the distributor for Quintana Roo, which was the first special tri-bike.

When we imported the Quintana Roo bike we sold a lot to some shops but the supply were not like it should be from the United States, and so therefore I asked, we had all these orders but no supply. So I asked Dan Empfield if it would be possible to license this frame and to build it in Taiwan, to make … a little bit more professional way. Before his frames were built in Mexico, close to the Californian border and it didn’t work out really good but the German created all these in standard was great on this bike so he gave me the license but I never had any experience in building these bikes. But for me, it was something, “Oh,” at the time with my father, we went to Italy to import the latest stuff from Italy and sell it at the races, so maybe my new Italy is Taiwan.

So I went for the first time to Taiwan and this worked out. We sold bikes very well but in the end, I had to figure out after a few years that the Tri-mart was a very small market. So we import these things, we also were the importer for Softride. I don’t know if you remember those Softride bikes, the B-bikes.

Wade Wallace (CyclingTips):

Yeah, yeah, how could you forget the Softride?

Roman Arnold:

Yeah, so we were the importer for Softride. We also did Softride bikes in license. Our brand was [inaudible 00:12:14], so we asked Steve Skies … so I had starting getting experience in making bikes in Asia and there I build a lot of connections and then a few years later, my younger brother Frank finished his university and in the meanwhile I did the shop and the wholesale and after he finished university post, our goals was to … yeah. What we started together with our father, we want to continue. But at this time, we said, “Oh, maybe I don’t [inaudible 00:12:52] it. It’s better to keep both business separate.

Roman Arnold:

I do the wholesale business with RTI, with Quintana Roo, with Softride, we were the Speedplay distributor and some other brands. We were the topic distributor, so we want to do the wholesale and I went back to my original second shop. So we separated the business, that he was in charge of wholesale and I go back to the shop and then later, with this experience I had before from Asia, after a while I said, “Oh, I have some experience how to do bikes in Asia, but I all see the big frames I carry it in my shop, which were trek Canyon Dale specialized, some of these guys, their product managers came to ask in the shop and asked us, “What other cool things [inaudible 00:13:56], what do you want to change on our bikes that we can sell them better in Germany.”

Roman Arnold:

So when we investigated this, there was more and more the wish that, “and maybe we can do our own bikes.” So and this in the end was the start of Canyon, that we say, “Okay, with my experience, I had before in Asia and the very good knowledge, because I always was in very much passion with the sport, especially road racing in the beginning.” And therefore, I think we know the demand from our customers very well, because they are still our passion. I didn’t start the business, because I say, “This is a great business, I can make some money here.” No, it’s because I love the sport and I know what my customers want, because, I ride the bike by myself, so I choose the employees around me in a similar way and this is how we started the business in the end. Then from there, we say, “Maybe we can be the new Dell for the cycling industry.”

CT:

Did you have a long term vision and strategic plan at this point or were you just going off gut feel and following the trends and entrepreneurial instincts?

Roman Arnold:

Actually, I have to say, I would say, I’m a typical entrepreneur, so there was not a super big plan, the strategic plan, “Sometime I want to be a global brand.” But there was a plan that I want to have, to create my own brand and to make it consumer direct and to make a difference.” But it was all step by step, it was not made on the big board that I say, “These are all the recipes I have to put together.” It was something like trial and error in the beginning. But or me, it was clear in a similar way and with my father. “Okay, I want to do something outstanding.”

Roman Arnold:

To stand of three brothers, which doesn’t sound … Maybe sound a little bit strange, you have to show something and this was also the big difference I have to say between cycling and soccer. So I would say, “I’m a team player,” but in soccer, say your club they won today or they lose, but in cycling, it’s much more difficult to stand out because there are 50 guys, 80 guys, 100 guys, and only one guy can win, but if you win, you’ll stand out. This was something that was exciting for me and this is still exciting today, because I think Canyon is a brand where competition is still very important for us. We want to win.

Roman Arnold:

This is also what drives us. It doesn’t drive us that we say we want to have a great value bike but it drives us that we say we want to have the fastest bike at Ironman. We want to getting better and better. We want to have the right product for our guys in the World Tour Teams and we listen to them and we need to go to the next level. This is what drives us and this is what started already as a child.

CT:

So the biggest difference between Canyon and most of your competitors is that you’ve held a strong belief in being a direct consumer brand. When did that line of thinking begin?

Roman Arnold:

The first step in being a consumer direct brand was that I went to Taiwan and what I know at this time, that I say, “Okay, I know how a good geometry looks like.” Because we also sold still Italian bikes like Colnago, like Summit, like Pinarello, so we know how the bike felt and we also know what is weight, you know basic things. Like what weight makes a bike stiff and what makes it no so. More or less, our very first bike, they weren’t too special on engineering because we just went to the vendors and say, “Can we … This is a direction we want to have,” but we were very good in spec, so we know all the specs and because we could send it consumer direct, we had a great bike at a great price, but not too special, honestly, I have to say. So these were the very first steps.

Roman Arnold:

Then we brought these bikes to the magazine and asked them to test the bikes and, yeah, we were tested very well. In the beginning it was more like some of the magazines who tested us, they got problems with their customer, because suddenly there was a bike that was riding very well, that was right, that had a great spec, but costs 30, 40, 50% less than a Colnago or a Pinarello at this time. So some of the customers of the magazine, the readers of the magazine said, “How you can test a bike like Canyon, so good, and the price is so low?” This was something what was very difficult to understand and they said, “Maybe they give something to the magazine, otherwise we could not test it, but it was not like this. It was just that we had a good spec-ed bike with the right geometry, with the right features, which somehow was okay for us to make but honestly, it was not too special.

CT:

Why did you choose the name Canyon? Why did that resonate with you?

Roman Arnold:

Honestly I have to say, the very, very first bikes we had but only for half a year, were not called Canyon, they were called Radical. They were called Radical because at this time we were young and we say, “We want to be Radical.” So we had one bike, road bikes with Radical. At this time, buy-ins were very popular so we had the Radical bikes with horn-horns buy-ins and big burrito saddle, but then, actually I have to say, we figured out Radical was too radical, and not in the end what we want to do, so we want to … We were sharpened our vision, what we want to do in the future.

Roman Arnold:

And then we choosed the name Canyon because Canyon is something that is there for a long time. Canyon is something that it’s very impressive. Canyon has a lot to do with nature. It’s very special, so this was the reason and why we choosed Canyon, this was much more special, individual, but also much closer to nature, what we want to be, to outdoor, outside, that you can feel the outdoor. We weren’t really clear if it would work for road bike but we were very sure that it will work for mountain bike. But we were looking for a brand name that can work for road and mountain at the same time.

CT:

With German being your first language, and that deliberate choice of an English brand name, is this when you began to have broader and more global ambitions?

Roman Arnold:

Yes, everything so I did read a book at this time from Steven Covey, which maybe many of you know, and one important thing was to have the end in mind, if you start something, have the end in mind. My end in mind was that I also when that I pretty early, for example, figured out, I need to have the domain Canyon.com. I think 1998, something, I figured out, “Okay, I have a Canyon DE, but then for other countries it was difficult to get the name and I said the only thing I need to have Canyon.com. But Canyon.com already was taken by somebody so I bought it in the US from a broker for something like US$30,000 which was a huge money at this time for us. So this was one thing.

Roman Arnold:

And then I started to trademark the Canyon brand in more and more countries. So even if we were very small, we started to trade market in more and more countries. It was not always easy. There was one big mistake I did in the beginning, so for a long time, we owned the trademark Canyon mainly all over the world, but we didn’t own it in Switzerland, because there was one brand Canyon in Switzerland that trademark names a few years earlier. So very close to us but it was also a small brand we didn’t know so we were not able to sell Canyon bikes for many years in Switzerland. So last year we were able to make an agreement with this guy and now finally, I can say, more or less, I won the name really, a global name. We own the trademark all over the world, but in the end, yeah, you have to work very early on this, otherwise it didn’t work out.

CT:

And you were selling online direct at this time or is this still the vision you had that you were working towards?

Roman Arnold:

No, first we had our catalogs, but then when online came on, we tried to sell online. Yeah, and we had our very first website made by the local guys, then we switched the website to go to bigger agencies. So I would say, we really were very, very early on website. We were very, very early. It was a very simple website, super simple, and for a long time, we still kept our catalog but I think then in the early year of 2000, we didn’t have a catalog anymore. We only had the website and of course, there were some people in the beginning said, “I cannot buy a bike online because I have to test ride it.”

Roman Arnold:

We very early had our PPS system, which was a system to make sure that the customer get the right size, but this was actually not too difficult for me, because when I started my garage, up in the small village, I build a lot of custom bikes. So that bike has to fit to the customer was clear to me and the key measurement is the inseam be measured and hen you meet like the top of your body, the shoulders, you need two, three more measurements and then you can make pretty sure that the bike will fit to the buyer and I would say, mostly our bike fit better than most of the shops, I have to say.

Roman Arnold:

If you can be good and you come to a shop, where I really can make a perfect measurement which maybe can be even more individual and better what we can do online but you also can go to the shop and they’re not really able to sell you the right size. So I would, today with our sizing system which was a very important thing, I would say we are not that perfect like a bike fitter. For me, a bike fitter, which I also was when I started my garage, I spent a lot of time on fitting, that as a bike fitter, I could say this for me is more like I buy a suit custom made for me. But actually, what I figured out over the years, that I not always need custom made suit if I have a good cut, and I know my size very well, it can suit very well. And if I have a custom made suit, for example, and if I change maybe it also not fit.

Roman Arnold:

And also when we started with professional racers, for example, in the very beginning I said, we have to really fit everybody on our bike. In a similar way, which I thought is the best way to fit it to these guys. But then I have to learn that they are very individual and some of them even of the professional riders, fit very special on the bikes, so I said, “These are professional riders.” I give it up to fit them, they should fit them on the bike, but for sure, we have certain things that we can say, usually, this bike side is right for this rider and this works very well, but from my point of view, this is a key also to sell bikes online, to make sure that the clients right bike.

Roman Arnold:

And then if more and more customers are out with the right bike and they have fun, they recommend it to their friends and this more or less is one of the important things why I say we were able over the years to sell many bikes all over the globe, and the customers are happy with our bikes. Because they get a very technical high end bike at a very reasonable price with a super good value, but price is the first thing. We have good price in our bike as part of our distribution system or part also of our thinking.

Roman Arnold:

For us, we say, we developed one slogan, “Democratize performance,” that we say, “Okay, we want to build the best bike, but we want to sell them to our customer at reasonable prices.”

CT:

Right now, Canyon currently has a very desirable brand perception. It’s right up there with arguably the best cycling brands in the world, but as you just mentioned, it wasn’t always the case. You used to be viewed as a value for money brand. What was the turning point and impetus for changing that brand perception around for you?

Roman Arnold:

The turning point, I have … all of these things are very personal and it’s like I told you before, I didn’t make a big sketch and I say, “This is how my company should work.” I’m a good rider, maybe I’m a good entrepreneur, but I’m not an engineer. So the whole thing … but then I told you very first bike, we more or less did together with our [inaudible 00:29:03] in Asia then I hired a famous designer who also worked in the car industry. His name was Lutz Schaeffer and he did great designs on road bikes as well as mountain bike and he had a certain knowledge also about engineering. But then the turning point was when we had to build our first carbon bikes, I have to say.

Roman Arnold:

When we built our first carbon bikes, I would say aluminum is somehow easy to understand but with carbon, with layer up and all these things it’s more difficult to understand and in the very beginning, we had a recall on our carbon bike … It was a carbon mountain bike and the bike under huge extreme condition, the frame could crash, and some of these frames had a problem in the magazine test, which was a big issue for us. There was no customer involved but in the magazine the bike crashed under certain conditions and then we decided to make a recall for this bike where we sold 200, which doesn’t sound too much today, but at this time it was a really big number for us and we were close to getting out of business but what I learned from this thing, I have to get better. I have to get better.

Roman Arnold:

We had a down point here and we were not able to make it right and then we sit down and we say, “What we have to do right?” So at this time, for example, I went to Toho. In Germany, at this time, there were only two Japanese companies who manufacture the carbon fiber the raw material in the end, where the bikes or the frames get made from and I saw one of the … It was Torre and it was Toho and I saw that one of these two companies, they had a subsidiary in Germany. So Toho had a subsidiary in [inaudible 00:31:27] in Germany and I went to Toho after I had this recall and said, “With my designer, we did the bikes and I thought we did it right, but it seems we didn’t do it right. So I want to know everything about carbon fiber now.”

Roman Arnold:

These guys said, “Crazy guy, we are only a sales agency here for Toho,” but they told me, “Oh, and close to you there is a famous university in Kaiserslautern, they are maybe the leading university in Europe at this time for carbon fiber.” Because it was outgrowing [inaudible 00:32:02], it was heavily supported by Bayer SF because it’s close to them. They got a lot of funds from there and so I went to this university and I told the university, “I had this recall. I want to learn. I want to do the best road bike what I can do,” and the professor told me, “Roman, yes, we can help you very well. Maybe you can raise three, 400,000 euros and then we can ask the European government to also support it and we can make a project out of you. We can make a project out of this, also government funded project if you bring some money, we are able to get some money because you are small business and we will develop the carbon fiber bike with you.”

Roman Arnold:

And then this time we learned a lot, we learned a lot with the university together and there was one guy in the university who was in charge of our project and his name was Michael Kaiser. So he developed that first Ultimate F10 bike with us, which at this time was the lightest and stiffest bikes after three year and we really learnt about fiber technology and the guy was making his doctor degree. So this was part of his doctor degree PhD in the university and after he had his PhD, I told this guy, “Michael, do you want to be the leader of the my engineering department?”

Roman Arnold:

He was thinking about it but his professor told him, “You better should take a job at Airbus or at Honda,” which is in Cologne, which is close to us and they had the development center for Formula One. And the professor told him, “Maybe you are the leader of the engineering department, but in the very beginning you are the only engineer.” Actually this was truth, but Michael chose to be the leader of my engineering department. We hired more engineers and today we are group, about 50 guys he is leading. So Michael was a key guy that brought me from a sales driven company with knowledge to an engineering company, and Michael developed a lot of good things and because of his university background, all his engineering knowledge, he was also able to bring the right people to my team.

Roman Arnold:

So today, we have a super strong engineering team and this is because of Michael Kaiser who is a key part of my company, very German thinking engineer and the other thing is I always was interested very well in design, so different from other companies, together with Michael, we also hired, I would say much more designers in my company than in other companies. It’s not only engineers. We also have a lot of designers for each project that in the end, if you see our bikes today, you also see a design philosophy that you can see different bike fit together in a design language we have that Michael also guide. This was the big turning point that we really from a shop driven bike guy, go to the scientific thing and really work in this direction. So I have to give a lot of thank you to Michael.

CT:

Was Michael a cyclist? Did he have a keen interest in the sport or was he interested in the project and challenge ahead of him?

Roman Arnold:

He was different than I. So I was a racer when I was young. I think he didn’t, was a racer but he always liked bicycles. He always liked bicycles but he wasn’t a racer but it was his big hobby was cycling, even when he was a kid. So he was not a racer, but he was a cyclist, very open so there, both of these things coming together. And in the end when I ask him today or a few years later, “Why you make the decision to go to Canyon instead of going to Airbus,” where he has a nice offer, he says, “Roman, finally, it was so exciting for me also to go with you to Asia and this what I figured out was my knowledge, I can have much more influence because I can work on a complete bicycle. In Airbus, maybe I would only work on the last portion of the wing.”

Roman Arnold:

And he says, “This is the job I like,” so this was a great finding for both of us, so I think he helped a lot to develop my company, but on the other hand, I also could help him a lot with the freedom I give him to develop his team and to develop himself. So this was really great for the company.

CT:

How did you raise the money to end up being able to do this university project? Did it come from family and friends, angel investors or was it just from your own profits?

Roman Arnold:

No, actually, I loaned it from the bank. We had some money so we had not a lot of money but I come from very, very small, so I always was educated at home, yeah. I have to save a little bit if I want to spend in the future and if I only have one Euro or $1, maybe I better should only spend eight cents, something like … But then I used some of the money, what I had and tried to … and I loaned it from the local back. I loaned it from the local bank this money and I could convince them that the money will come back, because I already was some years in business, they believed me. I have to say at this time, the local bank had a little bit more freedom and the guys in the bank, they also were cyclists, so this was good for us.

Roman Arnold:

I would also say, these kind of banks we have here in Germany very supportive to local business. So this was really good.

CT:

So it was a good bet then? You saw a return on investment towards creating your own carbon bikes and technology?

Roman Arnold:

Yes, it was like … but I also can … It was not a good bet, I believed in it. I was sure that I can, I have to say, and I was so eager to make the … At the same time, lightest and stiffest bikes and so we were really learning a lot and after we had this bike, the idea was I personally never could make it to the Tour de France, but maybe my bike can make it to the Tour de France and so I said, “I want to sponsor a World Tour Team,” and our very first World Tour Team was not a really World Tour Team, it was Team Unibet, who was racing, riding in the big races but they did only three or four races because then they were not allowed to race anymore, because of the Belgian Lottery, they said, “Online betting companies should be not allowed to advertise.”

Roman Arnold:

So we put the money in the team and it didn’t work out so this was again another lesson, but one year later, I was able through this to sponsor the Omnica Farmer Lotto Belgian Team and in this team Cadel Evans was, Australian guy and Cadel, I would say was not always the easiest person for us. Cadel in this year want to win the Tour de France and we had a time trial bike at this time. I have to say, that time, we had this great Ultimate Road Bike which from my point of view at this time already was maybe one of the one, two, three bikes in the panel and it really was a great bike, but our time trial bike, 18 teams, I would say maybe were number 12 from performance.

Roman Arnold:

And Cadel complained a lot with the team, he said, “I cannot win the Tour de France with this bike. There are other bikes in the [inaudible 00:40:49] that are faster and more or less the team pushed me very hard and make a huge battle. They say, “Buy the bike from the other company and just paint it Canyon.” And I say, “Sorry, we will not do it. This is something we will not do. This is against our philosophy. So this is our bike, we tried to make it as good as …” So we tried to change some details and … but anyway, it was not the fastest bike but what we did at this time, the goal was we want to have fastest time trial bike in the world.

Roman Arnold:

But unfortunately Cadel was not able to ride it because he went to BMC and it took us three years to make this bike, because we all did it very scientifically, said, “Okay, before I start it, I don’t copy anything. I want to know more how aerodynamics in cycling works.” So we did a lot of studies, we went to the wind tunnel. We did simulations in the computer. We bought the software to do all these things, but it took us three or three and half years to have the first bike, but in the end, we had a super fast bike, which help us to get finally guys like Jan Fordino, to guys like Patrik Gana but in the road field also, but in the end team like Movistar, a few years later, would say, “Okay, time trial is very important and we are always looking to win the Grand Tours or to be very good in time trial is a big thing.”

Roman Arnold:

So in this way, your Australian guy help a lot to get better, because we were pushing so hard and we really want to understand it and proudly I can really say, everything we do today on our bikes we really understand. We really understand, and we want to go to a limit but not going on a trend. We have a clear idea what is right and what is wrong for us.

CT:

But you did have a big success at that time. I mean Cadel Evans winning the World Championships on your bike in 2009, how did that feel?

Roman Arnold:

I was there in Mendrisio and on this day I was so proud. I was so happy. It was a greatest day at this time in my life, I would say. It was unbelievable but when Cadel came from the race, we wanted to do some pictures with Cadel and Cadel already was very strange. He didn’t want to have … our bike, because already two, three weeks before he signed a big contract with BMC. He won World Champion on our bike but the jersey you could see one year later on BMC, the only race he raced on our … Was the World Champion jersey was a Tour of Lombardia, yeah. So it was a strange thing for me, but we learned a lot from him.

CT:

You did keep that bike, though. I’ve seen it in your showroom in Koblenz.

Roman Arnold:

Yes, yes, yes.

CT:

Does it make you proud when you look at that bike?

Roman Arnold:

It was a important moment for me and I’m still very proud I have the bike here. I have Cadel’s signature but I would say, the second World Championship we won on the road and fortunately I also was there when Violetta was World Champion last year in Innsbruck, makes me even more proud because this was on a different level, also on a different connection with the team all over the years. Yeah, but these moments are really, really great moments for me in life. I also was a Harrogate this year, and I have to say there was one round to go and I will say, “Wow, it looks like we will be World Champion this [inaudible 00:44:41] this year.” It was 13k to go and then suddenly 10k to go. I said, “Oh, there’s a problem with the bike. Maybe he has a flat tire. Maybe there’s a problem with the shifter or whatever?” But in the end, he just ran out of [inaudible 00:44:57] …

CT:

You appear to have a very close connection from a sponsorship point of view anyway with Mathieu van der Poel, and he’s clearly a good man to get behind. What in particular excites you so much about him?

Roman Arnold:

He still has this kind of likeness. He is still a big child. You really, really see that he loves and enjoys cycling and he enjoys cycling in any kind of area. So you can put him on a road bike, you can put him on a mountain bike, but he even likes to go on a downhill bike. He complained to us, he said, “Oh, you promised to give me a downhill bike, so far I didn’t have my downhill bike yet.” He goes on downhill treks because he loves any kind of racing and he is so light in the race and on the other hand, he has a huge pressure on the race because he has already some expectations they have to him, but he can handle it in a very light way.

CT:

With a guy like van der Poel, riding your bikes, does that correlate directly to sales? Can you say that? I mean your Lux Cross Country Bike is a bike that always seems to be in high demand and hard to get. Is it safe to say there’s a strong correlation with sales and sponsoring someone like van der Poel?

Roman Arnold:

It has been a correlation with sales, if the bike is great, and I would say the Lux Bike it’s really, really a great bike and together with Mathieu van der Poel, it works good for us. [inaudible 00:46:35] can say this for Speedmix bike together with Jan Frodeno, but it has to be right on both sides. It has to be right on both sides. Also our … The In Flight Mathieu van der Poel is riding in the Cyclocross races.

Roman Arnold:

Actually, it’s a very innovative bike which before might be also some risk. It has steeper angles like other bikes, it’s corners a little bit more agile, so it was not the regular bike he was used to but Mathieu van der Poel is also a guy, he ride it and he is not afraid. He ride it and he can say, “I like it,” or “I like it not.” But if he likes it, he is so self confident that he says, “It’s right for me.” And now after two, three years, I can say that the team, for example, is super happy with this kind of bike. Before, maybe other teams would have said, “Maybe this is too extreme from geometry for us.”

Roman Arnold:

And sometimes you have to be ahead and Mathieu van der Poel really support this. He also supported when we bring a new bike. For him it was never something to be on a disc. Some other guys in other teams, for them it was more big transition to be on a disc bike and some guys told me in another team that they, “Roman, it’s difficult for us to race on a disc bike because the bike is 250, 300 grams heavier right now. It’s a road [inaudible 00:48:10]. It’s a bigger hubs. We cannot win a race on this bike.” But Mathieu van der Poel can win many bike races on this bike and he never ever thought about it, because of course, this bike has other advantages in rain, in other situations, but he never … He thinks about the find the opportunities, what can go and he is not thinking, “Oh, because I don’t have this and that, maybe I will not race.”

Roman Arnold:

He is so self confident in his self that he can enjoy the whole cycling sport and this is, yeah, I don’t know anybody else today who has this fun and charisma like van der Poel. You also know when you see it in the races. He always gives 100% and maybe more than 100% in the very end and if he is on the podium, and if he is second, it’s really like a [inaudible 00:49:08] if he is second. Maybe he is very close to tears and everybody else, if he would be second on a mountain bike race behind Schurter, he would say, “Wow, I’m so close to Schurter.”

Roman Arnold:

But for him, he says, “No, I want to win the race. It’s clear, the way I want to win.” That is also he wants to stand out but it’s not in a way that I push so hard that I have to do it. No, it’s more, it looks more easy from his side. It’s more like a game. It’s more like a child is playing a game and I’m so excited and maybe these other things in the very beginning by … Even if it’s a professional rider can go out of bed early in a race like Harrogate because he was so excited about the race.

CT:

Well, it shows how hard the race was, doesn’t it?

Roman Arnold:

Yeah, yeah.

CT:

So circling back to you and your journey with business and Canyon, did you grow in your early days on retained profits alone or did you have to go and seek outside investment to get unstuck from those awkward stages of growth that many businesses go through?

Roman Arnold:

The growth in most of the years was always make some money and take all the money and risk it for the next step. So this was ongoing for 15, 20 years. When we went, when we made the decision finally we want to be a global brand and global, the last big step for global means for us that we want to go to the United States, finally, I had to recognize it’s better to also have a, beside my own money to have an investor in the company that helps me to fund the business but also helps me to be better organized as a global business. So around three years ago, I sold one part of my company to a investor who helps me to grow the business to a global business. But before it always was, even if the business was already at a big level, every penny, every money we make, 100% invested in the company.

CT:

So you sold the stake in the business to TSG Private Equity in 2016, I think? I imagine you had many conversations with different options for investment. Why was TSG a good suitor for you?

Roman Arnold:

I have to say for many years, I was approached by many private equity companies. I choose them because in the end, I had the feeling that this is a company who wants to help to grow the business and not say okay, we have to save money, we have to have a better margin here. No, they are more in the way that I say whatever things we have to do to grow the business and they help us to investing in the right things. And it was a process I have to say that that took two and a half years and TSG always came back and they say, “Roman, we understand you are not ready yet. Is there something, if you want to do something in the future, we are there.”

Roman Arnold:

So it was a relationship building from them also for a few years, for two years in the end and then when I say, “Okay, now is a time we have to go,” there still were some other options but actually I have to say, I’m super, super happy with TSG. This was a great decision from my side, because they helped us in many areas, they helped us also to make a success in the US for us, which as a German company is not that easy, but after two years in the US, I have to say we exceeded all our expectations there.

CT:

Do they provide expertise and resource around e-commerce that’s benefited Canyon? They have a portfolio of heavy hitter consumer brands like BackCountry.com, so I assume they do.

Roman Arnold:

This is one of the benefits from them, this is one of the benefits. They help me … Before I told you it made a big difference when I hired Michael Kaiser as a key engineer in my company or now the head of all engineering, but TSG also helped me to hire more of these guys in different area, to strengthen each area and maybe in the beginning I would not be open to spend open to spend so much money for the right guys in every area. So we strengthened a lot of our team, like in a soccer team, if you want to go from national level to global level, want to play in the champion sweep, yeah, you have to have the right team together.

Roman Arnold:

We build up a better team in every area, which finally you also then can translate in the business that we get over the time better in customer service. We get better in supply chain. We get better in all these project management areas. They help me to get confidence to build a stronger team in my company and to sort of develop the culture but they also help me to do the right investment in online digital things. I’m very happy with choosing these TSG guys as my partner.

CT:

The summer of 2015, I visited your showroom a new assembly factory in Koblenz and you also had another temporary assembly factory that I didn’t get to see. I think it was like an old Coca-Cola factory or something. At the same time, you were also migrating over to SAP. What was that time like for you back then? It looked like the business was going through a massive transition at the time. Can you tell me more about that time?

Roman Arnold:

This was a super challenging time for us, so this was also one of the biggest steps we had to do, so we went from a normal factory … and the factory we had before and the old factory, we built the bikes in a much more simple way and now we had a super advanced factory which we want to change and the factory is oriented on car industry which many digital things in the same time we made the move to SAP. And actually, I have to say, it didn’t work out in the beginning. It didn’t work out in the beginning because maybe we did too many things at the same time, but again, I would say, what is different in Canyon and also from this thing, we learned from our mistakes.

Roman Arnold:

So for me, the big challenge was this was not a critical point in my company, but I say, “Okay, what we have to learn from this and what the key learning from this is if we do this big projects, we have to have a much better project management.” So the reason in the end why it went very well for us in the US, because then we’ll really planned like a huge company, our entrance to the US. It was a one and a half year project, with maybe 100 guys in the wealthiest professional project management and I would say we tried to do this when we did the new factory and the SAP, but in a totally different way than we do it today.

Roman Arnold:

So this was also a time it was critical for us and this was also the time when TSG came in, but for TSG it was clear that we will overcome these issues and this is also what I say for me, personal relationship and partnerships are very important and they also in this difficult time react like a partner and they give us support to over come this problem, instead of saying, “Okay, Roman, now with a new factory, maybe you are losing every day money because it didn’t have the output we were looking for.” We had some issues with our customers because we were not able to deliver the bike in time, but we did a lot, a lot of improvements in this are.

CT:

From memory, you ended up coming out and publicly apologizing for a lot of these missteps and growing pains you were going through at the time. With you happy with the way you handled it or in hindsight, would you have done it differently?

Roman Arnold:

I would handle it the same thing. So I have to apologize and then I have to improve the same. In the new factory, I can tell you we were planning to produce 300 bikes a day but we were only producing 80 bikes and when I asked … and it was not on purpose that we delivered too late to our customers, but when I talked to my team, and the team, everybody gave the best in the team. I’d ask them how long it will take to go for 80 bikes to 150 to 300. They say, “Roman, give us another four weeks and we will improve it,” and yeah, but after four weeks we went from 80 to 85 and then maybe we went to 120 and again back so it was a longer issue.

Roman Arnold:

And today, I have to say, it was not SAP what was wrong, it was just that we were not professional enough to handle this thing at this time and this is most of the time when you do a … I would say most of the companies who do a IT change, a big IT change like this, then suddenly, it’s everything’s process driven and since I’m the entrepreneur from the beginning, it was not everything process driven. It wasn’t [inaudible 00:59:02] driven, but we overcame all these things today. We are proud to have a factory that runs far more than 300 bikes a day and it’s getting more smooth and smooth, yeah.

CT:

Now you’re a 100% direct consumer business and to my understanding you only have two showrooms, relatively new one in the US and the original in Koblenz, Germany.

Roman Arnold:

Yes.

CT:

At one time you were very set on the idea of not having a physical presence all over the world. Is this a strategy you’re starting to reconsider?

Roman Arnold:

No, I think this is the way to go. I think if we want to be, for example, more successful in Australia, it would be good to be closer to the market that also people can more feel and touch our bike so I think what we learned from Carlsbad in the United States that it’s a good idea to have more showrooms, but it’s not that we are planning to have several hundred shops, but we are planning in each of the markets to have also a physical presence in the future.

CT:

Are sales stronger where showrooms exist?

Roman Arnold:

Yeah, I would say, this helps a lot. In the end, it’s a whole trust thing that you can feel and touch the things. But I even would say, my personal feeling is if I know there is a showroom in this country, and I see that the showroom is working very well, even I have a better feeling if maybe I cannot go to the showroom right away, because maybe the showroom is in Sydney and I live somewhere else but I have a feeling that also other people going to the showroom can help this physical presence to make this brand closer to the customer and the people in the showroom, of course, they get the physical experience and this is a way we want to continue in the future. I think this is no secret, this works in many industries.

CT:

Being a direct consumer brand that you personally created from nothing, you don’t have any filters and gatekeepers that the traditional model of using distributors and bike shops have. I mean when people criticize Canyon for issues, they come directly to Canyon, whether it’s on the forms or social media and that. I imagine many of your customers can also access you directly? I mean your email address is easy to figure out so how do you deal with that and do you ever take that personally?

Roman Arnold:

It’s a part of the business. I have to say, in the beginning it was very difficult for me, but actually today, nobody likes to see that somebody is criticizing you publicly. Sometimes, it’s the critique is right, but sometimes it’s also not in the right way and it’s also very personal from the guys but in the end, I have to say, I really appreciate when I got the feedback direct for the customer. This helps us to improve and this is a way to improve the business, yeah.

CT:

I think it’s safe to safe that Canyon’s one of the more innovative bike brands out there, you guys do a lot of interesting things. I mean everywhere from the shape shifter on your mountain bikes to the crazy grail handle bar design. Tell me about your first reaction to the design of the grail when it was first presented to you. How did it come about and what did you think at first?

Roman Arnold:

Yeah, with the grail, I have to say, it was maybe much more easier than you think it is. They didn’t show me the interim steps of the grail. We have a way that when we develop a new bike, there’s a product managers in the team, the engineers are in the team, the project managers are in the team, and the designers. So they developed it but there are certain steps where they have to show the bike to the top management and especially to me. So there was a final presentation of the bike and of course, I was very surprised. I said, “Whoo.” Doubledeck handle bar, oh, it surprises me but when I go deeper into it, actually, I was super, super proud on my team.

Roman Arnold:

And even if I know it’s somehow risky, because it’s a polarizing bike, I saw all the advantage and it got free within the same meeting, so I went out of this meeting and I say, “I’m so proud to have good engineers but also hear to have this very innovative designer in this team,” and the designer, yeah, is maybe not afraid to go over the edge or to really go far and I’m super happy that I say, “Okay, let’s go for this project.” I, personally, this is my favorite bike. I ride this bike.

Roman Arnold:

I ride also now in Girona, because I like Girona area very much and there are a lot of gravel bikes, so this is my gravel riding. This is my bike I have stored in my Girona room and it’s a great bike and I don’t want to have any other gravel bikes. But of course, some of our customers, they say … and I also see all the advantage, which I don’t want to go into now this bike, but they are some other customers, they say, “I will wait for you to have a more normal handlebar.” We have the aluminum one with more handlebar but we also will offer as a second option, very soon a carbon bike, with a more normal handlebar, but I personally think, still the Grail is the best bike which also will continue in the next few years, so but I’m happy that we go, that we not only do what people expect us to do. That we have the confidence that we can do something more.

CT:

Maybe a couple of parting questions for you that are more reflective on your whole journey with Canyon. Would you do all this again, if you knew what you were getting into from the beginning?

Roman Arnold:

Yes, I would have done it again, and actually, I have to say, even with some obstacles in this, it’s still so much fun every day. It’s a lot of fun, and yeah, I would done it again, again, and many things I would have done in the same way, with getting more experience and older. Of course, some things, I would have done differently but more or less, I would done it again and I’m so happy and thankful that I have the opportunity to do this.

CT:

One last question that I always like to hear people’s responses on. How much do you put down to Canyon’s success to hard work, luck, and smarts?

Roman Arnold:

I would say, I would add one more. Maybe if you say, I would give one third to all of this, we have to work hard, but you have to have lucky. There are so many critical situations like in a race. To win a world championship, to be in the [inaudible 01:06:39] over years without bigger injuries, we have to have luck. You can be the best rider but you have to have luck also, but you have to train hard. We have to work hard and then you have to be in the right team, so when you say, smart, in the end it’s a team effort, so if you be able to build a team to make the right partnerships, with internally good people, with companies like TSG, with industry partners, so all these things have to come together. So I would say it’s one third, one third, one third.

 

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