• Dr. Günter Kast

A man mobilizes.

Commitment. <font color="#ffff00">-=Der Familienunternehmer=- proudly presents Day (right) provides people in developing countries with bicycles. But his World Bicycle Relief is supposed to be more than an aid organization. This is why the co-founder and co-owner of SRAM, the second largest wheel component manufacturer in the world, combines his humanitarian program with an entrepreneurial approach.

It's more a "tank" than a bicycle: the Buffalo Bike weighs a full 23 kilos, the frame and spokes are made of hardened steel. It's got no gears and just a simple coaster brake. Its design is reminiscent of a Swiss military bike. "But for Africa," says Frederick King Day, "it's the right vehicle."

The luggage carrier can withstand loads of up to 100 kilos. Rims and tyres are heavy, but puncture-proof. And it makes sense to do without a circuit because the dust on the rarely asphalted roads of the Black Continent would attack the cables.

His passion for bicycles has made Frederick King Day - or F.K. as everyone calls him - wealthy. 40 years ago, together with his brother Stan and other comrades-in-arms, he founded the Chicago-based bicycle component manufacturer SRAM (see box, page 103). "We were dissatisfied with the standard circuits. That's why we developed a rotary handle," he sums up her innovation briefly. Today SRAM is the second largest component manufacturer in the world after Shimano. Brother Stan still works as CEO. But F.K. is gradually withdrawing from the operative business. He concentrates on World Bicycle Relief (WBR) and the Buffalo Bikes.

It's not like F.K. was desperately looking for a charity. "After the tsunami that struck Southeast Asia in late 2004. My first impulse was therefore to collect donations and send them to non-governmental organizations (NGOs)," he says: "But I quickly noticed on the spot what was missing most. The helpers were not mobile, could not even penetrate to the victims. That made me think. After all, I had been working in the cycling industry for more than 20 years at that time, and every day it's all about mobility that's as simple as possible".

To his wife, documentary photographer Leah Missbach Day, he said: "Let's do something that has a more lasting effect, where we can bring in all our experience". With a bicycle, an individual could travel four times the distance in the same period and transport five times more than on foot. And it is much cheaper than always calling for new airports, railways and roads.

With further donations from their network in the bicycle industry, the two of them are making a total of 24,000 bikes, purchased in India, available for Sri Lanka. There the bikes become the drive of the disaster relief. "That was the birth of WBR."

As a result, various NGOs asked to transfer the project to Africa. "But there it didn't work at all at first. We tried to work with bicycles that were available locally," explains F.K., "but they were cheaply made and soon broke apart. "Highly complex bikes from the industrialized countries were even less of an option.

The Days decide to develop their own vehicle. Today the frame is built by bicycle manufacturer Giant in China, the parts come from suppliers worldwide, the Buffalo is assembled locally in Africa by mechanics who train WBR with donations. "The wheel must therefore also be simply constructed. Each of the mechanics must be able to repair it and have the right spare parts ready at all times."

A programme initiated by WBR together with the Ministry of Education in Zambia is an example of what such an idea can achieve. With the help of donations, they distribute Buffalos to teachers and schoolchildren in the countryside, primarily to girls, because they are particularly disadvantaged. "They have to help in the household early in the morning, then often walk several kilometres to school on foot. When they arrive there, they are too tired to concentrate on learning," says F.K..

With the wheels you can avoid miles and hours of walking. A school board decides who gets a bike. "And he also makes sure the parents don't resell the bike or ride the brothers into the pub with it."

It is important to remember that sponsoring does not mean giving, there are strict conditions. "We're signing a contract with the future bike owners," F.K. explains. It says, for example, that in the next two years a child will have to travel to school regularly and punctually or a nurse will have to deliver medication reliably by bicycle.

If the contracting party adheres to this, the bike becomes the property of the contracting party after a period of time has elapsed. If the contract is broken, it can be withdrawn by a committee consisting of moral authorities such as the village elder and the priest. "It doesn't happen often, but it's happened before," says Day. Other NGOs would have copied this approach in the meantime.

The fact that such a project can work also has a lot to do with the F.K. network. So far, the entrepreneur himself has put a lot of money, time and commitment into his heart's project.

He also receives great support from SRAM customers in the bicycle industry. After all, the component manufacturer supplies parts to more than 30 large two-wheeler manufacturers - including top dogs such as Specialized and Trek or the Dutch Accell Group, which owns Winora in Lower Franconia. All these customers do not help with money, but also with know-how. Your donations will immediately be reinvested in new projects, especially in bikes. "There is therefore no large endowment fund that needs to be administered," explains F.K..

Another special feature of the initiative: Only about half of the bikes that had been sent to Africa so far were financed by donations. The other half was sold on the open market through WBR's local for-profit sub-company, Buffalo Bicycles Ltd.

By African standards, the bikes are expensive. They cost the equivalent of 165 US dollars - for this the people in Zambia, where most "buffalos" roll, have to work for several months. F.K. thinks this is okay, because it turns a bike like this into a prestige object that everyone wants to have and which he therefore pays particular attention to.

This is also an important lesson for imitators: a product, whether donated or purchased, must be of high value. Many NGOs that send discarded consumer goods to the so-called Third World in the industrialised countries do not meet this requirement. Success proves him right. In fact, the wheels are in great demand because they can carry a lot and are reliably repaired by the WBR mechanics. At the same time, they closed a gap because the African market is of little interest to globally active wheel manufacturers.

The aim of this strategy is that the traders who offer the "buffalo" will one day not only operate on a self-supporting basis, but at the same time make so much profit that they will again be able to finance wheels for those who cannot afford them. "I imagine we would have delivered a million wheels. And 200,000 of those were distributed as donations. That would be wonderful, a real dream."

For it to be fulfilled, as many of the bikes as possible must be sold via WBR's social enterprise subsidiary Buffalo Bicycles Ltd. because only then will the cash flow remain within the organization. After all, WBR is their sole owner. External bicycle dealers, on the other hand, naturally keep their profits and do not finance the WBR programmes.

In Zambia and Zimbabwe the model is already working very well, in Kenya and Malawi it obviously has potential. Only in South Africa, where WBR competed a good five years ago, things are tough. F.K. doesn't know exactly why, but the country is already more motorised and cycling has no great tradition there either. This was probably a relic of the apartheid era, when it was simply too dangerous to leave one's township on a two-wheeler. The US American learned an important lesson: "Every country is different, has its own peculiarities. If you don't take them into account, you lose."

Currently about 350000 Buffalos roll through twelve African countries. They make people mobile, create access to schools and health stations, to AIDS drugs. Over the years, the Days have learned that WBR is more efficient when it works with other aid organisations and does not see them as competitors in the fight for donations. In Zambia, for example, WBR cooperates with USAID and its RAPIDS program, which trains volunteer nurses to manage the AIDS epidemic in the country through education and drug delivery. WBR provides the volunteers with wheels so that they can reach remote villages without wasting valuable time marching for hours through the savannah.

Time is also a critical factor for Zambian dairy farmers. Before the "buffalos" appeared, they carried the buckets of fresh milk on foot to the dairy. It took a long time, the milk often became sour, and they could transport a maximum of 30 litres. Now they use two 50-litre cans, which arrive at the dairy in no time at all on the stable luggage racks of the wheels, even on the most brutal slopes.

The result: better quality, better prices for the farmers, higher output for the dairy. Farmers who could not afford a bike were given microcredits, and WBR worked with the Vision Fund to provide them. "F.K. is pleased to say: "Together we can boost the local economy": "But we will only really reach our goal when the farmers no longer need our bikes, but can buy a small truck from the additional proceeds to deliver the milk." "The farmers will be able to buy a small truck with which they can deliver the milk.

WBR employees record the change for the better with valuation reports. For the Palabana milk cooperative in Zambia, the statistics since the start of the project five years ago show: 25 percent more milk delivered, farmers' income increased by 23 percent, transport time to the cooperative shortened by 45 percent.

F.K. sees the most important reason for these successes in the fact that he did not rely on the classic recipes of development aid. "It could only work because we got into the African economy." He means above all the social enterprise model through which the Buffalos are sold to the local population. "This puts us under a certain amount of financial pressure. As a company, we have to make a profit. Those who think of money simply work more efficiently. So we can certainly apply the successful strategies of the Western market economy here."

In the meantime, the international business elite has also become aware of WBR. F.K. teamed up with the major bank UBS and its Optimus Foundation to launch a study to document the progress of the program, analyze failures and propose improvements. At last year's World Economic Forum in Davos, they jointly launched the Davos Challenge and equipped the WEF participants with odometers. For six kilometres travelled - that is the average distance to school in the Republic of South Africa - one pupil received a Buffalo Bike there. Even UBS Chairman Axel Weber joined in. In total, more than 1200 kilometres came together - and 200 more "buffalos" were on the road. ®


From zero to the highest gear - the SRAM story.

The idea to found a company for bicycle components came from the ex-triathlete Stanley Ray Day (picture below), who couldn't cope with his Shimano gearshift during the race training. Their innovation was a practical twist grip for bicycle gears, the Grip Shift.

Stanley and his brother Frederick King Day, called F.K., come from an entrepreneurial family. Her father was chairman and owner of Champion Home Builders, a manufacturer of mobile homes. The two brothers teamed up with designer and engineer Sam Patterson and lawyer Scott Ray King, the sextet was completed by Mike Mercuri and Jeff Shupe. The name SRAM is an acronym from the first and middle names of the three founders Scott King, Stan Ray Day and Sam Patterson.

Pictures from the company chronicle show them as casual sportsmen who screw the first parts together in shorts. The Grip Shift was developed at the end of the 1980s for racing bikes and triathlon bikes, later also for mountain bikes.

From the mid-1990s, the company began to expand its product range through its own developments and brand acquisitions. In 1997 SRAM took over the bicycle division of the German company Sachs, which had been building hub gears since 1907. For this purpose, SRAM built a new factory with a development centre in the Maintal industrial and commercial park in 1999. The hubs were manufactured entirely in Schweinfurt, whereby the majority of the individual parts were produced in-house or purchased from Germany and other European countries. In 2002 the suspension fork and damper manufacturer RockShox was swallowed, in 2004 brake manufacturer Avid. With the purchase of Truvativ in 2005, SRAM was able to expand its portfolio in the areas of bottom brackets, cranks, handlebars, stems and pedals for mountain bikes. In 2007, the US company Zipp, which manufactures wheels for racing bikes, joined the company.

Today more than 3800 employees at 17 locations in 13 countries develop and produce SRAM products worldwide. Nevertheless, SRAM did not succeed in overthrowing industry leader Shimano. But SRAM is, albeit with some distance, the number two in the world.

Stanley Ray Day is still CEO of the company. His brother F.K. leads the aid organization WBR. Both are majority shareholders of SRAM with their families. The rest of the shares are held by managers and deserving ex-employees.


Comparison: Spende against social entrepreneurship.

"The story of F. K. Day is inspiring," says Felix Oldenburg, "and it is exemplary. Denn entrepreneurs like him are increasingly looking for entrepreneurial strategies to contribute to a better world instead of just donating".

Such "social entrepreneurs", according to the Secretary General of the Federal Association of German Foundations, would, however, still have great reservations: Can money also be earned with help? Instead of giving simple answers, Oldenburg suggests asking better questions:

"The first is after the problem itself and its market environment. Can the problem be solved by a market mechanism? This is not the case with many challenges relating to civil rights or corruption, for example. Donating to a good NGO is still the means of choice here. Philanthropists can now do their homework well on the Internet.

Then at the other end of the profit scale there are areas such as renewable energies or broadband expansion. To support them without a refinancing business model would be a questionable use of resources or often a project that misses the point.

It gets interesting in between: An idea has a market at some point, but it may not pay off until later, or its added value is so distributed that refinancing becomes difficult. Here it is important to find a balance between the donation and the investment.

The still new field of "hybrid finance", i.e. the financing of such business models between patronage and the market, is therefore the most interesting challenge from my point of view. Entrepreneurs with good ideas like F.K. There's plenty of Day. But the financing is often lacking.

Philanthropy has become confusing. Anyone who takes the impact of an idea seriously should also make its growth possible. Business is one of the ways to achieve this goal. At the same time, however, we also need those who donate for basic needs and the prerequisites for markets. Playing them both off against each other would be stupid. But it would be just as stupid not to ask the social business exactly."


Author: Dr. Günter Kast

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