Viewpoints: Lack of innovation explains collapse of Briggs & Stratton

Other companies better learn that lesson, or they will follow suit

Last updated on August 6th, 2020 at 12:51 pm

Kathleen Gallagher
Kathleen Gallagher (Photo: Rick Wood)

Briggs & Stratton is our canary in the coal mine. The fundamental problems that pushed the 100+-year-old company into bankruptcy will devour many other Midwestern businesses if we don’t begin steering differently.

Some want to blame COVID-19, convinced it’s the perfect villain, the reason for Briggs’ collapse. But as Vincent Shiely, who ran two of Briggs’ product groups in the early 2000s, said in a recent LinkedIn conversation, “It’s more complicated than COVID.”

“There are many who say that under a different path this would not have happened,” added Shiely, now a partner at Lubar & Co.

That different path is called innovation.

The company that in the early 1950s revolutionized the lawn and garden industry by developing the first lightweight aluminum engine this time failed to innovate.

Sure, Briggs added new features to its products and more recently laid out plans to push into commercial battery power, but the company never drove the kind of transformative innovation that could have helped it grow beyond the reach of the challenges it is facing.

That failure to innovate sprang from a misguided vision. Todd Teske, Briggs’ chairman, president and CEO, and his board of directors, made the fateful decision to continue providing returns to shareholders rather than plowing money into new product development.

Briggs has spent $167 million on research and development but $239 million on share repurchases since its 2012 fiscal year, according to securities filings.

With no major product innovations, operating margins — profits after the cost of production — declined. Briggs’ operating margins fell to -3% as of June 2019 from 13% as of June 2002, said Richard Wamboldt, a student in the Investment Management Certificate Program at the University of Wisconsin-Milwaukee.

Essentially, Briggs has been losing money on the products it sells.

Wamboldt, who spent the most recent academic year studying Briggs, said there were many external factors that contributed to the company’s problems.

“They got the worst of the worst,” Wamboldt said. “Out of any company I can think of they were dealt the worst hand.”

According to Wamboldt, external factors that walloped Briggs included: Rising steel and aluminum prices; a decline in brick and mortar sales; extremely unfavorable weather patterns that disrupted seasonal sales; a bankruptcy filing by Sears, Briggs’ largest customer; the trade war with China; and of course, COVID.

Hindsight is 20/20 vision, but if Briggs had been innovating, its path may have looked quite different.

All of this is easier to say than to do. Companies in this area of the country — and Briggs is no exception — generally have much narrower profit margins than big West Coast tech companies, for example.

But the fundamental job of a business is not to produce pretty financial ratios and keep costs in line. It’s to develop an ever-growing portfolio of products that more and more customers want to buy.

It’s to do what Briggs used to do: disrupt the market with innovative products that sell. That’s why Tesla has a price-to-earnings ratio of 700+ vs. Briggs’ P/E ratio of…well, it doesn’t really have one anymore.

Here’s where we get to the important part. Briggs & Stratton, the world’s largest manufacturer of small gasoline engines and employer of around 5,000 people, including about 1,300 (down from as many as 11,000) in the Milwaukee area, agreed in its bankruptcy filing to sell all of its assets to a New York private equity firm for about $550 million.

Nothing we can do about that. But hopefully — now that the canary has died — we can leave behind this obsession with financial engineering and focus more on innovation. Focus more on the kind of new product development — maybe even through regional collaborations organized to use new technologies to solve big problems — that scales businesses.

Scaling businesses is, in fact, the topic of a discussion I’m moderating on Aug. 13. I’ll talk with three business people who’ve spent their careers successfully scaling companies: John Byrnes, chairman of 5 Lakes Institute and founder, retired chairman and executive managing director for Mason Wells, a top-tier Midwest private equity firm; Tom Erickson, founding director of UW-Madison’s School of Computer, Data and Information Sciences and former founding board director, chairman and CEO of Acquia, a Boston firm that sold a majority stake in late 2019 for $1 billion; and George Roberts, partner with Open View Venture Partners and former EVP North America at Oracle, where he was responsible for more than $1 billion of revenue.

Please join us. It’s free to attend the virtual 5 Lakes Chat @ Badger Startup Summit, but you need to register here.

Kathleen Gallagher is a Pulitzer Prize-winning writer and executive director of the Milwaukee Institute, a nonprofit that supports advanced technologies and high-growth businesses to help the region thrive. She can be reached at

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