SRAM Acquired Ochian: Why it Matters, and How It Strengthens SRAM’s Positive Feedback Loop.

SRAM announced last week that they acquired the European chainring manufacturer Ochain. What's special about Ochain’s products is their chainrings are two separate pieces that are allowed to move semi-independently of each other, allowing the rear suspension to be decoupled from the drivetrain in a way that was not possible before. The Ochain saw fast adoption by riders who wanted to get the most from their bikes' downhill performance, and it's commonplace on the downhill and enduro World Cups. For this reason, it's not surprising that this company attracted interest from the larger bike component brands, and SRAM has a strong track record of acquiring companies with whom they can expand their offerings. So I was not surprised to hear the news that SRAM acquired Ochain. In regards to this acquisition, there are a few effects that we can expect to see: firstly, we will see more bikes come stocked with an Ochain; secondly, SRAM will likely integrate this technology into their larger ecosystem; and finally, we should expect to see SRAM continue to make the best products until there is a major shift in the cycling industry.

SRAM has a large B2B business where they sell components to bike manufacturers for complete builds. SRAM can leverage their scale and relationships with these other brands to push the Ochain to be spec'd OE (Original Equipment) on more bikes. This could mean that we will see many more Ochains over the next few years; just like how the dropper post was originally an aftermarket upgrade product, then once they started to come already installed on bikes, their popularity really exploded.

If a brand chooses to include an Ochain with the purchase of a bike, it would allow their designers to optimize the suspension around the Ochain. The Ochain impacts the suspension in a significant way, and is another tool that engineers can use to design a bike to ride specifically how they want it to ride. I believe that for gravity-focused bikes, this could unlock another level of performance from the bike.

SRAM is also in a position to integrate the Ochain in a more streamlined way. SRAM has a large ecosystem of products, and they would be able to build the Ochain directly into a crankset in a cleaner way. However, the level of integration could go well beyond aesthetics.

One of the biggest downfalls of the Ochain system is that it adds some play into the drivetrain so that when the rider starts pedaling, there's a little bit of slack in the system before the power gets to the back wheel. Ochain knows this, and on some of their models, there's a switch that can lock the system out for climbs or trails that require more pedaling. One of the biggest ways that SRAM could revolutionize this product category in a way that no other company could is if they make an electronically actuated version of the Ochain. This could mean that the rider could manually lock out the chainring wirelessly from their AXS shifter pod. Or, even more impactful, SRAM has the option to build it into the Flight Attendant system and use the data that the suspension sensors are constantly gathering to auto-lock and unlock the chainring depending on what is happening on the trail. This would do a good job at removing the downsides from the Ochain system, while still keeping the benefits.

On an industry-wide scale, this acquisition is another data point that makes me confident that SRAM is only going to continue to widen the gap between what they can offer and what the rest of the competitors can offer. SRAM has continued to show that they are willing to invest with the goal to expand the capabilities of their brand, and in doing so, continue to compound on their strengths as a business and make the best products. They are doing an excellent job at using their scale both to offer products at the most competitive price points for performance bike parts, and using their scale/expansive product catalog to integrate the whole bike ecosystem in ways that no other brand can. 

What is scary about this is that it is a positive feedback loop where the better products that SRAM makes, the more they can sell, and the more money they can spend to make their products even better through R&D or acquisitions like this one, which would only lead to stronger sales. SRAM can theoretically continue this loop (that has worked so well for them already) indefinitely. However, the world works in unpredictable ways, so who knows what unexpected event might happen to put SRAM back on their back foot and open the door for other companies to get their moment to shine.