From Good to Great
Building a New Dealership Culture Using Technology
By
Becky Chernek
In 2001, Jim Collins, coauthor of Built to Last and former faculty member at Stanford’s Graduate School of Business, authored another best seller entitled Good to Great. In it, Collins explores how certain “good” companies were able to break through to become “great” companies, and then went on to remain great for many years (i.e., Walgreen’s versus Eckerd). He learned, through his extensive research, that the distinction lay in the character of the companies’ leaders. He learned that great companies don’t have at their helm the typical and famously characteristic super CEOs or managers . . . the ones who are always featured in the business news and whose egos are prominently displayed. Level 5 leaders, who are necessary for any company that wants to reach the “great” category of achievement, are those who are ambitious for the success of the company and not for themselves. They are ordinary, self-effacing individuals who also have firm resolve. They are able to make tough decisions whenever necessary . . . for the good of the company. When these leaders retire or move on to other positions, the companies remain great. They remain great, according to Jim Collins, because the companies’ Level 5 leaders had focused on three key points, which he called the Hedgehog Concept of intertwined circles: what they were deeply passionate about, what they could be best in, and on what drove their economic engine.
What does a discussion of Level 5 leaders and great companies have to do with a local car, RV or marine dealership’s Internet and finance managers? Everything. The marketplace for selling vehicles of any kind and vehicle products has drastically changed in the past few years. It has become abundantly clear that if a dealership wants to successfully compete in its town/city’s arena, it must have an Internet presence. And this presence cannot be a simple Web site saying, “We’re here! Come see us!” It must be an all-inclusive, ready-for-business site that is run and monitored daily by an expert Internet manger. Yes, an Internet manger. And the proper training of this new manager will be eminently helpful to the preservation and growth of F&I profits. Why? Because competition for products is no longer restricted to a twenty-mile radius of the brick-and-mortar company; it is nationwide, and increasingly savvy customers are finding these viable sources. Every dealership’s Internet and finance managers must understand this phenomenon and have a game-plan for dealing with it.
Maybe it is crazy to even think that Internet and finance managers can set aside their personal egos and individual territorial goals and work together to ensure the company has a steadily increasing customer base that is enthusiastic and supportive long term. This goal can be achieved, however, if they “search for the one denominator (profit per x or . . . cash flow per x) that has the single greatest impact.” Collins found that “Good to great companies set their goals and strategies based on understanding [that] comparison companies set their goals and strategies based on bravado.” He found that “The good-to-great companies are more like hedgehogs—simple, dowdy creatures that know ‘one big thing’ and stick to it.” Mangers must ask themselves: What is the one denominator our dealership can focus on, in this new marketplace of Internet competition? What is the “one big thing” that works now and will always work, no matter how much technology advances in the future and no matter how great the competition for car products?
Online Competition is Brutally Honest and All-Encompassing
One of Harry S. Truman’s most famous lines was, “You can accomplish anything in life, provided that you do not mind who gets the credit.” Now is the time for a dealership’s Internet and finance mangers to work toward company greatness and not personal illustriousness. Teamwork is more important than ever before. Competition is not within the dealership anymore. It is online and nationwide. For this reason, it is essential that every dealership spend time investigating what is available to their customers on the Web. The vast majority of customers are spending quality time on their computers exploring the sites of vehicle makers and statewide dealerships. They are making brand and price comparisons and weighing their options, which are abundant. JD Power and Associates recently put out some research statistics concerning this trend. They discovered that sixty-four percent of new-car buying consumers shop the Internet before they visit a local dealership for a test drive. To reach these potential customers and get them to buy cars and products locally, dealership managers must work together to establish a comprehensive, easy to navigate, filled-with-facts Web site.
What are new-car consumers finding on the Internet? Information that might make a few finance mangers hot under the collar! They are finding Web sites like Cars.com and Edmunds.com, which are filled with articles that reveal every current selling technique that dealerships use to sell products, including insurance.
Topics on these sites are wide-ranging: the top ten cars, those with best and worst mileage, best and worst resale value, best crash-test cars, and most dependable; which brands offer rebates and hot deals, the best purchase prices and trade-in values, and financing and insurance tips. Not only that, these sites inform consumers about what to expect once a finance officer starts negotiations and what negotiating tactics and tips they can use to deal with them! Every dealer and every finance and Internet manager should carefully examine such sites and discuss ways to contend with them effectively.
These new breed of consumers are also looking to the Internet for the best RV product or boat. They have second homes. The booming economy has provided money for more leisure time. We have more people over the age of fifty than ever before in history. They are retiring earlier. They want to see America via the RV experience; they want to go fishing and sailing, and do it in style. A January 2006 Nielsen/NR research report showed that 68.5% of the U.S. population uses the Internet. That is over 208 million people, out of a population figure of 299 million. Impressive, to say the least, and reason enough for every automobile, RV and marine dealer to get online.
A New Requirement: A Level 5 Internet Manager
We have mentioned several times that every type of vehicle dealership must have an effective Web presence and that this Web site must be run by an expert Internet manager. Why is this so important? Because statistics are showing that customers are increasingly generated through Internet leads.
According to Julie Ask, of Jupiter Research , “Nearly one in three new car purchases in the United States will be an Internet generated sale by 2006 .” Another survey, conducted by Ward’s, showed thatof their top one-hundred e-dealers, those that best utilized their Internet site sold twenty-two percent more vehicles in 2002 than in 2001. This trend is continuing and growing. Even NADA’s Paul Taylor believes that such Internet sales statistics are here to stay. This important sales venue cannot be ignored.
Who are these Internet users? Certainly the more highly educated consumers, but also the huge majority of younger buyers who have grown up using the Internet as a tool of investigation, and women, who, in 2001,according to a Washington Times Magazine article, made over fifty percent of new car sales . In fact, today, women make almost half of all decisions on SUV and small trucks sales and have influence on over eighty percent of all new car sales ! These younger buyers and women, in particular, have good jobs, make good money, and want the best possible vehicle for the best possible price. They use the Internet to do their initial searches. So . . . how can local dealerships best compete with this type of technology and reach these buyers? By hiring the best possible Internet sales manager.
Using the advice of Jim Collins, in his book Good to Great, the most important decision by a Level 5 dealer is choosing the right employees. His research found that without “the right people on the bus (and the wrong people off the bus)” the good company will go nowhere. He said, “Those who build great companies understand that the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the right people.” [p.54] Dealers must take however much time is needed to find the right Internet manager. This individual will sit at the controls of their development of new sales leads and will be accountable for closing on at least a third of the business’s vehicle and product sales. Although he (or she) can possess a long litany of professional experience and skills, I like Collins’ definition of this important person (and also finance managers!): “If you have the right executives on the bus, they will do everything within their power to build a great company, not because of what they will ‘get’ for it, but because they simply cannot imagine settling for anything less. Their moral code requires building excellence for its own sake, and you’re no more likely to change that with a compensation package than you’re likely to affect whether they breathe. …The right people will do the right things and deliver the best results they’re capable of, regardless of the incentive system.” [p.50] Dave Nassef of Pitney Bowles said that other than experience, he wants to know who the person is and what decisions they’ve made in life and why, because then he knows their core values. Know who your managers are.
It wouldn’t hurt, if your Internet manager were a successful sales professional, had proven abilities to manage others, and training in all aspects of car sales, including finance and insurance, but if the core values are there, these things can be taught. Your Internet manager should continuously study other Web sites. As I wrote in an article for F&I Management Technology Magazine to be published in July of 2006, “What are they offering? How are they presenting information? Which sites are the most effective and easy to traverse? What makes them so appealing? Are local firms making specific vehicle offers by listing sticker prices only . . . or are they making special discounts? Are products from the menu also offered? Are their prices listed and available for comparison with other sites? Do the sites provide an e-mail address? If so, who answers the messages and how quickly? Do they have a section dedicated to specific minority groups or offer customer service in languages other than English? Do they offer service contracts and other products online?”
When your Internet manager has addressed every possible issue of your local customers . . . you can begin to build your Web site. Your goal should be to make it the best in the world of its type and to effectively deliver the “one big thing” that sets you apart from your competition. I cannot stress enough that an important part of this equation must be an assurance that every
e-mail inquiry will be answered within twenty-four hours. Allowing potential customers to wait for a reply is like spitting in their eye! Those customers will be lost.
One more thing to consider: your Internet advertising budget. In early 2004, the Dealix Corporation came out with a white paper stressing the importance of Internet sales leads. The statistics should be prominently displayed in every finance office. The paper stated that “on average, auto dealers spend $550 on traditional advertising per one car sold, while the average cost per car sold using Internet advertising is only $200.” Clearly, this is a figure that should inspire discussion and action.
The Hedgehog Approach
As much as I have been espousing the urgency for acquiring an Internet presence and hiring an Internet manager, I want to iterate one more time Walgreens’ Hedgehog philosophy, as iterated in Great to Good. Although ridiculed at the slow pace they were taking to jump on the Internet bandwagon, and losing nearly 40% of its stock price, Walgreens’ CEO and other officers took their time, all the while contemplating how this technology could be used within the context of their Hedgehog model. They wanted to know how it would “connect to their convenience concept,” and how it could best augment their already successful business economy of “cash flow per customer.” How would using the Internet for business keep them the best in the world and “in a way that we’re passionate about?”
When Walgreens finally established its online presence, it presented a model that was the first of its kind: it had the ability to connect every single Walgreens store in the country. By sending every online inquiry or order to a central source, it essentially turned every store in the country to an individual’s local pharmacy. No matter where a customer was, if a prescription needed refilling, it could be picked up at a store within blocks. Live in Georgia, but visiting in Texas? No problem. Too ill to leave home? No problem. The prescription will be delivered within a day. To busy to shop in the store? No problem. Order online and the merchandise will be delivered within three days.
Walgreens’ stock nearly doubled within one year. The company zoomed to the best in the world once again, and drugstore.com’s worth dropped to less than its initial value. There is an important lesson for dealerships in this illustration. Take your time. Talk. Walk, before you run. Keep in mind your company’s core values. How can you best use technology to further your basic company concept? As Jim Collins said, “When used right, technology becomes an accelerator of momentum, not a creator of it. The good-to-great companies never began their transitions with pioneering technology, for the simple reason that you cannot make good use of technology until you know which technologies are relevant. And which are those? Those—and only those—that link directly to the three intersecting circles of the Hedgehog Concept.” [p.152-3]
How can your dealership use the Internet to generate higher profits? How can it generate new customers and keep current ones? How can it best compete with the national trend for buying cars and products online? You’ll know . . . once you’ve identified your company’s Hedgehog Concept: what are you deeply passionate about, what do you do best, and what drives your economic engine. With this firmly in mind, and with both your Internet manger and finance manager on board, working for the success of the company’s new endeavor, your dealership can become the best of its kind in your local arena.
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