Thursday, July 26, 2012

Batteries: AA, AAA or XXXL?

The most common battery size in the US these days is the double-A. We all tend to be quite familiar with battery sizes such as AA or AAA. But when it comes to larger size batteries, like those inside electric or hybrid vehicles, we are in unfamiliar territory… and our service parts organizations certainly are in unfamiliar territory. Compared to the small AA batteries, as an industry, we are wrestling with the monster XXXL batteries in our supply chain.
A group of subject matter experts met at a Carlisle-facilitated roundtable during this year’s NAPB. The purpose was to discuss the challenges around hybrid / electric vehicles, but almost the entire discussion centered on batteries. Four items crystallized in the discussion:
  1. As service-parts organizations, we are still exploring solutions for batteries.
  2. Our attention is focused on logistics, more than it is on sales & marketing.
  3. The group needs to “crack” four fundamental logistical questions for the moment.
  4. There are big opportunities to collaborate in this space.
No Mainstream Solution Yet - We Are Still Exploring

Toyota (due to installed base of Toyota Prius) and General Motors (due to the Chevy Volt) are the most experienced with batteries in the supply chain. But even these two companies are only giants among midgets. As an industry, we are still struggling with operationally executing service parts requirements for hybrids and electric cars. We are still exploring what the best approach is to handling batteries. There is no mainstream solution yet.

Our Attention Is Focused On Logistics, but Sales & Marketing Equally Demands Attention

Our main attention lies on the most immediate issues of how to logistically handle batteries in the supply chain; for example, where to store them, how to ship them, where to repair them. Less of our attention seems to be focused on Sales & Marketing questions, such as: How do we handle declining service and repair needs associated with hybrids / electric vehicles?

Four Logistical “Nuts to Crack”

While the discussion was loosely structured, four sub-questions emerged with respect to how to handle batteries for hybrids and electric vehicles in the supply chain:

  1. Where to store batteries in the network (temperature, degradation, special tools)?
  2. Where to repair batteries (centrally vs. locally, repair vs. replace, some dealers vs. all dealers vs. outsource)?
  3. How to transport batteries (hazmats)?
  4. How to dispose of batteries at end-of-life (remanufacturing vs. refurbishing vs. second life vs. disposal)?
These questions and their facets alone were enough to fill 90 minutes of discussion. Of course, there are additional questions to answer, but these are the main issues at the moment.

Big Opportunities to Collaborate

At the moment, motor-vehicle OEMs do not have much scale on battery issues – the vehicle parc for hybrid and electric vehicles is simply too small. Battery-related tasks are extremely resource and cost intensive at such a small scale. This topic, therefore, lends itself to collaboration (either between OEMs directly, or through third parties that achieve scale by supporting multiple OEMs). Other opportunities for collaboration are simply to share learnings and best practices (easiest), or standardizing designs and approaches for batteries (hardest).

In short, the facilitated roundtable proved useful to participants… not because it provided us all the answers, but because it helped us to get a little way down the path on this complex subject. It highlighted the issues, what OEMs are doing, and surfaced the enormous potential that lies with collaboration.

Wednesday, July 18, 2012

Our World Has Changed; People Are Not Illiterate, They Just Process Information Differently. Maybe Better.

“Rule #86 – Lew’s Rule: Errors are of two sorts: errors of commission and errors of omission. The nastiest ones are omission, because they are often ignored.” I learned this one in the early 1980s working with Lew Schneider, a brilliant
consultant. He said that it was easy to pick apart stuff that you could see, that was right out in front of you. Errors of commission. But, it was very difficult to discover the most insidious of errors; the stuff that wasn’t there. Errors of omission. Let me give you a vivid example. Look at the stock price for Research in Motion (RIM) – the maker of BlackBerrys. It is dying. RIM made an error of omission. It did not effectively adjust its strategy to account for competition from iPhones and Android mobile devices. RIM was crushed.

Lew Schneider lives on in my mind, and the minds of my people, and he is most encapsulated in Rule #86. He is still relevant and he is still very important.

Rule #101 – O’Neal’s Rule: It is all about romance. I shamelessly stole this from Rodney O’Neal, CEO of Delphi Automotive – they do $16 billion a year in sales. Rod always wanted to be romanced by the story of the strategy. “Talk about good and evil, tell me about the romance, suck me in and enthrall me with the story.” He felt that if the story were personal and interesting, it would stick. Smart guy. Well, a lot has changed in our world, and a lot stayed the same. In the old days, if you were in Ireland, the local shanachie would visit your home and tell stories. He was old and revered, a fabulous raconteur, and loaded with distilled knowledge called wisdom. He entertained, his stories stuck, and they were relevant to your life. For his efforts he got a great meal, an audience, and a belly full of great Irish whiskey. OK, Rod’s not Irish, but this is what he was talking about.

Well, the shanachie was displaced by a bunch of folks who produced tomes of wisdom by the bucket load. Out of the Crisis, In Search of Excellence, Good to Great, My Years with General Motors. All this was really good stuff and entirely relevant. And, for a time, people read this stuff.

Marshall McLuhan said that the “medium is the message.” What if the medium is pretty much obsolete? How do I reach you? Perhaps the greatest business book ever written was Out of the Crisis, by Deming. How do I get you to read 492 pages of Out of the Crisis? Unless I force you into an academic environment, I don’t. The world has changed and, in this instance, probably forever. Out of the Crisis is a lot like RIM and BlackBerry. Rule #86: Error of omission – people don’t read 492 pages of heavy text on their iPhone.

“Rule #7: The best learners are un-learners.” This one is critical to survival in our fast evolving world. Back before 1990, every boy knew the market for squirt guns. You got them at the five and dime and paid between 25 cents and a dollar for them. The buck version was a big honking thing that had gallonage, but little extra squirt. Lonnie Johnson un-learned all this. Smart guy. He figured out that he could make a big honking squirt gun that had squirt that defied the imagination. He called it a “Super Soaker” and sold them for around $25. In the process he created a billion dollar toy segment. It was critical to “un-learn” that the market for squirt guns was capped at a buck a copy.

There’s lots of stuff we need to un-learn. Amazon un-learned that books had to be made of paper. Blockbuster never un-learned that movies needed to fit on a DVD and be fetched at a store. Netflix needed to un-learn that it was a monopoly and that Amazon could spoil their market with a trick to sell merchandise freight-free. RIM needed to un-learn that it, too, was a monopoly. We make a huge time and emotional investment in what we learn, and we hold on to pseudo-knowledge way too long.

Rule #7: The best learners are un-learners poked its head up for me in the summer of 2011. We found out that we had to un-learn how we thought people learn. My firm hosted a set of focus groups that tapped into the automotive service buying and learning attitudes of the digital generation. This group is fast-growing, sort of like the Ebola virus. We call them digital service customers (DSCs). In 2010, they represented about 33% of the population; in 2011, they had grown to over 60%. Young, 20-40 years old, college educated, good jobs, no savings, smart with money. The American Dream is a light year away and irrelevant to them. We asked what they read. It was immediately apparent that paper was obsolete. What surprised us was that laptops, too, seemed to be headed towards irrelevancy. Remember McLuhan – the medium is the message. The learning medium for the DSC is their mobile device, and the messages that stick are ones that have best adapted to this technology. If a message is stuck in paper medium, it won’t sell. If it needs a laptop, it will suffer the same fate as iGoogle and RIM – obscurity, then death.

Hmmm. These DSCs might be a problem for lots of us. Maybe, I’m one of them?

I looked at my iPhone’s first page. This is all the stuff that I need the most. Yes, iGoogle is indeed irrelevant, because my iPad looks pretty much the same. I do not need drop down lists and text, I use icons. Angry Birds is right next to my Kindle and sits on top of my phone. If I want something that’s not an icon, I use Google. I search for short text and images that I can read quickly and then move on to the next thing. Say I’m in an airport. Do I want to read a book or play Angry Birds? If the book is not riveting, inside of 90 seconds I switch to Angry Birds.

If the medium is the message, then what’s the message here? Simple. Messages need to be short and riveting. They need to be separable. If you devote five minutes to a message, it must be easy to pick up where you left off. Think short stories instead of a novel. Messages compete with other messages and other activities. If your message is boring, it will be displaced by a session with Angry Birds.

Bottom Line: We need to make sure that the “media” we choose can deliver the “messages” we want. First, we need to make sure that we choose the media that people use, and not to underestimate the challenge of this. The implications of this stretch to our internal training and to our consumer merchandising and advertising. We need to un-learn our absolute conviction that we are headed down the right path. We might not be. Just think of RIM.

Thursday, July 12, 2012

MyGuy Update

They say wisdom creeps. Years ago we heard this from a pretty smart service manager: “Hell, if the store don’t work any good on Monday, there‘s no reason for it to work any better on Saturday.” That covers a lot of service retention programs out there. What else can we do? For one of our OEMs, customer loyalty crashes by 50% the day the limited factory warranty expires. That is a stunning amount of money leaving their orbit. Worse, the “post-warranty” crash is not limited to one OEM. It is industry-wide. Why do so many post-warranty
customers defect? According to the customers, their business migrates to operations perceived as more trustworthy, easier to do business with, and lower priced (see the adjacent graph for the order in which customers value these characteristics). Some dealers, though, enjoy extraordinary service customer retention, even post warranty, and two dozen of these premiere retention dealers across four brands are contributing to defining how all dealers may increase service loyalty.

We are working with about 25 dealers from five different franchises to codify MyGuy processes. These are the transformative processes that will make dealer service advisors and managers into the trusted automotive service partners that we so often hear customers refer to as “my guy.” To determine the MyGuy best practices from the bottom-up the work involves internet reputation assessments, mystery shops, service customer focus groups, on-site process observations, service manager/advisor interviews, multi-franchise dealer workshops, and multi-franchise OEM workshops.

Here’s our starting point – what service customers value. We have a list of the top 26 things they value, grouped into 5 tiers … ranging from most important to, well, you know. The findings from our dealer report cards are shown to the right. The top chart reflects the online reputation of one dealer who is seen as a leader in customer service loyalty. Online reputation is a mixed bag in the top tier of customer values, but overall we find that digital customers were kind in their assessments.

The picture changed for the worse after we conducted a mystery shop. The dealer’s service department seemed to shine in areas that were not all that important (tiers 4 and 5).

Of the top three tiers of customer values (accurate time estimates, reasonable hourly labor rates, and accurate upfront cost estimates), most dealers failed to meet expectations in at least one of these categories during our mystery shops. For oil changes, they did not provide a price or time estimate. For those with posted oil change prices, these rarely matched the final bill. As the original finish time came and went, several customers did not receive updates on the additional time the service would take, so they were left waiting to see (and wondering) when they would be done.

To improve in two of the top three categories, all you have to do is tell the customer how much it will cost and how long they will need to wait. If anything changes, let them know, instead of leaving them hanging. When it comes to communicating with the customer, less isn’t always more.

And, while you’re at it, take down that labor rate sign. Your customers don’t (usually) make $100 an hour, so they don’t like to be reminded that they’re paying you that much.

Bottom line: It looks like dealers are putting their time and energy into things customers don’t seem to care all that much about. Dealers do what we tell them. And, we are not telling them the right stuff. It’s time to direct their attention to tier 1 customer values!

Friday, July 6, 2012

Can Your Owner Center Represent Disruptive Innovation? Yes, If You Sell Tractors

The premise of this blog is that we might not be thinking creatively enough in the rapid development of our digital owner centers.  Ford’s brilliant Laura Fraga talks about “stickiness” in web applications.  Simple, but profound.  If mainstream cars and trucks are teflon appliances, there’s not much sticky about them for many or most of our customers.  Maybe what’s sticky is what these cars …. and tractors … are used for.  We need to glue together sources of innovation (the Super Soaker) with the kernels of brilliance in notable failures (GM’s obsolete Yahoo-based Owner Centers) with unbridled success (Google, Amazon, Apple).

We always think of Steve Jobs as the master of disruptive innovation.  The original Apple computer was a great example of this.   More recently, the iPhone was a major disruptor in the cell phone space.  RIM/Blackberry is now on the skids and looks a lot like Yahoo (stock price down 95% and they are still saying everything’s OK).  It is easy to intellectualize what Jobs did … because we can’t.  He faced off against a market leader (RIM) with dazzling technology that we can’t even see (just try to open up your iPhone) and took market share by the boatload.  All it took was a couple thousand engineers, Chinese sourcing, millions of dollars in merchandising, and the artist, Steven Jobs.  Hard to imagine doing what he did.

But, it is not hard to understand what Lonnie Johnson did in the early 1990s.   He transformed a 25 cent squirt gun into a $25 super soaker and created a billion dollar segment.  He formed his own engineering firm, wrote patents, and licensed his ideas.   Hell, it was just a big damn squirt gun. Golly, anybody reading this could do that.  If , … if you start with the right idea.  Ideas.

The right idea.  Hmm… sounds simple.  A few years back I was talking with Ford’s Laura Fraga about owner centers and third party web sites.  She asked if they were “sticky.”   I have been thinking about that simple phrase for a couple of years now.  I only frequent websites that are sticky. 

OK, what about the wrong idea?  The automotive segment seems further along in the development of digital owner centers than the other vehicle segments.  The thinking must be that digital owner centers are more appropriate for the automotive industry than for construction, agriculture, etc., so, there’s no there there.  Lonnie might challenge that and conclude that Ag is another Super Soaker.   Let’s assemble some facts based on a sample of one.  (Jobs was famous for basing decisions on a  sample of one … but, then again, I’m no Steve Jobs).

Some historical facts about me.  Nearly 20 years ago our family “rescued” a horse farm that was across the street from us.  We saw tell-tale white pipes sticking up in the air one day and knew it was about to become a cluster of ersatz colonial houses.  So, we bought it.  Thinking, horses … what’s so tough about raising a bunch of horses?  Got that one wrong.  It’s like brain surgery and there’s no rulebook or single source of information.  You stumble along, and our household’s bounty of graduate degrees has been pretty much useless.  There are a few lessons to be learned.  (1) Horses are fragile and break down a lot based on the slightest provocation (like the baseball players for the Red Sox).  (2) Vets are expensive.  (3) Horseshoes cost as much as Gucci’s … every 6 weeks.  (4) You will have as many horses as stalls in the barn.  (5) You will soon do everything in your power to fix the little things that seem to cause problems … like proper footing, proper paddocks, and manure removal.  (6) Each day of experience surfaces more understanding of how little you really know.  I spend more time on the internet figuring out how to improve my horse operations than I do with any other of my passions.  In fact, more than all the others combined.

Some recent facts.  Most recently, we built an indoor riding arena.  Maybe global warming is just a Massachusetts phenomenon.  It rains a lot here and the outdoor arena became useless.  Besides the arena, we needed four new things:  (1) good footing for the horses, (2) a rake that would not screw up the footing, (3) a watering system that would eliminate the dust from the new footing, and (4) a new dedicated tractor.

Here’s what I did.  I went to the World Equestrian Games website to find out what footing they used a few years ago in Kentucky for their dressage competition.  Did a Google search for rakes and water wagons that were appropriate for dressage and used the type of footing used in the World Equestrian Games.  We dedicated an existing tractor to the arena, but found out it was too heavy and did not have the needed turf tires (footing is all about compaction).  So, I went searching.  The perfect tractor for this sort of application is the New Holland Boomer 20.  Hydrostatic transmission, sips very little diesel fuel per hour (important because I use a 5 gallon can to fill it), 3-point hitch for the water wagon, draw bar for the rake, and weighs less than 2,000 pounds.  And priced very competitively – it is uniquely qualified for this application.  It pretty much stands alone.

One more fact.  I am a birder, love the Red Sox, am a weather and news junkie, and have a grudging respect for the New York Times.  Here’s what my iGoogle homepage looks like.  I use it 50 times a day. (Yes, I know Google just announced that they’re sending iGoogle out to pasture. I won’t be the only one who will miss it).

Conclusions.  Some people need to go to the store and need a car (an “appliance”) to do this; others are more passionate about their vehicle.  That passion certainly is alive and well in the upscale and high-mpg segments, but is on the wane for mainstream products.  Remember, Laura Fraga said that successful websites need to be “sticky.”  It is hard to imagine how to make websites for appliance automobile owners.  Passion? That’s easy.  Just buy a Porsche. Or a Volt.

Back to tractors.  Tractors are appliances, too.  To make a tractor owner center “sticky” you must focus on the use, not the appliance.  I think that Lonnie would agree with me.   I have some questions for us all:

Question #1:  If Google can allow me to quickly customize my homepage to reflect my interests, why can’t the OEMs do this with their “home pages”?

Question #2:  Maybe GM’s tie-in with Yahoo was brilliant … they just picked the wrong horse.  If the cost of the technology to do #1 is too stiff, why not partner with Google or Facebook?

Question #3:  If you can’t get organizational support for an innovative “home page “ experiment, why not work with Google Facebook and try to get your needed functionality incorporated as an application?  Redundancy is OK when it represents huge instrumentality.

Question #4:  Why not design these sticky Owner Centers with some owners?  If stickiness is all about the use, not the appliance, then it might make sense to involve some users.  OK, it will take more time to do it this way.  Maybe a day or so.

Question #5:  Maybe you don’t have to foot the cost of all this yourself.  The picture of the Arena Rascal Pro shows that there are product tie-ins that the OEMs don’t know about or appreciate.  Ag OEMs are pretty much terrible with implements and attachments … why not figure out the best tie-ins with third parties that could be brand-enhancing?  This could be by area of use represented in your home page customization process (e.g., for your equine “Owner Centers”, tie in to Kister).

Question #6: Have we thought about what a sticky use-based site might look like? The Knot is sticky, if you’re planning a wedding. It makes money via ads and vendor listings; it’s also an e-commerce site. They don’t sell wedding dresses (yet), but you can pick up some nice toasting flutes.  Another example is Redfin, which is a real estate brokerage with a great listings interface. What differentiates Redfin from other brokers’ sites is that it seems to strike just the right balance between the needs of the user (which involve obtaining information on listings via an efficient, understandable, and powerful interface) and its own objectives (selling its own listings). This balance is easy to envision, but incredibly hard to implement—because most of the time, Redfin’s audience will use other brokers.

Question #7:  We need to challenge our economies-of-scale thinking.  I live in Acton, Mass.  It is a tad more than 20 square miles.  In it are nine horse farms of consequence.  Five of these have indoor arenas.  So, there are a lot of horse farms out there in America, and we all have the same information needs.  You can sell tractors in this segment, if you do it right. It’s not a huge segment, but when you add up a bunch of small segments, you can get to a big one. Some other tractor segments worth targeting with use-based sites include:

  •       Row Crop
  •       Hay and Forage
  •       Dairy Farms
  •       Vineyards 
  •       Vegetable Farms
  •       Sugar Cane