Business success is not a solo effort
A couple weeks since my last blog, due to the demands of the ICDP Spring Members’ Meeting in Amsterdam last week. We had a good attendance (although more would always be welcome) and some great discussions around the various presentations. If you are an ICDP member you can download them from the member area of the website. The ICDP team covered everything from microcar distribution to the impact of BEVs on service workshops. Particular thanks however to Lawrence Hamilton, CEO of Lucid Europe, who shared his insights into the challenges of launching a premium BEV brand, and to Walter Barone and Sourabh Sawardekar from Hyundai Motor Europe who shared how Hyundai has developed a seamless omnichannel customer experience.
Away from the Members’ Meeting, I had the judging session for the annual AM Awards, a workshop with a dealer group focused on what the upper limit might be for size of a dealership, a meeting with the top management of a new Chinese manufacturer and a series of meetings related to a possible addition to the Auto West London dealer business. Lots of variety, but there is one element common to all of these activities – the interconnected nature of the automotive industry, and how no single party can deliver success.
I find it difficult to think of any role or any business within the broader automotive distribution ecosystem that can succeed in the long term without the support and collaboration of other parties. Manufacturers may have great product, but without an effective dealer network, it is unlikely that they will achieve their full potential in the market. Some may point to Tesla as an example of a great ‘solo effort’ and arguably that was true for a period of time, but even ignoring the self-inflicted harm caused by Elon Musk, I would argue that the absence of a committed dealer network is one factor that has led to the other missteps such as the price adjustments in 2023 and the repeated quarter end sales peaks to achieve target volumes. Conversely, a committed dealer network can support a brand through a period where product is uncompetitive, maintaining customer relationships through the aftersales business, ready to re-engage when the product cycle picks back up again.
The question of what is the right size of a dealer network, or the right size of a dealer within that, is influenced by the quality of relationships both upstream and downstream. Manufacturers who build dense networks are consciously choosing to put marginal market share increases ahead of the costs and inefficiencies created for dealers by intrabrand competition. Less dense networks ease those pressures but the impact of having a weak performer will potentially result in greater losses due to the lower ability of more distant neighbouring dealers to take up the slack. Similarly smaller individual dealers will lack the scale to take on the responsibility for local marketing or complex repair operations and may be financially more vulnerable, so require more support from the manufacturer. A network of very large dealers will reduce the resources needed for monitoring and oversight by the manufacturer, and have the potential to invest in people and technology that allow them to deliver a better customer experience at scale.
When looking at entries in the various categories of the awards that I have judged for over a decade, organised by Automotive Management magazine in the UK, I do not remember one entry making the short list that was essentially a ‘solo entry’. Even categories that result in the award being made to an individual do not go to someone who has done the equivalent of a rugby player picking up the ball in their own half, then running the length of the pitch to score. Those sorts of brilliant solo efforts are not repeatable, and in business we need consistency rather than occasional flashes of brilliance. The awards therefore tend to go to teams that have worked well, leaders who build strong teams or individuals who have been able to deliver exceptional results because they had the active or passive support of a team around them.
In the case of looking for extensions to the Auto West London business, we have been looking at a business that at some point did not have the qualities in its leadership that I have just described, but has now started to show promise in some parts of the business, and we believe that turnaround can be continued with appropriate support and some changes to the brand partners. I am not suggesting that it is impossible for the team to continue to make progress alone, but being part of a larger group with a long-term vision and working with manufacturer partners that are on a positive growth path changes the focus from surviving to being a winner. That has implications for motivation, retention and the culture of the business – something that will surely translate into what customers feel in the dealership.
In building a strong business in automotive distribution – and I suspect also in other business sectors, in sport and in our personal lives – the winners will be those who have built the strongest eco-system. In the automotive context that means working with strong business partners, having the best suppliers of services and technology and building a strong team within the business. Bringing all of that together requires coordination and an alignment of goals, like the sky-diving formation in my illustration with this blog, not simply everyone jumping out of a plane at 5,000 metres and hoping to sort it out on the way down.
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