Exiting Lockdown #1- Being prepared to make BIG change decisions
Exiting lockdown for the UK’s motor retailers has to be seen as a signal for change. Already under pressure before COVID-19 became a news story; the social and economic effect of the pandemic and the lockdown period means that as the industry looks to bounce-back; it must re-boot its broader business model.
In drafting this article, I undertook a quick online search of the word ‘challenge’ and ‘car dealer’. Over the last two years, there have been multiple articles on this topic; the dominant themes were; the move online, stock access, the shift to EVs and the challenge of connected cars. I venture to suggest that of those just listed, I see only the move online as an immediate priority. To this, I would add:
- Re-engineering the business around social distancing; health & safety – the ‘COVID-secure’ model sought by Government
- Low margins/cash flow/addressing overheads – in short, survival
- Resources – getting the business fit to survive and then thrive
- Being prepared to make BIG change decisions
In making this shortlist, it is the final one that I believe is the starting point; it sets the tone for positive change and underscores everything else.
Being Prepared to Make BIG Change Decisions
Breaking a business model that has worked feels uncomfortable, where people know their roles and where result have been financially sound is not easy. This can be especially true if the business leadership has been in place for some time and where frankly, change can seem scary and risky, but sometimes it is essential and COVID-19 could well be just such a catalyst.
A deep, profound change, the type that can make a real difference, rather than simply ‘tinkering’; often means making uncomfortable decisions. However, avoiding the change that you know deep down ought to be made can have a cost; margins can decline, competition can increase. It can be the road to a terminal decline.
The impact of COVID-19 can be a positive one for dealers. The shortcomings and risks of the traditional car retail model and the slow move to embrace e-commerce have been crystallised. Rather than a gradual, almost imperceptible decline, the need to embrace an Omni channel approach now will mean survival for many going forward.
I’m going to share the change experience at Mann Island Finance. We have been around for 30+ years and are coming out of a major change programme; we do so looking ahead with renewed confidence. While we are not a dealer, our roots come from being part of a dealer and we know and understand the dealer market. I certainly feel that our experiences can offer some useful insights and I hope they help.
The Mann Island Change Experience
For 30 years, Mann Island Finance has been a successful car finance broker, arguably one of the most recognisable car finance brokers in the UK. We operated across the UK with a great team of local finance experts. We were successful and our business model, earning an income from each transaction worked. However, it was coming under increasing pressure; new players were entering the market and customers were focusing increasingly upon price and not service. In short, the shifting operating landscape challenged our business. Not as dramatic or sudden as COVID-19, but the implications were the same.
We stepped back and made a conscious decision to reinvent the business optimising our service strengths and adding new capabilities to address the risks that we knew were there. Today, we are a lender with broker capabilities. We have combined the best of our old service skills with the best of a new more resilient and long-term lender model. We have invested in technology; challenged ourselves to get leaner and adjusted the skill-set within the business.
This change has not been easy and we continue to work at it; not just because we had to, but because in today’s fast-paced marketplace, we see continuous evolution as business-critical.
On our journey, we became part of Investec Bank; this has been a huge help. It has required some realignment culturally, and in terms of processes and controls. The value of all of these changes has been clear over the last ten weeks; we have a resilience and confidence borne of the hard change choices we have made.
Key Learning Points from Our Experience
Having gone through this change process, at the end of the day, we still retain much of the battle-hardened experience and can-do ethos that has always been part of our DNA. We also took the opportunity to choose to change, a luxury some may not have right now. However, as down to earth people I believe we can share some of our learnings and I hope they help:
The old wisdom; ‘if you do what you have always done; you will get what you have always got” is no longer true – you will get less because others are often hungrier and more proactive. How you have always operated must not dictate how you operate going forward;
Don’t accept decline; it is not inevitable – look for the greener grass upon which to graze and as in nature, be prepared to keep moving to find it;
We joined up with Investec Bank, who can you team up and/or collaborate with, who will add to your competencies, capabilities and create long-term alliances that are transparently mutually rewarding?
Re-assess all the organisations you work with and ask the hard questions; does their cost/value track-record stack up and what are the alternatives? (Don’t move on cost alone be sure to assess how else they add value);
Don’t be afraid to leave happy memories behind; it may be sad but some well-established processes cannot or will not make the change journey;
Work harder to know your customers’ changing needs and accept that your customer base will need to evolve;
Know what your real USP is and check it is still relevant – ours is service. We have invested in digitising our model, but we still overlay it with personal service – it is a differentiator that works;
You have to get digital; today’s primary car buying and financing customers are millennials and Gen X digital-natives; many prefer a self-serve approach, but with access to expertise when they need it;
Be bold in seeking change (challenge yourself to break the business continuously) – moving to become a combined lender and broker was a big challenge for Mann Island.
Teamwork (colleagues/suppliers/partners, etc.) and a common shared vision are critical.
If we can help you, our technology, people and service ethos are available. Our very best wishes for the future and thank you for taking the time to read our change story.