Don’t throw the baby out with the bathwater!

I think for the first time since I started doing a regular blog I've actually missed two consecutive weeks for which I apologise, but it's a reflection of a particularly hectic period preparing for our Autumn Members’ Meeting last month, getting our European Top 50 ranking out and various other commitments for external events and consulting clients.  Although one of the joys of working at ICDP is interacting with our members on a broad range of topics, this period has been dominated by the subject of agency.  There are many things going on in the industry at present, but it does seem that the progress of agency implementations seems to attract more attention than, for example, electrification or even dealer consolidation.

I think that this in part relates to the fact that in some way – even for those brands who are not progressing towards agency – the switch from franchise, or significant changes in the franchise model, will affect everyone in ways that are not fully understood.  Electrification is a much more gradual process which will similarly affect everyone but over a period of the next decade.  Dealer consolidation is clearly felt most in the business that is acquired even though the ripple effect will reach across whole markets.  The issue with agency both for those directly involved and those looking on is, in my view, that it has been approached by many players with the wrong mindset.  Different people see it as being primarily about the legal contract, customer changes in customer relationships, improvements in net pricing, implementation of new IT systems, transfers of responsibilities from dealer to manufacturer or a number of the other significant changes.  All of these do form part of an agency transition, but together they all form part of a fundamental change in the distribution model that has dominated the industry globally for decades.

By adopting an approach which does not reflect the real impact of this fundamental change, a difficult or failed implementation is almost guaranteed.  All of the points that I just mentioned are necessary elements of agency.  They are the enablers but the focus of that enablement is on people, customers, people in the dealerships, people in the manufacturer NSCs or distributors and people back in the centre responsible for planning production.  Agency gives them the opportunity to work differently and deliver better outcomes for all parties – manufacturers, dealers and customers.  If anywhere along that supply chain, the people involved are unable or unwilling to take advantage of the opportunities then the whole chain will fail.

What we are seeing in the implementations so far is that the scope has been at the same time both too broad and yet lacking the thinking that will support the change process.  They have either been insufficiently resourced or resourced with the wrong sort of people.  It seems also that the primary focus has been on getting short-term bottom-line results for the manufacturer rather than kicking off a successful change process which may yield more limited results in the short term, but builds the foundation for broader and lasting benefit in the medium to long-term.  For example, as supply constraints have receded, it is inconsistent to expect to maintain market share at the same time as discounts are removed and promotional activity restricted.  It is more important to guarantee success than it is to immediately secure some narrow benefits, but leave the whole concept discredited.  It is also unrealistic to think that staff whose previous role was transactional, consolidating dealer orders and passing them through to production planning, have overnight grown the skills to create an order pipeline and stock profile that meets the commercial needs of the marketplace.

From my personal experience with European wide change management programmes, the focus needs to be on the end game and not on the stage-by-stage implementations.  Demonstrable success in the first market eases the process at both NSC and dealer network level for the second market, and so it rolls on leaving the most challenging market till last.  As necessary you create the space for each market to settle – for example by easing the pressure to hit market share objectives – rather than leaving previous constraints in place at the same time as the market is being asked to create a new way of working.  In an agency context, it does it matter if in the short-term dealers are funded to carry out certain tasks that in the long-term rest with the manufacturer if that reduces the near term pressures on the NSC and leaves the dealers with some sense of empowerment?  Does it matter if some stock, albeit now owned by the manufacturer, is deployed locally under the control of the dealer in order to reduce physical logistics pressures and cushion any process bottlenecks?

Implementation approaches and timetables that work on PowerPoint often do not survive in the real world and it is real world pragmatism that we need to incorporate in the structure, timing and resourcing of agency implementation.  Small groups with knowledgeable people working together will most likely achieve more than larger teams who lack the detail understanding of how our business works.  I believe that agency can be a force for good, benefiting customers, dealers and manufacturers through making manufacturers directly accountable for their actions, and therefore positively steering behaviours.  Unfortunately, over ambitious yet incomplete implementation plans may result in agency being dismissed as inappropriate for automotive retail.  I do not believe that is the case and do not want to see the baby thrown out with the bathwater.