Will there be management lessons learned from this crisis?

We now seem to be on a path out of the full lockdown in most European markets, with dealerships either open or due to reopen in weeks, and most manufacturing plants running, or due to restart in the next month.  We still do not have a clear picture of how market demand will develop, but many OEMs are coming back with strong incentive programmes, and discussions continue at EU and national levels about scrappage schemes.  It is slightly concerning that China – which came back strongly when dealerships first reopened – saw a decline in wholesale volume of 14% in the first ten days of May.  Whether that is prudent management of dealer inventories by the manufacturers, or a reflection of slowing retail demand once the initial pent-up demand had been satisfied will only come out when we have retail numbers in a couple weeks’ time.

Whilst we wait and see and prepare to make the best of whatever demand there is, it is perhaps a good time to step back and consider if there are other lessons to be learned from the crisis.  Apart from the obvious impact of sales slamming to a halt, all players have had to make a range of business critical decisions in a highly compressed timescale – days instead of weeks or months.  New capabilities such as virtual showroom and home delivery have been implemented within a few weeks of the go ahead.  Most staff have been working remotely, yet teamwork has been maintained.  When we return to the ‘new normal’, how much of the ‘new’ will reflect these changes in management processes and styles?

Extended decision-making processes carry two disadvantages – the action agreed can only be implemented when the process is complete, and there are many decisions pending at any one time – a lot of work in progress.  Academic literature suggests that extending the timeframe does not improve the quality of the decision, and at a time of accelerating change, even a good decision may not yiel sustainable competitive advantage.  New competitors, new products and new services can emerge over months rather than years, so good decisions may yield an advantage for a while, but to sustain that, you need to look at more ideas and improvements, process them on a “fast and roughly right” basis, then move onto the next.  Improvements can be made incrementally, rather than looking for a ‘big bang’ solution.  It is the equivalent of a start-up launching with a ‘Minimum Viable product’ or MVP, rather than developing a theoretically perfect full end-to-end solution.  It is also the strategic decision-making equivalent of the Toyota Production System – Kaizen (continuous improvement) and elimination of waste.

Also reflecting the MVP philosophy, new functionality has been added in a hurry to address the new retail environment into which the industry has been thrust.  Some initiatives have been more successful than others, but there is the potential to learn lessons and build on what has been done (in the spirit of the progressive development of an MVP), rather than drop these fledgling services as soon as there are other, more familiar ways, of doing business.  Our friend Glenn Mercer has regularly reminded US dealers that dealer salesperson productivity has not changed in over 30 years, with an average sales performance of around 9 new and used car sales per head since 1985 (at least), despite the introduction over that timeframe of many new technologies and tools.  During the lockdowns, many US dealers have turned to online sales and one survey reports an average productivity improvement of 38% with the average salesperson selling over 18 cars per month.  Hopefully, the lessons will be learned, and the online channel sustained.  In groups, the opportunity to run a central (or brand) business development centre over extended hours, with lower selling costs per unit is obvious.

We have all become more expert in using Zoom and similar platforms, and recognised the cost and time saved from commuting to work and travelling to meetings.  Virtual has become the new normal, and Twitter has told all employees that they can work from home “forever”.  Behind this statement though, it seems unlikely that they will work from home always.  Virtual works at the moment because almost everyone knows their colleagues, feels comfortable sending messages or calling to swap ideas outside of scheduled video calls, and still feel part of the larger corporate entity.  This would diminish over time as new employees started and others changed roles.  The culture of the business would dilute over time, and ultimately this would reflect on the products and services offered to customers.  It is much more likely in my view that working from home will become more common, but not universal, and that travelling to business meetings will also become less of an automatic decision, and determined much more on a case by case basis.  This could still bring significant cost, time and environmental savings, but maintain the opportunity to build a real company culture with shared values, and business relationships that have a warmth and trust that are much more challenging to achieve through a screen.

Will there be lessons learned?  Yes, the opportunity is there.  Will they be in the much-discussed areas like Zoom replacing travel and the office?  To some extent yes, but the bigger opportunities may lie elsewhere.

Hoping that you all remain well, and for a more normal summer.