Mets Kramer and Ron continue their discussion on the Digital Dealership.

I think that's a really solid point. You know, there's the American retail landscape. is covered with businesses that have gone away because of the entry of Amazon. And it started from a simple circumstance of books. Look out there now, where's Borders? Look out there, what's the volume at Barnes & Noble? Look out there with the private, the small private bookstore. Circuit City. Yeah. And, you know, if you think about it, I read a lot of books. I buy a lot of books. A lot of people. criticized me. Have you never heard about a library? Well, you can't get a lot of the books that I need to read or have been reading at a library. And I'd go to a bookstore and the problem was the bookstore didn't have the book either. So I had to order it and then I had to wait. So here comes Amazon. I don't have to go to the bookstore. They don't have the book either, but I can order the book and it's delivered to me instead of me having to go down. So they recognized a couple of customer things that they satisfied with the books. And now they're the largest retailer in the world. And they've seriously altered Walmart, which was the previous largest retailer in the world. And now Walmart's fighting back and doing the same thing. It all goes down to digital data and how it's being used. And let me just throw one little thing out there before we get too carried away. Google has made an art form out of making money on what people are trying to find out about. So Amazon allows us to shop online. Google allows us to do research online. So those millennials, the 73%, why the heck do they need to go anywhere? That's why they're lazy like you and I are. Why should I do all those things and take all that time? Why don't I just do it online? So here comes Google and contrast that to our industry. 70% of the monies that Google spends goes to maintaining and working on the model. 20% annually goes to improving the model, the continuous improvement criteria. And that comes from performance reviews. That comes from employee engagement. That comes from listening to the customer, as Amazon does. And then the thing that intrigues me is there's 10% of the money they spend is on what they call moonshots. Yep. They just throw 10% on the table, say, go spend it. If it works, fantastic. If it doesn't, so what? And then contrast that to us. And we've got the last podcast we had was about the change in generations and going from the steam engine to the electric engine and taking a whole generation before the benefits of the electric engine were truly realized. We have, as you characterized it, We deal with problems every day, all day. We solve problems. That's our job. We come in in the morning and if we get too many phone calls, it's going to be a tough day. It's hard like hell. I want to survive and get out of here tonight.

Exactly. And who is there at the dealership level that is making a determination of what data we need to pay attention to? We pointed out machine population, machine ownership. If we went around to all of the dealers in North America, I bet you I'd find less than 10% of them had accurate current machine populations. And yet that's the fundamental piece of information we need to start with, isn't it?

Or even asking the employees of what can we do to make your life easier or make your job better. We don't do that either. You know, I'm posting a blog that's talking about workplace and worker disengagement. And, you know, we've been shielded with the pandemic. We haven't been able to continue to do what we've always done. But if you look at 19 and earlier, we didn't have a profession that was management. We just took the better counter person and made them the supervisor or the better. technician and made them the lead hand or whatever it is. Now we need a management function. We need somebody who's good at leading with people and engaging people and all the rest. And where we decided, you and I, that we wanted to talk about today was what I call triggers. I don't know if you want to use a different word,

Exactly. Exactly. So whatever that term is going to be, we need to identify things that we need to take action on. And one of the things we talked about with machine ownership is the guy's got a machine he bought in 2002,19 years ago. He's got 27,000 hours on it. Don't you think somebody should call on him to say, wait a second, wouldn't you like to have another machine? And do we do that today? I don't see that. Do you?

Imagine the world, and I agree with you 100%. The first thing that I was thinking as you were talking is that the reports that we deal with. typically are financial reports. Typically. And financial reports are retrospective. They're historical. There's nothing you can do about them. They're yesterday.

And we get hardly any management reporting, which is exactly what you and your boss with the nine-day work in process type of thing is talking about. And then I think you gave us another beautiful little transition. recognize there's a problem with reports, but rather than solving the problem with reports, what we did is we changed the report and we called it a dashboard. We just changed the delivery system. And dashboards are important, don't get me wrong. But imagine the day that you walk into your job and you have a digital dealership and we've determined what those action items are and what the data elements are that are going to drive that. And that you turn on your laptop and you're given a list of activities for today. And if we were able to parse through the data elements we've got and look at all of the things that we know we should do that we aren't doing, and we assigned a piece of time to that, we'd find we haven't got anywhere near the right amount of people. We haven't got the right amount of people to serve the customer. We haven't got the right amount of people to manage the assets. We haven't got the right amount of people to look after our own employees. And perhaps that's why there's such resistance to this change because people don't understand how to translate that.

Exactly. And to take your project from 10 years ago, today there's tools out there, software tools. Caterpillar just bought a company called Modern. It sends text messages out every day or whatever frequency you want to every customer who has a job going on, sends pictures, does all kinds of stuff. The trick with that is it's kind of like Amazon and your millennials. They're going to shop online. They don't want to waste time. The customer doesn't. What he wants is to know what's the status. OK, let's come backwards on that one. The reason he wants to know the status is we never meet a delivery date that we give. So that's, you know, it's problem, fix, problem, fix, repeat. You know, it's like wash, rinse, repeat in your hair. And we're not getting out of that trap.

No, we all are.

Yeah. Yeah. So. That's the buying pattern, the change in buying patterns. I had a hard time getting dealers to give me retention statistics. What percentage of your parts customers do you retain on a year-over-year basis? And then that became defensive because, well, the economy's off by 7%. That customer's purchases are down by 9%. Yeah, it's okay. But we never tried to find out, well, what about the customers that stopped buying altogether? Yep. Oh, so the prospective triggers, action items, for instance, I want to go check every part number who's been went to zero today. That'll forestall or hopefully prevent a backorder. I want to look at every part number on every first shipment of a stock order from a vendor that didn't get shipped completely. Yeah. Because that's a portent of a part that's going to be in short supply at the vendor. Yeah. And so we start, I guess, putting it into two piles, problem solving and perspective problem avoidance.

And if we look at the Amazon and the Google experiences, who's doing that today at a dealership? Either one of those. My conclusion is nobody. Yeah, we agree.

Rather than say that again, Matt, because I don't know that very many people think about that. The firefighters do what?

So translate that into our industry and say fighting the fire is solving problems. And what percentage do you think that we have that's of our time? The firefighters is 5% fighting fires,95% preventing them. What percentage of the time of our workforce, I think you gave us a hand, do you think are solving problems?

Sure. Hold on a second. Okay. Okay.

I wonder how many dealers actually have time. That Friday afternoon discussion is kind of interesting. If you go back to the 80s, we had to use Six Sigma as a tool to get us to look at change, at process improvement. We had to have a device, an excuse that gave us permission to do that. And I wonder how many people think they have time to be able to sit down and spend half an hour to an hour talking to every one of their teammates about what if.

Yeah, I'm, as you know, I'm a bit of a freak relative to checking things out and looking for different approaches. So here's a statement. The rate at which organizations learn may soon become the only sustainable source of competitive advantage. And exactly what Amazon is doing is focusing on learning. Now they're learning about their customers. But you also, I think, made something really critical, Six Sigma, et cetera. We took people out of the day-to-day jobs and gave them that job to do as their life. Yeah. We need to do that for the digital dealership as well.

Then there's another interesting approach. As you can tell, I've been doing something on curriculum design and core structures, all fixed set patterns. All processes that we're locked in on are incapable of adaptability and pliability. They're fixed. They're not supple. The truth is outside all of these fixed patterns, which is why the disruptors are always at the edge. In this particular case, you're a disruptor bringing the digital dealership to many people. Wait a second. I'm not sure. I like that guy. He's causing me trouble. That's welcome to my world. That's been what they've been saying about me forever. But, you know, on how we allocate time, I don't think anybody's got time that they wonder what they're going to do. They're over busy in every case. How do we get to the digital dealership unless we can have somebody whose life depends on that transition? Yeah.

Well, you know, go backwards. You and I have talked about this. Over the last 50 years, the market share in parts has dropped by 50%.

I don't know that anybody planned to have that happen. And the price of product has doubled and tripled and quadrupled. So to some degree, That drop in sales, market share has been masked. We've got the same thing in service. The market share in labor has gone down by 50%. We're losing to all manner of people. Amazon, I don't think the bookstores originally thought that there was going to be a risk. Today, seals and hardware and gaskets and hoes and fittings, et cetera. I don't think anybody feels at risk with that today. Look out, boys. You know, I saw cross-reference books that were being sold out of Chicago back in the 70s on seals, O-ring seals. Here's all the suppliers in the world, and here's the seal dimensions and specifications, and here's who you buy it from. They were in books like encyclopedias, for goodness sake. And they sold for, I don't know,700,800 bucks at the time, which was a lot of money then. But, you know, as a cat dealer, you're not allowed to buy from somebody else. As a brand. John Deere, Volvo, Case, Komatsu, whomever, you're not supposed to buy outside the family.

In the late 70s, I was getting beat up by a competitor on loader linkage pins. Highly sophisticated engineered product, nothing. And my primary vendor, the dealer net was 100 bucks. And my suggested list was 150. So I made 33% on that particular part. It was somebody in my territory who supplied exactly the same part from the real manufacturer for 75 bucks. Yeah. Half my price. Yep. And it drove me nuts. So we did a little research. We found out who the source was in Italy. Yeah. We got in touch with them. I could buy that same thing for 10 bucks. Wow. Yeah. So who's the price house? Is it me where I'm paying 100 and I'm charging 150? Or is it them where they're buying it for 10 and selling it for 75? Yeah. So I got my primary vendor to let me compete. with them directly. But as long as I didn't make any more percentage gross profit, they were okay.

My selling price became 15 bucks. Now who's the price hits? Yeah. And guess what? Those guys went out of business within 18 months. So here comes Amazon and they're going to be able to take out a number of layers of the supply chain. Yep. You know, it's a manufacturer.

The best example that I had of that was with General Motors, where you started with a manufacturing based price. Then you had a wholesale distributor price. Then you had a distributor price. Then you had a trade price. Then you had a retail price. Then you had a walk in the door price. And then there were specials. And, you know, there's so many different tricks on our business. It's complicated. So we got a lot of people that are busy trying to keep up with the complications. Yeah. But again, we've got nobody looking at the transitions and trying to take us into a better place. We're still solving problems. We're not in the problem avoidance business, which is what the digital dealership is aiming at, isn't it?

We have wonderful data on life cycle. Yep. We have wonderful historical records on parts consumption, mean time between failure. what the number of hours is on a machine of work. Now with telematics, we know how hard the machine's working. We know when there's sensors that are at risk. We have a whole host of things that we could use as action items. But who's going to go looking for them? Everybody's got a job. They're busy. They can contract with you. You can go in and look at these things. You can do an analysis, a review of the business. And say, you know, we can improve your equipment sales. We can improve your rentals. We can improve your parts. If you do this, this, this, this, this. Yeah. But how many people are out there doing that today? I don't know many. Do you?

No, I agree with that. The secondary thing, there's a fair amount of study that was done on second owner market share. So the guy that buys the machine from the dealer, it's a brand new machine. The first guy, he has a much higher market share and a much higher relationship with the dealership than the guy who buys the used machine. Maybe he buys it at an auction. Maybe he buys it from the original owner. But he has no relationship with the OEM dealer. And we, you know, Equipment Data Associates in North Carolina has got data with all of the financial transactions, et cetera, that go on, the leases. So we know what machines are bought in a territory. We can do that by county. We can go back over years. How many people do that? I don't know. But there's so many sources of data now, it almost overwhelms you. It really is the fire hose coming at us, isn't it?

The answer is no. And that's going to open the door for a whole bunch of competitors. We used to do surveys every five years at the AED with customers. And we asked all those things. statistic has gotten stronger. They want to buy from the dealer. The primary reasons that they want to go buy, what they need most, the customers, is availability is number one on the parts side. Everybody thinks it's price on service, but it's responsiveness on the service side. You know, what's your availability? You know, we end up with these reports and congratulations, you've got 87% overall. Customer orders 100 parts, you give them 87% off the shelf. Fantastic. Doesn't say anything about the 13 we don't give them. Doesn't say it takes us a month to get those. And we feel good about it. And you know what my number one rule is, find every part every customer is looking for and do it before you go home today and call the customer.

Yeah, well, that's a real simple statement. But the other thing was when I went out west to when I left Quebec and went to British Columbia, I said that that's what our mission was. And I sent 53 cots out, one for every parts manager. One of the guys actually picked up the phone and said, what's this? I just got a cot. I said, that's for every day. You don't find every part. You can have someplace to sleep. They didn't think I was serious. Believe me, I was.

Well, no, not afterwards. You know, there were a lot of comments. That's the crowd that I was, a little story on the side. I was brought into the company from Quebec. So that's French Canada going into British Canada. It's an outsider when they had 53 guys that felt that any one of them could have done the job. So they introduced me to this crowd. We went by helicopter from Vancouver International Airport up the coast, about 30 minutes. And then we spent, I don't remember, there was four days, five days, three days. We spent the morning fishing for salmon, which I had never done before. And I caught all the fish. And it's very different than trout and bass. You don't set the hook. It's a soft mouth. So if you set the hook, the salmon's gone. So I got all kinds of flack for that. Then the afternoon, we spent time meeting. and talking about things. In the evening, we ate and drank and told lies to each other, usual stuff, right? It became very clear that they didn't want me anywhere near the place. Interesting. Well, not surprising, but if you knew me. So the second day, I said, look, it's obvious you guys think that I shouldn't be here. One of you should be. So I'll make you a deal. You guys all agree on something, anything that's going to improve the performance of the parts business. But you all have to agree. If I can't get it done in three months, I'll quit and one of you guys can have this job. And you'd have thought that I'd given them a cashier's check for a million bucks. They were happier than clams. So the next day I asked you, you ready? No, we were still working on it. The next day they gave me one. So I go back. Now think about this. We're doing 100% absorption in the parts business. And everybody agrees it's something that's going to improve performance. Who's going to deny me? Nobody. So I got it approved almost instantly. And I waited a couple of weeks to make it look like it was more difficult. Then we had a conference call, said, OK, we're going to do it. And, you know, said, by the way, you know, was that maybe it was too easy. You want another shot at this? Yeah, we'd like another shot. I said, well, how long do you think? Well, next Friday. OK. So they gave me another shot. Same thing happened. And I offered to have a third shot. He said, no, we now know why you got the job. You're a devious devil. But it's the same thing. It's what I call the art of the possible. We have action items that are there that we know, but we're not doing anything about it. I would submit to you that we need everybody to, how about this as a starting point? Give me five action items for each department. Sales, finals, parts, service, finance. Five action items, triggers for each of those departments. Yeah. Why don't we put that out for people on the podcast? If you want to, send us email, either Mets or I, with your five items and let us play with that.

Or you go into a dealership and do a review and... and come up with your list. You know, the first consulting job I ever had, I went into the guy and I had about five pages of suggestions. And this was a really good dealer. And he was being very generous to let me have my first crack at this. And I get about halfway through, about an hour later, he was a good friend of mine. He said, Ron, do I do anything right? So I learned very quickly that you don't give them everything. You feed them. a few things that they can absorb. Maybe that's a thing that people can absorb on these action items. Give me five for every department. What do you think?

Let's end it there. Let's ask the audience, take some time, talk to your teams, come up with five items in your department that you think are action items that would be beneficial for your business and send it to either Metz or I. Sounds good. And we can go forward from that. That makes sense?

And that might be a good subject for your next blog relative to the action items. Maybe you can reinforce that five-point thing and what you're looking for and how to deal with it. In other words, what you do when you go review a dealership and what determine what they need to do and how your business works and helps dealers make more money, become more successful, get more market share, whatever the heck it is that they're after.

I think we covered a lot of ground again today, Matt, and I don't want us to go forever. People will get a little cranky with us, but anything you want to provide as a closing comment?

Yeah. And you're right. And there, there have been various changes on inventory parts, inventory management, almost every decade has been an adjustment. And, and the disruptors are, going to cause us hiccups. And it's, our customers want us leading. They don't want us following. And at the moment, we're waiting for somebody to challenge us and then we'll adapt. And until they challenge us, we're not going to do anything. And that's a blasted, that's a shame. It's a waste of a lot of potential and a lot of talent and a lot of people. Well, on that, let's close it up. And we'll have another one that... will follow through on this and take us to another place. But as usual, thank you, Mets. It was, I think, very informative. And to our audience, thanks for listening. And we look forward to having another conversation with another interesting individual in the near future. Mahalo. Thank you for listening to our podcast. We appreciate your support. Should you have any thoughts or comments, please don't hesitate to contact us at www. learningwithoutscars. com. The time is now. Mahalo.