The March of Technology: Insights into Dealer Systems Evolution

What we're going to do is wander down a little bit of memory lane, talk about current situations and a little bit about the future. And it's all about how computers, business systems, process has changed in the computer, in the dealership world. And being the oldest, let me start because I took a computer science course in 1964, where I learned how to wire unit record equipment. And those damn machines are in museums. That's it. Unfortunately, I'm not. Nobody wants to pay to see this stuff. But then dealer data processing, I think, for Caterpillar was the very first service bureau where they had the computer. Dealers would send in forms. processes were mud the reports went back and it went back and forth that way and if i'm not mistaken joseph that's where you started with caterpillar as a trainer for ddpd is that correct yeah

right and then at that time jenna jen i think you were working with a caterpillar dealer

Yeah, well, he's much older. I understand that. That's true. So with that as a starting point, when you guys started with computers and systems relative to dealers, how did that go? How did it happen from your perspective?

And, Jen, when you were working with the Caterpillar dealers yourself, you were involved with the systems, correct? Yeah,

Yeah, it really was. I was hired at the Caterpillar dealer, the first one, to fix the problem with the system for exactly what you were talking about, Joseph, and you also, Jennifer, the inventory management. package was highly sophisticated with statistics. And that was my background. And the inventory had grown triple, quadruple the size because of the variables inside the program were incorrect. They were multiplying everything by 10 and it was missed and it was assembly language programming. And it's hard like hell to find that stuff anyways. But, but as, as we've, and let me mention brand names just for a moment and it's all of them. We've got SAP, Microsoft, Infor, Xapt, JD Edwards, Oracle, DIS, E-Emphasis, CDK, all of these and others that are out there. And so now it becomes a little bit of, and technology has changed. Computer power has changed.

We can do things with telematics today that we never were able to do with sensors and machines and lifecycle, all of that stuff. How the heck does a dealer who really doesn't have those technology skills as an employee, how do they select one?

Actually, that was kind of coincidental to the early 80s with the continuous quality improvement or total quality management or whatever the heck. And I guess that's part of where you were going, Jen, within the dealer, documenting the process and how we could make things better.

Yeah, and Joseph mentioned GPS, I think, is a wonderful analogy. You need an origin. So those processes that have been around there two or three generations, who started and why and what's the legacy? And I call those sacred cows and we've got to shoot the damn things, you know, but it's getting people to change in this. You know, again, we talked earlier before we started about green screen and it's amazing how quick certain. people were on green screen. They'd get two or three screens ahead of themselves on the keyboard, and it was okay.

Yeah. Yeah.

Well, it was, there was a brand, I think it was Capro, back in the 70s that had a portable computer. It was really rudimentary. But when you turned the power on. the first thing that came on the screen was hit a key, any key. And you hit the key and the screen went, you know, well, you didn't break it, you know, to try and get people over the hump. But, you know, you mentioned GUI interface and here comes a relational database and all this other technology stuff. Initially, I think most of the people that were recommending systems were consulting companies.

It's kind of the way that their companies are set up too. They've got a sales force that's out there peddling the product. Then they've got a group of people that install the product. They know the product really well, but they don't really know our business at all. Right. Then you've got the customer service people that answer questions on the phone that haven't really visited a dealership. That's like the counter and telephone sales that have never been out to a job site. And then you've got product development. And, you know, they have user groups, right? We're going to have 10 people that are going to help us determine what we need to do with the package and making it better. And I was brought into the States to run EBS. They're no longer in existence in a major way. but I was asked to package it for sale. And they had 450 dealers at one time on the service bureau.

And when I was arrived, I think we had 90 or 100 that were still there because they didn't want to sell, didn't want to lose that batch cash cow by selling an online system. We've seen, even you guys have seen a hell of a lot of change. So how does a dealer go through the process of making the decision of a selection? Do they still use outsiders?

Yeah, you brought up a really important thing, pain points. What wakes you up at night? Yeah. Because they're there in every single aspect of every single business. Yeah. So how, like you help dealers select systems.

Well, not to be too smart about it, but when I look around, because I do systems advisory work as well and evaluations, but. I don't know that other than you two who have background in this business, I don't know that there's many out there that are helping dealers on system selection that know the business. And I don't know how you can help somebody if you don't know the damn business. Like you say, Joseph, creating a process flow chart of everything that goes on in the business today. Right. Yeah. And what's bad? What's tough?

And so that's. Just to interrupt you a little bit more insofar as blowing your own horn, if I understand right, you teach three classes on supply chain at Bradley University and Indiana University as well. Am I saying it wrong?

Yeah, just all the easy stuff, right? Yeah, it's kind of... So there's a cue though. You know, I'm not shy. These two know what the hell they're doing. So if you need help, get in touch with them. They're a contributor and a colleague on our website. You can directly connect with them there. So that's the end of that commercial. So we get that chart together. I suspect then you start involving different providers. Is that true?

And that's something I have a hard time as a person and have done forever. I'm not interested at all in cost. I'm interested in value. Right. And that becomes the process flow stream. And everything that we see in our society, you know, just look at entertainment where, you know, we started with movies only, black and white, silent. Then we went to color. Then we went to voice. Then we went to. Oh, my goodness, television. And then we went to Blockbuster and renting VCRs. And, oh, you made a mistake. You went beta. Well, you know, all of these things. And so in our little microcosm as dealers, and these dealers are not small anymore, probably if I look at the world, I would bet you 75% of the dealers are a billion dollars or more today. That's pretty big stuff. You know, in Canada, when I started, there were 10 catalogs. Today, there's two. One east, one west. Finning's one of them, and they're probably $18 billion last year.

Toramont's not far behind. Holt. We're talking big guys. Now, same thing's true with Deere. You got Rush, and you got RDO, and same thing's true with Komatsu. You've got the trading company. Same thing's true with Volvo. It's becoming a big boy's game. It's too much money for small people anymore.

Yeah. And the other side of that, Jen, I think is that, you know, there's very little available for that price point. 20 to 75. I'll broaden it. I'll make it up to 75 million. It's very hard to find a system that's cost effective. Yeah. Mahindra dealers, Bobcat dealers, Kubota dealers. There's a whole bunch of these guys that are in there.

Rental dealers as well. And that's, you know, that's another thing that's kind of intriguing. We've got, we started with a construction equipment base. Okay, here comes forestry. Here comes mining. Here comes agriculture. Here comes marine. Here comes... And it's scattered now. So again, the systems providers, my opinion, they're creating peanut butter. They're not providing specialized services anymore, which is one of the things that I think is coming at us. Here comes Salesforce, as an example, that took a niche that was CRM that wasn't really looked after very well. Here comes Target. Here comes Coda. Here comes all of these things that are specialized. tools that are excellent. How do you bolt them on?

And how does the dealer find those? Because typically those specialists, like text messaging on work order process or on backorder process, those things, and there are people that provide that. But how the heck does a dealer find that? And those smaller company specialists, they don't really have good sales coverage.

When I came into the States in 1983 and EBS, and I was in Denver, and there was a gentleman in Denver by the name of Bob Lane, who was a district rep for a manufacturer, ended up being chairman of the company. And in 1983,84, John Deere, that company, decided they were going to get in the software business. I had dinner with Bob because I'm with EBS, and I said, okay, what? What the hell's going on? Are you guys going to make machines or are you going to sell systems? He said, that's above my pay grade. Well, he became chairman and I called him and asked him the same question. He said, well, that's somebody else, Ron. He punted the answer, the question. Within the manufacturers, within the OEMs, every single one of them, Caterpillar, Comanche, Volvo, Dealer, Case, Deere, everybody has flirted with systems.

You make my point, though, because none of those manufacturers, OAMs, are today headling a software package other than Deere. And your market share is very low because of exactly what you're talking about. Every dealer, as much as we think they're the same, they're all different. They're all unique.

So let's shift gears a little bit and talk about tomorrow. Look down the road five years. Where the heck do you think we're going with technology in our industry?

I think that's very much in our future, kind of like an octopus. We're going to have a core that holds the data. The cloud, I think, is inevitable. But again, the one size fits all is a risk for me because every dealer wants to have different pricing options, etc. So the cloud cannot be homogenous.

Yeah. And then they'd be able to choose different pieces rather than one. I think, Jen, that's really... We'll have one rental package. We'll have one finance package. We'll have CRM reporting, all that stuff.

That's scalable. Yeah,

So where do you think working from home fits into this?

But you know, but but inside a dealership, can I provide customer service to customers without being in an office?

Stay with, stay with that just for a second. Service has probably the lowest market share in our industry of any of the categories, part service, sales, rentals. And it, depending on who you talk to, if you really want to get positive, it's 30% of the available market of labor down to as low as five. Yeah. In order to be able to have the dealer take control of that, just think how much money and investment in buildings that is. So that's not going to change. And as long as the dealer mechanic is not the primary person to place the order for the part, then the dealer parts business is at risk. So both of those things, to me, say that the dealer of the future might be at risk.

The only one that has been able to avoid that is Elon Musk. And that business model is, I think, five or 10 years from now, that's going to blow up. Yeah.

How close do you think we are to individuals being able to self-diagnose?

We've got a Samsung washer and dryer at home that we can do all our diagnostics on the phone, directly talking to the washer or the dryer. And they talk back.

Yeah, well, we've got the same thing. Unfortunately, we have two places, you know, so we control the thermostat and monitor the tension, the opening and closing doors from here for there and there to here. I mean, it's wild what you can do today.

Yeah. We're hooked up with about 10 different schools across the country with the technical training with technicians. And some of the manufacturers have pretty powerful and strong technical training classes. product features and benefits classes. So I think you're right. There will always be a place for it. But I guess the rule that I look at is whoever's closest to the customer is going to win. And that's building a relationship. And that's based on trust. And trust is based on performance. And performance requires technology. And whether it's a business system or distributed system or cloud system or local, whatever it is, I don't see dealers having skills on board. Cybersecurity, you mentioned just quickly in the cloud, if the dealer is not scared to death about hacking their computers, I don't know where the hell they've been.

Oh, they're scared enough. We've had personally two instances where our bank accounts were hacked over the last 15 years. One emanated out of a hotel in London and the other emanated out of a hack of there's no firewall on your modems and your internet provider routers, which is really weird to consider. So there's a lot of brains that are working on the sideline trying to get into things. I don't know very many dealers that have anybody that they contract with or employ who's a data security pro.

One of the interesting things is when I was starting, the people that were doing consulting and data security had served prison terms. Yeah.

It's really remarkable. And I know many dealers, not one or two, but many dealers that have lost hundreds of thousands of dollars through various nefarious activities. Yes, we know. Like you say, the benefit of the cloud having specialists that their life depends on, and they love it. And that's cool. That's just not, that's something we can outsource. And that's wonderful. Database manager, we can outsource it.

Yeah. The other thing, a lot of those, and this is not disrespectful at all, but they rely on their children at university because they're a hell of a lot smarter on a lot of this stuff. My grandkids,22 and 18, they shame me now. And I've been involved with technology most of my life. The other thing that seems to be coming faster and faster, but is problematic in data analytics. The quality of data that we're dealing with, in my view, is suspect. I don't think dealers have paid attention to that.

That's where your octopus, that core, we bolt everything on. Today, there's a lot of dealers that have differing systems. That example, let's just talk about a customer profile. Yeah. I've got three different systems. They have three different customer profiles. And guess what? They don't talk to each other. And different people are updated. That's where I'm worried about data.

Yeah, I agree with you 100%. The same thing's true with financial statements, Joe. What goes into the cost of sales in one place is different than it goes in the other place. And so KPIs all of a sudden become, whoa! So there's a whole host of things. Like the dealership, and let me make the simple analogy, the car dealer make money selling cars at less price because the manufacturer rebates based on volumes. The dealership, when I started a typical tractor, D8, the most populous tractor on the planet, was under $100,000, believe it or not. Wow. So, you know, it didn't really matter. And in those days, like right after World War II, there were seven people that make tractors in America. I think today there's three. And it's, you know, all of this stuff is a function of the fact that we don't keep up with change, which is where technology, which is why I... I think this discussion is so important for people. Where have we been?

Here's the track record. Here's the rate of change. It's pretty scary. A lot of people have sacred cows. I'm going to keep it that way. The acceleration of change is exponential. It's getting faster and faster. And here comes artificial intelligence. And God save me, I don't know where that's going. You know? Yeah. Yeah, I think this has been a worthwhile discussion. Any final closing thoughts? Either of you would want to? say to dealers when they're looking at technology?

Know yourself. I agree with that all 100%. One last thing. Let me ask from a teaching perspective. What are you seeing as the biggest need of kids in university these days relative to the business world?

I agree 100%. It's too much theory still, isn't it?

I agree with you 100%. I had a teacher in physics, thermodynamics, and he didn't mark on a curve. The pass was 18%. Only one person passed. We were all in the honors program, math, physics. He was a concert pianist at the age of 25 and a PhD in physics. The guy was brilliant. I had a cousin who was a... PhD in nuclear physics in the 50s. He was brilliant. He's one of maybe a dozen men on the planet. He's since passed. But the young kids today are confronted with so much, so many choices. And the reason I bring it back is that comes right back to the systems and technology. We are confronted as people with so many choices and we're not equipped, in my view, to make the choice.

Yep. Well, thank you, the power couple of the industry. I appreciate the time. And I hope everybody listening to this got something out of it. And thank you for attending this candid conversation. And we look to having one again in the near future with you. Mahalo.