Driving the digital revolution

cars_driving_at_nightTechnology is having a significant impact on the car-rental industry. Comparison sites and car-sharing services are just two technology-enabled developments of recent years that have transformed the industry and presented challenges to the established players in the market.

In a recent interview with McKinsey & Co, Hertz CEO Mark Frissora explained the approach the company has taken to dealing with the challenges of the digital revolution. It appears to be working; in 2012 the company, which is the largest worldwide airport general use car rental brand, reported record revenue and profit for the second year running. And 2013 is shaping up to be another record-breaking year with the company once again forecasting record revenues and profit for the full year.

Technology is playing a key role in this performance; one of Hertz’s five strategic goals is “leadership in advanced technology.” The company has already introduced a range of digital innovations such as mobile apps, online kiosks and 24/7, its on-demand car sharing solution. Hertz is clearly a company that has got to grips with digital and which is using it to make the business stronger and more successful despite facing increased competition and disruption from new entrants who are using technology to create new and innovative services.

The Hertz approach contains three valuable lessons which other organisations can apply so that they too can use the digital revolution to their advantage.

1.  Get to know what is really happening in your organisation

Hertz executives, including Frissora, regularly spend time on the front-line of their organisation to understand what their staff do and the challenges and issues they face on a day-to-day basis. Three times a year the whole executive team visits the Hertz call centre to meet with supervisors and listen to call centre agents talking to customers. The leaders of functions such as IT, marketing and finance also regularly “go to wherever the work gets done” in their areas to find out what is working well and what needs to be improved. And the leadership team gets together every quarter to share what they have learnt from these visits.

Frissora explains that this approach is the best way to understand whether a strategy is going to work at every level of the organisation. It also provides valuable insights and ideas that are used to shape and refine the business strategy.

To lead the successful transformation of any organisation you have to understand how it works, and where the real issues are; you have to understand the challenges faced by your staff on a day-to-day basis and address these as part of the transformation. And it is not just about your staff either, it is also about knowing what your customers really want, what they think of your products and services and how they interact with your business. By regularly talking to staff who deal with customers and by listening to customer service calls, the Hertz executives are gaining a valuable insight into the customer experience their company is providing.

2.  Embrace new ideas – even if they do challenge your business model

Many companies are too quick to dismiss new ways of doing things particularly if they are associated with start-ups or new market entrants. Whilst others take too long to adopt new technologies that are already being used by their competitors. In both cases such companies risk being disrupted, falling behind the competition and losing marketing share. In some cases a business that fails to react to changes in its markets or that does not exploit new technology may cease to exist altogether.

At Hertz they take a different approach. The company looks at how it can apply and exploit new ideas, trends and technology and makes quick decisions about how it should respond. For example, instead of fighting against price comparison sites, Hertz uses them to demonstrate their value-added offerings and to highlight their differentiators. And it could easily have ignored Zipcar, the online car-sharing service that enables customers to rent cars for a few hours from any location at only a few minutes notice. Originally Zipcar was a small player that only operated in a few big cities so it could easily have been dismissed as a niche offering or even a fad. But Hertz embraced the concept and is integrating the technology behind Zipcar into its own platform to enable a new business model, its 24/7 service.

Frissora provides a useful summary of the issues facing businesses in the digital age, “technology is constantly challenging traditional business models, and it happens faster and faster in ways that can be difficult to see. When a new technology emerges, companies need to decide almost immediately whether to adopt it—or they could risk being destroyed by it.”

3.  Make sure your board is tech-savvy

This is a subject I have written about before. In Boards need to get up to speed with digital I talked about the need for boards to gain a better understanding of what it means to be a digital business, and how technology can enable their digital transformation. And in Filling the digital knowledge gap I explained the steps that CEOs could take to address the shortfall in their board’s digital awareness.

Frissora has made sure his leadership team is up to speed with digital and has the skills, experience and credibility to lead the digital transformation of the business. The Hertz CIO reports directly to Frissora and is a member of the executive committee. And Frissora has also recruited board members from technology companies like Terradata and Facebook to provide experience in social media and analytics, which are key to its strategy.

And he has also created a senior vice president role for branding and innovation who has a cross-functional team of marketers and technologists that is tasked with redesigning the Hertz customer experience to make it relevant to a new “generation of renters.”

Hertz operates in markets that are being disrupted and transformed by technology yet it is delivering record breaking results. Its success is the result of a tech-savvy leadership team that is close to the business and truly understands what its staff and customers need, and which is open to new thinking and willing to change its business model to exploit new ideas and technology. Any business that wants to survive and grow in the digital age can learn from the Hertz model.

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