The Road to Success in Digital Transformation
Carousel Motor Group (CMG), an operating company of the Pohlad Companies, set out on a mission to redefine the pre-owned car-buying experience by putting the driver before everything else. That initiative resulted in “Carousel Online”, a fantastic example of a digital transformation success story.
Carousel Online is an end-to-end online destination for purchasing quality pre-owned vehicles. Every step of the process can be completed virtually, including search and selection, processing a trade-in, applying for financing, the checkout process, and scheduling complimentary delivery to your driveway. They’ve added innovative online experiences like virtual test drives to reinvent the way customers buy pre-owned cars.
A global survey by McKinsey reports that 80% of respondents have begun digital transformations in recent years, but only 14% have realized performance improvements as a result. And only 3% have succeeded in sustaining their transformation. Carousel Online launched in May, 2022 and is already exceeding their internal goals for customer satisfaction and conversion rates. A look under the hood reveals that the Carousel Online team followed many best practices for successful digital transformation and avoided common mistakes that often result in digital disappointment.
Vision from the top
Chase Hawkins, CEO of Carousel Motor Group explained, “We always knew there was an opportunity for a disruptor in the online pre-owned vehicle space who could deliver a premium experience. All other players in this space treat customers as transactions. Defining the business model around the customer was of paramount importance. Our early customer feedback indicates Carousel Online is on exactly the right track”.
That vision extends down to every employee on the Carousel Online team. Each person sees the impact their business model is having on the client experience and believes in what they are trying to accomplish.
Dedicated resources
Carousel Motor Group avoided a common pitfall of digital transformation initiatives by dedicating experienced resources to the project. A sure route to failure is to assign the task as a “side project” for people who are already fully utilized in the core business, or to dedicate inexperienced staff who just happen to have a little spare time on their hands. In contrast, CMG identified experienced leaders in each area of the business, backfilled their roles in the dealerships, and dedicated them to the development of Carousel Online.
Dan Olson has 23 years of experience in automotive retail and a proven track record of exceptional leadership during his three and a half years with Carousel Motor Group when he was tapped to lead the creation of Carousel Online. Dan was empowered to build a top-notch team from the ranks of CMG.
One of the all-stars responsible for the success of Carousel Online is Angie Gustafson, VP of Customer Experience. Angie also has more than 20 years of experience in automotive retail, and was tasked with ensuring the premium experience offered in the physical stores was translated to the online channel.
Data-driven Initiative
The Carousel Online team conducted in-depth data analysis to understand the market opportunity. They identified that 80% of used car sales in the area were in five segments: full size trucks, compact sedans, intermediate sedans, compact SUVs, and intermediate SUVs. The team analyzed their own sales and the footprint they had in those segments and realized the opportunity was significant if they could claim just 2% of that market in their own local geography. The opportunity is even greater when they consider the expanded geographic reach.
The Carousel Online team conducted extensive research into other providers in the market and how they approach the client experience. Their findings left them determined to apply lessons learned in their existing luxury brand dealerships in order to give online clients the same premium experience.
Independence from the Core Business
Carousel Motor Group consists of eight dealerships representing four luxury automotive brands and five mainstream brands. Each manufacturer has a different set of requirements for dealer processes, store design, and technology systems to which the dealership must adhere.
There are many ways to approach digital transformation from an organizational perspective, and one of the most difficult is to transform a business in place while in operation – to reengineer a train while it’s running down the track. CMG avoided that pitfall by pursuing their digital transformation project as a separate entity, isolated from the rest of the business. Dan explains that he was determined to prove the Carousel Online concept was a viable business model on its own, without depending on the support of the core business. He aggressively turned down “favors” from other dealerships, paid market rates for services and inventory, and ensured that Carousel Online would stand on its own.
Building Carousel Online’s innovative end-to-end digital sales channel as an independent used car outlet allowed them to accelerate the development process. Once developed, the core business can leverage the learnings, process innovations and technology from Carousel Online within the other dealerships wherever feasible.
Angie Gustafson explained, “We had no guardrails! Which meant there was nothing to hold us in, and nothing holding us back.”
Build on a Solid Foundation
While Carousel Online was developed as an independent business entity, they were able to leverage the underlying infrastructure and communications platforms of Carousel Motor Group. A few years before development began, Carousel Motor Group invested in a complete overhaul of their technology systems and support processes. They completed a cloud migration and Office 365 rollout that resulted in a reduction of 27 on-prem servers and major cost savings. Organizationally, they built out a high-performing technology team and added strategic business-facing roles to the IT staff. They put in place a technology governance process, and later a robust service management process. A complete network redesign to implement an SD-WAN architecture delivered improved performance, redundancy and disaster recovery capabilities. They standardized on a single data management platform and a CRM that is part of the Cox Automotive suite. The final step in the process was migrating to a Zoom phone communications platform that enabled the human connection to the customer and was pivotal to the success of Carousel Online.
Wayne Pisinski, Vice President of Fixed Operations at Carousel Motor Group stated, “Several years ago, when one of our manufacturers came along with a new technology requirement, we knew there was no way our IT infrastructure could support it. Today, we can confidently agree to any manufacturer expectations and drive our own technology innovations, including Carousel Online, because we have no doubt that our IT systems will be able to support them.”
Leverage Existing Technology
An important step in the early phases of any digital transformation initiative is to decide whether you will build the new technology from scratch, purchase off the shelf software platforms, or some combination thereof. Carousel Online accelerated their time to market by leveraging multiple existing technologies and integrating them in a way that was new and transformational. The automotive retail industry is saturated with standalone and bolt-on software products to fulfill the many different processes related to purchasing and servicing new and used vehicles. Cox Automotive is a major player in the industry with several technology brands and services including a CRM offering, a scheduling app, data aggregators, a data management system, as well as commercial products including Autotrader and Kelly Blue Book.
Carousel partnered with Cox Automotive to stitch together several software tools into their Esntial e-commerce platform that allows customers to complete the entire car-buying experience from their smart phone or computer. By integrating existing and proven technology, Carousel Online was able to launch their first-of-its-kind innovation in less than a year. Chase Hawkins explains, “Cox Automotive had the right e-commerce platform that would allow us to deliver on our customer-first strategy. It was also important that we find a partner who would co-author the customer experience and be highly flexible and fast-to-market in adapting their software to meet our needs.”
Proper Funding
Another common reason that approximately 70% of IT projects fail is a lack of adequate funding. Technology leaders and business executives will often dream big and set lofty goals during the ideation phase, but lose their nerve and start looking for ways to reduce cost as soon as the project is greenlit and the invoices start rolling in. The leadership at Carousel Motor Group and the Pohlad Companies put their full support behind the initiative, backing it up with appropriate funding and resources through the duration of the project, and having a realistic approach to financial performance in the beginning stages of a startup business.
Speaking from more than two decades of experience, Dan Olson says, “It is so refreshing to work within a company that embraces technology.”
Looking to the Future
The team at Carousel Online identified a clear baseline of functionality needed to launch the new platform. However, the creative and ambitious group saw opportunities to improve on that baseline. Rather than letting those ideas turn into scope creep, they wisely added these ideas to the development roadmap and launched the service on time and on budget. Post launch, they are gathering customer feedback and combining that with their experience and ideas to develop future enhancements to the platform.
“We have to be flexible. We recently added our KBB remote vehicle consultation, which allows us to evaluate a trade-in over Zoom and make an offer without the customer having to bring the car in to us,” said Angie “It is a valuable but unexpected feature, so we have to do a lot of education throughout the process.” She added, “We are always looking for ways to enhance the client experience. We have a weekly routine we call ‘Strategy Tuesdays’ where key leaders get together and dissect individual customer experiences and look for ways to improve.”
Results
Three months after their successful launch, Carousel Online is thrilled with their progress. Momentum is building, and sales have increased each month. Website analytics show they have logged 58,000 new unique users on the site in 90 days. Their conversion rate from site visit to checkout is an impressive 2.3%. [CA3] Best of all, their customers all have positive things to say, they have received nothing but 5-star reviews so far.
Dan acknowledges that they are still working through the challenges of brand awareness and sales funnel fallout, but he knows he and his team will overcome those obstacles through determination, hard work, and following proven best practices. Dan’s team is used to hearing his familiar refrain, “If the road to success were easy, everyone would be on it.”