Value slip …are you actually in the business you thought you were?

We bought new car.

Unusual for us as I generally prefer a ‘nearly-new’ approach to asset purchase, letting someone else take the dramatic hit between new sale price and the next day market value. But not this time. I was handed a specification including the model variant, (“2016”), which did not leave much room for manoeuvre.

So I went to a car dealership to buy a car – Right?

Wrong!

It turned out that I had to go to a finance and insurance broker (“…authorised and regulated by the Financial Conduct Authority…”) to negotiate the purchase of a mobile software platform.

I remember the days when a ‘mobile’ phone was actually a ‘car phone’ as the battery required was too big to carry around. It seems that now, with the relentless tidal wave of personal mobile computing enriching every aspect of our lives, a ‘motor’ is no longer just a motor. It is now software driven (literally!). The integrated ‘iPad’ in the dashboard is crammed with Apps from intelligent safety features to entertainment and from physical comfort to the personalisation of every aspect of the vehicle.

To keep up the service department have had to offer free software updates for every car!

I thought it odd that the service interval on this new car is just 1 year. My last two cars have had a 2-year service interval. As the mechanical technology has advanced, annual servicing has become unnecessary. So why does this state of the art car have to return to the insurance brokers every year? Could it be because going without a firmware update for more than 12 months could be too much risk for the manufacturer to carry? It is one thing if your after-market Satnav stops working but quite another if your core software application which runs everything (fuel, brakes, steering, external lights, speed…) uncovers a rare bug at 70mph.

Value slip

But it was the financial services hard-sell that caught me unawares:

  • 3 different types of finance scheme
  • 5 insurance schemes for risks associated largely with cosmetic damage (in fact everything except driving insurance).

“Are you sure you want to finance the car yourself?” – “Errr.. yes!”

“Are you sure you want to take the risk that someone will chip your paint?” – “Err… yes!”

The biggest risk to me from these offers is the fat margins associated with either set of products.

I wondered when the dealership business noticed that it could make better margins selling financial services than selling cars. When did that ‘value slip’ occur? At least I understand why they said they wanted me to be there for four hours  to pick up the car!

It is a standard question to ask in any strategy review and particularly in an Agile Strategy Design® review.

  • “What business are you really in?
  • “What value do you provide to the customers?
  • “How has that changed over time?”
  • “When was the last ‘ value slip ’ (think landslide) in your line of business?”

Technology and particularly mobile networked applications are the new ‘gravity’….

….. where is your business going to land?

Here’s the customary link to the cover picture

I hope you have an enjoyable day.

Nigel

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