At some stage most of us have had someone in our car sales team who has many years of elapsed experience, but who truthfully has one year’s experience, repeated many times.
The problem was that the person did not learn, did not grow, and was considerably less valuable to themselves and their organisation than someone who had embraced learning and who had continuously developed over time.
Businesses are the same as people in this regard.
One of the foundations of Toyota’s climb to prominence in the 1980’s was the concept of Kaizen within their production system, with its core principle of continuous improvement.
The focus was always on how to adjust what is done tomorrow in order to get better outcomes than today.
The concept is widely applied today, with sport being full of high profile examples steadily looking for small incremental gains across all aspects of performance.
The upcoming winner of the Rugby World Cup will do so thanks in part to what they do differently compared with four years ago.
The ITV advert indents have highlighted Danshari- the art of decluttering- as a vital skill for clearing out the ruck, but Kaizen has had a broader impact on both rugby and business.
So what are the key elements of Kaizen?
First, a mindset and determination to find continual incremental improvements.
Second, a focus of time and resources on data: its collection, its analysis, and its rigorous application in decision-making.
Third, a philosophy of listening to and empowering employees at the coal face, be that a production line or a sales floor.
When these three elements work together, they create a virtuous cycle of 'doing', 'learning', and 'adjusting'.
Returning to the world of automotive retail, and specifically used cars, how well have we as an industry embraced the philosophy of Kaizen?
We certainly are strong at measuring the financial performance of a used car business (vehicle gross margin, finance gross margin, stock turn, refurbishment costs, ROI etc.) and we have an excellent range of benchmarks against which to rate that performance.
Turning to operational decision-making, is the picture different? The most frequent decision is fixing the advertised price for a car, and under a Kaizen philosophy the initial decision of the price to advertise a car would be fact-based and documented, as would the subsequent decision to hold or move the price, up until final sale.
On a regular basis, the performance of the decisions would be analysed, and decisions made on how to improve performance.
Is this approach followed in your used car business? For those using Retail Accelerator or a similar tool there is a simple test.
At system set-up you are required to enter your price positioning strategy relative to the recommended retail price, be that AutoTrader or another, with probably different pricing strategies dependent on the time in stock of the vehicle.
The key question is how frequently have those pricing strategies been refined? Every quarter? Every year? Never?
Following a Kaizen philosophy, first the managers would have been consulted on their recommendations for setting the price positioning strategy.
Then, agreement would have been reached as to what was the targeted outcome over the next period, in terms of gross margin and time to sell.
Finally, at the end of the period, time would be set aside to review the results, not as an opportunity to berate or praise, but to listen and learn.
Was the pricing strategy followed? If not, why not? If it was followed, what was the outcome? How should the strategy be adjusted in order to improve results for the next period?
If this cycle of reviewing, learning and adjusting in a constructive environment is not occurring, then there is a risk that your used car business is like that employee who has one year of experience repeated many times, and is not learning and improving as fast as it should be.
When all eyes turn to Japan for the World Cup final, a short period of Seijaku ('silence, stillness, quietness) reflecting on your used car business may be of benefit.
Author: Andy Carroll, director, Albeda Ltd
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