Dear Avis, Please Don’t Screw Up Zipcar
Tuesday, January 22, 2013
Dear Avis: If you want to win big with the Zipcar acquisition you will have to try harder. Resist the temptation to impose your core car rental business model on the upstart transformer. Zipcar is your sandbox to scale a car-sharing model with potential to disrupt the automotive and car rental industry. Stop with the number two shtick, Zipcar can help Avis become a market maker instead of a share taker. Your main competitor, Hertz, is a share-taker demonstrated by its recent acquisition of Dollar Thrifty. Your opportunity is tremendous but throw away the classic post-merger integration playbook. Here are five ways to do that:
Change your lens. It isn’t about you. Zipsters aren’t your current customers. Your business model, renting cars by the day or week, isn’t designed for Zipsters. Start by understanding their experience and view the world through the lens of Zipcar’s business model, which provides members with access by the hour to a network of shared cars. You aren’t buying a platform to improve the Avis business model. You are buying a new business model that will benefit from access to Avis capabilities. ZipCar was struggling to scale its model and Avis can help. This is about enabling more Zipsters and improving their car sharing experience.
Innovate Through A Connected Adjacency
Scaling Zipcar without suffocating its nascent business model will require both autonomy as well as access to resources and capabilities from the core. Set Zipcar up as a sand box adjacent to the core. Give it plenty of room to operate independently. The more disruptive the new model the more line-executives from the core will try to undermine its success. Autonomy doesn’t mean Zipcar should operate in isolation to the core. It’s imperative to build strong connections so that people, ideas and capabilities can flow in both directions. This tricky balance requires significant CEO involvement to run interference on what will be many inevitable conflicts and tension points.
Don’t Think Synergy, Think Enablement
Classic merger and acquisition logic relies on pro-forma financial statements with identified “synergies” to justify the acquisition price. That’s usually code for cost and headcount reductions in the acquired company made possible by forcing it to use core business platforms. Avis expects to realize $50 -$70 million in synergies from the Zipcar acquisition. It all looks good in spreadsheets but Avis core platforms are not designed to support Zipcar. It’s not just a change management challenge helping employees gain comfort with new platforms. Core capabilities often come with so many rules and procedures that the new business model dies a slow painful death by a thousand paper cuts. Don’t start from the premise of achieving synergies to achieve financial results, think of it as enabling Zipcar to scale its business model. You can’t save your way to market making.
Let Zipcar play with the parts.
Not auto parts, capabilities. Business model innovation occurs when there is freedom to combine and recombine the parts in new ways to deliver value. Don’t force core capabilities on Zipcar. Less push, more pull. Let Zipcar have access to capabilities that enable business model growth. Let them play with capabilities without all the strings attached from the core business. Avis has powerful car acquisition, fleet management and insurance capabilities that can accelerate Zipcar’s growth. For Zipcar to thrive it must be able to play with the parts to combine and recombine them in ways that deliver more value to Zipsters.
Zipcar has created a culture of employees and customers that feel they’re part of a movement (no pun intended). Avis has done anything but. The last thing Avis should do is to get in the way of this winning culture. Go visit Zappos to see how Amazon has done it. Zappos has a unique culture enabling a different customer service business model than Amazon. Its culture continues to thrive post acquisition and is as crazy (smart) as ever. If you impose Avis human resource, communication, social media and many other policies from the core on Zipcar its culture and business model will atrophy. Let Zipcar access those policies and capabilities that enable it.
The leadership challenge of the 21st century is how to pedal the bicycle of your current business model while simultaneously exploring entirely new ones, even those that might disrupt the core. Ronald Nelson, Avis Budget CEO, seems to be coming around. In a conference call about the deal he said, “I’ve been somewhat dismissive of car sharing in the past but what I’ve come to realize is that car sharing is complementary to our traditional business.” Avis, you have bought yourself an opportunity to be a market maker. Zipcar is one of the best business model innovation examples out there. Please don’t mess it up.
This post appeared on the Fortune site here and was adapted from my new book The Business Model Innovation Factory. Get a copy of the book - http://bmif.businessinnovationfactory.com/
- Genome of an Innovation Movement
- INNOVATION: Can a college in South Providence fuel the economy?
- Met School Co-Founder Dennis Littky featured Speaker at the World Innovation Summit for Education
- NEW: Langevin Announces RI Innovation Forum
- RI Innovation Ideas - Get a Preview of the Innovation Expo
- Betaspring Tapped by White House to Drive National Innovation
- Random Collision Theory of Innovation
- CEO’s Can’t Tweak Their Way To Innovation
- How Not To Get “Netflixed”
- Five Reasons Companies Fail at Business Model Innovation