Insights at the intersection of digital business, technology, and customer experience from Maark agency leaders
About a week ago, the Hertz car rental company declared bankruptcy. They joined a growing list of well-known brands forced to suddenly acknowledge the most obvious fact of the 21st century — that the world interacts almost entirely through digital means. But it wasn’t a pandemic that caused Hertz to go bankrupt. The pandemic, in general, has not caused businesses to fail. It has only widened an existing gap between the old economy and the new.
Hertz has been failing for a decade along with the whole rental car industry. The financial crisis of 2009 opened the door for Uber and other opportunists to create a new ridesharing industry that took the commodity of automobile travel and wrapped it in a digital service. There were suddenly no lines or half-assed kiosks. There were no clunky websites or even clunkier upsells. There was just an app that worked. And a ride that showed up.
In fact Uber and Lyft took the commodity for granted. Sitting in the back of someone’s beat up Honda Civic was better than the spit-shined Hertzmobile because it was more convenient. The car, they realized, didn’t matter. In the words of Steve Martin in Planes, Trains, and Automobiles it’s, “Four f-in wheels and a seat.” It’s not about the car. It’s about the experience — the convenience, the timeliness, the transaction process — that matters.
The experience hasn’t changed much since 1987. Warning: Rental car customers use explicit language.
As mature industries consolidate and companies within them become bigger and slower, innovation disappears, and with it the differentiation between offerings. Think about how little difference there really is between flights or bank accounts, homeowner’s insurance or mutual funds, retailers or gas stations. Every company selling a commodity as if it were a novelty sits on the edge of extinction. It’s not a question of ‘if,’ it’s a question of ‘when’ and ‘how.’
Most companies in this position understand that this threat exists but cannot come to terms with the totality of its consequences. Nor the depth of their problem. They want to stick satellite radio (yes, radio) in the Hertzmobile and call that differentiation, instead of rethinking the business altogether. It’s easier and safer to incrementally improve. Pushing against the inertia of a big company is, after all, extremely exhausting.
In almost perfect irony Hertz spent its time in 2009 - the year that Uber launched - attempting to invent a camera system that would help them easily nab customers who had dinged their bumpers. So while Uber was reinventing the way that we move, Hertz was reinventing the list of things that we hate.
More recently, Hertz made other attempts to reorient themselves toward digital business. They now famously hired Accenture to misguide them in their transformation a few years ago and wound up suing them for taking too long and costing too much. Tens of millions of dollars’ worth of PowerPoint and offshore programmers, it turns out, won’t save a company from bankruptcy.
Companies in old, undifferentiated industries are facing an existential crisis. And the crisis is not a sudden decrease in consumer demand. It’s a crisis of preparation. It’s a crisis of confrontation. For at least the last decade the need for every business to build monetizable digital services has been increasingly obvious. The consequences for neglecting to do so are now just as obvious.
The fear isn’t a downturn, it’s bankruptcy. Hertz and J.Crew, Neiman Marcus and JCPenny, Gold’s Gym and Whiting Petroleum. The end of the old economy is pressing on. It’s time to think more deeply about how you’ll differentiate moving forward. Because you will never make a better bank account. Your only hope is to make a better banking app. You will never improve on a flight from Boston to Chicago. But you might improve on the experience of canceling one. You will never create a better ‘Large-Cap Core’ mutual fund. But you might deliver the most relevant tools on the planet for people to plan their portfolios.
These opportunities, for the most part, are still wide open. But to survive, we'll need to fully realize that these are the grounds we're competing on. We’re in the software business, not the commodity business. Instead of over-focusing on the commodity, we should sharpen our focus on the software experience. Because it’s with world class digital goods and services that we'll participate in the new economy. We don't have another decade to waste sticking another radio in the car. The future is here. It's time to build.