W hen a company is a leader in its brand category, transformation is not always at the top of the agenda. After all, it’s doing more than fine as is, right?
“It’s a big challenge if you have a successful company that’s always done things one way,” said Jim Lyski, CMO at CarMax, the world’s largest retailer of used vehicles. “Success can be a barrier [to transforming].”
But in today’s environment of business disruption, in which a powerful digital competitor can seemingly pop up overnight, vigilance is key. That’s exactly why you’ll find Lyski and CarMax CIO Shamim Mohammad practically connected at the hip these days, trying to stay a step ahead of would-be rivals. Both Mohammad and Lyski are convinced that continued customer experience innovation is critical to staying on top.
Mohammad was promoted to CIO shortly after Lyski joined as CMO in the summer of 2014. “That gave us a pretty unique opportunity to create a new working relationship between our departments,” Mohammad told CMO.com. The company, known for its no-haggle sales process, had always been entrepreneurial in practice. But marketing and IT had a fairly traditional customer-supplier relationship, with neither function contributing at the level that might lead to future growth.
Lyski and Mohammad were determined to more closely align the two functions to foster technology-enabled experimentation and implementation. “We wanted to move faster than we had been and start thinking like a digital company,” Mohammad said.
In the past two years, the two executives have torn down the walls between marketing and IT—metaphorically and literally. They formed multi-disciplinary product-centric teams focused not on ticking off tasks but enabling business outcomes. They embraced agile product design and development processes. IT embraced the public cloud to host the development of customer-facing systems. As a result, the two organisations function as a fairly cohesive unit, delivering customer-centric innovation at greater speed than ever before.
Here’s a closer look at how Lyski and Mohammad manage their executive partnership.
Silicon Valley Best Practices
Lyski and Mohammad began by determining how best to reorient their groups. “We wanted to bring a Silicon Valley approach to automotive retail,” Mohammad said.
He and Lyski took members of the senior leadership team on a “digital safari” through Silicon Valley. For three days, they talked to startups and venture capital firms about the power of emerging digital technologies. “That created a lot of energy around the things that we needed to do,” Mohammad said.
Digital technology is “a monstrous piece of the puzzle” for marketers today, Lyski explained. “All companies have to be technology companies,” he told CMO.com. “You don’t have to be on the bleeding edge, but if you’re not leveraging it to your advantage, your competitors certainly will.”
In fact, Mohammad travels to San Francisco quarterly to keep on top of technology developments. “It’s been very helpful to shifting our mindset from that of a retailer that uses technology to that of a technology company focused on delivering a customer experience,” Mohammad said.
Tearing Down Walls
Early on, it was also clear to Lyski and Mohammad that another change was called for: Marketing and IT needed to spend more time together. So the two executives removed the physical barriers separating the disciplines, moving everyone into a shared space with tech and marketing side by side.
They also adopted agile methodologies to address one of the biggest complaints most marketing groups have about their IT counterparts—that they move too slowly. Taking a page from Jeff Gothelf’s book “Lean U/X,” they organised themselves into self-directed product teams made up of seven to nine IT, marketing and operations employees. “We give them a metric—or they select one for themselves—and figure out how best to achieve it,” Mohammad said.
The approach is a good fit for the company. “Even though you might fail often, you fail fast; the failures don’t cost you much and direct you toward a pace that’s significantly faster and less risky than making big developmental bets,” Lyski said. “In the past, you’d spent months and millions of dollars to roll out some big capabilities and hope like hell they worked. This way, you get feedback every few weeks so that by the time you launch, success is inevitable.”
One team is focused on online finance, creating a seamless and simple experience for customers across channels. They created goals for improving lead generation and sales—metrics they track throughout the team’s life cycle. Last November, they launched a digital finance preapproval product, going from testing to pilot to full roll-out in less than six months. “That’s pretty good—going from something to nothing with a product that now represents a significant portion of our leads and sales and is completely integrated into the consumer experience,” Lyski said.
A different team is developing a home-delivery product: customers shop for cars online and then request that CarMax bring a vehicle to their homes to test-drive. The service, which executives hope will help CarMax compete against new digital companies, is being tested in Charlotte, N.C.
Another group is working on a remote-appraisal tool: Customers submit photos and information on their vehicles to CarMax and get a digital offer in return. “Our initial product teams were focused on re-designing our CarMax.com capabilities,” Lyski said, “but the speed and agility of the practice paid so many dividends, we expanded it to our digital consumer-facing products. Now we’re applying it to our consumer-enabling in-store systems and our associate-leveraged technology.”
New Growth Engine
Growth has never been an issue for CarMax, which expanded from one store in Richmond, Va., in 1993 to 175 today. “They did it all on a bootstrapping model,” Lyski said. “I felt that if they could grow as much as they did in their first 21 years without a strong marketing focus, there was a huge opportunity to apply what I bring to the party to accelerate that growth trajectory.”
CarMax’s biggest marketing assets were its customer service focus and an incredible amount of customer data. But little of that customer information was being analysed for future innovation. That’s where Lyski, a veteran digital marketing leader with a passion for data, came in. But he knew he needed IT’s help. “In my first meeting with Shamim, the one thing I asked for was a marketing technology leader,” Lyski said. “It was integral to leveraging our data and scale and turning into those consumer-benefiting experiences, products and services.”
In order to support the rapid and incremental approach to marketing innovation, Mohammad also recognised that IT would need to rethink its architecture choices. “We had to make sure we had the technology platforms to allow them to work really fast,” Mohammad said. “So when a product team has a good idea, they can very quickly get it in front of customers.”
IT adopted a public cloud approach for customer-facing systems in early 2016. “We’re no longer constrained by our data centre,” Mohammad said. “Our teams can make changes instantaneously [without worrying] about scale or availability.” Systems that used to be deployed in weeks or months—“or never,” joked Mohammad—can now be deployed in a day.
Speaking The Same Language
Even for a company with an entrepreneurial culture, change is hard. “It’s challenging to fundamentally change the way people do their jobs and there was scepticism,” Mohammad said. It was crucial that employees see the partnership that Lyski and Mohammad were personally forming. “When they saw that Jim and I were aligning around common goals and interacting all the time, they could see that we were serious about getting this done,” Mohammad said.
It also helped to have a CIO with a marketing bent—Mohammad had founded a marketing tech company and studied marketing at Northwestern’s Kellogg School of Management—and a CMO with a clear appreciation for the power of technology.
“Both the CMO and CIO roles are really evolving; CIOs need to be more business focused and CMOs need to be more tech focused,” Mohammad said. “And that’s exactly what’s happening here.”
“You’ve got to be able to speak the same language,” Lyski added. “You can’t be a CMO who doesn’t understand the technology stack. And you can’t be a CIO who doesn’t understand consumer data and insight.”
Having marketing and IT physically working together was also a key factor in working through the changes. “Co-location seems simple, but it’s a powerful tool,” Lyski said. “When you’re literally sitting across the table from a marketer or an IT lead or an UX designer, you gravitate toward a common lexicon. You don’t have a choice.”
Most transformative projects are overseen by a steering committee led by Lyski, Mohammad and CarMax’s head of strategy and operations. “We have different backgrounds and different personalities, but that creates some healthy differences in perspective as long as you can communicate through them,” Lyski said.
“We all hear things at the same time and it helps us stay on the same page,” Mohommad added.
The product teams also share their work with the rest of the company during “open house” every two weeks. The CarMax CEO will often stop by for these 20-minute sessions during which the product teams share their progress and plans for the weeks ahead. “There are usually 50 people there. It instils a tremendous amount of pride in the teams, knowing that the CMO or the CEO is paying attention,” Mohammad said. It also serves as a marketing tool for the results of the transformation Lyski and Mohammad have spearheaded.
Incremental change has its place, Mohammad said. But “sometimes you need to shock the system.” And to make those kinds of fundamental changes—and have them be successful long-term—requires everyone’s support.
“The beauty is that this has always been a company that believes in the value of ‘test and learn’ and trying new things,” Lyski said. “That’s why we started with small steps, proving the validity of this approach one experiment, one team, one victory at a time. It doesn’t take long to build momentum and it lasts.”