2021 Innovation Issue: KAR Global wants to be the disruptor, not the disrupted

When the pandemic hit last spring, KAR Global had little choice but to shut down its in-person, wholesale auto auctions, which had been the publicly traded company’s backbone for years.

But within two weeks, the Carmel-based company was back up and running—with 100% remote auctions.

So how did KAR make it happen?

The company’s chief digital officer, Tom Fisher, said the decision KAR leaders made several years ago to move from being a technology-enabled company to a full technology company laid the groundwork for what was practically an overnight move to a full digital operation.

Fisher talked with IBJ about not only the challenges KAR faced but also the preparations that made fast-paced innovation possible.

In March 2020, when you knew COVID-19 was coming, what did KAR leaders think they needed to do?

Let me set the stage with a little bit of background on KAR. We run wholesale auto auctions. And we primarily, pre-COVID, ran those out of 72 different auction facilities around the country and Canada and Europe and Mexico.

What that means is, the people would actually come to the auction—we call it in-lane—and then we’d have drivers that would drive the cars—we refer to that as driving across the block. It’s a sight to behold when you see a couple thousand cars on 12 to 24 lanes running simultaneously, and they’re just there for, like, 30 seconds at a time, and then they’re gone.

Going into 2015, just to give you some scope and scale, about 38% of our cars sold digitally—on one of our digital platforms. … By 2019, we had gone from 38% to 58%. And in the interim between those periods, we had made a decision that we were going to become a digital company.

The only thing is, we thought we would have three years, five years, 10 years to do it.

And in order to get ready for that, we had been making significant investments in technology platforms. I came over here from Genesys, from Interactive Intelligence, [to think about] how we start building the foundation, the building blocks to not be a technology-enabled company—which is oftentimes what we used to be referred to—and truly be a technology company that’s enabled by physical assets, which is a fundamentally different thing. So, we’re well down the road.

Did you go from 38% to 58% by allowing people to digitally bid on the cars that were in your physical auctions, or were there also digital-only auctions?

We made it an alternative method to buy cars, but you didn’t have to [be digital]. So, if you wanted to come to the auction, you could, or you could stay at your dealership and just bid right off your computer screen.

So, we were building all these capabilities way before COVID. Some people say it’s better to be lucky than good. I think it was just a lot of strategic vision from our leadership that we knew this industry was going to change, and we do not want to be disrupted. We want to be the disruptor.

And as a large organization who grew up in what I’ll call the legacy space, you don’t often see that anymore. But I think that there’s been enough lessons of people not reacting fast enough, that we just took that to heart and said, “We’re not going to be them. We will not be them.”

When COVID hit, [we realized] we can’t run our auctions the way that we used to do it. The executive committee was meeting every day, every night, full on. We made a really tough decision: We decided to shut down all of our auctions across the U.S. and Canada at the same time.

We were very fortunate in that we had been working on some brand-new technologies, which is referred to as Simulcast+. That allows us to be able to run the auctions completely remotely. You don’t need any people at the auction to bid.

But more importantly for our consignors, they don’t have to be there, either. They can be at home. They can be in their office. And they don’t even have to be in the same place to be able to actually run a sale.

We had just started that out as a pilot in a single site, about two weeks before COVID hit. And within the next two weeks, we took it from a single site to global, virtually overnight.

So, it took four years to go from 38% to 58%. Then we went from 58% to 100% in two weeks—and we’ve been running that way ever since.

Everything is completely online?

It is completely immersive. When you’re in the sale as a buyer, you can see who else is there. You know how many people are there. You can see who’s bidding on the vehicle against you in real time. You can chat with them. It replicates that social dynamic of a physical auction, but in a digital space.

Our number one goal is to make the digital experience not as good as being there but better.

How are digital sales doing?

That’s an interesting question. Changing an industry is a challenge, whether it’s the automotive industry or whether it’s the software industry, any industry. But I think what has been proven out is that, if you create the right ingredients and the right solutions, then industries can be changed.

Depending on the type of customer, we do see some different results. Some of [the sellers] are just doing unbelievably well. Some of them, we still have to optimize [for their needs], and we’ll continue to do that. But to me, it’s no different than any other migration or any other transition of an industry.

It is an iterative process. We have new competitors coming into the space. We have new ways of doing things, new technologies, new capabilities. But to me, that’s what being a technology company is. You can never lay down and rest on your laurels, because somebody is going to figure out a different way to do it—and it better be you versus them.

Let’s go back to pre-pandemic time—when KAR started to think about remaking itself into a digital company. How hard was that to do in such a large operation?

KAR overall is an incredible company. They’ve been incredibly successful even before this transition. And when you do things a certain way and you optimize to that methodology year after year after year, you have a lot of ownership mentality associated with it, like, “Hey, listen, we spent 10 years optimizing this and it’s having a good outcome.” And changing the way you do business is a challenging thing—more to get your customers on board than anything.

If I had to rank [the challenges], I’d say No. 1 was just from a customer-education perspective. How do we prove to them that this is a better way to do things?

The second part of it was that we had to make some changes internally, and candidly, the pandemic really accelerated those as well.

But I’ll tell you, this team is so forward-looking that it really wasn’t that hard of a lift.

Do you think if the pandemic had not come along, KAR could have pushed change along as quickly as it did?

Probably not. But if it wasn’t COVID, it could have been something else, right?

There’s a whole host of factors outside of pandemics that can cause industry shifts. And we were already seeing those. Like new entrants into the spaces.

And so, we were already seeing that type of competitive landscaping evolving in our marketplace. But if I had to estimate it, I would say it probably would have taken us three to five years to get where we are today, if it wasn’t for the COVID situation.

I say that because—for right or for wrong—the situation and the lockdowns and everything that went down bought companies like us time to be able to iterate and get better in this new way of doing. [Previously], you would have had to [be] perfect the first shot.

So it bought us time, which is the most valuable thing in any company, not just a technology company.

Also, for us, organizationally, [the pandemic] brings a lot of opportunity. The biggest example is, we’re completely freed up now from a talent-acquisition perspective to get the best talent in the seat, irrespective of location.

Will being able to hire from anywhere and let employees work remotely change your central Indiana workforce over time?

We’re seeing it right now in a very, very big way.

There are two sides to the coin. If I put myself in an employee’s shoes, the world is my oyster because, if I want to stay in Indiana, which a lot of folks do—you’d have to pry me out of here, I love it here—then you can. But you can work for any company in the world at this point.

Inversely, from an employer perspective, we’re hiring all over the country.

Now that doesn’t mean we aren’t corely focused on our Indiana community. That is our heartbeat. That is our cornerstone. So, as people progress, typically they will come [here]—particularly when you get in management or senior management, then it becomes more important to be in the office and be present.

Do you have advice for others about how to hire the kinds of people who can come into a company with a forward-thinking mentality? I didn’t ask that well.

Here’s the way I would [ask] it: How do you build a team that’s willing to disrupt themselves?

Yes.

I think it’s a mix. So, oftentimes, you can err on one side or the other.

I think it’s, No. 1, having a solid core team for what’s made you successful—because there is a ton of inherent value in how we got where we are today. And oftentimes, that gets ignored.

Then, it’s, how do you intersperse within that core the people I refer to as cowboys—for right or for wrong, cowboys and cowgirls that are coming in with a completely fresh set of eyes? Ideally, they don’t even come from the same industry. They come from an industry that’s going through a similar transition.

So for us, it would be somebody who came from the travel industry or from the software-as-a-service industry or nothing automotive at all, because they bring all the lessons that other industries have learned.

Then, it’s, how do you mix those together and how do you create this ecosystem of talent that can execute on an evolutionary vision? That can be incrementally improving. But [people who], when we’re dealing with COVID, if necessary, can execute a revolutionary transition. In normal times, you go from A to B to C to D. … In hard times, you have to go from A to Z to be effective.

If you don’t have those … visionaries, then oftentimes, you fall back into, “Hey, this is my playbook from the last recession or the last time something happened.” What this pandemic has taught us is, there are things that can happen in this world and you need those people who can take you straight from A to Z without having to go through all the other steps.

But the most critical piece, and this is the part that KAR had in spades, is strategic vision from the leadership. That was the part that I think really allowed us to do what we’ve done thus far.

If you don’t have all three of those things at the same time together, you will not be effective.

What do you see as the next big challenge on KAR’s horizon?

I think the post-pandemic challenge is going to be, how do we maintain the culture and the speed that we’ve been able to get to over such a short period of time? Because, going from a tech-enabled to a technology company, those are two different things. As you jump over into that pure technology side, the paradigm changes. It just goes faster. Every day, there’s something new that can make you better. Every day, there’s something new that could make a competitor better. You have to constantly stay focused on that north star that we’re not going to let somebody else beat us to the punch.•

—Lesley Weidenbener

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