It can be said that it’s a new day for dealerships in the industry. “Big data” has paved the way for dealers to use their extensive repositories of consumer data in incredibly strategic ways, tapping into emerging technologies and innovations that support business growth and enhance client experience.
Technologies today also give dealers the opportunity to rethink their present business models. A growing number of dealers have already made the move to manage their own data themselves in a secure, compliant environment that is flexible enough to meet frequently changing business needs and maintain an uncompromising position on data security.
Changing Business Models
The business model is changing in our industry, and big data is leading this charge. Dealers find themselves in a position to control data in a cost-effective manner that recognizes the value of unrestricted, but controlled, third party vendor access to data, which spurs greater innovation.
Overlooking this opportunity could deliver stiff consequences for many in the industry. Case in point: the story of Eastman Kodak, the behemoth in the photography industry. While the company was first to develop the digital camera, it was slow to embrace the new technology as it conflicted with its existing film business. It also kept a tight hold on its digital technology patents, stifling innovation throughout the industry. These actions ultimately contributed to the company’s Chapter 11 bankruptcy filing years later.
Kodak employee, Steve Sasson, credited with inventing the first digital camera, explained in a Huffington Post article (May 2013), “… the fundamental business model … was undermined by the new technology. It became difficult for them to shift the model …. In some ways, [the technology] cannibalized an already existing business that was quite profitable and well-regarded.”
Unfortunately, Kodak’s “existing business” was not where the industry was heading based on technological advancements and consumer demand.
Our industry can learn from Kodak’s miscalculation. Big data and supporting technologies are changing how we do business. The organizations that recognize and embrace this will reap the rewards. Those who do not may find themselves stuck in a model that no longer fits the market, much like Kodak.
Looking at the big picture, there are issues for dealers to consider and questions that should be asked (and answered) to ensure the security of dealers’ massive data repositories and to understand why the industry is shifting and what the associated costs are if we don’t move forward in new ways.
How Secure Is “Secure?” Ask the Question.
Ensuring the security of confidential and private consumer data is not only critical; it is the law. The Federal Trade Commission (FTC) has made it clear that processes and procedures must be in place to safeguard consumer data. With this in mind, every dealer should ask, “what is my DMS vendor doing to ensure there is not going to be a security breach?” and have the answer. This begs a follow-up inquiry to the DMS provider: “In the unlikely event that something does go wrong, what is your liability to us?” This is the multi-million dollar question. Many may be surprised by the answer.
Confronting Competitive Ambitions and Conflicts of Interest
In a marketplace where data security remains Priority One, and unrestricted, but controlled, access to consumer data is vital to the future success of our businesses and emerging innovations, there are issues to consider regarding leading DMS providers.
These companies offer the “one-stop-shopping” experience for dealerships, relieving them of managing and controlling their own consumer data. In light of things, it could be questioned what the true cost of these services is to the industry as a whole.
Certification programs offered by these DMS vendors claim to provide dealerships with added security assurances and dissuade them from granting third-party vendors access to DMS data. It has been suggested these costs are simply fees (referred to as hidden taxes) paid by third parties simply to maintain access to dealership data. Any review by these DMS vendors of third-party vendor solutions appears to be more competitive in nature with no focus on security, no testing and no actual requirements. Rather, it is simply a fee paid to maintain the title of “certified.” This should offer dealers little comfort from a security standpoint.
In recent times, these certification fees have risen dramatically with no real evidence of what the increases provide. These increases affect dealership costs, as the reality is, third-party vendors who pay the exorbitant prices to retain certification to access data through these providers cannot absorb the cost. They are forced to pass them on to dealerships. This, in turn, affects the consumer.
The other cost associated with these certification fees is the stifling of innovation in the industry. Vendors that cannot or refuse to pay these hidden taxes are oftentimes threatened by these providers with interruptions to their data feeds. In other instances, smaller vendors seeking certification are told to come back when they have a larger customer base. Still other vendors with competing solutions to those of these larger DMS providers have been told the market space is already too crowded and that it would not be right to empower another vendor in an already crowded space. In these situations, third-party vendors are essentially forced to work solely with dealerships whose DMS providers do not impose taxes on dealer data or other unreasonable demands. The restrictions reduce third parties’ market space significantly and suppress innovations, which in an unrestricted market may offer great value to our industry.
One of the scenarios above also brings up conflict of interest concerns. Some leading DMS providers actually have solutions in the marketplace that compete directly with third-party vendors. These are the very companies that determine whether third parties gain (or retain) access to dealership data. This is a huge conflict, which has gone unchecked.
It’s Your Data – Maintain Control of It
These realities should serve as a wake-up call to the industry. It goes without question that dealers go to great lengths to keep their consumer data secure. True to their entrepreneurial spirit, most dealers want the best solutions available in the marketplace. They also want greater control of their data and ease of use of their DMS. The big takeaway from all of this: It’s your data. Manage it on your terms.
Today’s technology enables dealers to do this. Dealers can maintain their own DMS, gaining complete control over how data is used, who is accessing it and specifically what they are accessing. They send out the data. Seeing as dealers are on the line for any data breaches that occur with their data, it makes sense to keep a tight rein on this information. One note on this subject, it is also prudent to ensure all third party providers show they have adhered to current ISO standards and have sufficient insurance coverage for data breaches.
This approach also allows designated vendors unrestricted, secure access to data on your terms, and in a way that supports greater innovation. It is an unrestricted flow of information into a marketplace free from the disruptions of conflict of interest and or a hunger for the competitive edge.
Allowing this exchange to take place at the same cost for everyone, levels the playing field, and allows emerging technologies to enter the marketplace, which gives consumers more choice, letting the market determine who should remain on the field.
It’s a new day for dealers who see value in emerging technologies, seek to keep costs down and desire a better way to control access to data and maintain security. Are you in?
Author: Chris Glenn
Chris Glenn is a seasoned automotive executive with over 33 years in automotive retail, most recently as the Vice President of Service Sales and Customer Care for AutoNation. He can be reached at firstname.lastname@example.org.