Very early in in the founding of carsales.com.au, it’s founders had a pretty big business decision to make which had an easy option and a hard option; the answer would have a material effect on its life span.
Here’s a little snippet that I believe is a great example of sound business decision making.
The rise of carsales.com.au was no accident and showed how the leaders at Dealer Management System provider Reynolds & Reynolds (R&R and now Pentana Solutions) were/are extremely astute business people who used business nous and previous learnings to make the right decision to forge what has turned out to be an incredible journey.
carsales grew out of R&R back in the late 90’s leveraging the DealerLink network between it’s dealers to seamlessly collect used car information.
R&R had a choice to make between two alternatives very early in the life of carsales:
The Easy Decision
Was to partner with one (or more) of the biggest media players in Australia to supply inventory as the infrastructure was already in place to collect the inventory and it really was just incremental revenue for not doing a real lot as well working with some of Australia’s largest and most well known brands, which could have been attractive to a small(ish) software house in Mt Waverley.
The Hard Decision
Was to go hard with carsales.com.au which was going into the unknown of competing against these media giants (at what they considered was their “bread & butter”) as a small software services provider.
Here’s my take on two important decision points that drove R&R to making the Hard Decision to turn their back on the media giants and compete against them with carsales.com.au:
1. “If it is this f&@king hard for us imagine how f&@king hard it is for them.”
This quote has stayed with me for nearly 20 years now. R&R had been trying to get dealers to list their cars on carsales.com.au for a little while and the process was a difficult sell even though there was a seamless, automated inventory feed from the dealer’s computer system to carsales.com.au. So when the big media players and newspapers came looking for (exclusive) inventory data deals, the leaders at R&R realised that if it is so hard for us to get inventory with our setup and relationship with the dealers, just imagine how hard it is going to be for them. They realised they had something of real value to build on.
2. They were quick learners.
R&R US acquired DealerNet.com in 1995 and was one of the first automotive sites in the US list used cars (cars.com and Autotrader.com started in 1997). In 1997 R&R sold DealerNet.com to The Cobalt Group so that it could focus on it’s non-equity strategic partnership with Microsoft’s Carpoint.com which was launched in 1996 (an excerpt from Automotive News, 1 December 1997 – DealerNet was a pioneer in providing dealers with Web pages in the early 1990s. But Reynolds wanted to sell it to focus on its relationship with its new partner, Microsoft CarPoint. ‘With CarPoint, we’re better able to fulfill our mission of linking dealers to buyers,’ said Kevin Distelhorst, Reynolds director of online services).
Fast forward a year to 1998, R&R US knew they had given up something that was potentially huge and missed their first mover opportunity (imagine their grief now, 20 years on when they see carsales.com valued at ~$2.6b). Generally speaking the US market is 2-3 years ahead on the take-up of new technology and/or processes which gives us in Australia an opportunity to learn.
Hindsight is a wonderful thing and it’s easy to say now that the right reign was pulled when the wrong one could have been so easy had the media companies in Australia actually got their act together.
I take my hat off to the leaders of R&R who made it happen.
Note: All views are my own and not those of carsales.com Limited or Reynolds & Reynolds (now called Pentana Solutions)