Tragic Tale No.002

This is the second in a series of tragic transformation tales, shared by a diverse group of business leaders, in conjunction with the launch of Angie’s book, TransformAble: How to Perform Death-Defying Feats of Business Transformation.

Today I’m talking to Val Gui, VP of Automotive Lending at Upstart and serial entrepreneur, as he revisits a tragic attempt at transformation from his past.

Val: Early in my career, I was brought on at a group of auto dealerships, spread across the country, to help significantly change their management model in order to accelerate growth and profitability. There were 13 dealerships, operating independently, and the CEO of the group would travel out to each of them, spending about a month at each, providing focused guidance to make improvements or solve challenges. As he sought to acquire more dealerships, he realized this wasn’t sustainable.

Angie: As organizations grow, leadership is always faced with the challenge of deciding when, how, and to what degree to centralize certain activities. So you were facing a very distributed business model, with hands-on management, that was initially effective but now hampering growth.

Val: Yes. The vision was that we shift to a much more centralized management approach, where we would collect operating data from the individual dealerships, who all ran as independent businesses, and then help advise and direct them to improve profit and revenue. We would replace the deep hands-on, in-person approach. More dealership acquisitions were on the horizon, and things needed to change.

Angie: A logical vision to enable scaling of the dealer group, and build more value per dealership at the same time. What happened?

Val: It totally failed. We were unable to transform, to change the behavior across the organization, to change the management model effectively. Which ultimately limited the ability to grow the business and continue scaling the overall organization.

Angie: To diagnose a failed transformation, it’s always important to first understand: was the initial vision good? In other words, did it have real potential to create great business value?

Val: It did. This wasn’t just about centralizing management. This was about tapping into our data to increase value across all the dealerships. There were a lot of opportunities to get bigger, to sell more cars. To better understand how we could leverage our nationwide inventory the best way. To be more strategic.

Angie: Leveraging the collective data for growth and profit, while reducing the amount of hands-on senior leadership time. Smart. Tell me how it played out.

Val: The CEO—also the owner—hired two of us, both recently out of college. We were excited by the challenge. We flew out to dealerships, learned about the business, and started to build models and identify what data we needed. Looking back, it’s clear how many things we did wrong.

Angie: I’m sensing this is about to dive off a cliff.

Val: *laugh* Maybe even a couple cliffs and pitfalls. We planned to roll out a first phase, a new reporting process, to get the data. This was some relatively simple reporting from the dealers, that would then be input into a scorecard. The scorecard would then be used in a 2nd phase, to identify challenges and decisions to be made off of that data. Dealerships would implement these decisions.

Angie: Seems reasonable, as a high-level framework. But…?

Val: It’s funny in retrospect, but at the time it was like pulling teeth. We were trying to roll out the first phase to get data from the dealerships, and we huddled up in a room, building an excel model that would power the scorecard. We knew what data we needed and thought that it was going to be super easy to get. So what did we do...? We just emailed it to the general managers of the dealerships. And they were like… “No.” At the time, I was so young, I was actually surprised by this. I didn’t realize what was happening.

Angie: You just…emailed it? “Give us your data?”

Val: Yes, but even worse, “give us this data and we’ll analyze it and tell you how to change and improve your dealerships.” I later realized this was seen as an attack. The dealers had all operated independently before this—this attempt to centralize was seen as an attack on their ability to run “their” dealerships.

Angie: Did you talk to them?

Val: Yes—I’d fly out to dealerships to talk to them. I thought that if I could just talk to them face to face and help them see the value, they’d “get it.” There was a ton of lip service, a little bit of engagement while there…but as soon as we left, it was business as usual. Of course, we also followed up with phone calls and emails.

Angie: What were those follow-up interactions like?

Val: There was excuse after excuse from each general manager as to why they couldn’t begin to change. Some didn’t even bother with the excuses—they just ignored us.

Angie: Was there any organizational change management planned, or tried, to consider the people side of this? How they felt, what their motivations were, how this would change and challenge their current operating model and mindset?

Val: No, that concept was not even something we had started to think about. I was so excited to jump in and make a change. But from a people and systems perspective, we were so far off, because we couldn’t even think of it. In your book are foundational laws of transformation—we desperately needed that foundational mindset back then, especially the concept of knowing that you are transforming a system of people, not just processes on paper.

Angie: It’s all too easy to try to approach a transformation like a math equation. Especially when we’re young and have no one experienced to teach us. Many leaders have learned the hard way.

Val: You’re telling me! And it took me years to realize what actually happened.

Angie: I’ve been there! One day, years later, you read or learn something and suddenly it clicks, what really happened. Now, transformations fail for many reasons, but once you have a real vision, at the core it is know-how and commitment. Those must exist to pull it all together for a real chance of success. You’ve been candid about your transformation experience at that time. What about the CEO? Did he have any transformation experience?

Val: No. He was exceptional at the “dealer turnaround”—he’d buy struggling dealerships and get them to perform. But he’d do it through sheer force of will—he’d spend time onsite running the dealership and installing his own management. This new model was very different—we were asking these general managers to make changes to how they ran the stores and interacted with the central organization.

We weren’t given any guidance or support to help us learn, like a transformation advisor. Additionally, it’s now clear that we didn’t have full commitment. In the face of the general managers’ resistance, the CEO did not stand firm. Many were his friends. Some had performed very well. And when they pushed back he wasn’t consistent in his support. He knew things needed to change, but either didn’t understand the need or wasn’t willing to be more directive—or both. He really just wanted to focus on selling cars.

Angie: The way he’d always done it.

Val: Exactly.

Angie: In summary, an attempt to centralize and leverage data for business growth is thwarted by lack of transformation know-how and low commitment. A great tale to learn from.

Val: It certainly taught me a lot.

Angie: Since then, you’ve become a serial entrepreneur. You’ve launched multiple businesses, and are currently tackling the massive transformative challenge of building a new business within an existing one. When you look back on this this tale, what strikes you the most?

Val: What was truly tragic about this particular situation is that this was all within our control. Often a transformation faces many external forces, and corporate divisional challenges. But in this case, it was really down to us—our team of two and the CEO—and our collective ability, knowledge, and willingness to transform.

Angie: Val, this was a great tale. Thanks so much for sharing.

Val: Thanks! Despite the transformation not going how I expected, I learned a ton from that first job—and have carried that forward with me!

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Order Angie’s book TransformAble: How to Perform Death-Defying Feats of Business Transformation from your favorite bookseller. 

Angie Tuglus is a transformation expert and executive advisor. She has led numerous business transformations as a former Fortune 500 executive, and has worked in companies ranging from startup to Fortune 10. Learn more at www.tuglus.com

Val Gui is VP of Automotive Lending at Upstart, where he is building and leading a new billion-dollar lending business. Previously, he was founder of two venture-backed companies, and is an angel investor in the San Francisco area, where he likes to take an active role in helping his portfolio companies manage through the constant change of a start-up. 
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© 2021 Angie Tuglus