PACCAR: Champions... have the Will to Prepare
As spectators we all get to see the winning goal, the last-second touchdown or the unbelievable performance.? As an athlete you have the privilege of gaining extra insights into how those winning moments happen.?? While I believe determination is a wonderful trait, it’s not enough.? Everyone has the will to win…It’s the champions who have the will to prepare 1.
In this newsletter watch how PACCAR, makers of Peterbilt and Kenworth trucks, and today also Leyland and DAF transport trucks in Europe, was willing to prepare.? They performed the equivalent of an 18-wheeler triple axle with a market winning twist scoring perfect points.?? Determination alone wouldn’t get PACCAR to where they needed to go.? PACCAR needed to prepare and that meant first developing a strategy.
PACCAR, a maker of large transport trucks, was in big trouble in the 1980’s.? Some may recall the late 1970’s and 80’s when strong Asian competition enter the North American automotive market.? However, it was the Europeans who provided the strong foreign competition in the large haul class 8 truck market.??? Daimler had picked up Freightliner and Western Star while Swedish based Volvo controlled Mack trucks along with building their own Volvo line. Together these two foreign juggernauts had pushed PACCAR’s market share below 18% forcing them to close manufacturing facilities in Missouri and California.? With quality control all but nonexistent, and costs spiraling, PACCAR was gliding down a path to oblivion.? How PACCAR turned this situation around to become one of the world’s most admired enterprises is a story of brilliant strategy development that included a rock-solid customer segmentation.
To plug the quality leak PACCAR instigated a Black belt quality program to reduce inefficiencies and increase the overall quality of their trucks.?? A quality control program is NOT a strategy, but it did address PACCAR’s quality issues and stemmed the market share from further decline.? Importantly it bought PACCAR time to reinvent itself and look for further market opportunities.? But where to start???? PACCAR needed to prepare; they needed to develop a strategy and that always starts with the customer.?
PACCAR conducted some customer research which revealed that 30% of trucks were “owner operated”.? The other 70% of transport trucks on the road were part of large fleet operations.?? Additionally, PACCAR uncovered information showing that Owner Operators, on average, did more over-night trips, meaning these trucks were often the operator’s second home.?? These drivers wanted more services and amenities in their trucks than the price shaving fleet operators who preferred bare bones vehicles.? The segmentation puzzle took further shape when PACCAR dug deeper.? For example, PACCAR found that owner operators needed a higher level of after-sales support to keep the truck on the road and earning money.? After all, Owner Operators weren’t part of a big fleet operation with their own service facilities.? Owner Operators also valued other things like reports on fuel efficiency and info on financing, insurance and leasing etc.? And, although Owner Operators valued a lower cost of operation, they were willing to pay a 10% premium for the amenities and services they wanted.
By doing the homework, PACCAR uncovered an underserved segment that Daimler and Volvo were not addressing with their bare bones trucks.? Servicing this Owner Operator segment was not going to be easy, and PACCAR would need to realign itself to achieve the anticipated results.? ?Resources would need to be re-allocated, but PACCAR did the math and determined that 70% of 30% is much better than (a falling) 18%?of 100%? ? Here’s what they did…
PACCAR developed a strategy to specifically address the Owner Operators. ? The biggest and most controversial change was in the way trucks would be manufactured.? In what was a huge departure from the industry norm, all PACCAR trucks would only be built to customer order - not on speculation.? To accommodate this change, PACCAR needed to re-design their inner workings and invest in a flexible manufacturing plant so trucks could be custom built for each customer who pre-ordered.? Additionally, PACCAR created and trained up an 1800 site dealer network to provide after sales support while at the same time developing an extensive roadside assistance program and investing in a 24 hour parts delivery warehouse.? Besides being comfy, keeping these trucks on the road was a big part of what these Owner Operators were purchasing!???
No longer feeling pressured by fleet operator demands for cheaper trucks, PACCAR offered options like comfy overnight bunks and amenities that included a light Kitchen.? Cabins came with additional noise insulation and seats were plush leather which also meant easy to clean.? Kenworth and Peterbilt trucks were designed to command a high re-sale value which appealed to the Owner Operators’ pocketbooks.? Engines delivered the most efficient “in class” fuel savings, pushed out higher performance and included hybrid fuel saving options.? PACCAR also offered remote mechanic services that increased the truck’s “on road time”.? Plus, they offered analytical reports on fuel efficiency along with information on financing, insurance and leasing.? In short, PACCAR treated owner operators as the businesspeople they are.?
What can we learn from PACCAR…
By focusing on owner operators, PACCAR has steadily grown and today controls over 30% of the class 8 truck market.? Go to any truck stop - Peterbilt and Kenworth (and now Leyland and DAF in Europe) are the envy truckers.?? Today, labour markets are tightening, and fleet owners want to unload non-core operations like mechanical shops.? PACCAR trucks are getting a second look from fleet operators who need to attract drivers and who want to unload value sucking maintenance operations.?? Daimler and Volvo are scrambling.???
True champions actively invest the time and energy to prepare!? ?What are you doing to prepare your enterprise for the future????
1. Paraphrased from Bear Bryant famous football coach who said “Its not the will to win that matters-everyone has that. Its the will to prepare to win that matters.”