A Week in Thought

I’ve been hiding from Deb Levy all week, because she has been calling and e-mailing me about this blog. She’s trying to tell me what I already know: it’s a little late, a tad delayed, perhaps? No, she is going to tell me it’s way overdue. I want her—and you—to know why it’s delayed, though. It’s because I hadn’t quite figured out how to say what I want to say about the Belron-Diamond deal.

For the first few days, I knew there was something that bothered me about the whole thing, but I couldn’t put my finger on it. It wasn’t the usual reasons you might expect. Yeah, the new “Belmond” (Belron mated with Diamond) is going to be gargantuan, but there is no crime in size.

And there’s so much talk about steering and anti-steering that it’s hard to know what’s real and what’s myth. To me, the definition of steering is almost the same as the one the Supreme Court used to defined pornography many years ago. They said “we don’t know how to define it, but we sure know it when we see it.” So every time one of my customers gets steered away from me, I see it and know what it is.

I wasn’t particularly unhappy to see Tom Feeney put in charge because he tends to tell you where he stands, even if it’s unpopular, and I can respect that.

So after a week of deep thought—and you know how hard it is for us guys to get in touch with our feelings—I can now articulate the two main things that are bothering me about the deal.
First, I feel sad for a bunch of people. I feel bad for companies that have to compete against Belmond in major markets. They’ve just consolidated and strengthened their presence even more. I feel bad for the quality suppliers that supplied Diamond but will now be cast adrift a replaced with Belron suppliers in their stead. I feel bad for the Diamond employees who have their jobs in limbo as of today. I even feel sorry for the insurers because they are too stupid to realize their role in reducing competition. The fewer competitors out there, the more adroitly Belron will be able to get the prices it wants from the insurance companies. We just saw this happen with repair rates. Just give them a year or two to clear out the market of a lot of competitors, then see what you’ll be paying for replacement glass. Go ask anyone in Canada.
But most of all, I feel cheated. Most industries have one, two, three companies that are market leaders. They set the agenda for their industry and they help develop best practices on an industry-wide basis. They define and participate in industry debate. They are part of the industry team.

But not in the auto glass industry. Belron seeks to differentiate itself by not playing on the same team. Its stance on AGRSS—our industry’s best hope for a sustainable future—is unbelievable. The company doesn’t even understand what AGRSS registration is and attempts to frame it as a certification program before their insurance customers. Belron says its Saftech program is better than AGRSS registration. They are two entirely different things. Belron has its own self-certification, its own auto glass competiton and its own programs. It’s one thing to be a market leader and help raise a whole industry up. By doing so you fulfill a role as an accomplished leader—and you can still leave everyone in the dust.

Dear Mr. Feeney:

Thank you very much for your presentation at the IGA Conference in Las Vegas last month. It was incredibly generous of you to speak before a group that you yourself acknowledged was “unfriendly.” That took a lot of guts and was a very courageous thing to do. I especially like the part where you talked about how Safelite and independent glass shops have more in common than they have differences. That’s very true. It takes a lot of fortitude to place yourself in the crosshairs when you don’t have to do it. And you didn’t have to. What you did will be remembered as a landmark moment in the auto glass industry.

Now I know you’ve gotten beat up a lot on the Web recently, and I’m not going to do that here. Like I said, you didn’t have to make that speech. I’m not going to ask you about the AGRSS thing or who the customer is or any of those “gotcha” questions a couple of people in the audience asked (though most of the questions were pretty straight-forward). I’m not even going to argue with you about the contention that all you guys do is “answer the phones” and that shouldn’t constitute steering. I’m pretty sure that the claims administration you do involves more than just answering phones.

But there are two questions I have got to ask, because they go to the heart of one of those differences between Safelite and the independents. You mentioned that you believe there should be a standard requiring drug testing and background checks for technicians. You said you don’t believe the AGRSS Standard goes far enough and should require this (never mind AGRSS is not a technician standard or certification, I could tell by your comments you didn’t get that and had been poorly briefed). It was also clear from your comments that this drug testing and background check idea is extremely important to your company. You mentioned that your techs are drug-tested. I expect there are background checks too.

So, Mr. Feeney, here’s my first question: If drug testing and background checks are so important to you, then why don’t you require them of the companies on your network? Why don’t you suggest to your insurance partner that they require them as part of the criteria they use? Why don’t you apply the same standards to the companies that you subcontract work to as you say you apply internally?

I gotta tell you, Mr. Feeney, I haven’t seen a whole lot of concern from Safelite about the companies that join your network. I have seen a ton of concern over making sure those companies accept the price you want to pay, but not much concern over the quality of that company or the technicians they have. If these background checks and drug testing are important, why don’t you require them? Please believe me, I am not asking this to be contrary. I would really like to know the answer because the only answer I can think of can’t possibly be the right one.

The only reason I can think of is that doing so would decrease the number of shops that could do your work. It would mean higher costs for Belron and higher prices for its customers. And I know that can’t be the reason because, as you said, safety and quality are more important than price.

And let’s talk about safety for a minute. You mentioned that you believe your own internal “certification” program is better than AGRSS. You emphasized how important quality is to you. So here’s my second question: If safety and quality are so important, then why don’t you require certification for those companies on your network? Heck, you could require any kind of certification you wanted—even your own—from the companies that do work for you.

If I didn’t know better, I’d think you were trying to keep the industry uneducated. It’s a lot easier—and a lot cheaper—to compete against guys when you can tell your insurance company you’re better than they are. You guys must laugh your heads off when the insurance companies buy it.

Or maybe you don’t require it because you know that a ton of people doing your work wouldn’t be able to any more and then you’d have some supply and demand issues, if you know what I mean; you’d have lots of jobs and no one to do them. That could be a threat to the whole network model.

The ability to use uneducated, “inferior” people for economic gain while refusing to educate them has long been the sign of an oppressor and the methods he uses to keep the oppressed in line. Surely you guys are better than this.

Belron is the biggest AG installer in the word. Say the word and thy will be done.

There’s a disconnect when you talk about the need for these things, yet you dole out a lot of work without any such requirements. Sorta like Congress exempting itself from following the laws it makes. It’s a pretty neat trick.

But that is just what it is: a trick.

Thank you again for your time. I look forward to hearing from you.

A+ for IGA

Yup, I was there.

I saw you.

Did you see me?

At the IGA Conference, I mean.

Let me tell you, I went grudgingly because a friend was going and we thought we’d hang out by the pool and enjoy a few of the “attractions” in Vegas—a little recreation on the company’s dime, if you know what I mean.

We figured we’d cruise on in and get our badges, show up at the cocktail party and not much more. It was a great plan. Except it never happened.

We got sucked into the seminars the first day and ended up going to almost every one of them. I had so many notes I filled up eight pages in that spiffy notebook they gave us. Let me say, the educational program was excellent. The first day was devoted to legal issues, the second to steering and the third was more technical.

Now if you know me, you know I’ve been critical of IGA in the past, and about 24 to 30 months ago, I wouldn’t have placed a bet on their future. But, make no mistake; these guys have their act together. It’s obvious they care about their members. You could see and feel it. Their board is an active bunch, the staff is young and energetic and they are starting to have some progress.
The comic book—and yes, okay, I was laughing at the idea for months before—the comic book is actually pretty darn good. I’ll eat crow on that one.

I saw a couple of new things at the show too. In all, it was time and money well spent and there are not many things you can say that about these days. I especially liked Scott Orth’s presentation about the Internet. The way it’s being used to drive auto glass work can sober you up—even in Vegas.

The insurance panel was interesting not only for its content, but also for the posturing by some of the participants.

And the Feeney presentation? Well, not since Joe Kellman gave a speech at one of the conferences in the 1980s has their been such a landmark. (More on that next post.)

Some suggestions for next time: First, allot more time for each seminar. The NAGS presentation could have gone another hour and many others left me begging for more, too.

Second, try to find a place in a hotel so we don’t have to take a bus, although one of the board members told me that everything will be one hotel next year. That’s a good move.

Three, bring back Corey Hemperly. What an outstanding presentation he gave. He is just a regular guy out of some Western state but he went through what he does to fight steering in an organized, detailed way. Awesome.

I’ll continue to take IGA, or anyone else, to task when it’s warranted. But not this time. IGA gets an A+.

Diamond in the Rough

What’s that old saying? “Fool me once, shame on you, fool me twice, shame on me?”

Well, shame on me. In fact, shame on all of us, shame on the whole entire auto glass aftermarket industry.

I didn’t quite get it the first time round in 2000, but I see it crystal-clearly now. In fact, let me raise my can of Bud in honor of Diamond Auto Glass. They have put forth, and will profit by, an amazing strategy, similar to the one Safelite used eight years ago.

Now, to most of the world, it seems like both companies laden with debt like a teenager with acne, had decided to shed it through a process known as Chapter 11. It’s a brilliant strategy and it goes like this:

Keep your prices artificially low. Charge too little or pay too much for product. When the rest of the industry screams out that “you can’t do it for that,” smirk and say “yes, we can and we are.” Imply liberally that those other companies are just not run by savvy businessmen, or just aren’t as good at business as you, the big national corporate boy.

And don’t forget to pound into the heads of your insurance customers that the rest of the industry is woefully inefficient, just small mom-and-pops hanging on to a business model that has long since ceased to work. Pretend you feel sorry for them.

Hang on to your secret, the one that Diamond (and Safelite before it) don’t ever mention: that it turns out those screaming independents were right. They couldn’t do it for that—and neither could you. You were losing money at the prices you charged. And, despite being able to one of the largest volume buyers in this country presumably having some of the lowest material costs, you were too. Diamond was barely profitable EBITDA and wasn’t profitable after.

But none of that matters really, because Diamond is a big company and filed for Chapter 11. It will shed all that debt and will be bought eventually. Even Safelite’s owner Belron has expressed interest, probably just to keep it out of the hands of anyone else.

But here’s why I’ve been fooled again. I have to ask: how many smaller companies went out of business during Diamond’s reign? How many mid-sized ones had to sell out because they couldn’t compete? How many of them get a second chance Diamond does? How come they get to take others down while they can rise again?Maybe Diamond’s strategy (and Safelite’s before it) had little to do with making money and more to do with eliminating competition. If so, it’s brilliant. It just shouldn’t be legal.

Where's the Beef?

Come with me on a ride. Let’s head out early one Sunday morning for a trip down I-95 from Dillon, South Carolina to Orlando, Florida. That should be about nine hours or so of driving. It’s going to be a long day on the road, but we will make a few rest stops and break for an hour or so for lunch.

I-95 has pretty good signage (except in Connecticut, but that’s another story) and at every exit it tells us what food, gas and lodging is available.

It’s 1:15 in the afternoon and now we are hungry. We could go for some really good All-American hamburgers for lunch. So we start reading exit signs. One exit near Jacksonville has Taco Bell, a McDonalds, a Pizza Hut and a Joe’s Beef and Burgers. Great, we think, two choices of hamburgers.

So which should we choose? We know McDonald’s; heck, we see them advertised every day. We don’t know anything about Joe’s but the word “burger” is in his name. Is Joe’s a really good local place or one of those just-get-a-sign-on-95-and-it-doesn’t-matter-how-the-food-tastes place? Would Joe’s be a great burger experience (and we fancy ourselves connoisseurs of great burgers) or a salmonella shack?

We hem and haw, but we really just don’t know, so we end up choosing McDonald’s. The food may not be great, but it’s never really bad and we know that the staff there is trained and retrained on sanitation and safety. So in we go and each have a burger and fries that could be defined as, well, adequate. In fact the whole experience is just satisfactory. Joe’s may have been great, but we’ll never know. We chose mediocrity over the potential for greatness because we knew what we’d be getting and it wouldn’t be great, but it wouldn’t be bad.

I’ve used a hamburger analogy before, but it’s never been more timely than now as Safelite has just hired a new executive who comes from … you guessed … the hamburger business (CLICK HERE for related story). Matthew Johnson is the company’s new media director and he comes from Wendy’s International. He also has worked for Lenscrafters and a number of companies with a strong national presence. Couple this with Safelite’s announcement last week it is going to use a number of its employees in upcoming advertising and you can see where this is going.

I’d expect to see a series of commercials, both print and radio, in the company’s associates’ words about how much they care, how important quality is and how calling Safelite is like calling the neighbor down the block. I’d expect these advertisements to be the rollout effort in building a national brand.

So are those who compete against Safelite doomed? Hardly. A number of Safelite’s senior executives have been quoted saying how difficult it is for the company to compete against local companies that have a strong brand and presence in that location.

Let’s go back to our I-95 journey again. Suppose that I’ve stayed in Jacksonville before and seen “Joe’s Beef and Burger” in local advertising and sponsoring community activity. Suppose I hear them on the radio as I pass through. Suppose I have a friend who lives in Jacksonville who has eaten at Joe’s for years and mentions the restaurant to me. Do you suppose I’d try Joe’s then? Of course, I would.

So the goal for companies that compete with Safelite is to create a pond that you can dominate. This is easier for a small company than a regional player. Choose a market size that you can dominate, and then get to work doing just that. Even if it’s a small part of just one town, make it yours. Create an experience for the customer that is so superior to what a national chain can provide that you will build loyalty that lasts for generations. Right now, I’d be preparing some advertising talking about how locally grown my company is, how much I care about safety and what a superior installation job I can provide. I’d explain carefully that my company is not a big conglomerate or chain, nor is it really a British or South African one. If I was AGRSS-registered, I’d mention that. “I’m your hometown, homegrown auto safety guy,” I’d be telling potential customers.

And, whether I’m selling burgers or windshields, they’d be great, safe All-American ones.Pass the ketchup.

My Own Dr. Phil

Dr. Phil is a friend of mine. No, not that Dr. Phil. Dr. Phil Cristin (not his real last name) has been one of my closest friends since we played T-ball together after school in second grade. I always thought I was the smarter one, but I grew up into the glass industry and Phil became a doctor. Go figure. Today, he runs one of those local make-an-appointment or walk-in places right in the center of town. Whenever I need a doc, I go to Phil. When he needs a new windshield, he calls me.

The flu hit me pretty badly a few weeks ago and I went to see Dr. Phil in his professional capacity. The receptionist told me I hadn’t been there as a patient for nearly four years. (I was proud of being so healthy.) She told me to have a seat and the good Doc would be with me as soon as possible.

While sitting in the waiting room, I noticed a lot had changed in four years. First was the sign-in sheet. It was numbered and you had to sign in with your name and the time you had arrived. The nurse filled in the column with a time when you were discharged.

I noticed that almost everything in that office revolved around the sign-in sheet. Phil himself came out to look at it a few times while I waited, as did several of the nurses and other staff. The receptionist kept filling in and recording numbers.

The second thing I noticed was the change in procedures. I used to go into an examining room and have my blood pressure taken by the nurse, then Phil would come in and I’d describe my symptoms and he fix me up, give me a prescription or whatever and I’d be on my way. One time, I had an ear infection and he had to do something called “lavage” it and that took him almost an hour, but otherwise, I’d generally have Phil’s attention for about 30 minutes or so.

Not anymore. This time one lady in white took my vitals and another wrote down what was bothering me. She asked a few questions and put them on a sheet, and then a third escorted me into an examining room where I waited for nearly 15 minutes before Phil arrived. While I had spent more than 30 minutes in the exam area, he ended up spending no more than five minutes with me. I got my script and left.

Last week we got to catch up a bit at our kids’ basketball game. One good thing about Phil is that he always let’s me give it to him. “Phil,” I said, “what’s the deal with that sign-in sheet in your office? Why are you all so obsessed with it? And how come I only rated four minutes of your time?”

Phil got a real sad look on his face, like I hadn’t seen since Mary Agnes Ilaterria broke up with him in high school. “Oh,” he said, “a lot has changed. We get paid so little by insurance companies for patient visits that I have see at least 110 patients a day just to cover my overhead. That doesn’t include the time I have to spend on the phone fighting with them to cover procedures or medicine my patients need.”

I did some quick math. “Phil, that’s like a patient every four minutes.” ”Exactly,” he said. “It’s all different. I used to do blood work in the office, but I had such a hard time getting reimbursed for it, we stopped doing it. Practicing medicine today is not as much about patient care as it should be. Did you know a doctor’s average income has been going down every year for the past ten? Dentists now have a higher average income per patient than doctors, because the insurance industry is not nearly as insinuated into dentistry as they are in medicine. It’s depressing and demoralizing and it’s killing patient care.”

Phil told me he was thinking of getting out of medicine all together. “I want to do something where I control destiny and don’t have to fight with insurance companies all day. Maybe I’ll come work for you in the glass business,” he said. I didn’t have the heart to tell him.

Watching Washington

I don’t live in Washington State, but I have sure been watching the fight going on there in the legislature the past few weeks (CLICK HERE for related story from glassBYTEs.com™). It’s been quite an education.

From watching the hearings, it’s easy to see that the insurance lobby is big and powerful and full of lobbyists with fancy suits. Heck, the chairman of the committee was even calling the lobbyist by his first name. They looked pretty chummy. Probably play a lot of golf together too. On the surface, you might think that there’s no chance for the auto glass lobby to be victorious. Well, your wrong. The Independents have already won. Here’s why:

1 - The insurance lobby had to spend big bucks fighting this thing. They had to use valuable resources, time, energy, people and bucks to work to squash an attempt by the legislature to do the right thing. Even Safelite sent a hired gun out there to fight the bill.

2 - There’s an old saying in politics: when you’ve thrown everything you got and nothing sticks, confuse the issue. Well, that’s what these insurance fat cats have had to do in this case. In the end, they tried to confuse the issue by saying passing a bill to allow consumer choice would result in steering, which is bad for the consumer. Funny, Mister Insurance-miester, I guess steering is only okay as long as you are the one doing the steering.

3- The independents have grouped together around the cause quickly and effectively. Using grassroots work locally, they created quite a campaign in a short amount of time.

Insurers like to paint this as a “big chain vs. mom-and-pop” issue. What they, and their legislators, never get is that it is a quality issue. If you have the appropriate insurance and meet their criteria, any network will put you on their list. They have no idea how well you install glass, they don’t know if you are an escaped felon, they don’t know if you are doing drugs or other acts, they don’t know much about you. Mostly all they know is that you’ll do it for their price. The independents have been screaming for years that you get what you pay for. Who installs your windshield is as much a safety issue as who takes out your gall bladder. How’d you like your insurance company to send you a doctor they don’t know much about (except that they’d do the surgery for what the insurance company will pay)? More on this next time.

P.S. By the way, a few of you have asked if I worked for a urethane manufacturer. The answer is no. Never have. Never will. When the editors asked me to come up with a name, I thought it’d be a good one, but no, I’m not one of them. I’m one of you.