Conduct a SWOT analysis Identify procedures that could be set in place to resolve the issues that have occured. Explain the importance of leadership and how it can pr
Please read and Summarize the case.
Conduct a SWOT analysis
Identify procedures that could be set in place to resolve the issues that have occured.
Explain the importance of leadership and how it can prevent future failures.
Response should be 3 pages in APA format
Size 12 font Times New Roman
Include a reference page
This case was prepared by Professor Deborah Ancona and Cate Reavis, Associate Director, Curriculum Development.
Copyright © 2014 Deborah Ancona and Cate Reavis. This work is licensed under the Creative Commons Attribution- Noncommercial-No Derivative Works 3.0 Unported License. To view a copy of this license visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
14-153 July 25, 2014
Robin Chase, Zipcar, and an Inconvenient Discovery Deborah Ancona and Cate Reavis
You’re out selling, selling, selling all the time. You’re selling to prospective employees, you’re selling to prospective investors, you’re selling to suppliers. And when we’re in selling mode, we’re constantly so upbeat and excited, and it’s only good stuff. You have to remember, deep in your heart, when something sucks, you’ve got to change it out right away.
— Robin Chase (MBA ’86), Co-Founder, Zipcar1 Robin didn’t have any particular fears about informing people about the ‘handwriting on the wall.’
— Jean Hammond (MBA ’86), Zipcar’s first investor What had been a picture-perfect mid-October day in Cambridge, Massachusetts, quickly turned bleak for Robin Chase, co-founder of Zipcar. She was not prepared for what the Excel spreadsheet was telling her nearly four months after the car-sharing venture had launched. The amount of revenue that Zipcars had generated for the month of September was half of what she estimated. Chase was stunned: the company would never be able to break even with the numbers she was seeing. At the time she launched Zipcar, Chase’s vision for the car-sharing startup was simple: she wanted to provide urban dwellers with convenient, reliable, fast access to cars.2 She wanted Zipcar to become ubiquitous in a country where 66 million people lived in the top-20 largest metropolitan areas and 20 million people used public transportation to get to work.3 Chase considered the environmental
1 Robin Chase (Zipcar), StartupBootcamp, November 15, 2009, https://www.youtube.com/watch?v=Ks4B82CJkpo.
2 Robin Chase (Zipcar), StartupBootcamp, November 15, 2009, https://www.youtube.com/watch?v=Ks4B82CJkpo.
3 Myra Hart, Michael J. Roberts, Julia D. Stevens, “Zipcar: Refining the Business Model,” HBS Case No. 9-803-096, rev. May 9, 2005; U.S. Census Data 1990.
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benefits of Zipcar a secondary part of her vision, although worth noting. In her due diligence about the car-sharing industry, Chase came across a number of European studies that estimated every shared car would result in 7.5 fewer individually owned cars on the road. Since its June 2000 launch, Zipcar had received positive press with stories appearing in USA Today, The Wall Street Journal, CNN, and The Boston Globe, and by October 2000 the company had 430 members. The car-sharing concept was clearly resonating with many urban dwellers, as Chase thought it would. The problem was that like many car-sharing concerns that preceded Zipcar, the financials told a different story. The business model Chase had spent months developing was not working. With just three weeks until the company closed on its first round of funding worth $1.3 million, which included a sizeable investment by a new angel investment group composed of MIT alumni, and two weeks before the company moved into its first official office space, Chase had to decide what, if anything, she could and should do.
Upbringing
The daughter of an American diplomat father, Chase spent the majority of her childhood in the Middle East with stints in Swaziland and Washington, DC. From a young age, she was exposed to a variety of cultural norms and customs. As Chase explained it, her childhood had a significant impact on the business leader she grew to become. She learned, for example, the importance of respecting all people, regardless of income and skill levels, a value that was of significant importance to her father: “My father always treated everybody incredibly well, and politely and respectfully…. I was brought up with this idea of we’re born into many different kinds of circumstances, and what clothes you’re wearing and what education you happen to have had doesn’t have a bearing on what kind of a person you are or how hard you’re working or what your intent is.” From her artist mother, Chase learned the importance of being flexible and making do with “the inputs at hand.” In the various countries where they lived, Chase’s mother would start and leave behind cottage craft industries:
In many countries, in the two to four years we were there, my mother would be painting on things or doing macramé, carving, or doing potato prints, and then she would hire the gardener to do it with her and then another person and, no kidding, in three countries she left cottage industries that turned into companies…. I would watch her with admiration and [think] wow! She created something out of nothing. In hindsight, I felt the power of what she did. She had this passion that
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she did for her own pleasure, and then she shared it, teaching and employing people. When she left, she left this significant thing behind.4
Chase began her university years at the American College in Paris and then transferred to Wellesley College where she majored French, English, and Philosophy. Upon graduating, one of Chase’s first jobs was at John Snow Inc. (JSI), a public health research and consulting startup, where she was project administrator for several United States Agency for International Development (USAID) contracts. During her time at JSI, Chase remembered thinking to herself, “These multimillion-dollar projects are being run by MDs and MPHs5, and they know nothing about finance or operations and they were doing a really crummy job. I decided I wanted to go to business school so I could run these big projects with a business school background.”
Building Quantitative Skills
With a desire to “feel confident in all things numbers,” Chase applied to MIT Sloan and was initially rejected due to her low GMAT math scores; she had not taken math since high school. She begged MIT Sloan’s Admissions Office to reconsider its decision, and was told that if she retook the GMAT and significantly improved her math score, she would be admitted. Chase spent weeks studying for the math portion of the GMAT and did well enough to be admitted to the Class of 1986. She was one of 32 women in a class of 220 students. Chase’s focus on math did not end with the GMAT or with her acceptance to MIT Sloan. She was committed to mastering finance, knowing that it would serve her later on. (Ironically, Jean Hammond, an MIT Sloan classmate who went on to become Zipcar’s first investor, said that Chase was known as a “quant jock.”) Chase reflected on the mathematics challenge she encountered when she arrived at MIT Sloan and an important realization she made about herself:
I hadn’t taken math since I had been in 11th grade. I hadn’t taken math in a very, very long time when I got to the hard finance course. Everything was completely over my head, it was all over my head, and during that semester I worked so hard on mastering the subject that in the final exam I got an A, and the highest grade in the class…. It was a demonstration to me within myself that I can master any subject. And it’s been important for me…around engineering or wireless spectrum or radio spectrum or options or derivatives that, if I need to, I personally can master that subject. And it really gave me the confidence that I could be a peer; that I could match whatever
4 “Entrepreneur Robin Chase: Transportation Is the ‘Center of the Universe,’” Stanford Graduate School of Business, https://www.youtube.com/watch?v=adxpqGSTRK0, May 3, 2013.
5 Master of Public Health.
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anyone was talking about; that I shouldn’t be intimidated; that I could take it; that I could stand on my own two feet.
Aside from the important personal discovery Chase made after mastering the finance course, a second key takeaway from her two years at MIT Sloan happened during an Orientation exercise called Subarctic Survival Situation. Chase and her new classmates were broken up into small teams. The teams were told that their plane had crash-landed in the subarctic region of Newfoundland, Canada, and that they had to rank 15 items that were salvaged from the plane in order of importance for their survival. Chase’s ranking of items differed from her teammates. After much discussion, Chase ended up conceding her position only to discover that the order in which she ranked the 15 items had been right. She learned, as she put it: “Some times you are right and really have to fight for it.”
Opportune Idea, Opportune Time
Between the time she graduated from MIT Sloan and the launch of Zipcar, Chase worked, as she liked to say, “full-time, part-time, or no time,” all while giving birth to three children, each born three years apart. By 1999, after having taken the previous year off from working, Chase was itching to start a company. One reason she was looking to launch a startup was that it would enable her to create work that she personally wanted to do, something that would give back to society and give her a certain amount of autonomy and flexibility. “Most of the world’s jobs are things I think are uninteresting,” she remarked. “I wanted to find something that had real tangible value, not just monetary value.” Having coffee one day in September 1999, Chase listened intently as her friend, Antje Danielson, a geochemist who worked for the University Committee on Environment at Harvard University, told her about a car-sharing business she had learned about during a recent visit to Berlin, Germany. The concept struck a chord: “I felt like I was the right person to hear that idea at that exact moment,” Chase said.6 “I thought to myself, ‘Wow, this is exactly what the Internet was made for: sharing a very specific resource among lots of people.’” Furthermore, wireless technology, which, as Chase put it, was “the buzz of the entrepreneurial community,”7 held tremendous promise for what it would enable a car-sharing startup to do, namely allow reservations and usage data to be seamlessly communicated among the cars, the company, and the users. At first glance, the percentage of adults who regularly used the Internet in the United States (46%8), owned cell phones (just over 53%9), and
6 Robin Chase (Zipcar), StartupBootcamp, November 15, 2009, https://www.youtube.com/watch?v=Ks4B82CJkpo.
7 Dinah Eng, “Robin Chase: Zipcar’s Founder Finds a New Gear,” Fortune, December 4, 2012.
8 Kathryn Zickuhr, Pew Internet & American Life Project, “Mobile Is the Needle; Social Is the Thread,” Presented at Wichita State University’s Elliott School of Communications, October 18, 2012 (http://www.pewinternet.org/2012/10/18/mobile-is-the-needle-social-is-the-thread/, accessed May 2, 2014).
9 Kathryn Zickuhr, Pew Internet & American Life Project, “Mobile Is the Needle; Social Is the Thread,” Presented at Wichita State University’s Elliott School of Communications, October 18, 2012 (http://www.pewinternet.org/2012/10/18/mobile-is-the-needle-social-is-the-thread/, accessed May 2, 2014).
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used the Internet wirelessly (0%10) suggested that Chase faced a steep uphill climb in her quest to build an Internet- and wireless-driven company. However, she knew these usage percentages were changing by the day, particularly in a technology-centric city like Boston. She believed the time was right for car sharing in the United States. But there was another reason why the car-sharing concept was illuminating. It was exactly the type of solution Chase was personally seeking. With three kids and one car that her husband took to work, there were certain times when Chase needed a car, but she knew that she didn’t need or want one full time. She was embarking on building a company with her own lifestyle in mind. Within days of their initial conversation over coffee, Chase and Danielson shook hands, agreeing to a 50-50 ownership of the company that eventually became Zipcar.
Networking and Learning
Upon deciding to start a car-sharing venture, one of Chase’s first phone calls was to her brother Mark, who lived in Portland, Maine. After earning his master’s degree in urban and environmental policy from Tufts University, Mark Chase founded and led the Seaport Transportation Management Association (Seaport TMA) in Boston. The Seaport TMA worked with large companies like Gillette and Fidelity to find ways for their employees to get to work in a more sustainable way. Chase knew Mark was familiar with car sharing and that he would be a gold mine of advice on whom to talk to. (Mark later admitted to Chase that starting a car-sharing company was something he had hoped to do one day, but she beat him to it.)
With Mark’s help, Chase began networking. Her list of whom to talk to was long and included policymakers in the cities of Boston and Cambridge, owners of parking lots, owners of land upon which parking lots sat, car manufacturers, car rental companies, the U.S. Environmental Protection Agency (EPA), engineers, academics, entrepreneurs, and, of course, investors. One of her stops included the Conservation Law Foundation (CLF), which was running a pilot study looking at the environmental impact of selling auto insurance by the mile. It was through the CLF that Chase met Peter Nessen. A member of the CLF’s board, Nessen was a public accountant who had been the chief financial officer of former Massachusetts Governor William Weld’s cabinet during the early 1990s. He lived on Beacon Hill and did not own a car. Soon after meeting him, Nessen became one of Chase’s most trusted advisers, advising her on budgeting, cash flow, and financial models. He became, as she put it, her “reality check.”
At some point during the networking process, while never doubting its value, Chase explained that she began to feel like a blind mole rat:
10 Kathryn Zickuhr, Pew Internet & American Life Project, “Mobile Is the Needle; Social Is the Thread,” Presented at Wichita State University’s Elliott School of Communications, October 18, 2012 (http://www.pewinternet.org/2012/10/18/mobile-is-the-needle-social-is-the-thread/, accessed May 2, 2014).
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You are trying to find the way up, find the path upward, and you are blind. You have no idea which way is the path. You have to construct the path. And during this networking piece someone says, ‘Oh, you should go talk to those three people,’ and you go talk to those three people. And then they say, ‘You should go talk to these other two people.’ And then some of these people are totally useless, and you never, ever talk to them again. But you are constantly going in these odd directions, and then you’re kind of making your way up. And then when you’re up, you can look back and see, ‘Oh wow, it was like a straight path. I can see it.’ But there’s a million dead ends…. I was learning how to become an entrepreneur.
One key industry contact Chase made during the exploration phase, and who was not a dead end, was Benoît Robert. In 1994, Robert founded Communauto, a car-sharing company based in Montreal, Canada. Knowing there were a number of other car-sharing organizations operating in Europe and two new companies in the United States—Portland CarSharing, which launched in 1998, and Seattle’s Flexcar, which would launch a few months ahead of Zipcar—Chase honed in on learning about Communauto. After fifteen years of operation, it was the largest car-sharing organization in North America, with 1,300 members sharing 50 cars in Montreal and another 700 members sharing 40 cars in Quebec City.11
Chase’s visit with Robert proved to be very valuable. She was struck by how open and generous he was with sharing his learnings about the business as well as company financials. Chase came away from her visit with two key observations about Communauto’s business model: first, the company was primarily paper-driven and was not harnessing technology in any way. Reservations, for instance, were taken over the phone and written down in pencil in the company’s ledger. Second, all cars had the same price, which proved problematic in the area of the city where parking was most expensive and where demand was highest. Due to the parking expense, Communauto placed fewer vehicles in these areas and, as a result, failed to meet demand. Chase recognized that this was a not a model she wanted to replicate.
On her networking and learning tour, Chase heard words of criticism and doubt about the car-sharing concept. It was no secret that profitability had eluded many car-sharing organizations (CSOs) in the past. The high cost of overhead, cars, insurance, and parking spots were largely to blame. As one transportation scholar put it, CSOs had been “synonymous with bathing in red ink.”12 Chase was well aware of the industry’s financial history:
I knew they had all failed. There were a lot of experiments on the West Coast where car sharing had failed many, many times with big government grants. There was one program in San Francisco where people would take public transit to the end of the line and drive a shared car to
11 Carol Harrington, “Car-Sharing Gaining Fans,” The Canadian Press, October 12, 2000.
12 Ilan Mochari, “Deals on Wheels,” Inc., February 1, 2001.
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their remote office park located outside the city. Then they would reverse course at the end of the day. This program failed because the economics were nonsensical. To own and operate your own car is $25 a day. And no one in their right mind is going to pay $25 to rent a car to travel the last few miles to their office. Furthermore, once the car is out at that distant office park, there would be no one there willing to rent it since every single person would have arrived there by car. Many of these pilot programs were set up in a stupid way. They were trying too hard. They didn’t leverage technology.
The car rental companies didn’t think Chase would be able to scale the business due to the fact that her car purchases would be in such small volume. Others doubted there was a viable market. One vice president of a Somerville-based car rental company told The Wall Street Journal that Chase’s idea was “awful. I don’t think it’ll work.”13 Meanwhile, Fred Salvucci, the former secretary of transportation for Massachusetts and a lecturer at MIT specializing in urban transportation planning, and from whom Chase sought advice, worried that the rental companies would get into the car- sharing business. (In May 2000, Hertz launched a “shared-car” pilot program in San Francisco. For less than $400 a month, “subscribers” had access to a fleet of Ford Escorts parked at a rapid-transit station.14) Chase was able to tune out the critics and naysayers, firmly believing there was market demand and that wireless technology would help put the concept of car sharing in the black. It was clear to her that she would be able to launch a car-sharing business with few employees. Zipcar’s first investor, Jean Hammond, who gave Chase a $50,000 convertible loan in February 2000, was also a believer: “My thought was that it was such a great idea, and that Robin could pull it off.” While Hammond acknowledged a good portion of her investment was in Chase and her ability to put an idea into practice, she was placing the majority of her investment bet on the Zipcar concept.
Putting It Together
“Zipcar, Inc.” was incorporated in January 2000 with Chase taking the title of CEO and Danielson, vice president. In choosing the company name, Chase turned to her potential customers. Without saying anything about the car-sharing venture she was putting together, Chase would stop strangers on the streets of Cambridge and Boston and ask them to say what came to mind when they saw the following words: Wheelshare, U.S. Car Share, and Zipcar. She discovered that 40% of people didn’t like the word “share” and Wheelshare made many people think of wheelchair. Zipcar ended up being the hands-down winner, and, best of all, the URL wasn’t taken.15
13 Adrianne Appel, “Company Wants Clients to Whom Days Seem Long,” The Wall Street Journal, June 14, 2000.
14 Ilan Mochari, “Deals on Wheels,” Inc., February 1, 2001.
15 Carol Tice, “Zipcar: Two Moms, a Business Idea and $68 in the Bank,” Entrepreneur.com, June 1, 2012.
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Chase got to work building a team to help develop technology and get Zipcar’s operations up and running. While involved with the technology and operations part of the business, the majority of Chase’s time was spent raising money, writing and designing the website, and determining a pricing model for the business. As with any startup, no task fell in a particular order or could be tackled linearly.
Team
From the beginning Zipcar had immediate access to automotive experience and engineering expertise. Danielson, who before Harvard had spent three years as a research assistant at a German-based institute working with semiconductors and two years selling and repairing cars,16 focused on in-car technology and acquiring cars. Danielson’s involvement, however, was constrained by the fact that she had a full time job at Harvard. She mainly spent nights and weekends working on Zipcar. Chase’s husband Roy Russell, an electrical engineer from MIT who worked at a technology company managing the development of speech recognition applications, was on hand to help Chase during the evenings and on the weekends. Russell set up the company’s server and eventually spent a lot of time working on in-car technology. (His role at the company became permanent in the fall of 2000.) Due to his vast network and knowledge about transportation policy and the industry, Chase’s brother Mark focused on business development. Chase sought additional people to join the team who were, in her words, “can-do, non-complainers who were ingenious and innovative, didn’t need a lot of oversight, and didn’t need money to get something done.” She was in search of generalists: “I didn’t want anyone to say, ‘That’s not in my job description.’ Or, ‘I don’t make copies.’ That was not acceptable to me.” She purposely did not seek out people from the car rental business to join the team, knowing what she was creating would be very different than standard car rental. She did not want Zipcar to be uttered in the same breath as Hertz or Avis. Chase’s hiring philosophy was driven by the respect she had for other people’s work:
I really think people are trying to do the best of what they can do. And when I hire someone it’s because I believe that they are good at something, and so I have real respect for people’s skill sets and you have to break that in order for me to stop believing. So that is why you can feel free to make mistakes…. I think that generally speaking, people are skilled at what they’re doing and they know what they’re talking about. So one or two mistakes doesn’t diminish someone in my eyes. I really do think that people are good at certain things and we have to find the right person and the right place, so hopefully we do a good job hiring and pulling the best out of people.
16 Myra Hart, “Zipcar,” HBS Case No. 9-802-085, rev. August 24, 2005.
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Stephen Oakley and Larry Slotnick were two key additions Chase made to the Zipcar team during its early days. Both were hired as “consultants” and were paid by the hour for the first few months they were with the company. Chase felt it was important to “try” before she “bought.” Money was scarce and she wasn’t in a financial position to make a wrong hire in the early stages. Stephen Oakley had known Chase and her family for some time. He and his family lived in the same neighborhood, and their kids went to school together. With a master’s degree in public health, Oakley had been interested in getting into transportation planning because of the impact he believed it would have on health. One thing about Oakley that appealed to Chase was his varied professional background. During the 1980s, Oakley quit his job as a nursing assistant to open up what became a popular bar and restaurant in Cambridge. When Chase first approached him about working for Zipcar, Oakley was the business manager of clinical operations at Cambridge Health Alliance. When Oakley heard Chase’s idea for car sharing, he thought she was insane: “Car sharing seemed like a brilliant idea, but it was like trains in America. I couldn’t see it happening. People love their cars. They don’t like to share things.” However, despite the career risk Oakley was taking, Chase’s passion and commitment to initiate something new won him over, even though he often wondered what Chase saw in him:
I kept wondering whether she was assessing my skills appropriately. She had this impression of me as a numbers person, and I’m really not a natural numbers person. I soon discovered that her expecting me to be able to do it made me able to do it. None of it is really rocket science. It’s not like this secret skill. The power of somebody to set up a situation where you feel there is no question you can fulfill an expectation is very powerful.
In Oakley, Chase saw someone who could relate on various levels to those with whom the company would have to work, and that through his experience in opening and running a successful bar and restaurant he would be adept at managing many small details and working with people of various professional levels. “I knew that he was an articulate, smart man,” she stated, “and he could talk to someone important at Harvard or MIT as well as the garage and gas station attendants.” Furthermore, Oakley had a vast network in the Cambridge area. Chase was also drawn to his sense of humor and knew he would be fun to work with. Oakley focused on operations. (He eventually became the director of Boston operations.) When Chase’s brother Mark first approached Larry Slotnick, whom he knew through the Massachusetts Bicycle Coalition, about joining the Zipcar team, Slotnick was serving as the coalition’s interim director. A biking enthusiast who was an engineer by training and had spent his early career in electronics manufacturing, Slotnick shifted his professional focus toward marketing after earning his MBA. Like Oakley, Slotnick found Chase’s vision to create something brand-new to be inspiring and infectious: “She was very inspirational when it came to educating us about what
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Zipcar was hoping to accomplish. This is not to say Zipcar was the first attempt at car sharing. But it was the first attempt, at least in the United States, for a really sustainable and scalable system that would become a part of the lives of millions of people, potentially.” When Slotnick joined Zipcar, he was not given a specific role or title, but his focus trended toward business development, marketing, and, post-launch, carrying out certain operational duties involving the company’s fleet of cars. Due to his love of biking, Chase tapped him to be the person to pick up and move cars and service them. The easiest way to do this was to travel from car to car on bicycle. If a car had to be moved, Slotnick would simply put his bike in the back, eliminating the need for a second driver. (Shortly after Zipcar’s launch, Slotnick became fleet manager.) In addition to Oakley and Slotnick, Chase hired various hourly paid consultants and engineers to work on specific aspects of the company. One of Chase’s later additions to the Zipcar team came in May, one month before Zipcar launched, when, on the advice of several advisers who felt the company needed someone with corporate experience to bring credibility to the
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