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Mention IPO in Boston, and Zipcar is likely to be one of the first companies on people’s lips. The web-based, car-sharing company founded in Cambridge in 1999 now has 6,500 cars in 28 cities and universities, and is near profitability. Mass High Tech reporter Galen Moore talked with CEO Scott Griffith, a winner of this year’s MHT All-Star award, about the company’s strategies for sustainable growth in the long-term.
Q: How is Zipcar growing now? Are you expanding to new cities, or is there further growth in cities like Boston, where you’ve been a long time?
A: At the highest level, we know 14 million people can walk to our cars without adding any locations or any new cities. We’ve signed up 325,000 of them. Obviously the best ROI is to get more of those 14 million people using the service.
Having said that, starting next year we’ll be opening some new cities. We merged with Flexcar almost two years ago now. The strategy was a larger network of cities under one brand, under one set of technology. We completed that, did all the integration and wanted to lift the cities that we’re in up to profitability and metrics we’re comfortable with. This year we’re accomplishing that.
Q: You’ve talked in the past about a possibility for an IPO. Is that still on the table?
A: A lot of it may depend on what happens around us. I think we’re a great potential IPO candidate. We’ve been told that by many banks now. I think we’ll be ready. We don’t really need a lot of capital right now for the business to grow. So at least in the next year or two, we don’t need to raise a lot. But I think for our own evolution of the company we’ll do an IPO probably as early as next year.
Q: What have you seen happen in the recession? Did the economy slow your plans for growth and the IPO?
A: This business is a little untested in a recession. Intuition would say we should be not recession proof, but we’re not like the jewelry store. If consumer spending goes down, we expect to see some downtrends. And what we’ve seen actually is about 25 percent (revenue) growth this year (to date) vs. last year (to date). We’re really excited by that. It says our value proposition works well, because we save people money against car ownership. Now that we know how we fare in an economic downturn, we’re going to be a little more confident about putting more cars out there and marketing the company more aggressively. Our plan now is, start to open new cities next year again, probably one or two a year — more probably in Europe than in the U.S.
Q: Has your business model changed at all?
A: We launched Fastfleet this year, which is implementing our technology on fleets that are owned by other government and university and corporate partners. That’s starting to grow now. The growth engine for us is the Zipcar brand in core markets, the Zipcar brand in new markets and then the Fastfleet brand.
Q: How do you control cost as you grow?
A: Scalability in the self-service model is a key part of our secret sauce. Doing things like adding the iPhone app that we’re launching now so people can use that as yet another self-service tool so they’re not calling us up. At the same time, we still have we think a very, very great experience when someone calls us up and has a problem. You put people in cars, things happen. You can’t stop cars from breaking down or people from getting flat tires. Unfortunately accidents happen out on the highway. So that’s where we have human intervention.
We have a call center. We have a back-office system that allows us to track exactly what’s happening with that car — who was in it last? Was there any problem before this? When someone’s on the phone they have a lot of information at their fingertips. That self-service experience is the tip of the iceberg. What’s under that is a lot of information and stuff in the back office that we can get into if we need to.
Q: What’s been successful for you in that effort? How have you managed to keep customer service calls from eating up your revenue as you grow?
A: Back in 2004 or so we started looking at Toyota’s Lean manufacturing techniques — what they call their kaizan process, which is continuous improvement. You empower all employees to call meetings and address process problems. We’re one of the first companies to use that in a service model. We’ve now got kaizan-trained employees in many parts of the company who are managing everything from how we manage parking tickets to how do we handle accident claims.
Each process that we see we start needing to put more headcount into. We ask ourselves the question, why are we putting more headcount into that particular problem? There’s some scalability issue in our model. We’ll put a kaizan team together and we’ll lock down on that. The challenge for us is no one’s done this before. Because we’re the market leader, we’re kind of making it up as we go. But we get better all the time.
Q: As you continue to grow, do you become impactful enough on urban transportation that you run into regulation?
A: I think policy generally is going to have implications on car sharing for the long term to be sure. This wasn’t envisioned — that there were going to be cars parked around cities with self-service access. Who can operate commercial parking operations in an unstaffed model? Can you put that behind a brownstone? Is that OK? I think those things are going to have to be debated. Can you take on-street parking and apply it to car sharing? We’ve done that now in Washington D.C., where they’ve literally pulled out parking meters and put Zipcar-only parking spaces where our cars live now all day and all night. We spent two years working with the District of Columbia to help them understand that every car we put on takes 20 cars off. And even though you can see those two cars on street that you help us put in, there’s 40 cars that you don’t see in the back alleys and the parking lots right in this neighborhood that went away because of these two cars.
Q: As the one who’s taking on the challenge and expense of untangling thorny issues, do you think you’re vulnerable to a fast follower?
A: I think a key to all this is what I think of as using information as a competitive advantage. We’re by far the biggest player in this category now. We have nearly 7,000 cars, 325,000 members. We have a database of events and ongoing systems that are able to be mined all the time. We should be the best because we can find something that looks similar that happened before, and get better at it.
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