Wheels Positions Itself for Future Growth
Dan Frank (right) becomes only the third Wheels president since it was founded in 1939 by Zollie Frank, Dan’s grandfather, and Zollie’s brother-in-law Amund Schoen. Zollie’s son, Jim (left), became the second president in 1974. Dan has held various roles in the company during his 16-year tenure.
This past September, Wheels Inc. named Dan Frank president. As the son of CEO Jim Frank, the pormotion puts Dan in charge of virtually all business units of the 75-year-old fleet management company.
Dan Frank becomes only the third Wheels president since it was founded in 1939 by Zollie Frank, Dan’s grandfather, and Zollie’s brother-in-law Amund Schoen. Zollie’s son, Jim, became the second president in 1974.
Dan Frank has held various roles in the company during his 16-year tenure. He most recently served as president of Wheels Service, where he oversaw the company’s maintenance, accident management, safety, telematics, and toll management programs.
To learn more about the strategic vision for Wheels Inc., AF interviewed both Dan Frank and Jim Frank, in conjunction with the company’s recent milestone 75th anniversary celebration in Chicago.
He is a member of the Wheels board of directors, president of Wheels Leasing Canada, and chairman of Ixe Fleet, a joint venture in Mexico.
AF: Congratulations, Dan, on being named president of Wheels Inc. As president, your responsibilities are not only operational, but also strategic. With this in mind, how do you plan to position Wheels for the future and what is your strategy to get there?
Dan Frank: I’m honored to be able to carry on a great tradition at Wheels and continue to evolve our company to face the challenges of the next 75 years. Of course, this is not something I’ll do alone. We are fortunate to have a terrific set of employees, vendors, and clients who all help shape our strategic vision, as well as execute our ability to get there.
Throughout our history, Wheels has been solely focused on fleet management and I don’t see that changing. Fleet is a complex business and we feel we have been well served by dedicating all of our resources to it. One can’t always predict what changes the future will bring, so the best way to position for it is to continue to build a company and a culture that is flexible, open to hearing
client feedback, and willing to respond with an emphasis on continuous improvement. We will also continue to maintain the financial strength to invest in change and be able to think for the long term.
AF: How do you see the fleet industry changing and how will you adapt Wheels to these changes to remain an industry leader? What areas in fleet are most likely to change during the next five years?
Dan: Safety is probably one of the fastest changing areas for fleet today. More than 30,000 people are still killed on our streets each year, with many multiples of that total who are injured. Fortunately, there has probably been no greater area of innovation than in safety technology. Frontal crash avoidance, blind spot detection, back-up cameras, lane departure warnings, side air bags, anti-rollover technology, traction control, adaptive cruise control, and many other technologies have led to a steady lowering of the fatality rate. Telematics has greatly increased our ability to monitor risky behavior, as has automated law enforcement, such as red-light and speeding cameras. Despite all the technology, cultural attitudes also need to change. As you know, I’ve been very active with the National Safety Council and also with Automotive Fleet in establishing the annual Fleet Safety Conference. Until self-driving vehicles eliminate the risks of driving, I believe this will continue to be an area Wheels will seek to lead the industry in helping our clients assess and utilize new technologies, develop policy and cultural changes, and reduce accidents.
Another major change happening in the industry is the move to greater amounts of outsourcing. Many of our clients have faced significant pressure to reduce staff, focus on more strategic responsibilities, or juggle multiple roles. To that end, we have developed products, such as our Driver Outreach program, which proactively monitors driver compliance and manages follow-up with them and our Sentinel program that provides easy-to-use, high-level results reporting.
In the next five years, the move to mobile computing will probably be complete. We will continue to invest in our mobile products to develop features, such as on-the-go approvals, vendor lookups, mileage or accident reporting, fleet communications, and many others from a mobile device, of course, not while driving.
While there are many other topics we could discuss, the last I’ll mention is the regulatory environment. Despite what seems like government gridlock, we’ve seen dramatic change in this area. The continued ratcheting up of EPA/CAFE fuel-efficiency standards, greater scrutiny of the handling of recalls by NHTSA, changes in regulation of financial markets resulting from the Dodd-Frank legislation, increases in automated law enforcement through the use of sensors and cameras, the requirement that all vehicles have back-up cameras, and increased enforcement of DOT compliance all have a significant impact on fleets and are areas where we continue to evolve our products to help our clients meet these new standards.
AF: Jim, with Dan assuming the role of president, how will your role change within Wheels in the immediate future and in later years? How will your succession plan play out?
Jim Frank: As a function of responsible corporate governance, succession planning is something we consistently focus on for all of our senior management positions, and it is also reviewed by our independent board of directors. The transition of responsibilities to Dan is evolutionary and this is the next step in an appropriate process. We certainly anticipate that Dan will bring a fresh perspective, a high energy level, and great insights to the leadership of Wheels. I will continue to have important roles with regard to client relationships, sales opportunities, and strategic planning.
AF: Dan, tell us about what you did prior to joining Wheels, after you graduated from Stanford University.
Dan: Living in Palo Alto, Calif., in 1995, I was fortunate to be at the very forefront of the development of the Internet. I joined the early management team of a company called Onsale, which was founded by legendary entrepreneur Jerry Kaplan, who wrote a great book on Silicon Valley entitled, Startup. Our business plan was actually first developed in 1994, before an Internet browser was even available. We were the third Internet company to go public, coming out just after Netscape and Yahoo.
We were the first ones to sell anything on the Internet and all the technology had to be created from scratch. So, many of the things we take for granted today weren’t so obvious then and we ran into new challenges on a daily basis. I’m not sure businesses had ever been required to scale at that speed before. We started out as an auction company similar to eBay, but, at the time we were more focused on selling excess inventory, particularly computer items, to the “geeks” who were the early Internet adopters, whereas eBay was focused more on collectibles at that time. I recall launching a third-party merchant site, similar to Amazon’s. The business hit a $600 million run rate on the first day.
Onsale was eventually combined with the old Egghead Computer and sold to Amazon. I moved on to found another company, called BigTray, which sought to revolutionize the restaurant supply space. We raised venture money from Sequoia Capital. At the time, the companies it founded accounted for 50 percent of the value of the entire NASDAQ. Initially, working out of its offices we were witness to the founding of many of the early Internet companies. I still remember when they first invested in Google, which I thought was one of the dumbest investments I’d ever seen. There were already hundreds of search engines at the time, with almost no barriers to entry, and they were all just a click away. So, I guess it goes to my point that it’s not so easy to predict the future!
In any case, BigTray was a huge success and supplied more than 13,000 restaurants in its first year. The dot-com boom was so strong at the time that almost everything was a challenge. Everyone from the landlord to the cleaning crew wanted stock options. Prices were sky high. Hiring great talent took up a huge portion of our time. Many companies lost their focus and discipline. They started spending enormous sums trying to scale their businesses. Fortunately, we stayed disciplined and focused on what restaurants wanted, and not on parties and extravagant headquarters. The business did well and was eventually bought by a hedge fund during a consolidation in that space.
At that point, I came back to Wheels and have been working in almost every area of the business for the past 13 years. My time in Silicon Valley was invaluable in learning how to build companies, innovate, move quickly, and keep focused on what matters to the customer, rather than the many other things that can distract entrepreneurs.
AF: With more than 50 percent of the vehicles in your portfolio being trucks, how are you looking to further develop this core business? What steps will Wheels take to better serve this growing segment?
Dan: That’s a good question because we got our start with pharmaceutical fleets and have such a large client base in that industry, some people think of us as primarily managing sales fleets. But, more than half our clients are in service industries that primarily utilize trucks and vans. To name a few, Wheels has a large presence in oil and gas, agriculture, pest control, chemicals, construction, and building maintenance.
We are always working to better serve all our clients, but service fleet industries do have their own unique challenges and opportunities. For one, they are more likely users of telematics. Depending on the fleet, they may be using it for safety, routing and call dispatch, hours-of-service reporting, maintenance diagnostics, or even service delivery and inventory tracking. We are continually working on better integrating these tools with our other services, as well as managing the logistics of installing and tracking the devices.
Additional challenges these service fleets have is field communications, data management, and coordination. Many service fleets have a tension between wanting to give the field a certain amount of control over their business, while also wanting to exercise corporate control over some policies such as safety, standardization of vehicles, or replacement policies. Wheels is continually working to ensure we can deliver the right amount of information and discretion to the branches, while also enabling corporate to get compliance where they need it, transparency into field decisions, and the ability to compare best practices amongst branches.
Speaking directly to trucks, we are working with upfitters to improve their operations, including better transparency into their process and the status of client orders. We have built a catalog tool that allows us to load upfitting options into our databases so we can configure and build custom upfitting templates and standardize the build of the vehicles. Our engineers frequently conduct site visits to make sure we understand how vehicles are being used and how we can better engineer the vehicle to optimize performance, cost, safety, or marketing value.
Finally, DOT compliance and safety continues to be a focus area for our service fleet clients. We have been integrating DOT-compliance fields into FleetView, proactively identifying vehicles with DOT compliance requirements for our clients, and monitoring and consulting with them on their CSA scores. Increasingly, we are using telematics to track factors such as hours-of-service reporting. Our maintenance advisors are now able to monitor when inspections are due or whether a roadside inspection was completed and is no longer necessary.
AF: Wheels was an early adopter of global fleet management, yet the ability to leverage a global fleet spend is still a challenge. How can Wheels and its strategic partners advance global fleet management in the coming years?
Jim: We are very pleased with the progress being made in global fleet management.
North America is certainly the most effective and cost-efficient market in the world. Other regions must be evaluated in light of available infrastructure, cultural dimensions, and vehicle applications. Our goal is to work with our clients toward continual improvement, and we believe there are very real opportunities in terms of policy implementation and local optimization, both of which are driven by good information/data and sound knowledge of the local markets. Our initiatives and successes in conjunction with ALD Automotive are supported by our global account management, data collection and reporting, and local presence in more than 40 countries around the world. Combined, we are now managing approximately 1.3-million vehicles.
AF: Wheels, as with every fleet management company, is integrating more and more disparate information into its user systems to provide its customers with the most complete picture of their fleets. Increasingly, the trend is to support the predictive analysis of fleet costs. What are the key areas of information technology investment Wheels will need to make to ensure it meets these needs in the future?
Dan: For clients who use most of our services, we are already gathering an enormous amount of data and many clients are seeing the value of that integration for decision making and predictive analysis. Actually, I would say the best example is in driver risk profiling. We can gather data from MVRs, violations (many of which don’t show on an MVR, such as red-light camera violations), telematics, accident reports, preventive maintenance compliance, used-vehicle condition reports, and many other areas to build a comprehensive risk assessment.
Just like credit reporting agencies, we can even look at other driver behaviors to see if this is the type of employee who tends to be compliant or who tends to break the rules. That gives us enormous ability to predict whether these are the types of drivers who are likely to have an incident in the future and, most importantly, take action to prevent it from happening.
In projecting fleet costs, one has to be a little more careful. Certainly, we have plenty of data and our Vehicle Selection Modeler helps client build a total cost of ownership (TCO) model with all our predictive data; however, this is an imperfect science. Fuel costs, interest rates, residual values, and many other factors can be highly variable. Often, a vehicle that may have had maintenance problems in the past will have been improved by the manufacturer so past experience may not be indicative of future results. Our cost projection and expense variance tools help our clients figure out what is changing, the sensitivities to those dynamics, and model different “what-if” scenarios depending on what we predict may happen in the future.
While Wheels continues to invest in both gathering greater amounts of data and in the modeling tools to create scenarios and predictions, we also realize data requires interpretation. Using our Results+ Metholodology, our account management team works with our clients to understand what pressures and changes their businesses are going through to help them figure out what type of analyses to do, how to interpret the data, and, most importantly, to then take action on the conclusions.
AF: What are fleet managers’ best opportunities to improve their value to their organizations in the coming years?
Jim: The very gratifying and stimulating aspect of professional fleet management is the long list of opportunities we have to partner with our fleet management clients in generating high impact value for our customers. At our 75th anniversary seminar, I listed six areas worthy of focus and presenting fertile ground. For the sake of brevity, I will focus on two of those here:
First, driver productivity and enthusiasm. Ultimately, what we are all about is the effectiveness of the staff driving our vehicles. There are many ways we can enhance driver productivity and enthusiasm, but first we must develop credible ways to measure our success in both dimensions. Without metrics to justify investment, our initiatives will not have credibility and warrant the investment in time and financial resources that may be required for success. So, we are starting to work with our clients to define the appropriate metrics that will then support the initiatives we have available.
Second, more granular decision making driven by comprehensive data and powerful analytics. As an industry, we are still too driven by general policy and averages when we now have the information tools that will allow us to tailor decision making down to the individual vehicle level with significantly favorable economic consequences. Replacement cycling, vehicle selection, fuel economy, and safety improvements can now be tailored to the individual vehicle and driver level given the powerful tools now available to us, and we need to press forward in taking advantage of these assets.
AF: Wheels has a long tradition of organic growth, while several of your peers have grown via acquisition. Do you see this trend continuing, or will Wheels seek acquisitions when available in the marketplace?
Jim: At Wheels, we are proud of the fact that we have grown to be the third-largest fleet leasing company without any acquisitions, just clients voting with their orders. That having been said, we have never been averse to acquisitions under the right circumstances. We do have a very important hurdle for seriously considering an acquisition: There can be no negative impact on the quality of service provided to our clients and those of the acquired company as a consequence of implementing an acquisition. Period.
There is no reason to believe the future does not hold acquisition opportunities. With our extraordinary financial strength and exceptional management team, we certainly have the resources to effectively execute an acquisition.