Robin Chase, Zipcar, and an Inconvenient Discovery

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As part of my MBA we were tasked with reading the linked case study developed by MIT Sloan about Robin Chase, the founder of Zipcar, and the dilemma she faced when she realized the company’s revenue was half what she needed in order to break even. Then write a 3-page reflection on her leadership.

https://mitsloan.mit.edu/LearningEdge/Leadership/Pages/Zipcar.aspx

As you’re reading, think about Chase’s decisions as a leader in forming this company. How did she develop her mission, team, and pricing model? What do you think led to her miscalculation?

Evaluate Chase’s strengths and weaknesses as a leader, focusing on how they relate to the development of her mission, team, and pricing model. What do you think led to her miscalculation? Then, put yourself in Chase’s position and discuss how you would have acted as CEO. How would your approach have differed, and why?

Here’s my reflection…

Chase had a clear, achievable vision for Zipcar. With hindsight I might be inclined to say that she should not of considered the environmental benefits of Zipcar as a secondary part of her vision, but rather a main motivator and promoter of it. However, I must be conscious when conducting my analysis that we are discussing events that occurred in 2000, when environmental impacts were not as mainstream as they are today. It would also be too easy to point out where she went wrong from a technology standpoint, with current day technology as an argument, but this would not be accurate, since the technology she had access to in 2000 was far more crude than it is today.

My initial thoughts when reading the case study, were that Chase might have been slightly premature in terms of her vision and where the technology was at the point when she decided to launch, but I could be wrong. It is true that perfection is the killer of progress, and it’s often better to get something out there [that isn’t perfect] and update iteratively with feedback from users. Chase’s reason for starting up Zipcar was sound — based on a personal problem she experienced — however, did she conduct proper market analysis and get impartial customer insight? Chase maintained close contact with Zipcar members, but was she guilty of confirmation bias, because she seen this as a “nice-to-have” in her life?

It is also easy to judge Chase’s choices based on knowledge available today — a sort of knowledge bias, if you will — because although she had an MBA on her team, the business model canvas and Steve Blank’s, The Four Steps to the Epiphany, wouldn’t be published for some years later. The customer discovery, validation, and creation processes etc. may have actually been inspired or informed from failures such as Zipcar’s.

The other thing to consider in regards to when the events in the study took place, is that Chase was operating from a stakeholder perspective in a country that values the shareholder perspective. The stakeholder perspective in the US may be gaining more traction now, but in 2000 it was likely more uncommon and may have alienated many investors. This conflict between the two perspectives may have been the cause of Welch not being a good fit at Zipcar, and the reason why one investor pulled their $200,000 commitment out upon Welch’s firing.

In the car leasing negotiations Chase used information asymmetry to her advantage to show Zipcar was not disruptive to the car manufacturers, but could benefit them. She used similar integrative negotiations with city parking departments to try and portray a win-win, or a non-zero-sum, situation for each party.

Technology and social values were the external forces for change that motivated the creation of Zipcar. These inspired Zipcar’s core values and organisational identity that were espoused by management, but not always enacted by employees, as demonstrated by Slotnick’s guerrilla marketing tactics.

Whilst Chase stated a desire for autonomous leadership, she demonstrated team-oriented and participative leadership, especially when she entertained opposing opinions about raising prices. It seems plausible to assume Chase also displayed humane-oriented and charismatic/value-based leadership, as she was seen as transparent and emotionally honest, as well as being a charitable person who cares strongly about the wellbeing of children. This was seen in the role conflict she discussed with her daughter, whom responded with a utilitarian approach, stating that if she sacrificed some of her family time to earn more money, she could donate more to charity.

Chase’s respectful upbringing obviously influenced her company mission, which had a common good approach in its goal of making car rental affordable to everyone and reduce the need for car ownership, helping the environment in turn.

It is evident from the case study that Zipcar fostered a people oriented, innovative, adhocracy culture as employees were brought in without any specific role or title. Since employees had to use their own initiative this showed that Zipcar had an organic and decentralised structure with low formalisation. It would also suggest that Chase practiced the justice approach as she treated everyone fairly and with equal respect regardless of income or education.

Although Chase had assigned leadership by default, she also demonstrated strong emergent leadership in that she had a lot of natural influence and power over people, as Oakley recalled; by Chase just expecting him to be able to do something, it made him actually able to do it. This showed Chase’s supporting leadership style, but is also a good example of how she was a transformational leader by provided her team inspirational motivation, intellectual stimulation and giving each of them individualised consideration. She also displayed the final component of The Four I’s of Transformational Leadership — idealised influence — as she aroused confidence and respect, being known as a “quant jock” at MIT Sloan. This would have also given her expert power.

The majority of Chase’s weaknesses can be put down to her being a first-time founder. A general lack of experience with cars and running a company, naivety, and lack of confidence. This showed in her self doubt and inability to make quick decisions, especially in areas where she should’ve been strong given her finance background. For example, she spent a really long time modelling numbers every which way and failed to make her own decisions; needing to ask for advice from Bell at HBS on the numbers — advice which could have been one of the reasons for her miscalculation.

She also demonstrated weakness or oversight in leadership when she hired Oakley and Slotnick as consultants, so that she could “try” before she “bought”. In terms of LMX Theory this could have made them feel part of an out-group and slightly excluded from Chase’s/Zipcar’s in-group. This may be the reason why Slotnick wasn’t abiding by the rules.

Although I’m sure the Zipcar team demonstrated each of the three types of task interdependence at different times due to its organic and innovative structure, this independent behaviour displayed by Slotnick shows that some of the team contributed via means of pooled interdependence, and may be a sign of some incoherence and lack of communication.

The pricing issues Zipcar faced can be put down to Chase’s common good approach. She priced the rentals too low. And although she showed participative leadership by welcoming counter-arguments to raising prices, she would have had to have been utilitarian about how she responded to her miscalculation, otherwise the company would’ve sunk further into organisational decline.

There was no incentive for customers to hire the regular cars for the day, when the premium cars were exactly the same price [for the day]. In addition to that, the day rentals were inclusive of 125 miles, which is a further $50 loss on each day rental, but also meant that members were incentivised to rent a car for the day even if they only needed the car for a couple of hours, but were going to clock up a lot of miles. This would’ve inevitably led to the underperforming utilisation and revenue.

If I was in Chase’s shoes…

I would’ve re-evaluated the onboarding process as there was too much friction that may have lost some business. The recording and billing process was also crude and wide open to manipulation from bad actors. There were no measures in place to prevent people from recording lower milage to reduce their bill. Given the nascent technology at the time, I’m not exactly sure how to overcome this.

I would have also challenged the status quo with the insurance companies, which was out of character for the innovative culture of Zipcar. The rental model was proven by Zipcar’s competitors, so they could be used as examples to negate risk and negotiate competitive deals between providers. I would have also had the terms of the car leasing agreements in writing, so that they could not unexpectedly demand deposits.

I would’ve also brought the consultants on as employees with a probationary period instead of paying them by the hour, as to avoid any out-group feelings.

The main things I’d have done differently is to regularly check the state of the business and keep the pricing model as simple as possible, especially early on. Chase should’ve been checking the performance data more often — long before several months had past with only a couple weeks before closing a round of funding. The pricing model needed to be stripped back until it was tested to only one car choice (regular), and the milage included in the day rate should’ve been lower or not included. If I listed premium cars at all, I’d list them with a relative “premium” day rate.

Miscalculation aside, Chase’s general leadership style resonates with me. I think she was a role model of transformational leadership that I think is commendable. In terms of leadership, I wouldn’t stray too far from Chase’s stencil.

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