Epilogue: One Year Later – The Unicorn Project

EPILOGUE

• One Year Later

Maxine walks out of the Town Hall. Steve and Maggie had talked about the incredible achievements of the company. The company is growing and becoming known as one of the most innovative in the industry.

Steve had once again reclaimed the role of board chair, and he thanked Bob Strauss for his service to the company.

The technology group is nearly twice the size of what it was when she was first exiled to the Phoenix Project. And Maxine is so proud that engineers in the company are presenting at nearly every technology conference around, showing off what they’ve built and, of course, letting everyone know that they’re hiring.

Every business unit is desperate for more engineers. Maxine spends nearly a third of her time looking for or interviewing talent. They’ve already hired every good engineer within driving distance, so they’re now hiring remote engineers everywhere and actively recruiting from almost every college campus.

They even found that an unexpected way of attracting great talent was through all the amazing new Parts Unlimited open-source projects that Maxine and the teams have created. Just like the tech giants, they’ve decided to open source various technologies that don’t create competitive advantage, and now many are becoming industry standards. For prospective engineers, the opportunity to work with the luminaries who created them is undeniably compelling.

Thanks to Maxine’s endless and relentless lobbying, the TEP and LARB have both been disbanded. Proudly hanging on her desk is a certificate that says, “Lifetime Achievement Award to Maxine Chambers for Abolishing TEP-LARB,” which is signed by everyone from the original Rebellion.

The engine sensor project is a monster runaway success, by far the fastest growing part of the company. Nearly two hundred thousand units have now been sold, generating $25 million in revenue.

The engine sensors were the surprise hit of the last holiday shopping season. Despite all their preparation, the company couldn’t keep enough in stock. They were not only impossible to keep on store shelves, but they were out of stock on the e-commerce site as well. They were back-ordered for three months, even with the massive production orders they had started earlier in the year trying to get ahead of the holiday season.

But it was their mobile app that made all the difference. People were buying the engine sensors because they loved the app so much. An entirely new demographic was entering the store. Many of the store managers had told her that it was the first time they’d seen so many people in their twenties coming to Parts Unlimited.

Maggie is convinced that a huge market will be car rental fleet managers, as well as agencies that recondition cars for the huge car auction market. They are even exploring connecting their enthusiastic ranks of home mechanic customers to car manufacturers, who desperately need to reduce their backlog of getting safety-critical recall work done—an “Uber for Auto Mechanics.”

The wildly popular Parts Unlimited mobile app won a bunch of industry interactive design awards from some of the most prestigious firms in the nation, to the pride of the entire team. And because of savvy deal-making, the profit margin on each unit sold was fantastic. Maxine’s part of a secret team that is actively in talks to acquire the sensor manufacturer, which would increase profit margins even more. She’s certain that the real money to be made is in selling subscription services to people with these sensors. Everyone agrees that this could be a $100 million business within a couple of years.

Bill has been assigned to lead the acquisition discussions. If the deal goes through, the founders of the sensor company will be independently wealthy, contingent that they stay with Parts Unlimited for another three years.

Maxine would welcome working with them. They, too, would help shape the future of a thriving Parts Unlimited. And they should be extremely happy with the arrangement, because they’d still be working out of their garage if it weren’t for the amazing software capabilities that Shannon, Brent, Dwayne, and Maxine had built for them.

One of them told her, “You made all our dreams come true. This is why we created this engine sensor, but we didn’t have the software skills to make it this successful.” That made her day.

Even though the acquisition will cost Parts Unlimited tens of millions of dollars, Steve is adamant that this money will be extremely well spent because it will further reinforce that Parts Unlimited is setting the direction for the entire industry. Dick reports that even skeptical Wall Street analysts think this will be a great move for the company.

In contrast, Maxine thinks about the four-hour delivery team. As predicted by Debra, Parts Unlimited had a tremendous advantage over its startup competitor, having vastly more resources, knowledge of the market, existing commercial relationships with service stations, and a willingness to put in whatever funding was necessary to win. In comparison, the startup was running out of money.

Debra and her team were able to grow revenue to $10 million, with no signs of slowing down. The entire direct sales force had been assigned quotas to sell this new offering, and it was quickly becoming their favorite thing to sell. Their customers love the service so much that the amount they order from Parts Unlimited is skyrocketing.

Maxine had recommended to Maggie that they graduate them to Horizon 2. She’s working with Bill and the executives to figure out which organization should own it, with the Service Station Direct Sales division being the most logical choice. She thinks that’s where it belongs, closest to the people who care most about it and are willing to happily fund it. Technology needs to be embedded in the business, not external to it or merely “aligned with it.”

A couple of weeks ago, Maxine learned that this defeated startup competitor had approached Steve, exploring whether he might be interested in acquiring them. Steve tasked Bill with conducting the due diligence. After a week, Bill dismissed the idea as a bad one. Quite simply, Parts Unlimited had already replicated or exceeded all their intellectual property, know-how, and software.

“Rumor is they’re now being shopped around by some bankers,” Bill had told her, laughing. “I’m sure they’re going to all our competitors to see if they’ll bite, trying to provoke us to reconsider. But given how we’ve already won in the marketplace, I really doubt that would be a threat to us.”

This is precisely what Sarah had wanted to do with Parts Unlimited nearly one and a half years ago. During those dark days, Sarah was trying to sell the company off for parts, while Maxine and team tried to figure out how to find $15 million to fund the Innovation efforts.

Once again, they’re at Dockside Bar. They just opened up a new patio area in the back, which the Rebellion has taken over to better enjoy the June summer evening. There’s nearly forty people here, including Maggie and Kirsten and leaders from all areas of the business. And she’s thrilled that her husband is here too.

Maxine is happy to be here with her fellow Rebellion members. Although, as the months go by, calling this group the Rebellion seems a bit anachronistic. The Rebellion has won.

Earlier today, Bill had taken her aside to let her know that she was being promoted. She was going to be the first distinguished engineer in the company’s history, reporting directly to Bill. She loves her proposed job description. Among other things, her charter is to help create a culture of engineering excellence across the entire company. She’ll meet regularly with the top company leadership to understand their goals and strategize on how technology can be used to achieve those goals, which of course helps the company win in the marketplace.

Maxine is excited that there is finally a career ladder for individual contributors and brilliant technologists without having to become managers. Her job is not is to come up with the best ideas. It’s to ensure that the entire company can ship the best ideas, wherever they come from, quickly, safely, and securely. She made a note to herself to find the best designer in the company. After spending two days at an interactive design conference, she knows that this discipline is critical to the company’s success too.

Kurt’s now reporting directly to Chris. Rumor has it that he will soon be promoted to engineering director, and that Chris is trying to figure out how to finally retire and open up a bar in Florida. In the meantime, Chris has eliminated QA as a separate department, distributing them into the feature teams. Ops is quickly turning into a platform team and internal consultants, with the goal of providing developers the infrastructure they need, complete with a vast army of experts who are there to help, looking for ways to make developers productive.

Patty now has a fascinating new role. To help accelerate moving more developers from Context to Core, she volunteered to manage over one hundred fifty applications, moving them all into maintenance mode, supported by a small group of talented and motivated engineers, with the goal of managing them at the lowest cost or killing them entirely. She is also helping to build a customer support function within the engine sensor product team, supported by Derek!

And in a suprising turn of events, earlier this week Maxine finally had that lunch meeting with Sarah, who had reached out to her. It was not at all what Maxine expected. Despite her initial wariness, she had fun and even learned some things. Maxine thinks they may even have built a degree of mutual respect. Maybe. They promise to meet again.

When she can’t stand the pestering any longer, Maxine stands up and clinks her glass. “Thank you all for being here tonight. We’ve got a lot to celebrate. As the Rebellion, we set out to overthrow the ancient, powerful, and unjust order! And against amazing odds, I think we’ve actually done it!” Maxine hollers out.

Everyone hoots and cheers, and several holler out, “Congratulations on your promotion, Maxine!” She raises her arms in the air in victory, then sits back down.

“Indeed, way to go, Maxine,” says Erik. “Large, complex organizations like yours are truly like sleeping giants that are awakening. Your engine sensor product shows that you identified a $300 million market you wanted to go after, and within a year, you have captured nearly ten percent of it. That’s an amazing feat. What startup could have ten percent of a $300 million market in one year? If a startup had done that, it’d be a miracle. They’d be on the cover of all the magazines and newspapers. A real unicorn.

“And this is surely the nature of this new economy. The power to disrupt the customer experience is no longer just the domain of the FAANGs: the Facebooks, Apples, Amazons, Netflixes, and Googles,” Erik continues. “Instead, it is within reach of almost any organization that wants to disrupt the market. And who better to disrupt things for the benefit of customers than the organizations that already have a decades-long relationship with them?

“Companies like Parts Unlimited already have the customer relationships, the supply chains, the understanding of the customer’s wants and needs as they progress through their own life journey. Compared to startups, the modern enterprise has more resources and expertise. What’s needed is focus and urgency, and the modern methods of managing the value creation process.

“As evidence, look at how Wall Street is valuing this company,” Erik says. “It’s at an all-time high, over 2.5 times higher than when you joined the Rebellion. Parts Unlimited is now being valued at six times trailing sales, almost four times higher than before. Parts Unlimited now has one of the highest multiples of any physical store retailer, making them the talk of the industry and an emerging success story of surviving and thriving in the era of digital disruption.

“And this is just the beginning. We are undoubtedly in the earliest stages of a new golden age that will lead to decades of economic growth, creating prosperity for all segments of society.

“We are at the dawn of the Age of Software and Data. Steve and Maggie are even thinking about what data is most important to the long-term success of the company, exploring ways of buying data from our customers and even potentially acquiring strategic data sources. And Steve already knows that technologists are some of the most important people in the company. Which is why you’re a distinguished engineer,” Erik says. “Did you know that Steve keeps a book by his bed of the most important people in the company, so that he’ll always recognize them, even in a crowd at Disneyland. And did you know that you’re in it, as well as Kurt, Brent, and Shannon? A decade ago, only the top plant managers and store managers were in there. Now, there are engineers in there too.

“Great times are truly ahead, Maxine,” he says.

“You’re so right, Erik. Small doesn’t beat big,” Maxine says. “Instead, fast beats slow. And fast and big will win almost every time. The Unicorn Project has shown us that.”

From:

Alan Perez (Operating Partner, Wayne-Yokohama Equity Partners)

To:

Steve Masters (CEO)

Cc:

Dick Landry (CFO)

Date:

4:51 p.m., January 11

Subject:

Meet up for drinks?

Steve,

I’ll be the first to admit that when I heard you present to the board a little over a year ago, I thought you were crazy. Even if I did believe you about “employee engagement, customer satisfaction, and cash flow” being the only things that matter.

Frankly, I could not see Parts Unlimited being a growth play, let alone doing it through software. But you’ve vaulted the company into the highest range of growth that we see in our portfolio. And given the significantly higher multiples that the markets put on growth (vs. value and profitability), your company was one of the best performers in our portfolio last year.

Despite my initial skepticism, I’m very happy that you’ve proven me wrong. Suddenly, I’ve become a bit of a hero in our firm. We’ve got many investments, some of which were once the most recognized brands in their respective industries. They could definitely benefit from a similar digital disruption. I now wonder how we can help those companies win in their markets.

I’ll be in Elkhart Grove for the next board meeting. Let’s meet for drinks the evening before? I’d love to learn more about how you did it and get your thoughts on how it might be applicable to some of our other portfolio companies.

See you soon, Alan