Hertz’s Bad Bet on EVs was a Good Strategy

Plus the value on changing your perception instantly and why lengthy data collection efforts can suck all of your time and energy.

Make sure to read to the end of the post for a single question for you, as the reader.

Hertz’s Good and Bed Bet on EVs

Hertz announced this week that they are selling 20,000 EVs (mostly Teslas) and replacing those cars with internal-combustion vehicles. This ends the big push Hertz made back in 2021 to eventually convert 25% of their fleet of vehicles into EVs from multiple car companies including Tesla, Polestar and GM.

What happened?

In short, the U.S. consumer market has not shown enough interest in electric vehicles. Tesla undertook heavy price cuts to sustain demand, repair costs have proven to be higher and consumers are wary of running out of range, so called range anxiety.

We should also note that renting an EV is likely one of the worst places for consumers to experience this kind of product. You can easily spend a good chunk of your vacation looking for chargers.

I would argue that Hertz’s bet was still a good strategy. In 2021, EVs looked highly promising. Tesla looked unstoppable, governments were eager to subsidize the transition and companies could score brownie points by jumping on a bandwagon. This is also the era before high inflation really kicked into gear.

I have always said that strategic decisions are difficult because of the many outcomes that could occur. Organizations need to make the best decision possible, based on what they know at the time. That’s what Hertz did and they can’t be faulted for taking a calculated risk.

I also think Hertz made the right choice by cutting their losses now and moving on. EVs are likely the long term alternative to internal-combustion cars but that may still be 5 - 10 years away in markets such as the U.S.. 

Organizations cannot grow by just scoring layups, the easy decisions. They need to swing for bigger and bolder decisions every once in a while. Good on Hertz for doing that.

Perception is Reality Until It’s Not

We often hear people say “perception is reality” and then we nod our heads in agreement. It seems like an obvious statement but have you experienced drastically different perceptions within minutes of each other?

I got a chance to do that recently in an exhibit about space called The Infinite. You go inside a huge, dark warehouse and then walk around with a VR headset (Meta’s Oculus). You are instantly transported into the International Space Station.

Here’s a short video showing you how the exhibit works.

After I put on the headset, I found myself highly unstable. I could only walk by taking very small steps because when I looked down, all I could see was the earth below me. The headset instantly tricked my mind into thinking I was floating in space.

It was a rapid change in perception and I couldn’t escape it, even if I knew I was just walking around the warehouse. It’s quite trippy to know rationally you’re seeing virtual images and videos but being unable to physically act like nothing is going on.

I love these kinds of exhibits because they make cliches tangible. If only we could put on a headset and understand exactly what another person is thinking or feeling.

The Rabbit Hole of Data Collection

An executive recently shared his team’s experience with formulating strategy a few years ago. They hired an outside firm who undertook a 7-month in-depth data collection effort. Tens of interviews, surveys, data analysis, and who knows what else. He loved all the data that was collected.

However, when it came time to formulate the strategy, their team couldn’t come to an agreement on the best approach. Things started to fizzle out and then the pandemic hit, killing the strategy project completely. 

We need to be careful with these lengthy data collection initiatives. In theory, they make sense. Who wouldn’t want a list of fascinating insights about your organization? My own strategy process has a data collection period but I time box mine to four weeks at most.

Collecting data is one of those activities that everyone loves and is unlikely to face any pushback. There’s some use in it but it can become like a black hole, sucking all of your time and energy. You blink and 6 months have gone by.

This organization would have been better off with a shorter (and imperfect) data collection that lasted a few weeks and then moved on to formulating a strategy. Within two months (or less), they could have started working on the implementation of the strategy itself.

Don’t lose focus on the reason behind a well-formulated strategy. The goal is to give your team priorities on what actions to take next.

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I decided to change the three questions you usually see into just one question. Think about it and let me know your answer by commenting.

Question for you: what idea stood out from you from this week’s newsletter?

Talk next week,

Ruben