Megatrends create opportunities: Aaron Baxter

It is clear that, as humans, we are able to adapt to rapidly changing technological transformations – as long as they make our lives easier. Which is why it should come as no surprise that autonomous vehicles are a thing of the near future. Cars running off electricity and drivers utilising shared mobility from a web of data is already becoming the norm on today’s roads.

It won’t be long before our cars will be driving us around, right? After all, who would have realised the success of Uber just a decade ago? Just like smartphones, it’s now hard to imagine life without the ride-sharing company.

According to PwC research published in 2018, the car of the future will be "electrified, autonomous, shared, connected and yearly updated".

So, how does a major fleet company feel about this? For the CEO of Custom Fleet, Aaron Baxter, whose long tenure in the auto industry includes 18 years with the executive team at General Electric, technological disruption is a motivating factor for the company to adapt its business model, particularly as it starts to edge towards the electric vehicle space.

"I think everything is underpinned by how quickly the industry is changing so our business model needs to change, too," Aaron explains. "The pace of change is only accelerating, and technology is clearly driving much of the disruption – what Uber has done to the taxi industry, for example.

There are a number of such cases within the fleet sector. What we’re doing is thinking about new platforms and mobile applications, thinking about how electric and driverless vehicles will continue to exert force on the market and, in many cases, changing customer expectations going forward."

With an MBA and a bachelor’s degree in business under his belt, Aaron spent three years as GE’s CEO for consumer, commercial and industrial businesses in Auckland, New Zealand. Prior to that he ran credit card businesses within GE Capital, now known as Latitude Financial.

Before joining Custom Fleet, Aaron was the Managing Director of GE Capital Australia and New Zealand, overseeing its corporate and commercial businesses. "My last role with GE was to sell Custom Fleet to Element Fleet Management – Custom Fleet’s parent company based in Canada. By the end of the transaction, I was part of the deal, so that was my exit point from GE," Aaron recalls.

"I thought the business had huge runway, then I spent a lot of time researching the fleet industry and realised it was very fragmented. I saw the opportunity for an emerging player to take advantage of some of the disruption going on in the industry.

I thought it was a great time to join, because there was an opportunity to change the business model and accelerate Custom Fleet’s growth," he explains. "The other thing I found attractive is that Australia and New Zealand are a long way away from headquarters so the independence to run the company wing-to-wing, and the accountability attached to that in regards to customers, shareholders and employees was appealing to me."

Moving Electric

‘Mobility as a service’, ‘electric vehicles’ and ‘autonomous vehicles’ are no longer mere buzz-phrases. They’re global megatrends. And they’re rapidly affecting the automotive sector.

"When you think about some of the global megatrends – such as mobility as a service, electric vehicles and autonomous vehicles – there are very few industries that would be facing the internal level of disruption that the automotive sector is at the moment," Aaron says.

"Megatrends create opportunities as well as challenges," he explains. "If you look at the electric vehicle, I think the automotive sector is completely committed." Aaron points to New Zealand, which he says is leading the way in the space, along with the Nordic countries.

"Most of the major corporates, as well as the government in New Zealand, have committed to 30% of their fleet being electric within the next two years, some within the next six to 12 months. That’s going to have a pronounced impact on the automotive industry and the fleet sector in general."

Original equipment manufacturers (OEMs), supplying the ‘nuts and bolts’ for cars, are already starting to phase out old technology, switching to be fully electric soon, Aaron says.

"There’s one OEM that’s said it’ll produce its last internal combustion engine by 2026. That’s only seven years away," he muses. "You start to think about the opportunity there," he continues. "We need to ask what that means for our technology strategy.

How do we fuel electric vehicles, maintain them and finance them? What impact does that have on our supply chain? What new partnerships do we need to forge? Our ecosystem is going to be completely transformed and who will be the constituents of the new ecosystem? "We’ve got a robust ecosystem but we’re now complementing a business model that’s existed for essentially four decades with the creation of a marketplace for our future customer base as well as the existing one.

"We want our customers to be able to come to us and for us to be a thought leader within the industry, to help them procure the right vehicle, manage the vehicle in its life and pick the appropriate infrastructure to support the electric vehicle, at both domestic and corporate levels."
And it certainly is about putting the customers’ needs and wants first, Aaron explains.

"When you start to think about the end of the life cycle of an electric vehicle, we’re going to have to help these customers navigate their re-marketing strategy," he says, adding, "In so many ways, Custom Fleet is starting to emerge as a marketplace for electric vehicles within
the region – particularly in New Zealand because it’s so advanced compared with the rest of the world.

I’m excited to be positioned as potentially a marketplace for electric vehicles for our customer base, now and into the future."

Generational Shift

There’s a lot to think about in terms of the sharing economy, Aaron says. "There’s clearly a generational shift from people owning vehicles, to moving towards a utilisation model. So, the next generation – and I know that my nieces and nephews are like this – don’t necessarily own vehicles, but they do take advantage of mobility as a service."

That gets Aaron thinking about the impact it has on the business, from costs and future transactions to how the customer experience changes and how willing the company is to take new risks. "We spend a lot of time thinking through how it impacts our existing business model," he reiterates.

One major shift taking place within the automotive sector is connectivity of data through telematics. "Cars today are generally connected through telematics.

Car manufacturers will have built-in telematics in the car," he explains. "You can use your mobile application as a form of connectivity. Then, there’s generally a lower cost opportunity with sensors and the Internet of Things that’s going to have the car connected.

"There are going to be so many opportunities to generate data from the car, which is, in turn, going to drive your safety strategy and your productivity and efficiency strategy," he adds. Custom Fleet is "going to focus on making sure that we can simplify the data, because there’s going to be an enormous amount of data.

We need to make sure we can manage it, simplify it and provide the right insights to our customers so they get the right safety and productivity outcomes."

Aaron explains that being able to manage the flow of data starts with making smart investments to get the framework right. "You’ve got to set your infrastructure upfront, and be willing to invest and make the right investments, in order to take advantage of it." In 2016, Custom Fleet spent close to A$55 million to provide a consistent system for the business across Australia and New Zealand.

"You’ve got to have the right core operating system," he says, adding that Custom Fleet has recently deployed a new system to manage its operations.

"We’ve also got a consistent customer portal and we were first to market with our data and analytics infrastructure, which is underpinned by technology called Cassandra and Spark. That gives us the ability to manage the flow of data internally, from both internal and external sources."

Looking at its telematics strategy, Custom Fleet has doubled the number of its control units, which look after vehicle tracking, to around 10,000. "We’ve developed a mobile application that hangs off our infrastructure, allowing drivers to self-serve. We provide all the tools that they need to manage their vehicle. We try to eliminate the administration burden," he explains.

When Aaron talks about data and analytics in the market today, he explains, it’s generally reactive, which he wants to turn on its head. "What we’re doing now with the investment is working to be the first company in the fleet sector to produce predictive, as opposed to reactive, analytics," he says.

"We will be going to our customers and sharing with them the optimal time to replace a vehicle, or identification of high-risk drivers, to try and avoid accidents in general. I’m excited about our ability to use data in the future.

"Regarding things like automation and robotics, we’ve got a multi-year program of investment to eliminate some of the repetitive and manual tasks, like quoting, ordering, replacing vehicles and modifying leases. We want to automate that to free up our employee base to start driving insights and value, as opposed to processing these administration tasks."

Staying connected

Aaron is up early every day, starting his morning with a gym session or spending time with his young family. But a couple of times a week, it’s an early morning call to stay connected with the leadership team at HQ. Listed on the Toronto Stock Exchange, Element is one of the world’s largest leasing and finance companies, owning leading fleet management companies across Canada, the US, Mexico, Australia and New Zealand.

"We’ve got a fantastic global parent in Element, which is publicly listed, so we have a strong balance sheet and a parent company that gives us the appropriate backing," Aaron says confidently. "Custom Fleet has been around for about four decades, but we’ve got the benefit, unlike some of the competition, of arguably the largest parent leasing company in the world."

Operating in more than 50 countries gives Element a strong international platform, with alliance partners BNP Paribas and Arval covering Europe. "We’ve got the value of being able to tap into that global network that manages 3.5 million cars worldwide. This gives us a real, rich source of data and insights into best practice beyond just the region here."

Aaron explains that the company actively connects with Element’s global reach in its localised regions. "More global multinationals are looking for a single solution across different regions, so we play an active role in connecting customers around the world and helping round out global deals.

There are a number of deals that we’ve been able to execute, that mean they do business with a single fleet company around the world, which is excellent," he says.

"I love it when we’re able to export talent or best practice. We try to not only share best practices and extract value for North America, Canada and Europe but also export a number of ideas to them. We’d love to get to a point where we’re potentially running centres of excellence from Australia, that contribute to the success of Element around the world."

To stay relevant in such a large global network, Aaron stresses that the company has to ensure the local teams are delivering for Element globally.

"You never lose sight of what you’ve got to deliver, and we’re delivering in spades to Element, from a growth perspective as well as an earnings perspective," he shares, adding that over the past three years, the company has consistently grown at three to four times the market rate, currently sitting at roughly 15% market share in Australia and 27% in New Zealand.

Very much focused on growth, Aaron explains that Custom Fleet has done the heavy lifting around building its infrastructure, transforming its people and growing its leadership capability.

"Everything we do is underpinned by the ability to outgrow the market. We start with that and then think about that investment in technology, and that ability to be able to generate the next level of data and insights.

"A lot of our investment is going into our data and analytics team and into our consulting team, who sit side-by-side with our front-end sales team, to deliver that next level of value and insight we think that the industry can’t match. Most of our strategy is bolstered by making sure we effectively use and simplify data and are able to generate the right insights for our customers to ultimately drive productivity, safety and efficiencies for our customer base."

Driving leaders

If there is a key driver for Aaron, it’s leadership. He’s passionate about growing the next generation of leaders, which he does through coaching employees to reach their potential. "I get great satisfaction from seeing emerging leaders take on bigger jobs, win a deal, or graduate from university, which ultimately will create better outcomes for them on a personal level.

The ability to influence and help people get better is important to me," he says. "On the personal front, it’s pretty simple, I try to be a great role model."

"What motivates me is trying to be a better leader every day, to continue to learn and improve. I’ve got a strong passion for growing and turning around businesses and creating value for our customer base, our employee base and our shareholders.

I get a lot of pleasure seeing the next generation of leadership coming through," he continues. "It’s a privilege to be able to work with a lot of smart, driven and high-potential employees. I get tremendous satisfaction from seeing them stretch and grow, on a personal and professional level."

Custom Fleet’s motto is ‘the pursuit of better’, "where we want people to turn up, challenge things and make them better every day". "Our leadership is supported with strong integrity and values," Aaron shares.

"I’m proud of our leadership team and our employee base. We’ve got a firm balance between fleet expertise and broader general management expertise. Our willingness to win and grow and be there for our customers underpins everything we do.

"There’s a strong sense of team versus individual and we work hard to make sure we’ve got the balance between strategy and execution. It’s great when you get to a point with leadership where employees self-regulate. We have an incredibly flat structure, so our leaders are accessible to our customer base, as well as our employees," he continues.

"I love spending time with our staff. I do a lot of roundtables and skip level meetings and I spend time on the floor to understand where we can improve.

"We’ve introduced agile work practices, which promote the ability for people to impact the business every day and make it better. That drives a lot of the ‘can do’ performance and winning culture. There’s an enormous amount of passion and pride at Custom Fleet. It’s great that, over the
past three years, we’ve emerged as a strong competitor and a strong brand within the marketplace."

When it comes to his own leadership philosophy, Aaron says, "People remember you for being an effective leader, in terms of how you help them and coach them to be better, both professionally and personally. A good leader, to me, is genuine and sincere; somebody who can instil the right amount of confidence across the organisation to believe in the strategy and the vision and to drive strong alignment.

"The great leaders I’ve worked for are the ones who foster the right confidence in you, but at the same time, equally stretch you or push you to be better. It’s a fine balance between stretch, confidence and providing clarity of direction. For me, they’re the important traits of a successful leader."

Transitioning

Aaron explains that the team is a nice blend of a budding younger generation, with eyes on technological disruption, and employees who have been in the industry for decades, with grounded knowledge that comes with experience. "If you look at our employee base, and typically the industry, there are a number of people who have been in the sector for a long time.

At Custom Fleet, we have employees who are in their twenties and those in their seventies. There’s a great mix between people who have depth and technical knowledge of the industry but, equally, you’ve got this emerging new employee base within the industry sector that’s tackling all the disruption."

Despite the wide age gap across the company and the industry as a whole, Aaron says the enthusiasm is spread evenly across the board. "I love the passion within this sector," he says.

"It’s fascinating seeing both the old world and the new world intertwine and work together. We’re putting a number of data scientists on, for example, and I love seeing how they’re interacting with somebody who’s been in the industry for three or four decades. It’s terrific to watch."

Diversity and inclusion are equally important to Aaron. "We have a strong gender balance here," he explains. "Lauren Lister, our HR Director, plays an important role fostering more female leaders across the company as well. We’re strong in terms of flexibility to promote that. "I’m all for diversity, so we’ve got just about every culture working across Australia and New Zealand for us.

We’ve been able to create five generations of age diversity and that’s important as Australia starts going through more volatility. We call upon some of our more mature employees to help us navigate through that."

To add to that, Custom Fleet is strong on helping its employees discover roles that are internationally transferable. "There is the ability to learn from our international colleagues and explore global roles.

I’m helping a number of our employees look at global roles throughout our parent company, Element, as we speak. That’s attractive, to think about a career beyond Australia and New Zealand." And the company has a site strategy, too, lifting the appeal of working in an office.

"I moved our headquarters to 333 Collins Street, which is a beautiful building in the heart of Melbourne. People want to work in a nice environment and our customers take advantage of our facilities as well.

"If you put aside financial metrics, which is pretty easy to measure success on, there is probably one thing I spend a lot of time on to determine whether I’ve been successful and the company’s been successful, and it’s simple: employee satisfaction," Aaron says.

"Do people like coming to work? Are they proud of working for Custom Fleet? Do they like their jobs? Because it’s a big aspect of their lives. When we survey staff, it’s one factor I spend a lot of time on, making sure that we’re doing the right thing by our employee base.

"Our willingness to invest in sites, in our employees and in technology is crucial to attracting and retaining good staff.

"Combine that passion and leadership with the sophistication of our technology and our investment then overlay that with our data expertise and you start to think about leadership, technology and data as a powerful combination in an industry that’s being disrupted."

In partnership

Working in close partnership with leading names in the industry – from Kmart Tyre & Auto Service, GM Holden, Toyota, O’Brien Glass and Suncorp to Fleetcor, Bynx and IAG-NRMA – Custom Fleet places a strong emphasis on fostering durable professional relationships with its suppliers. "If you look at our ecosystem and our business model, we’re heavily reliant on our suppliers to provide critical services," Aaron explains.

"Take, for example, Kmart Tyre & Auto Service; they’re responsible for our customers from a servicing and tyre perspective, and O’Brien Glass from a windscreens point of view. Bynx runs our core operating platform and acts as an extension of our internal IT team to make sure we’re mutually building the right functionality.

The same with Fleetcor, where they’re responsible for our fuel card. We entrust them to manage the relationships with the oil companies, and lead the market in terms of coverage, security and technology for our customers.

"We need to be clear about how they’re all representing our brand. That’s absolutely critical because we just haven’t got the scale or presence to do all their services and it makes no sense for us to do what they do so well. They’re an extension of our brand and, for that reason, we take a long-term view of how we approach our partnerships with our suppliers."

Custom Fleet builds on its mutual trust and respect with its suppliers during its monthly and quarterly reviews. "The good supplier relationships are where you create reciprocity. So, take Kmart Tyre & Auto Service, for example; we do their fleets and they do our servicing. That creates a lot of mutual respect, because there’s value being generated on both fronts," Aaron says.

"Then, when you start thinking about the disruptions, you can’t have a transactional relationship, there’s got to be collaboration around innovation, technology and process improvement, to make sure your supplier base is moving in the same direction as you are.

Customer satisfaction and retention is the measure of success for me. If you’ve got longevity of customers, it’s generally a good sign that you’ve got an underlying strong partnership. I’m proud that Custom Fleet’s average length of partnership is more than 10 years."