Jay Coughlan has been hunting elk in Montana for several consecutive years. Before the opening day of last year’s hunt he spent two days in the wilderness spotting bulls. Before the second day came to a close he settled in for one last view.
About 300 yards away he saw a bear trudging through an open, rocky area. He had seen bears before but few, if any, compared to this one in stature. He watched carefully through his scope until the animal disappeared into the woods 80 yards away.
For the next 15 minutes he lost track of its whereabouts. Knowing he was within the bear’s range of smell he began “seeing a lot better” in the woods as he plotted an escape.
“I just had a paradigm shift,” joked Coughlan, chairman and chief executive officer of XRS Corp., during the company’s user conference in Minneapolis, Minn., on August 19.
The paradigm shift, he explained, was symbolic of another destructive force that prompted him and other leaders of XRS Corp. to change the business model. The change, which began in 2011, not only helped to avert a potential disaster but has created a competitive advantage in the market for trucking technology, he said.
Coughlan began his career in technology by selling mainframe systems. A number of very successful companies have fallen victim to the forces of “discontinuous innovation” in the past 30 years. In the 1970s and 80s, for example, the mini-computer replaced the mainframe and companies like Data General and Prime suddenly became multi-billion dollar organizations.
In the late 1980s and 1990s, personal computers from Dell, Compaq and HP supplanted the mini-computer, but these too are now “done or on a respirator,” he said. Next came corporate devices and applications from Palm, Nokia and Blackberry. Then, four years ago, a new market leader emerged in Apple with the iPhone and iPad.
Since 2011, XRS Corp. has changed its business model from being a supplier of in-cab computing and software platforms for commercial and private fleets to a provider of “trucking intelligence.”
Refocusing its business model, products and strategy to this end has been painful both culturally and fiscally. XRS had to replace 75 percent of its employees. It also dropped a hefty revenue line in hardware sales.
“When I showed up at Xata seven years ago we were 85 percent hardware revenue. We’ve switched now. It’s less than 15 percent. That’s a revenue line that has dropped suddenly like a rock,” he said during an interview with CCJ.
During the user conference, Coughlan predicted that competitors of XRS who have not made a similar change in strategy may not survive, at least not in present form. Naturally, any company would be reluctant to give up a revenue line and their investors would not have patience to see such a strategy through to completion. As a publicly traded company, Coughlan has had to convince a lot of skeptics.
“At every board meeting I had to remind (our investors) that we are on a journey,” he said.
It helped that the company’s third largest investor, John Deere, has seen its own competitive landscape change dramatically. It is not enough to be one of the market leaders in tractors and farm equipment. It now provides intelligence and big data to farmers. John Deere uses equipment sensors to help farmers manage their fleet. And the sensory data is combined with historical and real-time data sets to predict weather, soil conditions, crop features and other information to create competitive advantage.
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