ESI Team

Inside the Digital Transformation of CarMax

January 28, 2022
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On the second episode of Enterprise Software Innovators, Shamim Mohammad, Executive Vice President, Chief Information & Technology Officer at CarMax joins the show to discuss the benefits of technological disruption and the various strategies CarMax has employed during their transformation into a digital platform. While many brick and mortar businesses have seen their unfortunate demise due to an unwillingness to adapt to a changed environment, CarMax has taken a different approach. Beyond the exciting innovations themselves, Shamim describes the cultural mindset present at CarMax that has enabled these transformations to occur successfully.  

For years, CarMax had established themselves as the preeminent marketplace for used cars, building a highly successful brick and mortar business. With the advent of e-commerce experiences taking shape in the market, Shamim and his team knew something had to change. In the past 6 years, Shamim helped shepherd in the digital consumer experience at CarMax. He describes these processes as unnerving, even “painful” but ultimately the right decision for the business: “...the transformation is painful - it is a difficult journey to take on, especially if you are a successful company, because you're saying, hey, you know, we're great. Nothing seems to be broken, but we need to really change everything and the way we do business.” Understanding a changing future and being unafraid to deploy new innovations to a presently successful business is how CarMax has been able to remain a leader in a rapidly changing marketplace.

Among the most exciting technologies Shamim discussed with us are the machine learning capabilities at CarMax that have optimized their customers’ experience while buying and selling used cars. Previously, a customer would have to supply substantial information about their car in person at a CarMax location to get the process started on selling their vehicle. Now, in a few clicks a customer can quickly upload information to the CarMax app and almost instantaneously receive a quote for their car. ML algorithms are taking care of the heavy lifting, enabling CarMax to service exponentially more customers while smoothing out the entire experience. As anyone who has purchased or sold a used car knows, this technology dramatically improves the process.  “Within a matter of a few weeks, we have become now the largest online buyer of used cars in the country.” Pivoting the business to satisfy customer demands for digital commerce experiences has been essential for CarMax remaining successful.

In the ever-hastened quest for digitalization, some companies neglect the users who are not ready for a fully virtual experience. At CarMax, creating an omni-channel experience was a priority for Shamim and his team. It means a customer can start a buying or selling process online, and finish the transaction at one of CarMax’s locations, or vice versa. Whether because of a lack of technological know-how, or just a desire to finish an important transaction in person, CarMax has implemented technology to enable a hybrid commerce experience. Practically, this means a customer can begin a buying or selling process in a few clicks on their phone or computer, and all of the data is stored in CarMax’s system so if and when a customer comes into a store, they can seamlessly pick up where they left off. With all eyes towards an improved customer experience, the omni-channel options enable CarMax to serve as wide a customer base as possible. 

Along with these newly deployed technologies themselves, Shamim emphasized the importance of culture at any company looking to disrupt themselves. Because the process requires buy-in from various stakeholders, ensuring everyone is on board and supportive is crucial to proper execution. As CarMax was readying itself to begin their digital transition, Shamim recalls senior leadership and the board of directors being important vectors of support: “...having the company kind of get bought into that concept was also critical. From my perspective, our senior level executive team, being very open-minded and understanding that we needed to shift, was extremely critical.” Without this, it can be difficult for change agents in any organization to capitalize on new opportunities, especially when they involve deconstructing parts of an existing successful business. 

In addition to company culture, Shamim has continually sought to bring startup ethos and methodologies to CarMax, which means a change in how several teams at the company operate. “We moved away from a project-based sequential waterfall organization to more of a product-based organization. And the product organizations work very differently…more empowered…more objectives and key results-driven…they're encouraged to experiment, test and learn. So that move from project to product was a big shift for us from a cultural perspective.” Again, CarMax’s beginnings as a more traditional brick and mortar business means these transitions took time and buy-in from everyone at the company to be a success, an important reminder that the technology alone does not change a company. The process is and should be more holistic. 

More broadly, Shamim has always had an eye towards startups. He always keeps his eyes and ears open, because startups possess an uninhibited mindset on consistently pushing boundaries and experimenting: “...We have to be exposed to as many startups as we physically can be in tune with, even though they may not have an immediate use case or need. Sometimes I don't even know what I need until I talk to some of these startups. I'm like, oh, that's a great idea. We should probably find a way to leverage that in our company.” By all accounts, CarMax represents a success story in their willingness to disrupt themselves, fundamentally shift their business to keep up with a changed customer landscape, implement new technologies, and retain a startup mentality throughout their journey of digital transformation. 

Listen to Shamim's episode here and read the transcript here