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Aug. 26, 2019

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CarMax: Driving What’s Possible

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CarMax, a Fortune 200 company, was the largest used-vehicle retailer in the United States in 2019, operating
206 stores in 102 markets nationwide.1 Started as “just a test” by then–electronic giant Circuit City in 1993,
“CarMax revolutionized the auto industry by delivering an honest, transparent, and high-integrity car buying
experience” to its customers.2 For 26 years, CarMax’s focus had been on making “car buying more ethical, fair,
and stress free by offering a no-haggle experience and an incredible selection of vehicles.”3 In addition, CarMax

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had made car selling easy by offering no-obligation appraisals good for seven days, using the slogan “At CarMax,
we’ll buy your car even if you don’t buy ours.” Headquartered in Richmond, Virginia, as of February 2019,
CarMax had “nearly 25,000 associates nationwide and for 15 consecutive years [had] been named as one of the
Fortune 100 Best Companies to Work For.”4

The size of the pre-owned market in 2019 was at the highest levels since the recession, with sales of over
40 million vehicles totaling over $150 billion.5 Competition for this market included local dealer franchises that
sold used cars, and large traditional players such as CarMax, Penske, AutoNation, and Lithia, plus a host of
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online dealerships that had recently emerged, such as CarsDirect and Carvana. Despite the intense competition,
CarMax’s sales had remained strong with impressive financial results (see Exhibit 1). CarMax sold more than
one million vehicles (748,961 retail and 447,491 wholesale) in fiscal year 2019, a 7% increase from the previous
year, while posting over $18 billion in revenue. In addition to selling more cars than any other used car dealer,
an industry source reported that CarMax had the highest gross profit margin (over $2,100) and the highest gross
profit per unit sold (10.7%).6 By comparison, upstart Carvana made less than $1,000 per car and a gross profit
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of about 5% per unit sold.

In addition to competing through their different business models, the entire automotive industry was facing
a great deal of disruptive change. During the annual shareholders’ meeting on June 25, 2019,7 when Bill Nash,
president and CEO of CarMax, was asked if he was concerned about the potential risks that new technologies
(electric and autonomous vehicles in particular) and ride sharing posed to CarMax’s business model, Nash
responded:
No

1 This is a field-based case. All information and quotations, unless otherwise specified, derive from interviews with company representatives.
2 “CarMax Celebrates 15 Years as One of Fortune Magazine’s 100 Best Companies to Work For,” CarMax press release, February 14, 2019,
http://investors.carmax.com/news-releases/news-releases-details/2019/CarMax-Celebrates-15-Years-as-One-of-FORTUNE-Magazines-100-Best-
Companies-to-Work-For/default.aspx (accessed Aug. 5, 2019).
3 “CarMax Reports Second Quarter Results,” Business Wire, September 22, 2017,” https://www.businesswire.com/news/home/

20170922005108/en/CarMax-Reports- (accessed Aug. 5, 2019).

4 http://investors.carmax.com/news-releases/news-releases-details/2019/CarMax-Celebrates-15-Years-as-One-of-FORTUNE-Magazines-100-
Best-Companies-to-Work-For/default.aspx.
5 “Used Vehicle Market Poised for Record Sales in 2019,” Edmunds, March 20, 2019.
6 James Treece, “CarMax Leads All Publics in Used Sales, Profits,” Automotive News, May 28, 2018.
7 “CarMax 2019 Annual Meeting of Shareholders,” CarMax, June 25, 2019, http://investors.carmax.com/news-releases/calendar-of-events/event-
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details/2019/CarMax-2019-Annual-Meeting-of-Shareholders/default.aspx (accessed Jul. 15, 2019).

This field-based case was prepared by Ryan Nelson, Professor of Commerce, and Ryan Wright, Associate Professor of Commerce. It was written as a
basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  2019 by the University of
Virginia McIntire School of Commerce Foundation. All rights reserved. To order copies, send an email to [email protected]. No part of
this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording,
or otherwise—without the permission of the Darden School Foundation. Our goal is to publish materials of the highest quality, so please submit any errata to
[email protected].

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When I think about the automotive industry and where we are today, it’s super exciting because there
is so much going on, and I think the change that we see over the next five to ten years is really going
to be truly remarkable…We need to position ourselves today so that we can take advantage of any type
of environment.

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So what was CarMax doing to position itself for the future? And would the same business model that yielded
so much success for so long be viable going forward? Finally, how could such a large company with a significant
physical presence compete with the nimbler digital start-ups as well as deal with emerging technologies and
changing customer behavior?

CarMax’s 26-Year Transformation

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Throughout its first decade as a company, CarMax operated as a traditional brick-and-mortar retailer within
the heavily regulated auto industry. Historically, the transference of keys and money had to take place within
the four walls of a dealership, and for many reasons—including regulation and the nature of the sales transaction
for automobiles—e-commerce hasn’t been a focus for car dealerships. Starting in 2005, CarMax began focusing
more on its web presence, making significant improvements to its website and digital marketing. The website
grew in importance as customers did more of their research and selection online, while still coming to the
dealership to test drive and buy cars.
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CarMax operated like many successful Fortune 500 companies during the first two decades of the 2000s. It
worked off of annual roadmaps and budget cycles and prioritized improvement initiatives based on business
cases supported by ROI projections, level-of-effort estimates, and resource requirements. The process was
driven by senior executives, who could spend months developing and pitching their ideas, in order to earn a
spot in an organization-wide prioritization of projects.” 8 Ann Yauger, assistant vice president of product
management, recalled:
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It was all done with the assumption that senior executives in the business should make the big
decisions, and that whatever we decided would be the right thing. At that point, the budget would be
set for the year and project teams would be committed to build what we had requested, potentially
months prior—new features for the website, in our case.

CarMax’s approach to project management started to change in 2008, when it began adopting agile
practices and more sophisticated procedures for usability testing. However, its planning, budgeting, and
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decision-making processes were still very much waterfall oriented.9 So despite becoming more agile in how it
developed software, its overall project- and portfolio-management process continued to launch products with
mixed results, including products that landed in what was termed “the thud zone”—products that didn’t hurt
the business but that didn’t significantly help it either. As Yauger described:

We found that we might overbuild an application—creating features that the end user didn’t really
need—but at the same time underbuild it because we couldn’t scale it out to all of our markets. We
Do

8 A project “[is] a temporary endeavor undertaken to create a unique product, service or result. A project is temporary in that it has a defined beginning

and end in time, and therefore defined scope and resources.” See “What Is Project Management?,” Project Management Institute, 2019,
https://www.pmi.org/about/learn-about-pmi/what-is-project-management (accessed Aug. 5, 2019).
9 Waterfall was “a project-management approach where a project is completed in distinct stages and moved step by step toward ultimate release to

consumers.” See Aleksandar Olic, “Waterfall Project Management Methodology,” ActiveCollab, May 24, 2017, https://activecollab.com/blog/project-
management/waterfall-project-management-methodology (accessed Aug. 5, 2019).

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wanted to move the business in new and exciting ways but needed a different process to be able to do
that faster, leaner, and smarter.

The most significant inflection point happened around the beginning of the lean start-up movement10 and
the rise of digital native companies like Facebook, Google, and Amazon. In her role as the leader of

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CarMax.com, Yauger took part in an executive council (two dozen executives from digital companies across
the country). It was the council that opened Yauger’s eyes to a better way to work. “We had this vision that we
saw so clearly…that the company needed to make this transformation. We didn’t need to just adopt a practice
or process change, we needed to fundamentally transform into a 21st-century, technology-driven product
organization, she said.

Following the lead of these more digitally advanced companies, CarMax ran a pilot project in 2013 with a
team of four people—giving them a problem to solve, a lean user experience (UX) book, and a six-week time

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box.11 The pilot quickly demonstrated how powerful this new way of working could be. The team was tasked
with a general problem statement (as opposed to a detailed set of requirements) and given complete latitude in
how to solve it. The team would begin each week with what it thought was a great idea for solving the problem
and then pivot on something else at the beginning of the next week. Iteration by iteration, it worked toward a
better and better solution. Yauger recalled, “The engagement of the team was over the moon!”

Another key moment occurred when CarMax brought in Marty Cagan, consultant and author of Inspired:
How to Create Products Customers Love.12 He offered some well-timed expertise and workshops on how to manage
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digital products. It was exactly what CarMax needed to improve and expand what it had learned through that
first pilot.

To continue building on this momentum, it became evident that more resources would be needed,
including more people who could do product management in a serious way.13 CarMax needed UX designers
(not just designers), delivery managers (not just project managers), web analysts who were also data miners (not
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just data analyzers).14 It assessed existing personnel against the new skill sets that they needed and made some
hard choices. It also had to rethink the underlying architecture and how to move toward DevOps—another new
movement that was gaining traction in Silicon Valley.15 Its biggest priority was to enable product teams to move
iteratively with greater speed, while releasing their products independently without bringing systems down. So,
all across the board, CarMax had to learn how to “work differently,” and it needed people who could lead that
rebuilding effort.

Of course, a change effort of this magnitude took time, happened in stages, and required buy-in from the
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company’s senior team: a new senior vice president of strategy and transformation, Ed Hill (who was appointed
in 2013 and became COO in 2018), a new CIO, Shamim Mohammad (appointed in 2014), and a new CMO,
Jim Lyski (appointed in 2014). They were able to help champion this new approach and recognized the value
it would provide to CarMax. Lyski recalled:

10 Eric Reis, The Lean Startup (New York: Crown Business, 2011).
11 Timeboxing “is an approach to task and time management that sets rigid constraints on how long a given task or project can take to complete.
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Extensions are not permitted.” “A time box is [a] defined period during which a task must be accomplished.” See “Timeboxing,” TechTarget,
https://whatis.techtarget.com/definition/timeboxing (accessed Jul. 15, 2019).
12 Marty Cagan, Inspired: How to Create Products Customers Love (San Francisco, CA: Silicon Valley Product Group, 2008).
13 Project management “is the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements.” See

https://www.pmi.org/about/learn-about-pmi/what-is-project-management.
14 Data miners used a process “to extract usable data from a larger set of any raw data.” See “Data Mining Definition,” SQL World,

https://www.complexsql.com/data-mining-definition/ (accessed Aug. 5, 2019).

15 DevOps is the practice of operations and development engineers participating together in the entire service lifecycle, from design through the

development process to production support. See Ernst Mueller, “What Is DevOps?,” The Agile Admin, August 2, 2010,
https://theagileadmin.com/what-is-devops/ (accessed Jul. 15, 2019).

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We saw the vision that the best way to lead is through a customer-centric product approach. Because
we’re a retailer, we’re an experienced brand, we really don’t have products, per se—but we took a close
look at how the Silicon Valley approach to product is really about continuous innovation. We started
with some small examples of how this can work that we thought would be very quick to market. One
of the early wins was digital merchandising—taking better pictures and describing the cars better

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online. We saw an immediate increase in sales. That was an early win. We took the customer-facing
pieces first, which we could see impacting the marketplace—even though behind the scenes, it was
what we call a minimal viable product that is not fully developed yet—but we had to get those early
wins, those early points on the board, and ensure that our senior team saw the value, because it was
going to command a ton of resources and take a lot of time.

Lyski and his colleagues set up opportunities for the emerging product teams to give demos to the board
to illustrate the value of the new way of working. In addition, the product teams were asked to give presentations

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to Wall Street analysts at CarMax’s regular in-house events to help them understand the transformation from
an operational level. As a result, the analysts started writing things like “CarMax is on offense, not defense,”
and “They are an innovator in addition to being operationally strong.” Bryan Ennis, vice president of product,
added: “When we looked at standing up the product organization, the early wins were good for two significant
reasons: proving that the new way of working drove innovation and delivered it with speed and quality at the
same time. And it also showed how we should probably organize ourselves in the long term.”
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Across the company, the emphasis shifted toward team empowerment with the mindset of failing fast, as
long as it was moving forward and learning in significant ways. Interestingly, the most difficult thing seemed to
be retraining leaders how to lead and stakeholders how to be stakeholders in a product-driven world. The new
job of leaders became setting the overarching strategy and being crystal clear on the goals they wanted to
achieve, clearly defining what success would look like, then getting out of the way (for example: “We need to
get more tier 1, high-value customers to buy from us, and I want to see a 2% increase in category X”), and later
providing input on the opportunity backlog by helping with hypothesis testing.
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As summarized in Exhibit 2, during roughly a 10-year period, CarMax networked outside of its industry
(via the executive council), conducted pilots, grafted expertise, leveraged advocates in influential places, and
managed the change process by publicizing early wins. Along the way, the company also learned how to build
a new organizational structure and a new product management process, and implemented a change
management model and value system.
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Building a Product-Driven Organization

Tom Giedgowd, product manager, provided the following definition of “product teams”: “We refer to
product teams in the Silicon Valley sense of the term—a team that is responsible for building a technology-
driven experience that is valuable for our customers and valuable for the business.”

As depicted in Exhibit 3, at the center of product teams is what CarMax referred to as the core team,
comprising three following different roles:
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 The product designer: Responsible for understanding the customer problem space, which involved
conducting user research, user interviews, and surveys. In the solutions space, product designers
worked in a Lean way on visual design, interaction design, and process design to rapidly prototype
many different ideas.

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 The lead developer: Responsible for ensuring that whatever the team conceived was feasible to build and
scale, using DevOps best practices. If the team needed to partner with any other groups within the
organization from a technical perspective, the lead developer served as a team ambassador.
 The product manager: Responsible for making sure the team was focused on an area of opportunity for
the business, and that whatever the team decided to do would drive business value as well as customer

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value. Product managers were often the external face of the product team, responsible for tracking
product strategy and key performance indicators (KPIs).16

To form a complete product team, several other important team members supported the core team:
 Marketing creative services stepped in if the product needed any internal or external marketing, such as
radio, TV, or paid search ads.

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 Delivery managers were responsible for making sure that the team delivered product on time, as well as
clearing roadblocks in terms of any external dependencies that the team might have with other teams
(analogous to the role of scrum master in the agile methodology).
 Field experience experts were responsible for helping the team “know the customer” by doing research in
the stores, prototyping in stores, ensuring that products were scalable across all the stores, and making
sure that whenever the team was building a product that was going out to the field, employees were
trained appropriately, and product launches were properly communicated. This role also created a
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feedback loop from the field, and differentiated CarMax from a lot of other pure technology
companies.
 Functional experts served as subject-matter experts (SMEs) whenever necessary. For example, an SME
on auto financing was embedded within the finance product team and knew all the nuances of used-
car finance (e.g., rates, terms, laws, and stipulations).
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 Developers coded software in compliance with best practices, such as DevOps, agile, and quality
assurance.
 Data scientists were responsible for measuring actual business outcomes, and as such were critical to
gaining visibility into what impact the team was having on the business. For example: Was the product
driving sales? Was it helping CarMax buy more cars? Was it helping CarMax acquire more customers?

Ennis described CarMax’s organizational structure:

No

We’re organized as a product organization across the customer journey. Now, what’s important to take
away is that it’s been a massive transformation, because you’re bringing all your technology, all your
delivery, all your analysts, all your product managers, all your designers…into a common way of
working.

An important distinction between traditional project teams and product teams was that while the former were
temporary, the latter were durable, meaning that they stuck together for the life of a product. For example, the
online finance product team did not have a date at which it would be done. It was constantly working in this
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space to either optimize, find, or create new online finance products. Tom Giedgowd, director of product
management, added: “The finance product team’s job would only be done if strategically, Ennis said, ‘I think

16 A key performance indicator “is a measurable value that demonstrate how effectively a company is achieving key business objectives. Organizations

use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while
low-level KPIs may focus on processes in departments such as sales, marketing, HR, support, and others.” See “What Is a KPI?,” Klipfolio,
https://www.klipfolio.com/resources/articles/what-is-a-key-performance-indicator (accessed Jul. 15, 2019).

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we’ve got all the juice out of the orange in the finance space—why don’t you guys focus elsewhere in the
business?’”

Another distinction was that product teams were empowered in the sense that they were not merely “ticket
takers.” Historically, project teams tended to follow a traditional waterfall approach, fulfilling requirements

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dictated to them by their executive sponsors. This resulted in a very output-oriented mindset. CarMax had
attempted to reverse this way of working. As Giedgowd explained:

My conversation with the executive isn’t “Mr. or Mrs. Executive, please tell me what to go build,” it is
“let’s talk about where you want to see your area of business two years from now. What sort of metrics
do you want to drive? Do you want to increase credit applications? Do you want to capture higher-
FICO customers? Do you want [to] increase profitability? What is it that you want to do from a
business outcome perspective?” And then similar conversations are held with sales operations: “What

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is the role of a sales consultant two years from now? Do you want to be higher converting? What
metrics are important?”

This outcome-oriented mindset resulted in a conversation focused on business objectives rather than “tell-
me-what-to-build” conversations. It was the role of the product manager to partner and work with stakeholders,
figure out what business objectives to go after, and set some KPIs—for example, “We need to increase online
credit applications from high-FICO customers by 20%”. The team was then empowered to determine how it
would achieve these goals, which allowed the product designer to say, “We have a goal to increase credit
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applications from high-credit-quality customers by 20%; now what are all the ways we could do this? We could
create a bot that gets people to submit applications or we could introduce another growth-hacking technique.”
There were infinite ways to achieve customer-led, rapidly prototyped, and tested ideas to quickly figure out
what tactic would best achieve the goal, and then the team could go build it. And this outcome-driven mindset
became the principal way that CarMax executed its business strategy.
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From a product-management perspective, CarMax used a flavor of agile called dual-track agile (see
Exhibit 4). By default, the agile method was designed to deliver a working product every two weeks. While this
approach ensured a faster, more regular delivery cycle, it did not ensure the delivery of valuable software that
would solve a business problem. To address this shortcoming, CarMax overlaid what it called the “discovery
track”—a parallel process that was designed to figure out the right thing to build from a customer and business
perspective. While the lead developer and their group of two or three developers were developing and delivering
software in two-week sprints, the product designer was running experiments—for example, they might do a
No

demand test on the website, rapidly prototype a new login page, or create a low-fidelity prototype based on
research gleaned from conducting a user interview or a survey. Often, the ideas did not work as planned and
the prototype got discarded. What was important was that the product designer avoided spending months
building something that didn’t achieve the intended outcomes. Anything that did work in the discovery track
was moved into the delivery track. This accelerated the rate at which new ideas were tested while simultaneously
increasing the chances that something of value would be created.

Usually, all three members of the core team were involved in the discovery process, although sometimes,
it would just be the product manager and product designer. In addition, the field lead would be included if the
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product would involve the stores, and creative services would be involved if the product would require a
marketing campaign. The product manager would choose the players depending on the context and desired
outcome or product.

When a product team created a product, three questions needed to be answered in unison:

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1. Is it valuable? Was the product something that CarMax’s customers would find valuable (e.g., would it
solve a problem?), but also something that was valuable for the business (e.g., was it profitable?)?
2. Is it useable? Was the product intuitive to the user? What were the interaction patterns? Did it delight
the customer?

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3. Is it feasible? Could CarMax build it—and if so, would it scale?

From the onset of every new product initiative, CarMax product teams sought to answer all three questions in
the affirmative. Many ideas would meet one or two of the objectives and be deemed unacceptable. The Venn
diagram in Exhibit 5 was a quick check teams could use to make sure they were on the right path from the
very beginning.

Underlying all of the above were the following five core values:

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1. Missionaries over mercenaries. CarMax sought to avoid the legacy model of output-oriented teams that
functioned more like hired guns than team players. CarMax teams aspired to be more like missionaries:
change drivers that engaged all relevant stakeholders.
2. Outcomes over outputs. CarMax valued an outcome-oriented mindset rather than a “tell me what to build,”
output-oriented mindset.
3. The team is the product. Emphasizing the durable nature of product teams, core teams stuck together for
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the life cycle of a product (idea, pilot, scaling, production, and maturity).
4. Leadership is a lesson in humility. Product teams didn’t function well with people who pretended to have
all the answers, who weren’t open-minded, or who had a big ego. An important trait was being willing
to admit, “I don’t know all the answers; I have to be customer led; I have to be empathetic; I have to
be willing to challenge my own preconceived notions.”
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5. Have fun every day. CarMax valued a culture in which its associates enjoyed working together to achieve
valuable outcomes.

Regarding this last core value, Yauger added: “At the end of the day, it’s all about culture and people, not
practices and processes; let’s create missionaries over mercenaries; let’s push for outcomes, not just output.”

The Road Ahead: Driving What’s Possible

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CarMax had come a long way in 26 years, but would these changes be enough to succeed in the evolving
competitive and technological landscape? “Digital native” start-ups had created a completely digital experience
in which potential buyers could search an online inventory and get a car delivered to them as soon as the next
day. Carvana, Vroom, and Shift had emerged as the leaders in this space and were beginning to gain some
traction. For example, Carvana had raised over $960 million in funding,17 and its sales had doubled in 2018 to
94,108 vehicles sold (making it the eighth-largest seller of pre-owned vehicles).18 Without traditional brick-and-
mortar dealerships, the digitally driven car dealers hoped to cut expenses and streamline the entire car-buying
experience. Carvana’s answer to the dealership was the Car Vending Machine, which offered a fully automated
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experience that included selecting a car to buy online and scheduling a time to pick up the car, and a robotic
lift presented the vehicle to the customer with no human intervention (Exhibit 6).

17 “Carvana,” Crunchbase, https://www.crunchbase.com/organization/carvana#section-overview (accessed Aug. 8, 2019)

18 James B. Treece, “CarMax Leads All Publics in Used Sales, Profits,” Automotive News, May 28, 2018,
https://www.autonews.com/article/20180528/RETAIL04/180529848/carmax-leads-all-publics-in-used-sales-profits (accessed Aug. 9, 2019).

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To complicate matters even more, emerging technologies and changing customer behavior threatened to
disrupt the entire automotive industry. With the recent success of Tesla, other car manufacturers were moving
toward offering fully electric vehicles. Electric car sales were growing rapidly from less than 1% of cars
purchased in the United States in 2016 to what was predicted to be 5.5% in 2021.19 In a similar vein, self-driving
cars were predicted to hit the marketplace very soon. For example, Cadillac announced the Super Cruise feature

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where drivers in the United States and Canada would not need their hands on the wheel, and Tesla’s Autopilot
feature promised to be full autonomous in 2020.

Another emerging trend that threatened to disrupt the used-car business was ride sharing. It was predicted
that the ride-sharing market would reach 220 billion in 2025.20 Leading market players such as Uber, Lyft, Didi,
and Gett, were all trying to get consumers to use their services and not purchase automobiles—a strong value
proposition for many city dwellers.

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While fully aware of these potential future threats to its dominant market share, CarMax believed that its
customer-centric, product-driven organization would continue to provide a sustainable competitive advantage.
During the June 2019 Shareholders Meeting, Nash made the following statement: “It’s a very exciting time for
CarMax. We got into business in 1993 to change an industry. We’ve not only changed the industry, we’ve led
the industry, and we’re poised to continue leading going forward. We call it ‘driving what’s possible,’ and it’s
about execution and innovation.”

Nash seemed to be referencing CarMax’s transformation, but also its push toward a more diversified
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business model that had been highlighted in an Analyst Day presentation earlier in the year.21 More specifically,
CarMax was making strategic investments in an omnichannel experience that would allow it to effectively serve
the following three customer sets:
 Customers who wanted to complete the entire transaction online
 Customers who wanted to shop on their terms both online and in-store
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 Customers who preferred to shop up close and complete the transaction in-store

Nash continued,

I am a firm believer that this is the future of car buying. This is where customers are going, whether
they know it today or not, and we want to make sure that we lead the pack. I also think that there are
a lot of competitors that won’t be able to make the transition. It’s a highly fragmented marketplace
No

right now. I think in the future, there just won’t be as may folks that can deliver an experience like this.
And I think that consumers will one day wake up and say, “If I can’t get an experience like this, you
are no longer relevant.” And we want to be relevant.

Clearly, CarMax was still the market leader, having successfully responded to changing market conditions
and fought off new competitors for nearly three decades. Throughout its life as a company, CarMax had
transformed itself and found ways to stay relevant. The key question on shareholders’ minds was, “Will the
customer-centric, product-driven, omnichannel approach allow CarMax to not only survive, but continue to
thrive in the future?”
Do

19 “New Electric Vehicle Sales Market Share for 2016, 2017, and Forecast for 2018 (Full Year) for Selected Markets,” EVAdoption,

https://evadoption.com/ev-market-share/ (accessed Jul. 15, 2019).

20 “Global Ride Sharing Market 2019, By Type, Expanse, Ownership, Business Model, Demographic, and Growth Opportunities to 2025,” Reuters,

February 14, 2019, https://www.reuters.com/brandfeatures/venture-capital/article?id=83120 (accessed Jul. 15, 2019).

21 “January 17, 2019 Analyst Day Presentation,” CarMax, January 17, 2019,
http://s21.q4cdn.com/483767183/files/doc_presentations/2019/Analyst-Day-Presentation-January-17-2019.pdf (accessed Jul. 15, 2019).

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860
 Page 9 UV7842

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os
Exhibit 1
CarMax: Driving What’s Possible
Financial Comparison

rP
Summary of Sales and Gross Profit (Q1 2019) and Market Cap (2019)
Market Cap (in
Gross Profit per Gross Profit
Vehicles Sold billions of US
Unit Margin
dollars)**
CarMax 224,268 $2,215 10.70% $14.6

yo
Penske 72,744 $1,278 5.90% $4.0
AutoNation 61,171 $1,378 6.60% $3.7
Lithia 40,675 $2,079 10.30% $2.8
Sonic 38,463 $962 5.20% $0.2
Group 1 38,836 $1,231 5.90% $1.5
op
Asbury 21,083 $1,594 7.40% $1.6
Carvana 36,766 $1,302 5.00% $9.9
** Market capitalization in billions of US dollars as of July 8, 2019.
** KMX’s Q1 ends May 31, 2019, versus March 31, 2019, for the others.
Data source: James B. Treece, “CarMax Leads All Publics in Used Sales, Profits,” Automotive News, May 28, 2018,
tC

https://www.autonews.com/article/20180528/RETAIL04/180529848/carmax-leads-all-publics-in-used-sales-profits (accessed Aug. 7,

2019).
No
Do

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860
 UV7842

t
os
rP
yo
CarMax: Driving What’s Possible
CarMax’s Transformation Timeline

op
Exhibit 2

tC
No

Source: Created by authors.

Do Page 10

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860
 UV7842

t
os
rP
yo
CarMax: Driving What’s Possible
Product Team Organization

op
Exhibit 3

Source: CarMax Analyst Day Presentation, July 18, 2018. Used with permission.
tC
No
Do Page 11

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860
 UV7842

t
os
rP
yo
CarMax: Driving What’s Possible

op
Dual Track Agile
Exhibit 4

Source: CarMax Analyst Day Presentation, July 18, 2018. Used with permission.
tC
No
Do Page 12

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860
 Page 13 UV7842

t
os
Exhibit 5
CarMax: Driving What’s Possible
Product Target: Valuable, Usable, and Feasible

rP
Valuable
yo
op
Usable Feasible
tC
No

Source: Created by authors.

Do

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860
 Page 14 UV7842

t
os
Exhibit 6
CarMax: Driving What’s Possible
Carvana Car Vending Machine in Tempe, Arizona

rP
yo
op
tC
No
Do

Source: “Carvana Vending Machine Tempe Arizona,” posted to public domain under Creative Commons (CC BY-SA 4.0) by
“Elephanthunter,” July 31, 2018, https://commons.wikimedia.org/wiki/File:Carvana_Vending_Machine_Tempe_Arizona.jpg
(accessed Aug. 5, 2019).

This document is authorized for educator review use only by Diksha Panwar, IILM Graduate School of Management, Greater Noida (IILM-GSM) until Mar 2023. Copying or posting is an
infringement of copyright. [email protected] or 617.783.7860