Managing Director & Senior Partner
The maxim that companies always lose revenue and profits in a crisis is wrong: almost one in six companies manage to improve both. These “comeback kids” can be found in a wide variety of industries and locations, but their responses to upheaval, whether internal or external, tend to have certain characteristics in common.
BCG frequently spotlights these companies to show how it’s done. For example, they tend to use the crisis as an opportunity to question their existing strategies and business models. While such determinations generally focus on the long term, companies in a crisis should immediately take a close look at everything they do.
What’s more, comeback kids typically use scenario planning. Not even leading economists can predict exactly what will happen in a crisis, so companies must look at the upside, the downside, and the range of possibilities in between. In addition, these companies tend to take a critical look at their investments and build enough reserves to survive whatever may come.
Another important common denominator is decisiveness. The comeback kids make decisions quickly and implement them promptly—not only during the height of the crisis but also later, when it begins to ease. As a result, they are able to switch gears rapidly as they discover how to utilize the situation to their advantage.
Finally, the right company culture is essential. A successful culture tends to combine dictatorial and cooperative leadership styles because companies in crisis must get everyone on board for change while providing role models for their employees.
One comeback kid, Sixt, made a strong recovery after the 2008–2009 financial crisis. (See the sidebar “About Sixt.”) In February 2020, BCG managing director and senior partner Ralf Moldenhauer had the opportunity to speak with Alexander Sixt, the head of strategy and the oldest son of company founder Erich Sixt. He talked about the secrets behind the vehicle rental company’s successful transformation and offered lessons learned from the 2008–2009 financial crisis.
Sixt is an international provider of mobility solutions in vehicle rental, car sharing, ride hailing, subscriptions, and leasing, and has a presence in more than 100 countries. The company’s stated goal is to give customers realistic alternatives to owning their own cars. Its mobility platform “ONE” combines mobility offers for vehicle-rental, car- and scooter-sharing, and taxi- and ride-hailing services in a single app. In addition, Sixt provides fleet leasing and management for business customers in its subsidiary, Sixt Leasing. Private and business customers may also lease or buy vehicles using Sixt’s online platform.
Sixt has grown strongly abroad over the past decade, particularly in the US market. Having entered the market in 2011, Sixt is now the fifth-largest car rental company there. Sixt has also increased its market share in western Europe, particularly in popular tourist destinations, such as France, Spain, and Italy. Its brand awareness is currently 95% in Germany and is growing at a double-digit pace in its corporate markets.
Your company came out of the 2008–2009 financial crisis very successfully. Where did that crisis hit you the hardest?
The entire economy was affected and, for us, it started with revenues. Traditional companies put the brakes on travel expenditures. And, of course, when people stop traveling, it has dramatic consequences for our business.
For us, one of the essential performance indicators is utilization, and whenever my utilization is down by one percentage point, it’s the same as about €30 million in profit. So, it was very clear after the relatively big slump in revenues we had in the first two quarters of 2009 that our vehicle fleet was too large, and that we had been profoundly affected by it.
You now have it down pretty well. How did you overcome the challenge and manage to return to a position of strength?
I have to say that one of the most positive effects of the crisis was realizing how adaptable our business model really is, given that at least 70% of our cost base is made up of vehicles. The vehicles are our working capital; that is, because we have them for just about six months, we basically need just that amount of time to realign our business model.
Naturally, that’s harder for someone who has big factories or plant construction, where shrinking down capacity is much, much more difficult. You can observe it so well in the numbers. When the first two quarters were strongly negative, we recalibrated the fleet, adapted the variable personnel costs, and then managed the third and fourth quarters to achieve a slight net profit for the year.
The second thing we did was to immediately lock in long-term financing: in 2008 and 2009 we secured financing at, I believe, relatively high interest rates—but nonetheless, secured it for the long term. At the end of the day, this definitely gave us the leeway we needed going forward.
Why do you think Sixt is a comeback kid? And what key actions did you take then that are still contributing to the business today?
Well, the fact that we, as a 100-year-old “startup,” are still being called a “kid”—I like that a lot.
I think the most important thing is the courage to act. You can paralyze yourself with thousands of analyses, buy tools, build systems, and what have you, but at the end of the day, you just have to do things. It may sound simple, but it’s the hardest management job to take concrete things and implement them. First, of course, there’s the immediate effect that each action has on earnings. And second, it puts the entire company on alert. Then everyone knows, down to the very last person, that the good times are over and that something needs to be done. It doesn’t just have an operational component but also a purely psychological, company vision component.
So, asking critical questions, that was one of the best things that happened to us in the crisis of 2008–2009—that we were able to inspect our processes in an incredibly critical way without having to explain why, because it was clear to everyone that it had to be done. And, as I said, we’re still profiting from those process optimizations today.
What do you think is fundamentally the secret of your success after the crisis? Specifically, what basic and cultural ways of approaching things set you apart and perhaps make you better than the rest?
Well, “better” is always really a tough topic for us. My dad always says that the real enemy of success is success itself, and I believe that that’s our core DNA, exactly like the principle of falsification. We are always thinking about why what we did was wrong, and we try not to think about why what we did was right.
So, what I believe sets us apart is, in one phrase, the will to grow. This has two components, one of them being growth. Immediately after the crisis of 2008–2009, we radically bet on growth relatively quickly and along all dimensions, such as internationally. We entered the US market in 2010, which by now brings in nearly €600 million in revenues—a step that recalls Warren Buffet, who always thinks anticyclically. That is, in a crisis, you have to think ahead, and I think we did that very stringently. We founded DriveNow, which we later sold to BMW and which gave us a huge amount of money, and we started a large number of initiatives aimed at growth.
So, get your house in order, make a clean sweep, and then go for growth.
The second component is having the will. It’s at the heart of our DNA that no one has to tell us what we have to do; we just really want to do it. And it’s not just the management, which in the end would be a pretty toothless tiger; it goes all the way through to the station managers. They want to do things. Doing is like wanting, just a lot more intense. And I believe that there’s some core DNA there that means we don’t just superficially act out the concepts. Sure, we lose some opportunities because we don’t think everything through down to the last degree of visionary creativity. But we’re always men and women of action.
What are you currently focusing on, personally, and what are you doing to make sure the company will be able to withstand a crisis in the future?
My focus changes on a daily basis, but I think we're at a really exciting crossroads right now. On the one hand, we have to keep advancing our digitization offensive. You have to imagine that during the crisis in 2009 we had maybe 70 developers, and now we have nearly 700 people who are here moving our digitization forward with consumer-facing products like the rent-share app, which now has nearly 300,000 connected vehicles and 1.5 million users. So, in principle, all the backbone processes that we have, such as the new software we rolled out for behind the counter (which makes it considerably easier for our employees to rent out cars, requires significantly less training, and has higher sales numbers), are definitely a focus for me.
On the other hand, we’re also working concretely with scenarios. We manage the company with an American system called OKRs, and I recently attended an OKRs retreat during which management set concrete targets for the next year and gave the company basic guidelines. But after all the planning had been wrapped up, my father came in saying that we needed another €100 million in earnings. And surprisingly, everyone just ran with that, even though it’s totally unrealistic, right? Based on the planning, there was no way, but the extra €100 million was like a dream at the end of the road, you know? It brought some incredible dynamics to the entire company, and we quickly found a whole bunch of measures beyond normal planning that could bring us just a little bit closer to that target. It was certainly not meant as a guideline for next year, that we want to make €100 million more in earnings—not at all. It’s more the underlying thought that, somehow, aside from the pure processes, at the end of the day, you have to have a dream. And the dream can be a product, or the dream can be market share, but it should always have an earnings component. And somehow that €100 million really got me going.