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CCC: Extending to the Supplier
Founder and Partner, Tidemark
Chief Executive Officer, CCC
Chief Strategy Officer, CCC
I’ve been investing in technology for about 20 years. I believe I could continue to do so for another 20 years and never meet another Vertical SaaS company quite like CCC. After three decades in business, CCC continues to push the frontiers of Vertical SaaS, and it seems like they are just getting started.
I love CCC as a case study for the VSKP. They have been the archetype and exemplar of many of Tidemark’s Vertical SaaS theories:
- Extending to the Supplier (auto body repair shops) by starting with a wedge product: estimation. From there, they’ve extended to become the one-stop-shop for auto body repair businesses.
- Extending to the Supplier’s Supplier (auto parts) by creating a two-sided online parts marketplace.
- Engaging nearly the entire industry (insurance companies, repair shops, parts providers, banks, car rental companies, medical providers, medical payers) on the same CCC software workflow to transform the consumer experience and become part of the industry fabric itself.
In Part 1 of our talk, we’ll cover how CCC built a franchise selling claims management software to auto insurers, and extended to their suppliers, the auto body repair shops. In Part 2, we’ll explore how they extended from the repair shops to build a two-sided parts marketplace.
These case studies are about giving in-depth, practical examples of the Win, Expand, and Extend framework. I am inspired by these entrepreneurs and I hope you enjoy – CCC is an incredible company!
This interview took place on January 12, 2022 and has been edited for brevity and clarity. Bolding added by the editor to highlight key points.
Dave Yuan: I’m really excited to talk through the CCC story, but maybe we can kick it off by having you introduce yourselves.
Githesh Ramamurthy: Sure. Dave, first of all, great to be with you. I remember the first four years it took to get you to be an investor. Then, finally, we were able to get you and TCV in the latest round, so that was wonderful! Very quick background: I was raised in Africa, the South Pacific islands, a bunch of places. I ended up getting a master's in Computer Science at Georgia Tech and, halfway through that program, I ran into three wonderful partners who were in the process of leaving McKinsey after several years of consulting sales forces. We came together, coined the term “sales force automation” in 1983, and launched a company called Sales Technologies.
Dave: You should have patented it!
Githesh: Well, we'd probably be expired by now! We built the business, we grew, and revenues compounded, I don't know, 70% a year for many, many years. We ended up in about 20+ countries around the world and became the world leader in sales force automation. Then, Dun & Bradstreet came along and made us a great offer.
That was my background before a short stint through business school up in the northeast, and then I joined CCC in ‘92.
Dave: That's a heck of a run. Marc, do you mind doing the same?
Marc Fredman: Sure! I don't have as illustrious a global journey as Githesh does, but I was a philosophy major in undergrad so I always liked solving big, complex problems. Out of college I became a banker, then spent about a decade with Boston Consulting Group. I joined CCC about eight years ago, and I think of my job very simply: my job is to think about the future and make sure our customers are the winners of tomorrow. What that means has expanded – it used to be insurers and repairers, and now it’s OEMs, lenders, part suppliers, and lots of other companies.
Dave: Maybe you guys can start by talking about the business from the eyes of the consumer. We'll go through in detail each of the different levels of this network, but it would be helpful for people to understand the scope of what you guys do.
Marc: For an insurance company, a claim is not just the payment. We describe it as a domino that kicks off potentially hundreds of microtransactions, all of which require dozens of different companies to come together.
When a consumer has been in an accident, they have to notify their insurer of the type of accident and what happened, where it happened, the facts of loss. That insurance company has to think about what to do with this claim: “Where is it going to go? Is this going to be something where they go to a repair facility? Is it going to be a total loss? Are there injuries?” That consumer then is going to end up (most likely) at a repair facility, which then has to figure out the extent of the damage. Nowadays, cars are getting a lot more complicated. Do they have to check if the systems on that car were damaged, like the lidar and other things? It can go on and on. All those things in total we call the insurance economy.
The insurance economy is all the different companies that have to come together to resolve those critical moments that led to an insurance claim. We have various solutions, but at the core of it, what we try to do is digitize that economy. Today, we have more than 30,000 companies on the CCC cloud – and our job is to power the decisions and experiences in a digital way so the consumer experience can be great, and all those different industry participants can be efficient and profitable and have growing businesses.
Despite the fact that we've been doing this for a while, every year in the US, there's more than a billion days that elapse between auto claims being opened and auto claims being closed. So there’s still a lot of work for us to digitize this massive industry.
Dave: That's a great way of putting it in context. Githesh, can you talk a little bit about what CCC does for insurers, both when it started and where it sits today?
Githesh: It's exciting to see where we are after I've been at this for 30 years. At the very start, we did one thing: when a car was totaled, we helped an insurer determine the value of the car. We had to have a number of people in the field to go and actually look at used car lots and the prices at which cars were selling, so that it wasn't some theoretical number but was based on real prices. That data varied by geography, so we started off with that single service, which is highly data intensive – and of course we use software to deliver it. Even back then, it was more of a transaction model. That's really where we started.
By the way, back then only 10% of vehicles were totaled. It became very clear, very quickly, that we were not addressing the other 90% of the solution for insurers, which was when a car was getting repaired. What did it cost to repair that vehicle? What was going to be the estimate? If we did not help solve this problem, we would get integrated out of business!
Dave: Githesh, what you're describing isn’t some trivial, lightweight app. What you built is a system that essentially powers your insurance customers’ business models.
Githesh: Yes, processing and addressing claims often represents 80% of an insurance company's spend.
Dave: How did you get in that position of trust to be able to serve these very large customers, and to drive 80% of their cost structure or business model? How does this happen?
Githesh: I think that the trust factor is extraordinarily important, and that is such a fundamental part of our business model. It’s not only trust, but trust and performance. You’ve got to deliver both.
Before us, the industry didn't have a consistent way of making decisions for these hundreds of microtransactions. Let's give an example. I’ve got a car in front of me that needs to be repaired, and the cost is, let's say, $3,700. I'm not making one decision; I am making dozens of decisions. Should I replace the bumper? Should I put in a new headlight? Should this panel be straightened out and re-sprayed and repaired, or replaced with a new panel? What we did, right at the start, was make it easy for frontline people to use their judgment and our tools to make hundreds and hundreds of decisions.
The trust we developed was the degree of precision, the ability to make reliable decisions. Frankly, because so many dollars are flowing through our platforms, making sure we're highly reliable is crucial.
Marc: To add one thing – It's really important to understand how hyper-local these decisions are that are being made, that get powered on our platform. You're talking about at an individual store level, what the local part price in that area is; what the local labor rate is; what the comparable vehicles and medical procedures are. What we have is a really robust decision engine powered by a trillion dollars of hyper-local data that powers all this stuff.
Dave: It does feel like this is more than a traditional returns-to-scale linear business. Because of that local dynamic, it's local scale, and once you've shown over many years that you can perform for a handful of insurers over time, I can see why more and more insurers would want to work with you.
Githesh: And your data gets better and better. Not only do you need OEM parts, you also need the price of aftermarket parts, you need the price of recycled parts, and so on. Your data, your network of parts providers, all of these things just improve with scale, along with your accuracy and your quality.
Dave: A lot of people would be happy with a great insurer business. But there's that next level of the value chain: the repair shop. Let’s talk about the initial landing spot, the initial launch.
Githesh: There was a very fundamental problem, as all solutions are rooted in some really deep problem. The fundamental consumer problem was that an insurance company could write an estimate, but then some repair facilities are going to say it will cost less, some say it will cost more. And the consumer is in the middle of that. What we started working with was feedback from an early customer who said, “This model is really broken. We need to engage with a network of repair facilities.” We then started building out the platform for repair facilities.
As Marc was saying, all claims are local, so you have to be hyper-local. You have to make sure that you have the right density in the large metros. We built a network connecting insurance companies and their systems on one end and thousands of repair facilities on the other. As we start to build that network, collision repairers start seeing the benefit of inbound assignments coming directly to them. The consumer, instead of running around to different repair facilities, could ask his or her insurance company directly if there’s a recommendation in their neighborhood that they could use. Then the insurer could say, “Here's a couple that are in the network. By the way, you're also free to go to anyone else you want to go.”
That's a very important aspect of this business, that people are free to choose. But when they do go to an in-network repair facility, there are three things that happen. #1: When they walk in the door the repairer says, “Hi David, we've been expecting you. We have your information, let me confirm that. By the way, your assignment is already with us, and here are the keys to a rental car.” #2: The repair facility writes the estimate on the same platform the carrier's using, routed through the CCC network. #3: The insurer follows up about the quality of the repair work done. All of that is behind the scenes, so this delivers a significantly better consumer experience, is much more cost efficient for the carrier, and is more productive for the repair shop.
The concept that I just described is called direct repair. We helped pioneer this concept, and as our network of repair facilities increased, this led to a huge benefit for everyone. Now, insurers could get repair facilities in every geography they wanted. And if you’re a repair facility, with one connection you could find your claim, get your assignments, and connect to a handful, then dozens, then literally hundreds of insurance companies. It’s a huge value add for the insurer, a huge value add for the repair facility, and a huge value add for the consumer, because the consumer is no longer in the middle having to worry about this. Of course, along the way we expanded a lot more functionality for the insurer and for the repair facility.
Marc: This is one of the things that's really different and unique about us. From a consumer perspective, for a lot of vertical software industries – or just vertical industries (think about restaurants, for example) – the supply chain is everything that happens before a consumer actually shows up; they just buy their meal and they walk out. We are the exact opposite. The supply chain actually starts after the consumer shows up at the repair shop. Because of that, you cannot have a solution that focuses on just what happens within the insurance experience; you have to look to manage the consumer experience downstream at the repair facility.
Dave: Extensions are really hard to do, and we'll get into one of the reasons why in a second. But the big idea that you guys have pursued really effectively is you change the consumer experience. The reason why everybody gets on board is because it's a dramatically better experience. And then, maybe as important long-term but not necessarily driving or catalyzing the action, you make the situation more efficient and beneficial for all stakeholders. Those are the two conditions to make this happen.
To transition into some of the headwinds that you might have faced: when you're working with multiple parties on two sides of a transaction, there’s a lot of incentives to align. You want to make the consumer happy and you want it to be an effective and efficient process, which is great for everyone. But there is a cost element to it which in some ways is zero-sum between the insurer and the repair facility. How were you able to engage with both sides and create this very positive-sum situation for the industry and each constituent? How did you bridge trust between two constituents that have a lot of aligned incentives, but also have some areas that aren’t aligned?
Githesh: When you have multiple participants in a transaction, sometimes the incentives are misaligned, or there are inherent conflicts because each side is trying to optimize something slightly different. That is actually one of the most fundamental problems we have to solve. We have to be understood as the neutral, objective third party arbiter of information. What helped us do that is that much of the information in our software – parts prices, and so on and so forth – is also published by our partner Motor Information, a division of the Hearst Corporation, in book form for the entire industry to access. Even if you didn’t use our software, all the information was published in book form to provide transparency for everyone.
Having an open, objective system where everybody could see the part prices, the labor prices, the overlap logic, the steps it took to repair each vehicle – you can have up to 20,000 parts per car and complex procedures – established a scientific and transparent process that was good for the business. Until then, no insurer had essentially turned over their checkbook to a repair facility and said, “Go ahead and repair the car and tell me what it's going to cost.” As people started to use these tools and use these technologies, we enabled a level of trust and a feedback loop. The more people that used the product, the more people that used the solution, the more feedback we got, and the more accurate we could be.
Dave: In addition to transparency, one important thing that you didn't mention is having a long-term history of integrity: showing up the right way and doing what you say you're going to do. That isn't in any McKinsey framework, but it’s fundamental to building the trust needed to create this business.
Githesh: And people dramatically underestimate the long-term power of that. In the last 20 years, I can tell you that we are reporting faster organic growth rates than we’ve ever reported. Part of it is like you said, the power of the absolute integrity with which you operate (as opposed to what I call the conditional truth). That integrity wasn't free. It bounded what we would even consider, but it’s the basis of our reputation.
We’ve seen the power of that integrity, especially as we branched into adjacent areas. We have gone from working with insurers to repair facilities, repair facilities to parts providers, parts providers to OEMs. We've made these transitions to adjacent verticals and adjacent industries; they all check back with others and because of the longevity (people usually stay in this industry for a very long time), we've been enormous beneficiaries of word-of-mouth. As people move from company to company or industry to industry, that integrity is paid off massively.
Dave: So as a steward for the industry, you’re able to establish trust with the repair shops and a landing wedge of repair shop estimating. What happens next?
Marc: Well, I know our opportunity in the repair shop has always gotten you really energized. As you know better than most, we really act as the shop operating system. That entails claims coming in the door, all the repair work that has to happen as a car is actually getting fixed in the bay, and then all the back-office stuff that happens after that – payroll, accounting, shop management and the like. There’s a lot there, and we've looked at pushing forward all those different areas.
The first thing we did was that middle part, the estimate. That's how we got started originally. Then over time, we've really gone to either side, going to lead gen and then to the back office. More recently, we’ve introduced a lot more on the CRM side for lead gen, including a product called Engage. We now have thousands of shops that allow a consumer to book a repair appointment the way you book a restaurant reservation. You can even send photos in to secure a remote estimate, which was particularly beneficial during COVID. On the back-office side, there's all the things you mentioned, which is really establishing the supply chain within the shop.
Dave: You guys have been a steward for the industry, and I think if you have a really long-term time horizon, it pays dividends. It’s so great to see that play out.
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CCC: Extending to the Supplier
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