Kelly Smith knows a thing or two about digital transformation.
Before the phrase fully entered the business world lexicon, Smith was at Starbucks, where he helped lead its digital and mobile app expansion from 2014 to 2017. He then took a similar role at MGM Resorts, using software and data to improve guest experiences at MGM locations.
Smith — who founded several Seattle startups earlier in his career — is now chief digital officer and chief information officer at Hagerty, a classic car insurer that just went public in a SPAC deal valuing the company at more than $3 billion.
“I am really having fun. The cars make it really fun,” Smith said in a recent interview with GeekWire (check out his wicked Porsche collection).
Founded in 1984, Hagerty is known for providing insurance for classic vehicles. It is riding growth in the classic car market, particularly amid the pandemic.
But the Traverse City, Mich., company has plans to grow into something much more — with digital at the core of that vision, and Smith leading the way.
The longtime tech exec and entrepreneur brings a unique perspective as someone who has lived through hyper growth at both nascent startups and decades-old corporations. He previously founded Seattle startups such as RocketVox (sold to ThePlatform), ImageKind (sold to CafePress) and Zapd (sold to RealSelf).
We caught up with Smith to chat about his role at Hagerty, the company’s SPAC, what digital transformation means, tech trends, remote work, Seattle, and his memorable moment with Elon Musk while interviewing for a role at Tesla. The conversation was edited for brevity and clarity.
GeekWire: Good to catch up with you again, Kelly. We miss you in Seattle. Where are you at these days?
Kelly Smith: We’re living in Idaho but I’m traveling to Traverse City once every three to four weeks. Hagerty’s transition to remote has gone great. We were extremely lucky because our leadership team was really supportive and enthusiastic about embracing best-of-breed tools for our employees. We made the cutover to Zoom and Slack before the pandemic. And now I think we have proven that remote work is a business advantage for us — so much so that we actually redesigned most of our office space to accommodate a remote work model.
GeekWire: The Hagerty gig must be fun. I think you love cars more than coffee (Starbucks) and casinos (MGM).
Smith: I am really having fun. The cars make it really fun. These old classic cars, they can be money pits. I’m in the middle of two restorations right now. It doesn’t make any sense. But to people who love these cars, it doesn’t need to make sense. Having people around you who enjoy the hobby and are willing to be somewhat irrational just to create some enjoyment in life is a blast.
GeekWire: Talk a bit about Hagerty and your role there.
Smith: Hagerty is probably the largest and most well-known insurer of classic and collectible car cars. But we sell a lot of insurance without talking about insurance. We’re one of the largest holders of valuation data for classic cars. We are one of the largest pay membership programs for automotive enthusiasts. We are one of the largest producers of automotive enthusiast media. We are developing physical spaces that are a combination of storage and entertainment spaces. We own many of the popular automotive events out there. And we’re working on a number of new innovations that keep fueling the automotive hobby, such as a new way to buy and sell cars. We have a range of platforms that are not yet launched.
GeekWire: How is Hagerty using technology and digital to expand, and what is your role in leading that?
Smith: To unpack that, it’s fun to go backwards. I went from the entrepreneurial Seattle world into a more traditional corporate role at Starbucks. I was curious and interested in how these traditional companies would scale in an age of technology and whether or not I could add value at that scale. Then I came to MGM where I was the chief digital officer doing a very similar kind of role. And then finally, here to Hagerty.
The “why” for me personally has turned into my own infatuation and interest in digital transformation stories, amongst traditional non-tech companies. It started becoming more clear how someone like me could add value in these types of environments. It’s unbelievably challenging, and it’s really interesting work.
One of things I’ve noticed as being a significant difference between my time in Seattle and the chapter of my life now is that the cultural divide is so much more significant than almost everybody, including my former peers, could have imagined, in every little way.
How many times do you hear people in Seattle talking about or using the acronym “IT”? Not much. And yet, outside of that reality, that is the phrase people use in traditional companies to talk about technology.
To the rest of the world coming up in tech, especially in and around Seattle and California, they don’t actually know the real challenges and issues within traditional companies.
And a lot of people don’t realize only 30% of digital transformations are successful. So the “why” for me is very curious. Because if everybody presumably is getting the same newspaper in the morning, if everybody’s reading the same internet, then why do we have stories like Kmart or Sears or Macy’s or even Blockbuster? It’s an interesting question. If we’re all getting the same newspaper, why are only 30% of digital transformations successful?
And so it’s that question and the reasons for the results that I have found to be incredibly interesting on the one hand, and incredibly fulfilling from a professional perspective because you can really drive meaningful, fulfilling impact.
GeekWire: Talk more about “digital transformation” and how you think about that phrase.
Smith: Digital transformation is not a buzzword that the consulting firms made up to sell more services. It is a real thing with with very real challenges.
To maintain business performance and relevance and cost control, you need to have an ability to produce innovative products that meet the needs of customers who now have evolving expectations. They have an experience with Airbnb, or an experience with Netflix, or an experience with Amazon. Their expectations are rising and it permeates across into other areas in so much as how a customer makes purchase decisions. It will have an impact on your profitability and on your customer acquisition.
Now, the issue is, fundamentally, that businesses typically don’t know how to go about creating a new kind of innovation culture within their traditional culture. And that’s usually because they don’t have awareness as to the importance of a framework to do it.
What do we mean by framework? From the board down, does the enterprise have a stated digital North Star? Or are they just throwing money at different initiatives hoping something good happens?
Is there support at the CEO level and down to help drive the culture change so that it sticks from senior management all the way down through middle management, so that the effort is not sabotaged?
For the last 30 years, a business may have operated in such a way that the VP of sales drove the product roadmap. And now all of a sudden, it’s a totally different conversation where there’s this new discipline called product management that feels that it has a different method for how you realize products and bring them to market. Product management isn’t even a thing in a lot of companies, including my former employer, MGM.
So it’s about bringing in new kinds of people, teaching new disciplines, new perspectives, and rethinking whatever you thought traditional it was. What it amounts to is creating a more collaborative, empowered culture that lets innovation flourish. It’s hard to do.
GeekWire: What’s an example of tech you are helping implement at Hagerty?
Smith: In our case, lots of people do business with us — adding a car, removing a car, starting a new policy, canceling a policy — over the phone. So we have hundreds of call center agents. As it stands right now, we don’t even have a mobile app where you can get your insurance ID card. So we are trying to pour concrete to get to a table stakes position and we are then trying to get to the next level where we’re using innovation to drive business value.
And what that means is obviously a lot of different things. A lot of what that means is going backward and modernizing legacy technology that’s holding the company back from delivering on those table stakes.
We’ve definitely shifted from a feature team, where you’re basically producing orders that come to the back kitchen, into a team where much of the innovation is happening more cross-functionally, and you have more people helping to drive the strategy and the product offerings.
We’re building systems. This includes everything that the Airbnbs of the world take for granted. We’re creating baseline systems that might have been assumed elsewhere.
The reason most of these digital transformation efforts fail is because there’s no blueprint. Without a framework or a blueprint, you might not get the results that you were hoping for. So what we’re trying to do now is set up a blueprint where we quantify the outcomes. We are investing in digital transformation for five reasons:
No. 1. Drive new sales. And there has to be a dollar amount and a date. That’s how we measure whether or not we’re successful. It’s new sales enabled by digital channels.
No. 2. Reduce our member support and service costs by X percentage by the end of 2024.
No. 3. Drive better customer retention metrics through these investments by X percent.
No. 4. Use these digital investments to create new levers that allow us to push deeper into our total addressable market so that we can take more of it.
No. 5. Hopefully with all these digital investments, you are driving increased operational efficiency and effectiveness in all areas, from finance to legal. You’re able to review contracts faster, collaborate more, work better and more efficiently.
“The reason most of these digital transformation efforts fail is because there’s no blueprint.”
So we are now starting to address the part where most other digital transformations fail, which is aligning on a framework so that we know how we’re doing. It’s really surprisingly straightforward, but most companies don’t do that. And so they flounder, and then the board loses interest. When the board starts losing interest, because they can’t keep track of what’s going on except for the money up going out the door, that’s when you start to see a breakdown.
GeekWire: Why did Hagerty go public, and why via a SPAC?
Smith: We roughly estimate that there are 500 million global automotive enthusiasts. We currently have 660,000 paying members who are part of our Hagerty Drivers Club. And so now that we’ve got a formula that’s firing on all cylinders, we can say, okay, let’s apply capital to this equation to produce more leverage so that we can push into other markets, international markets, ship some of these other products we’re talking about, develop more media content, produce more events, build out more physical spaces, and so forth. We’re using the capital for very healthy reasons.
In terms of the SPAC, we were able to find additional leverage through the SPAC partners that we ultimately merged with. It just so happens that our SPAC partners are car enthusiasts. Aldel (the SPAC) is primarily led by Rob Kauffman, who is a notable private car collector and is in the top 100 of worldwide personal car collectors. We both had strong ties to other car community and professional auto racing luminaries. And so the collective of those automotive luminaries adds additional leverage to our IPO and that’s why we did this SPAC IPO.
GeekWire: You are still investing out of Curious Office. More broadly, what tech trends are you excited about right now?
Smith: There’s a couple of different spaces that really have my attention. I think the low-code world is going to start to really heat up. If you remember years back, hardcore developers sort of looked down on these things, thinking it’s not real software. But I think we’re past that time.
I’m also interested in the intersection of loyalty, NFTs, and how people start to creatively use these things beyond pictures and images. Can you add customer value by using these things in really interesting ways beyond what we’re seeing?
And I’m really interested in product management tools, marketplaces, etc., because that’s going to be one of the big unlocks for mainstream businesses.
GeekWire: Any thoughts on Seattle and its tech scene, especially since you’ve left?
Smith: One of the things I notice about Seattle is how the streets and the landscape have changed just because of all the building going on. But my overall takeaway would be, between the combination of watching Seattle grow as much as it has, to watching Tesla blow up the way it has, and being in the middle of these digital transformation stories — it has made it pretty clear that we are going through such a massive transformational shift that now I understand better. I understand why Amazon is growing as fast as it is for consumers on one hand, and why it is growing as fast as it is, along with Microsoft, with the cloud on the other.
This is a transformational moment we’re living through. And I’m much more aware of it now than I was when I was in the middle of it.
And by the way, I don’t think you knew this, but I almost went to Tesla before going to MGM.
GeekWire: Wow — that would have been an interesting move.
Smith: I wasn’t necessarily even thinking about leaving Starbucks. But I got a call from Tesla and they were looking for someone to run their product teams. So I went down there, spent an hour with Elon in the conference room. That was pretty interesting. It was right around the time they were struggling to hit their Model 3 delivery marks, and it kind of wasn’t clear what was going to happen with this company.
Elon is super, super intense. I needed a minute or two to calibrate to the way he thinks. But then once I kind of did, we hit it off and it started being really fun.
He was sitting in the conference room with a furrowed brow when I walked in. I could see he was preoccupied with something. And I said, “looks like you’re you’re preoccupied with something, I hope my timing is not terrible.” He said, “yeah, I can’t figure out why we’re not hitting our sales numbers in the Northeast.”
I kind of lean back in my chair like regular people do and say, “hmm, can’t figure out why you’re not hitting your sales numbers in the Northeast.” He looked at me, he said, “Yeah … that’s what I just said.” I’m like, OK, I think I understand this guy better. He’s an extremely literal individual.
I told him that I bet it had do with people’s concerns over battery performance and cold weather. I said he should take a Tesla car and enter it in these events like Pike’s Peak (a race in Colorado). Electric cars eventually are always going to hold the record because they don’t have the deficiencies of altitude that combustion engines do. That got his attention. He’s like, “Yeah, that’s it.” Sure enough, by the way, electric cars went on to set the record, so it turned out to be true.
