Podcast

In this episode, we have our guest Laurie McCabe, who discusses how technology can help struggling businesses be more efficient during downturns. She also touches on different technology trends and ERP ecosystems,  how they have evolved and what changes you might expect in the future. Finally, she helps SMB business owners understand their technology options.

Chapter Markers

• [0:19] Intro
• [2:33] Personal journey and current focus
• [3:23] Perspective on growth
• [6:06] Difference between automation and digitization
• [9:31] Best predictor of the SMB market
• [13:57] The contradiction between analyst reports for manufacturing from actual sales
• [15:44] How to prepare for uncertainty?
• [22:38] Agility with cloud ERP
• [32:23] Closing thoughts
• [32:57] Outro

Key Takeaways

• If you can’t automate, it’s very tough to scale. And what’s happened during the pandemic is that that’s kind of gone on to steroids. And they’ve realized they have to not only automate but digitize a lot of their business.
• Whether moving tasks from a standalone spreadsheet to more central kind of applications or it’s doing more electronic transactions, more ecommerce, more digital payments, people are realizing that there’s no real time to wait. With this pandemic, the push to digitize has really accelerated.
• Now uncertainty is the keyword of the day. And everybody’s trying to figure out okay, well, I’ve adapted from COVID hit to now, but we don’t know what’s going to come next. In other words, we’re not going to go back to what we had before. We’re not going to stay the way we are now.
• The whole psychology of customers is changing, whether it’s B2B or B2C. What they want to buy is changing, how they want to buy is changing, where they want to buy is changing, and who they want to buy from is changing.
• When you’re using an on-premise kind of ERP, and you want to accommodate growth, what are you going to do is that you have to buy more servers, buy more licenses, install all that manage that. With the cloud, it’s simply a question of increasing your subscription.

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About Laurie

Laurie brings more than 25 years of experience in the IT industry to her current role as Cofounder & Partner, SMB Group. She has built widespread recognition for her insights into the SMB technology market.

She is a six-time Small Business Influencer Awards winner; has been recognized as one of the 50 Most Influential People in Small Business Marketing by AllBusiness, and is a member of Dun & Bradstreet’s B2B Expert Community. Laurie blogs often at lauriemccabe.com, speaks regularly at industry events and has over 17,000 followers on Twitter.

Resources

• Connect with Laurie
  • LinkedIn | Twitter
• Connect with SMB Group
  • Website | LinkedIn | Twitter

Full Transcript

Laurie McCabe 0:00

We’re not going to go back to what we had before. We’re not going to stay the way we are now. So what are things going to look like in six months or 12 months? And we can all make some guesses. Some of them will be better than others. But no one really knows what’s going to happen.

Intro 0:19

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:55

Hello, everyone. Welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at this transformation consulting firm, ElevatIQ.

Why should SMB companies be investing in technology during the downturns such as COVID? What could be some of the low-hanging fruits for executives to consider during the downturn? Why investing in technology is a wise idea during the downtrend? These are some of the questions you will have if you are managing a business during COVID.

In today’s episode, we have our guest, Laurie McCabe, who discusses how technology can help struggling businesses be more efficient during downturns. She also touches on different technology trends and the ERP ecosystems, how they have evolved and what changes you might expect in the future. Finally, she helps SME business owners understand their technology options. Let me introduce Laurie to you.

Sam Gupta 1:49

Laurie brings more than 25 years of experience in the IT industry to her current role as Cofounder & Partner, SMB Group. She has built widespread recognition for her insights in the SMB technology market.

She is a six-time Small Business Influencer Awards winner; has been recognized as one of the 50 Most Influential People in Small Business Marketing by AllBusiness, and is a member of Dun & Bradstreet’s B2B Expert Community. Laurie blogs often at lauriemccabe.com, speaks regularly at industry events and has over 17,000 followers on Twitter. With that, let’s get to the conversation. Hey, Laurie, welcome to the show.

Laurie McCabe 2:30

Hey, thanks for having me today, Sam.

Sam Gupta 2:33

It’s my pleasure. Do you want to start with your personal story and your current focus?

Laurie McCabe 2:40

Sure, yeah. Well, I’m basically right now, what I am is the co-founder and partner of a company called SMB group and SMB group, we’re an analyst and research company, and we really look at technology trends in the small and medium business space and try to understand what their challenges are, their goals are and how they want to use technology to help grow their businesses. And I’ve been an analyst and researcher for about 25 years now. So, you know, it’s really our niche and what we’re passionate about.

Sam Gupta 3:23

Okay, amazing. So there’s one question that we ask all of our guests, and that is going to be Laurie, what is your perspective on business growth?

Laurie McCabe 3:32

Well, business growth is somebody something almost every business wants to do, probably every business. And then, in fact, we do surveys every year, we ask small, medium businesses, what what are your top goals and often growing the business is number one, they’re really oriented towards expanding, I mean, there are a few businesses that just kind of want to stay as is, and you’re happy with the status quo, but overall, most businesses want to grow.

Laurie McCabe 4:01

And of course, right now, we’ve been in a pretty challenging time with COVID. And we know from surveys we’ve done over the last few months that almost all businesses have been impacted by COVID. Now, some have actually grown during COVID.

But the majority have seen revenues drop and obviously faced a lot of other problems that kind of get in the way of growth such as social distancing and your safety requirements and guidelines and people working from home and things like that. So growth is always a top goal for every business, but it’s been pretty challenging for many right now.

Sam Gupta 4:44

Okay, so when you look at the downturn, what are some of the changes that you are seeing in the market in the mindset and their appetite for technology when you talk to these customers when you do their surveys?

Laurie McCabe 4:55

Well, I think what’s really happened is that the pandemic has come accelerated the shift to automate. So small and medium businesses have known for a long time, or at least the majority have that to really grow the business and be competitive and be relevant, they have to automate. Because if you can’t automate, it’s very tough to scale. And what’s happened during the pandemic is that that’s kind of gone on to steroids. And they’ve realized they have to not only automate but digitize a lot of their business.

So whether that’s moving tasks from a standalone spreadsheet to more central kind of applications, where everybody can kind of see everything at the same time online, or it’s doing more electronic transactions, more ecommerce, more digital payments, whatever these things are, people are realizing that there’s no real-time to wait, that with this pandemic, the push to digital to digitize has really accelerated.

Sam Gupta 6:06

So it’s a very interesting comment that you made about defense or the distinction between automation and digitization. So how would you define the boundary between automation and digitization?

Laurie McCabe 6:18

Well, it depends. I think, for me, it’s all about can you both automate the process, right, and then create a digital output from that process that you can then analyze and act on, and kind of remove a lot of the friction from the process.

So you know, for example, I mean, e-commerce is a great example. I mean, if you’re taking all your orders online, and you’re fulfilling all your orders based on what’s coming into the system online, that whole process of you know, your payment is processed online, you digitize that whole process, you’ve obviously automated it, but you’ve bought, you’re also now collecting all that information digitally.

So then you can look at it, you can analyze it, and you can understand trends and things like that. So I guess that’s kind of where I would distinguish it a little bit.

Sam Gupta 7:13

Okay, so the process of the survey could be very exciting, right? And I’ve done some surveys myself, and oftentimes, we find that the insight that can be from surveys is always surprising. We find a lot of surprises. So tell me a couple of stories that you found very surprising lately, especially during COVID. Did you have any comments there that were like, okay, I just didn’t know this? And this is very compelling for me. So tell me some stories?

Laurie McCabe 7:43

Well, I mean, I don’t know if we had any surprises that, you know, rocked our world, so to speak. But you know, one of the big, big, the most interesting things I thought was in every survey we do every year, we ask them about their top business challenges.

Yeah, we have a list of about 10 or 12 different challenges. And every survey, one of the things that can tick off might be growing revenues, attracting new customers, retaining existing customers, hiring employees, retaining employees, all these things.

But one of the other things we always have on there is on being sustaining my business through uncertainty or dealing with uncertainty and changing market conditions. Now usually, dealing with uncertainty is way down on the list. It’s like number eight, or nine or ten post-COVID.

Laurie McCabe 8:39

Well, number one on both surveys we’ve done: dealing with uncertainty has become the biggest issue for, and I don’t think that’s surprising when you think about it. But it’s just amazing that this is something that usually Yeah, there’s some uncertainty always in the business climate. Now uncertainty is the keyword of the day. And everybody’s trying to figure out okay, well, I’ve adapted from my COVID hit to now, but we don’t know what’s going to come next. In other words, we’re not going to go back to what we had before. We’re not going to stay the way we are now. So what is what are things going to look like in six months or 12 months? And we can all make some guesses, and some of them will be better than others, but no one really knows. But everybody knows they’ve got to be able to adapt.

Sam Gupta 9:31

Okay, so let’s make some guesses here. So tell me your perspective. Because, in my opinion, I guess since you are sitting right there in the market, you are talking to so many different businesses, you are doing surveys, you are the best predictor of the economy of the SMB system market. So tell me, what is going to be your best guess, Laurie?

Laurie McCabe 9:51

Well, I think what most companies do is they have to plan for different scenarios, okay, because there are just too many elements that none of us have. have any control over. So you know, speaking here in the US. Obviously, this virus is surging. We also have a vaccine. We also are short on vaccine supply. And we also have distribution problems. We don’t know about these new variants, how that’s going to affect things.

So when you try to, you know, none of us, not even the most brilliant people in the world, know how that virus is actually going to play out. And obviously, the economic conditions and the business conditions are all going to revolve around that, to a large extent. So I think for most businesses, in terms of the economic outlook, unless you’re selling PPE, or all the supplies that might go with rolling out vaccines or something like that, you kind of realize that you’ve got to kind of prepare for, okay, kind of baseline business where I’m at today, growth in business, when hopefully, the virus, you know, settles down and starts receding, but then what happens if there’s a strain that’s resistant to the vaccine or something like that.

Laurie McCabe 11:06

So I think you have to think about all those things. And what that means is you have to be very agile and flexible. The number one, your workforce, already, we have a lot of people, of course, working in home, and a lot of businesses, thank you, well, how is this gonna play out over the long term?

So one, one thing I can say with a lot of certainties is we’re not going to go back to everybody being in a traditional office, again, it’s not gonna happen. So think about how you can best accommodate a more flexible workforce. What kind of jobs have to be done on-site? What kind of jobs can be done off-site? How do you accommodate and equip your employees, so they can be more productive in any of those environments? And that doesn’t just mean giving them a laptop and Wi-Fi at home means a lot of other things, both at home and in the office. And even as far as the psychology of the employee, right, and the stress of the employee dealing with all this uncertainty.

Laurie McCabe 12:04

So that’s certainly a big one. You know, you’ve got to be continued to be prepared for new requirements. We just had a new administration come in. We’re going to have already we’ve had some new mandates about masks and things like that. I think there’s going to be more that you know, about maybe you can you require your workers to get vaccines, different kinds of things like that, I think you should be thinking about cash reserves are essential if you’re not able to kind of manage your cash reserves.

So you can hang on through what your worst-case scenario is your big trouble. So no, really no use where it’s important to have a really good financial system, you got to know how much cash you have, where you can get cash, what’s liquid in new business, the new round of PPP loans is coming out, but you really have to make sure you’re doing that right. And then finally, we don’t think that anybody’s going to want to go back in time.

So again, the more you can do things through low touch, no touch kind of transactions, whether that’s e-commerce, digital payments, virtual services that you provide, instead of physical world services when that’s possible. Those are the kinds of things to think about. And one more thing I should have mentioned the staffing, volatility, you know, we’ve definitely seen small-medium businesses, layoff, rehire your layoff employees, rehire employees, layoff contractors, bring back contractors if you don’t have a good way to manage that, especially again, there are regulations are probably going to be changing around taxes and healthcare and everything else in terms of the number of employees you have and a lot of other things you’re going to find it is very difficult to manage. So you need to think about the fact that staffing volatility may continue for a while.

Sam Gupta 13:57

Okay, so I was having one conversation yesterday with my Bank of America counterpart. And I find these reports extremely fascinating question by the surveys. So we were actually discussing a topic, which is related to manufacturing growth. And he was arguing that manufacturing is up overall, with respect to COVID. In my opinion, when I talk to my customers, they all claim that their sales are 50% down to my manufacturing customers. So if I look at manufacturing CEOs and CFOs, they are claiming that their sales are 50% down, but the report is saying manufacturing overall is up. So what is your perspective on that?

Laurie McCabe 14:37

Well, we don’t really. We’re not in the business of measuring industry sector sales or anything like that. Yeah, I will say everything I’ve read is that because people can’t do a lot of the experiential things they like to do and spend money on like travel and dining out and things like that. They are spending a lot more on things like their home, like wayfarer. I just heard today your stock is up 30% year over year because they’re selling all kinds of things to make your home comfier.

Dell has had a great year with PCs because people are working from home, they want to have a good PC and monitor and you know, equip their home office. So I do think that it probably depends on what your manufacturing, car sales are up. That’s another thing that’s way out. People don’t want to be on mass transit. So I think it depends on what sector of manufacturing you’re looking at. But I do think that a lot of the money that people may have been spending on some physical world kind of experiences and services is going into creating comforts.

Sam Gupta 15:44

Okay, so let’s go back to your comment about dealing with uncertainty. So we are going to give you a new job today. Okay, so you are now the CFO of a manufacturing company. And I am also a CFO of a manufacturing company, and we are trying to deal with uncertainty. So we are going to take a scenario where my sales are 50% down. I don’t care what the report says.

My sales are 50% down at this point in time. Okay, so let’s say if you want me to be ready for the uncertainty, and you want to be ready for uncertainty as well because you are a CFO yourself, congratulations. Okay. So tell me, how would you prepare for uncertainty for the next six months on your own?

Laurie McCabe 16:29

Well, firstly, if your sales are down 50%, the first thing you have to do is talk to your customers and understand, okay, the whole psychology of customers is changing, whether it’s B2B or B2C, what they want to buy is changing how they want to buy is changing where they want to buy is changing and who they want to buy from is changing.

So are you either missing the mark with your product? Are you missing the mark with the sales and marketing channels you’re using? Are you missing the mark in terms of maybe not even just tuning into the psychology of the need for this kind of particular product in the right way? Is something lacking in the way you’re servicing your product? Do you have ways to serve as a customer more virtual way once they buy your product? should something go wrong with your product? So the first and most important thing is to really tap into what your customer is thinking and doing?

And if they are taking their business elsewhere, finding out why are they just not buying that product? Or is it something that you’re doing your own sales or service? It’s not anymore. And then we saw our survey, a lot of businesses, I think it was maybe about a third are either already have or planning to add new products and services.

Laurie McCabe 17:49

So in a lot of cases, it’s just what people want to buy is different. And you know, we’ve seen a lot of companies creating a virtual service instead of physical world service. I know that’s not manufacturing, but you just have to first all understand the customer and how that psychology is changing.

Then the other thing is, you have to execute. So once you find out, oh, they need this, or they need that, and I’m not doing this, like maybe your customer service, it’s too you know, you’re not doing virtually enough should be doing more virtually service them, then you have to figure out how are you going to deploy something to do that better.

Or if you’re going to have to gear up manufacturing for something different on I was talking to a company the other day that was making those CPAP machines. Okay, and you know, for the people that snore, and like about a 10 million company, and when COVID hit, it’s not that the CPAP machines demand went away. They were fortunate people still snore, but they realized a big opportunity to convert part of their manufacturing to PPE. And they did that. And this year for 2020. Their revenues jumped to $70 million from $10 million.

Laurie McCabe 19:07

That’s massive. But that was kind of like, okay, we know things are shifting, we know, there’s usually not this kind of demand for this stuff. But we see that there’s gonna be a huge demand. So we’re going to take this, this portion of our manufacturing facility, and retool it to manufacture something else.

So I think that’s, that’s a big part of it. And what we find in our surveys is that the companies, the SMBs, that and I’m sure it’s the same in large companies, but the SMBs that kind of say, what’s changing what’s different, what do I need to do differently? What do people want, it’s different, and it makes some changes that are generally going to fare better if you just kind of try to stick to the status quo in a time of major upheaval, usually not a great formula.

Sam Gupta 19:57

Okay, so let’s go back to this company a little bit. So $10 to $70 million dollar growth is massive, obviously. But that must probably be an operational nightmare, in my opinion, in terms of fulfilling that demand, right? But growth for a manufacturing company is not like a service company or something like that.

Because you still have to meet your demand, you have to create products. You have to ship it. And that’s unmanageable growth, in my opinion. So what was there, let’s say, the system landscape when they started? How did they retool? Do you have a little bit more background?

Laurie McCabe 20:29

I have a lot of background on that. And it was just kind of a casual conversation on a webinar. But you know, I do know that obviously, they did have to retool some of their manufacturing systems so that they could crank out a different kind of product. But I don’t want to give promos for any particular ERP, but they were using a cloud-based ERP. And it was pretty easy to reconfigure it. And that enabled them to scale in terms of the operational part.

They did have to hire more people. And it was challenging to hire people to help with this new business that they were creating and then generating. I think that that the people part because they did have a good technology solution in place. I think the people part was their biggest challenge. But luckily for them, they kind of caught this at the beginning, when a lot of other people were like, Oh, my God, the sky is falling, I’m laying off, I don’t know what’s going to happen. So I think because they were like April, yeah, we’re doing this, they’ve had a good head start maybe on some other companies in terms of maybe tapping into some of those people who are getting laid off or worried about their jobs.

Sam Gupta 21:46

So typically, we don’t find, you know, $10 million companies using cloud ERP. So obviously, that probably made them significantly agile, based on your previous comment about agility.

Laurie McCabe 21:59

You know, there there are, I mean, there’s definitely ERP systems out there for companies that are small. Not all companies that you see or hear using Oracle and SAP. Yes, definitely a number of solutions that are more geared towards the mid-market and even lower end to the market. So let’s say they weren’t using Oracle or SAP.

Sam Gupta 22:38

So here, with respect to cloud ERP, why do you believe that the cloud ERP actually provided them the agility that they would not have, let’s say, if they were using on-prem ERP or legacy ERP or something else?

Laurie McCabe 22:52

Yeah, well, a few reasons. Number one is that with the cloud ERP, you can scale a lot more easily, right? When you’re using an on-premise kind of ERP, and you want to accommodate growth, what are you going to do is that you have to buy more servers, buy more licenses, install all that manage that, you know, you’re doing some new things, you may be doing something where you need to add some new software, you have to integrate all that.

With the cloud, it’s simply a question of increasing your subscription. Whether that depends on the company, it may be based on the number of transactions or maybe on the number of users. However, the license, but you’re just basically turning up the dial. And the other thing is, I think a lot of the cloud ERP systems are much more modern, and they’re much easier to kind of reconfigure. It kind of accelerated the whole curve. In other words, in your key, because to do things at scale, you need to do them pretty elegantly. And I think a lot of the on-premise stuff is it’s kind of clunky and cumbersome.

Sam Gupta 24:00

Okay, so tell me with respect to, let’s say, if I’m designing a new service or new product in this company, which is probably growing, and if I have my cloud ERP, and let’s see if I need to reconfigure, what am I going to require as a manufacturing executive to go from point A to point B?

Laurie McCabe 24:23

Yeah, well, I am not a manufacturing ERP consultant. So I’m gonna give you that caveat. Right now. I’m a researcher and analyst. But, I will try my best. So first of all, what are you going to start making right? What are you going to make now that you weren’t making you and there’s some stuff right on the line with the equipment that you’re going to have to change, and that’s totally a manufacturing kind of question?

In the ERP system, again, you need to either have somebody on your staff that really knows that system inside and out and how you have it set up today that you can sit down with and you can plan for, well, we’re going to have another product line, we’re going to have the SKUs, we’re going to have all these things, we’re going to have new shipping requirements, new inventory requirements.

But there, it’s not only one thing. You have to kind of sit down and work through every single little logistical detail and make sure that you then and I’m going to use the word program, but you’re not really programming yet. You’re just setting up the system to accommodate that new process and workflow to accommodate that new product line.

Sam Gupta 25:41

Okay, so tell me some more stories. And I don’t know if you have more stories that you found during your surveys that were really compelling because of COVID.

Laurie McCabe 25:50

Well, yeah, there are great stories all over the place on another webinar with a guy that is a very big beekeeper. And so they sell bees, they sell honey, they sell all kinds of honey products and very successful business in their region. It’s dependent upon in-person foot traffic. And when all this happened, it was like, okay, now what, so they had him set up, they were not really set up for e-commerce, they set up for e-commerce, they set up an online community, and they had a great community of customers in their physical world.

And they did workshops on site. So they made a lot of those into virtual workshops. They started like discussion boards, so different people keeping these, you know, kind of trading exchange, and their revenue grew over 100%. So they really were able to make the transition.

Laurie McCabe 26:48

And I think, in that case, it really boiled down to the fact that they were able to recreate a great customer experience online. And not only did it keep your existing customers in the fold, but it also allowed them to go outside of this region within a state, maybe three or four counties within a state where they have been doing business. They could broaden that out, because then somebody could say, oh, well, you know, I have a friend, you know, they happen to be in Washington State, I have a friend, and he’s in, Ohio, he’s interested in do keeping bees.

And now this company could suddenly be a company where they couldn’t before because they really were not into e-commerce and didn’t have all this stuff online. They could be a vendor to this customer and a whole other state. So I think that’s a really great example as well.

Sam Gupta 27:43

So tell me a little bit more about the customer experience. What all did they change with respect to customer experience? And what, let’s say, manufacturers or distributors or retailers can take away from this conversation in changing their customer experience?

Laurie McCabe 27:58

Well, I mean, I think there’s a few things. I mean, people want to feel like they have a personal touch and a personal interaction, especially within SMB. And so again, listen to the customer, and make sure the customer has lots of channels to communicate with you.

Some customers may want to communicate via the old-fashioned way, like phone or email. The other ones may want to use your Facebook page or Instagram, or whatever. Some obviously, when they’ve problems, they want to talk to somebody in customer service. But I think it’s really important to be where your customers are, right? And make sure you are interacting with them the way they want to interact with you. And there’s certainly a lot of different ways to want to do that.

Sam Gupta 28:48

Okay, let’s talk about a business solution. So you have been researching business solutions for the last 25 years. And you are probably going to be doing this for the next five years. So if I were to ask you your entire journey, let’s break it down into five segments that okay, how the landscape was 25 years back, 20 years back a few years back, walk me through that journey in Super brief.

Laurie McCabe 29:10

Yeah, I know they can break it into five steps for you. But I can tell you that 25 years ago, most small and medium businesses were using maybe a couple at most of the business applications. Maybe they were using accounting, and you know, one or two other things, why it was just really hard. They’d have to stand up a system, load the software and manage the software, update the software, etc.

It’s been almost 25 years when since cloud-first started in the late 1990s is when Salesforce and NetSuite both launched. The cloud has really democratized access to the software. So small and medium businesses now use many many many business applications because in a lot of cases, and especially on the customer-facing applications like CRM, and marketing and sales, and e-commerce, and the collaboration, part, email, and if you’re using Slack, or if you’re using video conferencing or anything like that, you don’t have to run any of that in house, and you’re probably not writing any of it in house.

So now the small and medium businesses can really have almost they can, they can have a completely virtual business with very sophisticated solutions without making a huge investment. And I think that’s really the biggest change that the software is there, and the access to the software is there via the cloud. So as a small business, you can really run in a sophisticated way as a big business.

Laurie McCabe 30:46

Now, the missing link still, though, is the business expertise. Because a lot of times in a smaller company, you don’t have a marketing expert or a customer service expert, you know, you’ve got a handful of people wear different hats, they know a little bit about a lot of things.

So the cloud has solved the problem of getting the software and getting it in a cost-effective way. But they still need expertise. So a lot of times, I say, you know, before you invest in a new cloud solution, make sure first of all, it’s easy to use, it’s gonna fix or help you with whatever you’re trying to do.

Laurie McCabe 31:24

But second of all, spend a little money on getting a consultant that can help you you know, the marketing solution or financial solution or whatever help you get the most value from it because they know they’ve done it probably for lots of customers, they know lots of tricks, they’re going to keep you from making a lot of mistakes that a lot of other people have made before at the end of the day, you’re going to say wow, I’m getting so much value from this, as opposed to oh my gosh, I’m pulling up pulling my hair about out this thing will do what I want it to do.

So yeah, the software is there. There’s a lot of great solutions for design just for small and medium businesses, and you want to get a good fit. If you’re small, you shouldn’t be looking at I don’t think custom companies that you know their bread and butter is a large enterprise. You’re just gonna get lost in the shuffle. You know, look for the companies that really focus on your kind of size, business, and your industry and things like that, you’re probably going to end up with a much better fit.

Sam Gupta 32:23

Okay, Laurie, this has been insightful. Do you have any last-minute closing thoughts, by any chance?

Laurie McCabe 32:28

No, I think we’ve covered most everything. I think just I would sum up by saying, you know, really tap in listen to your customer, seeing what’s going on around you competitively know that you can get what you need to to help you grow. It’s out there, and the software’s out there for SMBs. But you know, spend a little money to make sure you’re deploying it in a way that’s going to give you the most value at the end.

Sam Gupta 32:57

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you’ll learn something new today. If you want to learn more about Laurie, head over to Lauriemccabe.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check out the related episodes, including the interview with Brett Beaubouef, who discusses whether moving to the cloud guarantees business transformation. Also, the interview with Randy Johnston from K2 Enterprises who touches on why process documentation is an essential ingredient for an efficient finance organization.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 34:00

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Bob Evans, who discusses what SMB customers need to know about cloud infrastructure providers. He also discusses the evolution of these vendors and their direction for the next 5-10 years. Finally, we touched on why understanding cloud infrastructure issues are still relevant and essential, even if the SAAS options may seem straightforward.

Chapter Markers

• [0:25] Intro
• [2:15] Personal journey and current focus
• [4:52] Perspective on growth
• [7:07] Macro positioning of major cloud vendors
• [12:50] The Infracture implications on cloud ERP
• [15:48] Cloud vendor-lock
• [21:45] Industry capabilities of cloud vendors
• [27:56] Tech prediction for CFOs
• [32:52] Closing thoughts
• [34:38] Outro

Key Takeaways

• Amazon has chosen to stick strongly in the infrastructure space. And they’ve also been built out into databases. I think they have 16 different specialized databases, which can be very useful.
• Microsoft has the infrastructure, they’ve added a database to that they’ve got the hybrid play that lets companies connect our older, traditional systems in with the new cloud possibilities. Plus they’ve got things that connect office and windows. And now they’ve got Microsoft Dynamics.
• What all the big tech companies are doing now is they’ve swung around, and they’re starting to develop industry-specific applications. And so everybody’s moving in this direction. And they are now applying these different tools that help businesses in those industries harness the power of data.

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About Bob

Bob Evans is one of the world’s leading analysts of the enterprise-tech phenomenon, the cloud industry, and the global phenomenon of digital transformation. He’s the creator of the Cloud Wars content network, a strategic advisor to CEOs and CMOs, and a keynote speaker. In 2012, he was recruited by Larry Ellison to become Oracle’s first chief communications officer, and he left there after 5 years to launch the two businesses he runs today: Cloud Wars Media LLC and Evans Strategic Communications LLC. He’s given keynote talks about business innovation, digital transformation, and customer-centric business on every continent on Earth (well, not Antarctica), and has written thousands of articles on those subjects.

Resources

• Connect with Bob
  • LinkedIn | Twitter
• Connect with Cloud Wars
  • Website

Full Transcript

Bob Evans 0:00

You know what’s happened even before March of 2020. And since then, the adoption of the cloud has accelerated. It has given midsize and small businesses a platform and access to world-changing technology so that the smallest company in the world can have access to the same sort of remarkable technology that the biggest companies in the world have.

Intro 0:25

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:02

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. While Software as a Service has made buying and implementing enterprise software such as ERP easier, evaluating SAAS options is never easy. With so much at stake with growth, understanding the implications of a cloud infrastructure provider is essential. You will have tons of questions such as security, the location of your data, and vendor lock-up issues. Finding the answers to such questions is hard unless you understand the cloud providers at the macro level.

In today’s episode, we have our guest, Bob Evans, who discusses what SMB customers need to know about cloud infrastructure providers. He also discusses the evolution of these vendors and their direction for the next five to 10 years. Finally, we discussed why understanding cloud infrastructure issues are still relevant and essential, even if the SAAS options may seem straightforward. Let me introduce Bob to you.

Sam Gupta 2:15

Bob Evans is one of the world’s leading analysts of the enterprise stack phenomenon, the cloud industry, and the global phenomenon of digital transformation. He’s the creator of the Cloud Wars content network, a strategic adviser to CEOs and CMOS, and the keynote speaker in 2012. He was recruited by Larry Ellison to become Oracle’s first chief communications officer. And he left there after five years to launch the two businesses he runs today, Cloud Wars Media LLC and Evans Strategic Communications LLC. He has given keynote talks about business innovation, digital transformation, and customer-centric business on every continent on Earth (well, not Antarctica), and he has written 1000s of articles on those subjects. With that, let’s get to the conversation. Hey, Bob, welcome to the show. Sam.

Bob Evans 3:13

It’s great to be here. Thank you so much for having me on.

Sam Gupta 3:15

Of course, just to kick things off. Do you want to start with your personal story and your current focus?

Bob Evans 3:21

Sure, Sam, you know, I have been in around the tech business for a long time. I was first involved with it from the media side. So I worked in magazines and some websites covering the tech industry from a business perspective. And Sam, it’s very easy to see if anybody talks to me for more than 10 seconds that I’m not a technologist. But I’ve always been fascinated by the business value and the business innovation that technology can help drive. So I really enjoyed that time in the media, but probably about 10 to 12 years ago, Sam, I decided I wanted to get out of the media business and into the technology business. So I worked for a year at SAP, where I helped them talk to the world more about the customer success that was happening, more about customer innovation, and so on. And then, I was recruited by Oracle.

Bob Evans 4:11

So I went over there, and I worked for Larry Ellison. For a while, I was their first chief customer officer. And then, after about five years there, Sam, I thought, I’m not getting any younger. So if I want to live out this dream to start a couple of companies on my own, now’s the time to do it. So I started a consulting business about four years ago that’s still doing well. But two years ago, I started Cloud Wars media, which allows me to cover, analyze, dig into and really try to understand how these big world-changing tech companies are aligning themselves with what business people need today. So not so much about the tech, but more about the business innovation that can help drive for customers.

Sam Gupta 4:52

Yeah, so I’m actually gonna dig deeper into all of that because my customers may not be directly affected by that, but they definitely need to know about the positioning of these different vendors. But before we do that, we have a standard question that we ask all of our guests. And that is going to be Bob, your perspective on growth. When you think of the word business growth, what does it mean to you?

Bob Evans 5:15

I am certainly concerned about it myself, right? You know, I have two relatively small businesses and entrepreneurs. So I want to see it happen. And I think, Sam, right, it is so much today, we hear so much about these big tech companies. And you look at these trillion-dollar valuations for some of these giant companies. It seems almost like, well, that’s just for the big, big folks. But you looked around with what’s happened even before March of 2020. And then since then, the adoption of the cloud, forget the technology side of it, has given midsize and small businesses a platform and access to world-changing technology so that the smallest company in the world can have access to the same sort of remarkable technology that the biggest companies in the world have. So I think all of that is a huge factor for growth.

Bob Evans 6:06

And the other thing, Sam, that I think is so critical about growth these days, for the excellent audience you’ve got up on your show is, yeah, that it’s the mindset of leaders these days, in companies about growth, right, they’ve got to be able to take their past, and all the wonderful things they’ve done in the past. And then almost like a deck of cards, they’ve got to shuffle that and come up with a different way of playing for the future, right, with customers and prospects calling more the shots about what happened, how quickly can these companies adapt to new opportunities match the engagement methods, and preferences of their customers understand new ways to apply some of these exciting new technologies, not because of the technology’s cool, but because it lets them do new and better things for their customers. So I think Sam, I entered 2021 with a huge amount of growth and optimism about the growth that small and midsize businesses can have in this remarkable time that we’re in right now.

Sam Gupta 7:07

Yeah. So now we want to discuss the infrastructure play overall. So obviously, from the cloud application perspective, small to medium-sized businesses may not need to worry about the IT infrastructure just because their vendors are providing it. But in my mind, as a technology guy, when I look at it, there is a lot of cross-pollination happening in the market. Some of these apps are deployed on AWS.

Some are deployed on Oracle infrastructure. And some are on Microsoft Azure. And in my opinion, there is a lot of implication that the business owner needs to know. So let’s start from the macro perspective, Bob. What is the positioning of each of the cloud infrastructure providers in the market? And obviously, we have three major cloud providers, and that is going to be your Microsoft, Oracle, and then Google. So tell us the positioning of each of the cloud infrastructure providers and where they fit in their positioning.

Bob Evans 8:05

Sam, you think back was only about 15 years ago that Amazon decided that they had an opportunity to break out this specialized internal capability. They had this. This has helped us so much. We can start a whole new business about this just 15 years ago. Now it has become what I think is the whole cloud business has become Sam; I think it’s the greatest growth market that the world has ever seen. Yeah, and it isn’t great. So much just because the technology is wonderful, but it’s great because of the capability that it gives to customers. And Amazon deserves a ton of credit for being the first one to seize on this. And to not only create the technology that made this possible but to go to market possibilities, right? You always hear about that thing age, just swipe a credit card.

Bob Evans 8:55

And you can be up on the Amazon cloud. Yeah, that’s not how the technology industry was accustomed to working. It was complex, and you had lawyers and 500-page contracts, and so on and so on. And they were talking, right, Sam, in terms of quarters and years, before you could really get moving on things.

So that ease of use, the simplicity of buying, and so on that Amazon brought to debt, I think I will go down as one of the great achievements in technology, industry history. In the history of this technology marketplace. Then you get a company like Microsoft that comes in, right. And when Microsoft was first getting into the cloud, one of the things they said was, well, we offer this infrastructure, but we also have software applications and middleware that allows a small, midsize business to connect everything from their biggest systems, down to their desktops.

Bob Evans 9:52

And early on, Sam, I think it was interesting because some of the bigger cloud companies, you know, laughed at that. They said Microsoft, this is you know, who cares? About that, yeah, but Satya Nadela said just the other day on the Microsoft earnings call. He said more and more Microsoft customers are valuing them because they said Microsoft’s solutions in the cloud could go from end to end, every part of what Nadella calls the digital estate. And I think that’s one of the factors behind Microsoft’s incredible growth.

So Amazon has chosen to stick strongly in the infrastructure space. And they’ve also been built out into databases. I think they have 16 different specialized databases, which can be very useful. Yeah, Microsoft has the infrastructure, they’ve added a database to that they’ve got the hybrid play that lets companies connect our older, traditional systems in with the new cloud possibilities, plus they’ve got things that connect office and windows, and now they’ve got Microsoft Dynamics.

Bob Evans 10:53

Yeah, ERP system, HCM, CRM, which is now Sam, it’s over a $2 billion business. Yeah. And on top of that, Nadella said released his numbers the first time Microsoft’s ever said, the size of Microsoft’s cybersecurity business $10 billion in the last 12 months. So Microsoft can offer a wide range of solutions, then you’ve got Google Cloud. And what Thomas Kurien has done there in the last couple of years has been remarkable. He, too, has taken them beyond the infrastructure play, right? They’ve developed now they’re starting to pair up their infrastructure expertise with what they can do with data, and yet AI and ML.

Yeah, so they’re creating some of these industry-specific solutions that a retail company can use to be able to manage these new processes that have arisen over the last couple of years, everybody going omnichannel, how you manage inventory differently, when it isn’t just the traditional retail model when it has to be done, you know, buy online pick up at the store, curbside pick up, delivery to your home, however, those things happen.

So there’s a whole new range of applications coming out from Google Cloud. And then as you mentioned, also Sam what Oracle’s doing, and I think, if Larry Ellison’s belief wins over more and more customers, what he’s done is create a different type, what he calls a Gen two infrastructure that’s more secure, it’s autonomous, you don’t need to have people manage it. And then that is coupled with his big bet there is Oracle’s autonomous database. So again, not going deep in the technology, but the play there, they said, is no human intervention. No errors introduced by humans, plus Oracle has a huge suite of applications that they can tie in. So four different major infrastructure providers with four very different approaches to the market.

Sam Gupta 12:50

Okay, amazing. So let’s, let’s talk from the perspective of the manufacturing CFO. So let’s say if I’m the manufacturing CFO, and I am completely sold on the cloud, I understand the kind of benefits it brings to me. But do I need to know more about the infrastructure where my ERP application is deployed? So if I talk to my ERP vendor, they say that you don’t have to worry about anything. The only thing you need to care for is the subscription license fee that you are going to pay. But you know, if my application is deployed on AWS versus Microsoft versus in a tiny shop. So should I care for that as a CFO?

Bob Evans 13:35

Sam, it has changed so much a lot of this thinking about that over the past several years. It used to be that a lot of business customers, a CFO, and a midsize manufacturing company might think, wait a minute, this cloud thing. Right, at least if I go down to my data center, I know that I can protect that. But now there are other companies telling me to send my data to send everything, you know, the most important assets in my company out over the internet.

So there was understandably a lot of concern about this. Yeah, what a lot of what I think so a valuable insight for your ID and Sam is that these big cloud vendors that we’ve just been talking about each one of them can spend can invest billions of dollars every year in security and performance and upgrades, and things like that. Whereas any sort of eight or nine, I don’t think there are too many midsize manufacturing companies that could spend millions of dollars on security, let alone billions.

Bob Evans 14:41

So, Sam, I think there’s been a leap that’s been made in the past few years that the confidence now that companies can have in AWS, in Microsoft Azure, in Google Cloud, in Oracle as being highly credible rock-solid things that go on there. So does the CFO need to dig into that a whole lot? I think they want to make sure that the SLA is being covered and all of that. But as far as getting into the technology, no, I, I don’t think that here in 2021 anybody needs to worry about that? There’s no foolproof system for sure.

Yeah. So I think customers have to apply a lot of rigor in the contract talks about that. But on the straight-up the implementation of the technology they are doing each of those big cloud companies doing a great job, I think with insuring it, because they know if they get one of those problems, if they have one breach that occurs, everybody in the world is going to know about it, everybody in the world is gonna say, hey, wait a minute, you can handle this, I’m gonna go to somebody else. So it’s definitely in the interest of these big cloud vendors to be even better than they promise.

Sam Gupta 15:48

Okay, amazing. So let’s talk some more from the perspective of the CFO. So let’s say you know, if I’m the CFO of the manufacturing organization when I hang out with my buddies, and they keep telling me about the vendor-lock, that if I utilize my cloud, then I am going to be locked to a specific vendor, and they can raise the price at any point of time right now, they might be giving you a cheaper deal on the app. But once you are locked in, they are going to increase the price. So what would be your perspective for a manufacturing CFO on that?

Bob Evans 16:19

It’s a great question, Sam. All of your questions have been very good. And I think it very helpful for your audiences. And I think that reflects. I think a big point that I wanted to make here is that up until about three or four years ago, Sam, it seemed to me that the whole cloud business was being driven by and built around the aspirations of the tech vendors. Yeah, right.

And I don’t think there’s a manufacturing CFO in the world yet. Who would ever on his or her own have come up with terms like Platform-as-a-Service, Infrastructure-as-a-Service, Software-as-a-Service, Data-as-a-service, you know, everything as a service, right? That’s a tech industry term. Yeah. And slowly, but surely, over the last handful of years that customers have started to push back on the tech vendors and say, Look, you keep all the acronyms you want, but keep that inside.

Bob Evans 17:10

Here’s the business problem that I need you to help me solve, I have to turn inventory more quickly, I have to manage my supply chain more effectively, I have to be able to customize the manufacturer of products. Because each of my customers wants things a little bit differently, I’ve got to be able to ship for a customer A to three different locations for customer B to 12 different locations. Your customer See, I have to ship six different variations to each of five different locations. So this is Sam, the complexity of what’s being asked of manufacturing companies today mid-sized small manufacturers that don’t have a ton of money to spend on information technology, I think there’s a wonderful opportunity for them to be able to say. I’ll find the right technology partners in the cloud to help me do this.

Bob Evans 18:02

Because they’ve got the infrastructure to run faster and more securely than I ever could, they’ve got these new applications that can be configured to my precise needs. And I think Sam, there’s also that growing sense that if the tech industry vendors, yeah, they try to make their competitive problems, turn that over into being a problem for their customer, where the customer says, hey, if I get into your stuff, and you try to box me into a corner, I will drop you so fast, you won’t know what hit you.

But yeah, you prove to be the customer, that you can help me work with other vendor tech vendors, I will give more and more and more of my business to you. And the customers have come around and started to be more in control. Sam, I think of some of these decisions, forcing the tech vendors to adopt more open policies toward that it’s not a perfect state now by any means. But more and more, it’s going in the directions where the customers are speaking with their wallets and exercising. You know more of the leverage they have in these negotiations.

Sam Gupta 19:09

Okay, amazing. So let’s say if, again, I’m looking for some sort of application. And I’m sold completely sold on cloud. And I have to choose among some of the vendors that are going to be well known in the market. So let’s say if I’m choosing between Amazon, or Microsoft or Oracle or Google, okay, let’s talk about the top four. Right? So if I have to choose an ERP application that is probably deployed in one of those, should I be paying attention to any variables from the infrastructure perspective? Or shall I simply be paying attention to my business aspects of the application?

Bob Evans 19:47

Yes. And again, you know, great insightful questions here from you. And I think the big thing here is to see that competition and free-market competition is great thing. So You have these world-class big companies that have been around for 30 or 40 years like Oracle, like Microsoft, yeah, like SAP? Yeah, coming out. And they’ve got, they’ve got these huge numbers of customers all over the world, they want to keep them. So it’s in all of their best interest to innovate more rapidly, come out with better capabilities, and be more flexible in both the types of products that they offer to customers, especially in the mid-market and smaller customers. But also, they’ve got to be able to play with each other in a nice way. Even if the tech vendors don’t want to do that, they know the customers are demanding.

Bob Evans 20:37

So I think the best source for a CFO in a company trying to which one of these they pick is to look at the customer references. Because you know, you can have the technology people in a company, look at the features on a website or demos, and they can go through that all day.

But who is the tech vendor that is able to put up more customers who will publicly reference and state, this company, vendor XYZ, not only not all of my technical specifications, they were incredibly good to work with, they met their deadlines, they met their budgets, and they want to help me not just do the transaction where I agree to pay this, I push somebody to check the cloud because it’s not a permanent license, it forces the tech vendors to win back that business year after year after year? So, Sam, I think the customers are taking control here. Then if I was, you know, going to offer counsel to your audiences about where to look and making these decisions. The number one factor should be customer references, customer references.

Sam Gupta 21:45

Okay, amazing. So now, let’s go back to again those four big vendors. And if I were in a specific industry, or is one of these vendors going to have an edge in a specific industry, or are they evenly positioned across the industries in their capability? So let’s take an example. Let’s say if I’m in the manufacturing versus distribution or healthcare, okay, is Oracle going to be better suited in a specific industry, or is Microsoft going to be better suited? So can you talk about the positioning of these vendors, from the industry perspective,

Bob Evans 22:18

The industry issue that you’ve just raised. I think that will be the single hottest and most innovation-filled category in the whole tech business in 2021 and also into 2022. Because up until recently, the big tech software vendors, their applications were meant to work horizontally right across HCM or across CRM across ERP. So they could handle the horizontal applications more and more.

What all the big tech companies are doing now is they’ve swung around, and they’re starting to develop industry-specific applications for all of the industries you just mentioned. Yeah. Right. And so everybody’s moving in this direction. And they are now applying these different tools that help businesses in those industries harness the power of data. So more AI-powered applications, machine learning applications, the ability in a manufacturing company to help deploy IoT technologies, and to be able to harness that data through these new industry-specific solutions.

Bob Evans 23:31

So, Sam, I don’t think I could state that there’s, you know, any one of those companies does a particular, you know, outstanding job in those. Each of them has its strengths. And again, I’d come back to that customer reference point of view. So if I’m in the discrete manufacturing business, which one of those companies because, they all say, Oh, yeah, yeah, I have an application that will do that. But that one is able to put three customers on the phone with me, that will say, Oh, yeah, this, this has worked better than we thought it would, or who might say, you know, what, stay away from vendor x.

You promised the world, and they didn’t deliver anything? Yeah. So. But the interesting thing, Sam, if you go back to your first question about growth, is this everything? So these industry-specific capabilities that are coming up, nobody’s ever had this before. And the opportunity to have those applications, greater understanding, and ability to leverage and gain insights from the data around that and to be able to move as fast and accelerate operations to move at the speed of the markets around you. That’s why I think there’s there are big opportunities for growth and optimism in 2021 and 2022.

Sam Gupta 24:46

Okay, amazing. So obviously, you interview one of the brightest people in the tech industry, Bob. So you know, what I’m going to ask you is, do you have any interesting stories that you heard in your recent interviews that you may want to share with our audience?

Bob Evans 25:02

You know, Sam, I think what was fascinating is I’ve talked to the CEOs of the big tech companies recently. We did a series called The CEO cloud outlook 2021. Yeah, I never talked to the CEOs of the tech companies about their products, right. But I asked them instead, what are your customers telling you or asking you about this year?

That’s different from last year? What’s the number one priority of CEOs? What did they come to you and say, hey, please help me with this problem? Help me with this opportunity? And more and more, it’s around things like how do I get to know my customers better? How can I customize and personalize the sorts of products and services I make? For the last 75 years, I have made these sorts of products in my factory, and I sold them this way. But now the customer is saying. I want you to make different variations. I want you to sell to me differently, I demand to buy from you and, you know, on and on.

Bob Evans 26:06

So a CFO and manufacturing or a distribution company? How do they take all the expertise they’ve built up over the last 50 or 75 or 100 years? And then how do they leverage that with these new digital tools and capabilities to become faster, smarter, more customer-focused, and better able to see what the trends are that are coming and be prepared to move as fast as the world around them. So I think that is the most interesting thing that I hear the CEOs say, and one of my favorite lines, Sam is, from Thomas Kurian, the CEO of Google Cloud. And he said we have a tendency in the tech industry to think about whatever’s going on right now.

That’s the biggest thing ever, he said, but it isn’t. History shows us that the world changes rapidly. He said a lot of people think that what was going on two or three years ago, yeah, is going to be the same as what we’re going on two or three years from now. And he said it isn’t. So he said, what we are trying to do at Google Cloud is to help our customers adapt, change, evolve, be agile, be nimble, and be able. Again, as I know, I’ve said this a couple of times.

But it’s such an important capability. How can your audiences stand to be able to move as fast as the world around them as their customers are moving and to be able to seize new opportunities as they arise? And that’s what I think the best cloud industry CEOs are focused on, not the technology that’s a given, but rather, how do I help get that innovation and that power for change and growth into the hands of my customers more easily and more simply.

Sam Gupta 27:56

Yeah. So let’s talk about the prediction of it. Because you know, the guys who deal in the metro space, I think they are best positioned to predict how the next ten years are going to look. So as a manufacturing CFO, how my life is going to change in the next ten years. Bob, tell me about it?

Bob Evans 28:14

Well, I think that you know, one of the things that are going to happen is what so many companies are going through right now, Sam of this whole thing, that the term digital transformation, perhaps the term has been overused, but the basic concept is more important now than ever before. And I think the number one key issue around digital transformation, which is the way that these your CFOs are going to move into the future for these next five or ten years. Yeah, they have to put the customer at the center of everything they do, right. And every company, of course, says that, but not that many companies actually do it. Yeah.

So how do you how does a manufacturing company allow its customers to come in, not at the end of the process, when something is made and shipped, but rather say, customer, you come in, you help me co-create this product that you ideally want. You help me talk about how it’s designed and how I can ship this in ways that are most optimal for you. You helped me understand some of the new markets that you’re going into so that I can be ready to adapt and change to that. So instead of the old sort of mechanistic world where a customer says I want this, and the manufacturer creates that, and by the time it’s all done and set up to cause that, well, this is what I asked for, but actually, my needs have changed.

So we had this sort of start-stop, on-off, the backward-forward world before, and instead is they’ve got to be able to synchronize, orchestrate and harmonize operations between the buyer and the seller. And so, looking into the future, I think how then does a manual factoring company truly put the customer at the center of everything. And Sam, I know you’re a pretty young man. You might not recognize this term. But did you ever hear of the term bankers’ hours? Bank hours?

Bob Evans 30:17

Well, it’s you know, this is for an old guy like me, but when I was a kid, I mean, up until I was in probably my mid-20s or 30s. But bankers hours were I remember I first heard the term and asked my dad, what does that mean? He said, well, he said, banks are open from 9 am until 3 pm, Monday through Friday, none of them are open earlier, none of them opened later. None of them are open on weekends. And he said it’s a nice business if you can do that. But yeah, the point was, the customers didn’t have any alternative there. We have ATMs. There was no online banking. So unlike that, yeah.

So it was a simpler world where the seller was in charge of it, the seller dictated, here’s when I’m going to be open, here’s what I will allow you the customer to do here are the things I will not allow you to do. And your whole world is not that long of a time has been turned upside down. I mean, you talk about that to a 20-year-old today, and they’ll look at you like you’re crazy. Why would anybody settle for that? Why would you allow that to happen? There are a million other alternatives. So that genies out of the bottle now, not just for things like banking and so on like that. We see it happening everywhere. Yeah, look at what happened in 2020.

Bob Evans 31:32

Telemedicine went from being sort of an idea that people dabbled with to now it is the future of medicine. Yeah. Personalized, customized manufacturing, it was before it’d be like, wow, that’s really expensive. And it’s hard. And I don’t know, but now it’s gonna be the way of the future, you get additive manufacturing, you know, 3d printing, digital twins. Yeah. Mixed reality, you know, these sorts of tools are coming in. And they’re going to reshape these companies in ways that, that right now it’s hard to fathom. But what the leaders and your audiences, Sam, those CFOs and executives have to do now is they’ve got to embrace change, yet, as a competitive advantage.

Yeah, they’ve got to be willing to say I am going to change more aggressively and more confidently, and more rapidly than any of my competitors. And that’s going to be an advantage for me, instead of the old way of looking at it, which is like, if I can just keep perfecting what I did for the last 50 or 60 or 70 years, I’ll become more efficient. So I’m all for efficiency, Sam, but the future is going to be all about innovation, high change, and the ability to adapt to external market conditions as rapidly as possible.

Sam Gupta 32:52

Okay, so we are close to our time now. Do you have any last-minute closing thoughts, Bob?

Bob Evans 32:58

I do, Sam. And I would like to ask you have a question. And that is, what would you say for your audiences? What do you think are the three biggest priorities for 2021?

Sam Gupta 33:09

So first priority, I would say, is going to be just to make sure you are able to sustain. Okay, don’t overspend yourself, just because the technology could be a shiny object. The number two could be the plan for the future. You don’t want to plan for the long term. Right now, plan for the midterm. And the third is going to be to not forget the future. The future is there. So those are my three.

Bob Evans 33:40

Yeah, Sam, those are great. Those are great. And I think especially, you know about the future, and you know, well, where’s this all going to head the closer that any business, any executive, the closer you can get to your customers? Yeah. And again, I imagine every executive say, well, I’m a successful executive. I have got to be a successful executive by listening to my customers. Yet, it’s not that simple. There are, there’s more pressure for companies to do this better than ever before. And I don’t think that you know, for your audiences, you could ever state that. But I love your three priorities. I think those are great. And your show does a terrific job of helping drive those points home and create ideas and new possibilities for your audiences, Sam, so thank you so much for letting me come on and share some ideas with you.

Sam Gupta 34:27

And thank you so much for your time. This has been a fun and insightful conversation, Bob.

Bob Evans 34:31

Sam, same here, All the best to you and to your audiences. I appreciated the time and had a great conversation with you. Thank you so much.

Sam Gupta 34:38

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Bob, head over to CloudWars.co. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Wayne Sadin, who brings a unique perspective on why business processes are more important for growth than individual business systems. Also, the interview with Brett Beaubouef, who discusses whether moving to the cloud guarantees business transformation.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to get you on the next episode of the WBS podcast.

Outro 35:52

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Robert Johnson, who discusses how the metal fabrication industry’s manufacturing processes differ from generalized manufacturing. He also provides insight into the unique challenges associated with the metal fabrication industry and the production of cold-formed steel. Finally, he shares some thoughts about the value of LinkedIn and how executives from traditional industries such as metal fabrication can take advantage of LinkedIn.

Chapter Markers

• [0:17] Intro
• [2:32] Personal journey and current focus
• [3:16] Perspective on growth
• [4:19] The importance of relationships
• [5:36] The effective methods of cold-calling
• [8:57] The supply chain challenges of the metal fabrication industry
• [11:18] The role of systems in the growth of a company
• [14:10] Metal fabrication vs. generalized manufacturing
• [19:07] The purchase process of steel
• [21:03] How to hedge commodity price risk for steel products?
• [26:58] Sustainability in the construction industry
• [32:00] The role of LinkedIn influence for construction executives
• [37:44] Closing thoughts
• [40:38] Outro

Key Takeaways

• What I’ve learned mostly about healthy growth is to be creative and to develop a relationship, the relationship, absolutely vital to healthy growth in business.
• Younger generations now want to work in tech, and they want to do it, they want to work with computers, they don’t want to work with their hands anymore. Very few. And so we have a, for lack of a better term, we have a dumbing down of the labor force.
• Let’s make it into an industry-specific customer, a potential customer, a general contractor, a hotel developer that I’m trying to I would love to get some business around, I’ll call that individual just introduce myself and never talk about business or what we did. To me, that’s not a cold call it.
• A cold call is almost anti-relationship. To me, the relationship is meeting somebody in a convenience store. Obviously, I’ve never met that person before. But we can see and can make eye contact. We can read body language. And we can smile at one another. There are other things that happen before there’s any conversation or interaction that is impossible.

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About Robert

Robert Johnson is a Construction Executive with 40+ years of experience in all sectors of construction. He has constructed projects totaling $375,000,000 and currently is Director of Manufacturing and Business Development at MAC Prefab, a Cold-Formed Steel Manufacturer and Fabricator servicing the Central and Western United States. As a member of ASPE(American Society of Professional Estimators), Robert contributes to many peer groups regarding current market trends.

Resources

• Connect with Robert
  • LinkedIn | Twitter

Full Transcript

Robert Johnson 0:00

It doesn’t wear out and all those things, but you have to purchase it smartly. You have to be able to utilize purchasing at the right time and then forecasting you can then make some more money. Or you pass those savings along and wind projects by being able to have the cheaper materials.

Intro 0:17

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:53

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. The metal fabrication industry has several nuances that don’t exist in generalized manufacturing. The metal fabrication industry also has unique challenges, such as sustainability that increase operational overhead. Finally, the unique manufacturing process and interactions with different stakeholders increase the process complexity.

In today’s episode, we have our guest, Robert Johnson, who discusses how the metal fabrication industries’ manufacturing processes differ from generalized manufacturing. He also provides his insight into the unique challenges associated with the metal fabrication, industry, and production of cold-formed steel. Finally, he shares some thoughts about the value of LinkedIn and how executives from traditional industries such as metal fabrication can take advantage of LinkedIn. Let me introduce Robert to you.

Sam Gupta 1:52

Robert Johnson is a construction executive with 40 plus years of experience in all sectors of construction. He has constructed projects totaling $375 million and is currently the director of manufacturing and business development at MAC prefab. Its MAC prefab is a cold-formed steel manufacturer and fabricator serving the central and western United States. As a member of an SPE, which is also known as the American Society of Professional Estimators. Robert contributes to many big groups regarding current market trends. With that, let’s get to the conversation here. Robert, welcome to the show.

Robert Johnson 2:31

Good morning.

Sam Gupta 2:32

Okay, just to kick things off, do you want to start with your personal story and your current focus?

Robert Johnson 2:36

Absolutely, I have been a part of construction management, business development for 40-plus years, started very young, working in the field, working with my hands, learning every little piece and part, and picking up every little piece of hardware. And that has developed through estimating and through management, senior management, executive level management, business development, and it just it has brought me to the place that I’m at today, which is I am all about growing, innovating, being creative, are really taking and helping a business get to the next level.

Sam Gupta 3:16

Okay, so that’s really interesting because that’s the focus of the show. So one of the things that we typically ask all of our guests is going to be your perspective on growth. What does growth mean to you, Robert?

Robert Johnson 3:27

Well, that’s very interesting. And I’m a fan. I like to put it this way. I’m a more seasoned individual. I’m not on the young side. And it has changed as I’ve grown in, and I guess the right word is mature. So my perspective on growth now is it’s on healthy growth, there is just going I’ve been a part of so many businesses that have been so concerned with growth, that that quality of work that profitability, all took a shot, and in many cases, some of those businesses don’t survive, many of those businesses don’t survive. So it’s all been about healthy growth. And I think what I’ve learned mostly about healthy growth is to be creative and to develop a relationship, the relationship, absolutely vital to healthy growth in business.

Sam Gupta 4:19

So when you say relationship, what are these relationships? Are these relationships with your stakeholders in your industries? Are these employee relationship customer relationship partner relationships? Define what the relationships are?

Robert Johnson 4:34

Yeah, that’s very interesting. And again, that has morphed to work or is transformed over time. I used to think that it was just primarily industry-related or trade-related contact people in relationships, whether it be vendors who are very important and can be a vital part of growth and good vendor relationship, but I’ve even drilled it down into casting a wider net, creating relationships on even the most basic level from meeting somebody in a convenience store, to social media to walk in just any and all of those things.

And of those relationships, I have found many of those relationships can lead to business opportunities, opportunities for growth, whether it be in manpower, skilled manpower, or be in profitable jobs, equipment, philosophies, things of that nature. So it’s just, it’s transformed over time. And now it’s much broader. I look forward everywhere I go.

Sam Gupta 5:36

Yeah. So that’s a very interesting perspective. And I’m actually going to ask a fun question there. Okay. So typically, I mean, you have been in the sales for a long time, and you have a very different perspective than if you meet somebody in the convenience store, you care for that relationship. So what is your perspective on the cold calls? Because some of the people who get calls from the salespeople, they don’t really appreciate them? Do you believe in cold calls? Do you think that you can probably get something out of the cold calls when you get a call from anybody? What’s your perspective on that

Robert Johnson 6:11

This is great because you kind of hit. It’s funny that you would really hone in on that I am. I have done cold calls. I have lived the cold call life. To me, a cold call is almost anti-relationship. To me, the relationship is an I’ll use the example of meeting somebody in a convenience store. Obviously, I’ve never met that person before. But we can see we can make eye contact. We can read body language. We can smile at one another. There are other things that happen before there’s any conversation or interaction that is impossible.

Well, I say impossible in a phone call. A cold call is typically you’ve never met, you’ve never talked. And that is not to say that it’s not effective. It is very effective in some cases in some industries. But I do know that it is probably one of the biggest pet peeves that people have is being on the receiving end of a cold call. And I’m a very open type of individual, obviously. But there is something that just makes the hair stand on the back of my neck. I’m not rude or ugly about it. I feel like we need to have some other conversation. First, let’s build up to that introduction. And then let’s talk about business at another time. So I have a long answer to your question.

Sam Gupta 7:27

Look, if somebody is cold calling, and they are simply trying to sell something directly and not really knowing who they are selling to, then it could be problematic, right. But a cold call could be a really fast way of connecting with someone, just introducing yourself and probably meeting for a meeting. Would you still appreciate that? Would he not appreciate that? What would be your perspective on that?

Robert Johnson 7:52

No. Now see, I have a different definition of that, that I do that that is exactly that is very effective. So for instance, let’s make it into an industry-specific customer, a potential customer, a general contractor, a hotel developer that I’m trying to I would love to get some business around, I’ll call that individual just introduce myself and never talk about business or what we did. To me, that’s not a cold call it.

In fact, it is, but I mean, in the most basic definition, it is. But to me, that is just simply, hey, buddy, how’s it going? I love your hotels. I think you do a great job. And if it invariably will lead to well, hey, thank you very much. I pray that they take the guard down, then they ask the question, well, what is it exactly that you guys do? Then it has turned into a sales call. It is no longer a cold call because valve their guard is let down. There’s comfort. There is a relationship beginning to fail.

Sam Gupta 8:57

Okay. Yeah, it’s definitely an interesting perspective. So now, let’s talk about your metal fabrication industry. So obviously, we need to talk about the nuances of that. And the current state, especially with COVID. So tell me a little bit about how the metal fabrication industry works. What are some of the supply chain challenges issues at this point in time because of COVID?

Robert Johnson 9:18

Sure, I can honestly say that COVID has really had a minimal impact on us. At a local level. Obviously, a greater level of that is where we sourced materials from federal, which I’ll get to in a second. But my background and the cold form steel market was as an again, as a framer, somebody that worked in the field and actually put the pieces and parts together, went to a material supply store and purchased studs in varying various links, etc. and then install those components fabricated on a job, etc.

Where I think that that the industry has gone and maybe one of the nuances with it, now is, and I’ll get into more about the differences and where I think the wood and the steel are, etc. But the labor force over the last several years, as we’ve gone through generation and generation, the younger generations now want to work in tech, and they want to do it, they want to work with computers, they don’t want to work with their hands anymore. Very few. And so we have a, for lack of a better term, we have a dumbing down of the labor force.

So, to combat that in the construction industry, of course, technology has to come into that. And where we’ve gone with the cold form steel industry, and where I think it is ultimately going to go permanently is the purchasing of coils, slip coils, steel coil, and then actually having the roll forming machines and fabricating that in a shop, the ability to use the software and the inner and all of those pieces and hearts to fabricate balls in a controlled environment where the quality control goes way up, and you ultimately wind it with a better product that gets sent out to the field and somebody with very little knowledge can assemble parts and come up with a very safe and effective way to build.

Sam Gupta 11:18

Okay, so as you are suggesting that there have been a lot of changes, you know, in the industry, it’s not as manual as it used to be. So I don’t know if you have any background in utilizing any systems, let’s say for estimation and also the processes that are being changed. Obviously, when you move to the larger industry or larger companies, they use far more sophisticated ERP systems to maintain their success. And you also made a comment that some of the businesses don’t survive. And I would guess that those are probably smaller businesses. So tell me your perspective, overall on growth, and how and what kind of role the systems play in the growth, and any challenges with that.

Robert Johnson 12:03

You’re right on. And unfortunately, I think the reason it affects the smaller businesses more often is less capital, less ability to purchase or step up and go take that technology to another level or use those tools. I can tell you that it makes it so much easier when you know in utilizing estimation software, onscreen, takeoff, plan grid, things like that, where you build the models within the system.

And then it’s a matter of, again, the lack of a better term dumbing it down to where some people can learn. They call they have to do scale drawing, for instance, and, and choose the right wall model. And it has all the components in there, the clips, that pieces, the screws, the shots, the pins, all of those things that make up that system and come up with a much more accurate way of estimating that takes that being able to have that technology and integrating it then with designers and our CAD guys that that utilize, we utilize frame CAD Frank as an excellent software, we also utilize my tech, my tech and their software and building trusses.

Robert Johnson 13:12

And it actually does a lot of the engineering for you. So it tells you whether your components are going to pass or fail. And we can model and build all of those things that then ultimately go to a structural engineer and get that takeoff weave and tie in laying out in the field with tools that you know are for layout, or you are using lasers and GPS, and we have people in the field checking construction conditions in real-time put, you know, putting him on a tablet, that information gets to a designer, real-time that’s happening all life and so that when the components are put out into the field, they arrive, right. All of that. Yeah. It is just making construction a much more exact science, and a much, much better product. Unfortunately, the smaller businesses struggle because some of those systems can be costly.

Sam Gupta 14:10

Yeah, yeah, yeah, definitely. So let’s talk about the overall industry and the processes a little bit more. So let’s compare this with generalized manufacturing. Your metal fabrication, especially the space you are in, it’s fairly unique. And sometimes it could be, let’s say, construction or manufacturing. If you look at the traditional manufacturing, then these guys are going to have products that are going to have, let’s say, bills of materials or BOMs, and then they have a fairly standardized process in terms of building these products right because that that could be done on the shop floor.

But in your case, it’s going to be slightly different because you have your production floor. You need to build this, and then you need to do a lot of field services with it. So you are going to have a bunch of processes the inventory the financials involved there. So tell me the nuances of metal fabrication how it differs from generalized manufacturing.

Robert Johnson 15:03

I may be way off base here, but in general, let’s just stick to general manufacturing of and how it would pertain to our particular industry, cold-form steel, which would be mass producing cold-form steel products, stud floor joist things that nature is a piece of the actual pieces. And that’s produced or manufactured at a mass volume level. It’s just one right after another. It’s just taking and printing studs at different lengths and bundling and sending.

Yeah, where are the differences in ours is it’s basically the same process except our technology takes and cuts and, and punches holes and drills holes and does all these different pieces in that same piece as it’s being manufactured, which then goes and it’s being printed on the inkjet printers are printing on each component and what the job name, what the wall number is all those things that are then having to be taken to another place as you’ve rightly pointed out, and or another place in a shop and assembled?

Robert Johnson 16:07

And then from an assembly standpoint, having to be moved throughout a shop, whether it has coatings or surfaces applied to it, ultimately loaded on a truck and then logistics and how to get it to the job site. So if there are components about it that are basically standard manufacturing, but the tweak in there is what it does with the pieces and parts automatically. And then the manual piece of having to put it together. So it differs quite significantly.

But I think it has evolved to a much better place than just a standard manufacturer. There is a place for standard manufacturing because people are always going to just build it by the piece. But yeah, it’s a higher, much more advanced form of manufacturing is the best way for me to say

Sam Gupta 16:55

Okay, so let’s talk about some other aspects of the manufacturing process. So let’s say you know if we talk about casting and doing so, in this particular case, do you see in your industry that the costing is fairly sophisticated of the product costs? Do you track at the machine level at the process level? Do you account for labor? How is costing done in your industry?

Robert Johnson 17:20

Well, it is absolutely cost-driven. And as you know, steel is a commodity. So right now, steel prices are very volatile. And it all boils down to that piece of steel that comes in a slip coil. So it may be 3,000 pounds of steel. But right now, we’re seeing over the next 60 days. We’ve already been instructed by our steel suppliers. We’re expecting a 30% increase over the next 60 days and steel pricing.

So there’s modeling we have utilized modeling be very sophisticated to purchase steel, much like you would try to buy stocks buy when it hits below and hold on to it. Again, it’s capital, and that can take up a lot of capitalism if you’re not busy enough to sit in a warehouse somewhere and take up space until you can use it, but do in doing that, the joy in this is where it works exciting to me is the differences in wood, we’ve been a wood world for so long.

And you can store mass quantities of steel coils. You can put enough steel coil to build a 2,500 square foot home in a bedroom in your house. And it doesn’t warp, it doesn’t wear out and all of those things, but you have to purchase it smartly you have to be able to utilize purchasing at the right time and then forecasting you can then make some more money, or you pass those savings along and win projects by being able to have that cheaper material.

But yeah, if that really is where it is, though, of course, the labor, all the labor and pieces, and parts that all pretty much stay the same, but ours is strictly really majority driven on the cost of coal from the steel itself.

Sam Gupta 19:07

Okay, so that’s very interesting. And that would probably add to some of the logistics challenges because you are basically tapping into the price of your commodity you need to buy in a store, so I don’t know if you store if you buy this and store at a, let’s say at a 3PL or do you simply sign the agreement so that they can deliver whenever you need. So how is that purchase process? Can you touch a bit on that?

Robert Johnson 19:35

So we actually do it a couple of different ways. We will either purchase it outright, and it will come to us, or because coil steel comes in varying widths. It comes to us when we get it. It comes to us on a six-inch to 10-inch width. But in actuality, when it’s delivered when you people, maybe many people have seen it going down the road on the highway. It’s one single big pile of steel in the middle of a massive truck. They’re Five, four, or five feet wide.

So we have suppliers that we can purchase those that they will keep in stock in their yard in their warehouse, for instance, until we need it to be shipped, and then brought to us or the other pieces that we just buy it. We store it ourselves, but we have a couple of different things. But I guess, though, in some cases, it says you describe, it’s we signed purchase order, we bought it, we don’t see it, it’s in your warehouse somewhere until we need it. But we have added that price that we agreed upon at the time of purchase.

Sam Gupta 20:39

Okay, so this is a very interesting perspective again because, you know, you are totally locking your cash down in your inventory. And obviously, you have been in this industry for a very long time. So maybe you can predict the price of a seal. But from my experience from my family is in manufacturing. We used to lose a lot of money just because they could not forecast how the price of a commodity is.

Robert Johnson 21:02

Exactly

Sam Gupta 21:03

So who typically loses a lot of money. Does it matter how accurate your prediction is? And what do you do to hedge the risk there?

Robert Johnson 21:12

Well, thankfully, it’s not very volatile. So steel that we purchased 30 days ago, you know, at a certain price is the although it may go up 60, you know, or 30%, over the next 60 days, it’s going to take a great deal of time for it to go back to the level of that, that we purchased at that previously. So the chances of us purchasing something, and then it winds up going the other direction where we’re holding steel now that we’ve bought it at that increased value, and now the markets down and we have to get rid of more expensive steel.

Yeah, it doesn’t happen. Because we’re busy enough, the steel that we purchase is typically getting run through our shop quick, we actually are on the other side of it, although we try, and it sounds fantastic. That makes us sound very intelligent when I say, oh, we buy steel when it’s super cheap, and we don’t buy it when it’s expensive. Unfortunately, it doesn’t always work that way. So we are going to be purchasing steel when it’s at that that 30% increase.

When that gets to be the case, then you’re buying what you need for a project at that time. And hopefully, you don’t have a lot of that on stock when the prices turn around. And they ultimately do they just you know, it’s very cyclical would recently go through it would be up in the middle of 2020 was up over 100% at someplace. People couldn’t get with it. It made projects go away. They no longer penciled. So it’s interesting, we don’t thankfully, steel has not been fat volatile, but it’s just it’s like playing the stock. Sometimes you win. Sometimes you lose.

Sam Gupta 22:53

Exactly. And that’s a great analogy. Because you’re saying that, you are never going to have to, let’s say, get rid of the steel because you are using it. But at the same time, if we compare this with the stock market, you are probably losing money on that steel. If you are tracking your costs accurately, right? Because you have a real one, you have the expensive steel in the stock. So I don’t know if your product prices are going to come down, because now that steel is cheaper in the market. And then you have storage as well. So I don’t know how much you plan that, but there is definitely going to be some loss there. Right?

Robert Johnson 23:27

Yeah, absolutely. I mean, and it is whether that loss on where it comes out is that we will pass along those cost increases to pay an owner or a general contractor or our customer, we will try to intelligently forecast and let them know ahead of time just like our vendor does us. But like for instance, right now, we’ve got several big projects that are getting very close, and we’re informing our customers, hey, listen, if you want to save potentially 30%, Let’s get your steel purchase right now.

So but ultimately, you’re right that the labor pretty much stays the same, although with rates being labor rates being increased now minimum wage, so forth, labor is fair. I mean, it’s always the same. And we’re always competitively bidding, which makes it also extremely difficult. So yeah, there are times when we don’t, when you can’t make money off your steel as you might typically be able to sometimes, the steel is getting passed through at cost just to get a project. So you’re correct. Sometimes you do in quotation marks lose some money on it.

Sam Gupta 24:41

Yeah. But you brought an interesting point that you at least have some questions that you know, you are able to sign these agreements with your vendors, but at the same time, you’re also signing these agreements with your customer. So basically, they are going to take, hey, that’s the nature of the industry, right? Because of the prices, then they have to lock themselves up to be able to have that. So you are in a good position there as a middleman that you are at least able to pass on some of that risk. Yeah, sometimes it’s an excellent closing tool.

Sam Gupta 25:09

Yes. So let’s talk about sustainability. You know you had some comments about the, and you do a lot of work in the sustainability and your industry, sustainability could be equally important too, because now we are building the house here, right? So obviously, we need to make sure that our lives are protected. Right. So how do you ensure the quality, and number two, how do you ensure the sustainability issue in your industry?

Robert Johnson 25:34

Well, it’s very interesting. One of the things when I talk about sustainability, is, of course, the fact that cold-form steel is 100% manufactured with recycled material, and which is fantastic. The safety aspects alone in building facility or home or whatever I’ve called from sales post would greatly offset any potential cost increase in material. But the analogy or an example that I like to tell people in, it will take typically, if we take in the example of a 2000 to 2500 square foot home, it takes approximately 40 trees to in lumber to build that home.

It takes the equivalent weight and steel with cars. So as far as what we’re doing for the future, what we’re doing for our children, making the jump to cold form steel, just the product alone just is so much wiser. But there is a cost increase that we have found that is roughly 2% when you factor in reduced insurance costs and things of that nature. But yeah, it’s much like working all the way around. And so we love the saleability of this the sustainability of steel.

Sam Gupta 26:58

okay, so tell me the market penetration and market receptiveness. Obviously, as you mentioned that, if there is going to be a cost increase, and the cost is always a factor when we think about the environment, but we need to be conscious of the environment as well. So when you talk to your customers, how are they receiving this? Are they able to sell, let’s say, their homes at a higher price, just because that is going to be slightly more environmentally friendly? Because somebody has to be at that cost, right? I mean, everybody’s going to take a share of it. So tell me a whole market, we’ll see said, Are there any other value prop of the cold-formed? Or is it simply going to be more from the sustainability environment perspective?

Robert Johnson 27:42

Well, it’s very interesting what I find, and this is the unfortunate part. And I think this is changing with time. But the majority of our customers care about the cost with this going to cost period. And they don’t even and again, it’s changing, but many of them the sustainability and those benefits aren’t as important as being able because most of our customers are general contractors, those general contractors are bidding against other general contractors.

So it’s all about costs. So what we have done, and really, we have a which sounds very grand, we have this vision of changing the industry and for years and years and years, builders, General Contractors Rayners have been able to send drawings to a lumberyard, for instance, and that lumberyard does everything they do the takeoff, they just basically do the whole thing, they give you a price, your package gets dropped at your job site, you have people show up and put it together.

Nobody does that for the cold-form steel industry. So we want to be that lumberyard for the cold-form steel industry. The biggest piece of this is educating our customers. There are so many benefits of builders risk insurance is much cheaper when you build a facility out of full form steel as opposed to lumber. Property insurance is so much cheaper. The health and safety of buildings made of steel don’t burn fast. People can get out of the building quicker.

You don’t have as much loss of life. In many cases, all of those pieces and parts have to end. It’s just an education process. And fortunately, some people get it, and others just look at the bottom line. And that’s it. They look at the bottom line today. They don’t look at the fact that they’re going to say 60,000 a year in property insurance for the next ten years, which is going to make up that percentage of increase that you’re spending to utilize cold form steel.

So it’s all about education. And I think some of that is our buyers, our purchase our ultimate customers are becoming more environmentally conscious. And as the times change, so I think we’re getting there. We’re just getting there a little bit slower than I would like.

Sam Gupta 30:01

Okay, and do you see from the cost perspective, do you think that in the future, the cost is probably going to be pulling to work just because I don’t know if the government is paying attention to this, but ideally, as a society, I guess it would be a lot more steel, right to somebody to pay attention to this, maybe we can increase to gold, and then you will be at a much easier place. Because at the end of the day, as a society as human beings, I think we should probably utilize still a lot more than gold.

Robert Johnson 30:33

We are getting closer and closer to, again, if you factor in and people understand all the cost benefits of utilizing cold-form steel, not just in the construction of cold-form steel, again, it’s easier for me to educate or convince a hotel, a developer and owner, somebody that holds on to a building for many years, they own 10-12 hotels, it’s easier for me to convince that gentleman, and he’ll pay that, for that matter, he’ll pay that premium at the time of construction, for quicker ROI because the construction with cold-form steel takes less time than it takes with wood.

So he’ll get two more months of rentals of all of his hotels or his apartment buildings. So what are all those things? They look at it a bigger, bigger picture than when we’re dealing with just a general contractor who’s competitively bidding against somebody else. And most of the time, it’s all about price. So, unfortunately, that’s just the nature of construction. But I do feel the tide turning. And we are getting there; we’re getting much many more requests for building homes out of coal from steel than we ever have. So we’re getting there.

Sam Gupta 32:00

Okay, amazing. Love it. Now we want to cover the most interesting topic that we really wanted to cover because you are sort of the influencer in your community in your industry, Robert, because of your LinkedIn presence. So we definitely want to talk a little bit about that why it is important? Can you touch briefly on that? Why are you so much into LinkedIn?

Robert Johnson 32:22

Okay, very interesting. And this is really. This is really hit me hard this week because the benefits of what I have been doing for years and years have are starting to pay off. So it’s a long game. It’s not a short game. So I have for years and years and years, I have they accepted connections I’ve reached out, I’ve built a large group of connections with followers, but not as great as some but much greater than I ever imagined, really, for myself.

And the content that I post on my personal page is uplifting. I tend to think it is more is not necessarily inspirational, success-oriented, self-improvement-oriented, and simple. And that that’s all my personal page. And I’ve done that all you see, very few posts about what I do for a living on my personal page. Yes, that is absolutely 100% relationship-driven. This is where the aha moment that I have had over the last several months is that my six tests are on sale. It’s on getting customers and winning spades. It’s on that that aspect of it in my LinkedIn philosophy is I like connecting with people that think and feel like I did.

Sam Gupta 33:47

Yeah.

Robert Johnson 33:48

So these people that are attracted to the content that I post typically are the kind of people that I’d want to hang out with. Well, who are you going to have the most success in life in sales in business with, but somebody that is in your tribe, somebody that’s in your community? So you’re your influence. To influence them in sales, one way or another, is much easier.

I have had over the last two weeks. I’ve had probably six offline conversations with contacts that I’ve had with, like on LinkedIn for a long time, some of which do follow our company page. Yeah. And, and I see them on that the company side, and what they do lines up with what I do. I had a gentleman that I spoke to this week that reached out to me through LinkedIn, that builds bridges, highway bridges, railroad bridges, and they utilize cold form steel for the form.

And I’m like, I never even thought of it. And they need somebody to build those components. So you. It’s a tremendous opportunity that came about because I posted something inspirational. Initially, I invited him to look at our company page they did. And voila, here we are. So that’s been my philosophy. And that’s kind of where I’m at with, with how I use LinkedIn.

Sam Gupta 35:17

Yeah, that’s really interesting because I don’t know what your perception is, based on your industry the way you are seeing. So let’s say if you look at your colleagues, peers, other marketers that might be prevalent in your industry, what do you think are the approaching being done, right, because 90% of the cases, when I look at them, they are either posting feels content, the pages, and you know, things that nobody really wants to talk about on LinkedIn. Right. And you are taking a very different approach the way LinkedIn is supposed to be. So what is going to be your advice for your peers, for your colleagues that are approaching LinkedIn, or there may be me benefit by utilizing LinkedIn? So tell us your advice on that?

Robert Johnson 35:59

Yeah. Well, when it’s interesting, my specific advice about my industry, my peers varies from other people, obviously, and I’ll just touch the status briefly. The HR people, the recruiters, that kind of people in the content they’re posting on LinkedIn is spot on if they’re talking about they’re so because people are on LinkedIn looking for a job there. That’s what they’re doing as far as utilizing LinkedIn as a sales tool, from my peers to people that do what I do. Isn’t this, folks? LinkedIn is not what you do.

You don’t get on there just to post pictures of your jobs and, and you want people to use you as a source. That’s not what I poke if I post something on my personal page, just because it looks cool. Or it’s a project that I think people have seen a lot will identify with just those kinds of things. But I never have in my life looked at a link look at my LinkedIn feed and said, Oh, and the other thing that they use, I’ve never looked, I’ll finish that thought, I’ve never looked at it and been like, Oh, hey, I need to use those guys.

That video of them, you know, holding up as metal stud is interesting. Not at all. But yeah, if you’re, they’re going about it. There are other formats and other media that are better for that this isn’t YouTube. This isn’t. So, unfortunately, this is a relationship. LinkedIn is a relationship-based media platform. And unfortunately, as you well know, that many are on there just to see how many followers they can get. And, yeah, you know, that’s just some of that age. Wisdom will come in time.

Sam Gupta 37:44

Yeah. This is a very insightful discussion. Robert, do you have any last-minute closing thoughts?

Robert Johnson 37:49

Yeah. So as I had mentioned, I’m a more seasoned individual. And I’ve seen this. This process has come for a long time. There’s a lot of the older folks, the more seasoned labor forces that have kicked against technology and have kicked against social media have kicked against the advancements of all of those things that I’ve mentioned, and what all it can bring to you.

It has for me, as a more seasoned individual has if you’ll embrace it if you utilize it, if you will, work, those advantages, the wisdom that you’ve gained over all the years, that’s not related to all of that, combined with the technology and the advancements of technology will make you a superior, individualized, carrier salesman, a superior manager, a superior owner, instead of kicking against it, and rejecting.

So it’s all about embracing; it’s opened up a whole new world for me and me. I love new tech. I’m constantly looking for new techniques and new ways to use it and machinery and equipment, etc. So I guess that’s what I was saying this whole thing if you want to talk about growth, embrace the changes and use the wisdom to make the right decision.

Sam Gupta 39:18

Okay. I could not agree more. But my personal takeaway from this conversation is going to be in business. It’s all about relationships.

Robert Johnson 39:25

Absolutely.

Sam Gupta 39:27

Thank you so much, Robert, for your time. This has been amazing. I’ve enjoyed it.

Robert Johnson 39:30

Thank you so much.

Sam Gupta 39:32

I cannot thank our guests enough for coming on the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Rob Robert, head over to macprefab.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including The interview with Chris Luecke, who touches on how manufacturers can augment their offerings by adding value-added and industry 4.0 Solutions. Also, the interview with Dave Griffith, where he discusses why manufacturers must look for low-hanging fruits when exploring the path of industry 4.0.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 40:38

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Chris Grainger, who discusses how his company EECO, a large electrical distributor, needed to change the way they sold to their customers. He also touches on how they started their journey of thought leadership, highlighting heroes in their community, which has helped them strengthen their position in the market and acquire net new business in a whole new different way.

Chapter Markers

• [0:15] Intro
• [2:07] Personal journey and current focus
• [3:27] Perspective on growth
• [4:38] Chris’ podcasting journey
• [6:26] Who should lead thought leadership initiatives?
• [7:57] How to find thought leaders to lead content strategy?
• [9:29] How can thought leaders balance their priorities?
• [13:20] Content consumption behaviors and trends
• [14:51] Finding business from thought leader strategy
• [17:03] How manufacturers can start on a thought leadership journey
• [21:06] The role of industry influencers
• [31:59] Closing thoughts
• [34:17] Outro

Key Takeaways

• If you want it to really get out in front and serve your industry the best, you better be figuring out how to do it via video and be a podcast. You know that that’s really two really good mediums to work through.
• A manufacturing business, or business in general, you need to understand the value you’re bringing to the market you’re trying to serve, and the questions they’re asking, and answer those the best you can, and if you do that, then you will bring so much value.
• If a company wants to be that thought leader and get out in front of things, you got to look at your subject matter experts. They should be the ones leading a lot of the efforts and getting behind it.
• The way you consume content and just what YouTube has done for the world over the last couple of years. You know you want to learn how to do anything. You, you pick it up and go to YouTube, and you figure it out, and you need to be there. So somebody, if you’re in the B2B space, one thing that I’m spending a lot of time on right now is, what are the questions that the markets asking? And then, I want to be the thought leader in answering those questions.

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About Chris

Chris Grainger has been supporting the industry for 20 years. His passion is serving others and creating strategies to support the changing needs of manufacturing. He hosts the podcast EECO Asks Why which highlights the ideas and heroes that serve the industry with aspirations to inspire others. 

Resources

• Connect with Chris
  • LinkedIn
• Connect with EECO
  • Website | EECO Asks Why | LinkedIn | Twitter | Facebook

Full Transcript

Chris Grainger 0:00

My approach with the executives was every company is a media company. It’s just we sell different stuff. So we had to figure out different ways to approach the market, and this is the way did they graciously.

Intro 0:15

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned in to the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:50

Everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at this transformation consulting firm, ElevatIQ. The last three years have changed the way businesses operate, with podcasts and videos becoming the most consumed media for information consumption. But 80% of the B2B sales decisions are being influenced by industry influencers and consultants. Today’s businesses need to be thought leaders in their space, but who drives thought leadership in a company?

In today’s episode, we have our guest, Chris Granger, who discusses how his company EECO, a large electrical distributor, needed to change the way they sold to their customers. He also touches on how they started their journey of thought leadership, highlighting heroes in their community, which has helped them strengthen their position in the market and acquire net new business in a whole new different way. Let me introduce Chris to you.

Sam Gupta 1:43

Chris Granger has been supporting the industry for 20 years. His passion is serving others and creating a strategy to support the changing needs of manufacturing. He hosts the podcast EECOAsksWhy, which highlights the ideas and heroes that serve the industry with aspirations to inspire others. With that, let’s get to the conversation. Hey, Chris, welcome to the show.

Chris Grainger 2:05

Thank you, Sam.

Sam Gupta 2:07

So just to kick things off. Do you want to start with your personal story? And what are you focusing on these days?

Chris Grainger 2:14

Oh, absolutely. I went to Old Dominion University in Virginia and studied electrical engineering. And from there, I had a great opportunity to work for an electrical equipment company was a wholesale distributor servicing the industrial market in the southeast US. I’ve had many different roles at EECO, what we call it, and one of the most recent projects that I’ve been very blessed to be a part of is we were able to start a podcast at EECO called EECOAskWhy. And we focus on the people. And the ideas out there that that are leading industry and getting a lot of topics and guests out there to share their stories because we really feel that they are the heroes.

So that’s been a wonderful adventure and something that has really been just taken such a big piece of my heart and to serve others with this. And I actually got that started by working with our executives. I know you customize a lot of your message to executives out there. And my approach with the executives was every company is a media company. It’s just that we sell different stuff. So we had to figure out different ways to approach the market. And this is the way that they graciously let me try. And we’ve seen some really good results since then.

Sam Gupta 3:27

Okay, amazing. So I want to touch on a lot of different topics there especially related to changing the mindset of the media company. And obviously, my target audience is going to be CFOs and CEOs. Sometimes they don’t really understand what media company means. So we are going to dig into that. But before that one question that we asked, every single guest that we get here is going to be your perspective on growth. What does growth mean to you, Chris?

Chris Grainger 3:51

Growth means to me. It’s always moving forward and having an open mind to understand the changing landscape of what’s around you. If you look at B2B, and that’s the industry that serves in is the B2B industry. Since when COVID impacted it, things have been completely flipped upside down. And to be in the have a growth mindset, you have to understand, hey, the things have changed. And what do I need to change the way that I approach my work? Or how do I support people? Or just how customers or clients need support in the future? How is all that changing? Because I have to add value to that. And maybe the value that I had a year ago, pre-COVID, is not the value that customers and clients need right now. So growth to me is just that growth mindset of always being evaluating and willing to change.

Sam Gupta 4:38

So now, let’s talk about your story. Obviously, you started the podcast for a reason. And you mentioned that your goal is to find heroes from the community. So obviously, our CFO and CEO roles out here, we like to see numbers, and obviously, you know, we want to serve the community. But we also want to serve our customers, and we need to have a business plan behind that. So what was the genesis of your podcast? What was the thinking behind that? What were the changes that you were monitoring in the market, and what are you trying to get out of it?

Chris Grainger 5:13

Sure. I mean, from what we saw, customers were changing the way that they’re consuming content. If you look at the industrial market, there’s a lot of information out there that you can get straight from manufacturers, but we’re the distributor, we’re the middle guy. So we need to be the ones leading the message for our customers and serving them the best way we can with thought leadership.

And I started valuing, and listening to a lot of things and studying, listening to a lot of Gary V and understanding things that he’s promoting from, from a media standpoint, and just really apply that to say, okay, to our business, we’re not doing this, nobody’s doing this, nobody’s talking about these things. It’s just the same old traditional way about business for the vertical that we’re in. And we had a great chance to get out front and really lead the way and not that we just want to leave everybody behind.

But hey, we need to go. We want to go where they’re going and where our customers are going and help them in ways they hadn’t considered. And that has been the biggest impact for us. And so when we start talking from I know, you talk about CEOs and CFOs, from an impact standpoint, I think for them, it’s been, hey, what were the thought leaders here, and when you’re a thought leader in whatever space you’re in, that’s gonna have financial impacts at the end.

Sam Gupta 6:26

Okay. So when I look at your background, I mean, you were not part of the marketing department. Typically, these initiatives are led by the marketing department, right? So in your case, when you started this initiative, so obviously, you know, every company needs to be a media company, I get it. So when we look at our manufacturing and distribution landscape, where should the mindset start? In terms of starting these initiatives?

Chris Grainger 6:51

Most of the time, it does start in the marketing departments, you know, because you’re right, that’s where a lot of that that creativity, if you will, it’s not always engineering, like with my background, but yeah, you know, that’s okay. But I will say, for us, I have a colleague, that he’s our executive producer, Adam sheets, he’s my number one guy, and he really helps me on a lot of the production aspects. But really, I think if a company wants to be that thought leader and get out in front of things, you got to look at your subject matter experts; they should be the ones leading a lot of the efforts and getting behind it.

And that just takes a different type of thinking. And there are a lot of resources that I studied, continue to study out there to help me evaluate where I’m at and where I want to go. How can I bring the most value to the market? How can I that bring the most value to my employer and ultimately serve the people that I want to serve the best and? And I think that that approach really led us down this unique path where someone in engineering is leading the charge, if you will, for a podcast to serve the market.

Sam Gupta 7:57

So in your case, how did this all start? If I look at your company, the size of the company is fairly large. Right? And I don’t know if you were their top subject matter expert. How did they pick you to start this podcast?

Chris Grainger 8:11

Well, I think that, basically, it was the default. So I actually pitched it to the executives. I had our CEO and a vice president of sales. And I just set them down with our marketing managers. I had a business plan laid out on how I felt like this needed to happen, you know, the little capital we needed upfront to get it going. And a list of topics. I think I started the list with 20 or 30 topics I thought we could talk about and since and they gave the nod and said, do you think you can do it and I put my head down, I said, I think I can, I’d love to have a chance.

You know, and looking back now, we’ve interviewed so many guests, and 100, probably 150 or plus, but actual recordings, and we’re up to almost 70 episodes out right now. And we’ve increased our cadence to twice a week of four drops. So it’s been really wonderful. I’ve had a great chance to meet wonderful people just like yourself, Sam, and the podcast. It’s just it naturally connects you to so many people, you know, CEOs and high-level executives all the way down. For me, I get the most pleasure out of working with the guys that are into the plant, the girls that are in the plant. They’re the ones that are on the floor. We actually interview them as well. And that’s what brings me so much fulfillment out of doing the podcast.

Sam Gupta 9:29

So let’s say if I’m looking at one of the engineering managers in my manufacturing organization. Typically their days are going to be super occupied, and they need to report whatever they are working on. Right, in addition to that, the podcast is a humongous amount of work. I mean, it’s not an easy task at all. Each episode that we produce requires 20 hours of work. To be honest, that’s how much work it takes to produce a podcast. It’s not easy. So in your case, and I don’t know, you know, what was the personal driver you said that you were listening to a lot of shows from Gary V, which could be very inspirational, I get it. But again, considering the amount of work involved, what was the major personal driver for you to undertake such a heavy responsibility?

Chris Grainger 10:12

I needed a project moving forward that I could put my heart into, and quite frankly, just selling parts and being a distributor tied to a lot of commodities, which was not fulfilling for me. So I needed to find a way to have a greater impact, you know, on a greater community, and try to give people a voice that I feel I’ve heard these voices for years as servicing the market, but I’ve never just one on one. So this gave me an opportunity to amplify that voice and get out there and give me something that I really felt aligned with, with my career goals, the things I’d like to be learning about, you know, I was one of those engineers, man that I did the engineering work, I did the math, I got the diploma, I did all the work, but I’ve never really had the passion for being the actual the engineer who’s doing the design work.

I’m much more rather be networking or helping people achieve their goals and working alongside versus being tied to a cubicle doing, you know, PLC programming, for instance. So it was just a natural fit for me in what I desire for my career. It’s a take a path like this and learn skills like this. And this led to now new skills like video and an understanding how video editing and trying to bring that component to fruition, because you’re right, it’s a lot of work for every podcast episode if you treat the guests the way that they should be treated.

And we do blogs, a lot of social media posts, and then repurpose all the content and make case studies where we can where I’m writing three case studies right now based on some of some conversations we’ve had. So it’s just it really consumes you. But if it’s work that you’re passionate about, you know, you find the time, and you make the priority.

Sam Gupta 11:52

So what are there any compromises in your job responsibilities? Do you still have that job that you were doing on a daily basis? In addition to that, are you able to do this as well?

Chris Grainger 12:01

Yeah, so I’m still an engineering and services manager, I think what it does for you, as your responsibilities go up, and time crunch goes up, you learn to delegate, and you learn how to manage basically, this podcasting is just like any engineering project, you manage it, just like that. And if you have a schedule, and you have a process, and you get it defined, and you block that time, it works, you know, so you just have to work that into the regular work that you’re doing that while the other work that you’re doing, because this is the work, you know, and it all falls in alignment, I still have monthly one on ones with every one of my direct reports, we still have dashboards, we still have all our metrics, and I have automated a lot of that stuff.

So that the numbers that are important for us to be chasing are in front of us all the time, so my just my engagement with my team is a lot more meaningful, more impactful, but also understand to do this right. And to do video, right, and to do blogs, right? and case studies, right? You better dedicate time to it, or it’s just gonna be halfway done with no value to people out there that are consuming it. And then, you know, nobody’s gonna get any value from it. And that point, why are you even doing it? So just it really, if you approach it like an engineering project, I think for me, that’s been the biggest thing and just defining that process.

Sam Gupta 13:20

Okay, amazing. So you did mention during your introduction that the market is changing, and the way our leadership is working in the market, the kind of messaging customers like to hear at this point of time is completely different. So what are some of the things that you have noticed that have changed in the market in the last two, three years,

Chris Grainger 13:39

So much more is going to video, man. I mean, that’s, we’re seeing so many of our vendors, we support getting messages out via video. And that’s something I’ve just been doing so much studying on about how to get. You want to be a thought leader. If you want it to really get out in front and serve your industry the best, you better be figuring out how to do it via video and be a podcast. You know that that’s really two really good mediums to work through.

Because just think about the way you consume content and just what YouTube has done for the world over the last couple of years. You know you want to learn how to do anything. You, you pick it up and go to YouTube, and you figure it out, and you need to be there. So somebody, if you’re in the B2B space, one thing that I’m spending a lot of time on right now is, you know, what are the questions that the markets asking? And then, I want to be the thought leader in answering those questions.

I really don’t care about the features and benefits and all this other stuff, at least because everybody’s got that feature and benefits that they can do for you. I care about what are the end-users? What are the people out there in the market? What questions are they asking because they’re the ones I want to answer. And if I answered them openly and honestly, with a servant’s heart, the business will follow.

Sam Gupta 14:51

I’m a CFO here. Okay, Chris, and let’s say if you are trying to pitch me an idea or my team is trying to pitch me an idea. Obviously, I have a job to do. I would love to serve the community, but I need to do my job as well. And my job is to maintain the top line as well as the bottom line, right? So let’s say if you’re pitching me an idea, in your case. Obviously, you are a superhero, Chris, that you are able to do your job, you are able to do the podcast, you are able to build the content.

But let’s say if I am running a manufacturing shop, as a CFO, I’m not gonna find another place, to be honest. Okay, I need to find some budget to be able to run this initiative. And I need to know the ROI from the initiative. So in your case, have you been able to find any business using this effort?

Chris Grainger 15:38

Yeah, absolutely. And it came down to, for us, a couple of our actual guests that we came that we were able to bring on have, since then brought us in to have deeper business conversations to actually expand our business. Some of them we’ve never even done business with before. And now that they go through this experience, we help them figure out something about their market, right. They liked it so much. And as a connector, and you know, this very well, Sam as a connector, I’m watching who’s watching. Then, when they when I see that they’re, they’re interested, or they like something, I’m reaching out to him.

And then, all of a sudden, next thing, you know, we’re building that relationship even further. Because like I said before, the way pre COVID work for a B2B is not how it is now. So it’s the podcast that has given us opportunities to serve new clients, understand their needs, build trust, and we’re doing all this without ever setting foot actually in their plant.

And that when you think of it that way, nope, nobody’s done that. So that’s been for us in return for sure. And several pretty specific cases. But it’s been really neat to see how that works. And as it grew, we’re not even a year into the podcast for us. We’re still less than a year old. I’m so excited for where it can go because 2021 is the focus more actual in client conversations to understand what’s changing in the market.

Sam Gupta 17:03

Okay, so let’s say find the manufacturer or the distributor, and I sort of understand that there is going to be some value from the thought leadership, I’m not sure if I’m sold on it, okay, because, you know, you need to try before you can see some ROI. So what would be your recommendation in terms of starting on this journey?

Chris Grainger 17:20

I would probably really start with your blogging, really get good at blogs, answer the questions, again, that your market asks and answer them straight up and talk about, you know, the stuff like cost delivery, and it’s not about puking out what you’re great at, it’s about answering the question, right? Everybody wants to talk about how awesome they are versus, hey, this, let’s just answer the question because that’s, and then start monitoring that content.

There are all sorts of ways to do that. And we won’t get into that today, but see what’s working for you. But blogging, that’s something anybody can do. There’s no equipment required. People still consume a massive amount of written content. And then if you can get to be a thought leader in your space, by blogging, that’s going to open up avenues, particularly for us, we’ve noticed, like, if a blog takes off, you can bet your bottom line.

I’m going to be bringing that topic up on the podcast because, obviously, people are searching for it. And our number one most downloaded podcast happens to be our number one most downloaded blog. We linked them together. Now, every time that people open up that blog, they’re consuming our podcast, they’re learning more about us, we’re serving them at higher levels, and then the leads continue to come in.

Sam Gupta 18:31

Okay, so I like the pitch of our blog, that it’s not really expensive, because you don’t really require the gears, but not everyone is going to be an effective writer. And if that was the case, then everybody in this world would probably become an author, which is not the case. Right? And blogging is very expensive as well, it’s not easy, because if I asked my marketers, my writer is going to say, I’m actually going to charge you whatever $300 for a blog, that is probably going to be 500 words, and there is no promise for an ROI. Right? If I have the same pitch with the trade show, if I’m going for a trade show or something like that, I’m actually shaking hands. I’m making the conversations there. So why do you recommend that I should be writing a blog, and how do you see ROI from that?

Chris Grainger 19:19

Well, I’m gonna give you a reference that I think your audience may really find value in. And it’s a book written by Marcus Sheridan. It’s called they ask you to answer. And if you write the blogs and if you have a sales executive, CFO, CEO, and your focus is again, being serving your industry that at the to the top level that you can, what do you need to know? Well, you need to know the questions that whoever your end customer is, what they’re asking the heart of it, and then you focus on that.

Now, you’re right. Not everybody has top-level writers, but we all in whatever business we have had subject matter experts, a lot of times, the information is in everyone that works around our head. But you do have to gather that information. It could just be as simple as, as a brainstorming session, it can start off as just technical type documents, and then work with maybe you use up work or use different, outsource type of resources to get some marketing assistance to actually pretty it up, if you will, things like that.

But if you want to be the leader, you better find resources to get behind being a thought leader and content development because that’s the way the world is turning. And that’s why I said that that resource they ask you answer, you start walking through the principles of that book, and that guide if you will, that will put you where you need to be in making those decisions.

Because you know, it all starts with change. Next thing you know, you’ve got, you probably need a Content Manager, you maybe need a video choreographer that’s in your organization. And a lot of times, these types of roles aren’t thought about. But they better be because it’s changing so quickly. You better get it, you know, get on that train.

Sam Gupta 21:06

So what is the role of the influencer? So the more and more I’m noticing the market, Chris, the role of influence that is changing, especially in the B2B market, if we look at any of the expensive purchases, and I don’t know how expensive your equipment is, but in 90% of the deals that we come across in our space, they have some sort of influencer involved.

And obviously, these influencers are either social media, celebrities and again, social media celebrities don’t need to be somebody who’s doing fashion talk or music talk. They are either the manufacturing influencers or digital transformation influencers, or industry 4.0 influencers, and the more influence that they have, the more they’re influencing the deals. And there is a whole different ballgame here in terms of maintaining the relationship with the influencer. And the more we see LinkedIn the way it is going at this point in time, the way we see the podcast, and the video community the way it is going, I think influencers are going to be very relevant in the future. So what would be your thoughts on that? Do influencers matter? And how would you build relationships with the influencers?

Chris Grainger 22:14

So the answer does the influencers matter? Yes.

Sam Gupta 22:19

And why is it that because not every manufacturer cares for the influencer?

Chris Grainger 22:24

Why? Because again, look at how people consume content now and how they learn, and how they make decisions. I’ve read the stats all over the place, but somewhere between 70 and 80% of a buyer’s decision typically is made before they contact the distributor or the company directly. Why? Because they’ve consumed so much content online. So either you figure out a way, as a manufacturer of, or as a leader in the industry, to be out front in the content that they’re consuming, or you get left behind.

And if you’re a company like EECO like I work for, we don’t make anything, you know, we sell other people’s stuff, we are distributor, we are essentially the middleman between the manufacturer and the end-user. So for us, it’s even more vital to be that thought leader in helping get these topics and get in front of them and to be that thought leader for these topics for the industry, so that they see the value that we connect the dots that we can connect from for all the different types of solutions to bring to the table. So influencers are so important. If you start doing just like you’re doing with podcasting, and videos and blogs, and all that stuff, you connect, and you meet the influences, and next thing you know, you may be an influencer yourself as your network begins to grow.

Sam Gupta 23:39

Okay, so where do you see this going? I mean, obviously, podcasting is slightly newer compared to, let’s say, blog or video. But in the case of podcasting, I mean, right now, it is newer. So we have some categories, let’s say penetrated in specific niches or these spaces. But let’s see if everybody starts doing the podcasting. Do you think everybody is going to be equally successful with podcasting?

Chris Grainger 24:00

No, not at all. Because I think there are their stats out there. And, and a friend of mine, I believe he was on your show, Chris Luecke. He talked about the number. I can’t remember the percentage, but it’s over 50% of podcasts that start fail, and they never get past episode 10. So I mean, I think, you know, it sounds glorious and wonderful. You know, and I’ve talked to several people who are trying to start podcasts. And what I tell them is, you know, when the mics hot, that’s the fun part.

But there’s so much work before and after, and I related it to I used to work on race cars. And I told him, I said, you know, everybody shows up this on Sunday to see two cars out on a racetrack, but they don’t see all the work prior to leading up to, and they don’t see all the work afterward where you have to fix stuff to get tore up. Right. So it’s the same thing with podcasting. There’s so much pre-work and post-work if you want it to be successful and if you’re truly trying to serve people the right way. I think that’s what turns a lot of people off, man.

Sam Gupta 24:56

Okay, amazing. So let’s say we have this manufacturing value team, right. So you guys are distributors, and you see the value because you are not really carrying your product. You are slightly more marketing channel for your OEMs or the manufacturers. But do you believe that even for the manufacturers or retailers, they have to develop thought leadership as well? And if they do, you guys have sold similar products? Is there going to be any duplication in thought leadership when you and manufacturer retailers start doing the same thing?

Chris Grainger 25:27

I think it could be, but I think that’s good. I mean, I think the more you know, the more that manufacturers understand their fit. And that helps the distributor as not every distributor, Sam’s going to be like us and want to be the thought leader in and get out in front of a lot of us. Most distributors, rather, really want to just understand what the manufacturer’s features and benefits are and go talk about those because that’s easy.

So you know, we’re taking a much different approach. But I think any manufacturing business, or business in general, you need to understand the value you’re bringing to the market you’re trying to serve, and the questions that they’re answered that they’re asking, and answer those the best you can, if you do that, then you will bring so much value. And if there’s a crossover, I mean, there’s a crossover in what I do and what in what some integrators are doing. And I think there’s just, but that’s good. I mean, it’s just people are talking about these topics. And that makes it even more relevant.

Sam Gupta 26:21

Okay, so what is your perspective on some of these consulting businesses? So in the manufacturing ecosystem, we have a lot of consultants who don’t necessarily sell their physical products. They are primarily consulting. So do you believe that they should be answering these questions as well? And if they do, then what are they going to sell? Because that’s what they are selling?

Chris Grainger 26:41

Absolutely, they need to be answered, but they’re going to be selling, you know, you, you’re answering a lot of questions that people are asking, but at the end of the day, as a consultant, there’s still that one on one touch because everybody’s story is unique. Right? But you know, some of the high levels, the basic questions you get asked all the time if you were to lead that effort as a consultant, you know, and I’m trying to do this, I have another side hustle where I do financial consulting, or financial coaching on the side to help people and what my approach there is shifting to, I want to start asking the questions that people are, are asking about their personal finances, and just answer them and be the thought leader there.

And then from that, that’s gonna groom those leads. And when they come to me, they’re going to have a wealth of information that, hopefully, I’ve helped them with. But there’s still going to be dots that need to be connected, I think, as a consultant in any business, and just I just use mine as an example. That’s the value you bring you you connect the dots.

Sam Gupta 27:51

Okay, so you mentioned that you found a lot of heroes as part of your podcasting journey. So do you have any stories that you might be able to share of those needles? Do you want to highlight any of those?

Chris Grainger 28:03

They’re all so good. Sam, I had, you know, I guess one of the surprises I spoke to a gentleman, he was a president of a company in Virginia. And he has no social media presence. I think he has a LinkedIn account, but nothing else, an introvert, not very active. But just one of the most humble people I’ve ever met in my life.

His episode, man, it blew up like when we dropped it, it just all of a sudden a rocket ship. It came to show me how he’s such a servant leader. And he’s helped people so much throughout his career that they immediately wanted to hear what he said when that was released. So that was a really, really cool one. You know, we did a women’s series.

Sam Gupta 28:47

I want to discuss that further. So what were some of the key takeaways of that story? You know why it really clicked with people were just so compelling about that episode,

Chris Grainger 28:56

What it started with, he didn’t go to college. He went straight from high school graduated. He started as a welder at this company, traveling the country welding, earning every spot he got, right. And every time he made an advancement, his career was just through hard work, determination, and a servant mindset, and all the weight.

Like I said, He’s the president of the company. So obviously, it worked out very well for him. And he’s, he’s just done tremendous things. But that’s been that that was the big takeaway, just how it was not an easy road. But he never wavered once. He was always committed to serving people the best, helping them not get into political battles, and trying to figure out, you know, what’s in it for me, and that just propelled him to the top.

Sam Gupta 29:45

Okay, so did you do any sort of surveys with your listeners? You know, what was so compelling about that episode that resonated with everybody is it just the humbleness, which is great, but there must be something else to the story that really resonated with them, right.

Chris Grainger 29:58

I think what really would resonate, man, was just the authenticity of this gentleman, and how much he really impacted people because you, you can’t get certain stats from your podcast, as you know, depending on where you know, you publish at, but still, it’s only so granular that you can get to so it’s hard to really tell, obviously a lot in his area was a big lift force just in from a geography standpoint.

But I still think this, just his straight humility. And in his overall story is just something that really took off, of course, we do, quote, post on LinkedIn, and Facebook and things like that. So we’ll take snippets of every episode, and we’ll make quotes, and we’ll put little, you know, things out there, just little 30 minute blurbs out there. I think you do that as well. Yeah. And that that really worked well. And just, it really took off, man, it was really cool to see.

Sam Gupta 30:54

So yeah, so you were telling the other story. Do you want to share that?

Chris Grainger 30:57

Well, the other one that you so far is what stood out was we did a woman in engineering series. And that was phenomenal, man. I mean, I have two daughters, eight and ten years old. So that was a series that was passionate to my heart. And it just we had guests all the way from a young lady who just graduated college and going into engineering manufacturing, to we interviewed very high-level executive at a major manufacturer and from everywhere in between, from a work standpoint, work experience standpoint, and it was just it touched my heart.

My daughters listened to all. It was 11 episodes. They loved them all. They were very inspired. And just to hear how these women, all their paths were unique. But they all were so successful and just brought so much inspiration, if you will, to my ten-year-old in particular, and just how cool the different things went. I mean, they’ve talked about they’ve traveled all over the world, and then these different things and they would come to me that you know, this lady went to China or you so yeah, she did, man. So it was cool.

Sam Gupta 31:59

Okay, amazing. That’s it for today. Chris, do you have any last-minute closing thoughts?

Chris Grainger 32:03

No, this has been great, man. I mean, I just really appreciate them. I’m humbled. I’m honored that you asked me to be on. I wish you much success in the future. And if any of your guests would like to check out our podcast, I’m sure you’ll link that up in the show notes. And we’d be, you know, very appreciative for people to check us out as well.

Sam Gupta 32:19

Okay, amazing. And I’m gonna have a comment there. So I think I have hosted you as one of the most humble guys on my podcast. Okay. You are a servant leader. Okay, so the way the humble episode worked for you. I’m hoping that this podcast is going to give me the maximum number of downloads.

Chris Grainger 32:43

That will be an honor if that happens. And I really thank you so much for having me, man.

Sam Gupta 32:49

Thank you so much for your time. Really appreciate it.

Chris Grainger 32:51

Absolutely, buddy.

Sam Gupta 32:52

I cannot thank you enough for coming to the show and sharing your knowledge and journey. I always pick up learnings from our guests, and hopefully, you’ll learn something new today. If you want to learn more about Chris or EECOAsksWhy, head over to EECOAsksWhy.com and connect with him on LinkedIn. You can look him up with Chris Grainger on LinkedIn. If you’re interested in his financial coaching side hustle, head over to fmgfinancialhope.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check out the related episodes, including the interview with Katie Thomas, CPA from Leaders Online, who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. Also, the interview with Greg Mischio from WinBound, who talks about why manufacturing organizations need to adopt the approach of a digital twin to augment their sales teams.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode.

Outro 34:17

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Ted Needleman, who discusses the role of ERP consultants why they are pivotal for an ERP implementation, and why they play a huge role in user experience and training. He also helps us understand why modern systems are more user-friendly than legacy ones. Finally, he touches on the attributes you should be paying attention to while selecting a usable system.

Chapter Markers

• [0:19] Intro
• [2:47] Personal journey and current focus
• [4:39] Perspective on growth
• [8:10] The value of consultants for ERP projects
• [12:26] The importance of usability in an ERP system
• [14:24] The technological advancements in new ERP systems
• [20:34] The limitations of QuickBooks
• [23:29] The importance of recognized ERP vendors
• [25:48] What is an ERP?
• [32:59] Closing thoughts
• [35:01] Outro

Key Takeaways

• Those legacy ERP systems were designed to accomplish tasks and not to be usable. And the software that’s been written for the cloud is built on the knowledge of human factors.
• Legacy systems were designed where you have these big operations manuals to tell you every 15 pages to figure out how to input data into the fields. the new ERP systems are basically flowcharting your way through the system.
• Usability isn’t absolute. Usability is very much reflected in the level of the person, in the end, the entity that’s using the system. And as you get more and more sophisticated going through the system, it becomes more useful because if you’re printing out financial statements, you have to understand what they are.
• ERP is a chameleon. It is an accounting system. It is a manufacturing system. And It is a retail system. So it has to be what the business needs and every business is a little bit different. And an ERP system has to be flexible enough. It has to be configurable to a business without ruining other aspects of the application. It has to be scalable.
• If every ERP system did exactly the same thing, exactly the same way that we want to ERP system, it would only be one vendor. And it’s a difference rather than the similarities that you have to be aware of, and you have to understand how they fit in with your way of doing business.
• There are a lot of people, unfortunately, that have been put in that situation because ERP is working its way down from large enterprises down into businesses that would normally be considered small to midsize businesses. And that’s a new market over the last five or ten years for ERP vendors.

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About Ted

Ted Needleman has been a programmer, an accountant in public practice, the Editor in Chief of Accounting Technology magazine, and the Director of an imaging and printing test lab. He has been reviewing hardware and software for over 40 years and has published more than 4,000 reviews, articles, and columns totaling over 4 million words, as well as two books. He’s been a Contributing Editor for Accounting Today for the past 23 years, writed the Ted on Tech blog there, and is a frequent reviewer for PCMag, Digital Trends, and other sites.

Resources

• Connect with Ted
  • LinkedIn | Twitter

Full Transcript

Ted Needleman 0:00

Legacy systems were designed a long time ago. And it’s like having a 1940 pickup truck that you keep replacing the tires and the oil, and you patch the rough spots. I’m not saying any one particular vendor is in that situation, but you’re working with yesterday’s technology.

Intro 0:19

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:55

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ.

ERP systems are perceived to be complex. But why are they so hard to implement and learn? How do usable systems differ from the other complex systems? Does technology play a role in user experience? Why are ERP consultants so expensive? And why are they so critical for an effective ERP implementation? These are some of the questions you will have if you are reviewing a new ERP system today.

In today’s episode, we have our guest, Ted Needleman, who discusses the role of ERP consultants, why they are pivotal for any implementation, and why they play a huge role in user experience and training. He also helps us understand why modern systems are more user-friendly than legacy ones. Finally, he touches on the attributes you should be paying attention to while selecting a usable system. Let me introduce Ted to you.

Sam Gupta 1:55

Ted Needleman has been a programmer, an accountant in public practice, the editor in chief of an accounting technology magazine, and the director of an imaging and printing Test Lab. He has been reviewing hardware and software for over 40 years and has published more than 4000 reviews, articles, and columns, totaling over 4 million words, as well as two books. He has been a contributing editor for accounting today for the past 23 years, rated the TED on tech blog there, and is a frequent reviewer for PC mag Digital Trends and other sites. With that, let’s get to the conversation. Hey, welcome to the show. Ted.

Ted Needleman 2:41

I really appreciate your inviting me on. I look forward to talking with you about this.

Sam Gupta 2:47

I appreciate that as well. And just to kick things off, do you want to start with your personal story? And what are you focusing on these days?

Ted Needleman 2:54

Well, you know, again, I’ve got a kind of crazy background. And I think that most of it if you’re on LinkedIn, you can see some of it. But not all of it. I’ve been working in the fringes of ERP, and for almost 50 years,

Sam Gupta 3:12

I like crazy backgrounds because they are the most insightful people.

Ted Needleman 3:17

Yeah, you know, I started out in programming and IBM 1401, sign a 4k card system. I started as an operator, taught myself assembly language programming, got a couple of jobs, and worked my way up to what would be an IT manager position. Then, I had had enough. And my father, who was a CPA, had broken up with his partners and said, Do we want to come to learn accounting with me? And I had written accounting systems and programmed them.

So I said, Sure, let’s do that. And I went back to school while I was working for him. I got a degree in accounting and was all this time actually doing reviewing work on hardware and software. In fact that my first review was the Osborne accounting system for IBM. And from there, it’s been, you know, 40 years of reviews and 4000 of them are so well, a million words, two books, and was in public accounting for 12 years. And then the editor in chief of accounting technology for ten more, and I’m still 23 years later a contributing editor to Accounting Today. So you know, I think where you found me was the ERP reviews I’ve done for PC Magazine.

Sam Gupta 4:39

Yeah. So the next question is going to be slightly standard. After that, Ted, we have a very insightful conversation. And that is going to be the usability of the ERP system. And I believe that you are the most qualified person to talk about that because you have done tons and tons of reviews, and you have looked at pretty much every single system out there. But before we get there, what is your opinion perspective on business growth? What does growth mean to you?

Ted Needleman 5:03

Well, it depends on which side, which side we’re talking about. My concern with growth is the organization that’s implementing the application. And in order for that organization, enterprise to grow, it needs to have a couple of things. It needs to have a knowledge of the business, how the enterprise itself fits into the business framework.

And then, once you know how your business operates, then you have to figure out what your resources are and what you need. And then you know, it’s an evolving process and people that just say, Oh, I can use QuickBooks, well, maybe you can, maybe you can’t, if everybody could use QuickBooks, there wouldn’t be all the ERP vendors in the world. So growth is really a knowledge process. And it takes time. It takes expertise.

Ted Needleman 5:56

Sometimes if you can’t get somebody or somebodies that have the expertise that you don’t a consultant than an accountant, even sales engineer, you know, back in the old days, IBM had SEs, as systems engineers, and they would accompany the salespeople, and they would look at the entity and make suggestions of where IBM fits in.

And most of the vendors at that time, the hardware vendors, had the same similar approach. And to my mind, that makes a lot of sense. You know, I think. Unfortunately, some people, some enterprises, entities are afraid to ask for help. You know, they don’t want to appear not knowledgeable. And there’s nothing wrong with that nobody can know everything. And the more input you get from people that know something, the better decisions you’ll make and the smoother integration of the software application with your actual business.

Sam Gupta 6:53

Okay, so let’s say if I’m the manufacturing executive, Ted, obviously, I know about my business, I probably know my existing financial system, let’s say if I’m on QuickBooks, so why is it so important to hire a consultant?

Ted Needleman 7:07

Well, you may know your business, and you may have some idea of the capabilities of different software. But getting a good fit is a little bit more than that. Let’s take manufacturing as you can since you brought it up. Manufacturing is a pretty evolved process.

Even if you’re just making toothpicks, you know, this shop floor software is a resource allocation that has to be done both in terms of people materials, these logistics involved getting the stuff into the shop floor, running it through this process of making the products, and the bill of materials, there’s logistics shipping, it’s not just plugin, you know, boot up a CD, and you’re up and running. Even if the software does meet your requirements, it has to be operable by the people that are using it. And understandable out the output of the system has to be understandable by the people that have to make decisions with that information.

Sam Gupta 8:10

So let’s say if I have used, I’m already using a legacy ERP system in my organization, my employees are already familiar with the ERP system, I understand my processes better than a consultant who I’m going to train, do I still need a consultant?

Ted Needleman 8:28

Probably not. I mean, but to be honest with you, if you’re using a legacy ERP system, then there’s a reason that people move to different platforms legacy or ERP systems are running on hardware house usually, or software as a service hosted with is still running closely tied to the hardware, today’s newer ERP systems are very often operating in the cloud.

And there’s a couple of advantages to that. Not everybody will need them. But there are a couple of advantages. First of all, legacy systems were designed a long time ago. And it’s like having a 1940 pickup truck that you keep replacing the tires and the oil, and you patch the rough spots. I’m not saying any one particular vendor is in that situation. But you’re working with yesterday’s technology. And when those legacy ERP systems were designed, first of all, they were designed to accomplish tasks not to be usable. And the software that’s been written for the cloud is built on the knowledge of human factors.

Ted Needleman 9:29

Okay, you take to give you a quick example without going into a lot of detail. Years ago, when I was with an Accounting Technology magazine, I got invited by Microsoft to visit them in Redmond. And one of the things that they showed us was that their usability lab, their products, they were people in all kinds of people, secretaries, programmers, executives and had them use the software and photographed it and question them and you know, and try to discover the spots where people had difficulty, but you can’t always address every you know, everybody has different approaches.

So you can’t take everybody’s suggestions and put it into your kind of get a gumbo if you do that, rather than something really good. But the software is designed for the cloud has, by and large, been designed with human factors that can be considered. And in my mind, again, having done this reviewing, it talked with software vendors over the decades, usability is the number one fact in my mind. Yes, you need the functionality. Otherwise, there’s no point in implementing the software.

Ted Needleman 10:32

But I think if you can’t use it, it can have the most features of anything. Look at the fighter jet. Fighter jets got all kinds of stuff. It’s got missile stuff. It’s got radar and GPS. And it’s got altimeters and autopilots. That’s nice. But if you don’t know how to use it, you can’t fly the damn thing. And it’s the same thing with applications. If you can’t understand it, you can’t get the most out of it. You may be able to use it to some degree. And I think that software vendors in the ERP space have done pretty much a good job in making their software understandable.

They certainly have done a good job making it feature-rich. But let’s go back to the manufacturing example that you brought up earlier. Yeah, shop floor management and any kind of production organization have things like resource allocation, and the software may be able to help you. But you know, I’m not a big fan of the black box, I understand the need for it. I mean, I don’t have to know how my car is put together to know how to turn on the ignition and drive it.

Ted Needleman 11:34

But when you have processes that have a large effect on the way you conduct your business, you should have some understanding. Now ERP software will cooperate minimax and minimax used a simplex algorithm and replace transforms and all kinds of mathematical techniques to optimize your decisions.

But if you don’t have some vague idea of what it’s doing, then you really can’t understand the data it’s presenting you with because it’s just not gonna say, hey, more butter, less guns, which is really the prototypical resource allocation situation, you know, it goes into economics, but that’s resource allocation, a decent system will have some ties to project management, it gets involved, but you really have to have some understanding of the processes and some understanding of how you fit into those processes.

Sam Gupta 12:26

We want to touch a little bit more on usability. So let’s say if I’m the manufacturing executive, I don’t necessarily have the software background, and I’m trying to understand what makes a system usable. So give me some examples of, let’s say, if I use the same feature in the legacy system, how my life is going to be different in a usable system,

Ted Needleman 12:50

Well, first of all, learning the system is going to be different, okay, because legacy systems were designed where you have these big operations manuals to tell you every 15 pages to figure out how to input data into the fields, a current Acumatica, NetSuite, and similar mid-level, and your IFS is basically flowcharting your way through the system.

And there are different levels of knowledge that are needed at different levels in the organization. A data entry person needs to understand what kind of data it goes into, where it goes into, and what to do if it doesn’t fit. Right. On the other end of that system. The accountant or CFO, or CIO needs to be able to look at the output and figure out what it’s telling them about running their business.

Ted Needleman 13:34

So there are different needs at different levels. So usability isn’t an absolute, okay? Usability is very much reflected in the level of the person, in the end, the entity that’s using the system. And as you get more and more sophisticated going through the system, quite honestly, it becomes more useful because if you’re printing out financial statements, you have to understand what they are. But most of the time, you don’t have to do a lot of input. You’ll have templates that that will work for you this year versus the previous he is against budget this year is against last year’s budget. Those will be templated reports. And pretty much every year, pieces from that I’ve looked at, and I haven’t looked at everyone on the market as report writers where you can fairly easily construct your own custom reports. Now, that is another place where a consultant is really, really helpful.

Sam Gupta 14:24

Okay, so I’m getting that newer systems are slightly more visual than the older legacy systems. And obviously, report writing is great, too. So what has changed from the technology perspective? Let’s say if you look at the cloud landscape, is cloud slightly superior in building the visual system, then the legacy systems. Can you touch a little bit more from the technology perspective? What has changed?

Ted Needleman 14:48

Again, when you’re building software, a lot of times, you’re using multiple languages. You know, cloud software is not generally using some form of Java. The programming language has an effect back on the presentation of the system to the user. But basically, what’s happened in the last ten years, maybe a little bit less, is the rise of the customer experience CX.

And to a large extent, CX is very dependent upon the user interface. And systems that are that have been designed in the last decade, maybe where the, you know, where the cloud has really become predominant, are designed from the bottom up to present a user interface at different levels in the organization that wasn’t true of a lot of times of legacy. It’s a matter and legacy, the people had to adapt to the software, and the more recent cloud-based stuff, some of the really updated legacy software, the software adapts to the user.

Ted Needleman 15:45

And I think that’s a better approach in a lot of things. But again, I’m a big fan of consultants that you can’t know everything about, number one, your business. So on that side, probably an account, your accountant is helpful. And you can’t know everything about the capabilities and features of the software, no matter how good a salesperson they might have.

And somebody that’s done installations and knows the features can save you a lot of time and time is money. You know, it used to be when you had something like SAP, you know, are two years ago, it could take years to actually get this thing up and running perfectly. Effectively. Wait, nobody can afford that. Now, business moves too fast, life moves too fast, you need to get the stuff, figure out what you need, see how it works, get installed, and then make other decisions if you need to add or subtract or whatever, but you need that anchor, and you need it in place fast. And I think a lot of cloud-based software gives you that advantage. And using a consultant gives you even more of that advantage.

Sam Gupta 16:46

Okay, so let’s talk about a little bit of complexity. So let’s say if I’m bringing my QuickBooks instance up as an accountant, or let’s say if I hired an intern, they could figure out things like WooCommerce or Shopify pretty easily. But when it comes to ERP systems, there is this notion of complexity. So what makes ERP systems so complex that consultants are always going to be required?

Ted Needleman 17:11

That’s an easy one to answer. They’re complex because the businesses that they go into are complex.

Sam Gupta 17:18

I mean, let’s say if I’m using the QuickBooks. Okay, am I’m using WooCommerce. Okay, I have been running my business so far. But all of a sudden, I’m talking to my ERP sales guy. And they are telling me that you know what, you could do QuickBooks, you could do WooCommerce, buy on your own, but you cannot do ERP on your own?

Ted Needleman 17:39

Well, first of all, let’s talk about scalability, which is another consideration. QuickBooks doesn’t scale past 35 users. So if you’re running your enterprise, and you have more than that number of users, you’re so well, but generally, again, my view of this situation is, I mean, QuickBooks is a great program. It really is. It’s a great application, they have a lot of links through APIs to other ancillary applications, like retail CRM, but it’s a piecemeal approach.

And for some people, it works very well for others. Depending on how complex their business is QuickBooks, may have to make too many links and compromises, and every time you make a compromise, it impacts your business. Now, it may be worthwhile and money and time to make that compromise. But I look at a small business a little differently than most people, I think these days, and SMB doesn’t make a lot of sense to me.

Ted Needleman 18:43

In some situations, small and medium-sized enterprises make sense to me because the way we do business in the last five years through the Internet and globally has changed the way we do business. And you can have a two-person company that does manufacturing. It does kitting from pieces from all over the world, you may have multiple multi-currencies, and this is a two-person business. And they might be doing $10 or $15 to $20 million a year in revenue; QuickBooks isn’t going to help them. They’re going to need an ERP system to do that. They need something that can handle the complexities of today’s business. And the more usable that is, the easier it will be to get a match between the business and the application.

Ted Needleman 19:27

And that’s critical. You can go for an ERP system, and it can cost you $5,000 a month, and if you can’t figure out how to use it, you are spending money on something to say, hey, I’m running this, or I’m running that well. If you can’t use it, you’re not really running it. You’re spinning your wheels to a large extent. That’s like me buying a Mach truck to take home groceries from the supermarket.

There are a lot of people, unfortunately, that have been put in that situation because ERP is working its way down from large enterprises down into businesses that would normally be considered small to midsize businesses. And that’s a new market over the last five or ten years for ERP vendors.

When you’re dealing with those smaller businesses, they’re, First of all, they don’t have the expertise to understand a lot of the functionality with UI. They may be so feature-rich that it becomes confusing. So it’s a difficult situation right now for people. And that’s why I think consultants really fill in a gap there, they fill in the gap as educators, and I think that’s a valuable service that they provide.

Sam Gupta 20:34

Okay, so tell me a little bit more about QuickBooks. So you made a comment that you know QuickBooks does not scale after 35 users. Why is that?

Ted Needleman 20:41

The way it’s designed QuickBooks enterprise was designed with a custom database? They don’t use, and they don’t use SQL? Or they’ve stuck with a custom database, and the database has limitations. And quite honestly, you know, I think QuickBooks Online is probably a better idea for a lot of people. Because if you have more than a couple of users on a network, with in-house QuickBooks, close, you need some pretty heavy hardware as a server cloud. With QuickBooks Online, all you need is a Chromebook. You know you can run QuickBooks, and a lot of these a lot of ERP software, or browser-based. So it doesn’t matter what you’re running as long as you don’t have 15 processes on your laptop or desktop.

Sam Gupta 21:21

Okay, so let’s say if I’m the business guy, and I don’t really understand the technicals of these things. So let’s say if I try to run my business after 35 users, what are the implications for me? Is the server going to crash? Is the software not going to respond? And is it not going to work? Am I going to have disruptions in my business? So from the business perspective, what are the implications if I try to run my business past 35 users on QuickBooks?

Ted Needleman 21:45

If you don’t understand where the limitations of the app application are, both feature-wise and hardware-wise, you have no business implementing that software by yourself. The idea of QuickBooks Enterprise or QuickBooks Online is that you allow growing the in-house, standard desktop QuickBooks Premier because businesses are hopefully are going to grow. And as they grow, they’re going to need more users. They’re going to need more people. They’re going to need better reports. And they’re going to need more features. Now, I mean, I’m not trying to think QuickBooks. I like QuickBooks. But QuickBooks isn’t an ideal solution. For a lot of businesses these days.

Ted Needleman 22:23

I think that in general businesses that are enterprise driven rather than small businesses, QuickBooks has links to retail, but if you’re going to have multiple stores with multiple registers and take orders over the Internet, and web, sure, you could link in Shopify and other things.

But you’re much better off with a vertical system that’s designed for retail, both front and front, office, and back. And you can kind of shoehorn businesses into applications. But you’re better off not trying to force an application to do something it may not have originally been designed to do when there are options mid-level, which is mid-market is kind of converting over to ERP. An ERP is designed to be flexible enough to accommodate a lot. A lot of the ERP vendors do very, very good verticals. And you know, if it’s this line from the start to meet those kinds of requirements, you’re going to have a hell of a lot less trouble initially, and you’re going to have a hell of a lot less trouble over the long run.

Sam Gupta 23:29

Okay, so when we look at the vertical software, so since you mentioned that comment, right? So when we look at the vertical software, there are a bunch of them. So some of them may not be as popular. They could be regionalized. And we don’t even know if those brands are going to be stable or not. Right. So what would be your perspective, whether we should go for a name brand or not so recognized brands, but they might provide the functionality that I need as a manufacturing executive?

Ted Needleman 23:56

I mean, realistically, most of these vendors would not know when they started selling their software. Yeah. So if somebody comes along, and they’re not necessarily recognized, they may have a better way of doing things. And again, you need somebody. Not everybody in an enterprise in an organization is going to have the understanding of the processes in the organization, as well as the processes in the software, to be able to make a good match.

And sometimes the salespeople and in the software vendor, the ERP vendor can bridge that gap sometimes to your accountant can bridge that gap. And a lot of times, you’re better off just saying hey, help I you know, what’s the best choice to make because there are a lot of people that don’t need that.

Ted Needleman 24:46

There are a lot of people that have good CFOs and CIOs and great IT departments and they’re able to make those decisions on their own. Not everybody needs a consultant, but again, if you’re going to a new vendor, First of all, you got a problem with converting whatever you’re doing now into a new format. And this is a one-time deal for you in the organization at any entity, but it may not be a one-time deal to a consultant that’s really familiar with doing that kind of operation.

So it’s false economy to say, hey, I don’t want to pay this guy $150-$200 an hour, I’d rather waste $300 or $400 or $500 an hour, ten times over trying to do it myself. I think some of the time, it’s just a matter of not understanding what the process is of implementation. And again, that’s not a value judgment against anybody considering your ERP or any application for that matter. If you haven’t done it, how can you know what’s involved in it?

Sam Gupta 25:48

When we look at different ERP systems, and when we talk to different people, as manufacturing executives, we get different definitions of what an ERP is, to be honest. Okay, so in your perspective, what exactly is an ERP? Some people say that, you know, it’s an accounting system. Some people say that it’s an order management system. So how would you define any ERP?

Ted Needleman 26:07

ERP is a chameleon. It is an accounting system. It is a manufacturing system. And It is a retail system. It has to be what the business needs and every business is a little bit different. So an ERP system has to be flexible enough. It has to be configurable to a business without ruining other aspects of the application. It has to be scalable. That’s one feature of mid-range, you know, mid-market and ERP that you won’t find in a lot of the lower-end systems. But that’s changing because vendors like Xero, and Zoho, which are built on the cloud applications, are pretty much completely scalable because the databases that they’re built on are completely scalable.

And basically, accounting, especially as a database application, you know, you can call it whatever you want books, accounts, their fields in a database. And way that they’re most accounting applications is built on relational databases like SQL HANA. That’s one feature that you see in some of these lower-end things that are kind of modeled on an ERP model. But basically, I’d say, if I had to pick one characteristic of any ERP system, it’s adaptable. And that’s valuable because every business is just a little bit different from every other business.

Sam Gupta 27:26

Let’s go back to your comment about the new format of a new system. Typically, in the ERP system world, obviously, one system is definitely going to be different from the other one. So let’s say if I have been running my business on one ERP system for the last ten years, what is going to be involved for me if I need to switch to the new ERP system?

Ted Needleman 27:44

Well, first of all, it could be a nightmare.

Sam Gupta 27:48

Tell me more.

Ted Needleman 28:02

Well, to get a consultant because you’re in for a real ride going from one way of doing things to another is I’ll give you an extreme example. Okay. From my personal history, the first book I wrote, I wrote longhand on yellow legal paper, the yellow pads, and my wife typed it.

It was on an apple two, with a Z80 card running WordStar. Okay, so there’s a difference. I could type on an electric typewriter, which I had. I’m not really a typist. Even after all these years, in all these words, I’m still not very much of a typist. But today, when I have one of these, if I wanted to transcribe one of these sessions, like when we’re doing now, I would take notes, and I’d make notes, and I type it in and edit it today, I record it, I send it out to rev.com, they transcribe and send me back a Word file, and I do an edit on that or just highlight what I want to pull out of it.

So it’s different. When you’re going from an older type of ERP system to a newer type of ERP system, you may be doing the same types of operations, but you’re doing them differently. It goes back to usability. Today’s systems are designed. I hate to say the less. They’re less functional because they’re more functional. But that functionality is more accessible on new systems, and it was on old systems, and that makes a mental paradigm shift that has to take place in the company, you as the manufacturing exact to understand why you’re doing things differently and what the impact is going to be on your business positive or negative. And that’s a big jump a lot of times, especially if you’ve been using any ERP for 20 years.

Sam Gupta 29:38

Okay, so last time when I actually looked at different ERP systems, I got super confused because they all look fairly similar. Okay, so let’s say if I’m, as a manufacturing executive, I’m going in a demo, and I can see every single ERP system out there can probably do a sales order for me can probably do a purchase order for me and I have no idea how to differentiate how to understand what is going to work for me. So let’s say if you were the manufacturing executive. And if you were going in a demo, how would you identify a usable system from the heart to your system?

Ted Needleman 30:11

Well, if it was me, first of all, before I went to any ERP vendors, let’s look at your system, I would go to my department heads, and there are people that do data entry and understand what we’re doing. And what we’re doing that might be a little bit different from the way everybody else does it. Because every executive has their own way of doing it has their own way of looking at things, their own level of importance on different things. And you need to have a good understanding of what you need and what you want.

Okay, before you sit down with the ERP vendor, because at the base form, I mean, let’s take accounting because accounting, accounting is accounting. I mean, it doesn’t, it doesn’t matter exactly how you do it, there are standards generally accepted accounting standards, yes, that tell you what you have to have, as far as redundancy, you know, internal control, output has to be formatted, you know, for the SEC, or certified what it’s I mean, there are some standards that are set in stone by regulatory agencies and the users go into you go into a bank for a loan, they expect to see not only a P&L and a financial statement, they want a cash flow statement, they may want other things.

So you need to know what you do a little bit differently than other people might do. And that, you know, that’s the secret sauce. I mean, that’s what makes you successful, and that that accounting system, or that ERP system, or that ERP system as to support what you needed to do. And it may be a little different.

Ted Needleman 31:44

Every ERP vendor has a basic set of functions that they do. And you’re right, you know, it’s confusing. We, oh, we do this. Oh, and you go to the next one, oh, we do this, but it’s the same thing. I’ll give you a kind of an example. A car is a car, okay. But some cars are little cars. Some cars are performance cars. Some cars are SUVs, some cars, and pickup trucks.

And depending on what you need to, if you’re gonna haul wood to a construction site, you don’t want a Corvette, you may want to quote that, but you’re not going to be able to use a Corvette to haul sacks of cement. Yeah. So the tip is that you look at when you go looking, and you’re talking to ERP vendors, you ask them, How do you do this? What do I have to do to get this out of your system? Can your system do this? I did things a little differently than everybody else. Can your system handle that without a lot of fudging around and custom reporting?

And the first step in any acquisition is to know what you want to do with it. Yeah. And that if every ERP system did exactly the same thing, exactly the same way that we want to ERP system, it would only be one vendor? Yeah. Okay. And it’s a difference rather than the similarities that you have to be aware of, and you have to understand how they fit in with your way of doing business.

Sam Gupta 32:59

All right. That’s it for today. Do you have any last-minute closing thoughts, by any chance?

Ted Needleman 33:03

Yeah, I think when it comes down to it, you have a three-level match that you have to meet, you have to match the people in the organization, the features in the software, and the needs of the business, and you need to address all three of those things to make a good purchase.

And if you’re not, if you’re not capable of doing that yourself, and that’s not a dig on anybody because very few people are actually good at recognizing everything in a business. That’s why we have consultants, that’s why you have accountants, you have specialists that are doing it. And a lot of times, it makes a lot of sense to pay a specialist to take a look and give you a hand. I mean, I couldn’t build a house. I can frame at a wall. But I can’t build a house. I would never do that.

Ted Needleman 33:44

Well, again, it’s an understanding of where your limitations are and bringing onboard people in your organization and outside of your organization to boost those areas.

Sam Gupta 33:56

yeah. All right.

Sam Gupta 33:56

Thank you so much, Ted, for your time. This has been an insightful conversation.

Ted Needleman 34:00

So it’s fun talking with you, Sam, and I appreciate your asking me to be on.

Sam Gupta 34:04

I cannot thank our guests enough for coming on the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Ted, look up Ted Needleman on LinkedIn and connect with him. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check out our later episodes, including the interview with G.Brett Beaubouef, who discusses whether moving to the cloud guarantees business transformation. Also, the interview with Randy Johnston from K2 enterprises who touches on why process documentation is an essential ingredient for an efficient finance organization.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get out. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 35:01

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Damon Pistulka from Exit Your Way, who discusses why word-of-mouth or traditional marketing strategies are no longer enough for business growth. He also touches on his growth secrets and how they have been able to rule the market through the network effect. Finally, we touched on what strategic buyers or private equity look for when business owners try to sell their business. 

Chapter Markers

• [0:18] Intro
• [1:52] Personal journey and current focus
• [7:20] Perspective on growth
• [12:52] The network effect
• [20:21] The shift to e-commerce
• [28:53] The predictability of value on a weekly basis
• [31:42] What buyers look for in a business
• [36:15] Closing thoughts
• [39:19] Outro

Key Takeaways

• COVID really changed their effectiveness because those same people that were the road warriors that were out there visiting these potential clients and moving them down that funnel in person, we’re not able to do that this year.
• When you’re sitting down with a web design person, your problem will be that your web design isn’t good enough. Or if you sit down with a cold calling person, you’re cold calling is not good enough. But the reality of this is that’s not the case. It’s not a one solution fits all. You have to really figure out what your core problem is. And it could very well be that it’s one of those, but it could very well be that something else.
• You need to be measuring where you’re at consistently. And when you talk about how you translate operational performance. And I say all the way from the initial contact with the lead all the way through capturing money.
• Only about 20% of the businesses that are put on the market generally sell in it simply for that key thing is that the owner is too much too heavily involved are too much the value of the business and it’s gone when they leave.
• If you look at the statistics, less than 10% make it to the third generation, but those that put these kinds of systems in, they go multi-generational, and you know, sometimes they’re 100 years or more, but so these kinds of things are where we’re really the investment in this has such a huge long term payout, because succeeding the business, hey, you can you’re leaving the legacy you want.

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About Damon

Helping business owners and executives create legacy businesses, Damon is focused on identifying and executing opportunities to increase business value. With 20+ years of building and managing businesses in extreme conditions and diverse industries, Damon is committed to helping clients be their best, crush competitors, and dominate markets provides an unwavering focus.

Damon developed his skills as a business value and operational improvement specialist.  He is an expert at engaging internal & external teams to develop game-changing solutions that foster business success. He continues this work today with Exit Your Way® clients scouting the path ahead and keeping them on track while they work towards their goals.

Resources

• Connect with Damon
  • LinkedIn | Twitter
• Connect with the Exit Your Way
  • Website | LinkedIn | YouTube | Facebook

Full Transcript

Damon Pistulka 0:00

Business is not growing. I say, well, what are you doing now to do more outreach to potential customers? How are you trying to get yourself in front of those people? And I get a blank stare back, and they go, oh, it’s always been word of mouth. And that comes out inevitably in every conversation where I’ve had growth problems.

Intro 0:18

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:54

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ. If you’re an SMB lifestyle business and have had growth challenges, your end goal could be selling to an investor or a PE firm if you are a second or third generation with this, your business chances of survival would be slim. If you don’t follow the modern procedures for running your business. Operating a business has become even harder as the game has completely changed in the last three years, especially with COVID.

In today’s episode, we have our guests Damon Pistulka from Exit Your Way, who discusses why word of mouth or traditional marketing strategies are no longer enough for business growth. He also touches on his growth secrets and how they have been able to rule the market through the network effect. Finally, we touched on what private equity buyers look for when business owners try to sell their businesses. Let me introduce Damon to you.

Sam Gupta 1:52

Helping business owners and executives create legacy businesses, Damon is focused on identifying and executing opportunities to increase business value. With 20 years of building and managing businesses in extreme conditions and diverse industries, Damon helps his clients beat their best competitors and dominate markets. Damon developed his skills as a business value and operational improvement specialist.

He is an expert at engaging internal and external teams to develop game-changing solutions that foster business success. He continues his work today with Exit Your Way clients scouting the path ahead and keeping them on track while they work towards their goals. With that, let’s get to the conversation. Hey, welcome to the show, Damon. Thanks, Sam. So just to kick things off, do you want to start with your personal story and your current focus?

Damon Pistulka 2:45

Sure, Sam, I can do a little bit about that. My story really starts growing up on a large family farm in the Midwest. It’s something that not many people have the opportunity to do. When I started, it was smaller than it was when until my father grew up quite a bit. And my brother did. But you know, we had several 1000 acres that we took care of cattle and other livestock that depends on us. So from a very early age, I understood what it was like to have to take care of things, have to figure out a lot of things. And you know, in my early years, and through my teens, I really enjoyed learning about how things work from the standpoint that I was a mechanic of sorts; you had to be growing up on a farm like that.

Damon Pistulka 3:42

We were literally 30 miles away, almost from the nearest car dealership, and things like that. And it just, for example, I think even now the nearest Walmart is probably 40-50 miles away. So you know, the town I grew up in had about 300 residents, and I graduated with a class of 16. So I grew up in a much different environment than most other people that you’re going to talk to in business simply because of that. And what that is given me throughout my career is a foundation of when I’m in a manufacturing company, or I’m in a construction company or something, and I’m helping them with or e-commerce with those kinds of companies. I can relate to the people that are actually doing the tasks in the business, whether it’s someone sweeping the floor, running a machine, or driving a truck, I can understand what they’ve done and understand that position that viewpoint and I think that’s always helped me to really think about business holistically.

Damon Pistulka 4:45

And you know, after I grew up there, I went to school, got an engineering degree, did a fair amount of graduate work and industrial management, and then I was often and running facilities and then businesses mainland. The manufacturing space and ended up doing that for 10-15 years with investment-owned businesses and private equity-owned businesses. And ultimately, after I finished that in about 2009, I started doing my own consulting work. And then, in 2015, I started working with an old business associate Andrew Cross from Northwest.

At that time, I was a business brokerage that he had started shortly after we’ve worked before. So he and I did that for about a year and a half before we really started to look at how we were helping people in selling the businesses and what we really wanted to do, and what my vision had been since I was in my mid-30s.

Damon Pistulka 5:48

And running businesses for private equity investor-owned companies was to bring that same kind of focus into other non-investor-owned companies. So you know, the focus that they always have is we are growing this business to a certain value because there’s a definite exit point for us out there in the future. I saw how that worked. And I saw how much we were able to change those businesses and how much value we are able to create. And I wanted to do this in my 30s. But I really didn’t have the network around me to do it and with the right people. And that came together for us in 2016. And we’ve been going down that road very hard since helping people grow their businesses to the size they want, prepare them to sell, getting them sold, and just growing businesses, not just but and growing businesses, so they run better and helping business owners do that.

Damon Pistulka 6:39

So that’s, in a nutshell, me from where I started to where I’m at now. And I just, I’m so grateful that I get to do this on a daily basis helping these business people realize their potential, whether it’s a business team, a management team, helping them or people in the business, helping them reach their goals, or the business owners themselves finally getting their business to the point that they have toiled over for many years, to the point that it’s actually now providing a return for them, allowing them to step back from the business and really continue to, to grow without as much help from them. So it’s, I’m just thankful I get to do this.

Sam Gupta 7:20

Okay. And it’s interesting the way you mentioned the word growth because that is typically the second question that we like to ask every single guest that we have. So Damon, from your perspective, tell us what your perspective on growth is?

Damon Pistulka 7:34

When I look at business growth, there are two things that are slowing people down on business growth. One is squirrel syndrome. We, as entrepreneurs, are naturally attracted to shiny objects. And that is one of the first things that I usually have to myself. For myself, personally, we have to focus on what really is going to generate more revenue for the business, right? Because typically, someone goes into business because they’re good at something. So I’m going to open a plumbing business because I’m good at plumbing. And I know I can make more money than I was working at my plumbing job, and I’ll have more freedom. And I’ll do all these things. That’s why they get into business. It doesn’t matter if you’re a plumber, if you start a sheet metal manufacturing company, or you’re doing high-end aerospace machining, you know, these people get into business, typically, because they’re good at doing that thing, right?

Damon Pistulka 8:27

They’re not in business because they’re good at selling typically, or they’re good at business typically. So when you come back to why the first thing that’s limiting growth usually is you’re simply not focusing on growth and not executing the fundamental things that you need to do.

I mean, there are, I can’t tell you how many people you walk into, and you go, okay, talk to them about their business, and they go a business not growing like my one, I say, well, what are you doing now to do more outreach to potential customers? How are you trying to get yourself in front of those people? And I get a blank stare back? Yep. And they go, Oh, I’m not really, you know, my, it’s always been word of mouth. And that comes out, inevitably, in every conversation where they’ve had growth problems has been word of mouth. Or I used to have a really good salesperson, or they moved on or retired or something like that.

Damon Pistulka 9:20

And the fact of the matter is, is most businesses or if you say some businesses have not made the transition to really how people are buying today. And when I was actively selling in businesses in selling as a salesperson, General Manager, salesperson in these businesses back in the early 2000s. There weren’t social media really to speak of. You had a website, but it was more just a placeholder. It wasn’t a place where you could go and really get information about things and all the things now, and the buyer demographic at that point has changed completely from then until now.

Well, when you look at that, The ownership in these businesses, a lot of them are the same age as I am, they’re in their, their 40s, and 50s. And they’ve, they have not really moved forward to the point that they understand the way that the private equity buyers that are buying now from them really want to find out about them, research how they help people with their specific situation, and then get 75% of the way through the buying process, before they contact you all digitally, that I don’t care if this is an e-commerce business that sells shoes, or a CNC machining businesses, for the aerospace industry, it all happens the same now.

Damon Pistulka 10:41

And that’s where we come back to these companies. When we go, listen, you have to make sure that that part of your business is at least functioning. And then you have to make sure that you’re handling that input the leads that you’re getting from that the right way with a process that really works because the business owners have often relied on a salesperson or one particular sales process that seemed to work for them.

But they really don’t treat it, especially in some of this business, like manufacturing or something where you’ve got really high ticket items, right? Because let’s face it in manufacturing, if I close the sale, it can be 5 million, it could be 30 million, because of the length of the relationship and the contract sizes and everything like that.

Damon Pistulka 11:26

So we’re not talking about 100 or 1000 transactions. We’re talking about 10s of transactions here, even in 100 million dollar businesses, right? They’re going to bring on the big clients. So But what they don’t do is they don’t apply the same principles that you need to develop a good sales process like, okay, who do we have in our funnel? And where are they at?

And how are we helping them answer their questions, educating them on how we could potentially help them, and moving them down the funnel or funnel or out of the funnel because of the nature of manufacturing or large construction work, right? This, to me, the businesses are very similar.

Damon Pistulka 12:05

It was often the salesperson that had the contact that went out there and established that relationship and did that stuff. And, and still, those salespeople are still around today. But I think that 2020 and COVID really changed their effectiveness because those same people that were the road warriors that were out there visiting these potential clients and moving them down that funnel in person, we’re not able to do that this year.

And I think the companies that are actually taking the time to figure out how you’re going to do that, with a hybrid of digital and person-to-person to move people through that process, are much better off. But that’s one of the things that I really see is that they haven’t prepared digitally. And they haven’t figured out how to integrate the old and new into a more effective solution.

Sam Gupta 12:52

Yeah, and I could not agree more, especially with respect to some of these industries, manufacturing and distribution. Obviously, they are very traditional in the way they operate. And I want to go back to your personal story a bit. You mentioned that in 2015, you didn’t have much of a network, but you worked really hard from 2016 onwards, and it seems like you are in a good place. The way you are present, as in my opinion, digitally. I think you guys are doing amazingly well.

So obviously, when you come from a similar background as these manufacturers and distributors, and you had to figure things out yourself. So tell us your entire journey, how you started? What is the network? Number one, what was the network effect? What is the advantage of developing this network? So walk me through the entire journey that you have gone through in building your Exit Your Way?

Damon Pistulka 13:43

Yeah, what I really like I said, from ours, I was 35 or 36 when I envisioned the company. And what the vision of it was at that time, it is to see a company that was helping business owners grow their businesses, get them to the value they wanted. And then you can do what you want at that point. You can sell it. You can keep it. Or you can give it to your kids wherever you want to do and. And then I realized at that time that I didn’t have the network of specialists and people and resources really, that we’re able to do this, you know, I had done it with the teams that I had in these businesses, but to do it, like I envisioned with multiple companies at a time and creating extreme growth. It really took a lot more specialized resources. So I started as I said and 2015 and realized that I didn’t have enough resources.

Damon Pistulka 14:38

I was one of those business executives that had gone their career as many do. You’re focused on the businesses you’re working in. You’re not building that network. And You’re not getting those specialists around you that can really help you, and I recognize it kind of got slapped in the face with it. And I started working on LinkedIn, and I was lucky enough to start getting connected with some very knowledgeable people. I started working on it.

And I grew my network a bit. I met some other advisors and things and really started to get things moving. So, I went from a few 100 connections in 2015 to 2016, 2017. I probably had 10-12,000, something like that, and some advisors that I’ve met that really good. And then, fast forward that to 2019 is when I really took another look at it and said, okay, we were moving forward with our business, we had moved through some clients and really done some extreme growth with people that I’d met on LinkedIn.

Damon Pistulka 15:37

And I was like, for us to really take this to the next level we had talked about in 28, late 2018-2019. And we wanted to go national, and I said, Listen, I think there are two things that we’re going to have to do to go national. My partner and I were talking about partners. At that time, we were talking about it, we said, Wait, we got to be virtual. First of all, this isn’t the end of 2018. So we got to have a better network than anybody else.

I said, Okay, so that means that we have to either meet them in person, meet them online, get to know them, figure out what they do, and better than anybody else. That really is in started us down a journey of massive amounts of time on the road, massive amounts of time and LinkedIn. And ultimately, in 20 late 2019, I met a few people on LinkedIn that really, really unlocked the gates for me, so to speak of LinkedIn.

Damon Pistulka 16:30

And that was Ira Bowman, Mike O’Connor, a couple of guys. When it comes to LinkedIn, I respect them a lot because they understand how to grow a network and how to connect with that network and engage with them, and really do that. They helped me a lot in seeing how you can build a solid network and then how you help those people to then begin building those relationships.

And then I met people like Nick Dorsey, who taught me he was Nick was really one of the first people that I ever met online, and then on LinkedIn, and then met in person, and it comes to be now he’s a season ticket holder at the Seahawks as I am we go to games together when we can. We sit across the stadium. It’s a lot of fun. And you know, once I figured that out that LinkedIn is not a place for you to click your keystrokes in and message back and forth. But it’s a place for you to meet like-minded individuals.

Damon Pistulka 17:26

So you can take those relationships offline, and do them in video calls or in-person meetings, wherever you can do to get to know those people better and really build the relationships that you can and that you can on a much larger geographic scale with a platform like LinkedIn. And for me, honestly, that was in 2019, when that started to happen and started to gain some traction.

Well, fast forward to the first quarter of 2020. And COVID hit. Well, what happened, everybody that was working in the offices had to work at home, and now the user base on LinkedIn or the actual time on LinkedIn skyrocketed. Yeah. And efforts in the first few months of 2020. Well, I took that opportunity to really aggressively go out and meet people. And to the point that at the beginning of COVID, for us at the end of March or something like that, we were sitting there, it just hit me one day, I was like, Listen, these business owners, these advisors, these people are having trouble, they don’t understand, you know, this is just a new situation for so many.

Damon Pistulka 18:34

And I talked to Andrew, and part of the work I did was in turnarounds where you know, they put me into an investment group and put me into a really horribly poor performing company in a turnaround, right. So this is similar to what was happening with a lot of these businesses and COVID. I told Andrew, we were talking about it, I was like, it hit me over a weekend. I was like, dude, we got to be talking to people about this because they don’t understand the gut-wrenching decisions they’re gonna have to go through to save their business to keep, the employees employed, and all these different kinds of things. And we started having weekly video calls. Pretty soon it was, you know, we had two people on it, and we had six people on it.

Damon Pistulka 19:15

And then the next thing, you know, we were, we were at 50 Plus, and, you know, the zoom wasn’t really working for us. And we had to change platforms, we moved over to remote because it was a little better platform for us and what we’re doing, and here we are with that, you know, 30 or 40 of those events later, we still are doing them weekly, we still are got a really good group of business owners, executives, advisors that we talk with every week where we’re, we’re building relationships, we’re talking about clients, we’re sharing speakers that that that teach us all something every week and in throughout this, we were able to build our network, and this is what I hadn’t been able to do before and we knew we needed to do this to go national and really do it the way we wanted to.

So 2020 for us was a tremendous growth year for us internally as a company. Not only were we successful in selling some of the companies that we had been working with, and we have clients this year that were, you know, I’ve got a larger oilfield services client that they were down significantly, but they still made money.

Damon Pistulka 20:21

You know, and I’ve got, we’ve got ecommerce clients that that, you know, up 60-70%, and they could have been up probably 80 or 90, but we honestly that ecommerce companies in the year 2020, if you haven’t grown that much, I don’t know what you’re doing. Because this shift to e-commerce is so strong, so strong, we’ve got another client, that’s, you know, they’re up almost 200%.

And it’s the e-commerce businesses that are really struggling just to keep up with demand, right. So this building, this network, turned into a lot more for us because once we started doing that, we started doing a video with it. And we started building, building our video content on our website, we started then live streaming to LinkedIn, we started to do live stream shows two times a week, because, hey, we wanted to, to provide more information for business owners and executives that would help them grow, prepare their businesses, make them run better, and get them ready for sell if that’s what they want to do.

Damon Pistulka 21:24

And, and you know, so our, our weekly roundtable, we call it that we’ve had on Thursday mornings at 7:30 pacific that, as I said, it’s going and then we also had, I don’t know, we had 35 or 40 other live interviews that we do on Tuesdays and Thursdays at three o’clock Pacific. And I’ve really been fortunate to interview some fantastic people, some fantastic business owners, and share their stories.

Because through sharing those stories that they for some of the business owners that we interview, I mean, their stories are so amazing, because you can talk to a business owner that that started a business and their business today can be $50 million. But I will guarantee you without fail that it has not been a smooth road. And when you talk about growing a business and you talk about, you know the things that business owners need to do, I think people that are in business now need to hear that they need to understand that, hey, it’s not sunshine and rainbows it all the time, you’re going to have some great wins, but you’re going to have some challenges.

Damon Pistulka 22:31

And as you’re growing those businesses, I think hearing those things helps people. So for us, 2020 in the network building really exploded our ability to help others and just came to fruition and some things, and we talked about I had a client this year that had a really specialized software need. Through LinkedIn, I was able to find the exact resource they needed in literally, I put a post up I had within an hour, I had a few, I don’t know, five or six different suggestions, and one was the right one, and away you go.

This wasn’t available to me 24 months ago. Now that has helped us so much more because really for what we do. And when we’re helping a client grow, we’re not looking for a five-year relationship. But if we have those, that’s great. Our real goal is to take a business from point A, which could be that they’ve got, you know, 10 million in revenue, and they’re worth about 2 million or 3 million or 5 million or whatever the number is.

Damon Pistulka 23:31

And the owner really wants that to be $20 million and worth two or three times that that’s what we do, we go from point A to point B. So that is not a long-term thing for us. That is something where we want to be doing that as quickly as possible. So it takes specialized resources, right? Because you don’t want to haphazardly do that. And as many business owners know, they’ve, they’ve spent countless dollars on stuff that didn’t work.

So we try to go through those things ahead of time and knowledge to be really, really good at diagnosing what they actually need and set of the solution that’s in front of them trying to fit their needs. Because I forgot, I was reading a book earlier this year. It was. I can’t remember the guy’s name. But he coined it very well. He said when a digital marketing person that specializes in email marketing, and I don’t know if he uses web design or something like that.

Damon Pistulka 24:21

But he said, when you’re sitting down with a web design person said your problem will be that your web design isn’t good enough. Or if you sit down with a cold calling person, you’re cold calling is not good enough, he said. But the reality of this is that’s not the case. It’s not a one solution fits all. You have to really figure out what your core problem is. And it could very well be that it’s one of those, but it could very well be that something else.

So we take the solution agnostic approach going, listen, this is the challenge we need to fix. What is or the problem we need to fix are the things that we need to improve on. What are the best ways to do it, and we look at all the potential solutions?

Damon Pistulka 25:00

Because we’ve got this network now that I can do this, and we go, okay, let’s take this talk to these people, these specialists talk to the internal people work together to figure out what is actually the right solution, not just I was contacted by a great PPC person, they’re selling me Google ads, or I’ve got this great web designer that I know that tells me their web, my new website is going to solve everything we really go listen, in, our solution would look more like this.

It’s like, hey; you could redo your website. But that’s going to take you three months. And you know, it’s going to cost whatever, but really, your website has these key issues that we need to fix. Other than that, we don’t need to spend any more time because we’re here focus on growth in sales, because I don’t care about growth in visits to your website, it’s nice if it’s creating leads that are creating sales, everything we focus back on to is it’s got to be generating sales, those sales have to be profitable, that profit has to turn into value that the owner can realize, simple as that. So our solutions, like I said, are much more about,

Damon Pistulka 25:59

Hey, your website needs this work. We need to mix in some PPC. We need to mix in some social because data, we’re long term or some SEO, and do some things that are going to help you in the long term as well as the short term to get to growth you want because we got to hit your target, we got to be moving towards your target today. But we need to hit your target, which is even bigger, six months from now, or whatever we decide with that client. So when you get to network, you need a network like that.

Because if you don’t, then I know a good marketing person down the street, or that’s in your industry, and they’re going to, you know, do email marketing or whatever it is, it’s never a one-stop solution. And that’s putting those things together is where we really sell. And then as you grow the business that you know, we’re old school on the fact that we really believe well, old school, new school, wherever you want to talk about, I mean, in the private equity world, KPIs measuring performance has been the standard for many, many years.

Damon Pistulka 26:56

And in the private business, it’s not done for a large part just because those business owners don’t have the pressure that an investment owner does investment owner has a down month, they don’t, they have to go tell that to their investors, right, because they the investors get those updates they get those things are a public company, but I talk to business owners every week that have very good businesses might make them millions of dollars a year, but the monthly financials and the weekly or daily performance measurement falls off they’re don’t even consider that.

And that’s the basis of what we do. Because in order to make progress you need, you need to be measuring where you’re at consistently. And when you talk about how you translate operational performance. And I say all the way from the initial contact with the lead all the way through capturing money.

Damon Pistulka 27:50

When I say operation, I don’t mean that exclude sales, or finance or anything like that the overall operation of the business, if you are tracking that with KPIs from like I said, from that initial lead through the collection of cash, you are going to be much better off because if I’m sitting here today, and I have a have managed, you know, whatever you want to call it, you have a weekly meeting, to discuss with your internal managers, your internal teams, the performance in their areas, and then you talk about that from sales all the way to a collection of cash.

And you look at those metrics, and you see how they’re performing. And as an owner of the business, you can begin to rely on that. Because if those KPIs you’re using get you to a gross margin level of the business, you can then begin to predict your profitability each month. When you begin to be able to predict your profitability on a weekly basis, it drastically changes your business, the predictability of profits starts to turn it into a very desirable business.

Damon Pistulka 28:53

And this is where I really feel like the heart of how we help clients grow significant because you develop businesses that owners can then if you set up the team, right, and they’re able to do this, right, sometimes the owners have to be more involved and other times with the size of business and different things.

But when you put that predictability in on a weekly basis, and you start to understand that if I hit these numbers on a weekly basis, from A to Z, that my financials are going to look fine at the end of the month because you basically you’re taking your annual goals, you’re breaking them into monthly goals, break them into weekly goals, simple as that.

But when you start tracking, you’re addressing challenges on a weekly basis, and you’re hitting those numbers, and you get about three, four, or five months into this, and you can see it change and the owners about how they begin to get a new comfort level with their business because a lot of them sit around and go okay, I want to see how I did at the end of the month with the financials or they’re looking at the bank account and both of those things are not good.

Damon Pistulka 29:56

I just say they’re just not good. I don’t know a good way to do it, but because the bank account is really, you know, you might have big bills, you gotta pay whatever you have to look at, you’re just not looking the right thing we’re looking cash in the bank. On the other way waiting for the financials, you don’t know what the hell is going on, what’s the what if it’s, it shows your worst nightmare, it’s you just did just waiting for something bad to happen.

On either of those ways, when you put this predictability from A to Z in a business, you can tell that, listen, if my salespeople are doing what they’re supposed to be doing, that generally leads to enough sales, which generally leads into enough profit, which generally I’m measuring on a weekly basis, which means that I’m generating enough money to cover my fixed expenses, am I and give me the profit I want, it’s a whole new world, and we put that together, and then you just you put the right pieces in place.

Damon Pistulka 30:47

So you go, okay, we’re stalling on this part of the business, you know, maybe the operations aren’t keeping up, or you’ve got to do you know, you’re, then you’re just, you’re just do bottlenecking areas and adding new solutions, which we often have to because, you know, when you take a company, and you double it, and in 24 months, you know, you go from $10 to $20 million or something like that, because these e-commerce companies and some manufacturers to have that ability to do it, you have to run through structural changes, and you have to develop and implement structural changes in the business because you might have a whole another level of management that wasn’t there before.

But in 2001, I’ve got three customer service people on the phone, or account managers, and now I’ve got 10, it was easy to manage three, but now I have to have a manager for 10. You know, those are the kind of things that you have to go through and, and really understand and keep changing your metrics and changing your structure your business to keep up with it.

Damon Pistulka 31:42

But in the end, if a business owner is looking to realize the value from their business, either by taking out profits over a long term, and you know, using that to retire on or fund whatever else they want to do, or to eventually sell their business, this predictability and systematic achievement of goals is what a lot of private businesses don’t utilize.

Because they simply weren’t in that situation. It goes way back to when we started talking about they got into it because they were good in manufacturing or good and, you know, had a good product ideal. Yeah. And that’s why they got business. They didn’t get into it. Because like I said, there are good sales are systematically building a business. And that’s, that’s where I think there is our application. And what we do it is it’s, it’s a ton of fun. I mean, when you see these business owners realize that man, my business is worth something now, and I’ve got enough money, I can go on vacation now. And I don’t have to freak out and throw up three times a day.

Damon Pistulka 32:49

Because, honestly, that’s what it is, is it for most business owners? Is their life chained to the business? Right? Are they chained to that damn business? Because they feel like if they leave for a week, that’s gonna fall apart? Well, I know. Yeah, exactly. Right. If you see them what was good the kind of work that you guys do, putting the systems behind them in the ERP systems and, and simple solutions for these, you know, when you look at all this measurement stuff I’m talking about relies on good solid systems behind it.

And we’ve talked before, I’ve implemented a number of ERP systems and then said, it’s like, eight or nine now. And when you look at these things, if these things can give you actionable information, these measures out easily efficiently, that’s really what we look for, and those because we can use that and move forward. But these business owners can then go on vacation. They can step back from the business.

Damon Pistulka 33:45

And if it’s set up, right with the likes of the team, and everything clear goals, they will see that that business can flourish, and sometimes even better, without them around as much. And what that does, then is that helps them they’re a, they’re more profitable, you’re able to hopefully take more profits home with them invested however they want, anywhere they want to do, but then when you go, now it’s time for them to decide what they want to deal with their business.

Because the thing that sucks is we all get old, we are going to have to do something with that business. Right? Yeah. When you get to that point, and you go, listen, now it’s time for me to think about what I’m going to do with that business. And you’re in the first case where you didn’t do this work, right. And I’m changing my business. I’m still working that you look at that from the outside buyer perspective.

Damon Pistulka 34:33

And that’s very, very hard to sell. That’s why only about 20% of the businesses that are put on the market generally sell in it simply for that key thing is that the owner is too much too heavily involved are too much the value of the business in most cases, and that just how do you transfer that value forward? It’s gone when they leave so by creating these businesses that can sustain themselves. And grow and do that, really the owner becomes the architect of the overall they really laying out the goals and then making sure the money is there to do it or whatever they got to do.

Well, that’s something that a buyer, a new buyer, can come in and take over. Right? They can do that. And the real thing is that benefits both, I mean, because then they can realize that on their way out and do it, even if that’s a succession, right, because you don’t, I don’t care if you’re the first generation, the second generation, third-generation, family-owned business, if you put good systems in early, that business has a tremendously higher chance of success through the generational change.

Damon Pistulka 35:38

Because you know, if you look at the statistics, I think it’s like, less than 10% make it to the third generation, but those that put these kinds of systems in, they go multi-generational, and you know, sometimes they’re 100 years or more, you know, but so these kinds of things are where we’re really the investment in this has such a huge long term payout, because succeeding the business, hey, you can you’re leaving the legacy you want.

But also, if your business is consistently growing, and you’re going to say transferred to your daughter who’s going to run the business, and she’s going to continue to go. Your daughter wants to take a good wage. She wants to build value and have her own value in this company, right?

Damon Pistulka 36:15

So if you’re building value, well, then there’s more money to go around. Because this is what we see on the other side of this is okay, I’ve got a business that’s doing 15 million and, we’re making whatever we’re making $2 million a year off the business and, and the owner that, once associated to their, their daughter and their daughter, okay, I’m going to be pulling 500,000 out whether instead of the business owner now taking out 2 million, they’re taking out 1.5 million, nobody wants to really do that.

Or you want to structure a long-term buyout from the daughter to buy out long term from the current owner, the father or mother, whoever it’s onerous, they have to take the cash flow out of business to do that. Whereas if you’re growing that business, it’s actually new cash flow that funds the purchase of the business and or new cash flow that helps to provide money for everyone. You know, those are the things where I think that growth in family-owned businesses, multi-generational businesses is often overlooked.

Sam Gupta 37:11

Yeah, I agree. That’s pretty much it for today. Do you have any last-minute closing thoughts, by any chance?

Damon Pistulka 37:16

No, you know, I just think that if you’re stuck in your business, there’s a lot of help. And if that is the case, I mean, there there are just so many people that there’s so much good information out there, right? Just keep looking for it. Keep trying, you know, it’s you’re in the same boat as everyone else. So that’s, that’s why they can say, um, you know, I’m just glad for the opportunity today to talk to you and to talk a little bit about growing businesses, man.

Sam Gupta 37:41

Yeah, amazing. Love your insight. Thank you so much for your time. This is going to be so helpful for manufacturers and distributors, the way you have paved your journey, we can do the same as well. And by the way, the time that you spent, it’s done in like, three, four years. So anything is possible. It is just that you have to have a plan. And you have to have real good execution behind that.

Damon Pistulka

38:04
Yes, execution is key because a good plan is worth zero if you don’t execute it. Right.

Sam Gupta 38:09

Thank you so much, Damon. I really appreciate it.

Damon Pistulka 38:11

You bet. Sam, thanks a lot.

Sam Gupta 38:14

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Damon, head over to exityourway.us. Links and more information will also be available in the show notes. If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Nick Jackson from the Mendota group, where he discusses what private equity buyers look for in a business when they buy. Also, the interview with Jim Gitney, where he discusses how the need for people processes and technologies change at each inflection point our business grows.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of The WBS podcast.

Outro 39:19

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Clay Coleman, who discusses the importance of a quality management (QMS) system. And why it matters for manufacturing and distribution companies. We also had a chance to discuss what manufacturers need to know about starting their ISO and QMS journey. Finally, we discussed how American Petrolium Institute (API) for Oil and Gas differs from other industries’ ISO needs.

Chapter Markers

• [0:00] Intro
• [2:09] Personal journey and current focus
• [5:54] Perspective on growth
• [7:03] Why quality management and QMS matters
• [12:19] What small businesses need to do to prepare for ISO
• [21:06] Pre-requisites before starting the ISO journey
• [24:25] ISO 9001 vs. American Petroleum Institute (API) Spec
• [27:20] How oil and gas quality standards differ from generalized manufacturing
• [36:58] Closing thoughts
• [38:04] Outro

Key Takeaways

• A quality management system forces a company to sit down and identify all of the little tactical steps involved in creating each of the processes pertinent to your company’s order fulfillment lifecycle.
• Even if you’re a small shop with three leaders and three workers, you still need to start with that org chart. You need to identify who’s responsible for what aspects of the company. And then add to your designees responsibilities as the Quality Manager and then dive into one of the first sections of in this example API.
• QMS is the quality management system, which is your book, a tier-one quality manual, supported by tier two procedures and work instructions, documented by tier-three forms and records of standard ops. So it is all written procedures that you can then leverage whatever tools you need. You don’t need an ERP system to adhere to a quality management system. You can do it all with Excel and by hand in a binder.
• At the end of the day, the quality management system is not simply undertaken. A quality management system needs to be thoroughly vetted by the decision-makers in your business. And if it’s seen that value is there, there’s a number of different ways to do it. A small businesses can become ISO or API certified without having to invest the fortunes. We’ve seen, with a few companies able to operate in industries with barriers of entry, such as quality management certifications.

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About Clay

Clay Coleman is an expert in international business development, process, and strategy specialist. He has 10 years of experience in IT / Quality Management System implementations, analyses, and advisory services.

Resources

• Connect with Clay
  • LinkedIn
• Connect with Gaslogix
  • Website

Full Transcript

Clay Coleman 0:00

It was very, very daunting. Seeing binders of here’s how to do a job and learning that there’s not one standard format that you have to adhere to was the opening of the door to unbox our Schlumberger engineers and start getting the innovation company like crazy out of our comfort zone.

Intro 0:26

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:02

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.

Managing the quality of your product is not only required to provide a consistent customer experience. It will also be a requirement by customers and regulatory bodies in specific industries. The necessary amount of effort in getting certified and audited can not be underestimated, with significant financial risks for non-compliance.

In today’s episode, we have a guest Clay Coleman, who discusses the importance of a QMS system and why it matters for manufacturing and distribution companies. We also had a chance to discuss what manufacturers need to know about starting their ISO and QMS journey. Finally, we had an opportunity to discuss how API for oil and gas differs from other industries.

Let me introduce Clay to you.

Clay Coleman is an expert in the international business development process and strategy specialist with ten years of experience in IT and Quality Management System implementations analysis and advisory services.

With that, let’s get to the conversation.

Hey, Clay, welcome to the show.

Clay Coleman 2:07

Hey, Sam, how are you doing today?

Sam Gupta 2:09

Okay, just to kick things off. Do you wanna start with your personal story and what you are focusing on these days?

Clay Coleman 2:16

Yeah, absolutely. So I’m Clay Coleman, and I met Sam through a colleague of mine, Wayne Sadin, who I was working with over at Orion. And my journey to the discussion we’re gonna have today about being a quality management field. I just love it as I come from a background of analyzing it and have the opportunity to take a company from ground zero to an international provider of Donald tools. So just a little bit about my background to dive into that I started out as a pricing analyst for Georgia Pacific for the railroad’s division. And we did not have software for it. It was all macros, Excel, Access databases, and having to use OCR and stuff. So I went into consulting with a subsidiary of Capgemini called Sogeti and moved to Houston to focus on the oil and gas industry.

Clay Coleman 3:19

It was in that focus that I was exposed to Schlumberger and a number of other different large oil field service or oil companies in the area doing different engagements like SharePoint migrations ERP implementations. When we got into advisory services, where a lot of it came into reviewing and simplifying processes from that work, I went to Weatherford to go in the house as a process engineer. And then I was given the opportunity to help launch a company called Frontier Oil Tools.

It was a group supporting a company that was purchased by Schlumberger in 2010 or 2009 employees over in Russia and Eastern Europe with what we viewed in the US as commoditized tools, selling downhole tools that are used in the construction and completion of an oil well had certain barriers of entry. One of which was to become an API, which is the American Petroleum Institute, certified manufacturer of downhole tools and also certified provider of services for the install of said tools. But for today, we’re going to talk about manufacturing in particular.

Clay Coleman 4:48

I spent about six years long, six and a half years with Frontier Oil Tools, before moving on to go to a large public group to work on an ERP implementation with Microsoft Dynamics. And since then, I’ve helped launch a little company called GasLogix, where we are distributing natural gas by-products.

We’ve bought ownership rights to natural gas scrubber and storage group south of here. And we are doing a little logistics and distribution network set up across the US and the entire platform. I’m leveraging for that Zoho One.

So we’ve been asked to introduce an ISO 9001 quality management system for that energy company that we bought distribution rights for. And now I’m diving back in. So that kind of round circle with the Microsoft implementation and then working back on quality has brought us to conversations you. And I have been having back and forth, Sam, and I’m excited to dive into it a little bit today.

Sam Gupta 5:54

Okay, and I’m super excited to dive into that as well. But before we do that, but one standard question that we asked every single guest, and that is going to be your perspective on growth. What does growth mean you, Clay?

Clay Coleman 6:07

Growth, to me, means the ability to fulfill an order. You can go out there and sell, sell, sell. But if you can’t meet your obligations of the sale, whether that’s providing a product on time, a service that gets completed on time, etc. If you’re not able to live up to your obligations, you cannot grow in enabling the ability to meet those obligations as sales ramp-up is the creation of standard operating procedures, resulting in repetition. And those repetitions create data with which we can assess and continuously improve. I firmly believe that a quality management system forces a company to sit down and identify all of the little tactical steps involved in creating each of the processes pertinent to your company’s order fulfillment lifecycle.

Sam Gupta 7:03

So you know, as you mentioned, from the growth perspective, that growth is comprehensive. It’s not just sales, and marketing is slightly bigger than that. And quality management is obviously going to be a big puzzle of that. And you mentioned the quality management forces companies to think about their product quality overall and forces you to improve the process and efficiency as well. But let’s look at some more benefits. From the quality perspective, let’s say if somebody is starting on the quality management journey for the first time, why should they care about QMS?

Clay Coleman 7:34

So quality is kind of a big animal to tackle. And I think we want to start with identifying what a QMS is, and that’s a quality management system. Okay. And so ISO, the international standards organization as a standard called ISO 9001, is the blueprint of a quality management system that you would need at your company. And that blueprint would serve as each of the little processes. Some may have a lot of details. Some may not think that you need to have documented for your company with which you can standardize, implement, etc.

So I’m going to speak to API because that is where my experience stems in working with the American Petroleum Institute. The only difference between their quality management system requirements and ISOs is the addition of some oil-specific topics. So if I was looking to implement an API quality management system, I would go to API. It is the oil and gas industries regulatory body that provides certification to different applicants from API, they have their quality management system, and that provides your outline of processes that you need.

Clay Coleman 9:02

Now, you can take a look at that. So, in particular, this one is API spec, Q1 ninth edition. And that covers the ISO 9001 2015 edition, quality management system requirements that adhere at all industries in the US, well, internationally, API is pertinent to the US. At the end of the day, what you’re going to do is you’re going to get on API’s website. And you’re gonna download that quality management system spec.

When you first look at it, it’s just gonna look like an outline. And you’re gonna see a couple of high-level topics of quality management system requirements, a quality management system, what is your quality policy. And whatever your objectives may be, it’s a lot of high-level stuff in those first five or six sections. As you continue to look, you’ll eventually come to section five in reference to what we’re speaking about API spec Q1 for a quality management system, section five product realization. We’re going to talk a little bit about that when we dive into some specifics within here.

Clay Coleman 10:12

But at the end of the day, and navigating this first view, you’re looking at a tier-one quality manual. And that’s your high-level overview. We have all of these different processes documented. And here’s a little excerpt about what it is in each of those sections. In this example, section five has an association with what are called tier two and tier three documents. Tier two is your procedure or work instruction that accompanies that reference of the topic. Tier three is the form that gets filled out in conjunction with performing that action to record that transaction and serve as a record for you following the process.

So when we look at a quality management system from day one, here’s what I want to implement at the company. I’ve gotten in, and I now have API spec key one’s quality management system requirements. And as I read through each of these different paragraphs or subjects. I see that there are a number of tier two procedures that need to be documented that may or may not have an accompanying form to serve as a record of performing that procedure. We got to connect the dots top-down, bottom-up, at the end of the day, the high level of what that does, taking that view, to assessing the scale of the project. It’s going to be to implement a quality management system for your business allows you to read this 30 something page guide as much more than that, because not to scare anyone.

But a quality management system involves the documentation and standardization of all the processes in companying how your business operates from quote through a collection of invoice receivables,

Sam Gupta 12:19

Okay, so that’s a great description, Clay. So let’s say if I have a manufacturer or distributor. Also, let’s say they are a lifestyle business, and typically, lifestyle businesses are going to be that are less than $25 million in revenue. And they are typically founder-run businesses, right. So that’s how we describe the lifestyle business in the finance community. So let’s say you have a lifestyle business. And they don’t really have any of their processes documented. And they sort of have processes, but they are not as standardized. Everybody has their own way of following the processes. So what do they need to do to prepare to start the journey for ISO?

Clay Coleman 13:01

I think the first thing that in this example is that most companies need to do, who is asking for this. You got to get your decision-makers in a room and have everybody on the same page top-down that you want to implement and adhere to the quality management systems. So that’s step one. You need to get all of your decision-makers in a room, listen to the Ask, ask yourself, why do we need a quality management system? Is it worth it? And if so, you need to define some roles, responsibilities, and expectations of members of your team for the implementation of this system.

So you’ve got to define your actors and who’s going to be responsible for drafting and implementing the quality management system. And a lot of us in this WBS group have done different project management engagements. They are pretty familiar with a RACI chart you need. Even if you’re a small shop with three leaders will say and three workers, you still need to start with that org chart. You need to identify who’s responsible for what aspects of the company and then add to your designees responsibilities as the Quality Manager. Then you need to dive into one of the first sections of in this example API.

Clay Coleman 14:50

QMS details the responsibilities of a quality manager. You have to have your president or leader of the company sign off in support of that designee. And in the implementation of this QMS. So that’s step one, got to get everybody on the same page, got to get agreement top-down. You got to get somebody assigned to the project and granted the authority to do what they need to do to get this implemented appropriately. Or you need to work with the different business units that are going to be responsible for individual paragraphs and references within the quality management system.

Sam Gupta 15:05

Okay, so from your perspective, is QMS some sort of ERP system? Is that a software tool? Are you referring to the documentation and collection of a spreadsheet to call this system? What is your perspective on that?

Clay Coleman 15:27

So QMS is the quality management system. And the quality management system is your book. A tier-one quality manual, supported by tier two procedures and work instructions. It is documented by tier-three forms and records of standard ops. So it is all written procedures that you can then leverage whatever tools you need. You don’t need an MRP system to adhere to a quality management system. You can do it all with Excel, and by hand in a binder. I wouldn’t recommend it because there are retention periods on records, and yada, yada, yada, it’s pretty old school.

But you can still become certified without having to invest in any of these high-dollar tools. So when I talk QMS, I’m talking about your quality management system. It is your tier one, tier two, and tier three sets of documentation. Its purpose is to be wrapped up to serve as your standard operating procedures for each aspect of the business.

Sam Gupta 16:39

Okay, so let’s say if I’m going through tier one, tier two, and tier three. And I can relate that tier one is probably going to be a high-level summary of some of my processes. So what specific standards am I going to expect in each of those sections as I’m going through that document?

Clay Coleman 17:00

So getting into, and I’m going to talk API because there are ISO references throughout. It’s basically ISO with some oil and gas spefic additions. The first set of your tier one manual is to highlight what a quality management system is and its goal. What our company objectives are and what are our company’s high-level KPIs. And who’s responsible for the maintenance and continuous improvement of this quality management system.

After the first handful of paragraphs, you’ll then start getting into detail. As an example with API, Section four is all covering the intro pieces we had just discussed. Once you hit section five, section five is about product realization. Within product realization, you get a number of subsections 5.1 being contract review, so a review of the contract you just sold, whether that’s to provide a product or provision, a service, risk assessment, design and development inputs, purchasing, and then it walks through your manufacturing, how you’re, if say, if you’re making a product, where are you taking your measurements and validating that the product conforms all the way through that process, the way you need to look at it is it starts, everything starts high level, and then it just keeps getting deeper and deeper and deeper into the weeds.

Clay Coleman 18:35

So all of section five is going to be about provisioning that product. Then once you finish with that in continuing the example of API, once you hit section six, it’s all about your quality management, system monitoring, measurement, analysis, and improvement. So it’s about continuously improving this document. So Section four and starts in Section four. But in an API quality management system, Section four is your intro, your high-level overview of company application. Section five is the production and provision of whatever it is you sold.

And then section six is all about how we maintain checks and balances of this quality management system, ensuring that we’re doing what we say we do in our providing record of it. And section six is where you get into doing your own internal audits, hiring whichever certification body in this example API for external audits, etc. Once you’ve gotten through that, that’s the end of the quality management system. It’s an intro. Here’s how we do all this stuff. So as you can imagine, section five is where a lot of information is in section five is the primary target of the audit.

Clay Coleman 19:58

Then, section six is Okay, we’ve implemented this to IMS, how do we ensure that we adhere to it, because, as you said earlier, and I saw this at whether for a lot because whatever was made up of over 100, different acquisitions, people kind of want to work, how they’re comfortable. And the quality management system in forcing your company to document and standardize its procedures, which means all of your workers or those that are affected by those procedures now need to adhere to what’s documented, it can be a pretty radical change.

That’s why I say step one is getting all of your decision-makers in a room and assessing is it worth it for WBS and my concept of growth, meaning you can’t grow unless you’ve got the proper foundation, I would say a quality management system in forcing you to standardize and document all of these procedures and examples we just went through, creates a foundation with which you can then edit or build upon.

Sam Gupta 21:06

So give me some examples of those checks and balances that you mentioned related to different processes that I may have in my business. I get the idea overall, in terms of what you’re doing, but I’m still looking to see whether I have those checks and balances at this point of time, as they relate to my processes and purchasing as they relate to improving success in design, I may not have some of the approvals that some authorities might be looking for. So what are the examples of those checks and balances that I should be expecting, and I should probably have those in place before I embark on the journey of ISO?

Clay Coleman 21:42

Well, you know, I think a really good example that’s got some broad applicability for the context of our group with WBS is to talk about a sales contract review. So this and the order fulfillment lifecycle is when we are converting a quote to an active order. So we’ve quoted a customer, they’ve responded, we’ve gone back and forth with whatever adjustments, negotiations, etc., may be necessary. We’ve sent them the revised final details gotten in writing confirmation, that yes, we are ready to go on this quote, order it, etc., or begin the order.

A sales contract review, in an example, would be as simple as a one-page printout that just says customer name, quote, number details of the order, a little summary of the back and forth for whatever changes were required is, quote, accurately reflected. And this is all an internal sign-off. Put it in a folder or sign off, scan it, and put it in a digital folder. I prefer attaching it to any ERP system.

Clay Coleman 22:54

But I’m not going to speak about ERPs in case that’s not being used. It just needs to be related to the order at hand, the quote converting to order, and now you’re ready to put it into fulfillment. And so in the manufacturing world, I would have taken this formal quote, I would have attached my correspondence from the customer, I would have attached my sales contract review, which has the designated salespersons sign off because he’s accountable for yes, these details are correct to then release to my manufacturing lead to put into motion.

And that would kickstart the checking of inventory for material and buying new material if required. The print up of the work packet, the drawings, the getting it on the machines, yada yada yada everything downstream from there, but the value that a sales contract review brings to the table, as I think a really good example for something that ISO is going to be looking for is it holds that salesperson accountable for what is being pushed through your company to fulfill.

So if that guy sold this specific liner hanger to this company, all of the accompanying details that are in that quote, required for accurate fulfillment, have been checked off and approved by the salesperson, and it transfers the accountability to whoever your designated individual may be in your company. Instead of it being well, a bunch of finger-pointing when something goes wrong. Well, you did this wrong. Well, you signed off on it.

Sam Gupta 24:25

so let’s talk about API. So obviously, I can relate that API is probably going to be slightly more specific than ISO 9001. And there are going to be some oil-specific standards. So let’s say if I was doing the generalized manufacturing, and now I’m trying to move to oil and gas, okay, then I have no idea how oil and gas works. And you are trying to teach me how oil and gas specifications are going to be different from generalized manufacturing. So what are some of the things that I should be expecting in API?

Clay Coleman 25:03

So what’s great, and I would imagine it has similar applicability in medical and aerospace manufacturing. American Petroleum Institute provides what’s called a conformity matrix. And it is a spreadsheet outline of all the different subsections of a requirement referenced within specific paragraph x that need to be documented somewhere. And when you’ve finished creating all of these documents, you populate this conformity matrix with reference pointers to your internal documentation as to where that requirement is met.

That conformity matrix on the very left-hand side shows paragraph 5.1. Point two in the API requirement is 7.2, point one A through D. In the ISO 9001 2015 edition reference, it’s a quick scan if you’ve got familiarity with ISO, and you want to go into an industry-specific standard like API in this example, the conformity matrix by that certifying body is where I would start because as you review that spreadsheet, in the case of API, they’ve highlighted where requirement has no reference to an ISO requirement.

So it’s an outlier. ISO does not require this, or where they’ve identified that API doesn’t care about this requirement, even though it’s an ISO. So not required in the API paragraph. But this is an ISO number. So it’s a cross-check of what’s different. And it shows what additional details would be needed. On top of a standard ISO 9001 quality management system, that API would require to extend their certification. So a company can earn, you know, I just like to roundtable that a company can earn an ISO cert a number of different ways. It’s the industry-specific regulatory bodies that leverage that ISO cert and then add to it for their certifications.

Sam Gupta 27:20

Great. So from the process perspective of API, Are there going to be any differences in terms of how I should be capturing my transactions? How should I be recording my vendors? How should I be documenting my quality standards in the case of oil and gas? Are there going to be any differences from the general manufacturing?

Clay Coleman 27:36

No. So what that was one of the most difficult things for me to learn, especially being that my initial exposure to quality management systems was through Schlumberger, who basically had every step of your role, how to perform your responsibilities, and what those KPIs to measure that performance would be documented. It was very, very daunting. Seeing binders of here’s how to do a job learning that there’s not one standard format that you have to adhere to was the opening of the door.

To unbox our Schlumberger engineers in start getting the innovation pumping like crazy out of our design department, we took a lot of unnecessary step-by-step procedural with accompanying you need to enter in X, Y, Z in ERP, system area, etc. And just simplified it down. So to answer your question, when you’re looking at writing a quality management system, and you approach it with ISO first and are then wanting to specialize further with API certification, you can keep your ISO documents and gap-fill whatever those missing requirements as identified for the conformity matrix we were previously discussing have pointed out that ISO QMS will suffice for an API certification. As long as you’ve added in the additional requirements, that API is documented for the conformity matrix.

Sam Gupta 29:25

Okay, so how does the follow-up process look like so? Let’s say if I’m applying for the ISO, you know, I’m probably going to have some sort of inspector who’s going to review my process. So walk me through the journey, how the process and process of review and submission looks and how our follow-ups going to be year by year, and what, as a business owner, I need to do to make sure I have everything that my auditors are going to expect

Clay Coleman 29:52

in preparation for going down the road of implementing a quality management system. You need to know upfront that year over a year. You’re going to be internally and externally performing checks on yourself. Some industries don’t require an annual formal audit, whereas others do. And in some of those cases, others do until you become tenured at five years, or what have you. In approaching the implementation of a quality management system, you need to really, as a business owner or leader, look at it as we are now going to have written documented standard operating procedures that we need to adhere to if our QMS says we do it, we need to show it.

And if there’s the ability to show a record of having performed certain requirements, there needs to be an accompanying way to record that, that effort with API, the way this whole thing works is okay, your company has determined that yes, it is worth it. There’s value in implementing an API quality management system. We’ve gotten the spec from Q1. I’ve designated someone in our leadership group responsible for this project.

Clay Coleman 31:18

And I’m going to recommend if you’re starting from scratch, doing a little searching and finding one of these API quality management system training groups, kind of similar to prepping for a PMP exam, where it’s a little three-day overview because then that’ll provide you some templates. So you don’t just sit there spinning your wheels, trying to create all this stuff from a blank canvas. That’s not against the rules. If you’re provided something, and there’s not a legal issue there, you can use it. API doesn’t care.

But you need to have the framework for tier one, tier two, and tier three blown-out quality management system. By downloading the spec, you’ve got the guide to write your tier one manual. I’m just going to pause here and reiterate that you’ll save yourself some money, whether that be from time spent effort, etc., by going to one of these overview courses that provide you with templates and material with which to construct this, because it’s also going to get all of your verbiages lined up because an audit, they’re going to want to see your designee go full understanding of what a quality management system is why we’ve implemented it, how are we maintaining it, etc.

Clay Coleman 32:00

So to pick back up, you’ve gotten all your stuff, you’ve now written your tier one, tier twos, tier threes, you’ve practiced it. You need different industries to have different lengths of time before you’re eligible for audit, that it has to be an implementation in oil and gas, it’s six months. So you have to show records of this being implemented and followed for a period of time.

You then go to that governing body and submit your QMS tier one, tier two, tier three, your record of implementation, because you actually have to do a sign-in sheet for meetings to show that you had a meeting had a record of it, and record of conducting business in conformity with your quality management system. So whether that be inspection logs, if you’re a manufacturing company, and all of the job packets, it’s the details that are in that job packet.

Clay Coleman 33:44

All those records need to show that you have been doing what your standard operating procedures are written as for that period of time, API will assign an auditor, an audit date, and there will be some fees. The fees on this it wasn’t ridiculous for American Petroleum Institute. I believe it was under $5,000. It was all in on the certification fees paid to API, including the formal spec that I had to have from them. And so I mean, it’s you know, it’s not cheap. But that’s API.

I’m assuming manufacturing and aerospace are probably in the same area. But that’s, that’s why I say you know, it’s a lot of effort. But it’s not unattainable for a small business. This, you just have to be willing to commit to documenting all the nuances of how you conduct your business, implement it, and create records of following said process.

So rounding it up, you’ve written it, you’ve implemented it, now you’ve submitted to become certified. You’ll then have an internal audit that you conduct yourself, or you can hire a third party to do that. There are different ways, and then you have your formal audit where they review the performance of your internal, which is why I say you can hire someone. There are different strategies there that we can discuss later. And then also all the meat and potatoes of your tier one, tier two use tier threes, and nobody’s going to pass it on the first round, they’re going to present to your findings and findings need to be addressed, because it’s in nonconformity. In other words, you said you were going to do this, and you’re not, or where’s the record, etc.

Clay Coleman 35:30

And you have to do an investigation, identity why, and document what happened? Do we need to change any? And what was the impact? Does there need to be a change? How are we changing? How did you change? And how are you monitoring to ensure that there’s no backsliding? That’s the way that you address these findings. You then go year over year with that certification body where they’re coming in and checking in on you very much in the same style as your certification on it.

But at that point, it’s just maintaining. So once you’ve addressed those findings, and your first certification audit, to the satisfaction of the governing body, I say that because there may be some back and forth. But you’re basically logging into a website and attaching evidence of here’s how we changed this. Here’s how we’re following it. And they go, yes, Frontier Oil tools have sufficiently corrected these nonconformances. They have a sufficient quality management system for the API reference spec Q1 ninth edition for quality management systems. They are now issued a certification of conformance with sets back. Long story short, now you can advertise you’re an API certified manufacturer and provider of tools, and you’ve gotten past that barrier of entry required and upstream oil to get your tools down.

Sam Gupta 36:58

So that’s it for today. Do you have any last-minute closing thoughts?

Clay Coleman 37:01

At the end of the day, the quality management system is not simply undertaken. A quality management system needs to be thoroughly vetted by the decision-makers in your business. And if it’s seen that value is there, there’s a number of different ways to do it. In small businesses can become ISO or API certified without having to invest the fortunes we’ve seen, with a few companies able to operate in industries with barriers of entry, such as quality management certifications.

Sam Gupta 37:45

I just wanted to thank you for your time. And there are some serious insights here that manufacturers and distributors can definitely take advantage of. So thank you again for that.

Clay Coleman 37:57

Absolutely. And thanks for your time today, Sam. Happy to pop in here and share some thoughts on quality management systems.

Sam Gupta 38:04

I cannot thank our guests enough for coming to the show and sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learn something new today. If you want to learn more about Clay, head over to gaslogix.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check the related episodes, including the interview with Max Krug, where he discusses what actions businesses need to take if they encounter product quality or business performance issues. Also, the interview with Ian Pratt where he discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, you can rate us on your favorite podcasting platform. Or DM me on any social channels. I’ll try my best to respond personally and make sure you get out. Thank you, and I hope to catch you on the next episode.

Outro 39:05

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Nick Jackson from The Mendota Group, who discusses. What lifestyle brands can do to enhance their value for strategic buyers. He also discusses what founders can learn from CEOs who typically manage the business acquired by PE firms. Finally, he touched on why they put a negligible value on technology when you buy lifestyle brands. 

Chapter Markers

• [0:00] Intro
• [2:28] Personal journey and current focus
• [4:05] Perspective on growth
• [5:53] why talent is important for a growing company
• [10:12] Ideal company for a strategic buyer
• [15:31] Factors why companies are in the market for buyers
• [20:08] Why do buyers put a negligible value on the ERP systems
• [24:14] What founders can do to increase the value of their company
• [27:02] Closing thoughts
• [31:17] Outro

Key Takeaways

• Employees are just a critical part of executing our strategy. These manufacturing companies are relatively complex, and they can’t be made successful with just a handful of people at the top figuring things out. So we want people again. We want our employees to feel like they understand the direction we’re headed, that they understand the financial and strategic expectations of the business. And we want them to feel like their position is very key to that whatever role they have.
• We really look at what’s the customer concentration, we really don’t want to see one customer be greater than, let’s say, 25% of the revenue unless there’s a really, really good reason for that concentration.
• We want to know that there are customers who the business has worked with, that are name brand decent-sized companies that we feel with some more specific and directed sales effort, we could, we could get deeper and more involved with those customers to grow the business because we all know that growth, the easiest growth comes from growing your existing accounts versus trying to win new.
• Make sure you understand exactly why you make money, you have to be able to demonstrate to somebody on the outside where the profitability is, why it’s existed, why it’s sustainable, and why it’s going to continue at a level that is, you know, at current levels are better.

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About Nick

Nick and his partner started The Mendota Group in 2000 with a focus on acquiring small to medium-sized manufacturing companies. In the last 20 years, Nick has worked on 19 different acquisitions which include all aspects of due diligence, negotiation, and financing of these transactions. Nick works closely with the management teams of their current holdings to help develop and implement strategies for growth. These companies collectively represent over $150MM of revenue and more than 750 employees.

Resources

• Connect with Nick
  • LinkedIn
• Connect with the Mendota Group
  • Website

Full Transcript

Nick Jackson 0:00

No, no one wants to buy a company where even though it was a million bucks for 5-6-7 years, then all of a sudden something happened in the market where popped up to $2 million. But that thing that created that pop is something that’s not sustainable, not predictable.

Intro 0:17

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:54

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host and principal consultant at a digital transformation consulting firm, ElevatIQ.

Business buyers have a unique way of evaluating businesses. If your end goal is to sell your business, you may want to know what buyers value in a business as an asset to align your growth plans with their needs. Do buyers put more value on the team or the rest of the clients? Do they emphasize more on technology or products? When do you get a higher return on homegrown software or an off-the-shelf ERP?

In today’s episode, we have a guest Nick Jackson from the Mendota group, who discusses what lifestyle brands can do to enhance their value for strategic buyers. He also discusses what founders can learn from CEOs who typically manage the business acquired by PE firms. Finally, he discusses why they put a negligible value on technology when they buy lifestyle brands. Let me introduce Nick to you.

Nick and his partner started the Mendota Group in 2000, with a focus on acquiring small to medium-sized manufacturing companies. In the last 20 years, Nick has worked on 19 different acquisitions, which includes all aspects of due diligence, negotiation, and financing of these transactions. Nick works closely with the management teams of their current holdings to help develop and implement strategies for growth. These companies collectively represent over 150 million dollars in revenue and more than 750 employees. But that, let’s get to the conversation.

Hey, Nick, welcome to the show.

Nick Jackson 2:24

Hey, Sam.

Sam Gupta 2:28

All right. So, just to kick things off, do you want to start with your personal journey and what you are focusing on these days?

Nick Jackson 2:35

Sure, yeah, that’d be great. My name is Nick Jackson. I’m co-owner of a firm called the Mendota group. We’re a private equity firm based out of Madison, Wisconsin. We are what’s referred to in the industry as a funds sponsor, which means we do acquisitions of small manufacturing companies. We, my partner, and I invest our own personal capital and all those transactions, but then we partner with other capital providers to buy out those companies.

Our focus in the last 20 years of doing this has been looking for what we refer to as lifestyle companies that are in the range of a million to 3 million of cash flow, typically 10 to 15 million of revenue. And, you know, our focus is to kind of come in, provide the entrepreneur a transition to a different phase of their life, and then take a controlling interest in the company and work closely with the management team that exists there to kind of improve the company and move it from a lifestyle-focused business and move it more toward growth and, and profitable business for the future.

So we’re always excited to talk with any entrepreneur owner who’s not only looking for a way to sell their business but looking for better, better investors that can come into their business and help their team to grow into the future.

Sam Gupta 4:05

Okay, that’s very interesting, and I want to dig deeper into that. But before we get there, I had one comment. I appreciate you guys because you guys actually are sort of the catalyst for growth. And that’s the purpose of this podcast. Okay. We focus a lot on growth. So in your opinion, Nick, what is your perspective on growth? What does growth mean to you?

Nick Jackson 4:28

Well, it means to us as professional investors growth means two things. The obvious one is if we grow a company, the value of the company grows, and we as investors see an increase in the value of our investment. That’s the obvious one. But the more important one in my mind is if you have growth of a business and profitable growth, not just top-line growth, for the sake of creating more activity, but if you have profitable growth in a business, that requires a very, very clear strategy. It requires lots of challenges to be tackled.

And, lots of activities to be executed to really have growth. And so we believe that a company that is on a path of very, very strategic and deliberate growth will do a great job of attracting and retaining great talent. People don’t want to necessarily work at a company that’s just doing the same business for ten years. People want to be part of a winning team. And people want to come in and be challenged in their positions. And I think, you know, growing companies and working hard to win in markets is a big part of that. So we think growth is a big part of attracting and retaining great talent.

Sam Gupta 5:53

Okay, so that’s a very interesting point there. And I actually wanted to cover that later in the interview. And since we are already on that, so I want to cover that now. So why is talent so important for the growing company? And why do you believe that lifestyle businesses, and you refer to some of these starting businesses as lifestyle businesses, and I have seen a lot of other people referring to it as lifestyle businesses? So why is talent so important? And why do you believe that you guys are better positioned to attract the talent as opposed to the founders?

Nick Jackson 6:33

Yeah, well, I think, you know, as many people say, people are, are the foundation of a business, they really are especially a manufacturing business, we have many key people that are helping us make our product and get it, get a high-quality product out the door on time, every day. And then we have all the people you know, outside of our shop floor, who is helping to organize and, and be prepared to manage our financials and, and handle customers and deal with sales.

So employees are just a critical part of executing our strategy. These are, these manufacturing companies are relatively complex, and they can’t be made successful with just a handful of people at the top figuring things out. So we want people again. We want our employees to feel like they understand the direction we’re headed, that they understand the financial and strategic gets expectations of the business. And we want them to feel like their position is very key to that whatever, whatever role they have. And if they feel that they understand what they do and how it fits into our strategy, then we think they’ll be more excited about being on the team and moving us forward.

Sam Gupta 7:43

Okay, interesting, so you touched a little bit on the value of the company, and value could mean a lot of different things to a lot of different people. You touched a little bit on the revenue and cash flow as well. But right when you buy these companies, what do you look for in terms of value? Do you have any specific KPIs that you’d like to look for?

Nick Jackson 8:02

There are some very traditional valuation metrics that we use in the industry. You know, most in this part of the world, most people value the business on a what’s called EBITDA, which is earnings before interest, taxes, depreciation, and amortization. Or essentially, it’s a rough estimate of the operating cash flow of the business. And most people, most firms will look at some multiple of that value or the of that cash flow as a way to kind of set a valuation.

But then there are lots of other statistics, like how what kind of CAPEX is required in the business? And how consistent has that cash flow been over recent years? So you know, we use those metrics as kind of a quick early indicator of what do we think this business is generally worth? And then we use, you know, more detailed information, we gather and diligence to say, to what extent do we want to be at the upper part of that range or the lower part of that range?

Sam Gupta 9:00

Okay, interesting. So have you seen any specific red flag that you typically notice when you look at these companies that no, no, no, no, no, this is not the company? I definitely want to talk to you?

Nick Jackson 9:12

Sure. Yeah, there’s, you know, there are numerous times where we will begin the process of, of being engaged with a company, and we’ll look at their financials and learn about their earnings and start to get our head around what we think an evaluation is and one of the real obvious red flags is if we can find out that the earnings they recently had are somehow an anomaly to history.

No, no one wants to buy a company where even though it was a million bucks for 5-6-7 years, then all of a sudden something happened in the market where it popped up to 2 million, but that thing that created that that pop is something that’s not sustainable or predictable or stable for the future.

So that’s a big part of our early on processes, digging into the future. financials and digging into the reasons why the company’s performance is what it is and trying to draw conclusions about if we think that’s sustainable and something that we feel we can invest in long,

Sam Gupta 10:12

Okay, so I like to make the analysis comprehensive, okay. And I like to look at both perspectives. So the positive and negative, so let’s say, and my friend, Curt Anderson, and we did an interview with him as well. And he likes to refer to this as a soul mate.

So let’s say if you were looking for a soul mate here in terms of your company, in terms of your dream company, okay, what is going to be some of the metrics that you are going to look at on the balance sheet and financial statement? So let’s say if I’m trying to, you know, propose myself as your soul mate, Nick, and I’m presenting my financial statements to you. Okay, so how do you think I’m going to be your soul mate? I mean, what are some of that criteria?

Nick Jackson 10:47

Yeah, as far as specific metrics and financial metrics.

Sam Gupta 10:51

So let’s say if I showed you my financial statements, right at this moment, okay, and you are going to be like, you know, what, I am going to come after Sam because this is my dream company. Okay, I’ll do anything and everything to please them and get this done. Yeah. What is that dream company for you?

Nick Jackson 11:06

Well, Dream company for us is anybody that is any company that’s north of a million dollars of EBITDA, okay, closer to 2 million would even be better. But anything greater than a million dollars of EBITDA, we would prefer that that business that their EBITDA percentage is better than 10% of revenue. You know, we don’t like necessarily to participate in businesses that are very low margin, but very high volume, not to say those are bad businesses, but those don’t just don’t fit our skill set.

So we’d like to see a situation where somebody does at least 10% of their revenue. And then as far as the rest of the metrics go, it’s really looking at one of the particular things we tend to look at is how much of the company’s revenue exists as profitability after you take out variable material costs for the business because factoring a large part of the business is material.

Nick Jackson 12:01

Yes, we look at that revenue minus variable material cost as what we call material margin. And we like to see that be a fairly robust percentage, usually over 55%, if possible, because then that leaves plenty of room for the rest of the business with people and SG&A and costs, things like that, to still maintain good profitability.

And then you know, after that, after we’ve kind of determine those kinds of basic financial metrics, and we really look at what’s the customer concentration, we really don’t want to see one customer be greater than, let’s say, 25% of the revenue unless there’s a really, really good reason that concentration valuable, we want to know that there are customers who the business has worked with, that are name brand decent-sized companies that we feel with some more specific and directed sales effort, we could, we could get deeper and more involved with those customers to grow the business because we all know that growth, the easiest growth comes from growing your existing accounts versus trying to win new.

Nick Jackson 13:02

And then, you know, I think the last is kind of looking at the salary and compensation structure throughout the business, and just making sure that you know, things are in line, that there’s good equity and consistency across the business. And that, you know, there’s some good rationale to how people are paying and compensating their employees.

Sam Gupta 13:23

Okay, and do you pay attention to historical growth as well? I don’t know how many SMBs are or can claim that they are going, let’s say 10% 20% every year? I don’t know if that is even feasible. So do you look at that?

Nick Jackson 13:37

Yeah, you know, interestingly enough, that I think even small manufacturing companies can claim that type of growth, because oftentimes, you know if you think about it if we’re buying a company, that’s 15 million in revenue, and million and a half to 2 million of EBITDA, it’s likely in a market that’s very, very large. So if you’re a $15 million revenue company doing some type of metal forming or other product, there’s that market is huge.

Nick Jackson 14:07

And so doubling the business over the course of three to five years is not necessarily that outlandish, knowing that you’re still a very, very tiny piece of the market if you get the 30 million, so we look at historical growth to some degree so that we can understand what changed but again, by definition, we’re more interested in a lifestyle business.

And in that definition, the owner has achieved all of the financial success they want to achieve. The business is generating profitability and cash flow that meets the owner’s personal requirements. And so, by definition, the owner hasn’t really cared so much or really drove hard at growth. So we are looking for somebody that’s got a 15% pager because we know by definition, we’re buying a business that the owner didn’t care so much about that, and we’re hoping that we could come in for business with the management team on that kind of thing.

Sam Gupta 15:05

Okay, and so, what are some of the factors that these companies are trying to sell? Obviously, one of them is going to be, you know, the owner is competent, now they want to retire. That’s definitely one of the factors. What are some other factors that companies want to sell or want to hire you?

Nick Jackson 15:21

And when you say what they want to sell, you mean factors that they’re trying to tell us about in terms of why their businesses were buying or what they’re selling to their cause.

Sam Gupta 15:31

If they are in the market, they are there for a reason, either the growth has slowed down, or they don’t feel that they can grow by themselves, or, you know, the owner is just done, and they don’t really have a sustainable plan after that. So there must be a list of factors why these companies come to the market?

Nick Jackson 15:47

Yeah, I think most often, I would say that we’ve done 19 different transactions over 20 years. So I would say the majority of the time, the reason the owner is selling to us is that they’ve gotten to a point in their career, whether it’s what they’ve created wealth, or what their ages or what their family situation is, or whatever, they’ve gotten to a point in their career where they would like to kind of separate from the business and devote their time and financial resources to other factors, whether it’s retirement, whether it’s other businesses, whatever.

And so they’re looking for this transition out of the day-to-day operations of their existing business and to move into a different phase of their life. And the people that they have in their business are not able or capable of pulling off. Let’s call it a management buyout. So they need somebody to come in who can not only evaluate the business but as the wherewithal and the capital to be able to complete that transaction. And so that’s almost always the reason the person selling, Of course, they’re going to tell us about their company and why their team is great, and why their customers are great. And all those things that we evaluate in our due diligence process. But that’s almost always the instigator of somebody wants out, is just moving to a new phase of life.

Sam Gupta 17:00

Okay, interesting. So obviously, in your space, seeing people is not going to be as much of a factor in terms of creating that sustainable plan for the company. And when we look at the value of the company, people, process, and technology, these are going to be three factors on which you will evaluate. You know how much the company is going to be worth.

So in this particular case, let’s say if the owner or key executives want to retire, people are not as important. I would say, right, I mean, there are going to be other knowledge workers who you definitely want to retain. Otherwise, you might not be able to run the operations, right. But still, I don’t know how much price tag you are put on the people factor, but because you are going to bring the new audience who are slightly more capable of growing the company. So in terms of people process and technology, which is your biggest variable in terms of value. Can you touch on that?

Nick Jackson 17:50

Yeah, I actually would probably say that people and processes are the most important. Okay, technology may be the least important. And that may be confusing, but the reason I say that is, again, we’re trying to buy a company that has been stable and profitable but hasn’t been growth-oriented. So almost by definition, the amount of technology they’ve injected into the business over the last couple of years, whether it’s new machines or whether it’s an ERP system or whatever, is usually pretty diminishing because they haven’t felt the need to use that technology to support growth, because they haven’t necessarily cared about sustainable, significant growth.

So we put a lot of value on the people and the process. And what I mean by that is if a company has good processes in place, they not they may not be growth-oriented processes. But if they’re profit-oriented processes, meaning the team had a good way of maintaining profitability, even though revenues were fairly stable, that’s a reflection of a team that understands how to manage costs, how to keep pricing in place with customers, how to manage their purchasing process, right, those are all processes that are important to maintain profitability.

Nick Jackson 19:05

And then you know, we’re going to look at the people, and we’re going to evaluate all those people, because we’re going to keep nearly everybody in the business it we don’t ever go into a business buying it saying, Oh, these are all the people we’re gonna eject out of the business that just doesn’t happen. These are all great people. They’ve built nice, profitable companies. Some of them may not like our vision, so they may choose to leave over time, but we’re gonna keep the people, and so when we’re evaluating the people and setting our valuation, we know that these are people that can maintain the profitability of a business.

What we’re really trying to see is to what extent their people that can morph to our new philosophy of, hey, we’re gonna put this company on a growth path. And usually, we do have to bring in some others to kind of help bring an outside perspective, starting with a new CEO, but bring it outside growth perspective, but you know, we’re often evaluating most people to make sure they’re going to be excited about this new phase and be interested in, to, you know, join us on that new path.

Sam Gupta 20:08

Okay, so, we are actually going to touch a lot more on the technology aspect of this, because you mentioned that technology, you don’t put a lot of value, which is slightly counter-intuitive, in my opinion, most people would get that technology would have probably most dollars. And by the way, I mean, technology could be a lot of different things. And unless we are talking about the commoditized product here, then it’s a different case.

But technology could be your ERP system, it could be your machines, it could be your patents as well if somebody has paid, and I’m pretty sure you are putting a lot of dollars on that because that’s a fixed stream of revenue for you over the period of time, I don’t know, you know, how much expiration is going to be for parents, but typically that is going to be for like, you know, 17-30 years. So that’s, that’s a huge Jackpot for sure. So tell us, you know why you don’t put a value on ERP system. And I have seen lifestyle brands spending millions of dollars in building their unique processes. And I’m yeah, I’m hoping that they think probably they might be a software company, and they might be able to sell that out or, you know, millions of dollars, but you are putting $0. So tell us more.

Nick Jackson 21:18

Yeah. So first off, let me define technology in a couple of different ways. When we look at technology in a business, it kind of falls into three buckets. You know, as you say, the IP or product technology, our companies typically don’t have a robust set of IP. They’re not innovators, product developers so much. If it’s there, we would love it.

But that just hasn’t been very typical. These are fairly mature businesses. So a cutting-edge technology that translates IP is not real. The other technology is any technology for actually manufacturing the product, whether it’s machines, robotics, things to help with our quality systems, other automation, that kind of technology is very valuable to us. And to the extent that a team shows that they use it and not only use it to manage costs but use it to kind of convince their customers that they have a unique way of making the product and efficient manner that’s very valuable.

Nick Jackson 22:12

And then the last is really what you’re talking about ERP or other information systems inside the business. We would love it. And we’ve had some circumstances where the company we bought, the team was very, very plugged into the ERP system was using that data on a very regular basis to make good decisions about health and profitability. And to the end, we can tell from the day we start our due diligence whether people have a command of their data out of their ERP system.

So they do that gives us great hope and lots of good valuation we put on that because we know that team is really living by the data in their business. What we more often find, though, is that they use their ERP system for maybe basic accounting, a little bit of inventory, they don’t really use it for, let’s say, shop floor or scheduling or things like that. And what typically has happened is the invent the entrepreneur has been running the business for 15-20 years and has a complete command of everything about the business.

Nick Jackson 23:18

So if he or she is that intimate with the business, understands the margins, like the back of his hand, can do quotes on the back of an envelope, and understands you know, what’s broken in the business, if they get behind on shipment, that entrepreneur is not going to put a lot of value on an ERP. They certainly are not going to drop to $400,000 on an ERP implementation because they’re saying, I’ve run this business for 20 years, I know every aspect of it. And that’s great. And I don’t blame them for not investing in it.

But for us, when we come into the business, and we say okay, entrepreneurs moved on. Now we’ve got a management team that’s got to grow this business. And we got to decide where we want to invest capital and what customers and how we want to do, how we want to change pricing, and all these things that require good analytics and data having any ERP bringing an eventually any ERP system into that so that we all have better data is going to be really, really critical for the future. Okay,

Sam Gupta 24:14

So some of my audiences, obviously entrepreneurs, and as I’m pretty sure you would agree with me that they are super, super passionate, and as an entrepreneur myself and as entrepreneurs and lifestyle brand, we can do anything and everything. And we obviously work hard, right? Obviously, one of our goals is going to be to exit the company and probably maximize the number of dollars that we can get because these are our life savings, if you think about that, right?

So let’s say if you were us, what would be your advice from day one? Let’s say if I want to maximize the value of my company, I’m building a company, I’m building a manufacturing or distribution company, and I want to maximize the number of dollars that I can get as part of exit or as just a growing company. So what would be your advice?

Nick Jackson 24:58

Yeah, well, obviously the, as I mentioned earlier, maximizing the dollars of exit value is based on the level of your earnings. So that’s the obvious one is increased earnings. But that’s too easy. You know, I would kind of my advice to people as they’re thinking about an exit and preparing for an exit in our world is, first of all, make sure you understand exactly why you make money, you have to be able to demonstrate to somebody on the outside where the profitability is, why it’s existed, why it’s sustainable, and why it’s going to continue at a level that is, you know, at current levels are better.

Secondly, I think the more data so this comes back to the ERP question or other ways to have data for more data that people can provide to substantiate that conclusion of where their earnings are, and why, though, why they’ll continue that the more data, the better—so being really prepared with good solid data. And if they don’t have it today, start collecting it now.

Nick Jackson 26:01

So that they have it a year, and then the third thing I would say is to make sure that the team of key people, whether it’s the management team or other key people that they really understand. And they all agree with the conclusions that that entrepreneur has about why we make money and how that’s going to continue in the future. Because in the end, we want as buyers, we want to make sure that not only is the company profitable, but that everybody that’s critical on the team actually understands why they’re profitable and, and how they manage that, that they have a command of each aspect of their business.

And they can quote-unquote, manage that profitability. Not that they got a little lucky, a few new customers bought a bunch of stuff from them, and they had a little pop of earnings for a year. So it’s got to be intentional. And having the team be able to sit in the room with us and really explain where they make money and how their particular discipline or team affects that is really valuable to us.

Sam Gupta 27:02

Okay, so that’s it for today. Nick, do you have any last-minute closing thoughts by any chance that you might have for our listeners?

Nick Jackson 27:09

No, it was great, Sam. I appreciate the time. It’s been great to be on the show. And again, my advice to everybody is if you’re thinking about selling your business, and even if you’re in the evaluation phase, not quite ready to sell but want to talk to somebody who does this on a daily basis and want to learn about how to prepare, they can find me on the MendotaGroup.com. I’m happy to talk to anybody. I enjoy talking to entrepreneurs about their businesses. I have a lot of respect for the passion and the risk-taking that entrepreneurs bring to it and if I can be helpful to them as they’re evaluating the future exit, I would love to do that.

Sam Gupta 27:47

Okay, and I can attest to that. I mean, Nick is a fun guy. Everybody should reach out to him. It’s been a fun conversation so far. I have enjoyed our interaction. Nick, it’s been amazing. Thank you so much for your time. Really appreciate it.

Nick Jackson 28:02

Alright, Sam, thanks a lot. Have a great one.

Sam Gupta 28:04

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Nick, head over to theMendotaGroup.com. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Damon Pistulka from Exit Your Way, where he discusses what buyers look for in a business while buying it from business owners. Also, the interview with Jim Gitney, where he discusses how the need for people processes and technologies change at each inflection point of business growth. Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure to get help. Thank you, and I hope to get you on the next episode.

Outro 29:06

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further. We also had a chance to discuss the specific steps executives need to take to undertake process improvement initiatives. Finally, we touched on why tracking unit costs is vital for lean or continuous improvement efforts. 

Chapter Markers

• [0:00] Intro
• [2:50] Personal journey and current focus
• [3:31] Perspective on growth
• [4:32] Importance of Quality of life
• [9:53] Difference between reactive and proactive planning
• [21:38] Process to work with a lean consultant
• [29:34] Closing thoughts
• [31:17] Outro

Key Takeaways

• Reactive planning, you’re constantly changing and dynamic. And, and people are getting frustrated because the information isn’t flowing around. And they’re not really sure what they’re supposed to be doing. In a planned approach, the information is flowing it starting at the beginning of the process and nice and evenly flowing through the entire process.
• Whether I’m working with an insurance company or manufacturing, what I find is quite often that the planning processes are the first foundation that’s wobbly. So if you can fix the planning processes, you can fix the rest.
• Assume that your quality could be 10% higher, your cost could be 10% lower, and your production could be 10% higher. If that’s your current problem, now go and solve it.

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About Ian

Ian is a hands-on business optimization practitioner who has 30 years of solid experience applying improvement methods across all elements of an organization, his experience is expansive covering a wide range of industry sectors and business functions.  

Ian has been directly responsible for the development of continuous improvement cultures and understands the relationship between all of the elements of the value stream. His deep and broad understanding of business context combined with his systematic approach to root cause analysis enables him to optimize the value stream achieving inventory reduction, improved consistency, and reduced process waste.  

Specifically, Ian’s strengths are demonstrated in his ability to re-engineer complex cross-functional processes to eliminate all forms of waste, automate process steps and develop people to have a broader understanding of the business environment and improved data for decision making. His ability to quickly engage stakeholders and adapt to new environments eliminates barriers to change. 

Resources

• Connect with Ian
  • LinkedIn

Full Transcript

Ian Pratt 0:00

I think four dispatch managers in 18 months and a lot of that was just driven from just this constant day-to-day crisis management and frustrated delivery drivers who were loading and unloading trucks because of communication Issues.

Intro 0:14

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 0:51

Hey everyone, welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host and principal consultant at a digital transformation consulting firm, ElevatIQ.

Growing a business is challenging. You might acquire newer facilities, your employees might be overwhelmed and might ask for additional resources, the process of growth could feel overwhelming, especially with operational challenges. You might feel that you’re spinning your wheels and your efforts are not paying off.

In today’s episode, we have our guest, Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing further. We also had a chance to discuss the specific steps executives need to take to undertake process improvement initiatives. Finally, he touched on why tracking unit costs is vital for lean or continuous improvement efforts.

Let me introduce Ian to you.

Ian is a hands-on business optimization practitioner who has 30 years of florid experience applying improvement methods across all elements of an organization. His experience is expensive, covering a wide range of industry sectors and business functions. He has been directly responsible for the development of continuous improvement cultures and understands the relationship between all of the elements of the value stream is deep and broad.

With that, let’s get to the conversation.

Hey, welcome to the show, Ian.

Ian Pratt 2:48

Hey, Sam, thanks for having me here today.

Sam Gupta 2:50

Of course, my pleasure. Just to kick things off, do you want to start with your personal story and what you are focusing on these days.

Ian Pratt 2:56

My passion is helping organizations to release the untapped potential within the organization. I’ve worked with them recently with a window manufacturer whose inventory was overflowing their warehouse finished goods inventory. And I helped them untangle the problems in their planning processes so that they ended up with a lower, far lower level, about 15% of their original inventory. So that’s the sort of thing I do, but I tend to like to work with the leaders and coach them so that they have a sustainable business model after I’m finished working with them.

Sam Gupta 3:31

Okay, so obviously, I want to dig deeper into this story. That’s very interesting. And we are always looking to see how we can improve our processes, how we can improve our results. But before we get there, one question that we ask every single guest, and that is going to be, what is your perspective on growth? And what does growth mean to you?

Ian Pratt 3:51

Growth means two things, it’s looking that way at making more sales, but it’s also looking this way at making the same volume of output at a lower cost, which is growing the profit. And there’s probably a third angle for looking at growth.

And that is, what is the quality of life of my employees. So they come to work and have a positive experience. And going home with that positive mindset, or they come into work and having a negative experience and going home and taking that negativity into their social life. So there are three areas to look at growth.

Sam Gupta 4:22

Okay, bottom line, bottom line, and quality of life is what you meant mentioned, right?

Ian Pratt 4:26

Yes, definitely. Yeah, they’re all very important. And if you get the third one, right? The other two will happen for you.

Sam Gupta 4:32

Okay, so in your opinion, I guess the quality of life is likely more important is that the first driver that you consider when you get into any engagement? Is that always the first thing that you have in your mind?

Ian Pratt 4:43

It is the end game that I have in my mind. So always thinking, what’s the culture like here? Are people frustrated? And is there a good relationship and negative relationship between the manager and the employees and the employees engaged? Are they just going through the motions, but then I look at what are the systems that support and find that and how are they contributing to the current state.

So at the window manufacturer, there was a lot of tension in the warehousing dispatch areas. And the challenge there was to find the source of that tension solve that problem so that they could work in a more planned approach. And in that organization, the planning was incredibly reactive that someone would say this builder need to Windows tomorrow, can you make them now as of tomorrow, surely we knew about this five days ago.

So looking at how information flowed in the organization, how the employees were working, and making some changes to the way the information was flowing, so that there wasn’t the crisis management on a day to day basis so that the employees could have a plan and execute the plan, their quality of life improved, but inventory in the warehouse came down dramatically as well.

Sam Gupta 5:44

Interesting. So can you describe the tension a bit more? So I guess, you know, one thing that I’m hearing is there was the planning was reactive. I think you’ve mentioned that but expand on that a bit more.

Ian Pratt 5:56

Okay, well, when I went to the factory and talked to the people in the dispatch area, they would be venting frustration and anger. This is what we were meant to do today. But now, these two jobs would come in at the last minute, and we’ve got to sort this out. And then we’ve got to move all this inventory because we’ve got to get the stuff that’s behind there. And there’s just constant crisis management by the employees to try and meet a dynamic plan from the front office.

So there was they had high turnover, they had, I think, four dispatch managers in 18 months and a lot of that was just driven from just this constant day to day crisis management, frustrated delivery drivers who would load a truck, then they’d have to unload the truck and put a different product on the truck.

And then they’d go out and start their day. So they’d lose two hours in the morning, which would mean they’d have to work two hours overtime to finish their deliveries for the night. And then, you know, if they had soccer training that night, they’d be missing it because somebody somewhere the information wasn’t flowing in the right sequence to allow them to come in and execute their job from the start of the day.

Sam Gupta 6:56

So how did this all start? Was it growth was it employees in what was the real trigger for this tension?

Ian Pratt 7:03

The building industry in the region of the world that I live in, in Adelaide, Australia. The building industry is very seasonal. In winter, it slows down a bit, and then coming out of winter, it ramps up a lot. So you have that seasonality as a coming out of winter. You got the high demand coming in.

Quite often, people would order a house in January to be built in November because they know they had that slow period where you know when it rains, nobody’s working on site. So it was more this seasonality that was impacting them, they had grown, and the building was in a growth phase in this region. So their demand was going up.

But their systems weren’t able to cope with the increased volume throughput, plus the seasonal uplift in volume. That’s typical as well. They probably could have gone on as they were. They just would have kept turning over a lot of employees and spending a lot of time on money on overtime and rework within their deliveries, and they would have had to build a new warehouse for their excess inventory. But before they invest that money, that’s why they brought me in to have a look.

Sam Gupta 8:05

Okay, so the new warehouse was the reason, and there was the employee churn that you already mentioned. But if they have been in the market for some time, even if they have seasonality, most of the businesses have figured out, even if they are running on paper, how to accommodate for the seasonality.

So again, do you have any more background in terms of how this all started? Was it because of the loss of a key employee? Maybe an employee was there who was really good, he or she was really good at managing everything. And then they lost him or her, and all of a sudden, the hell broke loose. So what was the trigger? Do you have any more background on their vengeance?

Ian Pratt 8:46

Look, I’ve been in plenty of organizations that have been relatively dysfunctional on the inside for a large period of time. And at some point, the penny drops with the owner, or they get a new owner. In this particular case, the inventory had been climbing for a number of years and had reached a point where it exceeded the capacity of the current warehouse.

Okay, so then they’re like, Well, before we build a warehouse, we should look at why we are ending up with so much finished goods inventory. So they had to invest capital. They were at the point where they needed capital to continue functioning.

Sam Gupta 9:21

Right. So I guess, you know, let’s say if I am a business owner, and I’m looking to see what are going to be my symptoms when I should be probably reviewing my operations or the business performance, one of the symptoms could be that if I require excess inventory, that could be a good thing if I’m getting a lot more sales and revenue, but that may not be an as good thing, if I’m not getting sales, but I am maintaining excess inventory and having to build a warehouse. Would you agree with that?

Ian Pratt 9:45

Yes, definitely. I would look at that. At any point, if your plan is changing on the day you’re executing, it is a problem.

Sam Gupta 9:53

Okay. So describe to me more reactive planning. So what is the difference between reactive planning and proactive planning, and how would you change that.

Ian Pratt 10:02

Okay, so what happens in an organization is information doesn’t flow as nicely as you would logically think. So a customer places an order, then there’s a delay to you commence the manufacture, then you deliver it. And in the building industry, which is a little dynamic, because houses get delayed, the delay of the house requiring windows, that information wasn’t feeding through into the planning processes.

So for a reactive plan is one where you create a plan, but then you’re constantly changing it, which creates rework for everybody in your system. And you suddenly have an urgent order that needs to be done today. You get the people that start to quickly rush through one door, so you can get it out into dispatch, people have to wait around for that order, and then you get it loaded, and then take out this one door that was missed, or something urgently required. In a balanced planning process, all the information is flowing at the time that it is most critically needed.

Ian Pratt 10:53

So the change that I implemented to reduce the warehousing, which is at the end of the process, was to provide the person at the front of the process with a way of checking that the order wasn’t delayed before they started manufacture—so identifying what hasn’t has been delayed up from the first person in the manufacturing process actually controlled the level of inventory that you held at the end of the process.

So what that did is meant that almost never did you come along and say, Hey, we need to change today’s plan, or we’ve got an urgent order, because all the urgent orders have been sorted out at the beginning of the process, they flowed through in a normal fashion, and they just look like any other order.

You know, reactive planning, you’re constantly changing and dynamic. And, and people are getting frustrated because the information isn’t flowing around. And they’re not really sure what they’re supposed to be doing. In a planned approach, the information is flying it starting at the beginning of the process and nice and evenly flowing through the entire process.

Sam Gupta 11:51

Okay, so give me a little bit more about the size of the organization. So you didn’t mention that they had like four dispatch managers. But how large was the organization overall from the size perspective?

Ian Pratt 12:02

The organization employed about 70 people are manufacturing and dispatching windows for pretty well all of South Australia and part of Victoria. Yep. But the office I dealt with, which was the Adelaide Independent Business Unit, working with the general manager, they I think they employed about 70. And they made about 80% of domestic windows in our region.

Sam Gupta 12:25

Okay, so walk me through their systems, what they were using, what they were completely manual, what they weren’t any specific systems?

Ian Pratt 12:32

They had no ERP system in place, but they were pulling the data to commence manufacturing eight days before manufacturing before the delivery date. So then their manufacturing window was five days, but they were pulling the orders per day, eight days early. But what I did was analyze the data that builders tend to change the order, and 80% or 90% of builders change their order on day seven.

So I just shifted their preplanning from day eight, today’s six and provided a format that the frontline employees could look at and go right. Yeah, I can see where these orders all that. So they could then pick which one to start manufacturing—so empowering them to make choices on which order to manufacture based on the color code system that the orders had against them, those printed out.

Ian Pratt 13:21

So all the information was in their systems. It just wasn’t presented in a way that the employees could then use to make choices about what work they did. And what they had done was build contingency into each stage of the process. The person who produced all the work orders and got all the manufacturing diagrams together only needed one day to do it, but they gave them three.

If they were running late, they could still get it done on time. And they had all this contingency built into their processes. But that contingency meant that we were missing. They’ve pulled the manufacturing work orders to manufacturing, and then the system was updated after they pulled it. So the two pieces of information were not in sync any longer.

Yeah. So what a change has got the information to be in sync. And what they were working off of was a printed production order with a due date written on it. I had that due date removed and gave a separate list of due dates that could be updated, intraday, you know, can be updated to three times a day if you want to do to the first person in the manufacturing process. So they could go down and just pick which order to do next, based on the current system data.

Sam Gupta 14:23

So this seems to be an example of, let’s say, hand assembly. Their production floor must be very hand-assembled. It’s probably a job shop. So do you typically work with just the job shops and hand assembly shops? Or do you experience but do you have experience working with any other machine-oriented production floors as well?

Ian Pratt 14:40

I have in my early days. Yeah, definitely. More recently, though, in our region, we don’t have a lot of high-volume manufacturing. Okay, the automotive industry has pulled out of our region, okay. And now, a much more service orientated we mining services, farming, agriculture, those sorts of things and more dominate.

Then in the region, so yeah, I’m working at the moment with them a mining company, which has a high volume manufacturing, they actually produce the in a product, they don’t just dig it out of the ground that goes all the way through the process. So it’s more of a continuous production operation, probably similar to a lot of like plastics manufacturing these days. So yeah, I’m working with one of them at the moment and looking at coaching, they’ve probably got about 100 supervisors, and I’m coaching them on how to identify waste and eliminate it from their business.

Sam Gupta 15:29

Okay, so tell me a little bit more about this one. So what was the waste in this particular process that you just mentioned? And what do you do to move back?

Ian Pratt 15:37

Again, whether I’m working with an insurance company or manufacturing, what I find is quite often that the planning processes are the first foundation that’s wobbly. So if you can fix the planning processes, you can fix the rest. Now, the Perth the area that I’m working with, at the moment in the mining, that they have the same problem that they go to mine and area, but they’ve got surveyors surveying on the same day as the miners are trying to mine it and somebody is trying to add a water extension in there as well.

So that getting the planning so that it runs nice and smoothly, yeah, is their largest area of waste. And ERP systems are fantastic for if when you get them right, to help align all of your resources so that things are happening sequentially or happening in a nice smooth flow, rather than multiple people trying to work on the same part of the equipment at the same time, the area I’m looking at there, probably 50% of their time, is unproductive due to poor planning.

So we’re working on identifying the failures within the planning systems. But what we’re trying to do is, instead of a holistic program is coached the frontline employees and supervisors to chip away every day fix one problem, and at the end of the year, fix 365 problems, and things are a lot better. So that’s the style lean we’re trying to implement there.

Sam Gupta 16:55

Okay, so 50% unproductive is a lot. So what are some of the reasons why the process is 50% unproductive? Is it just because there is a lot of bottlenecks in the process? What are the core reasons?

Ian Pratt 17:04

Again, this is across all industries that are looking at have the same problem is that when the plan or not enough effort is put into the plan, people plan their next task after they finished their first task during the day. So they come in, they pick a task, they go to do it, they can’t do it, because there’s either some material missing or something like that, right.

So they put that aside, and then they pick up a new task. And then they go and execute that new task. And I’ve seen this in financial services, businesses that employ only six people, and then 50% of their time picking up on putting down work rather than doing it.

Ian Pratt 18:00

So if you ask the employees, are you busy all day, they are busy all day. Yeah, but they’re picking up a task and putting it down and picking up another task or doing something on them putting it down. They do not see anything all the way through. So and the same in the mining company. It’s about getting them to have an executable plan at the start of the day. So the employees can go out and do their first job, the second job, the third job, and the fourth job, and then come back and all those jobs are done, rather than going out to do the first job having a problem coming back, sorting that out, and then going to the second job.

So when I say it’s waste, the employees would say they’re busy. Yeah, but they’re not adding value. Yeah. And the same. What I find is when I’m coaching leaders, and we look at in the Leader Standard Work is that quite often leaders are incredibly busy as well, you’re in meetings, addressing email, they are firefighting, and all those sorts of things, but they’re not actually adding any value. So what we need to do is get people to let go of some of the inefficiencies and get them to have an executable plan at the beginning of the day, then execute the plan and focus the plan on the things that add the most value within the business.

Sam Gupta 18:42

Okay, so when you design these processes and plans, and sometimes those could be slightly prescriptive, and I don’t know, you know, how people react to them if they want any changes and those processes, are you going to have enough room in these processes to accommodate those contingencies.

Ian Pratt 19:03

Okay, so I don’t design any processes, what I do is I coach people on how planning processes generally work, and then they work out how that would work in their environment. Okay, um, what I talk about is very much the plan do check act cycle is that you when they’re doing their planning upfront and designing their processes that I talked about, use the 80-20 rule 20% of the effort to get 80% of a solution and then continuously improve it from there.

So build in the entire continuous improvement cycle out for three, six months. So you can put something in the monitor it and use visual management to display how you’re tracking whether your KPIs are improving as a result of your planning, and then you make changes, you know, do some root cause analysis, and you need to involve people from frontline to middle managers in that process. The middle managers bring more the commercial view, and the frontline will or problem-solve so that it actually works for them.

Sam Gupta 19:55

Okay. So when you do these coachings, what will be the deliverable that you are going to have to the operations manager? Is it going to be just the coaching? And then they are going to design the processes? Or do you engage, let’s say, for three to six months? How does the engagement work? Can you tell me a little bit more about that?

Ian Pratt 20:14

Yes, definitely three to six months. I turned down work; if people want me to just come in and give them advice, okay. The problem is 90% of people don’t know how to implement, okay, so if you just give them advice and come back in two years’ time, they’ll still be where they were. So I haven’t added any value. To me, there needs to be an improvement in business performance, that’s, you know, preferably five to 10 times the cost of my engagement and annual improvement to make it worth doing.

So if you can make your country an incredibly well-run business, looking at us how I can help you a little, but you’re doing really well, you’re going to pay me a lot, but not get a lot of benefit from it. So in that environment, I’d take more of a just a mentoring rather than a heavy load engagement. Yeah. But in organizations where there’s a lot of chaos going on, and you look at the guy, I know, I can give you ten times the cost of employing me.

So then I’ll come in for three or six or 12 months, whatever is required. And sometimes that’s only two days a week or three days a week for that duration, to help them understand their problem, fully understand the problem, identify possible solutions, and then help them implement and then do some iterations of learning and measure the improvements in performance either cost down, volume up, quality up, service up, whichever there is the key KPI for them, and then I help them to actually get that benefit. So the business performance is actually improved by the time I leave.

Sam Gupta 21:38

So let’s say I’m the manufacturing executive, okay. And obviously, I know that I have a problem. That’s why I’m talking to you, right? So I’m inviting you to my facility. Now you have to tell me how many days you need to be there at my site.

So let’s see if I’m inviting you today to my site. What would you like me to do in order to make sure number one, you have all the resources that you need to be successful? And how is the day going to be structured? How many resources do you need to be able to make sure you are able to get the data, the KPIs, whatever you need to be successful to do whatever you are going to do?

Ian Pratt 22:15

Okay, so, what I normally start with, if somebody comes out and says, looking and we’ve got a problem, can you come out and help us fix it is normally? So let’s just agree on a ten-day engagement upfront, and they go analyze your business. And I’ll tell you what the problem is, what the solution is, and how long it would take to solve that problem.

So trying, I’ve had people come to me, again, I want to give you a six-month contract, can you come here and fix this problem? I’m like. Since I don’t know if I can fix it in six months, I need to come and see the problem. I need to feel that I need to understand what’s broken in the business that’s causing that problem. So I can tell you whether or not I can actually fix that in six months.

You know, if their problem is the ERP system is really poorly implemented, then yeah, it’s gonna take them two years to get over that amount of money. The problem is just simple information flow, and problems with simple planning process their nets differently, like between six weeks and three months to get them on the right track.

Sam Gupta 23:07

So how do you find these KPIs? I mean, do you typically require the financial statements from my side? So let’s say if I invite you, and you are going to be two days at my site, and you want to look at, you know, what the problems are.

So let’s say one of the problems could be, I have excess inventory as well. And my employees are saying that they probably need a new warehouse, they need a lot more employees, and they are already overworked. And they are threatening me that they are going to leave my organization. So that’s my problem right now. And I’m inviting you to help me. So let’s say if I invite you, do I need to show you my financial statements to be able to find the KPIs, or how would you find the KPIs? And the KPIs come from looking at the value stream?

Ian Pratt 23:34

So okay, well, in a manufacturing business, one of the KPIs is probably the cost of unit sales. If you don’t know that, there’s your first problem, so we need to, and I’ve had gone to a client or timber mill, where they’d had no idea what the cost of any of their particular products was. So we implemented it took maybe two days, a very crude activity-based costing system.

And that identified that problem approximate cost center. We’re able to identify which products were losing money and which ones were making huge returns. And unfortunately, for them, the products that were losing money, we’re the ones that they produced in the highest volume and did to work with their customers to make them a lot more profitable.

But no, I come in and have a look at, like, what’s the value chain? You know, just some basic measures like what’s the cost per unit sold? What should the cost per unit sold be? If it’s a manufacturing business, there’s a lot of standard things like what’s your inventory, record accuracy?

Ian Pratt 24:40

How many days of inventory stock do you have? What’s your lead time? What’s your manufacturing cycle time, those sorts of standard metrics that come from an ERP system. So you look at those standard metrics to see what’s going on. You need to immerse yourself in the business. The manager can tell you exactly what’s going on.

And I’ll give an example a client said, you know, looking, my staff are telling me I need to hire more people. Yep. Okay, so let’s just use a basic formula to work out whether that’s true or not. How many units of work do you do? And How long do they take? Yep. What else? Do people do that? How long does that take? Let’s calculate it out.

Ian Pratt 25:00

And I calculate it and says, well, based on this. You’ve got too many people, yo, where are you losing time and the manager sit there and go, I don’t know. So you have to find out where the time has been lost in their business. And that’s normally stopping and starting or not prioritizing the work property having a problem in their planning system, or people not really being clear what their job really is.

So those sorts of problems exist. So you need to immerse yourself in the business and go and have a look and see and feel and see where inventory is building, where the lines are running, where it’s not running, where employees are frustrated. And what they’re saying is causing their frustration, which isn’t necessarily the actual problem, but it gives you somewhere to sniff around and have a look.

So you need to sort of look and see and feel, and then you’ll know what KPIs would fix the problems that I see in this business. And it’s different for every business, but I never look at the financial statements. That’s not necessary. But I quite often work with finance people to work out the cost of sales? Because quite often, that’s the one that you want to get a 10% reduction in the cost of sales.

Sam Gupta 26:25

So yeah, yeah, so interesting point about the cost of goods sold and cost of the unit, right? I mean, that’s very important. And the kind of, you know, customers we typically engage with. Obviously, not everybody is going to have the cost of the unit. And obviously, that’s going to be very important he as he mentioned.

So from your perspective, let’s say if they are not packing it, sometimes what they do is they are going to track really at the financial statement level and operations, people don’t really have any understanding of their cost of the product. Because what they are going to do is they are simply going to have the total cost, and they are going to divide it by whatever measurement they have to determine the cost. So that’s what the actual costs are, in your opinion, the cost of the unit is really important, especially in the job shops, right? So in your experience is most important for all of the businesses or somebody says what will be your perspective on that.

Ian Pratt 27:15

The cost is super important to understand. So that you’re not, you’re not trying to grow a line of business, that’s losing money. But the problem is a lot of people overanalyze costs. So they say, look, it’s you know, I’m paying my staff, they $40 an hour, I’ve got to add some cost of employment, I’ve got to add a percentage for the warehousing, or they add a percentage for this percentage for that, and then they have suddenly gone.

Should I add $1.50 or $1.60? It doesn’t actually matter. Yep, just right, with the best Cost of Goods, you can do it in the next one hour. And just what you know, if you need to refine the numbers, if the cost and the sales price are that marginal, that you need to refine the numbers, this is not a good product, what you need to do is look at, if you use a crude system, you should be able to say, yeah, this is roughly the cost. And so you say, hey, we’ve got to get our cost down.

Ian Pratt 28:05

So they start trying to reduce the numbers that are in the equation. Okay, but that’s just changing your baseline as well. So what you really want to do is say, What if we’re going to use these numbers? Let’s stick with these numbers. And then let’s see a reduction in cost based on this measurement, rather than an absolutely hugely precise measurement that takes six months to try and work out what is what exactly the cost is?

So we’re going to just look at what are the key contributors to cost and how do we those build up? And then let’s track those key contributors and see that we’re seeing a reduction in some of those key contributors. Now, that won’t be the absolute cost of sales, but it’d be an indicative cost of sales, which is better than what they have right now.

Sam Gupta 28:47

Yeah. And that’s a pretty good description. So basically, what you’re saying is just have the major contributors of the cost, maybe four or five. You don’t have to count for every dollar. And as long as you have that, that should be good for you. Right?

Ian Pratt 29:01

Yes. And some costs are fixed. Whether you include them or don’t include them, it doesn’t matter. Like we’re not going to reduce the number of overheads. So we might, but it’s unlikely that’s not the target. So if you’re not reducing planning to reduce the number of overheads, factoring them into the cost for improvement purposes isn’t essential.

And you can factor them into, you know, your costs, but you’re really looking at looking for the key cost leavers that you’re going to try and seek to improve and having those included, and then you can refine the actual cost with the overheads and other things that you’re not going to change at a later date.

Sam Gupta 29:34

Okay, amazing. So that’s it for today. Do you have any last-minute closing thoughts here?

Ian Pratt 29:38

Now I would just encourage them every manufacturing and operations manager and a mentor of mine said this to me when I was about 21 years old, and it stuck with me for those years is have a look at your business and assume that your quality could be 10% higher, your cost could be 10%, lower and your production could be 10% higher. If that’s your current problem, now go and solve it. So that’s probably the best lesson I could offer any manufacturing manager or CFO go and tackle that problem and, and you’ll do well.

Sam Gupta 30:06

Alright, amazing. Thank you so much for your time and insight. Ian, I really appreciate it. And I cannot thank our guests enough for coming on the show and sharing their knowledge and journey. I always pick up learnings from our guests. And hopefully, you learned something new today. If you want to learn more about him, follow him on LinkedIn. His LinkedIn handle is IanPratt. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Ram Krishnamurthy, where he discusses why costing strategies matter for ERP implementation and how to make an ERP project successful. Also, the interview with Dave Griffith, where he discusses why manufacturers must look for low-hanging fruits when exploring the path of industry 4.0.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help.

Thank you, and I hope to get you on the next episode.

Outro 31:17

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

In this episode, we have our guest Carol Marzouk from Leadership’ N’ Soul, who discusses how to uncover and correct lingering toxicity before it stunts your business growth. We also had a chance to discuss the implications if you smell it but choose to ignore it. If you are looking to learn how to fix toxicity before it’s too late with compelling stories full of laughter, this is a must-listen episode for you.

Chapter Markers

• [0:00] Intro
• [2:50] Personal journey and current focus
• [8:51] Perspective on growth
• [16:14] Her personal story dealing with a toxic executive
• [25:08] how to uncover the toxicity and then how to fix it?
• [31:30] Story of internal communication issues resulting in a fatality
• [35:59] Closing thoughts
• [37:52] Outro

Key Takeaways

As CEOs, we have to learn how to recognize these conditions. And we have to know how to coach them because they’re in your organization. So if you find that they’re stunting your growth by doing this to other people, and these guys can manage up really well. So you’ve got to be very good at noticing this. And you’ve got to keep an ear out for other people saying things about their behavior.

The first rule with narcissists is to avoid anything that might upset their sense of self. Because they have this idea that they’re grandiose, they want to make sure that everybody thinks that they’re bigger than they are. And that’s to compensate for their sense of inadequacy.

Their ambitions can be used to motivate them because that’s what they live off of. That’s their currency. So you want to use that currency. Like, for instance, if they have high potential to succeed as whatever director or whatever their VP role is that they’re looking for or whatever it is, you want to use that as the carrot as the currency to motivate them, right. So the challenge is, of course, to avoid feeling their sense of grandiose grandiosity, so it helps to keep Conversations tactical.

When we give love, that means that we have love to give when we give kindness. That means that our cup of kindness is full and that we can give some of it out to other people. But if we don’t have it, how can we give it.

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About Max

Carol Marzouk, the “Executive Lion Tamer®” has spent 30+ years inspiring leaders and teams to impact the bottom line while retaining their “soul” and integrity.  She is known for using unconventional methods to get real results and helps clients take immediate action, leaving the theory in the office. She has worked with leaders in a variety of industries including manufacturing, distribution, and F&B.

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Full Transcript

Carol Marzouk 0:00

He did this for two years. And whether I was in France or China, Japan, Italy, it didn’t matter. He would show up. And he would say things like. You bring zero value to the company. And you really don’t know what you’re doing. You have nothing good to say; nobody should listen to you. And he would demoralize me, and it would always be right before I’d speak.

Intro 0:24

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.

Sam Gupta 1:01

Hey everyone, welcome back to another episode of The WBS Podcast. I am Sam Gupta, your host and principal consultant at digital transformation consulting firm ElevatIQ. When you think of growth barriers, you might not think of corporate bullying and executive toxicity.

Sure every company has its share of issues. But how bad can toxicity and bullying get? Can it be catastrophic for companies? Cause fatalities? And invite lawsuits? If yes, they are significant legal and financial risks that have a massive impact on the bottom line and growth.

In today’s episode, we have our guest Carol Marzouk from leadership and soul, who discusses how to uncover and correct lingering toxicity before it extends your business growth. We also had a chance to discuss the implications if you smell it but choose to ignore it. If you’re looking to learn how to fix toxicity before it’s too late with compelling stories full of laughter, This is a must-listen episode for you.

Let me introduce Carol to you.

Carol Marzouk, the executive line tamer, has spent 30 plus years inspiring leaders and teams to impact the bottom line while retaining their soul and integrity. She is known for using unconventional methods to get real results and help clients take immediate action leaving the theory in the office. And She has worked with leaders in a variety of industries, including manufacturing, distribution, and F&B. She also does a lot of work in the M&A space focusing on the people and culture side that usually falls by the wayside as the financials are being discussed. Carol has held several leadership roles and has overseen the work of hundreds of employees. She has excelled as a speaker, consultant, coach, trainer, and facilitator.

With that, let’s get to the conversation.

Hey, welcome to the show, Carol.

Carol Marzouk 2:48

Thank you, Sam. It’s wonderful to be here.

Sam Gupta 2:50

Okay, just to kick things off. Do you want to start with your personal story and what you are focusing on these days?

Carol Marzouk 2:56

I would love to. I am from Mexico City. So my name is Carol Marzouk, and I was actually born in Mexico City, the fifth of five girls. Can you imagine that? Sam?

Sam Gupta 3:10

Oh, wow, look at that. That’s a lot of family.

Carol Marzouk 3:13

A family, a lot of family. My dad was actually born in Iraq. And then he moved into he moved to India, and then ended up in Australia. Then my mom’s side is from Syria and Italy. And then they ended up going to Mexico City. All sides were Jewish. So that’s why they had to escape. And so then I was born in Mexico City. And the reason why I got into this.

Sam Gupta 3:40

So I’m super confused right now because, you know, I don’t see any country that I didn’t hear. Tell me one country that is not there.

Carol Marzouk 3:49

I’m like the United Nations all in one. Name one. I’ve got it covered. My last name is from my husband. His family’s from Egypt.

Carol Marzouk 4:03

Just in case, we needed another country. I think the reason why I got into this field of, you know, working with toxic executives and conflict resolution and, and really working with, you know, the big egos in the workplace and, and growing companies at different inflection points and helping them deal with the people side that that constantly gets in the way of them growing their company is because, well, you know, being the fifth child, I was always kind of in the way of my sisters.

Sam Gupta 4:42

So you are telling me that you were bullied.

Carol Marzouk 4:45

I was. I was actually we were in Mexico City.

Sam Gupta 4:50

You have practical experience of being bullied, I guess, as a child.

Carol Marzouk 4:56

Oh my goodness. Sam. We were in the nine-story of our apartment building, and they wanted to see if the stroller would fly out of the veranda out of the balcony with me in it. And it was an experiment. You know, it’s like let’s see if Carol flies with the stroller, and so I always had to escape these death-defying things that my sisters would try on me.

Carol Marzouk 5:33

So it was really incredible, you know, and growing up, just always being the one that actually had to resolve the conflict between the sisters and then also my parents and my sisters. And I was always the one that was kind of brought in to mediate. And so I got really, really good at it.

Sam Gupta 5:55

Okay,

Carol Marzouk 5:57

And also, to survive, right? I had to learn how to survive amongst all these different personalities. I was like. We were all raised in different jungles. It was kind of crazy.

Sam Gupta 6:05

Yeah, I was a middle child myself, so I can see where you’re coming from.

Carol Marzouk 6:12

How many children? Three, three. Okay, yeah. So five and five girls are very different than you know, a mix or five boys. I mean, five girls crazy. They’re crazy. We’re all crazy.

Sam Gupta 6:27

Did you guys cry all the time?

Carol Marzouk 6:29

Oh, my goodness. Can you imagine that? When everybody was kind of on the same? Do you know you know what I’m talking about?

Sam Gupta 6:37

Oh, my God, I don’t even know if I’m supposed to be making this comment during the show, to be honest, and how that is going to come across.

Carol Marzouk 6:45

I’m sure everybody’s thick-skinned around here. And you can say whatever you want.

Sam Gupta 6:50

I hope people can handle my jokes. You never know. Right?

Carol Marzouk 6:52

I hope so. I hope so. Yeah. So it’s crazy. So growing up, that’s how I was, and I got just really good at it. And then and then, later on, I started working in, in law firms, and, and the, you know, big companies, and I always ended up being the mediator and being the ones that were being the one that worked in with the high-level folks and resolving their conflict and, and understanding how to coach them and mitigate the situation and how to get everybody to see the different viewpoints, and really have to understand the different communication styles and languages that everybody speaks. Even though everyone might be speaking English.

Everybody really does speak a very different language. Yeah. Right. And so that’s how I got into it. Sam, it’s quite interesting. And I was incorporated for a long time until I got into my own firm. And that’s how I got here. I’m internationally recognized. I have my certificates. You know, I typically don’t like to bore people with this.

Sam Gupta 8:00

you can describe them because we don’t, we can’t take the picture as part of the show. So you need to describe each of your certificates.

Carol Marzouk 8:08

Really quickly. I’m UCLA, psychology, communications. I worked with Yale School of Management for years and, of course, got my certifications for executive coaching in several different areas. And then also behavioral coaching. I have my Lean Six Sigma Green Belt certification, and oh, it’s just so boring. Sam, Please don’t make me. Um, let’s move on. Let’s move on. Okay, so let’s talk about how, how toxic executives can really be right under your nose.

Sam Gupta 8:51

If you are moving to the next question, then we have to have one ritual here. Okay. You’re not supposed to move on to the next question. The next question always is you have to tell me, what is your perspective on growth?

Carol Marzouk 9:02

Okay, well, Oh, goodness, we don’t want to mess with ritual.

Sam Gupta 9:06

Everybody has to go through that.

Carol Marzouk 9:09

Oh, goodness. Okay. My perspective on growth? Well, I think that, um, when you’re talking about growth, I think it’s always about being innovative. It’s, it’s always about thinking organically and inorganically. So always just finding new sources of growth and thinking about just value creation, right? And looking at the changes in your competitive landscape, understanding what your competitors are doing, and always staying ahead of the game. You know, a lot of times, we get really complacent. And I worked for a company for several years, and they had a monopoly for many years, until, you know, some other people came on board, and they were forced to get better, or just lose their platform. And so it’s really important to always have that perspective, and then, of course, understanding and managing your exposure to risk, right?

So I know you CFOs out there are always really attuned to risk, right? Many of the CFOs that I work with are very conflict-averse and not conflict-averse, risk-averse. And so managing that exposure to risk and how, you know, it’s related to our reputation. Our operations are also very important when we’re thinking about growth, right, and our financial volatility.

But that’s when I think about growth, I think about all of that, but being who I am, let’s be honest, Sam, the very first thing I think about which you know, is the bigger umbrella is the people side because if we are a people business, those people in our business are really part of the business that is going to take us to the next level. And if we as the lead as the top of the fountain, if you will, I always describe it, as you know, you’re the top of the fountain. And if you think about it as a chocolate fountain. I hope you are hungry. It’s like pure milk chocolate. Can you taste it right now.?

Sam Gupta 11:21

Am I gonna disconnect the interview right now to grab a bite.

Carol Marzouk 11:24

right. Um,

Carol Marzouk 11:30

We can’t give some to everybody right now. So if you’re the top of the chocolate fountain, right, you’re the CEO, the CFO, the CEO, and you’re pure milk chocolate, you’re, you’re the best leader you can be. Well, that’s going to go down to the next level and the next level and the next level. And, and if you’re not, right, if you’re not if I could take a video camera, and show how you are showing up as a leader, and how you are doing whatever you’re doing, how you’re behaving in order to grow your company. And if you’re comfortable with me showing that video to the rest of your company,

Sam Gupta 12:10

Would you please not share my voice with anyone? Please do not share my video with anyone, okay?

Carol Marzouk 12:23

If that’s you know, but if that’s if that makes you comfortable, right? If you would feel good about that video being used as training for the rest of the organization, then you’re doing a great job, right? Because serving on a leadership team, should be a privilege. And so back to the growth conversation. Again, it’s if you’re showing up as the kind of leader that leads to the kind of growth that your company deserves and desires, then your people are going to be doing the same.

Sam Gupta 12:58

Okay, amazing. So yeah, so before we move on to the next question, we need to set the expectations here, Carol. Okay. So you are actually coming to the executive podcast, okay. And we are the guys who pay you. Okay, and we’re calling them toxic, toxic executives.

Carol Marzouk 13:17

Oh, my God, I suck. That’s horrible.

Carol Marzouk 13:29

Um, the truth is, is that, um, so the CEOs, the CEOs, the CFOs tend to call me when there are other executives, wink wink, none of you guys. Other executives are behaving badly. And that’s, and that’s what happened. And I can give you some stories, and maybe it’ll resonate with some of you in the audience. I mean, you know, we’ve got, we’ve got plenty of them.

But the truth is, is that these are important only because the last thing I want for you or any of my clients is for you not to be able to recognize this and also for you to leave it untouched and let it continue. So that it stunts your growth, that is a problem for me, it is a problem for me because I’ve lived it in some corporate areas and because I continue to see it with some of you know, the clients that that come my way and it’s not okay, it’s not okay.

And the reason why it’s not okay is not only is it a cry for help from these people that are in executive positions, but it’s also not that it’s also ruining your company, but also ruining the people around you. It’s like a virus. It’s a virus. Right, and it’s, you know, we’re talking about the Coronavirus I used to talk about it as I’ve been doing this for almost 30 years, and yeah, I used to talk about it as being like the flu virus right when somebody sneezes on you, right? Imagine, right?

Carol Marzouk 15:23

And so somebody, I’m sure all of us have had that experience where somebody like gets too close and make coffee on you, or they sneeze on you. And it’s disgusting. Right?

Sam Gupta 15:39

Can we talk about something positive here?

Carol Marzouk 15:49

Yes. Let’s talk about something positive here. But um, in order to get to the positive, I have to talk about why. And I have to talk about No, no, Sam. No, we can’t talk about positive until you tell me. Look, Sam, I’m a doctor.

Sam Gupta 16:06

Okay, if you don’t talk about the disease, how are you supposed to cure people?

Carol Marzouk 16:14

That’s right. That’s right, sir. The positive thing is growth, right? We have to uncover the disease in order to cure it, right? Yes, so so with the sneeze, you can just go take a shower, because you know, you’ve been sneezed on, but when you have some of this stuff happening, sometimes you don’t know it’s happening. So you don’t know you need to take a shower.

Then pretty soon, you realize that you’re like, it’s, you’re really, really dirty, and you don’t know how that happened. And all of a sudden, you’ve got a whole bunch of people that are extremely either, you know, ready to throw in the towel, or there’s a lot of gossips, or they’re just not producing, or you know, and it’s just too late. And it’s because it started at the top with the executive team. So let’s, let’s talk. Do you want me to talk about some stories?

Sam Gupta 17:04

Please, please. And that’s how we are going to relate because right now, I’m actually thinking of washroom, to be honest, when I’m thinking about this conversation. Can we go back to the office?

Carol Marzouk 17:14

I know. Right? That’s, that’s, that’s me, I take you from chocolate fountains to sneezes to the washroom. Um, so let’s see one of the stories that I can tell you very close to my heart. And very well, it happened to me. I was in a very big corporation and was in charge of the growth, the learning and development, and growth for the whole executive team, but also for the whole enterprise, all of the different organizations under this enterprise.

I used to travel all the time, and part of my job was to grow the, you know, help the board and with the personal development and their growth. Also, I ran the leadership academies for all of the different groups. So my boss’s boss would actually go wherever I went, and he would, he would make sure to pull me aside, right before I got on stage to talk to the board, or to talk to the executives and to, you know, to deliver content or to make a speech. And he would say to me, Listen, Carol, I don’t understand, and just so you can, you can picture this Sam, he was Iris. Fine. So I’m five-two, I’m five-four on a good day, but 5’2″ usually.

Sam Gupta 18:43

That a height?

Carol Marzouk 18:44

Yes, yes. Height, height?

Sam Gupta 18:47

You look tall. Come on.

Carol Marzouk 18:48

Thank you. Thank you. That’s heels on. He must be between six-four or six-six. I don’t know. I guess it depends on if I was five-two or five-four.

Sam Gupta 19:00

But it could be frightening.

Carol Marzouk 19:03

Really long is, I guess.

Carol Marzouk 19:05

Yes, exactly. He has a very, very deep Irish accent. And he’s taller than me. And he just he would say to me, I don’t know why you’re working here. I don’t know why the CEO, who is my friend, wants you to work with the board. I don’t know why he wants you to work with him and run this program. He’s my friend. And I should be working with the board, and I should be running this program.

Now, he was two levels above me. And he had a really big problem with me. And he never, he would never give me anything good. He never said anything good. And he did this for two years. And whether I was in France or China, Japan, Italy, it didn’t matter. He would show up. And he would say things like, you bring zero value to the company. You really don’t know what you’re doing. You have nothing good to say. Nobody should listen to you. And he would demoralize me.

And it would always be right before I’d speak. So I got really good at kind of compartmentalizing it. I got very good at that. But for two years, he did that. And, and at some point, I felt like a fraud. Right. Like about two years into that, I felt like a fraud. Not a good place to be, I guess. Yeah, it was horrible. Here I am telling my leaders, you know, how to be the best leader and how to be a strong and powerful presence. It’s how to stand up, and all of this, and here I am taking this from somebody only because my paycheck is coming from this organization, and how can I stand up to this guy?

You know, and he literally, I mean, intimidated me, right. So I decided to do something about it. And so I decided that what I was gonna do was, I was just gonna ask him next time, he said that to me to tell me three good things that I’ve done. Yeah. And, and I did, I started doing that. And I was shaking. I mean, I was shaking when I said.

Carol Marzouk 21:17

Do you know what he said to be the first time that I asked him that Sam?

Sam Gupta 21:22

I am curious, though. I’m, I want to know,

Carol Marzouk 21:24

Yes. He said nothing. He said nothing. Yes. He literally said the word nothing. And then I did it again. Next time he did that. He just shook his head. Then yeah, and then the next time, he would just be silent. It took about four or five times. And he never said anything, anything, nothing, nothing positive. But I still kept asking the question. And so eventually, I trained him to know that I would be asking him, and he started getting uncomfortable.

Yeah, with asking him, and he stopped. And so I got him to stop. And so that was good. But you know, they, in the end, people like that they have this insecurity, right? Or they have this. This is like a narcissist. And the reason why I’m telling you that story, right? It is because we have to learn as CEOs as CFOs. And CEOs, we have to learn how to recognize these conditions. And we have to know how to coach them because they’re in your organization. So if you find that they’re stunting your growth by doing this to other people, and now, these guys can manage up really well. So you’ve got to be very good at noticing this. And you’ve got to keep an ear out for other people saying things about their behavior.

Carol Marzouk 22:47

So with these kinds of guys, if you know that there’s somebody that’s like a narcissist, even though you might be tempted to all of a sudden, like, have a loud wake-up call with them, right? The first rule with them is to avoid anything that might upset their sense of self, right?

Because they have this idea that they’re grandiose, they want to make sure that everybody thinks that they’re bigger than they are. Right? And that’s to compensate for their sense of inadequacy. And that’s okay, right? You’ve got to kind of feel a little bad for them because they have that sense of inadequacy and that insecurity. And so what you don’t want to do is call them out on that. Yeah. So while they may seem very confident, it conceals a very deep vulnerability. So your first goal as a CEO or as a CFO is to place your self-esteem on a firm foundation. Not to destroy it, you have to convey respect to him or her.

Carol Marzouk 23:47

And it needs to be recognized. So you know, what I’d like you to do is show empathy and initially gain their trust. So that eventually you can they can let you in so that you can talk about those dysfunctional behaviors. Now, for me that that works very well. Right now, I’m, of course, a third party, but that’s my bread and butter, right? I literally can do that. They trust me. And they bring down all of their masks.

But the important thing that I want you to understand is that their ambitions can be used to motivate them because that’s what they live off of. That’s their currency. You want to use that currency. For instance, if they have high potential to succeed as whatever director or whatever their VP role is that they’re looking for or whatever it is, you want to use that as the carrot as the currency to motivate them, right. The challenge is, of course, to avoid feeling their sense of grandiose grandiosity, so it helps to keep Conversations tactical. So that’s one story, Sam, the next story do me to go into a story about a fatality.

Sam Gupta 25:08

Yeah, I mean, I would definitely like to get into that. But I would definitely also like to discuss some sort of scientific method here that you might be using. So obviously, I can see this problem pretty much in every single organization. Okay. And the reason for that is because, you know, some of these subject matter experts, they may have been with the organization for a very long time, they might do way too much that executives even don’t have the power to negotiate with them, and they sort of becoming toxic is the word that you’d like to use, right?

They are extremely valuable for the organization. But at the same time, they are equally toxic as well, for people like you if you have to hang out with them. So I can see the problem. Right. So obviously, I want to cover the story as well. But more importantly, I want to cover the scientific methods that you used to number one uncover the toxicity and then how to fix it?

Carol Marzouk 26:04

Yes, yes. So the way that I uncover it, well, my process is, you know, it’s very simple for me, what I do is, I always meet with the person. So somebody comes to me and says, Hey, you know, Phil, this actually just happened yesterday, somebody came to me and said, this was in a manufacturing space. And the salesperson was, you know, bigger than life, right?

They make, they bring in a lot of money for the company. And, you know, I think like 2 million this one particular person brings in, and he thinks he’s just always right, and bigger than life, and etc. And so he’s having a really difficult time with the office manager with everybody because he will. Frankly, he lies a lot and appears to be greater than life. And, and so the, you know, the CEO is talking to me and saying, Carol, I don’t even know how to approach him to tell him to talk to you.

Sam Gupta 27:11

$2 million dollars, right. $2 million.

Carol Marzouk 27:14

Exactly, exactly. And, and, you know, the thing I told him is, look, this guy is suffering, that he’s making a ton of money. Um, he has more money than he knows what to do with. But he, he’s not happy. Because he also told me some other things that you know about his life. He’s not happy. And most people that are like that are not happy, because, well, you know that because look, Sam, like, you and I are laughing, right?

When we give love, that means that we have love to give when we give kindness. That means that our cup of kindness is full and that we can give some of it out to other people. But if we don’t have it, how can we give it and so so his cup of kindness has been empty for a long time, and his cup of understanding and his cup of all of that stuff, right? So he’s hurting this. This guy is in pain. And so what I asked him was, let’s think about the currency, why would he want to change? Why? What’s in it for him to want to even meet me, and it’s different for everyone.

Carol Marzouk 28:18

For this particular person, it was very important to have a good relationship with the office manager because for. It was a status thing that if the office manager was in sync with him that that means he owned the place. And so that’s what we use as the currency because right now, the office manager is not in sync with him. And so the way he’s going to approach it is, hey, you’ve got to meet Carol. She’s going to help us get her in sync with you. Right? Like, nothing’s wrong with you, right?

Remember, because we can’t deal with a narcissist or somebody that believes they’re grandiose, you can’t attack them at the beginning. You’ve got to gain their trust first. So yep. So that’s how you do it. And then once I talked to them regarding my approach, so once I get face to face with them, then it’s a matter of frankly, do I like them as people, right, and I don’t, I personally don’t work with anyone I don’t like, and even though these people are, quote, unquote, toxic in their workplace, or whatever it is, they’re really good people.

It’s just that they’re crying for help, honestly. And so that’s why they’re preventing the company from growing. And even though they’re bringing in money like this guy. He’s actually about to destroy the company if we don’t fix this because this woman is going to bring a major lawsuit that’s going to take them down. Wow. If we don’t fix this, I mean, it will take that company down.

Sam Gupta 29:49

Yeah, that’s going to be a huge P&L hit. I don’t know how big this company is. But lawsuits are not fun.

Carol Marzouk 29:55

Yes, it will take them down. He told me it’s gonna take them down. She’s got so much evidence against him and some other people that have abated and have the same similar issues because it’s a cultural thing. If you’re allowing that guy, there are other people too, right? So it’s a problem. And so once I talk, so once I talk to him, and he, you know, he has synergy with me, and he trusts that I’m going to keep our, our conversations confidential, because I do, and then we move forward.

And, and that’s the scientific aspect of it that he bases its therapy, it’s therapy for corporate Yeah, um, in a way it’s applying, it’s applying principles, therapy, Quinn’s principles, because I’m healing the parts of him that are unable to heal in the environment that he’s in.

But I’m also bringing him back into the environment and working in working with the environment that he’s in. So not only do I work with the person, but I also work with the people that he works with. So I work with the whole team every month so that it’s not like, Oh, this person’s got a problem, let’s send him to an island, right. Having fixed it’s no, it’s this person’s got a problem, we’ve enabled this behavior, we are enablers, we also have issues. We’re also going to fix those issues. And we’re going to watch this person transform as we also transform. So I meet with them every month.

Sam Gupta 31:30

Yeah, and people issues are always bigger. When you talk about any of the last transformations, whether you are talking about the ERP transformation, or digital transformation, or company transformation, whatever it is, I mean, you are going to have subject matter experts, and always that are going to be people issues that are always going to be the top issues because of that, your initiatives are likely to fail.

So yes, people issues, the biggest ones, and they need to be healed. So I absolutely agree with you there. Okay, so I want to cover your story, the fatality one, quickly.

Carol Marzouk 32:02

Sure, absolutely. So the fatality, one was a manufacturer, and this one again, they were in at an inflection point of growth. And one of the operators Actually, it was an operator, and he was moving into a supervisory position. And He was in the machine. Um, and he when he was kind of servicing the machine, and somebody turned on the machine, while he was in it, that screen on, on very crazy Sam, and the and then the guy, the guy passed away.

So that was a symptom of a huge problem in the culture. That hasn’t been dealt with. And it all started at the top, and the CEO didn’t want to see it because he didn’t want to deal with the people issues. It really did start with his executive team. And it just kind of, again, like the fountain, right, it just kind of went. And it just kind of dripped down until something happened that now OSHA is involved in, you know, a whole bunch of people involved. Obviously, I’m involved.

Sam Gupta 33:15

But what was the trigger? I mean, what was it? Was it because of the internal communication? Was it because they didn’t have any system for communication? What was the real problem here?

Carol Marzouk 33:24

The real problem was, well, they also were going through a merger. And so that’s partly why I also got involved just because they were going through a merger. So I was looking at the people side of the culture of the company, that that bought them out. But it was it had to do with the executives at the top knowing that there were issues with the processes and the systems. And so they weren’t the lean company. That’s not the issue. But the issue was the processes in place. They were not solid. They weren’t even clear.

Sam Gupta 34:03

Yeah, wait for a second here. So let’s say if we look at the landscape of the majority of the SMB businesses or lifestyle businesses, I mean, they don’t necessarily have a system or process coordination. This is not the way manufacturing companies are supposed to run. So they are typically coordinating either on paper or just manual. So do you see this risk with a lot of SMEs out there?

Carol Marzouk 34:22

I don’t see it that often. Although I just recently saw another one where there was a fire on a machine because it was rewired wrong, and it was almost going to bring the whole place down. So, um, it is scary because it is about communication. But more than communication, it’s about comprehension. And it’s about the supervisors. Really, it’s not just about handoffs; it’s about understanding that they need to see the whole thing through, and it’s about the leaders at the top caring and not staying in their offices, and Yeah, they’ll handle it.

That’s not my job, or I don’t want to think about the people side, or Yeah, I’ve got good people there, or it’s about them really looking and watching and doing 360s, and really paying attention to what’s really going on there. And not just thinking, Oh, yeah, well, nothing’s happened now. I mean, where this fatality happened, they’ve been, they’ve been in business for a long time. It’s never happened before.

Sam Gupta 35:28

Yeah, just because it never happened before does not mean that it can not happen today.

Carol Marzouk 35:32

Exactly. So yeah, this is an It’s not like I see it all the time. But I see it enough to say. I think the time has come where the CEOs, no matter how big the companies are, because I work with very, very big companies, and also small companies. And I have to tell you that no matter how big the companies are, the CEOs really need to have an eye on everything. At the end of the day, they’re the CEO.

Sam Gupta 35:59

Yep, I could not agree more. So do you have any last-minute closing thoughts by any chance?

Carol Marzouk 36:04

Yes, I would say I would just ask this question. What are you waiting for? That’s my closing thought is what are you waiting for? That’s it.

Sam Gupta 36:14

I hope that they are not waiting for such issues. These issues are serious. To be honest, we can laugh all day. But, in a manufacturing facility, people’s issues are serious. The communication issues are serious. And if you don’t have processes in place, this could happen to anybody, any company, any person out there. So Carol, even though we are laughing here, but again, this is a serious issue to make sure that you have internal communication in place, you have the right leadership in place, you don’t have toxicity in place.

Carol Marzouk 36:45

Thank you so much for having me on your podcast. Sam, it was a true pleasure.

Sam Gupta 36:51

I cannot thank our guests enough for coming on the show to share their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Carol, head over to leadershipnsoul.com.

Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Ben Baker from your brand marketing, where he discusses how internal communication influences growth. Also, the interview with Erin Koss, CPA from the Syte Consulting Group, where she discusses how internal communication helped her make a massive project successful despite unforeseen challenges.

Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to catch you on the next episode of the WBS podcast.

Outro 37:52

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.