Podcast

In this episode, we have our guest Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues. He also describes how statistical process control (SPC) could help in addressing such issues. Finally, he shares several stories in different manufacturing verticals, where he has implemented SPC processes.

Chapter Markers

• [0:00] Intro
• [2:22] Personal journey and current focus
• [2:57] Perspective on growth
• [3:44] How to accomplish double the growth?
• [4:25] Does SPC help double the growth?
• [10:48] How statistical process control differs from any other data gathering
• [15:21] AI predictive analytics versus SPC
• [21:44] Does SPC need an ERP system, or can it work standalone?
• [24:07] Which industries are the right fit for SPC?
• [28:34] Does SPC slow down the processes?
• [35:23] Closing thoughts
• [36:10] Outro

Key Takeaways

• If we’re getting the wrong measurements, we’re going to get the wrong behaviors, the wrong behaviors, the wrong outcome. So we want to make sure that the processes, we really understand what the next step in the process needs.
• If things start to go outside of normal ranges, and we don’t wait till we have a major problem before we react. SPC helps us understand when a process starts to drift, and we take action before it becomes a problem.
• Statistical process control is about understanding statistically how the process is performing. And if we start to see the process drift, there are rules around what an out-of-control situation looks like or what we call special cause variation, when we have specified variation, we react and correct it before we have a problem.
• Most manufacturers don’t understand with SPC you start with measuring the product, but that’s not the end game. That’s where you start to understand where is the variation in my process, and I want to make sure that the outputs are good every time we produce the product, but the power of SPC is driving it back to the process.
• There’s a measurement called CPK. That measures process capability. And depending on what that data is telling us, it tells us the frequency and how often we should take the measurements. Yes, we want to make sure that long term, the process stays capable.

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About Max

Max Krug, the owner of Future State Engineering, has 35 years of experience in operations, with a focus on manufacturing and distribution companies. He coaches companies to help develop operational excellence strategies and provides hands-on mentoring and implementation support for the necessary and sufficient actions to become a high-performing organization. His education is in Industrial Engineering, and he utilizes Theory of Constraints, Lean, and Total Quality Management techniques to achieve breakthrough performance improvement for organizations.

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Full Transcript

Max Krug 0:00

Leave the process alone if it’s operated correctly and understand when it should take operator intervention to make adjustments and quality will improve significantly just doing those two.

Intro 0:12

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 0:48

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

Growth could be challenging with product quality and process waste issues. You can also see inflated costs and reduced profit margins if you don’t track scrap and waste appropriately. The problem could even be more significant if your measuring equipment is not appropriately calibrated or provide the necessary precision needed by your processes.

In today’s episode, we have a guest Max Krug, who discusses what actions businesses need to take if they encounter product quality or business performance issues. He also describes how a statistical process control or SPC could help in addressing such issues. Finally, he shared several stories in different manufacturing verticals, where he has implemented SPC processes.

Let me introduce Max to you.

Max Krug, the owner of future state engineering, has 34 years of experience in operations with a focus on manufacturing and distribution companies. He coaches companies to help develop operational excellence strategies and provide hands-on mentoring and implementation support for the necessary and sufficient actions to become a high-performing organization. His education is in industrial engineering, and he utilizes Theory of Constraints, Lean, and total quality management techniques to achieve breakthrough performance improvement for organizations.

With that, let’s get to the conversation.

Hey, welcome to the show, Max.

Max Krug 2:21

Hey, Sam. It’s great to be here.

Sam Gupta 2:22

Okay, amazing. So to kick things off, you want to start with your personal story and what you’re focusing on these days.

Max Krug 2:27

Yeah. So what I do is that I help organizations improve their performance. So my focus is really manufacturing companies. I’ve spent my whole career in manufacturing. I do a little bit in distribution, where I’m really looking to help manufacturers improve their business outcomes. And really, I am a hands-on guy working with the leadership, working in the organization to help them understand how we can do things better, how we can get better outcomes, and how we can drive better performance within the organization.

Sam Gupta 2:57

Okay, so tell me, what is your perspective on growth? And that is the question that we ask every single guest that comes to the show.

Max Krug 3:05

So my perspective is, I want to focus on operations to create the capability to deliver what the market needs or what the customers need. Too many times, I see companies go out, get a whole bunch of sales, and they can’t deliver on that, and they just make the customers mad.

So my focus is really, let’s make the internal operations capable of delivering what the customers need, and maintaining stability, and be able to deliver that even through the growth of the organization. So if we have customers that are satisfied now, what happens if we could double the growth of our current sales and deliver what we’re delivering now to our current customers? To me, that’s my focus.

Sam Gupta 3:44

Okay, so if I’m the manufacturing executive, obviously, you are exciting me. Who doesn’t want to double the growth? So tell me how you are going to help me accomplish.

Max Krug 3:51

First, we need to understand from your customers’ perspective, what their needs are, and then to be able to deliver on those needs better than anybody else in the market. So I’m trying to create a decisive competitive advantage by creating the internal capabilities to deliver on those needs, to the extent that no other competitor can, so I want to differentiate or the organization from what the competitors can deliver. Of course, that focuses on where in the operations do we need to have controls to make sure that we can deliver every time to the customers,

Sam Gupta 4:25

Okay, and my understanding of your work as you do a lot of work in the quality and SPC space as well. So say, SPC or quality, how to accomplish double the growth? Or is it the overarching work that you do that helps them accomplish this kind of growth?

Max Krug 4:40

I’m looking at the concepts of process control to help fuel the growth because we want the process to be stable. So what that means is the outcomes are predictable. I don’t care if it’s a manufacturing process, a machining process, a plating process, a sales process, a scheduling process. We want to make sure that those processes are capable of delivering what the next step in the process needs.

So I look at the customer-supplier relationship within the organization and say, Okay, this process. Who’s your customer? Let’s make sure that we deliver everything that’s necessary and sufficient for the next step in the process to complete their work. So I use best process controls an overarching philosophy to say, Okay, what is it the next person needs? Let’s make sure we deliver on that. And that makes sure that the process is capable of delivering on that.

Sam Gupta 5:30

Okay, so I like what I hear, but I need to know more about how this is going to happen. So obviously, you know, I would like my businesses to be predictable. I would like all of my processes to have some sort of KPIs. I have been trying this for the last ten years, but somehow I’m not able to get to the point where I feel comfortable with my processes. So what could be my problems?

Max Krug 6:00

So part of it is what I see in a lot of companies is everyone does understand who their customers are in the organization. Let’s first do is make sure we understand in the organization, who are your customers and really understand what do they need to do their job, then we go back and look at the process and say, okay, is the process able to deliver and I’m a big Pareto principle guy. So what that means is the 80-20 rule.

I would say most companies, I would go and look at 20% of their problems come from 80% of the causes. So if I can focus on 20% of the problems, I can eliminate 80% of the chaos that’s happening in the organization. 20% of your processes are creating 80% of the disruptions in the organization. So it’s all about focus. So if we can go in and look at those process options and put some controls in place, yes, you know, measurements need to be there.

Max Krug 6:56

But we got to make sure we have the right measurements. If we’re getting the wrong measurements, we’re going to get the wrong behaviors, the wrong behaviors, the wrong outcome. So we want to make sure that the processes, we really understand what the next step in the process needs. And so many times, I see people doing things, and nobody’s looking at it. I see it in reports all the time. And companies, oh, we’re generating all these reports. And, okay, who’s looking at the reports? I don’t know.

I just send it out. I’ve been sending out 20 years to this group of 50 people. And I said, Okay, stop doing that. Okay, and then see how many people come back and say, Hey, where’s that report usually send out every week? I didn’t get it this week. It’d be surprised how many people don’t come back and ask for that information. So typically, companies are sitting in what I call a sea of data, we have all this data that we’re gathering about our processes and our systems and our organization, but there’s no data I can see.

So it’s about having data that you can see to make decisions that are going to affect the outcome. And that’s the whole process control concept, right? We just want to have data that’s relevant to make decision-making the most of the other data is irrelevant. So there are very few points in the process, we need to actually understand are working well to make sure that the system or the organization is delivering what they need.

Sam Gupta 8:20

Right. So I completely agree with you there. I was an executive, if I had access to the data that I need to care for, obviously, that’s the ideal place to be, but it’s not as easy to accomplish. In my experience, you know, we have been doing a lot of reports in my organization, if in the ideal scenario, what I would like to do is I would like to have a dashboard where I can see all of my processes, I could see all of their outputs, I could see all of the bottlenecks between the processes, but is there something you have been able to accomplish and some of the engagements that you have done?

Max Krug 8:57

Yes. So we start out by understanding what the vital signs of the organization are. Like, think about your health, I only have a few vital signs I need to look at to make sure I’m healthy. My heart rates are good, my blood pressure’s good, my temperature is good, my breathing rates are good, as long as those are within normal ranges, I’m pretty healthy.

It’s the same in an organization. What are the drivers of your organization? Let’s put some metrics around those. Let’s monitor those metrics statistically and understand. Okay, as long as I stay within normal ranges pretty healthy. If things start to go outside of normal ranges, and we don’t wait till we have a major problem before we react. SPC helps us understand when a process starts to drift, and we take action before it becomes a problem.

Max Krug 9:49

So statistical process control is about understanding statistically how the process is performing. And if we start to see the process drift, there are rules around what an out-of-control situation looks like or what we call special cause variation, when we have specified variation, we react and correct it before we have a problem.

It’s a proactive approach, not a reactive approach. We can look at different processes and really focus on the bottleneck. So, where are the bottlenecks in the organization? We got really tight process controls around those because the bottlenecks dictate the outcomes of our organization. So if we can put process controls in the area where we have bottlenecks, we want to make sure that those processes stay operating within normal limits. Anytime the process starts to drift, we want to make sure we take corrective action to get it back in control before it goes out of control and becomes a major problem.

Sam Gupta 10:48

Okay, so you mentioned the term SPC. So I need to know a little bit more about that. And obviously, as an executive, I’m the CFO or CEO of my organization. Somehow I have figured out how to build the financial statements and how to sell my products, right? That’s the state. I mean, I’m not very good at maths.

So now, you are putting a lot of different terms there. You know, and I need to know more about why that matters, why the statistical process control differs from any other data gathering that I have been doing. For me, it’s just the dashboard. Right? So tell me how the statistical process control differs from just a regular data gathering.

Max Krug 11:32

Okay, so we can look at data in two ways. It’s either forward-looking or backward-looking. Most of the metrics I see in companies are backward-looking. So how did we perform the last quarter, the last month, the last year, and it’s all looking backward, statistical process control is looking forward. So we’re looking forward and saying,

Okay, this is how the process of performing as long as we can continue to operate. Under normal conditions, we can predict with high accuracy what the outcomes are going to be. So we want to be looking forward. The analogy I like to give is like, try driving home by looking in the rearview mirror of your car. How far are you going to get? So we don’t want to have metrics that are rearview looking. We want to be looking out the front windshield.

Max Krug 12:17

So if I understand, okay, these are the drivers of my organization, then I can put some I can take some statistics about the process, how it’s performed, and make predictions about the future. And if I first say, I want to understand is that process stable? Is it able to deliver what is necessary?

So we always look at trying to get process stability first. Typically, I see and companies, they’re swimming in problems, and they’re reacting and firefighting all day long. So we need to stop the firefighting. So that’s a reactive mode of operations. We want a proactive mode of operations. So what does that mean? It’s like stop the firefighting. Let’s understand what’s creating the firefighting. And then let’s put process controls in place so that the process doesn’t wander, doesn’t drift.

And if it starts to not create the outputs that we need, we take immediate corrective action. So the first step is always to get process stability. So what that means is, we’re able to understand what the things that have to happen in the process are? What are the inputs to the process, and make sure that they stay within desired limits? So we’re using statistics to make predictions?

Max Krug 13:28

Looking forward, we’re taking process data. And we understand what does normal looks like. As long as things are operating normally, the outcomes are highly predictable. So the first thing is making sure we do things consistently. So it’s inevitable, every company I go into that has a multi-shift operation, the first shift comes in, let’s take a specific machining center, they set up the machine, and second shift comes in, oh, that guy doesn’t know what the heck he’s doing.

He’s got it set up wrong. So he starts making adjustments to the process. And all of a sudden, we start having quality issues. So I see it all the time in companies where people think that they have more knowledge than the other guy, and they start making adjustments, and then the processes start to go out of control. So we want to prevent that from happening, saying, you know what, there’s only one best way to perform the process.

Max Krug 14:22

And SPC helps us to make sure that we’re performing that the best way, and we can see it if something changes. We can immediately react to it before we have a problem that gets you from a reactive mode into a proactive mode. Then once we get stability, now we can focus on capability. Capability means we’re delivering to our customer requirements. So think of the stability.

It’s the voice of the process, saying, okay, what’s the process telling me I’m taking data and the process and I take statistics and say okay, this is what the process is telling me then capabilities. What’s the voice of the customer? So can we make the process the voice of the process match the voice of the customer? Now we got a process of stable and capable, and SPC statistical process control makes sure that we keep those processes operating so that they meet the customer requirement. Okay.

Sam Gupta 15:21

So as an executive, you know, I get all these terms throwing around. And every time I talk to a person, I get a new term. So here you are telling me, SPC. And obviously, I get the picture between forward and backward. But that sounds like more of the predictive or prescriptive analytics. So is there any correlation between AI predictive analytics versus SPC?

Max Krug 15:43

Yes, so SPC is also the same thing, right? Predictive, right. So we want to be able to predict what the outcomes are going to be. So, of course, things are changing all the time. We have different sales. A mix can change within the organization, sales, demand can change, our material supply could change. So there are all these changes happening.

We want to make sure that those changes don’t affect the outcome of the organization. Employees are changing. So it’s a way to make sure that giving all the variables that can happen in the organization, that it’s still able to deliver what’s needed to the customer. And I’m talking the external customer, but also internal between process, that’s

Sam Gupta 16:23

Okay, so tell me a story of a customer where you have worked. So tell me the state where they were in? And then what work did you do for them? And then what was the impact because of that, because I’m actually trying to relate to what SPC really is, to be honest, okay, I don’t know if it is going to be a tool that I need to get in my organization.

So tell me a story where you have implemented this, and, and walk me through the history of the organization, give me details about what the organization was, what was their industrial products, you know, what they were manufacturing, and then the kind of work you did, and the results as well.

Max Krug 17:02

Okay, so I helped the company put it in statistical process control. They asked me to come in. They were having trouble with late deliveries for customers, high scrap levels, high reject levels, high rework, rework levels. And so they’re like, we’ve tried all these different things to try to improve, and we’re not getting any better.

I said, Okay, let’s talk about statistical process control and how we use that to help you get better. So again, using the Pareto principle, I would say 80% of their scrap is coming from 20% of their processes. So if we can focus on that 20% of the processes, and they were a company that was a powdered metal manufacturer, so they supply the lawn and garden industry.

Max Krug 17:47

So they do components for lawnmowers, snowblowers, that type of equipment that they’re supplying the OEM. And so they were having trouble. And so we started to look at, okay, their molding process. So if you’re familiar with powdered metal, they take metal that’s in a powder form, they compress it in a press, they run it through a sintering oven, they do some secondary machining and maybe some other processing in terms of heat treating, or plating and send to the customer.

So the molding process was the process that was giving them most of the problem. Of course, they were finding the defects downstream, right? It’s like, oh, after it’s centered, oh, these parts are out of spec. Right? So is it the sintering oven that’s causing the problem, or some of this stuff was filed after machining? Where’s the problem? So what we did is we said, You know what, it’s really back in your molding department that’s creating most of this problem.

Max Krug 18:35

That’s what we started, say, Okay, let’s see if we can put some statistical process control in the molding department. They looked at the parts and said, Okay, again, if we look at all the variables in the process, again, I would say 20% of the variables are creating 80% of the good quality. So we get to understand what variables are controlling the process. That’s where we want to put SPC in place.

So when we did the analysis, we found that the weight of the product had was a good indicator if the process was operating correctly. So if I had too little weight, that means all the features probably work to spec. If I had too much weight, that means maybe some things were oversized, or we had too dense of material. So we started to say, Okay, let’s just start simple. And let’s start capturing the weight of the product coming off the press. We know what normal should look like. We know the tolerances on the weight. So let’s start capturing samples of the process to see how the weight is how consistent it is from cycle to cycle, and from hour to hour, and from shift the shift. So we started collecting that data.

Max Krug 19:44

And I did SPC training for their people. So they understood the concepts of variation, what creates variation, how do we control variation, and again, we don’t need to focus on everything. We just need to focus on those critical few things that are creating the most disruptions. In the output, if we can control the weight that controls a lot of the process, so we started taking data. And it’s funny, because I said, Well, the first thing we need to do is make sure that our measurement system is capable.

So can the measuring devices that you’re using actually measure accurately and precisely? So we did a, we did a gage study and found out that the equipment is it can’t measure precisely and accurately. Okay, so I got to fix that before I start doing SPC because then I don’t know, the variation I’m seeing is it coming from the measurement system are coming from the process itself.

Max Krug 20:39

So we had to correct the measurement system. And we got that under control. Now we can see the variations all coming from the process. So we did the training, we get a software that we use, we started plugging the data. And then it’s like. We want to train the operators to be able to read the SPC chart. If I can’t read the chart, it doesn’t do me any good.

So it’s like having a roadmap. And I look at the roadmap. If I can’t read the roadmap, I gotta get to my destination. Yeah, I can’t. So the SPC is the voice of the process. It tells me what’s happening. If I understand how to read the SPC chart, it gives me information about what’s happening in the process. Now I can understand what’s going on.

And if things start to go out of normal condition, I can take immediate corrective action. So, in this case, their scrap levels came down by 75%. They right there, their delivery performance went up, their customer satisfaction went up less rework, less scrap, right cost savings, so there were huge benefits for the company.

Sam Gupta 21:44

Okay, let me ask you this, let’s say if you’re working with a customer, and it seems like they must have a really sophisticated quality department where they might have several steps in the quality processes, and they must be doing a really good job in tracking the scrap, right? So some of the customers that I work with, I mean, they don’t even track scrap, they don’t even track the rework. Again, I mean that data may not be available in the system.

So typically, would you require an ERP system before you can start the work? Are you going to interview people? How are you going to find out where the most improvement needs to be? Is it going to be just the process starting that you need to do you need to interview people? So tell me a little bit more about which customers are going to be the right fit for SPC?

Max Krug 22:30

Okay, so I run into a situation where they don’t have any data. So I come into that situation, what I do is I go talk to people, the people in the process know, if you talk to the operator, he knows how much scrap is coming off the process, even though we’re not tracking. We don’t need to have super accurate data to get started. Yes, if we have the data, that’s great. But again, all that scrap data collection is backward-looking, right? We want to be forward with anything.

So the SPC helps us look forward. So if we have that data, that’s great. But if we don’t have it, it doesn’t mean you can’t start right. So we just talked to the people in the process. They know what’s going on. And they know what the issues are. That’s just managed us never listened to them. So if we can gather that information to get started, you can see immediate benefits by putting in some simple process controls.

It’s like I said, with a company that does, we measure the weight because the weight is good, the sintering process is going to be good, the machining process is going to be good. We’re going to have a good product at the end. As I said, there are very few variables that actually control the process. So we don’t need to put all these sophisticated systems in place to measure everything everywhere. Use the Pareto principle and say, You know what, 80-20 rule good enough to get started and then focus on improving from there.

Sam Gupta 23:55

Okay, so do you see this being used in volume manufacturing as well? It seems like this must be applicable, more for precision manufacturing, where they are extremely careful about the quality.

Max Krug 24:07

Yes. So it’s interesting because I went into a company, and they were our job shop. And they had all sorts of process control issues, scrap issues, rework, the same issues we talked about. And I said, well, have you thought about doing some process control? They said, well, everything we do is different. I go yes, that’s why it’s called statistical process control, and not statistical product control.

So most manufacturers don’t understand SPC. You start with measuring the product, but that’s not the end game. That’s where you start to understand where is the variation in my process, and I want to make sure that the outputs are good every time we produce the product, but the power of SPC is driving it back to the process.

So, for example, if you do painting, for example, or powder coating or plating, what are the variables that control the thickness of the part and the adhesion? Well, it’s the cleanliness of the part and maybe how well the part is grounded. And also, in electroplating, it’s like my current level and my cleanliness of the part. Well, if I really want to drive it back to the process level, you know what if I took statistics and the concentration of my batch? Then if I maintain that batch concentration within certain limits, the parts have to be clean. So the power is really driving it back to the process level. What statistical process controls 95% of the companies still measure the product to take it to the next step?

You want to drive it back to the process and say, What are the variables that are controlling the process. And if I can maintain controls on those variables, now I’m doing real process control. So it can apply to any process. It doesn’t matter if it’s a machining process, painting process, plating process, heat-treating process. It can be applied to any process.

Sam Gupta 26:05

Okay, so tell me some more stories in different industries. So obviously, you told me about the powdered metal, you told me about the job shop? Tell me where else it could be applicable.

Max Krug 26:15

So easiest is high volume. If you’re high volume, repetitive, so I’d look at organizations as either high volume or job shop. So if you’re high volume, of course, you know, a lot of companies struggle with maintaining consistency of producing the same types of products over and over. So it definitely applies there. Again, we start with doing product, but we want to drive it back to the process, really doesn’t matter what industry. It can apply to any industry.

If you have customers that have high requirements in terms of quality specifications, that’s the best application. So I’m working with companies in the Department of Defense work. I work with companies that are in pharmaceuticals, automotive, or woodworking. So it can apply to any industry.

Sam Gupta 27:04

Okay, so let’s say if I want to start on this journey, right, and obviously, you are talking a lot about processes. But when I think of the processes as an operations guy, I’m thinking of any ERP system. And I don’t know if I need to have those because they are super, super, super expensive systems, right? So do I need to have an ERP or MES in place before I can start SPC? How would these systems talk to each other?

Max Krug 27:36

Okay, so you don’t need to have an MRP system because SPC is more taking data right from the process of someone’s taking measurements right off the process. They’re going to be putting that data. So there’s a bunch of standalone SPC systems that are you can either integrate with the ERP or you can just have them standalone.

So you don’t sort of necessary condition is you don’t need to have an ERP system up and running. And even if you do, right, a lot of companies I see the data and their systems garbage. So we don’t need to have super accurate data. To answer that question, you can start even if you don’t have an ERP system. You can start with a standalone. You need some type of statistical. And you could do it manually. But yeah, manually, then you need someone to collect all that data analysis, it is better to have electronically, so I prefer electronically, but the standalone systems can get you started right away, and they’re not really that expensive, especially for the return on the investment you’re going to get for investing in a system.

Sam Gupta 28:34

Okay, so next, let’s say if I’m the CFO, right? I’m always looking at what are going to be the implications of any of the initiatives. I’m looking at the opportunity cost. So it does seem like that, you know, probability, the customer satisfaction is going to improve, the quality is going to improve, but it seems like we might be adding additional steps to the process. So, if I’m not collecting today, then most likely, I’m actually going to be introducing these new steps. And that is actually going to slow my processes down. Right? So typically, with the SPC initiative, do processes get slowed down because now I’m introducing additional steps. I’m trying to weigh the pros and cons of the initiative. Tell me if there are going to be any new steps in the process if they are going to slow down the process to weigh it against the benefits that it is going to provide for me.

Max Krug 29:28

Yeah, so most times, you’re collecting data in the process now. It’s just putting that into a system that can actually give us feedback on how the process is performing. So if we take a machining operation, the operators doing the check. So whether he’s writing those dimensions down or not, it’s doing the same thing. It’s just capturing that data, and there are systems that you can actually connect Bluetooth with the gauge to the data collection, and you take measurements like you’re doing, and it automatically collects that data.

So there’s no actual extra effort by the operator to put this data into the system. The benefit is it’s going to give us the feedback and the process immediately. So that’s where we don’t have visibility now. So no extra effort, the benefit of having better visibility and the process. And we don’t want to have inspection-based quality, right. So if you have a bunch of quality tech quality engineers that are going around doing checks periodically, you can reduce that amount of work by having the SPC. So it’s actually gonna free up those resources to provide to do other things for the organization.

Sam Gupta 30:37

Okay, so let me make sure if I understand this, so let’s say if I have a bunch of equipment that is actually doing the quality work, right. And right now, my quality guys, maybe taking the samples from the product, and they might be noting it down. And that’s all they are creating the certificate of compliance. That’s what it’s called, from the quality perspective that some of the customers may require. If the manufacturers have, let’s say, in the pharma space, or in the oil and gas space, right, because they have to make sure that the products that you are providing comply with the quality.

So in most cases, that is going to be just the sampling process that most manufacturers follow. So in this particular case, let’s say if I have multiple pieces of equipment that are actually measuring the quality, so are you telling me that all of this equipment is going to be integrated with the SPC system, and as soon as the product actually goes through that particular process is tab is that going to measure let’s say, we measure the weight, the weight is going to be captured automatically in the SPC system? And then, in the next step, could be, let’s say, measuring the length that is going to be captured automatically in the SPC system?

Max Krug 31:40

Yep, yep, that’s correct. And then your certificate of conformance could be the outcome of all that data for that loss. So if you have like control, you collect that data through all the different process steps. And that’s your data that you’re going to submit with your certificate of conformance to say, Yep, our processes are in control. And here’s the proof that they’re in control.

Sam Gupta 32:01

Okay, but I mean, in my current process, I don’t necessarily measure every single product. But in this particular case, it does seem like that every product is going to go through the quality process. So it does seem like that this is actually going to slow my process down.

Max Krug 32:14

So you don’t need to measure every product. Again, it’s all about focusing on the ones that are causing the most harm. And again, I would say 80% of your quality issues are coming from 20% of your products. So I go into a company, they’ve been working years to improve quality and haven’t got any results. I go and say, well, my assumption is that 80% of your quality issues are going to come from 20% of your product. So what products are giving you the most headache? Oh, it’s this group. I say, Okay, my assumption next is 80% of the quality issues are coming from 20% of the processes.

So I drive back to the process and say, yep, these two processes are creating most of the issue, just like we did with that company saying, you know, what if we can control the weight that controls most of the processes downstream. Now let’s go there focus and say, okay, what are the variables that are creating the most issue, and if we could put some controls around them, let’s start there. So we started with the weight, significant benefit for the organization. So we don’t need to measure everything. That’s a misconception. We never need to measure the right things. And then measuring the right things, taking that data, and driving improvement from what the data is telling us, then we get breakthrough improvement for the organization.

Sam Gupta 33:26

Okay, so help me understand this a little bit more. Is it going to be more of the temporary initiative that I’m putting in? So let’s say if one of my products is actually giving me the most problem, and obviously, I’m looking at the process, not at the product level, right. So let’s say if there is any specific process there, which I suspect may be the cause of the problem in the process.

I can put my SPC system down at that step and see how that process step is performing. And as I get more data then am I going to get insights that, you know, what are the opportunities for improvement? And once I actually have the improvement done? Can I take the SPC system out? Can you tell me a bit more about that?

Max Krug 34:06

So the frequency that you want to take measurements and how long you want to measure is all a function of how capable the processes so there’s a measurement called CPK. That measures process capability. And depending on what that data is telling us, it tells us the frequency and how often we should take the measurements. Yes, we want to make sure that long term, the process stays capable.

But I’m a proponent of Dr. Deming was. Most of my training came through Dr. Deming’s teaching, and the original premise was to not do the same frequency and measurement all the time. It’s like let the process tell you what’s the capability and adjust the frequency of how often we do measurements based on the capability. So even with the company that did the powdered metal, the frequency of measurement wasn’t the same on every product.

Some products run much better than others. So we reduce its frequency, I noticed because we know the process is much more stable. And we want to push for quality at the source. So we want to have the operators give them the tools to be able to make the right decisions. I don’t need to have a quality engineer or a quality tech come to make the decision for the operator. I want to push that decision-making to the operator and give him the tools to make the right decisions.

Sam Gupta 35:23

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

Max Krug 35:28

So I think a lot of companies think that SPC is a complex thing that we need to consider. It’s not. It’s really simple once you understand it. The biggest benefit of SPC is the two issues I see in companies. People make adjustments to the process when they shouldn’t, and they don’t make adjustments when they should. Okay. SPC will help solve those two problems. Leave the process alone if it’s operated correctly, and understand what I should take operator intervention to make adjustments and quality will improve significantly just doing those two things.

Sam Gupta 36:04

Right. Thank you so much for your time, Max. This has been a fun conversation. I totally enjoyed it.

Max Krug 36:08

Great. Appreciate your time.

Sam Gupta 36:10

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 learn something deeply. If you want to learn more about Max, head over to futurestateengineering.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 Jason Chester, where he discussed the challenges today’s manufacturers face with changing consumer behavior. Also, in 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 out.

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

Outro 37:13

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 Brett Beaubouef who provides insight into whether moving to the cloud guarantees business transformation. He also discusses how you can ensure business transformation with your Cloud ERP implementation. Finally, he provides a deep analysis of what to look for in a Cloud ERP Solution.

Chapter Markers

• [0:00] Intro
• [2:20] Personal journey and current focus
• [3:42] His perspective on growth
• [4:58] Does cloud ERP guarantee business transformation?
• [15:19] How would you ensure business transformation using cloud ERP?
• [18:39] How to find the best cloud ERP?
• [37:31] Closing thoughts
• [39:40] Outro

Key Takeaways

• The cloud ERP is a good enabler to help you in terms of transforming your business, but it’s really not the most important piece. And unfortunately, a lot of people in our community today and in the industry focus solely on technology or cloud ERP.
• All the money that’s spent towards the ERP implementation is typically spent on the implementation itself. And the least amount of money spent, and the ones that can have the largest impact, and that’s the individual people.
• A lot of customers think that this is something that doesn’t require a lot of effort. There are some misperceptions out there that also reinforce this thought. And it’s the misconception that cloud ERP is inherently intuitive. That’s almost like me saying to you that statistics is inherently intuitive.
• So when we’re talking about simplification, it’s about this philosophy and approach of utilizing what’s delivered out of the box as much as possible. That’s the basic value proposition for cloud ERP is that you can use everything that’s provided by that vendor. So that’s simplification.
• If it’s taking me two to three weeks to close my books, there is no level of trust, or it’s very minimal that I have with the cloud provider. So regardless of any technology, new technology they provide to me, I’m not going to trust it because I’m still having trouble doing the basics.
• Remember that you’re outsourcing your ERP IT services to a third party. This is the service, the software itself may work great. But if the service is inadequate, it’s really going to create a negative experience for the customer and for the users.

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About Brett

For the past twenty-five years, Brett has helped customers select, implement, and manage ERP solutions across five industries. Growing thought leader for ERP deployment and realization strategies. Brett is an ERP-published writer and author of an ERP agnostic blog called ERP the Right Way! With over 10k followers across 100 countries.

Resources

• Connect with Brett
  • LinkedIn
• Connect with ERP the Right Way
  • Website

Full Transcript

Brett Beaubouef 0:00  

One of the areas that traditionally they tried to reduce or skimp on is training—training the users. And it’s really the users that are going to have the most impact on if the ERP is going to successfully support the business or not.

Intro 0:20  

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 0:56  

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 looking for an ERP in 2021, you might not even think of any other options than a cloud ERP. But what is cloud ERP? Does cloud ERP provide a competitive advantage? How do you ensure business transformation with cloud ERP? These are the questions you will have if you are at a stage where you can’t grow unless you implement a newer ERP system. 

In today’s episode, we have our guest, Brett Beaubouef, who provides insights into whether moving to the cloud guarantees business information. He also discusses how you can ensure business transformation with your cloud ERP implementation. Finally, he provides a deep analysis of what to look for in a cloud ERP solution. 

Let me introduce Brett to you. 

For the past twenty-five years, Brett has helped customers select, implement, and manage ERP solutions across five industries. Growing thought leader for ERP deployment and realization strategies, Brett is an ERP-published writer and author of an ERP agnostic blog called ERP the Right Way! With over 10k followers across 100 countries. 

With that, let’s get to the conversation. 

Hey, Brett, welcome to the show.

Brett Beaubouef 2:19  

Hey, thanks so much, Sam. Appreciate it.

Sam Gupta 2:20  

Okay, to kick things off, do you want to start introducing yourself and what you’re working on these days?

Brett Beaubouef 2:29  

Absolutely. So my name is Brett Beaubouef. I am an ERP thought leader as well as an ERP project manager. I’ve been in the ERP industry for the last 25 years, started out as a customer, then as a consultant, was really blessed to have the opportunity to work my way up the growth chain, if you will, doing technical consulting, functional consulting, solution architect, project manager, and then a practice manager. These last several years, I’ve been focused on how customers can generate maximum business value from their ERP investments that are through research, also doing surveys with customers, helping them to better understand what they have and how to best utilize those investments. 

So that’s my passion I’m on. On the side, as one of my hobbies, I write an ERP blog called ERP the right way. And I share my wits and my wisdom as well as it’s a great opportunity to get feedback and to learn from others. Cuz I’m still on this journey of learning the world of ERP.

Sam Gupta 3:42  

Okay, amazing. So before we get deeper into your background, and I have tons of questions there because obviously, you have a very interesting experience. But one question that we ask every single guest that we get here is, what is your perspective on growth? Brett

Brett Beaubouef 3:58  

Growth is necessary, first and foremost, right? Businesses, by their very definition, are a going concern. And in order to remain going, you’re going to need growth as the world has become more global, and competition is global. It’s no longer localized. Everyone is looking for opportunities for growth, not only from a competitive advantage perspective but in terms of their operations, their processes, the information, the data that they collect today, how can they leverage and use that to further their competitive advantage and actually grow? 

So my particular world I focus on is ERP, specifically, and cloud ERP. So I’m definitely researching working with customers to identify how moving to the cloud is one piece of their strategy for business growth.

Sam Gupta 4:58  

So Brett, tell me, does cloud ERP guarantee business transformation?

Brett Beaubouef 5:06  

Well, that’s an excellent question, Sam. No, the short answer is no. Technology is one component of a business solution. Within a business solution, I see it as people, processes, and technology. The cloud ERP is a good enabler to help you in terms of transforming your business, but it’s really not the most important piece. And unfortunately, a lot of people in our community today and in the industry focus solely on technology or cloud ERP. 

I can hear it now in sheer sales presentations that are happening with customers, look at these features, capabilities, look what this can do for you, and not really defining, okay, the story of how these technologies enable the business to be successful. In fact, if you really think about which component is the most important component of a business solution, again, we talked about people, processes, and technology in my 25-year experience, it’s people. It’s the individual business user. It’s that individual that’s keying in that purchase order every day and matching AP invoices against payments. Those are the individuals that are most important that really can drive the success of a business. And cloud ERP plays an important part as an enabler.

Brett Beaubouef 6:38  

However, what I found through my ERP career is the fact that all the money that’s spent towards the ERP implementation is typically spent on the implementation itself. The system implementation partners coming in to assist with the configuration, also in the products and the services that say the software vendor or reseller provides, whether that’s Oracle or SAP. And the least amount of money spent, and the ones that can have the largest impact, and that’s the individual people. 

So typically, as I work with customers, and of course, every customer wants to maximize the bang for their buck and implement ERP as quickly as possible. One of the areas that traditionally they tried to reduce our skimp on is training, training the users. And it’s really the users that are going to have the most impact on if the ERP is going to successfully support the business or not. Not only in terms of training and educating, but also in terms of organizational change, how their day in life will change. 

A lot of customers think that this is something that doesn’t require a lot of effort. There are some misperceptions out there that also reinforce this thought. And it’s the misconception that cloud ERP is inherently intuitive. That’s almost like me saying to you, Sam, that statistics is inherently intuitive.

Brett Beaubouef 8:20  

There are certain things that are not going to be inherently intuitive. They’re complex. And enterprise resource planning solution is not intuitive. There are certain aspects. They should be intuitive, like, for example, creating an expense report. Yes, or self-service for HR. Absolutely. But there are some other things or other configurations that need to be done that are not, in here at least intuitive. In fact, it takes a lot of thought. There are probably 1000 decisions that a customer has to make as part of a cloud ERP implementation. 

That was the case for on-premise. And guess what that is the case for the cloud. So really, what I tried to do in working with customers and giving them advice and guidance, is helping them to better understand how cloud ERP can support your business transformation. So one of the ways that we try to do that is to set realistic expectations. We can go back 30 years, and first when the ERP came out, and the functionality and the capabilities that were there in the present, and then you have seen the second generation of ERP and now the third generation, especially with cloud ERP, but there are certain things that ERP can do, but also what the cloud ERP can’t do. 

There are certain things that it is very good at doing, you know. Other expectations customers may have that are really not realistic. For example, let’s talk to a couple of those efficiently. Cloud ERP can help drive efficiency, primarily through standardization. Also, automation of manual tasks. 

Brett Beaubouef 10:29  

What I’m trying to say is cloud ERP can help you do smarter work. So in how does it do that by providing you additional insights into the data pattern recognition, highlighting those opportunities for you, cloud ERP can do that. Now, can it create a competitive advantage for a customer? Absolutely not. And if anyone tells you that, then they’re trying to sell you something. Keep in mind ERP is broad. It has been designed and developed to support a multitude of customers from a global perspective across multiple industries. 

And almost every cloud ERP vendor worth a grain of salt will tell you that it inherently has best practices engineered into its products and services. That’s a fair statement. Best practices are not competitive practices. There’s a difference. Best practices are common. So common across an industry or a particular country, people kind of figure out this is the best way of doing things. 

But Sam, let me ask you, say like we’re playing a game of chess, and you have something that you feel gives you an edge over me? Are you going to share that with me freely?

Sam Gupta 12:02

Definitely not.

Brett Beaubouef 12:05  

Absolutely. It’s the same thing when a company, they’re not going to really say, Hey, you know what, I’m going to share this with the world because it’s great. And everyone should be doing this, this, you know, this certain process this way? There are going to be activities and processes that are competitive, and competitive advantage is the most important. 

Now, from a cloud ERP perspective, it’s just going to provide a generic platform, right in terms of automating processes and workflows. And even maybe in the configuration might be a little unique for a particular customer. But when it comes down to those competitive advantages, it’s not going to be provided out of the box for any ERP cloud solution.

Brett Beaubouef 13:03  

But what’s most important is that the customer is still able to support those competitive advantages. And that could be via an on-premise solution. That could be via, say, a cloud environment, but something that is private, not public, that’s just available to everyone. So it’s important to set those realistic expectations. I know there are many stories that are out there that may say, X number of top industry leaders use this solution and other sales propositions that are driven towards showing that, hey, this customer is successful, and this customer is successful because they purchased this particular vendor, cloud ERP. 

Now, I definitely agree that it’s probably played a role in supporting that. But that is not by itself is the only reason there’s far more than that, especially in terms of competitive business practices and activities, also in the people. So it’s good that as you’re looking at different cloud ERP solutions, you understand what the software can do, but also what the software can do.

Brett Beaubouef 14:29  

And that will help you to ensure that you have appropriate expectations because if you don’t, a lot of the ERP implementations have been noted as failures. And by the way that they’re at relatively speaking, few failures, there are quite a few disappointments. A lot of those disappointments have come from unrealistic expectations of what the ERP would be able to do. And as well as not fully appreciating the role that ERP or cloud can play and supporting your processes as well as your people to be more competitive because they’re truly your competitive advantage. The software is just a software or service at the end of the day.

Sam Gupta 15:19  

Okay, so you do a lot of work in the business transformation space. And I want to make sure that we are covering everything that we can from the business transformation perspective. So let’s say if we want to ensure the business transformation using cloud ERP. How would you ensure that?

Brett Beaubouef 15:34  

Given what I’ve described in my comments earlier, another key area that I see a lot of customers not fully define or just assume will naturally happen is improvement in business performance. I think it’s very important that any customer undertaking a cloud ERP implementation gets a snapshot, if you will, of currently where their business is at, especially in terms of performance, so that when they go live with the cloud ERP solution.

They have a reference point to go back and say, okay, we’ve implemented this business solution. Has it truly improved business performance? You can look back at those metrics that you defined upfront to determine, okay, have we improved? Yes or no, some of the KPIs or key performance indicators will improve based upon doing an ERP cloud implementation, just for the sake of automating a manual task or eliminating variability.

Brett Beaubouef 16:44  

If you’re a student of lean principles, like I am, you know that a key to reducing cycle time is reducing the variations that can happen within a business process. Cloud ERP can be very useful in reducing those variations as well as making it more efficient. However, there are going to be some business processes that will not be improved. Those business processes tend to be more around the competitive advantage. 

And if anything, it identifies to the customer the fact that if you only depend upon cloud ERP to satisfy all of your strategic goals and your initiatives, you’re missing the point. There’s no cloud ERP solution that can do that. It’s part of the answer, absolutely. But also, you need to look at those processes and the resources that you have to make sure that they’re aligned to hit those KPI targets. 

So whenever I see customers do a cloud ERP implementation, they’re focusing more on the software or on the features than they are on the results, having the baseline, targeting your KPIs, managing your KPIs, of making sure that you’re focusing on the true business results. And not necessarily at these little silo points. Features that may add some efficiency may reduce some variations but has no impact on the end business result. And at the end of the day, that’s why you’re implementing the cloud ERP to improve business results.

Sam Gupta 18:39  

Yep. So let’s say if I’m thinking of implementing a cloud ERP solution, and I want your advice in terms of what I should be looking for in a cloud ERP solution, what would be your advice?

Brett Beaubouef 18:53  

First of all, I would advise customers would be to think outside the box. And do not just focus or leverage traditional approaches for software selection. I can summarize it into five key areas for me, 1) simplification; 2) repeatability; 3) reliability; 4) technology growth; and then 5) trust. 

So let me break down each one of those one at a time. Simplification, we briefly talked about this here previously, where we really want to simplify our management of a business solution. From a technology perspective, as simple as possible. The more parts you have in an engine, the more opportunities you have for a breakdown. So we want to keep that simple.

Brett Beaubouef 19:51  

Also, in terms of maintenance, having a simplified solution will make you, I’d be quite honest, more flexible and adaptable. A school of thought that was around, especially in ERP design and development, back in the 90s and early 2000s is that, well, if you want flexible and adaptable, we need to build more configuration options for you. Or we need to enable you to create more customizations. That worked fine in terms of the initial setup and tactically addressing specific flexibility or, you know, adaptability. 

However long term, it had adverse impacts, say like, for example, updates that you may receive from your ERP vendor. It was harder to take those updates because you’ve added and that additional complexity, if you will, in terms of customization. And don’t get me wrong, Sam, I’m all for customization, especially if it supports the revenue-generating activity. 

But if you’re telling me that, and I worked with a customer once, in this situation, that they needed 30 customizations for an expense module, and they sold life insurance. So I asked them, okay, why do you need 30 customizations for an expense module? Well, we want to be world-class in expense management. And I sat back and said, I hear you. But you don’t sell expense management. You sell life insurance.

Brett Beaubouef 21:44  

And I said, even if you do, it may save a minute or two of additional time for the individual expense reporter as it, but in the big scheme of things, you’re adding more work in terms of the level of effort to do an upgrade, number one, number two, you might need those resources that you’re focusing on, making maybe a siloed point solution, a little more efficient, could have a better impact in the entire business result. 

And another area in the business solution. So everyone has scarce resources, everyone has to manage the money that they have. And I just advise customers to make sure that they’re getting the most bang for their buck. If they tell me that, Brett, this is a competitive advantage, or this is a compliance issue.

Brett Beaubouef 22:40  

And I need to have this as it is all good. That makes sense. But don’t spend it was in an area that may have limited benefit from a functional perspective that has an adverse effect on the business result. So think in terms of that. So when we’re talking about simplification, it’s about this philosophy and approach of utilizing what’s delivered out of the box as much as possible. That’s the basic value proposition for cloud ERP is that you can use everything that’s provided by that vendor. So that’s simplification.

Now, let’s talk about repeatability, this kind of aligns with trust, but I’ll talk about it. Now you have a repeatable solution, you create a journal entry, and you can continue to create that journal entry. And you get the same result, Time after Time. Now, it’s a little different in the cloud; from the standpoint that you don’t necessarily are subscribing to software, you’re subscribing to a service. 

So from a service perspective, you want to make sure that that service is repeatable, that the services that the ERP cloud provider is providing to you are repeatable. It’s there. You put this information is you’re going to get that same result. And cloud ERP is now more mature than what has been in the past, say the last 10 to 15 years. But still, it’s important that that service is up, that’s available, because you may have the functionality there. But if the service is not up, then who really cares. So that’s what I’m talking about repeatability, which is also that availability, and that every time I do a certain transaction, I’m going to get that same result. 

Third, reliability, the service is up and running, also in terms of whenever I do have an issue with cloud ERP. I have a service desk to go to. Now with cloud ERP, you are outsourcing a specific part of your ERP IT support to the vendor. With cloud ERP, you’re outsourcing that service.

Brett Beaubouef 25:04  

As I work with cloud ERP customers, it has been an education that we had to do with our customers in terms of, right previously, you’ve had dedicated IT support resources there on-site available to you that you could just pick up the phone and call. Not so much in the cloud ERP. And here’s why. First of all, in cloud ERP, most support models are shared support. So there are no IT resources or support resources dedicated to one customer. They’re typically dedicated to multiple customers. 

Now, you can purchase additional support. But most cloud customers, again, the basic value proposition of reduced cost, most cloud customers don’t go with that option. So you have to appreciate knowing that. Okay, now I’m going to be reliant on a third party to provide me support. So reliability is important, not only that the services available, and that you can support your business with but also in terms of there are support resources there and available to you, that will be able to work with you if you run across a particular problem and they issue.

Brett Beaubouef 26:26  

Now, a lot of cloud ERP vendors will say, you know what, we provide superior support because we offer 24X7 service. The reality is, most customers don’t want to be available 24X7 because a lot of times, whenever there’s a support issue, there needs to be real-time interaction. And I don’t know of any customer that I’ve ever worked with that was happy to get a phone call at 2 am in the morning from an IT support resource in India saying, hey, I got time, let’s work on your problem. 

And they are like, no, please leave me alone. Go away. I’m going back to bed. So it’s some of those nuances that a customer needs to think through as they’re moving to cloud ERP. It’s not a bad thing, Sam. And it’s actually a reduction in cost. However, as you said, Nothing in life is free, and you get what you pay for. So as long as the customer knows that acknowledges that it can work within those boundaries, I think that’s good. The next area is technology growth.

Brett Beaubouef 27:45  

Again, this is where cloud ERP is superior because you’re on a public cloud. And all the customers are on the same software code, which enables the vendor to provide more updates quicker to customers than they had in the past. So say like, for example, an on-premise customer, you might get an update once a year. And they might then next a customer may implement it every other year, versus in the cloud, you’re getting an update either every three to six months. 

And it’s upgrade friendly, which means that the customer no longer has to go through a battery of tests and reviews of code, those features and that technology is provided with an update and is there ready to be leveraged and used by the customer. As far as selecting the right cloud ERP solution provider, I wanted to select someone who is always providing updates and leveraging the latest technologies. 

Even though as well as I have the choice of using that technology or not and I’m on a public cloud solution, if I decide not to use that technology or that capability, that’s okay. It’s available for other customers. They can use it, there’s no impact to me, but at least I have that technology there.

Brett Beaubouef 29:23  

Now let’s talk about Trust. Trust is very important in the cloud. Again, you’re renting it, are subscribing to a service, you’re outsourcing, part of your support, all these new technologies and capabilities are going to be available to you. However, if you don’t have trust in your vendor, and I really should stop using the term vendor and just call them a service provider because truly, that’s what they are. 

Say, like, for example, I have a provider, come to me with a quarterly update and say, Well, look here. Now we’ve embedded artificial intelligence and machine learning into our processes. And our customers can start leveraging and using those recommendations that are made by that functionality. Now, if I’m still as the customer, if I’m still having trouble trying to close my financial books, what are the odds, I’m going to be jumping with joy that AI and machine learning has been made available to me? Probably none at all, you know, it’s the basics, you know, you got to be competent in the basics. So that’s where it comes back to that repeatability.

Brett Beaubouef 31:24  

If it’s taking me two to three weeks to close my books, there is no level of trust, or it’s very minimal that I have with the cloud provider. So regardless of any technology, new technology they provide to me, I’m not going to trust it because I’m still having trouble doing the basics. And with me having trouble doing the basics, guess what? My business process performance is not where I expected it to be. And trust is very important. And since it’s a service, it’s not a one-time deal. It’s not like that the implementation is up, and we’re good; It’s every month; and it’s every journal entry that they put in.

You’re either adding or subtracting from the trust. And that really, I think, is a limit to customers in terms of how much they are really leveraging Cloud ERP. Now, to get the full value proposition that was articulated to the customer during the sales cycle, they need to continue to adopt the latest technologies, in the latest features, they need to continue their growth within the cloud ERP service, not maintain if they maintain, they’re basically losing money off the deal.

Brett Beaubouef 32:44  

So it’s important that it’s not a point in time. It’s a continuing solution. And again, we’ll encourage customers to continue to stretch and further leverage in use. Their cloud service is trusted at the end of the day. Now when I also talk with customers about what they should look for in the ERP cloud solution. And we talked a little bit about this in terms of having customization for particular non-revenue generating processes. You really need to focus on business processes in business results. 

Generally, there are three types of business processes, there’s revenue-generating, and of course, from revenue-generating, your target is to be as effective as possible. Now, sometimes being effective means you’re not as efficient. But that’s okay. Especially if you want to create a unique customer experience, but the customer knows and understands that. 

But for revenue-generating business processes, you want to be as effective as possible. That’s where your competitive advantage lies, and you’re not looking for a competitive advantage within the cloud ERP provider. You’re just looking for the enablers that will support you in implementing those competitive business processes. So that’s revenue-generating. 

Now, if I’m looking at revenue, support in revenue, supporting the business process, say like, finance or HR, my target is to be as efficient as possible, right? I don’t necessarily want to create a unique customer experience for each of my expense reporters. I want it to be competent and cheap. And I want it to be reliable.

Brett Beaubouef 34:34  

With compliance, the same school of thought, I want to be as cheap and as competent as possible, right. I don’t want to say like when you and we do our individual tax returns once a year. I don’t provide a lot have additional notes to the IRS. And I don’t care if they have to spend more time looking at my return as long as I get my return and I am compliant. I’m good with that. I don’t need a world-class solution that needs to do my tax returns. 

Even though when I work with customers, naturally, they will focus on things that may make them more efficient in their particular functional area, they may not be seeing the bigger picture in terms of the entire business process. And the organization in terms of right I have a need, or I have a want sorry, not a need want for HR particular process or activity, however, is that more important than a particular need, I have in my revenue-generating business process, which one will generate more money for the company in the long run, which one is going to further ensure those business results that my executives and my shareholders are looking for?

Brett Beaubouef 36:14  

So I would use these three broad types of business processes as a priority list, if you will, in terms of Okay, when I’m defining my requirements, okay, what’s most important to me, and you may have some uniqueness within a particular company. Sometimes it’s called differentiation. What makes you unique, but what makes you unique, may not be growing your business, and you need to look at that requirement from that perspective as well. 

Finally, what you look for in a cloud ERP solution is a good service. Remember that you’re outsourcing your ERP IT services to a third party. This is the service, the software itself may work great. But if the service is inadequate, it’s really going to create a negative experience for the customer and for the users. And guess what, when users can’t get a solution to their problems, they start looking at workarounds and then not using the software as intended. And then, that results in other consequences that will eventually reduce the business value a customer should be experiencing from their cloud solution.

Sam Gupta 37:31  

Okay, amazing. So thank you so much for your insight. Do you have any last-minute closing thoughts?

Brett Beaubouef 37:36  

Absolutely. So first of all, Sam was thank you for giving me the opportunity. I really appreciate it, you know, having this opportunity. I always say this to customers. And remind them that technology is just one piece in the business transformation puzzle. Technology should be viewed as an enabler but not the sole driver. 

Also, whenever you’re making an ERP selection, not only look at the software but also look at the services that are being provided. That’s, that’s vital and important. Also, look at how you select software. Just don’t look at the individual products and features. And assume that if you get all those products and features that will result in the desired business results you’re after, really take more of a business results focus in then have the ERP provider or vendor explained to you how their solution supports your desired results.

Brett Beaubouef 38:42  

Because at the end of the day, it’s business processes that create results, not functional silos, not bells and whistles, or the latest technology. It’s those technologies and those features incorporated into a business process along with the right business activities and people that will drive your business performance and then measure it. 

You don’t know what you have until you measure it. And you can’t measure what you have until you measure it. Identify upfront what those KPIs are? What are the things that are important? And then measure that as you go through your business transformation journey, you will identify the drivers to improve your KPIs versus just assuming implementing a cloud ERP solution will transform your business.

Sam Gupta 39:40  

Okay, I could not agree more. So with that, I just want to thank you for your time. 

I can’t 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 Brett or his blog, head over to erptherightway.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 Erin Koss, CPA, who shares a story of an ERP project that was a massive success, despite disruptions from COVID-19. Also, the interview with Ram Krishnamurti, where he discusses why costing strategies matter for any ERP implementation and how to make an ERP project successful. 

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 the next episode of the WBS podcast.

Outro 40:51  

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 Katie Thomas from Leaders Online, who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. We also had a chance to touch on why accounting and finance subject-matter expertise is critical for marketers to reduce marketing spend. Finally, she also covered how executives can drive their employees to be more active on social media to generate opportunities. 

Chapter Markers

• [0:00] Intro
• [2:39] Personal journey and current focus
• [6:21] Her perspective on growth
• [6:38] Importance of subject-matter expertise for marketers
• [10:49] Importance of sales skills for executives
• [14:41] How operations and finance executives can improve their personal brand?
• [18:27] Why does personal branding matter?
• [23:44] Content strategies for finance and operations executives
• [27:58] Why does company branding matter?
• [30:53] Who should be accountable for company branding?
• [32:49] Closing thoughts
• [34:13] Outro

Key Takeaways

• When you can speak your clients’ language, and truly understand their business, it allows you to provide a lot better service to them and also to allow the message that you’re creating for them to resonate better with their prospect.
• To understand how posts work on LinkedIn, you have to recognize that there’s an art and a science to it. And the art is what’s going to really make your posts stand out in the art is going to be your stories, your experiences, how you actually teach or talk about a subject. And the science is going to be the tactics of the posts. So the length of the posts, the hashtags, the buzzword.
• Personal Branding matters because it’s ultimately how people do business with people. People buy from people and companies that they resonate with, they don’t just buy the product or the service because they buy from you, and how you put yourself out there, whether it’s positively or negatively, you’re creating a brand for yourself.
• There are four types of content. And when I say types, I don’t mean like video, text, audio, but really like four different sectors of content. And the first one is educational. So this is typically really easy for people to come up with. And it’s going to be like tips and teachings, action steps that people can take to reach their goal. It could be myth-busting.

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About Katie

Katie Thomas, CPA is the owner of Leaders Online, a digital agency that helps executives increase their influence, impact, and income through thought leadership marketing. Leaders Online serves clients all around the world and works with some of the top accounting and finance professionals.

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Full Transcript

Katie Thomas 0:00  

You can get better. I think as we grow as humans and we advanced in our careers, we can get comfortable in what we’re doing and what we’ve always done and try something new. Just like with anything, say whenever you went to school for the first time, it’s uncomfortable, and we have to get over that. And that’s really what it is. It’s a lot of times having the confidence to try something new.

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 1:03  

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

Growing a company today is no longer the same as it used to be five years back. Today, your customers expect you to be thought leaders in your industries. While we have been using social media to enhance our personal and company brands for quite some time. The game has entirely changed in the last three years. The companies that are actively promoting their brand and encouraging their employees to elevate personal brands will have a substantial edge compared to the rest. 

In today’s episode, we have our guest, Katie Thomas, from leaders online who discusses the importance of personal brands and why personal branding is essential for personal growth and corporate branding. We also had a chance to touch on why accounting and finance subject matter expertise is critical for marketers to reduce marketing spend. Finally, she also covered how executives can drive their employees to be more active on social media to generate opportunities. 

Let me introduce Katie to you. 

Katie Thomas CPA is the owner of leaders online, a digital agency that helps executives increase their influence, impact, and income through thought leadership marketing. Leaders online serve clients all around the world and work with some of the top accounting and finance professionals. 

With that, let’s get to the conversation. 

All right, Katie, welcome to the show. 

Katie Thomas 2:36  

Hi, Sam. Thanks so much for having me on.

Sam Gupta 2:39  

Just to kick things off. Do you want to start with your personal story and what you’re working on these days?

Katie Thomas 2:44  

Yes. So my name is Katie Thomas. I am a CPA, and I run an online digital agency called leaders online, where we help executives increase their influence, impact, and income through thought leadership marketing. So my career started out probably a lot different from many digital agency owners and service providers out there. I actually started out in public accounting. So I am a CPA, and I continue to hold my license today. 

And, you know, it’s interesting, because I got into public accounting, actually, in a way where I was going to college, I was working at my family-owned business at the time doing sales and marketing, I loved it. And everyone said you should get an accounting degree. Accounting is the language of business. And so I took accounting, I was like, wow, this is, you know, it comes really natural. To me, it makes a lot of sense. 

But it’s interesting, because all along, I was like, I just I don’t know if this is for me, but you know, the years go on, I graduate. And the next step is you might as well get your CPA because you went to school, you got a degree in accounting, and you should go and get the CPA. 

So I went ahead, got the CPA. Well, to make your license actually active, and you can pass the test, but then you have to work. So I went to work at a public accounting firm and went to work at Ernst and Young. The whole time while I was there, I kept wanting to do sales and marketing. 

I actually went to one of the partners there. After working there for a few years, I said I enjoy my work, and I was getting to work on some really great projects. But I know that my heart is in marketing and in sales and creating relationships with people. I really want to go into business development, is there an opportunity? 

And I got this blank look like, what are you talking about?

Katie Thomas 4:47  

You’re a CPA, and unless you’re a partner, there’s just really not an opportunity here. That’s when I recognized that the CPAs, and I’m sure are very similar for a lot of other similar professions out there, you really aren’t taught the skill set to grow a brand to create an online presence in today’s world. And then you get to this partner level, and you’re just expected to know how to do it. 

I thought, well, there’s probably an opportunity here to go out and help accounting firms. That’s where we started with doing just that. And so when I left, I took the skill set that I had learned at working in the accounting firm knowing their business and how they operate some of their pain points, how they serve clients, knowing how to speak their language and went to them and said, Look, here’s what we can do, here’s this opportunity, is this something you’re interested in. 

And it’s been a really cool journey to see how there are all of these amazing professionals out in this place. They have great businesses, they offer amazing services that transform lives, but their reach and the impact that they could be making. It’s not tapped into because they aren’t taking advantage of this amazing opportunity to market themselves and be confident and marketing themselves. 

Sam Gupta 6:21  

Okay, amazing. So, there are some very interesting points here that I would like to dig deeper into. But before that, I am going to ask one question that we ask all of our guests, and that is going to be what is your perspective on growth? Katie, what does growth mean to you?

Katie Thomas 6:38  

So when I hear the word growth, I think of getting bigger, getting better. And so of course, as humans, we can become better we can develop ourselves physically, mentally, spiritually, as business owners, we can grow a bigger business, create better bottom-line, but really when I truly think of growth, and what that means to me is how can we, as humans get bigger, create a bigger impact that spreads to more people and create a better world as a collective. So as people and as business owners, executives, it’s not just about becoming better as ourselves, but it’s about growing and impacting others along the way.

Sam Gupta 7:16  

So now we are going to move on to the other things that you mentioned as part of your intro. And one of the things that makes me super curious about your CPA designation, and you said you’re still maintaining that. 

That could be hard, I guess, as a marketer? Because and I don’t know, if you find the sales and marketing world, more exciting, I think you do, because that’s what you mentioned, as part of your intro. So do you still like going through the CPA curriculum? Or do you not?

Katie Thomas 7:43  

I like it because I think that everything that I have to do, for say, continuing education, not only helps me as a business owner and a leader become better and grow my business, but it allows me to understand what a lot of our clients are dealing with and help educate them on say, for example, this cares act that came out when COVID hit, or this new legislation that just came out allows me to stay up to date so that I can even help them communicate better with their prospect market and their current client.

Sam Gupta 8:18  

Yeah, and I find the thing very interesting, because, you know, I don’t know, if any marketers out there are actually going to have CPA designation, it’s very hard to find that, in my opinion. In my opinion, sales and marketing folks should have deep subject-matter expertise of clients’ business. 

This is the challenge that we have seen across manufacturing. And I asked this from marketing agencies that are focusing on manufacturing. Okay, why are you focusing on manufacturing? Can you speak manufacturing? And the same question I’m going to ask you, Katie, you know, you are speaking with accounting and accountants, right? you need to be able to speak their language. And I can almost guarantee that the other folks that are not CPA will not be as deep in their insights when they are writing the content. 

So in your opinion, having a CPA designation, does it matter? If yes, why?

Katie Thomas 9:13  

So it doesn’t matter from a sense of, are you capable of doing, you know, marketing at all, but like you said it, when you can speak your clients’ language, and truly understand their business. It allows you to provide a lot better service to them and also to allow the message that you’re creating for them to resonate better with their prospect. 

So I don’t want to say that it’s having a CPA designation is an end all be all, but I think that what having a designation like that. What it does is it helps qualify you to the applicable party that you aren’t just saying that you understand their business, but you truly you’ve been tested, and you’ve passed that test. So you really do get it.

Sam Gupta 10:11  

Yeah. And your clients don’t have to spend as much time in training you when you are writing content for them, creating the marketing collateral for them, you are probably going to understand when you walk in the door of your clients.

Katie Thomas 10:26  

Exactly. And it goes further than just coming up with topics. But it’s fact-checking the blog post. It’s making sure that we can write what’s relevant today. Because as anyone who’s tried to file a tax return ever knows, the tax laws are constantly changing. So it’s just the whole process of marketing becomes easier.

Sam Gupta 10:49  

Yeah, and you bring a very interesting perspective because you mentioned that blank look during your introduction with your partner. And if I go back to my journey, as well, and I have had sort of the crossover as well, a few sales and marketing roles, and a little bit of it of finance. And I can relate so much. 

So when you were growing up, you know, you had two choices, either you were meant for sales and marketing, or you were meant for the slightly more back-office job, but now more and more crossover I’m seeing in the market.

So in your opinion, when you had this, this journey in the partner firm, obviously, you, you must have realized that the CFOs don’t really have as the sales and marketing skills, or I don’t know if deep is the right word there, to be honest, to describe the sales and marketing skills. But everybody needs communication skills, everybody needs sales skills, to be able to succeed in their job. So what would be your perspective for CFOs and CEOs in developing those skills and why they are so important to have?

Katie Thomas 11:52  

Yeah, so I think that it first just comes with acknowledging that you may have great technical skills, but non-technical skills are equally as important. And what got you to where you’re at now can’t always get you to where you want to go. And so if you can look at it in the way of, I may be really good in this area. But I’m okay with accepting that when I try something new, I may not be as good, but I can learn, and I can improve, and I can get support from you know, maybe it’s someone internal to your company, or someone you hire, you can get better. 

I think as we grow as humans and we advance in our careers, we can get comfortable in what we’re doing and what we’ve always done. And to try something new. Just like with anything, say whenever you went to school for the first time, it’s uncomfortable. And we have to get over that. And that’s really what it is. It’s a lot of times having the confidence to try something new and recognize that it may be difficult, but there’s a lot of opportunities that we can capitalize on and create a bigger impact if we are to take that chance.

Sam Gupta 13:08  

Okay, so what are some of the specific skills that you see are missing in the, let’s say, you know, finance or operations executive that they can improve on?

Katie Thomas 13:17  

So if we’re gonna look at it from a marketing standpoint, I mean, there’s a lot of skills that any buddy can learn. But what I like to do is focus on, like, what are the things that you specifically need to be involved in, because there’s a lot of skills that you really you should just have a professional, it’s not the best use of your time. 

And the skills that they really should be investing time in is making sure that they’re, they’re actively participating in creating their personal brand and their company brand. Because whenever you think about all the brands that are popular and ones that people know, it’s because they give you feelings, they, you think about Nike, you know, it’s just doing it. It’s like an Olympics. There’s Amazon. It’s quick. It’s fast.

When you think about, like a personal brand, let’s say like, even like, Will Smith, he’s funny. They all give you feelings. And as CEOs and CFOs, we have to be actively curating and participating in developing that brand, and what feelings we want to evoke, and what kind of inspiration or motivation or change that we want our company to create through our products or services.

Sam Gupta 14:41  

Yeah, so the two words that you mentioned are personal branding and company branding. And I see a lot of changes overall in the marketplace. And in the last three years, especially the social media platforms like LinkedIn have come a long way at this point of time, especially for b2b businesses. 

So obviously, personal branding is huge because that actually helps with your career. Other folks need to know you. So whatever content you’re writing on LinkedIn, a lot of operations folks and the finance folks are becoming active on LinkedIn as well. But they are not as active as the sales and marketing folks. So I don’t know what is going to be your perspective on that. 

Katie, what would be your recommendation to some of these finance and operations executives on improving their personal brand?

Katie Thomas 15:26  

Oh, my goodness, I work with those exact people every single day. And if you want to create a personal brand online, you should absolutely start with social media. It’s not going to require a lot of your time. And you can create your personal brand, get it out into the world very quickly. 

But it’s gonna take you creating content because the content is how people get to know you. And I know from having the same conversation every single day with people just like you who are listening to this episode, that whenever you bring up creating content, it can be very intimidating because you may not know what type to create, you may think that you don’t have time to create it. 

But really, the truth is, Sam, the truth is that everyone has all the content they need inside of them, especially if they’re at this CEO level. And you don’t need a lot of time to create it. But what you do need to do is understand the different types of content that you can create. 

And some simple frameworks around like, how do you actually present that content so that people can easily consume it and take the action that you want them to take from that content? How do you actually get them to do it, and you can just use a framework?

Sam Gupta 16:48  

Okay, and this is my challenge working with marketing people, to be honest. I mean, they get deep into the content and copy. And let’s say, if I’m the operations or finance executive, I don’t even understand what content word means. So can you tell me what different types of content are? What can I create myself so that my personal brand is going to be stronger on social media?

Katie Thomas 17:08  

Yeah, so let’s just take it a step back. And whenever you think about creating content, we can think of them as creating posts. If we’re saying just creating a post on LinkedIn, you have to understand that, really, there’s an art and a science to it. And the art is what’s going to really make your posts stand out in the art is going to be your stories, your experiences, how you actually teach or talk about a subject, that’s good, what’s going to make it successful. 

Now, anyone can learn science. The science is going to be the tactics of the posts. So the length of the posts, the hashtags, the buzzword, but the art, that’s what’s going to make your content your posts stand out. So this is, this is your unique stories, your experiences, your ways of teaching. 

And that is really learning the art. That’s what’s going to make you successful. And if it weren’t for this art piece, social media wouldn’t be as powerful. But the great thing is, too many people worry about the science, the tactics, what hashtags I should use, but they forget about this art, and they lose touch with their audience. So the arts is what’s going to connect you to your audience, but the science that’s going to be kind of what helps speed up or enhance the art that you’re putting out there.

Sam Gupta 18:27  

Okay, so let’s talk about personal branding a bit more overall. Let’s say if I am an executive, okay, and I don’t know how much time it is going to take from my side on a daily basis in creating the content is going to LinkedIn, and I’m not even sure how it is going to help me. 

So tell me why personal branding matters?

Katie Thomas 18:51  

Personal Branding matters because it’s ultimately how people do business with people. I mean, people buy from people and companies that they resonate with, they don’t just buy the product or the service because they buy from you, and how you put yourself out there, whether it’s positively or negatively, not at all, you’re creating a brand for yourself. So if you actively develop your personal brand, you’re out there making an impact and creating an opportunity for you to try to create a perception that you desire. 

So let’s say you do nothing. You might be creating a perception that you don’t desire, but you can take charge of that and actively create the perception that you want, and you desire people to perceive a view of your company, your services, your products.

Sam Gupta 19:47  

So this could be very applicable for the sales and marketing guys, and you know, if I’m the operations or the finance guy, my expectation is going to be this is the job of my sales and marketing team. 

So why as an operation or a finance person, I should care for personal branding, and why I should invest my time in personal branding?

Katie Thomas 20:07  

Well, you should absolutely invest your time in it because you’re creating opportunities for not just your company but also yourself. I believe that as we actively develop ourselves, and if we’re open to sharing that we’re developing others, and we’re creating an opportunity for people to really connect with us on a deeper level, because as we share stories that people can relate to, and learn from.

And that’s a lot of what personal branding is, is, it’s just sharing stories and showing that you’re human, that’s going to create connections that you don’t know, what could result of them, whether it’s actually like a business opportunity for your company, or it’s a personal opportunity for a friendship, or maybe it’s another job opportunity down the road. 

Or maybe it’s a partnership opportunity where you start up your own company, you don’t know where that could lead to, and what opportunities but again, it goes back to at the end of the day, we’re all people, and we’re all striving for this collective growth as a society and as a world as a whole and you creating your personal brand. It’s just plugging right into that growth.

Sam Gupta 21:23  

So I’m completely on board with that. But let’s say let’s take a scenario, let’s say I’m the operations and finance guy. Obviously, I care for the world, and I care for the society as well. But I need to worry about my own priorities, too. I’ve got 24 hours on my clock. And I work, let’s say as operations or finance executive, I work for 15 hours a day, I have to take care of my family. And now I have to spend time on personal branding. As far as the opportunities go, I have a stable job. I don’t really care for the opportunities as much. So why does personal branding matter for me? 

I’m not necessarily looking for an opportunity. And you did mention that job opportunity down the road. So how big is going to be a factor, let’s say in the future, especially what we have seen in the last three years, with respect to personal branding, how much personal branding is going to be relevant in hunting for the next job,

Katie Thomas 22:22  

I think it’s only going to continue to become more relevant and more, much more of a say, the requirement that you have a brand there. I mean, just look at changes on social media platforms you mentioned, like the past three years, and everything’s changed. 

For example, on Facebook, a few years ago, you could create a post on your company page and get it seen by 1000s of people today. If you’re not paying and you’re not running an ad, it’s going to get seen by hardly anyone, most likely. So when are you are thinking about, like, why should I care if I’m that person who has a stable job, I am already working 14-15 hours a day, it’s to remain relevant. 

This is where the future is going. As you’re in this position, you’re part of your job, no matter what your job is, even if you’re a finance professional is you need to remain relevant. And part of doing that is active online. And it’s not, while you’re online that you know, maybe it’s connecting with other people in your position, seeing what they’re doing, what maybe they’re doing better than you what you can improve upon. It all goes back to, though, you growing and developing and staying relevant. 

Sam Gupta 23:44  

Right. So, let’s talk about some of the content that you mentioned. So let’s say if I’m the finance or operations guy, I don’t feel that I have anything exciting to talk about, to be honest. I’m not even sure how I’m going to be sharing any content. So what are some of the things that I can consider when I am creating these posts?

Katie Thomas 24:08  

So I like to say there are four types of content. And when I say types, I don’t mean like video, text, audio, but really like four different sectors of content. And the first one is educational. So this is typically really easy for people to come up with. And it’s going to be like tips and teachings, action steps that people can take to reach their goal. It could be myth-busting. 

So as the finance guy, you likely are really close to understanding what products and services you offer. Even if you’re in the financials, you understand what’s being sold. So what are maybe some myths around those products and services, what do people need to know about them, that’s all going to be educational. Then there’s brand content. 

So brand content is going to be stories about your journey, impactful moments in your life turning points that led you to where you’re at now, so maybe, why did you get to the position that you’re at? Maybe Why did you leave your previous job? It could also be like your why if you’ve read like Simon Sinek, it could be your hobbies, quirks, interest, anything that others can connect with.

Katie Thomas 25:20  

So what do you enjoy doing outside of your work? Where do you get some mental relaxation? What do you like to do on the weekends? All those things, they’re important people want to know that you’re human, then there’s also professional content. So what’s going on in your industry? Are there changes that are going to impact you, your clients? What’s going on in your organization? Are you looking to hire? Are you, you know, changing technology? What are you struggling with? If you’re open to sharing, maybe you’re What you are looking for. 

So new staff, new clients, networking groups, testimonials, you could a post community involvement also great. And then finally, what we see a lot of content and can turn people off social media is monetization content—so launching pitching promotions announcement that invites and monetization contents. People absolutely need to know what you have to offer them. 

But you just need to make sure that you’re not only doing that, and within that, we have these four categories. It’s really important to note that there can be overlap. One post could be in multiple categories. So let me give you an example. Let’s say that you, I work with a lot of accountants.

Katie Thomas 26:32  

So let’s say you’re an accountant, and you have an educational post about three ways you could reduce your taxes this year. And then at the end, you say if you’d like to learn some more tips, then go ahead and sign up for my webinar here. So you had a monetization piece, you did have some sort of promotional posts, but you also gave some education in it. Another thing was, let’s say that you’re, you know, an executive coach, you could say, here are three things that you need to consider this year when you’re looking to create a more purpose-led organization with transformative business results. 

And then again, you could say, you know, if you want to learn more about this, then be sure to sign up for my newsletter, where I send out weekly tips or, you know, something like that. So whenever you start looking at these different categories, we all can create branded content, we all have a story, we all have things that we like to do outside of work, or that got us to where we’re at now, none of us just ended up in the position that we are today. 

Just because we woke up, we did certain things. And same with educational content, you’re an expert in what you do. And you know, whether it’s teaching about your job or teaching about the product and services that the company offers. That’s, that’s all stuff that you can easily talk about and discuss.

Sam Gupta 27:58  

Okay, so now we are going to move on to the other topic that I really wanted to talk about, which is going to be company branding that he mentioned in the conversation. 

So in my opinion, I think the onus is really on the companies, how they want to position themselves on social media because from when you look at the organization perspective, or the company perspective, it’s one company, it’s not sales and marketing versus, you know, accounting and IT. It doesn’t work that way for the company. It’s going to be when we look at the company branding. It’s going to be opportunities for the company, the more opportunities that the company has, the better.

So some companies, especially when I look at some of the startup world, what they do is that they have incorporated this as part of their performance model, or as part of their comp model that you need to be active on social media. Everybody needs to be active. It does not matter whether you are a CEO or janitor. Everybody needs to be posting the content on LinkedIn, and everybody needs to be liking the content that companies are posting, or commenting or whatever.

Sam Gupta 28:57  

Because you know, when you let’s say your sales or marketing team is sharing the content, just five or ten people are going to be there. But let’s say if your whole company spends time on social media, now we are talking about 50 people trying to influence the content, trying to promote the content, that could be a big deal. 

So when I look at these startups, they’re really going after each and every employee and encourage them to go to social media and promote the content. But when we look at the bigger companies, they don’t necessarily have that. And in my opinion, we have seen this in the last three years. And this is probably going to be more relevant in the next three to five years that the companies that are promoting their employees to promote the content on social media are going to have a competitive edge. 

So what is your perspective on that? Katie, when it comes to company branding?

Katie Thomas 29:45  

Absolutely. I completely agree, Sam, and they’re going to, I believe, have a competitive edge, of course, from getting noticed by their desired market. But I also think that acquiring top talent is another big one, where they’re gonna have a competitive edge because, as someone says, fresh out of college or middle-aged and on LinkedIn looking for a new job, whenever I see this company that’s clearly communicating their brand, their values, what they stand for their culture. And I see a bunch of people engaged with it. I want to be a part of that. 

It’s just like going to say High School. People want to be a part of the group. They want to be part of the cool kids. And if you are creating that online, that community, that culture, then yeah, you’re going to get left behind. And I think that a lot of times people do that are starting to think about this, they think, well, maybe we’re missing out on, you know, the market share. 

But it’s like, what about also all that wonderful talent? That’s huge. As you know, getting the right people in your organization helping you build it is huge. And so I think we need to consider that too.

Sam Gupta 30:53  

So, where should the motivation come from? Let’s say if you were the CEO of a company, Katie, and you are, let’s say, if you were running a manufacturing or distribution business, and you want to make sure that you are able to tap the opportunities when it comes to personal branding, company branding, but at the same time, the employees need to be focused as well in their work, right, because you need to make sure you are making money, you are finding some opportunities as well because some of these efforts on social media could be harder to track when it comes to ROI. 

So, where should the drive come from? Where should the motivation come from? Does it need to come from the CEO? Or, does it need to come from HR? Does it need to come from sales and marketing?

Katie Thomas 31:35  

So I think it’s an interesting question. And you know, how people are motivated is different for everyone. I think that having a general consensus that encouraging everyone to post is great. Some companies I’ve heard actually offer you a bonus or an incentive based on your participation on social media. And that’s going to be individually each company if they want to do that. 

But I think that something that all companies can do, beyond just encouraging people to post, is helping them understand how they can do it. Because whenever we do something new, if we don’t have instructions, or feel like we can competently take that first step, then it’s a lot more difficult if someone can come in and not just say, hey, post on social media, but here are some samples of posts that you can create. 

Here are some formats that you can use. Here are some hashtags that you can use. And here are some ways that you can schedule your post here, maybe some places you can get stock photos, just a simple training, and education around it. That can go a long way to getting people to take part and being active on social media.

Sam Gupta 32:49  

Okay, amazing. Katie, this has been a fun conversation. I hope you enjoyed it. That’s pretty much for today. Do you have any last-minute closing thoughts? 

Katie Thomas 32:58  

Yeah, well, thanks, Sam. So thanks so much for having me. As the closing thoughts, it doesn’t matter if you’re talking about your company brand or your personal brand. People want to know that there’s a human behind you. So there’s a human behind the company, there are humans, and behind your brand, there’s a human. So anything that you do, as you’re looking to develop your brand. Just remember that people do want to know you’re human. 

So one of the things that anyone can do today is just to get on LinkedIn and spend 30 minutes and voice message, your newest connection, say hello, introduce yourself, and wish them well, that you will be shocked at how many people respond and are amazed that you took the time to send them a personal voice message. 

That’s really what I think is so important to remember as we are in a digital world is. You can’t replace yourself, and the more that you can have involved in it, the more success you’re going to see from it.

Sam Gupta 34:01  

Yep, I couldn’t agree more. The more human your company is, the better you are going to do with respect to your hiring with respect to your growth. So on that note, thank you so much, Katie, for your time and insight.

Katie Thomas 34:11  

Thank you, Sam. I appreciate you.

Sam Gupta 34:13  

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 Katie or leaders online, head over to leaders-online.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 Brian Burke from sellyourmac.com, who touches on his growth secrets, and how they became the fastest-growing company on INC 500 3x. Also, the interview with Corey Warfield from CoryConnects where he discussed how to hack LinkedIn algorithms and grow your company using LinkedIn strategies. 

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 35:30  

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 Brian Goffenberg from Vitalhub, who discusses the difference between accounting for a public and private company. He also touches on the importance of auditing and why most companies must consider getting audited by a public accounting firm despite its price tag. Finally, he shares his experience on the relationship between CFO and CEO and what new controllers and accountants need to know about this relationship.

Chapter Markers

• [0:00] Intro
• [2:57] Personal journey and current focus
• [4:23] Brian’s perspective on growth
• [6:09] What CFOs need to know about working with CEOs?
• [9:21] The skillsets differences for a CFO in public versus a private company
• [12:14] What do aspiring CFOs need to know about crossing the line?
• [17:08] 3-5 qualities of great and least desirable qualities of CEOs and CFOs
• [23:26] When are financial executives legally liable in their role?
• [26:23] The importance of auditing for SMB companies
• [30:48] Closing thoughts
• [32:18] Outro

Key Takeaways

• Don’t ever cross the line if anyone pushes you. And I’ve seen it in numerous organizations with a CEO or a CFO to an area where they’re not comfortable with, you’ve got to push back, and it’s that’s probably your duty, you’ve got to make sure that you’re compliant and that you’re not allowing the business to go down a path that it shouldn’t.
• As soon as you compromise yourself, if you have done it once, you just can’t undo it. So you have to set that line. And part of it is communication. It’s really going into, if you feel someone is pushing, pushing too hard in an area that you’re not comfortable with, you’ve got to talk about it.
• If your CEO does something that you think is off the line, and you try and approach him, and you try and get it dealt with, and it’s not getting dealt with satisfactory, you only have one real solution, and that’s to quit, and then find another job.
• To understand what it is to work in an organization where you don’t have cash, and you’re scratching and clawing to get money, whether it’s from customers from the bank to meet payroll, and then then you have a much better understanding of what it is to be in business.

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About Brian

Brian Goffenberg CPA, CA has expertise in the financial management of information technology firms, including Medworxx Solutions Inc., Philips Lifeline, DWL Incorporated, and Delrina Corporation, both before and after its 1995 sale to Symantec Corporation.

He has served as a financial partner and business advocate within a varied scope of organizations – and has served in leadership roles throughout trajectories of up to triple revenue growth. In addition to certification from the Canadian Institute of Chartered Accountants, Brian holds a Bachelor’s degree in Commerce and Accounting from the University of the Witwatersrand, Johannesburg, South Africa. 

Resources

• Connect with Brian
  • LinkedIn
• Connect with Vitalhub
  • Website | LinkedIn | Twitter

Full Transcript

Brian Goffenberg 0:00  

To a CFO to an area where they’re not comfortable with, you’ve got to push back, and that’s part of your duty. You’ve got to make sure that you’re compliant and that you’re not allowing the business to go down the path that it shouldn’t.

Sam Gupta 0:13  

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 to grow 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.

Intro 0:49  

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 a CEO of an SMB company, you might think that getting to $25 million in revenue is the hardest. However, if you ask anyone who has experience with an IPO or with the public companies reporting, the game completely changes when you go public. As a public company, you will have increased reporting needs and additional stakeholders such as the board and shareholders. If this is your first time reading a public company, you will need to game up your leadership and persuasion skills. 

In today’s episode, we have a guest, Brian Goffenberg from VitalHub, who discusses the difference between accounting for a public and private company. He also touches on the importance of auditing and why most companies must consider getting audited by a public accounting firm, despite its price. Then, he finally shares his experience on the relationship between CFO and CEO and what new controllers and accountants need to know about this relationship. 

Let me introduce Brian to you. 

Brian Goffenberg, CPA, CA, has expertise in the financial management of information technology firms, including MedWorks Solutions, Inc., Philips Lifeline GWl In., and Delirina Inc., both before and after its 1995 sale to Symantec Corporation. He has served as a financial partner and business advocate within a varied scope of organizations and has served in leadership roles, role trajectories of up to triple revenue growth. In addition to certification from the Canadian Institute of Chartered Accountants, Brian holds a bachelor’s degree in commerce and accounting from the University of the Witwatersrand Johannesburg, South Africa. 

With that, let’s get to the conversation. 

Hey, Brian, welcome to the show. 

Sam Gupta 2:57  

Okay, to start off, Brian, you know, I would like to learn a little bit about you. Do you want to share your personal story and what you are focusing on these days?

Brian Goffenberg 3:05  

I currently work for a software company called VitalHub Inc., a healthcare IT company, which trades on the Toronto Venture Exchange, was a company which my advice to see the CEO of the company, Dan Matlow, and myself purchased and then took it to took it public via RTL. I immigrated to Canada at the end of 1986. from South Africa, where I qualified as a CA and was bought to Canada by work by a company called Zipper Seven, which is where I worked for them for a number of years. 

And then I’ve spent a number of years in industry working for private and public companies ranging from healthcare IT to technology, and including advertising. So I’ve had a wealth of experience in in the number of a number of different companies. 

I like to consider myself more of as an operational CEO, CFO, and a great second support person for any organization. So my role as a team as a CFO is to really make sure that I’m supporting the CEO and giving him or him or her all the support that they need to be successful.

Sam Gupta 4:23  

Okay, so one of the questions that I always ask, and obviously, I’m going to be digging deeper into some of the things that you mentioned during your intro. But before that, one of the questions that everybody needs to answer, whoever comes on the show, and that is their perspective on growth. So tell me, what is your position on growth?

Brian Goffenberg 4:43  

I think, you know, any organization wants to grow. You have to challenge your organization’s set goals and make sure that you’re growing, but I do believe in managed growth. By manage growth, I mean that you’ve got to be able to grow the organization in a responsible fashion. 

So If you’re, if you’re running a business and you want to have a business that’s less successful, you have to be profitable at some time. So, yeah, I see a lot of businesses going out and trying to create a lot of noise and come up with a try and drive revenue, but have no proper path to profitability.

Brian Goffenberg 5:19  

And I just don’t think that’s sustainable. If you’re obviously a DotCom business or your business that’s looking just for eyeballs, you’ve got funded, you have tons of funding, and you’re able to take that money and just try and get subscribers and use there too. And your exit is to just exit by selling your subscriber base. 

But otherwise, I don’t think you’re going to if you’re going to grow a business. You’ve got to have a profit path to profitability. And it should be pretty, pretty close. You don’t want to have that, that path, and that that gate too far. So yeah, I think it’s very important to make sure, you know, obviously, you’re going to plan for funding and make sure that you get the right funding to allow you to achieve that goal. And anytime that you do any planning, you have to plan for some contingencies, which are going to arise along the way.

Sam Gupta 6:09  

Okay, so I want to go back to one of the comments that he made during your intro for CFO being the support person for the CEO. This is very important. I definitely agree with you there. In fact, I have personally written an article, which talks about overall the skills that CFO needs to have in talking to CEOs. And sometimes, the CEO may have a finance background. Sometimes they might not. Sometimes they may understand the nuances of finance and accounting, and sometimes they might not appreciate it. 

So what would be your perspective? Let’s say if I have a new CFO, who is starting in their career, and they want to learn how to work with a CEO, what would be your perspective on that?

Brian Goffenberg 7:01  

I think you got to understand. I think being the CFO, you’ve got to have obviously, you’ve got the technical skills. So you’ve gone through a super amount of training, and you’ve got some really good technical skills, probably way more advanced than then you’re than your CEO has your CEO typically has a lot of other skill sets, which you don’t have, and you got to recognize that you don’t have them. 

And you got to be able to make sure that the CEO has the information has information and knowledge is power, to give them that the information and support to grow the business. And it’s going to be timely, and it’s going to be smart, and it’s going to be good information. So your role you’re going to understand you yet may be technically smarter, or you may have better training than your CEO because CEO is there for a reason. 

And this has accomplished the role for a lot of good, probably a lot of good reasons. Now, you have to also be in line with your CEO. When I say the line, you have to make sure that you believe in what the CEO does if you don’t believe in what the CEO is trying to achieve.

Brian Goffenberg 8:01  

And CEOs will push you. They’ll push the envelope in any business that they’re typically pretty positive. And when I say positive, they’ll push the envelope, and they keep people like keep wanting me to move the business forward, and you may stumble, you hit a roadblock, they’ll typically work out how to get around that Roadblock, you may come up with some solutions and some technical ideas and see where things aren’t always going well. 

But they would typically look at the grass is always greener to them. And they can always push forward. So you’ve got to make sure that one is that you’re comfortable with it with this CEO and that they have the right level of integrity, don’t ever cross the line if there’s ever you may be pushed along the way. And I’ve seen it in numerous organizations with a CEO or a CFO to an area where they’re not comfortable with, you’ve got to push back, and it’s that’s probably your duty, you’ve got to make sure that you’re compliant and that you’re not allowing the business to go down a path that it shouldn’t.

So it’s really important, I think to be in step with the CEO, you can argue or debate. These debates are healthy, and it helps move things forward and understand your role and know that you can always disagree and beg to disagree, but continue and work forward to help the organization.

Sam Gupta 9:21  

So I want to go back to some of the scenarios are public versus the private company. In the case of a private company, you are only working with the CEO. But obviously, as you mentioned, the CEO has a tough job. They need to talk to the shareholders. And I don’t know how much CFO is involved, and maybe you can talk about that as well. 

But I mean, you, as a public company, are trying to convince a lot more people than just as CEO. So how does the job change? When you are a public company versus a private company?

Brian Goffenberg 9:56  

I think the stakeholders are still the same. You see you’ve got you got the CEO, you’ve got the shareholder, depending on, you know, with a public company or with a private company, you know, it might be closely held, you might have a VC that is expecting you, other people that are backing you, if it’s just you working for CEO and who owns the company, it’s, it’s a very different dynamic, or, you know, sometimes you could work for a family-owned company. And there’s another dynamic where you’ve got to deal with a family. And some families are functional, some are dysfunctional, and you’ve got some challenges. You may have some challenges there.

Brian Goffenberg 10:28  

But if you’re working for a private company, that’s, that’s owned by the has taken in some outside money, whether it’s VC, whether it’s bank financing, you’re responsible to those other shareholders, and you’ve got to make sure that you’re providing them with honest and the right information. So how it differs when you get to a public company, now that all the information is out there, it’s in the public domain, you’re, you’re purchasing quality financial financials, your business is being monitored and being judged on a quarterly basis. 

So you really have to be aware of what you’re putting out the information that you’re putting out. And when I say aware, you understand that everyone has that, that information yourself to be aware with a public company, that you can’t give more information to some people than others. So, you know, there’s someone signed an NDA, they don’t, they can’t get certain information, but people are trading on the information that they receive.

Brian Goffenberg 11:24  

So you have a responsibility to all shareholders who are out there who are getting information from you. And the amount of information that you can provide and people are comfortable with you. Giving up depends on the relationship I think you have with the board and the CEO. And if they’re comfortable with what you what you’re telling the street, let’s find out, then you’ll be able to give out more information and have more conversations with people in the street. 

If they’re not, and you’re not involved in the operation, and you’re not involved with the business as much, then people will want you to have less communication with the street with a private company, it’s pretty much controlled, you’ll be talking to the board, and you’ll be talking to individual shareholders, but probably the CEO would probably control most of that.

Sam Gupta 12:14  

Okay, so I want to go back to one of your comments that you made about the pushback. It actually reminds me of some of the exams that I have written as part of my CFA journey. And I remember those ethics questions. They used to be very difficult, extremely, extremely difficult. My head used to spin reading those questions. 

So obviously, your info and reports are great, but it depends upon the person who was interpreting them. Sometimes, it could be challenging to pursue it to communicate. So when it comes to pushback, what are some of the things that newer CFOs can learn in terms of skills so that they are able to persuade and they are not crossing the line? I think you mentioned that term as well. Right? And in terms of ethics, you need to be super careful, especially if you’re running a public company. Oh, my goodness. I mean, that’s a tough job. So you need to be ethical, but at the same time, you also need to please your board and CEO. So how do you do that? Brian?

Brian Goffenberg 13:19  

I think he has to say that draw a line in the sand where you say, Fine, I can go, you know, I can push the business I can, you can push me so far. But I’m not gonna break, and why am I not gonna break? I’m not gonna step over them. And I’m not going to do anything that I don’t believe is right. And that, that’s unethical, that’s going to compromise my integrity. 

Because as soon as you compromise yourself, once you’re done, you just can’t undo it. So you have to set that line. And part of it is communication. It’s really going into, you know, if you feel someone is pushing, pushing too hard in an area that you’re not comfortable with, you’ve got to talk about it.

And you’ll talk to the individual. I will say to my staff typically is if I’m doing anything that you see that I’m doing something that’s not appropriate, come and speak to me. And if I’m not giving you if I don’t come up with a great solution, or you think that, that you’re still not comfortable with what I’m doing, or, or how I’ve changed or anything like that, then you go to my boss and you tell him, and that checks and balance that I have.

Brian Goffenberg 14:20  

And I believe all people should have that same type of check and balance, but they should be they should have that internally so fine to say, if I’m going down a path that I don’t feel comfortable with, I have to bring it up, and the first person to bring it up is to speak to your superiors who is the person who is pushing you down that line.

And if they don’t understand your situation, or if they don’t see it the way you see it, and you’re still uncomfortable with the way it’s being dealt with, you know, they may see and say, oh, yeah, I understand and let’s do something else, always they don’t do they still going down a path which you’re not comfortable with. 

Then get hold of someone on the board, and you’ve got to find someone that you feel comfortable with and discuss it with them. And they make it they may say well, yes They might either with you or disagree with you, but they’ll come up with them, they should be able to help you with the solution. If they can’t, then you’ve got a bigger issue because, you know, you may be down a path that you that you’ve just you’re not comfortable with completely and then you may, you may have to leave the organization,

Sam Gupta 15:18  

Okay. And related to this, the ethical questions are not really as black and white. They are very great. And that’s what makes them extremely difficult. And the risk is paramount because you have a risk of getting fired because, at the end of the day, you are actually reporting to the board and the CEO.

So obviously, you have a lot at stake. So it requires a lot of courage, in my opinion, to be able to bring these topics and talk about them. And sometimes that could be emotional as well. So what would be your perspective in terms of dealing with the situation? I know you have touched on this a bit, I would like to get a deeper perspective.

Brian Goffenberg 15:55  

You have to be comfortable as being to see I mean. You’re working with this person. You should be working pretty closely. And as I say, you should be the person’s right hand, man or woman. To do that, you’ve got to get getting their confidence and their trust. And if you’ve got that, then they’ll speak to you, and they’ll be able to discuss items. If you don’t have that trust, then you’ve got a big issue because then you’re going to ask yourself, Is this something that I really want to do, or I want to be part of because both parties, both the CEO and the CFO have to understand their roles. 

And if then stand how that kind of integral they are to each other. If you don’t, if your CEO doesn’t feel that your, your, your role is then important to him or her, then you’re probably not doing as good a job as you should be doing. You need to try and bridge that gap and trying to understand what it is that that person needs and the support that they need for you to be successful. 

And you’ll find that out pretty soon. You’ll see, and you’ll be able to see if you’re successful if they come to you for information and coming to discuss things with you. If they are just ignoring you, and they’d left you in the backyard a typical bean counter type thing here: just give me the numbers, and I’ll be happy. You may not be in the right place.

Sam Gupta 17:08  

Okay, so on that point, I would like to touch on a couple of more things related to the CFO and CEOs relationship. So let’s say if you were to name some CEOs that were your absolute favorite, okay, you could name them if you don’t want to name them, that’s okay, as well.

What I’m really looking for is the five qualities three to five qualities that you appreciated in them, the best CEOs, and not-so-good CEOs, and if they may have some qualities that you didn’t appreciate as much, so maybe you can talk about that. 

And then I want to do the same thing with CFOs as well. So I’m pretty sure you have some peers, three to five qualities that you appreciated about the CFO, and three or five qualities that you don’t appreciate in some CFOs.

Brian Goffenberg 17:56  

When I first saw that when I joined the company called Delrina, which was a public company way back which got bought out by a company called Symantec, which has all the antivirus software, I worked for a CFO named Mike Cooperman. He was a phenomenal mentor. He pushed us, challenged us, and allowed us to, to sort of thriving in an environment where we were running, you’re trying to grow a business. 

And it was a pretty successful business. I think he is probably one of the biggest exits in Canadian software history. I think it’s sold for about $461 million. But Mike would push you, would allow you to make mistakes, and would allow you to push the envelope on a super simple IP made sure that you learned along the way that you continually try to improve the business end, and just would give you advice along the way.

Brian Goffenberg 18:46  

As far as CEOs, I worked for a great CEO called Lynn Wexler when I was at Lifeline, which helped me to go forward by Philips Lifeline to lifelines of personal emergency response systems for the elderly, layin, once again, we challenge you he would be he was pretty direct. 

So there was one thing that you had to get used to. So if there was a problem or something, he would tell you, and he wouldn’t mince words, and will really hold you accountable to whatever you did push you to do your best push you for continuous improvement. And we have probably one of the biggest most, one of the most rigorous planning processes that I’ve been involved with, with Lifeline.

Brian Goffenberg 19:27  

And because we did that, we spend a ton of time and effort in the planning process. We typically knew that we would at least meet and exceed our results on a regular basis. And I say the land was just one of those people that challenge you that put it out there, and you know that you could do whatever you like, and his doors would be open at the end of the day. 

You knew that he was in charge, but and you better prepare when you come to a meeting, and you come to speak to him because you didn’t want to waste the individual’s time. So I think those qualities are those things that you got to be paid to be pushed. And you got to be prepared to be challenged, thinking just be an environment that you thrive in.

If it’s, you know, some people don’t like the operational side of a business, and then don’t get involved in it, stay and do the areas, the concentrated areas that you’re comfortable with, whether it’s just you know, Stricker county technical accounting, I know, I went through a ton of training on the technical side of accounting, it’s not my strength, and it’s not an area that I enjoy, I enjoy the operational side of the business, one that I’ve been trying to make sure that time is effective as possible, as an operational CFO.

Sam Gupta 20:38  

Okay. So when I look at the analysis, I typically like to make it comprehensive. So obviously, you spoke about the qualities that you admire in a CEO and CFO, but we did not get a chance to discuss the qualities that you don’t admire. And that is equally important as well because that is actually going to provide us a lot of learning. So again, you don’t have to name anyone here. But I would like to talk about some qualities that you didn’t appreciate, either in a CEO or CFO.

Brian Goffenberg 21:06  

And on the sheer side, I’ve worked with people who want to say push the envelope, and I think it went over the line and I wouldn’t, I wouldn’t want to, I don’t want to work with those types of people. I just think people who, who don’t respect the position that the CFO position or respect what you have to offer. 

And when they first start out in the industry, you work for someone, and you sit there, there’s no real, what I call it Whistleblower Protection. Yeah, they talk about in public companies, and then, but as an individual, you sitting there, and if your CEO does something that you think is off the line, and you try and approach him, and you try and get it dealt with, and it’s not getting dealt with satisfactory, you only have one real solution, and that’s to quit, and then find another job. If you don’t have the resources to quit and think, then you end up staying around and buying your time until you find the right opportunity.

Brian Goffenberg 22:02  

But you’re working in a pretty tough environment. So I think what you’ve got to do upfront is in the interview process, understand who you’re dealing with as best as possible, and spend a ton of time and energy researching the individuals to make sure that they do have the integrity and that that they do have the maybe the same type of goals and aims that you have, I’ve worked for a number of people that I would never work for, again, just because I think either they crossed the line or they just weren’t as honest as they as they could have been. 

And you don’t have to tolerate that. You’ve got to. I think you’ve got to make sure and ask yourself. I mean, I remember one working for one company and one of the individuals one of the senior people in the company came to me one day, and he said, Well, he how he evaluates whether the company is the right company for him, he asked himself one question, and this is, and you’d only appreciate this if you have a family.

Brian Goffenberg 22:55  

He also questions is what I need my children to work here. And if you think about that, it’s a pretty interesting question because most of us will tolerate a lot more than we let our kids tolerate. And I remember he asked the question to yourself and ended up leaving within a month. 

I asked myself the question too. I had the same answer as him. But at the time, I didn’t have any financial resources to leave. So I stuck around a little bit longer than I probably should have. But it’s, I think it’s a really interesting question. This is one that you can appreciate if you do have a family.

Sam Gupta 23:26  

Okay, so let’s talk about the journey of an accountant. Obviously, when anyone starts in their finance or accounting career, they are going to be starting with a position that is probably not going to be as comfortable. And when I look at the accountability, I am looking at, let’s say, the signature on a legal paper where you are going to have legal obligations personally, and I keep hearing this news. 

And I don’t know, to be honest, I mean, in terms of the overall journey, how much CFO is accountable, and let’s say if something happens to the company, or with respect to reporting, the consequences could be including, you know, getting some jail time, right, which is extremely, you know, sad and severe, that nobody wants to see.

So, in terms of accountability, when does that accountability start? Does it start at the comptroller role? Does it start at the CFO role, or are they never going to be touched, and the responsibility is really on the CEO and shareholder to make sure that the reporting is accurate, and CFO is not going to be legally accountable for anything.

Brian Goffenberg 24:32  

I think the day the day that you take on and that you decide you want to be a CFO, or whatever, you take on that role, and you take on that accountability. And that’s one thing that I think you have to understand that you have, as you said, you talked about ethics and that product, or your training is that you take on that role, so you cannot allow yourself or to stray and to to do anything that’s unethical. That’s illegal. 

It’s just, you know, people rely on you the reason why you’ve called it That the CFO, the controller than what anyone can do to finance it because there’s a huge responsibility, you’ve got you controlling the cash, you’re typically dealing with banks, you’re dealing with it with the recording of what the corporation’s any of the corporations, movement, and operations.

Brian Goffenberg 25:20  

So it starts from day one, it doesn’t, you don’t suddenly wake up and become have that role. It’s the, and it’s, it’s, you have to make sure that you don’t step over the line and are training to be lousy to do that. The chair that you know, the challenges as most organizations, once you, as soon as you’ve quantified you’ve got the wealth of knowledge. 

And you want to use that I encourage all people getting into business when you are starting out in any role to be patient when you start because typically, you will have probably more knowledge and your skill set at the time because your newly qualified grad will probably be more technically your technical competence will be probably more than most of the people that you’re working for.

But just remember, they have a lot of experience, they’ve been down this path, and you can learn a lot from them. So I think to be patient, learn as much as you can, absorb as much as you can, but speak up when you would see that you can add value. 

Sam Gupta 26:23  

Okay, so one of the questions that I really wanted to cover as part of this interview is your auditing experience. Brian, you have been an auditor for a long time. And in my customer base, when I look at anything below $25 million manufacturing and distribution companies, they are not necessarily getting audited. So tell us what the importance of auditing is and why everyone should consider auditing. If you think that, you know, everyone should consider auditing.

Brian Goffenberg 26:52  

So everything’s interesting. I’m a fan that I always used to say to people what a thing was there was a wave of public accounting firms to try and convert you from being an entrepreneur to being a technical auditor. Because you have to do this three years in my name instead of three years or sending of articles with an accounting firm. 

So you go in there, as you probably did, you’ll see it because you want to become an entrepreneur, you saw a lot of CEOs became CFOs. So that was kind of the path you wanted to travel. But then you get to have to do the three years of articles. I think, you know, when I look back at what I did, and how I learned during that time, I think what you really want to do during that time period is it’s a great opportunity to learn and see how different businesses run.

Brian Goffenberg 27:41  

Should companies be always audited? Yes, they should. I think it just gives them a good opportunity to see what controls the challenge with an audit that I found was just so historical. By the time you finish the audit term, the company could be under. They’ve moved on. And you’re really just providing you know, if the company has run well, you’ve confirmed what they’re doing, if it’s not done well and they and the issues you’re you’re coming up with issues, which probably operationally aren’t good anyway. 

And the business itself may or may not be in it have its own problems. But I think from an auditing perspective. It’s a great opportunity to learn to see you may decide that it’s a career that you’d like it’s not, you know, being a partner in an in a CPA firm is a pretty decent career. And you can do pretty well out of it. Just be patient and learn is probably the biggest bit of advice.

Brian Goffenberg 28:34  

The other thing that that I learned once long my career what I had one part that was really great as being an audit in Anderson, Arthur Andersen in those days, what it was around was a pretty fair amount of competition among people and what have you. 

So you did you kind of rush when I say rescue if you try and do it as fast as possible to make sure that you, you’re meeting deadlines, and etc., but and I was on the job and one of the parties turned around to me, so Well, what do you know about the inventory, and I looked at him, I suddenly I showed him my working papers, which are fantastic, you know, well, well laid out, etc.? He says to me, whoa, do yourself a favor. When you go to accounting, spend a day or two with a CEO, CFO, just walk around with them, talk to them, and then understand the business and then start auditing.

Brian Goffenberg 29:23  

And they’ve made so much sense when I looked at it, because suddenly now I started learning a bit about businesses learn more about the business instead of just working in spreadsheets and not understanding the businesses. So I think one of the big things taken out of that is if you’ve got an opportunity while you’re auditing to understand the trend, learn about businesses, to speak to some pretty smart to individual CEOs, CFOs are different organizations and use it and get as much as you can out of it. 

Another thing too that you’re going to realize when you come out of that once you’ve done that, depending on how much time you spent with them on the operational side, and most auditors don’t spend much time, and I find that most orders come out, pretty rich don’t really understand the business side of things.

Brian Goffenberg 30:09  

So, you know, they have a very technical and accounting side, but on the business side really don’t understand much. And I maintain on the business side. If you really want to understand the business, you have to go through it. You have to be working in an organization where you can’t afford when you have the challenge to make payroll because then you start understanding cash flow. 

And you understand what really drives the businesses. You’ve always heard the term cash is king. It is. To understand what it is to work in an organization where you don’t have cash, and you’re scratching and clawing to get money, whether it’s from customers from the bank to meet payroll, and then then you have, I think, a much better understanding of what it is to be in business.

Sam Gupta 30:48  

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

Brian Goffenberg 30:53  

I think if you’re going down this journey, I think it’s a great journey to go down. Be honest with yourself, define what type of role you want to be in, and be honest with what you’re capable of doing. You know, a lot of people sit there to say, Yeah, I want to be CEO, I want to be an operational CFO. 

But they’re not prepared to understand or learn the business side of things. And I’m not comfortable on the business side of things and not comfortable dealing with people. Make sure that you were comfortable with whatever role you want to take on the patient and just work to the best of your ability, and you’ll be successful.

Sam Gupta 31:28  

That’s amazing, Brian. This is a super powerful insight. And I’m sure this is going to be very helpful for your peers and the people who are starting their journey. So I thank you so much for your time and insight.

Brian Goffenberg 31:42  

Thank you very much. And so if anyone wants to reach out to me for your anything, I’m happy to help companies who are starting out of going down or going down different processes can reach out to me, and I’d love to help, and I’d love to, to impart some of the knowledge and that I have gained over the years.

Sam Gupta 32:05  

Okay, and we are going to be including your contact information, Brian, and the links that you are going to send out in the show notes so they can check there as well and they can connect with you.

Brian Goffenberg 32:15  

Thank you.

Sam Gupta 32:16  

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 know further about Brian, please visit vitalhub.com. He is also active on LinkedIn and available for any board or advisory work and would be happy to mentor individuals. 

He also encourages everyone to follow his current CEO, Dan Matlow, and VitalHub on LinkedIn as he is one of the best CEOs he has ever worked with and is proud of the culture that he has created at VitalHub. VitalHub is proud of an open culture where you don’t have to be afraid to challenge anyone. 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 later episodes, including the interview with Randy Johnston from K2 Enterprises, who touches on why process documentation is an essential ingredient for an efficient finance organization. Also, the interview with Wayne Sadin who brings a unique perspective on why business processes are more important for growth than individual business systems. 

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 33:57  

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 Dave Griffith who discusses why manufacturers must look for low-hanging fruits when exploring industry 4.0 initiatives. He also explains what industry 4.0 means to different manufacturing verticals. And how they can take phased approaches to make these transformation projects successful. Finally, he shares several stories of his recent successes using the phased approach.

Chapter Markers

• [0:00] Intro
• [2:41] Personal journey and current focus
• [3:33] Perspective on growth
• [4:20] What is the phased approach for industry 4.0 initiatives?
• [8:20] What are industry 4.0 initiatives?
• [9:20] How to go from point A to point B with industry 4.0 initiatives?
• [21:07] How to perform cost-benefit analysis with industry 4.0 initiatives?
• [25:23] Industry 4.0 initiatives for hand assembly shops
• [27:24] Industry 4.0 initiatives in different manufacturing verticals
• [32:07] Closing thoughts
• [32:18] Outro

Key Takeaways

• You can help visualize everyone who can understand where they are. And then, once you are starting to recoup some of that money, you can then look to expand the project. Again, it’s all about a phased approach and scalable solutions for industry 4.0 initiatives.
• Most of these machines, you’re going to buy from an OEM, they’re going to come in potentially guaranteeing you some percentage of efficiency. They’re going to train your people to the point of being able to run the machine as to what happens after the handover. Additionally, how efficient you actually run is generally not to the level of is not to the level of where you want to be.
• When we look at efficiency, we’re looking at it over the course of a processor over the course of a line, especially if there’s material movement in there.
• If you’re looking to become more efficient, again, some of the easy low-hanging fruit for industry 4.0 Initiatives, as we talked about is scheduling is data visualization.

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About Dave

Most people would call Dave a Manufacturing Consultant. He considers himself a Dreamsmith. His goal is simple: Help you achieve your manufacturing dreams. His goal is to shepherd the next generation of solutions to the plant floor and leverage those solutions to the greatest extent possible.

After spending more than a decade in the Automation and Manufacturing industries, Dave focuses on two client groups: 1) Manufacturing faculties looking to go through transformational processes. 2) Service providers looking to launch and grow next-generation industry 4.0 initiatives. Dave has a very straightforward approach. Dream Big. Start Small. Show ROI.

Resources

• Connect with Dave
  • LinkedIn
• Connect with his business
  • Website | LinkedIn

Full Transcript

Dave Griffith 0:00  

You’re going to have people dragging their feet; you’re going to have people who refuse to be part of the process. And if you do not have people who are willing and actively engaged in the process, there’s no way that your outcome can be successful.

Intro 0:13  

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 0:49  

Hey everyone. Welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at the digital transformation consulting firm, ElevatIQ. The industry 4.0 initiatives offer significant opportunities and require executing the last transformation projects with success. If not planned well, the changes could cause substantial disruption and become a bottleneck to your growth. Such projects require careful planning and a phased approach to ensure these project success and meet your growth objectives.

In today’s episode, we have our guest Dave Griffith, who discusses why manufacturers must look for low-hanging fruits when exploring the path of industry 4.0. He also explains what industry 4.0 means to different manufacturing verticals and how they can take a phased approach to make these transformation projects successful. Finally, he shares several stories of his recent successes using the phased approach. 

Let me introduce Dave to you. 

Most people would call Dave a manufacturing consultant. He considers himself a DreamSmith. His goal is simple. He helps you achieve your manufacturing dreams. His goal is to shepherd the next generation of solutions to the plant floor and leverage those solutions to the greatest extent possible after spending more than a decade in the automation and manufacturing industries. He focuses on two client groups, manufacturing facilities, looking to go through transformational processes. And number two service providers looking to launch and grow next-generation solutions. Dave has a very straightforward approach. Dream Big Start small show ROI. 

With that, let’s get to the conversation. 

Hey, Dave, welcome to the show.

Dave Griffith 2:38  

Hey, Sam, thank you so much for having me on. Very excited to be here.

Sam Gupta 2:41  

And super excited as well. To kick things off, do you want to start with your personal story and what you are focusing on these days?

Dave Griffith 2:49  

Sure, happy to. Hey, everyone. My name is Dave Griffith. I run a company called Caplin Solutions. We work in the manufacturing industry. And we help companies go through transformational processes such as industry 4.0 and digital transformation processes.

We’ve gotten more than a decade of experience all the way from ATM machine equipment builders through the software and automation industry. And at this point, as I said, our goal is to work on the industry 4.0 initiatives in which we are helping companies go through a phased approach and helping them understand what these processes mean to them, as opposed to being overwhelmed with one big thought.

Sam Gupta 3:33  

Okay, so before we get into the things that you have described, what we typically do is we ask a standard question with every single guest that we get, Dave. So what is your perspective on growth?

Dave Griffith 3:47  

Yeah, so this is actually one of my favorite questions that you guys ask everyone, Sam, and my perspective of growth is growth is the output of doing all things correctly. If you build a good company if you have a good product, if you treat your employees. Well, the outcome that you’re going to have is growth. And so that is one of those, the reason why we should continue to work and strive both internally and externally, to do well as a company and to do well as business leaders.

Sam Gupta 4:20  

So a couple of things with respect to your phased approach, the one that you mentioned, you know, during your intro, so what is the phased approach, and why is it important for the industry 4.0 initiatives?

Dave Griffith 4:33  

Yeah, so when you look at an industry 4.0 initiative, you know, most people think of it as an extremely expensive five-year-long process that at some point someone is going to come in, and everything is going to work correctly. In the real world. I have not seen that happen. I’ve seen lots of struggles with that.

So we have been working on a phased approach. And the concept is simple right? You come up with your idea of what you want the output. You figure out a way in which you can start small and that you can prove to everyone this is going to work and start and have a good return on investment. And so it’s a phased approach in which we go through, we show return on investment, and then we’re able to continue to use the money that we’ve saved or created, and continue to go down in industry 4.0 initiatives.

Sam Gupta 5:27  

Okay, it’s very interesting that you talk about, you know, the output of industry 4.0, when it almost seems like the backward approach, in my opinion, that’s how things should be done, and you are doing it in the right manner.

So give me an example of the work that you have done where you started from the output, and then you placed it backward. So basically, what you are doing, in my opinion, is you are actually defining your KPIs and the ROI that you want to get from your initiative. And then, you are describing or defining the whole plan until the beginning, and then you start doing the plan. Is that accurate?

Dave Griffith 6:06  

So what generally happens is we’re going to go through some sort of like roadmap-ing engagement, and that concept is we’re going to go, we’re going to spend time at the facility, we’re going to talk to the champions, the stakeholders, we’re going to go talk to the operations, and the people who are actually working at the manufacturing floor. And then, once we go through, and we’re having these conversations, we’re going to understand not only where they are today but also where they want to be. And then once we understand where they want to be, we’re going to go and roadmap, you know, phase one, or phase two, or phase three, and find ways that we can sustainably get them to that end goal.

Sam Gupta 6:45  

Okay. So when you talk about, you know, taking from one step to the next, what are some of the critical success factors that you have seen in terms of defining this roadmap? And where do you think people feel most of the time because one of the comments that you made is, you know, most of the time, these initiatives may not be successful. So what is your opinion in terms of critical success factors?

Dave Griffith 7:08  

So I would say that the number one critical success factor is that the organization is actually ready to go through one of these initiatives. I have seen where one person wants to go through an industry 4.0 initiative. And if that one person is not the business owner, and they can then go help leverage the rest of their operations group there, you are not going to have success.

In the end, you have to, as an organization, be ready to go through an organizational change, which the output is going to be one of these industry 4.0 initiatives. If, and I have seen experience with a handful of different facilities, the organization is not ready to go through this change, you’re going to have people dragging their feet, you’re going to have people who refuse to be part of the process. And if you do not have people who are willing and actively engaged in the process, there’s no way that your outcome can be successful.

Sam Gupta 8:03  

Yeah, I agree with your assessment there. Stakeholder management and change management are definitely very important. But before we get there, I had a question related to the industry 4.0 initiative. So in my experience, industry 4.0 could mean different things to different people. I mean, it could be all over the place. So can you define what or what the industry 4.0 initiatives are?

Dave Griffith 8:30  

I think that that is a fantastic point. Thank you for bringing it up, Sam. And while I could define what industry 4.0 means to me, I said, I know some people who define it as basically the use of the internet while going through things. In my mind, what is more, important than how you and I would define it is how the actual facility would define it.

So when we go through one of these roadmap-ing processes, one is understanding where they are and where they want to go. I asked them what industry 4.0 initiatives mean to them? What does this transformational initiative mean to them? And then where do they want to go? And by helping them kind of close their eyes, think about where they want to go have that, you know, big dream, if you will, we’re then able to go through the process of delivering the industry 4.0 initiatives, that is what that facility is looking for.

Sam Gupta 9:20  

Right? Let’s say if I’m a manufacturer, and I’m planning to explore whether I should be utilizing the industry 4.0 initiative or not. So when you talk about the use of the internet, in my opinion, it could mean industry 1.0, 2.0, 3.0, or 4.0, right? It could mean anything. So let’s say find the manufacturer, and you’re trying to advise me. I’m your customer, Dave. So you know, if you want to ask any questions, you can ask me any questions, but let’s do a little bit of role-play here. In terms of you’re advising me on the industry 4.0 initiative. So how would you take me from point A to point B?

Dave Griffith 9:58  

Yeah, so it’s one of those, Sam. We would sit down, and my questions to you would be along the lines of Okay, Sam, where are you today? And then where do you want to go? And quite literally, most of the time, I am asking them what the industry 4.0 initiative means to them. Can I walk you through an example of one of these processes in how we started from point A and got to the end goal of one of these industry 4.0 initiatives?

Sam Gupta 10:26  

That’s exactly going to put things into perspective. So please do that.

Dave Griffith 10:30  

Perfect. So to set the scene a little bit, I was brought in by one of my vendors to a facility that prints the warning labels in the ingredients that go in medicine. It’s one of those folded pieces of paper that they literally joked about, and everyone throws away. No one reads you know what I’m talking about, Sam?

Sam Gupta 10:48  

Yep, I think I’m following.

Dave Griffith 10:50  

Yeah, perfect. So they did a lot of printing, they did a lot of folding, they had a variety of different pieces of paper. And they had a lot of different legacy systems. So when we came in, we kind of showed them what we could do industry 4.0 wise, we showed them a variety of SCADA and MES and other digital and data analytics systems, what we had done in the future, or what we had done in the past, and how we can help them and we were having the conversation.

There was an intern that turned into a floating operations person that had done some measuring and saw that they were, you know, approximately 17% efficient. We’re like, Okay, wow. So that seems like we need to do a better job collecting the data. And we looked at the old machines, and only a couple of them had controllers, and very few of them had controllers that we could actually pull data off. And so we’re like, wow, this could potentially be an expensive implementation.

Dave Griffith 11:42  

But as we continue to talk about the situation, we realized that one of their major issues was in scheduling and how their scheduling is running. Now historically, they had a person that would come in and literally with pencil and paper, go in schedule, all the runs over the course of the day. So, between some of the runs, they had to have changeovers in which they were physically changing, you know, the machines for their setups. And it was not an uncommon thing, where they would come in, they would have a run, there were four hours of changeover, they would have a second run. And then there were another four hours of changeover back to the original setup, just over the course of a couple of shifts, and this was killing their efficiency.

Dave Griffith 12:25  

So, as we continue down, we had the conversation of how we can leverage the tools that we have in order to help them with this particular situation. And their budget was, was fairly tight, I think we were looking at approximately that the $10 to $15,000 range. So what we did is we helped them with a scheduler tool. And to go back to the internet, this scheduler tool actually was running in the cloud. The reason why it was running in the cloud is that we could then help them scale it to the other 12 or so locations that they had.

So something like this would require us to go through sit down, understand, you know, the quote-unquote, rules, which is how they go schedule, which is, you know, what, what happens through one of these changeovers, and then that means that we’re going through the process to understand how they’re running, and then determine what those changes look like. And the main benefit of one of these automated scheduler tools is that it’s going to help them put together the schedule that is going to have the least amount of downtime between the run.

So that way, we’re not running something that, for instance, needs to get folded ten times, then changing paper sizes, and then going back to the original setup, which was one of the issues that they were having because they were just scheduling it like package like line, one can run a C and D. And so we’ll just run it a C and then D.

Dave Griffith 13:47  

So by automating this, we were able to help the person who normally spent their whole shift go through confirm the schedule and then go through the process of doing higher-level tasks. Then as we were going through this process, we were able to put up some large, inexpensive big-screen televisions, we were able to show everyone on the floor, what’s coming up, if we’re on schedule, if we’re ahead of schedule, etc. And then we had a bunch of we have we have almost always had extreme amounts of success with these projects. You know, normally we see an increase between about 17 and 32%. of boost in productions when instituting something like this.

And then to drawback to the idea of starting small. With this goal, we were able to take the success the money they saved from it, and we were able to double down into the next phase. In this particular example, we were able to add some sensors some data collection on the legacy devices so we can do a better job of calculating the OEE the overall equipment effectiveness, and then help visualize the data on the screen to define some additional productivity spikes.

Unavailability most of the time just by allowing people on the floor to understand where they are in relation to schedule. It’s human nature to want to, you know, be on schedule or to beat the person who was on the other ship. And so, just by going through that process, a very relatively straightforward industry 4.0 initiative, we were able to help them modernize and take advantage of what they were doing.

Sam Gupta 15:25  

Yeah, that’s fascinating. I mean, I love the story, to be honest. In fact, I mean, what I have personally seen, because obviously, you know, I visit a lot of different manufacturing facilities as well. And some of these folks would claim that they are fairly automated, they have their earpiece system running, but their scheduling is going to be running on either the spreadsheet or paper. So that’s the story that I really like to hear. So thank you for that.

And since we are talking about the phased approach here, Dave, we are going to be taking a slightly phased approach with this conversation as well. So initially, when you started this story, and you mentioned that the operational or the operations intern was able to measure the efficiency to be 17%. So let’s say if I’m a manufacturer, and I want to measure how efficient I am with my operations, how is that good project going to look like with respect to the cost, budget, and schedule? And the only objective that I have is, I want to measure how efficient I am with my operation.

Dave Griffith 16:32  

So that’s a good question, Sam. And in this particular example, I always like to bring it up because he was literally out there on the floor with a stopwatch. I’m sure he was probably one of the most hated people in the facility. And all the hooks are out. As all the books are out there running on the line. He’s out there with a stopwatch and his notebook. And while we were there, nobody likes timekeepers.

Dave Griffith 16:57  

No, but nobody likes timekeepers. And so while we were there, he’s like showing us the notebook, we’re walking on the plant floor, I’m pretty sure some guys and ladies have given him some side I but he came up with this number because he was literally out there with a stopwatch measuring how long it takes, kind of in addition to that they had done, you know, the line is going to run they’ve got you to know, three to 10 people on any particular line, depending upon the run. And then they literally had to leave shut down the line.

Someone had to walk into the scheduler’s office to get the next piece of paper. So they knew what the next job was. So they were extremely inefficient. And honestly, we see most people who aren’t looking at efficiency are generally in the high 10s to low 20% efficiency. So if you’re looking to measure how efficient you are, other than you’re probably not very efficient. You know, you could do it as simple as an intern with a stopwatch can go out there and measure it.

Dave Griffith 18:00 

In my experience, that is the first realization of, hey, we’re capacity constrained, how can we go through the process of pushing more product through most of the time until you are to the point of having to look to spend a ridiculously large number of dollars on a new line on a new machine, you don’t look to see how efficient you are. Then when we’re looking to go through a process in which we measure the OEE, the overall equipment efficiency or effectiveness, you know, that is highly dependent upon where you want, you know, I’ve seen, you know, low five-digit projects, all the way to work with companies that have spent, you know, $10 million on one phase, in my mind. And with this phased approach, it’s how you can go through the process of getting the most bang for the buck if you will.

So you can help visualize everyone who can understand where they are. And then, once you are starting to recoup some of that money, you can then look to expand the project. Again, it’s all about a phased approach and scalable solutions.

Sam Gupta 19:06  

Yeah, and it’s interesting that you know, you mentioned the point about hiring the intern. And typically, when people hire interns, they don’t actually consider the opportunity cost of the intern. But if you look at the opportunity cost, and I don’t know if you’re an intern, maybe making maybe, you know, $30 40,000 a year, maybe $20 per hour, I really don’t know, but the intern is going to take some time. So I don’t know if the project is going to be four to three months, four months.

But there is an opportunity cost associated with that. That is something that most people do not know how to measure or they sort of ignoring. So let’s say if I’m hiring a consultant like you, Dave, are you going to be slightly more efficient in providing the same data that my intern will be able to do while considering the opportunity cost? What is your perspective on that?

Dave Griffith 19:58  

So that’s an interesting question. Sam, I should say in this particular example, I believe the intern spent about a week out there. And it’s not something that I would have a person with a stopwatch out there for weeks or months at a time.

Sam Gupta 20:14  

Let’s make one thing very clear, Dave, if you are going to hold the stopwatch on my shop floor, I’m not hiring you, Dave.

Dave Griffith 20:26  

I agree with that. My other thought, My other point is, I am not the right person to go and hold a stopwatch on the floor, people are going to pay me too much money for them to want me to spend my time holding a stopwatch on the floor.

And if we need to go through a process like that, that is something that we could look at and see if there’s an intern that we could grab for a week in order to do that. And we could help them, you know, put together some basic calculations. Or we could look at bringing an attempt something like that, to bring in some additional manpower, who is local to that facility in order to help us measure the what the occurrent efficiency looks like?

Sam Gupta 21:07  

Okay, interesting. So let’s go back to some of the analyses that you will have provided with respect to your story. You mentioned that you had 70% efficiency, to begin with, and then you were able to get roughly 17 to 32%. So when you do these projects, Dave, do you typically look at, let’s say, if I have a machine that may not be performing to its efficiency, so one approach could be that I put a fence up there, and then I tried to get some data from it and see how the machine is performing. Or the second approach could be, I could actually get the modern machine that could actually have the industry 4.0 capabilities in build. So when you do these projects, do you do the cost-benefit analysis as well, in terms of what is going to be the right way to approach a problem?

Dave Griffith 21:52  

So yeah, I guess the easy question, or the easy answer to that is, is yes, I should say that there aren’t there are not necessarily industry, 3.0 machines versus industry, 4.0 machines, most of these machines, you’re going to buy from an OEM equipment manufacturer, they’re going to come in potentially guaranteeing you some percentage of efficiency, and they’re going to train your people to the point of being able to run the machine as to what happens after the handover and how efficient you actually run is generally not to the level of is not to the level of where you want to be.

So we have worked with people who have legacy machines. I mentioned before we work with, I once was in a factory. And these guys were running, you know, literally, world war II machines, you know, 1940s machines, high-speed production, that’s run that way for, you know, 60 or 70 years, they’re not going to change it. And I’ve walked into facilities that have brand new CNC machines, and depending upon what their production runs look like. There are always additional ways to look at efficiency. So most of the time, when we look at efficiency, we’re looking at it over the course of a processor over the course of a line, especially if there’s material movement in there.

Dave Griffith 22:50  

And then after we’ve looked at that, what we do is we look at, I call them the lowest hanging fruit, right? There are reasons why we’re not performing at various different times. And then we do our best in order to pluck that lowest hanging fruit in order to increase their efficiency. As I mentioned that 17 to 32%, when we institute some scheduling and visualization, in my experience, that is the visualization process of helping everyone understand where they are is some of the lowest hanging fruit and most facilities.

Sam Gupta 23:47  

So obviously, the scheduling is always the big problem area, in my experience for most manufacturers, whether they agree with it or not. Okay, sometimes they might be too complex. So I completely agree. But from your experience, other than scheduling, have you seen anything else where you may have the potential to optimize?

Dave Griffith 24:11  

Yeah, so beyond the scheduling, we look and have lots of conversations with companies that are capacity constrained, right? They’re looking to increase their capacity, but they don’t want to buy, you know, another $5 million line, or they’ve physically run out of space in the building to go ahead to put another line in there. So that’s when we go, and we look at one of these OEE situations to understand where they are.

And I have seen a wide variety of different issues. You know, it is not uncommon that it could potentially be a supply chain issue. And one of the reasons why you know the company is down is because they literally have run out of their product. And if they’ve run out of their product, they cannot run their product down the line, or they’ve run out of labels. We’ve come across a variety of different issues. The goal is to understand you know where they are. And then potentially the Phase I is to help them understand where they are so that we can see what the problem is. And if the problem is we’re running out of raw materials, it’s Okay. Let’s focus on the supply chain. And let’s see what we can do to get everything connected.

Sam Gupta 25:23  

Okay, so you talk a lot about machines, what I have seen, you know, in some of the manufacturing verticals, where they don’t even use a lot of machines, I’m talking about some of the hand assembly shops, and behind the assembly, shops could be let’s say, the configuration of retail shelves or it could be the cables of the telecom equipment, and you will be surprised that I mean, they are done using hand assembly. But I have seen firsthand that they are actually making this with, you know, the hand assembly process. Can you believe this? So let’s say if you are going to hand assembly shop, and you are looking for some of the areas of improvement, what would be your recommendation for these and assembly shops.

Dave Griffith 26:10  

So with the hand assembly shop, we’ve done some work with those groups, we’ve done some work with the hand assembly shops, we’ve done a series of work with a company that does uniforms, right, so the uniforms come in, they need to be pressed, the pressing is a manual process. As they go through that, you know, they want to find ways in order to increase efficiency. We went through a process where we basically put a couple of lights, green light, and red light, up, we measured the speed of the conveyor belt, and we were able to measure the output.

And we were able to help them understand where they were in the process as to their quota. Now, most of these people were actually paid by the piece. And so what they wanted to do is they wanted to press as many pieces as they could so that the money they made at the end of the day was the most that they possibly could. So just doing some basic visualization. And visualization is something that I talk about a lot is exceptionally helpful, not only for those manual processes but also especially in instances where the outcome is based on the quantity or the quota.

Sam Gupta 27:24  

Okay, amazing. So we are going to shift gears a bit. We have been talking about the micro perspective here. And I like to take the macro perspective as well. So in your experience, do you see the industry 4.0 approach to be applicable for specific manufacturing verticals? When will you go through different manufacturing verticals? Do you see the industry 4.0 opportunities in a specific vertical? Do you have any perspective on that?

Dave Griffith 27:51  

So I would say industry 4.0 because it has such of a vast, you know, opportunity. And it means different things for different companies has applications in all verticals, as to if it’s right for that particular group at the time because of the change management. And the organizational change that we’ve talked about is a different question. But across verticals, there are industry 4.0 applications.

Sam Gupta 28:19 

Okay, amazing. So with respect to your phased approach, what else do manufacturers need to know before they consider any initiatives?

Dave Griffith 28:30  

So again, the big question is, are we ready to go through one of these? And then the next question is understanding where kind of that low-hanging fruit understanding where the biggest opportunities lie and then finding generally trusted partners in order to help lead them through this. And when you’re looking for someone to help lead you through this, it may be inside of the organization. It may be outside of the organization because you’re looking for people who have very specific skills and tasks. And as you’re going through this, make sure that you have conversations, make sure that these are people who know what they’re talking about and have gone through these situations and scenarios and applications.

Sam Gupta 29:14  

So did you want to cover anything else that we were not able to touch as part of this conversation?

Dave Griffith 29:34  

So, Sam, I think we did a really good job. Do you think that there’s anything in particular that your listeners, you know, your general listener group, would benefit from if we hit a particular topic or particular situation?

Sam Gupta 29:48  

So I think, you know, from the phased approach, we got the idea from the philosophical perspective that you know, then we need to make sure that they are ready for the initiative, the mindset is there? That’s all well and good, but I don’t know if he got the real execution plan in terms of how to start on the initiative. Would you like to touch a bit on that?

Dave Griffith 30:12  

How to actually start, like how to start phase one? Is that the question? 

Sam Gupta 30:17  

So basically, you mentioned that you know we need to identify the low-hanging fruit. So I got the picture that, you know, some of the low-hanging fruit could be, you know, just getting the stopwatch, finding the areas with respect to the scheduling. You also mentioned some of the things such as, you know, just putting a sensor in a machine prior to getting the data prior to put the monitor, which is well and good. But let’s say if I’m considering the larger issue that maybe I’m replacing a machine on my shop floor. And if I want to go from point A to point B, how would you define the roadmap? 

Dave Griffith 30:50  

Yeah. So if we are looking to, you know, go down and actually talk about a physical roadmap, again, we’re going to have a conversation. We’re going to understand where you are. We’re going to understand where you want to be. And we’re going to help you go down this process of catching the low-hanging fruit and actually implementing some of these solutions. So if you’re looking to become more efficient, again, some of the easy low-hanging fruit, as we talked about is scheduling is data visualization.

Again, looking at putting even relatively inexpensive TVs from like Best Buy or Walmart on the floor to help visualize some of this information so that the groups know where they are. It is human nature that if you see where you are, as opposed to where you’re supposed to be versus schedule, or you see where you are compared to your friends on the second shift, you want to work faster, produce more just because of that. And so, if we can help visualize that data and give people the opportunity to see where they are, then we’re going to almost certainly and instantaneously get a significantly more or significantly larger amount of output.

Sam Gupta 32:07  

Okay, amazing. Love it. Do you have any last-minute closing thoughts, Dave, before we close this?

Dave Griffith 32:13  

No, I appreciate every one. I appreciate Sam for coming on. Everyone is coming out here to take a listen. I have put together a little bit of information on the website. Dave-Griffith.com, the digital transformation quickstart guide in which I talked about five simple steps in order to go through to get you guys started on your digital transformation, or in this case, industry 4.0 initiative.

Sam Gupta 32:39  

Okay, amazing. Thank you so much for your time, Dave. I love the story. I love the insight. 

Dave Griffith 32:45  

Perfect. Thank you, Sam.

Sam Gupta 32:46  

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 Dave, please visit dave-griffith.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 Jason Chester from InfinityQS, where we discuss the challenges today’s manufacturers face with changing consumer behavior. Also, the interview with Curt Anderson from B2BTail touches on what customer manufacturers need to know about starting their e-commerce journey. 

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 33:53  

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 Aman Ailani from SAH.OL Cold Brew, who discusses the unique challenges and important metrics for a CPG brand and a food and beverage company. We also had a chance to discuss the secrets behind his company’s exponential growth in the Boston market. Finally, we touched on how LinkedIn has helped him raise awareness about his brand in a space where he competes with powerful brands like Starbucks.

Chapter Markers

• [0:00] Intro
• [2:41] Personal journey and current focus
• [3:20] Perspective on growth
• [4:00] How can FMCG businesses manage their cash better?
• [5:16] Why is Velocity KPI important for a CPG brand?
• [9:46] The current state of the sugar-free market of food and beverage industry
• [12:52] The manufacturing processes of a cold-brew facility
• [16:08] The differences in the manufacturing processes of the cold-brew industry
• [17:15] Sales and operations processes of a cold-brew business
• [19:50] How to test the MVP and collect the data to get initial customers?
• [22:13] The negotiation skills with retailers and distributors for product placement
• [27:23] how can a CPG brand use LinkedIn for their brand awareness?
• [30:15] Closing thoughts
• [32:18] Outro

Key Takeaways

• Velocity essentially just measures the speed or the rate at which your product is selling. So, for example, for us, so a case for us is 12 cans, 12 cans in one case, and for us, velocity looks like how fast are we selling a case?
• In the grocery industry, you know, numbers are everything margins are everything grocery stores operate on such razor-thin margins. So if you don’t handle those the right way, they can get away from you like really, really quick.
• By posting every day and by kind of letting people in behind the scenes of what it takes to run a CPG brand, I’m able to build really solid brand awareness through just vulnerability, being transparent.
• LinkedIn and TikTok are very similar in the sense that there’s a massive, massive content deficit on there. There are way more eyeballs, and there are thumbs, which is to say that there are more people looking at posts and actually posting, and there’s only 0.5% of people who are active on the LinkedIn post once a week. So organic reach is huge.

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About Aman

Born and raised in Dubai, Aman Ailani grew up around a coffee culture. Arabian coffee pots, rich aromas of dark roast beans, and the sweet smell of dates filled every home he was in. While still very young and his company early-stage, he has already created a buzz about SAH.OL Cold Brew around Boston and social media, with a big expansion of distribution forecasted for 2021.

Resources

• Connect with Aman
  • LinkedIn
• Connect with SAH.OL Cold Brew
  • Website | LinkedIn

Full Transcript

Aman Ailani 0:00  

For a CPG brand, you know numbers are everything. Margins are everything. Grocery stores operate on such razor-thin margins. So if you don’t handle those the right way, they can get away from you really, really quick.

Intro 0:12  

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 0:48  

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

Growing a consumer packaged goods or CPG brand is uniquely challenging. Not only will you need a product that consumers are willing to pay for, but you’ll also be required to win over your distributors and partners. Even if you succeed in developing your customers’ channels, you might still feel if you can figure out how to manage your supply chain and cash flow.

In today’s episode, we have a guest, Aman Ailani from SAH.OL cold brew who discusses the unique challenges and important metrics for a CPG brand and a food and beverage company. We also had a chance to discuss the secrets behind his company’s exponential growth in the past. Finally, we touched on how LinkedIn has helped him raise awareness about his brand in a space where he competes with powerful brands like Starbucks. 

Let me introduce Aman to you. 

Born and raised in Dubai, Aman Ailani grew up around a coffee culture Arabian coffee pots, rich aromas of dark roast beans, and the sweet smell of data with every home he was in. While still very young and his company early-stage, he has already created a buzz about the whole cold brew around Boston and social media with the expansion of distribution forecasted for 2021. 

With that, let’s get to the conversation. 

Hey, welcome to the show, Aman. Hey, Sam. Thanks for having me. Really excited to be here. Okay, amazing. So to kick things off, I would like to start with your personal story, as well as what you’re focusing on these days.

Aman Ailani 2:41  

Yeah, for sure. So my name is Aman Ailani. I was born and raised in Dubai in the United United Arab Emirates. And I lived there for the first 17 years of my life. Then I came over to America in 2016 for college, had a really, really good experience in college at Bentley University, just outside of Boston, studied entrepreneurship. I played on the golf team there. And yeah, I started my cold brew coffee company.

Sam Gupta 3:04  

So before we get deeper into that, and I obviously have a ton of questions about your introduction. But one question that we ask everyone is going to be your perspective on growth? What does growth mean to you, Aman? 

Aman Ailani 3:20  

Yeah, I was really excited to be here and talk about this. So for us, and you know, the CPG brand, FMCG industry, growth can be seen as this big thing, you know like you’re at every supermarket, every grocery store, every round of the country. But the reality is, and the honest truth is that for smaller businesses, for emerging brands, that can honestly be really dangerous sometimes. And for me, for our company, right now, growth looks like just being slow, being strategic, taking our time and making sure we have our finances, and we have our money in the right place before we, you know, just blitz scale and get super big all of a sudden.

Sam Gupta 4:00  

So that’s a very interesting perspective. I have not heard that before. So when you say it could be dangerous for a CPG brand, my assumption is going to be you are speaking more in line towards spending way too much and then running out of cash. Right. So how do you typically plan in a way that you are not burning yourself out?

Aman Ailani 4:19  

Yeah, I think I think for us, so just a little background on our product. So we make cold brew coffee. And so it’s like an iced coffee, and it can, and they’re sold in grocery stores. So just for us, you know, it could be really easy for us to pump a whole ton of cash into, you know, brokers merchandisers, distributors and get our product into 5000 stores in the first year.

But then, if we don’t have the ability or the finances to then support that place within those stores within the first year, you know, that’s not really going to be doing much for us.

So for our growth, specifically within the CPG brand space, is really just going Slowly about it and making sure that we’re taking one step at a time in the right order. And for right now, that looks like starting in, you know, about 20 stores just here in New England, measuring our velocity, measuring our data, and then using that to our advantage to grow in the right way.

Sam Gupta 5:16  

Okay, so velocity is a very important term that you mentioned that, and I have read you talk about that on your LinkedIn profile as well. So what is velocity when it comes to a CPG brand? Could you touch a bit on that?

Aman Ailani 5:30  

Yeah, for sure. So basically, velocity essentially just measures the speed or the rate at which your product is selling. So, for example, for us, so a case for us is 12 cans, 12 cans in one case, and for us, velocity looks like how fast are we selling a case? You know, so apparently, that number is between nine and 14 days, it takes us to sell one case, which is really good for the coffee space, but specifically, the perishable product space, which is the broader category in which we operate in.

So that’s really important for us. And basically, a higher philosophy, the quicker it is, the more frequently that grocery stores have to reorder your product, the better it looks, because it shows that you’re a fast-moving product. It shows that people are not just buying it, but they’re returning for more. So that’s just one of the many, many reasons that philosophy, specifically case velocity, is so so important for us.

Sam Gupta 6:21  

Okay, interesting. So I don’t know, you know, where you are in terms of your growth journey. And I don’t know how much revenue you are doing at this point in time. But when you measure the velocity, how are you measuring? What is your system landscape? Like? Are you doing the accounting on QuickBooks? Do you have any systems in place at this point in time to measure your KPIs? How are you running your operations?

Aman Ailani 6:45  

Absolutely, absolutely. So QuickBooks is really important for us. In the grocery industry, you know, numbers are everything margins are everything grocery stores operate on such razor-thin margins. So if you don’t handle those the right way, they can get away from you like really, really quick.

So that’s just one way that we measure what we’re doing. But specifically, also, another way we do it is just through our relationships with grocery stores, with our distributor, stuff like that, you know, the more information we can get from them, the better it usually is. So they’re really kind to us. And they provide us with a lot of really solid, solid information on, you know, how our product is selling in one store and wide channel. And at what velocity, which is the most important part.

Sam Gupta 7:29  

Okay, interesting. So when you talk about these different stores, are these mom-and-pop stores? Are you at the big brand stores at this point in time? Can you touch your customer landscape? If you don’t mind? You don’t have to name them. But just tell me, you know, how many big stores do you have? How many mom-and-pop stores? 

Aman Ailani 7:47  

Yeah, absolutely. So, we’re in around 15 stores in the New England area right now. We’ve only launched for about two and a half months. So we are very, very new to the market. But we were able to grow really quickly that in that span of time. Currently, our target accounts are natural food stores, organic food stores, co-op grocery stores. We aren’t in any big-box retailers yet. But that’s definitely an avenue and a route that we want to go down in the future. So I will say organic natural food stores and kind of like the higher-end grocery stores are our target market right now.

Sam Gupta 8:20  

Okay, interesting. And where did this idea come from? For the cold-brew? Do you have any background in coffee? Does your family have any background in coffee? How did you come with this idea for cold brew?

Aman Ailani 8:33  

Yeah, yeah, for sure. Um, so I actually never drank coffee until my freshman year in college. I was staying up late one night, very early on my first few weeks, and I needed something to keep me going. I needed a way to stay awake to study, and I had nothing available to me.

So I go to the vending machine, and I grab one of those refrigerated like frappe a type cold brews. And I opened it up a drink, and it’s so much sugar in it that I, you know, the coffee doesn’t even work. I have a sugar crash.

So I think okay like there has to be a way to solve this. So I buy my own cold brew maker, actually. And I take it back home with me to Dubai. They started visiting local coffee shops, local roasters, and I started making my own cold brew, which I do for the next four years.

And over the course of those four years, I basically learned the ins and outs of coffee, cold brew, and everything there is to it for my senior year. This is where we actually have to start and launch our own businesses in order to graduate. So my professor looks at me, and he goes, you make that you make the cold, right, that coffee and I go Yeah, and he goes, Well, I don’t just put that in a can. So I started talking to manufacturers, I started talking to producers, and one thing led to another, and here we are today in about 15 stores across Boston.

Sam Gupta 9:46  

Okay, so tell me a little bit about you know, obviously there are a lot of different cold brews, and you mentioned that sugar is one of the factors. That could be your differentiator, but you know, the coffee market, in my opinion, could be crowded, right. So how are you differentiating yourself in the market?

Aman Ailani 10:03  

For sure, for sure, it’s a really competitive landscape, especially in the grab-and-go beverages and single-serve. But the biggest thing we have going for us is really the fact that we’re all-natural. So we don’t have any preservatives, we have no additives, we have no sugar, and no dairy. We are gluten-free, zero carbs are on sale product is zero calories. And the only two ingredients, have our coffee grinds and filtered water.

So it’s a really natural process. And that’s kind of the biggest thing we have going for us. But also another thing that we really leverage is the fact that we’re a local independent brand. I think our consumers and our target audience really resonate with that. They realize that when they buy our product when they drink our coffee, they’re supporting a local brand. And yeah, we appreciate that support. And that’s a big reason why we’ve we’ve come so far.

Sam Gupta 10:49  

Interesting. So when you say local brand, does that mean the local brand from New England? Because when we were talking about your brand name in the pre-show, it has the Irish meaning. So typically, when you talk about local brands, I have seen some of the Canadian brands here, and they would probably have the Canadian flag. So how are you communicating your local values? 

Aman Ailani 11:11  

Yeah, yeah, that’s a great question. Yeah, we’re local, we’re local to New England, that’s kind of our thing. That’s kind of what we do. We communicate local values, mostly with our retail partnerships. So a lot of the stores that we link up with a lot of the partners that we have, they’re all local stores, you know, they support other local products. And, yeah, we make that really clear on social media, and we make that really clear, and everything that we do through our marketing efforts.

Sam Gupta 11:36  

Okay. Interesting. So, since you mentioned that the preservatives, right, and that seems to be the key factor in your product. So how does that differ from the manufacturing perspective? And why the other brands that we have in the market? You know, for example, Starbucks, I’m pretty sure you are probably competing with them, too, right? So why are they not able to do what you are doing? That is number one? And number two is how is your manufacturing process going to change? Just because you are not using any preservatives?

Aman Ailani 12:08  

Yeah. Well, I think Starbucks is doing a lot of things right for them to get as big as they’ve gotten. I think Starbucks, you know, is really practical and a lot of things, but how we differentiate ourselves is really just through the way that we roast and we brew our coffee. So our coffee is low, said more on the lighter side. You know, it’s not a dark roast at all. It’s very fruity, floral, it’s very chocolatey, which is what our consumers really, really love. So that’s something that’s working really well for us. And from the manufacturing side, you know, not too different. They were a lot smaller manufacturing-wise. But we make the most of that, and we really maximize our dollars. 

Sam Gupta 12:52  

Okay, so, from the process perspective, I would like to, you know, dig deeper into that. So from your facility, if I take a tour of your facility, walk me through your facility, how that is going to look like? Is it going to have just a brewer or grinder? Do you have commercial grinders right now? Do you not have commercial grinders? So how’s your manufacturing facility at this point in time? 

Aman Ailani 13:12  

Yeah, yeah, that’s a great question. So for a CPG brand, there’s, there’s something known as contract Packers or contract packaging. And basically what that is, is instead of, you know, owning your own facilities and buying your own equipment, you are paying another company that already has facilities to make your product, and you pay them on a flat rate per piece basis. So that’s what we do.

That’s the biggest reason we’ve been able to stay so lean. You’ve been able to stay honestly profitable from such an early point is. We haven’t invested massive amounts of capital into equipment. So just a high overview of what the facility that we currently work out of looks like. We obviously have big brewing. That’s where our coffee actually gets brewed. Coffee is ground, and that’s put in there, and it’s steeped with cold water.

But apart from that, we also have a full canning line, which is where you know, the actual coffee gets filled into cans, the label gets put on the can lid is applied, and then it’s kind of like a shot out into like a tray where it’s been packed into 12 packs. So it’s honestly pretty basic. Another big, big thing is water filtration. That’s really important and good coffee, and good property starts with good water. So our filtered water is pretty big and what we do, and yeah, it’s a super, super neat process.

Sam Gupta 14:32  

And, you know, we wanted to talk about the manufacturing process. So obviously, we spoke about different collaborators that you mentioned, and you mentioned about, you mentioned about your contract packaging company. So I’m simply looking for information number one that is flowing back and forth, the inventory that is going back and forth, and how your manufacturing process looks. Do you have the job order at the start of your manufacturing process? And do you have the finished goods towards the end? So walk me through the entire manufacturing process.

Aman Ailani 15:08  

Yeah, absolutely. So So our coffee is made with a blend of Central South American and African beans. Those beans are obviously roasted to the appropriate roast level and then ground after their ground. Coffee Beans are then put in a massive container. And it’s filled with cold water. So the coffee and the water, they kind of mix, and it kind of just sit there for 24 hours.

And then that resulting liquid essentially is what our actual product is. So that’s what cold brew is. Its coffee grinds steeped in cold water for 24 hours. So that liquid is put through a canning line. And obviously, Cans flow through the line. So the can comes in, it gets filled, the lid gets added, it gets labeled, and then it shoots out where it’s then packed into trays with 12 cans each. So it’s a super, super quick process. But the actual brewing takes over close to 24 hours to make sure that it’s the right level.

Sam Gupta 16:08  

Okay, so when you did your research, I’m pretty sure you compared your CPG brand with, you know, the other manufacturing verticals. So how was the brewing different from the other manufacturing verticals that you compared?

Aman Ailani 16:20  

Yeah, yeah, absolutely. You know, when we, when we’re looking to start this, we shopped around, and we talked to a couple of different contract manufacturers, we essentially just landed on the one that we did, mostly more than anything, just because of the relationship that we had, the conversation just flowed easier, I was able to trust them a lot more.

So as far as verticals go, you know, this was pretty much the only way that cold brew can be made, especially the way that we wanted it. But the eventual CPG brand that we settled on, solely because of the relationship and they’ve been amazing to work with, especially in our industry, you know, it’s the relationship is everything, everything from you know, demand to forecast, planning to actual execution, storage, and then obviously getting the product out to stores, they’ve been just rock stars in the whole process. And I can’t thank them enough. So that relationship is really crucial. And it’s the biggest reason we went with them. 

Sam Gupta 17:15  

Okay, so when you were exploring these vendors, and sometimes, you know, it could be a challenging relationship to manage, right? Because I don’t know, you know, how much volume you have? How much volume are there other customers have, right? And probably you are going to be a small fish. And I don’t know, again, how big this manufacturer is.

So how do you manage the expectation, especially if you are getting a lot of different bulk orders from your customers, and you have to deliver on time? If you don’t deliver, then you lose the customer? So it’s sort of the double-edged sword there. Right. How do you manage that? 

Aman Ailani 17:48  

Yeah. I think it just comes down to communication, right. So right from the beginning, I let them know. And I think they were very appreciative. I was like, Look. I’m not going to be your biggest customer by any means. But we haven’t a really solid base of accounts, and we’re going to have a really great distributor. So essentially, we just deal with one large purchase order at a time that goes straight to a distributor, and then the distributor, then essentially distributes it to the store.

So we don’t supply like one case at a time. But we do one massive order. And then the distributor kind of like parcels that out just stores as and when they need it. So that was honestly a big part of it, just making our communication, just very clear with them from the beginning saying, we’re going to be consistent, we’re going to be great, we’re going to hold up our end of the bargain, but this is what you’re getting from us. And they really appreciated it. And they’ve been, like I said, just amazing to work with.

Sam Gupta 18:40  

Okay, amazing. And I mean, based on the amount of duration that you mentioned, you have actually made phenomenal progress here, in my opinion, okay, if it is really the work of when happens. That’s impressive. So let’s say if we’re in the ecommerce merchant, and I probably want to start my own CPG brand, okay, and I’m actually trying to set up all of these, these channels, and customers as well. So, where would you recommend me starting?

Aman Ailani 19:08  

Um, I think the biggest thing is, once you have a product that you think can really do something, and once you have a product, do you think customers are willing to open their wallets and actually purchase? The biggest thing is testing it. So one thing we did is we did a small test for our CPG brand.

So basically, we made 70 cases. And then I hit up 70 of my friends, 70 people, and I asked them to buy one case each and let me know that though, once I knew that, okay, the majority of the people liked the product, think this is good, what actually buy this. Then we went ahead and started talking to grocery stores and started getting into stores. But by far, the biggest thing is just testing your assumptions, which is really, really common in the startup space.

Sam Gupta 19:50  

Well, so I’m actually going to challenge you on that, okay. You know, testing, testing with your friends is not really a good test, to be honest. Okay. The reason for that is because they are going to be nice to you, they are going to probably, I mean, and this is not a very expensive product, right? So they should be willing to take out, let’s say, five or $10, or whatever your coffees cost, right. So it’s a good test. I mean, you can’t actually do your demand forecasting based on a past that has been on friends. So yeah. How would you overcome that?

Aman Ailani 20:24  

Absolutely. And I’ll be honest with you, you know, I wish I wish we didn’t have to do it just on friends. But I launched during COVID. And I don’t think it would have been appropriate to stand outside a grocery store and ask people to talk to me as at a grocery store.

But no, I completely agree. You know that was definitely a risky test if you want to call it. But look, the long-term big picture is paid off. Because the information that we gathered from that, even if it was from my friends, you know, it’s paid off, we see great velocity for our CPG brand, you know, we’re in, like you said, We’ve had great growth, we’ve, it’s paid off, basically. So if I had to go back, would I test again on my friends? Probably not. But I didn’t really have another option at that time. And I think that’s better than nothing.

Sam Gupta 21:08  

Interesting. So what was the next step? So okay, so in this case, maybe you got lucky or whatever, you know, I would not recommend anybody testing on their friends for their CPG brand. But yeah, you had your challenges with respect to COVID, which is completely understandable. Right? So what was the next natural step? So when you put this on grocery stores, based on the test that you have done with your friends? Did you select any specific store? Did you have any data to support? Which stores do you want to go after? What was that process like?

Aman Ailani 21:37  

For sure, for sure, so our product, you know, just the nature of it, sugar-free, dairy-free, natural product, it performs best in natural food stores. So yes, we can go, you know, to the big stores like Walmart, Costco, and you know, we’re gonna see amazing. I’m sure we would have seen amazing returns there. But getting into those stores, as you might know, can be expensive and can be costly for a young startup brand. So the biggest, the biggest kind of store we tried to go after was just natural, you know, organic food stores, health shops. And that’s where even to this day, we see our most successful.

Sam Gupta 22:13  

Okay, interesting. So when you interacted with these guys, what were some of the questions that they asked? Because obviously, they didn’t know you, they didn’t know your CPG brand, right? And they must be pitched by a lot of different brands. So what were some of the initial questions that he got?

Aman Ailani 22:25  

Yeah. Such a typical buyer. So we talked to grocery buyers, and a typical buyer pitch, you know, you start off, you give a little background on your CPG brand, you will let them know who you distributed product with? And then the next natural question is, how much is your product? Like? How much do we pay to get it? How many cans come into a case? You know, what promotional offers? What do you guys do? What marketing support do you do? And essentially a lot of generic questions. But to cut through that noise, what they’re really asking is, can we trust you? I think the biggest thing buyers want to know is your this CPG brand that we are going to bring in. We are going to give you shelf space. We’re going to put you in a position where you can sell it. But can we actually trust you? So essentially, to cut through all that noise? Is it just asking, prove to me that we can trust you, and building that trust is is very important?

Sam Gupta 23:15  

So okay, so that’s very interesting because I would like to know a little bit more about that. So how do you build trust in the case of a food product? Right? Because it could be a huge risk for them. You could be anybody, and you could be selling anything? And because of that, there could be a life-threatening situation, right? So let’s say if I’m the buyer, and if I have never bought anything from you, how would you build that trust?

Aman Ailani 23:39  

Yeah, and honestly, you know, well, from a high level, the manufacturing facility that we have, you know, we’re on amazing terms with the FDA, which is what is you have a great place to start. But that’s never come up. What’s actually come up is prove to me that by putting your CPG brand on the shelf, it’s going to sell, like, prove to me that I’m not, I’m not silly for giving you a shot. And honestly, the first store is the hardest to convince. But then after that, what we can do is we can just use the data that we have the sales data that we have with velocity data we have and just use those KPIs to pitch to other stores. And to be very frank with you, it’s pitching to our 10th store and getting to our 10th store was way easier than getting to our first or the first one was really the biggest one to overcome.

Sam Gupta 24:27  

Yeah, it’s always like that. Yeah. The first one is always difficult because you don’t have data. You don’t have to set a CPG brand. You don’t have a champion who can really communicate for you. Right. So yeah, I agree that the first one is definitely going to be difficult. So what were some of the biggest challenges that you had to overcome other than sales?

Aman Ailani 24:49  

Um, I’m trying to think. I honestly think just big picture. The biggest thing to overcome was the fact that I was a 21-year-old boy at the time. I’m 22 now, but I was a 21-year-old boy. He was trying to take this big risk. And you know, try to convince them that I should be the next guy they should be getting a chance to. That was, that was definitely the hardest thing. I got overlooked a lot. A lot of people wouldn’t work with me just because they said I had no experience with a CPG brand. But I was willing to build that experience, you know, and everyone has to start somewhere. So I was just really grateful for the first few people that gave me a shot and gave me an opportunity to show what I can do.

Sam Gupta 25:28  

Yeah, and that could be a very difficult situation because I was in your shoes, what, 20 years ago? Yeah, it was very hard to convince. Okay, tell me what you have done.

Aman Ailani 25:39  

Yeah, yeah, exactly. And it’s, it’s, it’s so true. You know, like, guys come to you with that question, or grocery buyers come to you that question, like, there are all these we carry for big-name brands? Or why should they give you a chance, you know, like, there’s no guarantee that he will sell as much as they do? And I say, you know, that’s right, there is no guarantee. But by taking a chance on me, you know, you’re placing your bet on something that could become the next big thing in the world of coffee. So it’s been really fun trying to explore that and just continuing to overcome, you know, all these obstacles.

Sam Gupta 26:09  

Okay, amazing. So I don’t know if you are invested at this point in time, you know, do you have any investors backing you? How much was the capital that you had to secure? And again, you don’t need to be specific. I’m simply trying to get a ballpark here. Let’s say somebody is trying to start the coffee business. What should they keep in mind?

Aman Ailani 26:29  

Yeah, I think there’s this real notion, especially on LinkedIn, and you know, other things that all you see are these big brands that raise $5-$10 million, and they go after the big retailers, but I’m gonna be very honest with you, we’ve put in very, very little money, we have not raised investor money. You know, it’s family-backed, his family-owned. So without getting into specifics, like it’s an average production run, it wouldn’t not be costing you more than $2,000. Like, it wouldn’t cost you more than one to $2,000 to make a full, like a full run of production. But we’ve had to be really smart with our money, you know, we get pitched a lot of services, we get pitched a lot of things, people try to convince us that we need this, we need that. And the honest truth is that you don’t think what you really need is a good sales pitch, you need a solid product, and you need numbers in place to show that your product is selling. And that’s what we’ve been able to do. Yes, we are growing a little slower than some of the bigger brands. But we’re growing, you know, and we’re taking one step after another. And I’m really excited to see how how the future goes.

Sam Gupta 27:23  

Okay, interesting. And I noticed that you are very active on LinkedIn as well. And that is definitely one of the areas where I like to focus during my podcasts interviews because, obviously, LinkedIn could be powerful. So tell me why you are on LinkedIn. That is number one. And number two, what is your biggest channel in terms of revenue? Obviously, stores out there? But are you able to recruit some of these stores from LinkedIn? Or are they coming to you from the website or personal interaction? Tell me, you know, how are your revenue channels set up? And where are you acquiring them?

Aman Ailani 28:08  

Yeah, absolutely. So I’ll answer the second question. First, all of our revenue basically comes from the stores that work with our distributor. So our distributor has, you know, a massive list of stores that they service. And we basically, through that list, we’re able to get, you know, pitch our product to a store that we know that they already use our distributors. So that’s the biggest one that’s brick-and-mortar sales. And then LinkedIn, have we made any sales because of LinkedIn? Not really, probably not. But the biggest thing that LinkedIn does is it helps us to develop our brand awareness. You know, being a startup brand, being a younger brand, we don’t have the same national reputation that other brands do. So by posting every day and by, you know, kind of letting people in behind the scenes of what it takes to run a CPG brand, I’m able to build really solid brand awareness through just vulnerability, being transparent. And to be fully honest, like we go, I give away all our secrets on a day. Apart from our gross margins and unit economics, you can find out everything that I’ve ever needed to figure out about my brand on my LinkedIn. So just being transparent has really helped us, and you know, we’ve received a nice following, and people are tuning in to my posts. So that’s, that’s pretty cool. Right? 

Sam Gupta 29:19  

So you mentioned that you don’t have the measurable ROI from LinkedIn, but you do believe that LinkedIn is somehow helping you. So let’s say the folks who are not on LinkedIn. What would be your recommendation for them? 

Aman Ailani 29:35  

Absolutely. You know, there’s LinkedIn and TikTok are very similar in the sense that there’s a massive, massive content deficit on there. You know, there are way more eyeballs, and there are thumbs, which is to say that there are more people looking at posts and actually posting, you know, and there’s only 0.5% of people who are active on the LinkedIn post once a week. So organic reach is huge. And I think that if you just show up and If you just start talking and if you just start sharing your experiences, you know, it doesn’t even have to be deep. It doesn’t have to be insightful or analytical. Just start sharing your experiences connect with people from the industry and, you know, the greater industry with which you’re part. And I think you can really see some pretty cool things happen.

Sam Gupta 30:15  

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

Aman Ailani 30:20  

Yeah, I’d love to. I’d love to just encourage people that if they’re thinking of starting a business, it’s all talk, and it’s all noise until you actually started doing it. So you know, if there is that idea you have in your head, just take one actionable step to put it down on paper. And I think that you know, the natural course of events and natural food events can only happen after that. So take one actionable step to launch your business. 

Sam Gupta 30:47  

That’s great advice. I would say for the newer entrepreneurs, and that’s going to help a lot. And your insight is going to help a lot as well. So I thank you for your time and insight. Yeah, thanks, Sam. It was great being with you. 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 Aman or SAH.OL, head over to sipsahol.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 Brian Burke from sellyourmac.com, who touches on his growth secrets, and how they became the fastest-growing company on INC 5000 3x times. Also, the interview with Corey Warfield from CoryConnects, where he discussed how to hack LinkedIn algorithms and grow your company using LinkedIn strategies.

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 for the next episode of the WBS podcast.

Outro 32:18  

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 Ben Baker who starts describing how internal communication influences growth. He also touches on the cultural differences between VC-funded startups and traditional manufacturing and distribution lifestyle businesses. Finally, he discussed what industrial executives could do to enable the culture with internal communication tools and processes and how they can grow with a great culture.

Chapter Markers

• [0:00] Intro
• [3:03] Personal journey and current focus
• [5:02] Perspective on growth
• [6:45] How internal communication affects growth
• [8:47] The difference between traditional industrial companies and startups
• [15:13] Legal and financial structure differences between industrial companies and startups
• [24:22] How to dismantle silos and put systems and processes in place?
• [29:21] 30-60-90 day plan to install an internal communication system
• [35:08] Closing thoughts
• [36:40] Outro

Key Takeaways

• 75% of the employees are disengaged in one way, shape, or form, everything from searching the internet for a new job on indeed, to just not caring about what the job that they’re actually doing. And that’s the statistics that you see across the board.
• If we can get people to understand the purpose of the organization, how they matter in the organization, how what they individually do, helps the organization grow, and enable them and empower them to be better advocates for the brand. They’re more willing to stay with the company longer. And therefore, it enables the company to grow more effectively, more efficiently and allows for greater communication and better culture throughout the organization.
• As you go from 10 to 50, to 100 to 500 to 1000 to 10,000, that symbiotic relationship that that ability to have that across the desk communication lapses, and the larger the organization, the more challenging it is to have companies have effective communication because there are so many more people that have to be communicated to, then you can’t just have a huddle once a day, you have to have multiple huddles.
• Your client list is worth about a nickel or maybe a quarter because when you’re gone, and you don’t have those personal relationships with those people, if you don’t have it, there aren’t the policies and procedures. Nobody cares about your client list. Your equipment can be bought and sold. It’s what makes your company valuable is the fact that we know that if you die, or you leave, or you, whatever the company is going to move on just fine when you’re not there.

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About Ben

Ben has been helping companies, and the people within them understand, codify, and communicate their unique value to others for nearly a quarter of a century. He is the president of Your Brand Marketing, an Employee Engagement Consultancy, author of “Powerful Personal Brands: a hands-on guide to understanding yours,” and “Leading Beyond a Crisis: a conversation about what’s next,” and the host of IHEART and Spotify syndicated YourLIVINGBrand.live show with more than 170 episodes behind him.

Finally, Ben believes that if companies understand, live, and build cultures around their purpose, employees will engage, stay, and want to grow with the company.

This takes great leadership, communication, and awareness of the brand.

Resources

• Connect with Ben
  • LinkedIn
• Connect with Your Brand Marketing
  • Website | LinkedIn | Twitter | Facebook | YouTube

Full Transcript

Ben Baker 0:00  

75% of the people in one shape or form don’t really care about the company they work for. And 50% of the people are actually out there looking for another job or at least open to another job. It’s really difficult to get them involved in growth.

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 0:52  

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. 

Internal communication influences the culture of an organization. And culture typically is the biggest driver of growth. But what exactly is the culture? Is it about hiring employees from diverse backgrounds? Is it about creating the culture buzz that most startups create? Well, every company might claim that they have the best culture. The culture that differentiates a fastest-growing company from the rest is hard to build. 

In today’s episode, we have our guests, Ben Baker, who starts describing how internal communication influences growth. He also touches on the cultural differences between VC-funded startups and traditional manufacturing and distribution lifestyle businesses. Finally, he discussed what industrial executives could do to enable the culture with internal communication tools and processes and how they can grow with a great culture. 

Let me introduce Ben to you.

Sam Gupta 2:01  

Ben Baker has been helping companies, and the people within them understand, codify and communicate their unique values to others for nearly a quarter of a century. Ben is the president of your brand marketing and employee engagement consultancy, author of powerful personal brands, a hands-on guide to understanding yours, and leading beyond a crisis, a conversation about what’s next. And the host of iHeart and Spotify syndicated YourLivingBrand.live show with more than 170 episodes behind him. Ben believes that if companies understand love and build cultures around their purpose, employees will engage to stay and want to grow with the company. This takes great leadership, communication, and awareness of the brand. 

With that, let’s get to the conversation. 

Hey, Ben, welcome to the show. 

Ben Baker 3:00  

Hey, Sam, great to be here. Thanks for having me.

Sam Gupta 3:03  

Of course. And just to kick things off. Ben, do you want to start with your personal story and what you’re focusing on these days?

Ben Baker 3:10  

Oh, my personal story? Well, it all depends on how far back you want to go. You know, the story is long. It’s arduous. But let me give you the highlights because nobody wants to hear my full life story.

Sam Gupta 3:22  

We can hear, but I don’t know how long that is going to be.

Ben Baker 3:26  

45 minutes show. So let’s stick to the highlights. I’ve been in sales for over 30 years and marketing and branding for the last 25. I started off 25 years ago in direct mail. Now direct mail is just like manufacturing. For anybody that understands the print industry, really understand the manufacturing industry because it is all about the process. It’s all about making sure that you get stuff from A to be on time on a budget, and we make sure that the quality of the project is relatable throughout the entire project. 

So that’s where I started. And it was all about how do we communicate value? How do we get the people that we’re interested in talking to understand our value to them? Why you know why we’re helping them, how we’re helping them, how we’re going to make their lives better. And for the last 25 years, that’s what I’ve done.

Ben Baker 4:22  

Now it’s evolved from print to promotional products, to tradeshow development, to really to branding. And what we do now is we help companies with internal communication because we find that that’s really where the largest challenge of many organizations is. They have full teams that sit there and do the marketing and the communication outside of the company. But they’re really bad at communicating purpose vision value inside the company and actually living it. So that’s really in a nutshell where we came from where we are today because our goal is to help companies stopping to sell commodities and start loving their brands.

Sam Gupta 5:02  

Okay, so I want to dig deeper into a lot of those things that you mentioned as part of the intro. But before that, we have to ask one question that we do with every guest. And that is going to be your perspective on growth. So what does growth mean to you?

Ben Baker 5:17  

I’m assuming most of your listeners are CEOs and CFOs. And because of that growth really is a financial thing really taking a look at where is the company day after day, month after month, year after year? You’re sitting there looking at going. Have we increased profits? But the question is, is it top-line growth? Is it bottom-line growth? Where are our margins? Where are opportunities? Are we growing in terms of the different number of customers that we’re doing? Are we getting more penetration per customer? There are lots of different ways to look at growth. 

And it really depends on what are the goals of the company that I’m dealing with of how I discuss growth because growth can mean different things to different people. I’m truly a believer of what’s your penetration within a particular account. To me, that is growth because it’s a lot cheaper to get more business out of the current customer than it is to do client acquisition. 

So the more you understand the customer more, the more you can relate to the customer, the more trust you have with the customer, the more different types of projects you do with the customer, the more you submit that relationship, the deeper you are with that customer, and that leads to your overall growth, and actually leads to greater profitability, because you do not have to bid every single project.

Sam Gupta 6:45  

Yeah, I agree with your comment on capitalizing on existing relationships. If there is a possibility, then acquiring new customers is always going to be slightly riskier. It’s going to be harder and more expensive. So now, when I look at this conversation, when I’m actually trying to connect the dots, so let’s say if we look at the internal communication. I sort of understood the value. But how does internal communication affect growth?

Ben Baker 7:10  

Internal communication affects growth is because if people don’t understand where you came from, where you are, where you’re going, and how they individually matter, employees are not going to engage. Now, right now, the statistics are the average employee 75% of these employees are disengaged in one way, shape, or form, everything from searching the internet for a new job on indeed, to just not caring about what the job that they’re actually doing. And that’s the statistics that you see across the board. You can look it up on a Google search pretty much anywhere 50% of people over the last year. 

Now, these are pre-pandemic numbers. I’m not really sure what the numbers are today. We’re actually physically out there looking for another job one way, one time, or another within the company. So when you’re sitting there going, Okay, 75% of the people in one shape, or form, don’t really care about the company they work for, and 50% of the people are actually out there looking for another job, or at least open to another job. 

It’s really difficult to get them involved in growth if we can communicate effectively if we can get people to understand the purpose of the organization, how they matter in the organization, how what they individually do, helps the organization grow, and enable them and empower them to be better advocates for the brand. They’re more willing to stay with the company longer. And therefore, it enables the company to grow more effectively, more efficiently and allows for greater communication and better, you know, better culture throughout the organization.

Sam Gupta 8:47  

Yeah, and I cannot agree more with that. But it’s easier said than done, right? So when I look at, when I look at the market penetration, if I look at some of those startups, the talent that they attract for some reason. They are super passionate about what they do, and they care for the company. They are very explicit in communicating on social media how much they love the brand. 

But I don’t really see that in the traditional industry or manufacturing or the distribution companies. So what are some of the factors when in your perspective? Why are these manufacturing or distribution companies not able to create the same culture, the same charisma that these startups are able to create?

Ben Baker 9:26  

Well, startup culture is a very different thing than anything else. Startup culture is based on the fact that you’re part of Genesis. You were part of the team and knew the owner personally. You were probably hired by the owner and work side by side, it wasn’t an owner sitting in an office somewhere on the 13th floor, and you’re down on the third. You’re side-by-side you’re working in is a single team. And there’s a culture that gets built out of that. 

Now, as organizations grow as you go from 10 to 50, to 100 to 500 to 1000 to 10,000, that symbiotic relationship that that ability to have that across the desk communication lapses, and the larger the organization, the more challenging it is to have companies have effective communication because there are so many more people that have to be communicated to, then you can’t just have a huddle once a day, you have to have multiple huddles. 

Ben Baker 10:18  

And the question is, how effective is the person who’s leading the huddle and communicating what the message and the drive are from the top? So it really comes down to I look at it as a game of telephone. And, when you start off with a game of telephone, when we were kids, somebody said something at the beginning line, and then it goes to 30 different people. 

And you ask the person at the very end of the line, what did the first person say? Well, dimes to doughnuts, you’re never going to get the same message. And it may not even be close. So as organizations grow, and they expand, and they get larger, there’s really has to be effective communication in order to get people to feel that they belong, that they’re empowered, that they’re trusted, that they’re believed in, and the work that they do matters. So, therefore, the organization moves together in one single direction, and that direction is taking care of the client.

Sam Gupta 11:18  

And that’s how it should be, but it’s not typically. Okay, so size is definitely a factor. Once the organization becomes larger, then they have a different problem. But let’s compare two organizations that are of similar size. So let’s talk about some of those startups. So let’s say a startup could have 20 people and some of these lifestyle manufacturing or distribution businesses, I don’t know if you understand this term, but typically, the lifestyle term is used for the businesses that are going to be slightly more family-owned, and that are going to be $25 million and less than revenue. 

This is a slightly more financial or CFO term that they use for such businesses. And the reason why they do this is that typically, these businesses don’t necessarily have the growth mindset. So let’s compare two of these businesses. One is a lifestyle business, which is roughly $25 million in revenue, maybe 20-30 employees, and then a startup 20-30. 

The amount of drive that both of these businesses are going to have is going to be very different. For a startup, these people are going to be super pumped, super passionate, super driven. They are going to be communicating about their brand on social media. But look at the lifestyle business. I don’t know how passionate these guys are going to be. So what is the difference between these two businesses, Ben?

Ben Baker 12:33  

Well, the difference between the startup culture is everybody who is part of the startup has a piece of the pie. It might be a small piece of the pie. But everybody’s got, you know, one or two or 50 or 100 shares of this company, that hopefully someday they’re going to convert, because a lot of the people in the startup community, especially in the tech community, either are all sitting there going, Okay, we’re going to create this business, we’re going to create this technology, and somebody is going to buy it. 

And that’s the thought process. The thought process is we’re building this business to sell. And whether it’s, it’s to go public, or whether it’s to be bought up by something larger, or whether it’s to get a large investment by a VC, whatever it is, they’re looking to be able to have convertible shares. And because the individual people within the organization have, hopefully, convertible share, there is an incentive for them to stick around and being for them to work harder because there’s that entrepreneurial spirit within it. 

Now, the typical lifestyle businesses, and I’ve been part of many of these organizations, you’re an hourly worker, for the most part, for the most people, you’re either an hourly worker or a salaried worker. And whether you’re working your 40 hours a week, or 30 hours a week, your five hours a day, 10 hours a day, whatever you’re working.

Ben Baker 13:52  

That’s it, that’s your compensation. Some organizations are smart enough to have quarterly or yearly bonuses. That is an individual check that is based upon the profitability of the corporation, and therefore has some type of share stock sharing, private stock sharing that goes out to the employees. So they have some type of incentive to be able to sit there and say, Hey, here’s my bonus for the extra work that I did. But typically, a lot of organizations don’t, they might get a Christmas dinner, or they might be a golf tournament. 

But people don’t see that as a tangible reward. In the same respect, I am sitting there and going. I have minority ownership in this company. There’s a piece of it, that’s mine, and therefore, if I do well, in this company, you’ll go from being a $10 million company to $100 million company, and we have sold, guess what, there’s a payday at the end of the day. 

Now, a lot of these companies obviously don’t survive, and those shares are worth nothing but the thought processes. It’s just like turning the route to the roulette wheel or pulling a lever on a slot machine. Everybody’s sitting there going. Hey, There’s a chance. And because there’s a chance, there’s far more incentive for them to be able to have that more engaged, more passionate, more entrepreneurial spirit within the individual worker, the company.

Sam Gupta 15:13  

Okay, so financial compensation is one thing, and I don’t know if every startup out there is actually making the share arrangement because that actually complicates the legal structure, to be honest. Okay, absolutely. It used to be the case. But I don’t know if that is always the case. In my opinion, I think that is actually driven by the greater purpose. And it goes back to your comment about internal communication. 

In my opinion, the way they build their culture starts from hiring. They want to hire people who are going to be super passionate about number one, their brand, number two, their startup, and number three, what they really do in their lives. So they are super passionate, super committed to their employees. And even if they don’t have the shares, or the financial compensation, as you mentioned, they are getting the freedom. And typically, that freedom is not available, probably the be the lifestyle organizations. That’s why in my opinion, maybe the employees are not as committed. What will be your perspective on that? 

Ben Baker 16:10  

Well, take it from that point of view that that thing is, is that people want to grow, people want to learn, and people want to see the growth it comes down to. Are you hiring somebody within your company to be the receptionist?

Or Are you hiring them as the receptionist with the thought process that you know what this person, if they do really well, maybe we can turn them into an inside salesperson, maybe we can turn them into an outside salesperson, maybe someday there could be they’re going to take over the finance department or the HR department or whatever depending on what their passions are, and growing them within the company. 

And I think that if you hire people to just do a task, if you’re hiring somebody just to run a machine, or if you’re hiring somebody just to do a task. And your assumption is that we’re just going to keep them at this machine or keep them doing it—this the same thing the rest of their life. People run out of passion pretty quickly.

The typical thing is right now, the millennials and the Gen Z’s are staying at corporations for 18 to 36 months at the most. And the reason they are is that they don’t see a passion, a path for growth, they’re not learning, they don’t feel that they’re developing, they don’t feel they’re getting more responsibility.

Ben Baker 17:22  

They don’t feel they’re getting a title bump. They don’t feel that they’re getting all the things that they need to be better human beings and be better for themselves. And therefore, they go looking for another company that might be able to give them something different to learn something new programmers. You see, programmers do that all the time. They get bored programming, whatever their programming and they might get paid the exact same amount at a different company. 

But if they get to do some different type of programming, a different language, and a different skill set, whatever, it gives them the incentive to go move somewhere else because they don’t see a new project on the go. So companies, all companies, need to sit there and say, why am I hiring these people? And how am I leading these people? In order to get the best out of them in the long term? And a lot of it comes down to?

Are you listening to your people? Do you understand what they’re passionate about, what they want, what they need? Some people just want to stay in a particular job. I have a friend of mine. She is an executive assistant to the CEO and used to be the Vice President of Marketing for the same organization. She is way happier, way happier, as the executive assistant to the CEO, then she was the VP of Marketing.

Sam Gupta 18:41  

That’s a very interesting story. I’m looking to learn more about that. Why is she so happy?

Ben Baker 18:45  

She’s happy because she’s working in a smaller and smaller situation. She has her fingers in all the pies that she wants to do. She’s, she’s involved in the charity, she’s involved in a lot of the major decisions, she gets to take care of one executive and make sure that everything that he needs is done. And she is privy to stuff that a lot of people in the company never would be based on the fact of where she sits in the organization. 

When she was in the VP marketing position, it was all politics, it was constant pressure, and it actually caused her to have a heart attack. And what she realized is she was far better suited for this position as the executive assistant.

Now she makes pretty good money as an executive assistant, don’t get her wrong, because she’s really good at what she does. But her skill set was far better off that way. But unless, unless she had the conversation with people at the senior level and say, Look, this is not the right thing for me. I understand that I’ve gone as far as I can within a position. I’m not happy doing this anymore. I still want to stay within this corporation. I believe in the corporation.

Ben Baker 19:55  

I believe in its mission, its vision, its values, its purpose, but I want to be doing something different, and there was the ability to have the conversations to explore new things, she would have left. And they would have lost a really, really good passionate employee that had years and years of institutional knowledge that would have walked out the door with them. 

But as a company, realizing that our people need to be listened to, they need to be understood, and they need to be valued. And we need to understand what do these people need to be engaged long-term. That’s how we build people within the organization and get people to stay. That’s how we get them to be more engaged and more purpose-oriented.

Sam Gupta 20:38  

So let’s talk about this scenario. So let’s say if I’m a CEO of a manufacturing organization, and one of the problems that I have noticed is, I’m afraid of sharing knowledge with my employees. Right. Typically, that’s how the lifestyle businesses are. That’s how my mentors have recommended that this is how I should be operating.

That’s how the majority of the lifestyle businesses operate. So all the admin and financial knowledge are going to be inside the office, all the operations knowledge is going to be in the operations department, the shipping knowledge is going to be probably in the shipping department. 

So we have these siloed. And they are there for a reason because that’s how manufacturing works. That’s how distribution works. But when I look at the startups, obviously, they have a very open culture. So I want to fix this. I want to have a similar culture in my organization as well. So Ben, let’s say if you were to fix this organization, what will be your recommendation for me,

Ben Baker 21:32  

The first thing is to tell the CEO, the CEO, CFO, CEO, to get over it, to realize that the organization will grow far better, and far faster, and far more profitably the more information they share. Now there’s certain information you’re not going to share with people. I truly understand that there are certain pieces of information, proprietary information, critical information that doesn’t need to be shared until it needs to be shared. 

But going and leaving everything in a vacuum and not getting your people involved in letting them know where you are, where you’re going, what the challenges are, what the opportunities are, and listening and asking for their help. You’re handcuffing yourself as an organization. You’re limiting your growth by sitting there going. I have to call, hold the cards tight to my chest and not tell anybody what’s going on.

If you have a heart attack, what happens if you get hit by a car? What happens to your organization if, all of a sudden, somebody leaves your organization that had mission-critical information that only they knew about what happens? We have this type of stuff that happens every single day. We had a shipper receiver years ago that felt that they had to be the only person that knew what was going on in the shipping receiving department.

They ended up getting sick and be out of the office for two and a half months. We ended up hiring somebody else to basically do an audit of the entire department, rebuilding the structure, rebuilding all the processes and procedures to make sure that we had a far more open understanding of what was going on. So, therefore, this could never happen. 

Ben Baker 22:28  

Again, the amount of money that is lost every single year through siloing is staggering. It’s millions and millions and billions of dollars across North America, every single year through silos by the left hand not understanding what the right hand is doing—in one department not understanding when I hand this off to these people, what happens to it. And we need to get out of that mentality. We need to get out of the mentality that there is information out there that, God forbid, I should share with my people because they might run away. 

The problem is, what if they stay and they don’t know what’s going on? They can’t help you and can’t be creative. They can’t sit there and say, You know what, I know we’re heading in this direction. But you know what we really if we looked at this piece of equipment, and we modified it, and we moved it, this part of the short the floor to another part of the floor, we could have some efficiency of scales. What do you think about trying this?

And it could be something as simple as that to be able to get your efficiencies aligned to be able to bring brand new product in without having to run a third shift. And it’s a matter of the more we can communicate, as you know, senior leadership, what’s going well, what’s not going well, where we’re going, and what do we need to do to be able to be successful, and everybody understands that everybody all of a sudden can start marching in step to be able to help that goal happen. 

Sam Gupta 24:22  

It’s interesting the way you talk about these processes and the system as well. But typically, when we look at the state of the lifestyle businesses, they don’t they Sadly, how many processors the information is really kept with an employee who is going to be responsible for that function. If they are old, then obviously, there are going to be challenges. But that’s how, you know, the majority of the lifestyle businesses are running. 

So what would be your recommendation in number one, removing those silos that we have with respect to these employees, and what will be your recommendation with respect to putting a system in, and typically, bringing these systems could be a major change for the organization that could actually disrupt the process? So how can we make sure that we are able to bring these things without disrupting the processes of the organization?

Ben Baker 25:40  

Well, the first thing I would say is, why should we do this? And the big reason why we should have processes and procedures and codified it’s all it is doing is codifying what we’re already doing. And being able to sit there and go, Okay, we’re doing this Wait a second, it’s not working as well, let’s take a look at our procedures. Oh, wait for a second, I see that step number 32 is being missed. Okay, fine, let’s move forward. But the problem is if we don’t have policies if we don’t have procedures if we don’t have the process, we’re worth nothing. 

When we go to sell our business, there are so many people with manufacturing businesses and others who come up and say, Well, I want to sell my company year and a half, and they go to the business broker, and they go to try to sell the company, and they get told that their business is worth 10 cents on the dollar, what they think it is. And the reason for that is they don’t have policies. They don’t have procedures and contracts. They don’t have legal documents in place that make them attractive to a potential buyer.

Ben Baker 26:40  

So all they have is a client list. Well, guess what? Your client list is worth about a nickel or maybe a quarter because when you’re gone, and you don’t have those personal relationships with those people, if you don’t have it, there aren’t the policies and procedures. Nobody cares about your client list. Your equipment can be bought and sold. It’s what makes your company valuable is the fact that we know that if you die, or you leave, or you, whatever the company is going to move on just fine when you’re not there. 

And that’s the big reason why you want the policies and procedures. Now how do you do that? The big thing you need to do is you need to sit there and say, Okay, let’s take a look at what do we do on a daily basis on a departmental level? And how do we do it? And sometimes it comes in bringing in a process engineer or somebody who can just sit there and ask why.

Why are you doing this? Why do you do? Then what do you do? And then what do you do? Then what do you do? And be able to document it? And then how people that actually do that job on a daily basis look over the documents and say, Is this really what you do? They say, Well, yeah, but we do this, and then we do this, okay. What that enables you to do is speed up your hiring process, speed up your training process, it allows you to, to be able to cross-train people.

Ben Baker 28:05  

So if somebody can run this machine, they can run that machine, and be able to do this job and do that job. And therefore, you can be able to be more flexible as an organization and be able to move forward more effectively. And a lot of it comes down not only just the process of that, but a process, how do we communicate with each other? How do we link teams like right now? The big challenge is, with people working from home, what policies and procedures do we have in place in any of your listener’s organizations about working from home? 

How are the leaders in the managers dealing with people leading from home, are their set of expectations that are already there that everybody under knows, everybody understands everybody knows what they’re expected to do on a daily basis? If there’s not, then it leads to people sitting there going, Well, I can do this, or I could do this. It’s all open to interpretation. Maybe I’ll do nothing. So if we can do that, it’s not about carrot and stick. It’s not about saying, Well, you didn’t do step number 32. So you’re going to be fired. It’s about having the procedures in place. So everybody understands what needs to be done in order for things to be successful moving forward. And they understand how their particular job meshes with all the other departments to be able to allow for long-term success.

Sam Gupta 29:21  

So one of the questions that I typically ask is how to go from point A to point B. And typically, when we have these siloed functions, it could be harder even for a CEO because they are not going to know everything. So let’s say if I want to drive this culture of creating these processes and documentation, number one, which should be the driver, and how can I get from point A to point B,

Ben Baker 29:43  

The first thing you need to do is decide why it’s important to you as an organization, and you need to believe in it. You need to sit there and say this is going to be painful. This is going to take time. This may cost money. This is not going to go well the first time we do it. We’re going to make mistakes, and we’re gonna have to move forward. But in the end, this is going to make us a more profitable organization. And if you can, that’s the first place you need to start. 

Ben Baker 30:00  

Second of all, it comes down to culture. First, you need to be able to get a culture and a purpose of an organization where people believe that the silos are being dismantled. Because once people understand the silos are being dismantled, and that the organization flattens in terms of the curve, and allows people to be able to communicate, cross-departmental, it allows for sharing and allows for idea generation that allows for people to be able to work together to build the processes and procedures together. 

But until you can break down the silos until you can, you can actually have buy-in from the top, and actual leadership from the top that says, hey, we’re this is what we’re going to do. This is why we’re doing it. This is what we want to achieve. We need to look at this as an organization. And not just it’s not just the finance issue, it’s not an ops issue, it’s not a sales issue. It’s not a marketing issue or a shipping issue.

We need to be able to bring all this together; in order to serve the client, we need to serve our clients better because we need to be more flexible to make sure that we can, we can be resilient and adaptable as the business moves forward. And that means that we all need to work better together. And it’s enabling that conversation and communication first, and breaking down the silos second, and then developing the procedures that go along with it.

Sam Gupta 31:36  

So I’m completely sold. I mean, I want to do it. I’m an executive. And I definitely see the value in whatever you’re recommending. But I’m not sure how to execute this. So I typically like to see a 30-60-90 day plan, right? So let’s see if I want to enable this. What should be my 30-60-90 day plan? And what are going to be my deliverables that either I can ask my team, or I myself can deliver those to my team? So how would you structure your 30-60-90 day plan?

Ben Baker 32:03  

Okay, so 30-60-90 day plan is once we have buy-in from the top, and we have a budget and a purpose of delivering that we decide that we’re going to go through and that that could be 60 to 90 days right there, hammering that out with an executive board. Depending on if we have five people to deal with, one person to deal with 12 people to deal with, and what that’s going to be, that’s an issue. The second thing that we do typically within organizations is form communication groups within different organizations. 

And the first thing we do is we have a discussion with each organization’s is what the company about what do you do? Who do you do it for? Who are your biggest customers? Why do they buy from you? What are the biggest challenges that you see where the biggest opportunities you see? We do this by we’ll have an ops Group, a finance Group, a marketing group, a legal group, whatever. Then what we do is compare and contrast. And we sit there and say, Are people on the same page? Do people believe that the company does the same thing? Do they believe that the clients are the same thing?

And do they believe that the purpose is the same within the company? Typically, the answer is no. So that’s where we start working as to start working with companies and understanding and helping them build a brand story, to be able to sit there and go, Okay, this is who we are, as an organization, this is what we do as an organization. This is, what could we do for you? And this is why we do it. This is why our customers care about us. And there’s a lot of research and development that can go along with that.

Ben Baker 33:07  

From that point forward, it’s about communicating it back to the various groups and getting buy-in from the groups to get them to understand what’s the new direction and why we why the company is doing, what they’re doing, and where they’re going, and how they matter individually. 

Now, this is something this could be. This could be 90 days, could be 150 days, could also be 180 days. It could be a year, depending on the size of the organization. As I said, it’s not a process. It’s not like flipping a switch on a new machine. It’s dealing with people, and when you’re dealing with people, you need to understand the individuals, and you need to be able to get the buy-in because if you don’t if you just try to ram a new set of beliefs, a new structure, a new purpose, a new vision, down people’s throats, the first thing they’re going to do is a rebel and they’re going to sit there and say, Hey, wait for a second here. This is new. I mean, I don’t. I’m not buying into this. I’m either gone or Hey, whatever. This is just the flavor of the day.

They’re going to go back the way things are. I’m just going to keep my head down, and I’m not going to do anything. So the trick is to be able to form a line in the sand first. Where are you today? Understand where do you want to go and be able to bring the people along the road through various communication methods to be able to help them understand where you’re going and why they matter, and why they need to be part of this moving forward.

Sam Gupta 35:08  

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

Ben Baker 35:13  

You know what, I’d love to have a conversation with people. People can always reach me through my website. It’s yourbrandmarketing.com, happy to give people a free 30 minutes over zoom. Find out a little bit more about who they are, what their challenges are, and see if there are ways that we can support them.

Sam Gupta 35:32  

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 have learned something new today. If you want to learn more about Ben or his books, head over to yourbrandmarketing.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 Randy Johnston from K2 Enterprises, who touches on why process documentation is an essential ingredient for an efficient finance organization. Also, the interview with Wayne Sadin, who brings a unique perspective on why business processes are more important for growth than individual business systems. 

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 36:40  

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 Kevin Lawton from the New Warehouse Podcast, who discusses why standardization plays a key role in inventory control and planning. He also discusses how to perform root cause analysis for any inventory control issues and how manufacturers and distributors can plan their inventory as they scale. Finally, we also had a chance to discuss some basic warehouse planning terms.

Chapter Markers

• [0:00] Intro
• [2:47] Personal journey and current focus
• [6:28] Perspective on growth
• [7:36] The importance of inventory control
• [11:03] How to fix inventory control and accuracy issues?
• [14:36] The process for standardizing inventory control processes
• [17:01] How to organize the inventory
• [22:09] What is Slotting and its importance?
• [23:24] What are golden zones?
• [25:13] The difference between a sexy and non-sexy warehouse
• [29:18] How to scale warehouse operations?
• [30:53] Closing thoughts
• [33:03] Outro

Key Takeaways

• If you’re able to get ahold of your inventory control, get inventory accuracy to a decent level, and be able to get those things to a place where you can confidently say that what you have in a location or in a building is what you say or what the system interprets, then you’re really kind of setting a foundation there to be able to start to grow and start to expand and it makes it a lot easier to upgrade your system.
• Take a look at the entire lifecycle. So you want to start at the beginning. That’s the first place that an error can happen. And if you can catch errors in the beginning, fix those, then you’re probably going to fix a lot of the errors that are happening downstream as well.
• If we’re talking about organizing your inventory, so there’s a couple of different ways you want to do it. I think organizing your inventory, the first step to doing that, is making sure that you understand your locations. So there are lots of different types of locations that you can have involved with racking can have floor locations, all different kinds of things.
• Slotting is the positioning of the inventory in the warehouse. You would say, say you have 30 locations, and each one is assigned one SKU. You’d have 30 products, and they’re always going to be in that location until you decide to redo their location and the Slotting.
• The golden zone is the easiest pick location for a picker. So there’s a lot of factors that go into that. It depends you know what type of equipment you’re using, or the pickers on their feet, and how the locations are set up.

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About Kevin

Kevin Lawton is the founder and host of The New Warehouse Podcast and has been working in the distribution and logistics industry since 2012 when he began his career as a temp employee in the Inventory control at Simon & Schuster. From there he grew in the inventory department and moved into various distribution and operations management roles. He was able to be a key player in four different new distribution center startups as an integral part of the project as well as involved in multiple software update and transition projects. His passion is to continuously learn and also share that knowledge which was the driving factor for the creation of The New Warehouse Podcast.

Resources

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  • Website | LinkedIn | Twitter | Facebook | Instagram
• Listen to The New Warehouse Podcast on all podcast platforms and at TheNewWarehouse.com

Full Transcript

Kevin Lawton 0:00

People start to police themselves because they see a product that ends up in, say, I have a cotton ball in my q-tip location. Now the picker goes, and they’ll call attention to that to your inventory person and say, hey, there’s a wrong product.

Intro 0:16

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.

Inventory control and warehouse processes are the backbones of your operational effectiveness. Defining a standard for your key inventory processes from the get-go can help with scaling without going through operational chaos. Non-standard processes cause bottlenecks to other areas of the organization and could become an impediment to your growth.

In today’s episode, we have our guest, Kevin Lawton, from the new warehouse podcast, who discusses why standardization plays a key role in inventory planning. He also discusses how to perform the root cause analysis for any inventory issues and how manufacturers and distributors can plan their inventory as they scale. Finally, we also had a chance to discuss some basic warehouse planning terms.

Let me introduce Kevin to you.

Kevin Lawton is the founder and host of the new warehouse podcast and has been working in the distribution and logistics industry since 2012, where he began his career as a temp employee in the inventory management department at Simon and Schuster. From there, he grew in the inventory department and moved into various distribution and operations management roles. He was able to be a key player in four different new distribution center startups, as an integral part of the project, as well as involved in multiple software update and transition projects. His passion is to continuously learn and also share that knowledge, which was the driving factor for the creation of the new warehouse podcast.

With that, let’s get to the conversation.

Hey, Kevin, welcome to the show.

Kevin Lawton 2:43

Hey, Sam, how are you? I’m so happy to finally be on the show.

Sam Gupta 2:47

And I am super excited as well. Just to kick things off, do you want to start with your personal journey and what you’re working on these days?

Kevin Lawton 2:56

Sure. So what I’m working on these days, first off, is responding to all your LinkedIn notifications all the time. You’re always tagging me and always engaging with me, so I appreciate that.

Every time my phone is vibrating in the last two weeks. It’s always Sam. You’re staying on top of mind there. So yeah, my journey. So I work in the distribution, warehousing space, been doing that for about ten years, really focused on the inventory control aspect of that, also focused on safety as well, in recent years. And now, because of that, I got interested in learning more about the industry because this was not my formal education.

My formal education was in business, but entrepreneurial studies were my major, actually. So, I decided that I should learn more about what I am actually working in. I looked for what I like to learn from, which are blogs and podcasts and videos and things of that nature. And I was, I was not really finding something that I thought was, I guess, cool or interesting that kept my interest in the industry.

Kevin Lawton 4:19

So I decided that maybe I should start a blog and do this. I had done some blogging in the past. So that’s kind of where that idea came from. Then I quickly realized that man, a blog right now, super busy working on this project and my full-time job and just didn’t have the time to write and do all this stuff. And actually, my boss at the time was like, Well, why don’t you do a podcast because I was telling you about the idea?

And I said I don’t really know anything about podcasts and how to do them. But then I thought about it. And I was like, well, it’s a lot easier to talk than it is to type, and write takes more time, right? And so, yeah, so then I pursued the podcast started in March of 2019. It’s called the new warehouse podcast.

Kevin Lawton 5:19

I called it the new warehouse because I wanted to showcase everything. That’s cool. That’s happening in the warehousing and distribution space. And I think when I first started the podcast, I wrote an article on LinkedIn called Making warehouses sexy. And I talked about, how warehouses really, there’s a perception I guess, to the I call it the outside world, that it’s really, just as this concrete box with a bunch of cardboard boxes inside, but there’s so much more going on inside this, that’s really exciting with the technology, and especially robotics, and all these automation now, as well.

So I really wanted to get that message out there and get it out to younger people like myself at the time. Now, I think I’m bordering on getting older now. I think I’m feeling it. But I wanted to get it to younger professionals and have them more aware of what’s going on in the industry, and also learn myself as a way for me to learn more from guests that come on the show. So that’s really my focus now, but I also still work as a full-time warehouse manager focused on inventory control as well. I’m at a company, and that’s kind of where I’m at right now, Sam.

Sam Gupta 6:28

Okay, amazing. And I want to dig deeper into each of these topics, including how to make the warehouse sexy. But before that, I always ask one question to every guest that we have on the show. And that is going to be the perspective on the growth. What does growth mean to you, Kevin?

Kevin Lawton 6:49

Sure, I think growth is often interpreted as something that’s very large scale. But growth to me is progress and improvement. You know, I think even as you grow, if you’re better tomorrow than you were the day before, I mean, that’s growth. So I really think that growth is just taking the right steps forward. Sometimes you take a step backward, obviously, to go forward. But being able to grow is really, you know, just seeing a little bit of progress. That’s growth and those little bits of progress and improvement that add up to big-time growth over time. And that’s really the way that I feel about growth.

Sam Gupta 7:36

Interesting. And when we talk about making progress, and when we look at inventory control, inventory control could be all over the place. I mean, I have personally seen warehouses in different fashions, some smaller warehouses, they might not be as organized, the bigger ones may be slightly more organized. And you may call them sexier, I guess. So in your experience, what is the importance of inventory control? And what can smaller, let’s say the manufacturers or distributors can learn about the importance of inventory control?

Kevin Lawton 8:08

Right. So I’m a little biased, I guess, maybe, because I’ve been working in inventory control for almost ten years now. But I really think that inventory control is kind of the backbone of an operation. There are so many things that are tied to it that can go wrong if your inventories not in the right place at the right time.

So, being able to as a smaller manufacturer, more distribution, location or company in general. You know, there’s a lot of upstart e-commerce businesses, now people getting into distribution. And they’re starting out small, maybe a couple of SKUs, being able to establish good inventory control practices, and having good inventory accuracy when you’re small, will really help with growth.

I’ve certainly seen, and experienced companies where they’ve tried to grow, and inventory control was not quite in place yet. And it really kind of hindered them from getting to that next step. It was a big roadblock to overcome and try to get right. So if you’re able to get ahold of your inventory control, get inventory accuracy to a decent level, and be able to get those things to a place where you can confidently say that what you have in a location or in a building is what you say or what the system interprets, then you’re really kind of setting a foundation there to be able to start to grow and start to expand and it makes it a lot easier to upgrade your system. Go to different automation as well integrate with different systems as well. So I really think that’s a foundational key to building for a smaller business.

Sam Gupta 10:05

I’m not sure how you are calling yourself biased. To be honest, I’m in the ERP business. And whenever I walk to any manufacturing or the distribution facility, I’m typically talking to the eight stakeholders or the executives, and the guy I have to always please is going to be the inventory or the procurement guy, the statement that they make is, if you cannot please this guy, then the ERP is not happening. So you are definitely not biased. I just wanted to make sure we are aligned there.

Kevin Lawton 10:38

I said the biased part because I’ve been working in inventory control. But I definitely know what you mean. Because I think someone that works in inventory control has a certain particular mindset, right? Because they, they want things will be done a particular way because it affects their inventory. So that’s probably why you always get that message that you need to please that guy, right?

Sam Gupta 11:03

To be honest, inventory is the foundation. It’s the heart. If you don’t get your inventory right, the implementation is not going to be right. There’s no way to get the implementation if you don’t have the appropriate inventory procedures in place. Let’s say the steel numbering or appropriate organization of your parts, or BOMs or the inventory organization, so inventory is definitely the heart for the entire ERP.

And now that we are talking about the ERP, that means the entire organization as well. So yeah, so your inventory control is extremely important. I don’t think anybody’s gonna argue with that. Yeah. Okay, so the next thing that I really want to touch on the standardization of the inventory. So let’s say, Kevin, I’m taking you to a warehouse or the manufacturing facility, and they are experiencing that they have been having some problems, and they have no idea how to fix them. The problems are related to inventory accuracy. Obviously, the processes are manual. They are not as efficient as they would like, and you are going there as a consultant. So what is going to be your first, second, or third step that you will be taking in fixing this warehouse or the inventory?

Kevin Lawton 12:20

Okay, so, yeah, I mean, my first step would be, well, first, I would ask that you let me see your standard work, share your standard work with me, right. And if they’re having major issues that sound like which this imaginary company is, they probably don’t have standard work. So that’s the big first issue right there because the Standard Work is really going to dictate and ensure that every operator is doing every process the same way.

And when you have operators who are deviating from what the standard process should be, that’s really when you have a lot of errors occur. So that would be the first step. And then, you know, obviously, if they have standard work, then we’re going to audit that with shadow their operators and see how they’re actually executing the processes, and then identify any gaps there and see where their errors were really occurring. But the standardization of the processes, I think, is really where it starts. You may have some people that say like, well, we need to do a total reset. Let’s do a wall-to-wall physical.

Kevin Lawton 13:29

But if you do a wall-to-wall physical inventory, and then you just go right back to the processes you’re doing, you’re going to be in the same spot within three days a week, at least. So it’s really not going to help you need it. You need to kind of take a higher-level look, check out the processes, are then standardize if they’re not standardized. Let’s map them out. Let’s figure it out. Then as we’re figuring it out, you really begin to understand, like, there’s a gap in the process here.

Or every time the person goes to pick this type of item. Well, the barcode doesn’t scan, so there’s no confirmation, and they might take something else because you’re not actually confirming what they’re taking. So how do we fix those things, then really, that leads to kind of the root cause of it? So really going into that scenario that you described, Sam, I mean, that’s really the big major first step is to look at the standard work if it exists. If not, let’s create it. And as we’re doing so, that’s when you start to identify those gaps and where those mistakes and where those errors are happening.

Sam Gupta 14:36

Okay, so let’s say, if I have just one guy in my inventory, I’m a really small manufacturer or distributor, and whatever he or she has been doing so far, somehow it’s been working. Obviously, the processes are not really standardized. And I want to standardize them. So what will be some specific processes that I need to look at? Can you suggest some sort of list And a list of maybe a plan that you may be able to suggest in terms of creating these standard operating procedures that you are talking about with respect to the warehouse?

Kevin Lawton 15:11

Sure. So the processes you want to look at are any process that has inventory movement involved. So, I mean, basically, we’re talking about every process. But I think what you want to focus on first is you really want to look at what’s happening when that inventory is coming into the building, so in the receipt process, because if you identify issues that are happening at the beginning of your inventory lifecycle within your warehouse, that’s really where a lot of times, you can cut out a lot of errors that are happening, because it’s coming in and something wrong is happening from the beginning.

And if it’s not gonna go right from the beginning, then it can go through every single process within the warehouse incorrectly. And that’s really can multiply the number of issues that you have. So I would start in receiving, and then go through the entire process, so the actual receipt of the inventory, then you’re looking at the put away of the inventory, depending on how that happens. What are they doing during that process? Then the next would be replenishment, how are they replenishing, then you have the picking process.

And then, from the picking process, you’re going to have your shipping process as well. And you know, depending on the operation distribution, business model, you may have some other processes in between, but you want to, you want to pick those apart, essentially no pun intended there.

So take a look at the entire lifecycle. So you want to start at the beginning. That’s the first place that an error can happen. And if you can catch errors in the beginning, fix those, then you’re probably going to fix a lot of the errors that are happening downstream as well.

Sam Gupta 17:01

Okay, amazing. So when you think of the inventory or the warehouse and it’s almost like a library. And the organization needs to be similar to libraries as well because you have similar processes if you really think about it. And now you could organize your library in many different ways. So what would be your recommendation with respect to organizing the inventory? Let’s say if I am trying to streamline my processes in the bad house?

Kevin Lawton 17:28

So if we’re talking about organizing your inventory, so there’s a couple of different ways you want to do it. I think organizing your inventory, the first step to doing that, is making sure that you understand your locations. So there are lots of different types of locations that you can have involved with racking can have floor locations, all different kinds of things.

So you want to understand what do you have to work with? And sometimes, you have limited resources. So it’s not like you can create flexibility or you can switch things up, you can move racking around, do you have what you have to work with, you want to understand what is there, what types of locations do you have, and then you want to make sure that your locations are standardized in the way that they’re named, and their naming convention, there’s a couple of different ways to do that, depending on the layout of your warehouse, you would want to look at that, but you want to make sure that when you have people traveling to those locations.

They can easily locate them, and they know where they are. That’s especially helpful on the training aspect as well. If somebody can navigate their way through your warehouse fairly easily, then you’re reducing some of the training time there over top of it, unless, you know, you have those locations over here.

Kevin Lawton 18:45

And you have to know that when you get this location, you actually have to go over here, not here. It gets confusing, and things get mixed up then as well. So that’s really the first is understand the types of locations you have, then make sure that your location naming convention is standardized, and understandable easily to navigate. And once you do that, then you can take a look at the inventory that you actually carry, marry it to the types of locations that you have, because sometimes you have locations where you carry certain inventory and say you have a handstick and well he can’t fit a full pallet there right so you know this inventory comes in all the time and full pallets, so you need a full pallet location.

Once you start to do that, then you can kind of get a sense of where you’re going to start placing things and what can be placed where then you want to take it to another level. Once you get things established, then you can start looking at slotting and using certain zones, looking at golden zones for picking as well, which would all involve looking at the usage of your inventory. Understand what are my fastest-moving items, and as you look at your fastest moving items, You want to locate those in your warehouse closest to your shipping area?

Kevin Lawton 20:05

So it reduces the pick travel time, which helps improve your process. And it’s going to get it there faster. Now, when you look at that, there are two things you want to look at. Okay? What’s the number of hits that I have? So how many times is this picked in, say, a month or two weeks? It depends on the capacity that you have in terms of storage, but you want to look at the hits. And then you want to look at the actual usage, and you want to get an average usage.

So you can set up your min-max levels within the location so that you can ensure that you’re properly replenishing, getting those things into locations where they need to be so that when pickers are ready to pick or when orders come through when they’re going to drop, everything is good to go. And they can get those things.

Kevin Lawton 21:00

Now, as you start to identify that, you also want to make sure that as you’re locating these products, physically, you want to marry that in the system as well. So if you have a location and you say it’s always going to be, I don’t know, Q tips, well, you want in the system, you want that location to be assigned only to Q tips, so nothing else will ever go there until you decide to change it or do a re-slotting.

So really, in terms of locating and storage and filling out the library, as you mentioned, Sam, I think that that’s really the way to go. It’ll help you get more organized as well. And people will start to understand where a certain product is supposed to be. You can even identify the location with the SKU that’s supposed to be in there. And then people start to police themselves because they see a product that ends up in, say, I have a cotton ball in my q-tip location. Now the picker goes, and they’ll call attention to that to your inventory person and say, hey, there’s a wrong product in this location, and then the inventory person can check it out and see what happened there and fix the issue.

Sam Gupta 22:09

Okay, amazing. So you mentioned a couple of terms, and some of my audience may not be familiar with these terms. So let’s say if we talk about Slotting, okay, what do you mean by Slotting where it is going to be applicable? What are the implications if they don’t use Slotting?

Kevin Lawton 22:23

Sure, so Slotting is. I guess the way to break it down is by Slotting is the positioning of the inventory in the warehouse. As I was talking about assigning certain locations to certain products, like our Q tip example, that’s the Slotting. You would say, say you have 30 locations, and each one is assigned one SKU, you’d have 30 products, and they’re always going to be in that location until you decide to redo their location and the Slotting. So that’s really the Slotting.

And within that, you’re also identifying what is the best position in the warehouse for the product? So what’s the best location? So I talked about there having faster-moving items closer to your shipping area? That’s all involved in the slotting process. And that’s really, that’s really, I guess, the way to explain that.

Sam Gupta 23:24

Okay, and how about the golden zones? You mentioned the golden zones as well. How would you describe that?

Kevin Lawton 23:29

The golden zone is also it’s within the slotting realm or umbrella. But the golden zone, you’re really talking about? What’s the easiest pick location for a picker. So there’s a lot of factors that go into that. It depends you know what type of equipment you’re using, or the pickers on their feet, and how the locations are set up as I mentioned before, but if you look at an example, like some flow rack that’s set up if the picker is on their feet, and they come to a flow rack position, you’re going to look at the ergonomics of that pick as well, right.

Kevin Lawton 24:00

Usually, the location that’s probably about waist level, his or chest level is going to be the easiest pick for that picker. So you’re going to want to put your faster-moving items there because they can grab him more easily, as opposed to your bottom location where you know, they have to bend down, you obviously don’t want them as well from a safety and ergonomic standpoint to be bending down a lot as well.

You don’t want to put an item at the bottom that’s going to get a bunch of hits, and they’re going to be picking from all day long because then they’re just going to be bending over. And it’s not safe, it’s going to overtime, it’s going to be strenuous for them, and it’s not going to be good for their well being, and the operation overall and the business to especially if you’re running into all of a sudden people are getting back injuries because they’re straining themselves bending over all the time. So the Orange zone is really, what is that ideal best pick location that is going to get the product, fastest to the picker? And what are they going to be able to pick fastest as well?

Sam Gupta 25:13

Okay, and now let’s go back to your comment about making the warehouse sexy. So let’s say you had your dream warehouse. And obviously, my understanding would be, you would probably prefer a sexy warehouse, as opposed to a non-sexy warehouse. So what are some of the examples that you have explored in your past where you found a warehouse to be super sexy? How would you describe a sexy warehouse versus a non-sexy warehouse?

Kevin Lawton 25:42

Sure, so I think my initial answer actually may be surprised when people, but it’s not technology and automation. It’s actually cleanliness is I think, is the sexiest thing. So I think that’s really where it starts. And cleanliness as well, it goes hand in hand, I think with inventory, accuracy, and control, too, as well. But from there, I mean, there are so many things happening in the warehouse space.

And as I’m finding through my podcast the new warehouse as well, there’s so much technology, so much robotics, and automation happening. Those things are really exciting. And I think when you bring those technologies in, that really makes the operation sexy. I’ve heard from some robotic companies where they say they have employees who the pickers there on the floor, doing different types of warehouse operations and tasks, but all of a sudden, they bring in robots to the warehouse to help them kind of empower their jobs make their jobs easier, more of a collaborative setup.

And the employees get excited because some of them, they’ve said, like, Oh, I get to go home and tell my kids that I work with robots now. So that’s really, I think, the things that kind of make it sexy, and there’s, I wouldn’t say there’s like a model that I would say, like, Oh, this is my ideal warehouse, it has this type of conveyor and this type of robot, it really depends on the operation.

Kevin Lawton 27:00

But bringing in those technologies to enable people to do their job better and really make an operation flow a lot better is really what I guess define as, as sexy in the warehouse. It’s almost like a well-timed orchestra or something like where everything is kind of getting to the point it needs to be like at the right time.

It’s just flowing through the operation. And you can kind of tell that things are just moving through, and the people know what to do. They know where to be when they need to be there. And the job for them is to be there for them when they need it to be there. That’s really. I think the sexy part about it. And all these technologies and different systems as well are enabling that, and that’s really I think, I would say my ideal, sexy warehouses that have that, that operational flow that just works.

Sam Gupta 28:22

Yeah, I guess what you’re talking about is the smoothness of the operations, as opposed to technology, which could be enabled as well. But the primary factor has to be the smoothness of the operations.

Kevin Lawton 28:34

Yeah, it goes back to the standardization and then the process. I had actually interviewed the CEO of Rayment Forklift on my podcast, and he said something that always stuck with me since he said that, you know, if you automate a bad process, you just made a bad process faster. So it’s you need to take that step back. And I think that’s why that’s probably why I think that in terms of sexiness, having that great process flow first before kind of getting into the sexiness of robotics and automation and shiny things.

Sam Gupta 29:18

Okay, amazing. So we discussed the smaller warehouse. And now, let’s move on to the scale part. So let’s say if my distribution volume is growing, and I need to plan for things based on the volume that is going, maybe I need to have the second warehouse. So how are my processes going to change? How are my standardization needs going to change as my business scale grows?

Kevin Lawton 29:43

I think the important thing here is that if you establish the standardization in your processes, and you’re going to expand whether it’s to a bigger facility or a second facility, as you mentioned, there shouldn’t be many changes if what you’re doing is working for you. But if you don’t have the standardization, I think that’s where you run into complications, because now if you decide, okay, I’m going to do the process this way at my old warehouse, but now I have a new warehouse.

So I’m going to do it a different way. It doesn’t necessarily make sense. I know one thing that I’ve seen that is works fairly well is standardization across a distribution network. So everybody kind of does things the same way. And now, granted, there’ll be some, some little bit of nuances because the layout will be a little different. But for those nuances, you adapt, but your standardization from your small warehouse to your big warehouse should stay relatively the same. It’s kind of your foundation and framework to really set up the new warehouse.

Sam Gupta 30:53

Right, Kevin? So I think that’s pretty much it for today. Do you have any last-minute closing thoughts?

Kevin Lawton 30:58

Last-minute closing thoughts are first Sam, thanks for having me on the show. I really appreciate being on in the beginning here. I think it’s gonna be a big thing, especially, you know, like I mentioned, all your pushing on LinkedIn is really, really good stuff. And I’m happy, you know, getting me more engaged on LinkedIn, too. And I really appreciate that.

But yeah, I think in terms of growth, the podcast, I’m sure for you, is going to grow. And I hope that some people can get some great insights into this. And also, if they are interested in hearing more about what I have to say, are some of my guests in the warehousing space, you know, they can check out the new warehouse podcast as well, on all podcast platforms, and also on thenewwarehouse.com.

Sam Gupta 31:39

So on that note, I want to thank you for your time and insight. This has been a fun conversation.

Kevin Lawton 31:45

Definitely fun. Thanks a lot, Sam.

Sam Gupta 31:47

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 Kevin or the new warehouse podcast, head over to thenewwarehouse.com. And listen to it on all podcast platforms. 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 later episodes, including the interview with Sarah Barnes-Humphrey from Shipz, who shares her knowledge of the international supply chain and trading. Also, the interview with Wayne Sadin, who brings a unique perspective on why business processes are more important for growth than individual business systems.

Also, don’t forget to subscribe and then 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 33:03

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 Paul Sklar who takes us through the retail industry’s deep dive. He also walks us through how the industry operated in the past and what retail executives need to know about the changing landscape for the retail industry due to changing customer expectations and increasing need for a better and comprehensive customer experience than siloed thinking.

Chapter Markers

• [0:00] Intro
• [2:49] Personal journey and current focus
• [8:03] Perspective on growth
• [11:36] Differences between retail and wholesale businesses
• [15:15] Process and system challenges because of blurring lines in business models
• [20:10] Stories of customer experience and customer service
• [26:44] Customer Service challenges in the age of social media
• [27:56] Closing thoughts
• [30:01] Outro

Key Takeaways

• As we get over the apogee of where the pandemic is right now, the bigger retailers are going to continue to get bigger. We’re gonna see a resurgence in local, and the middle is going to continue to get squeezed.
• As we bounce back, we will see digital commerce become more popular and more widespread, and retailers are going to start to re-architect their systems in order to support concepts like unified commerce, unified retail. That’s like the next evolution of omnichannel retail.
• We’re going to look at the loyalty data, the CRM data, we’re going to look at all that data together because customer behavior to how we predict customer behavior is going to become extremely important as the way we typically have measured the business in the past. Comp sales or gross margin, or your basket size, all that is going to be relative of all that is going to be rendered irrelevant or not an effective way of looking at the business over the next few years.
• Retaining customers is not as expensive as acquiring them. Once you own them, if you do the right thing, throughout their experience throughout their journey, and all the channels that you do business with, their lifetime value could be tremendous. I’m not sure today if retailers or brands are taking full advantage of that.
• The customer always controlled how good a brand was always. But now it’s so evident and so prevalent, and so visible.
• If I was a CEO, or president of a brand, or retailer, I don’t know how I would be able to sleep at night because I would be up worrying about my customer service team, my customer experience team, every single minute of the day.

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About Paul

Paul Sklar is a consumer-centric executive with extensive experience as an Omni-Channel/DTC leader, with cross-over expertise leading Business Development, Go-to-Market Strategy, Merchandising, Product Development, Marketing, and other Brand Building functions. Paul has led teams at Wolverine Worldwide, Ralph Lauren, Sears, Newell Brands, DeLonghi, Sharp Electronics, as well as Macy’s.

In addition, Paul launched a consulting advisory in 2019 with the mission to help start-ups and established businesses develop their go-to-market strategies and build their own brands. Paul is a graduate of Temple University, with a BBA degree in Marketing.

Resources

• Connect with Paul
  • LinkedIn

Full Transcript

Paul Sklar 0:00

2020 has accelerated digital transformation amongst many, many industries. However, retail was probably one of the most impacted and affected. I believe that we’ve almost witnessed the next five years of change and evolution in retail in the past five months.

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 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 0:56

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 a retail business might seem straightforward, it has its nuances, which is probably why it’s often referred to as a labor of love. Either you love it or hate it. With COVID and changing consumer behavior, the lines keep blurring in the traditional retail supply chain with the ever-increasing complexity of business processes and evolving need for better digital systems to provide the customer experience needed for the modern and ever-changing retail industry.

In today’s episode, we have our guest, Paul Sklar, who takes us through the retail industry’s deep dive. He also walks us through how the industry operated in the past and what retail executives need to know about the changing landscape for the retail industry due to changing customer expectations and the increasing need for a better and comprehensive customer experience than siloed thinking.

Let me introduce Paul to you.

Paul Sklar is a consumer-centric executive with extensive experience as an omnichannel or DTC leader with crossover expertise leading business development, go-to-market strategy, merchandising, product development, marketing, and other brand-building functions.

Paul has led teams at Wolverine Worldwide, Ralph Lauren, Sears, Novell brands, DeLonge, Sharp Electronics as well as Macy’s. In addition, Paul launched a consulting advisory in 2019. With a mission to help startups and established businesses develop their go-to-market strategies and build their own brands. Paul is a graduate of Temple University with a BBA degree in marketing.

With that, let’s get to the conversation.

Sam Gupta 2:49

Hey, Paul, welcome to the show. Okay, just to kick things off, do you want to start with your personal story and what you’re focusing on these days?

Paul Sklar 2:59

Sure. I’ll take you through my career journey in a nice compacted way. So I’ll just kind of go all the way back to college, right. So in my junior year in college, I was looking for a real job. And after spending, I don’t know, 10 or 15 years working at overnight camp, my parents told me I couldn’t work overnight camp anymore, because if we let you work at overnight camp, you might work at overnight camp for the rest of your life.

So at the recommendation, advice of a family friend, I accepted an internship at BAM Burgers, which was one of the original divisions of Macy’s. I never intended to begin, and I never intended to have a career in retail. But hence, my journey began.

And I’ve come to learn that over the years, that retail is a labor of love, you either love it, or you hate it. I also learned early that retail could be a very simple business. And we found so many different ways to complicate it over the years. Retail can be broken down into four tenants for the most part: Know your customer, know what she or he wants, put the goods in the store or on the website, and tell her or him that you have it. That’s retail. That’s as simple as retail can be.

Paul Sklar 4:16

But again, we found so many different ways to complicate it over the years. Now, as I think about some of the most influential moments in my career, I’ve had the opportunity to work for and with some of the legends of retail early in my career, and I’ve had the ability I’ve learned early that you had to soak up and absorb every bit of information and knowledge that was imparted to me whether it was store visits, or merchandising reviews or open a buying meeting, vendor meetings, or even elevator conversation.

Sometimes you learn the most when you’re riding an elevator with an executive. And he or she asks you some questions or asks you about your business. It’s kind of like a watercooler chat. I find them very effective and very educational. I spent the first two-thirds of my career in home furnishings. And then, as much as I loved home, I often thought of home furnishings as kind of like a secret society. Once you get in, you can’t get out. I started my career as a sales manager at Macy’s.

Paul Sklar 5:17

And I’m proud that I was able to make it through four consolidations at Macy’s. It reshaped itself from a collection of regional department stores to the national chain that it is today. At one point, I thought I was going to spend my entire career at Macy’s. But I left the in 1996. And I spent ten plus years on the vendor side, in different wholesale leadership roles. I worked for Sharp Electronics. I worked for Bloggy or for Mill Brands. Then I made the decision. I’m gonna say around 2000 or 2001, to return to retail.

Remember earlier I said retail is a labor of love. You love it, or you hate it. A lot of people leave retail, and they move into wholesale, and they never go back. I’m probably one of the few people that kind of went backward. I went retail, wholesale, and then back to retail. But again, I think you love it, or you hate it. And I’ve always loved retail. There’s instant gratification. You work with a customer really closely. And that’s what I love about the business. I had the opportunity to work for some great companies. I spent nine years at Ralph Lauren. And then, in 2015, I left Ralph Lauren, and I spent three years at Wolverine Worldwide.

Paul Sklar 6:30

Wolverine Worldwide is the parent company for Merrill Sperry, QED Saucony, Stride, amongst them other brands. And there, I had the opportunity to lead omnichannel merchandising, planning, marketing, visual presentation, and store operations. After achieving and exceeding many of the goals and reshaping Wolverines’ approach to retail, I left in 2018 to advise and consult. This has given me an opportunity to think about the next chapter of my career, as I’ve had the privilege to work with great brands, retailers, and technology providers and what retail will look like in the future.

For me is I’ve been consumed and driven by this innate and natural curiosity regarding the convergence of both digital and physical retail how that convergence is impacting the customer experience. And I feel over the past nine months since the COVID19 pandemics accelerated, many strategies and ideas that were still in the testing pilot stage became the strategy.

I think Sam 2020 has accelerated digital transformation amongst many, many industries. However, retail was probably one of the most impacted and affected. I believe that we’ve almost witnessed the next five years of change in evolution in retail. In the past five months, I used to think that more change in retail over the past two years than in the previous 100. But again, the past nine months are like nothing we’ve ever seen before.

Sam Gupta 8:03

So I definitely want to dig more into a lot of terms that you mentioned. And I was not familiar with a lot of them, to be honest. So we are going to do that. But before we get there, one of the questions that we always ask our guests and that is going to be, what is your perspective on growth? Paul, what does growth mean to you?

Paul Sklar 8:24

To me, as I think about the industry, and I think about growth. You see, almost two things happen. You see your large big-box mega-retailers continue to grow, for example, Walmart, Target, Amazon, Home Depot, Kohl’s, or Kroger. They’re all growing. They’re all growing because they’ve been able to continue to drive their operations throughout the pandemic and actually acquire new customers.

Now, what do you do with those customers over the next year? That’s what we have to think through. But they’ve been growing at a tremendous rate. And especially from a digital and e-commerce standpoint. Sam, I read an article yesterday. And according to salesforce.com, total digital sales for December 1 through December 14 hit $181 billion. That’s up 45% over the year before. In the US, we hit $40 billion. That’s up 36% versus the year before.

And I have to tell you that total retail is not growing, maybe growing like a half a percent. So this just kind of gives you an idea of the shift between people visiting stores and shopping online. Brands think that 70% of their customers over the past nine months are now shopping online or in some digital way one way or the other.

Paul Sklar 9:58

And a lot of it’s going to stay, going forward, even when we kind of get over this hump, and we get to this place where we get back to some kind of normal retail economic model, how brands approach that going forward is going to be key.

So I talked a little bit about these mega-retailers, right. The other thing we’re seeing is we see growth. And I remember seeing a resurgence in small local businesses. And I think that’s because as people are not traveling, and they’re staying close, and they’re staying local. You’re seeing a kind of re-energizing resurgence in local retail, and whether it’s local restaurants, local boutiques, cafes, personal care places, salons, the local hardware store, the bike shop, all those places, we see a lot of growth.

And in some cases, we are noticing some small businesses actually starting to open. We are seeing contraction is kind of in the middle. So if you’re connected to the mall in some way, or connected to a place where there’s a lot where they’re traditionally or typically has been a lot of consumer or customer traffic, you’re kind of seeing a little bit of a squeeze there.

So I actually feel that as we get over the apogee of where the pandemic is right now. And by the middle of 2021, as we start to see a return to some normal shopping patterns. Worse, we’re gonna see this. The bigger retailers are going to continue to get bigger. We’re gonna see a resurgence in local, and the middle is going to continue to get squeezed.

Sam Gupta 11:36

You mentioned the term labor of love. I totally love that phrase. I wasn’t familiar with that. But one comment you made about whoever goes to wholesale never returned back to retail. So I would like to touch a little bit on that. And I don’t know if my audience is going to be familiar with the differences between retail and wholesale. So number one, can you touch on the differences of those businesses and why people who leave retail and go to wholesale never come back?

Paul Sklar 12:05

So years ago, before digital commerce and e-commerce became prevalent became as big as it was, you either work for a brand or wholesaler, or you work for a retailer, not a lot of brands went direct at that point in time. If you were a brand, you basically sold your goods through a reseller. And what I always found is, is wholesalers brands love to hire people that spend time in retail because they were close to the customer, they understood who the customer was.

So what better way for me to hire a salesperson or marketing person or a brand person as if I own a brand than to hire someone that spends time in retail? I don’t have to train them on who the customer is. So there was a lot of movement from the retail side of the business and listen to retail again. It’s a labor of love. You Love it, or you hate it.

Paul Sklar 12:56

But it’s a rigorous career. Because at one point or another, you spend time in stores, at least historically, you did. And listen, you work nights, you work weekends, you work long shifts, you stand on your feet. You love it, or you hate it. Because I believe to be successful, you truly have to love it. You have to love the consumer. You have to love talking to the consumer and learning about the consumer. So a lot of executives or people who had careers in retail shifted the wholesale a little easier.

In some cases, you could work at your own pace. You sell goods to a retailer then sells them to a customer, okay, you didn’t have all the technology and visibility you had today, it was a selling type of mentality, all of a sudden, I’m gonna say the late 70s, early 80s, you know, maybe mid-80s, that kind of started to change as technology, maybe even 90s as technology kind of became more prevalent and crept into the process.

As a retailer, we started using different types of programming, whether it was early Excel or Lotus 1-2-3, you know, remember that in order to do our store distribution plans, as opposed to doing it by hand with a Poisson distribution chart. So you know, everything started to become a little bit easier.

Paul Sklar 14:17

And everything became a little bit more specialized. As opposed to sometimes in retail, you were almost kind of like a jet. You were almost kind of like a generalist to a point. But everything became a little bit more specialized, kind of in the 90s. And then, as e-commerce started to grow, no, you found brands that decided I don’t need to go to a retailer anymore.

I could control my own destiny and go direct to customers. Then you had retailers that own private label brands that wanted to explore selling their brands to other retailers. So you had a lot of overlap, convergence, and morphing between the brands, the wholesalers, and the retailers today, you’d be hard-pressed to identify a brand that only wholesales. Most brands, I would say at least 95% of brands sell directly to a customer in some way or another as they wholesale at the same time. So I feel like over 30 years, the industry has changed.

Sam Gupta 15:15

Yeah. So that’s a very interesting perspective. And it’s very rare that I hear this from folks. You’re coming right from the retail, and you have deep insight into the retail and wholesale industry. So it’s very interesting to learn from your perspective. So now, going back to the convergence. Obviously, there is going to be a lot of overlap, newer business models.

These are channels that your wholesalers are able to explore, your retailers are able to explore, and obviously, brands are able to explore. So from the business perspective, it’s amazing because you are actually getting the newer channels, you’re probably getting new revenue, you have the hold of the customer. But what do you think from the business process perspective and from the system perspective? In my opinion, these blurred lines are a nightmare.

Paul Sklar 15:59

Without a doubt, and I think, Sam, it’s because, you know, when I think about the past two years, so to speak, and I think about just technology, and I think about software, I would probably say over the last two years between 2018-19 and 20, has probably been one of the most buys for stated periods for retail software.

And there are so many different providers and solutions out there. Listen, as a brand owner or retailer. I don’t know how you keep pace with technology? Or really, how do you know what to buy? And what to use? How do you know what’s going to benefit your business? No, of course, you know, you have your big ERP providers SAP and SAS and all those folks. They serve a purpose.

But how do I understand what to buy to help me with personalization? How do I understand what to buy to help me drive acquisition? How do I know what to buy to help me talk to customers throughout the customer experience? There are so many different things out there. There’s right not to mention the know-how AI and predictive programming. Predictive forecasting is starting to. They’re starting to take a life of their own within retail.

Sam Gupta 17:20

Yeah, and it’s interesting the way you are describing that. In fact, when you look from the technology perspective, if your business is actually changing on a daily basis, if you are exploring the newer business processes or newer business model on a daily basis, that could be a moving target. Okay, so even if your problem could be that you don’t know, what exists in the technology space, the very first question that technology folks are going to have is, hey, what is the problem that you are trying to solve? We have a consistent problem that is happening day in day out, right? So you have to define the problem definition. And if these business models keep changing, it’s just a moving target for technology companies and also to explore the technology initiators.

Paul Sklar 18:02

Yeah. I think when you break down kinds of categories, order management, planning, ecommerce. Now, now there is mobile commerce, customer service. Now, there are so many different providers and so many different options. And you know, 2020 and 2021 are going to be interesting. So, in 2020, we had really limited investment from a technology standpoint but a lot of offerings. And the limited investment was due to the pandemic, and which is the obvious reason as retailers and brands kind of went into cash conservation mode.

But as we look at 2021, I think the software industry is forecasted for a significant uptick in the second half, as we see economic recovery and bounce back, and what we’re seeing what’s really going to drive that, you know, wanna vaccine and people feeling more comfortable shopping in person again. But you’re going to continue to see digital commerce become more popular and more widespread, and retailers are going to start to re-architect their systems in order to support concepts like unified commerce, unified retail. That’s like the next evolution of omnichannel retail is where we go where it’s just one thing. It’s just one form of business, ever not thinking of it in terms of stores and e-commerce. And it’s all connected. It’s just shopping.

And that’s how we’re going to think about the customer to we’re going to look at all the data. We’re going to look at the loyalty data, the CRM data, we’re going to look at all that data together because customer behavior to how we predict customer behavior is going to become extremely important as the way we typically have measured the business in the past. From you know, comp sales or gross margin, or your basket size, all that is going to be relative of all that is going to be rendered irrelevant or not an effective way of looking at the business over the next few years.

Sam Gupta 20:10

Yeah, I could not agree more with the topics that you just mentioned, unified commerce, unified retail. I think that ties back with the topic that you are talking about a lot these days, which is going to be customer service and customer experience.

So let’s say if we are to explore some of these stories, maybe from your past, where you could probably change the customer experience for the customer, or the problems that you faced, do you have any stories that you might be able to talk about, and how or what you would do differently in those stories?

Paul Sklar 20:42

So I think the last two companies I worked for, and it was interesting how we talked about the customer because we talked about the customer separately because we approached the business via the channel, we had talked about the customer. From a channel standpoint, it was just because different people or different parts of the organization owned the different parts of the P&L.

So I know at Ralph Lauren, we talked about having an e-commerce customer, a full-price customer, a wholesale customer, and an outlet customer. To me, it was still one Ralph Lauren customer, but acquisition and retention efforts and how we thought about the customer were diffused because we broke it down to what part of the business owned that customer, and we saw very little crossover shopping between the channels because there was a limited crossover from a P&L ownership standpoint, it was similar, we kind of had a little bit of the similar issue.

We’re, you know, symptomatic Wolverine, no, Wolverine is a collection of brands, whether it’s Merrill or Sperry or Saucony, or Kids or Stride, or Choco, right. We kind of looked at not Wolverine customers but brand customers.

Paul Sklar 21:54

And I always wondered what the opportunity could be if we looked at the Sperry database and looked at crossover back to Saucony. And maybe someone did at one point or another. But I’m not sure we really did it on a consistent basis. So even when you get into the brands, we even looked at in-store shoppers, wholesale shoppers, that shop that people we sold our goods to right or e-commerce shoppers. So I always thought that there was more opportunity to look at the database collectively to look at the brands in the database collectively.

Because I know what customers were and use many brands, especially today, brand loyalty might not be as important as it was years ago. So I think as brands and companies and corporations spend a lot of time, a lot of resources, and a lot of money acquiring customers, how they treat those customers once they have them is just as important as acquiring them.

And I feel today that retention is not as important as acquisition. But we all know that it costs that customer acquisition that CAC cost is very high today, especially from a digital standpoint, and retaining customers is not as expensive as acquiring them. Once you own them, if you do the right thing, throughout their experience throughout their journey, and all the channels that you do business with, their lifetime value could be tremendous. And I’m not sure today if retailers or brands are taking full advantage of that.

Sam Gupta 23:26

Yet, I could not agree more. And there’s always a bias with respect, having a heavy emphasis on the acquisition and not as much focus on retention. And from my personal experience, I can tell you that. If you do a really good job of retaining your customers, they actually become your champions. You will have a word-of-mouth effect and in the age of the internet right now, especially in 2020-2021. Your reviews matter. Your word of mouth, marketing matters, your influence, and marketing matters. So, in my opinion, I think retention is far more important than acquisition. The acquisition is obviously important because you want new customers, but retention can help you acquire customers as well.

Paul Sklar 24:09

Yes, there’s an old adage, Sam, that it takes years and years and years to build up brand affinity and brand value. But with one or two bad customer service or customer experience, situations or issues. You could take that apart in a day because I don’t have the data in the front end. But I read somewhere that when a customer has a really great brand experience. They’ll tell 10 to a dozen people about their experience. But if they have a poor brand experience, they’ll tell double that their poor brand experience.

Sam Gupta 24:45

Exactly. And I could not agree more, especially again, with respect to social media. Social media could be extremely powerful. And with the kind of penetration that we have seen, I would say in the last one or two years, especially with things like TikTok, it’s so powerful. Now people can act up by themselves, they can promote a video, and that could be viral. And I don’t know if you remember that Southwest story or not. This customer had a poor experience. She uploaded the video, and the whole world knew about Southwest. They didn’t want to fly on Southwest. Yeah, a similar thing could happen.

I mean, and you are absolutely right there with respect to poor customer experience versus good customer experience. Poor customer experience, people definitely, definitely want to talk about the good customer experience they might talk about. They might not talk about it, but at the same time nowadays, if you know, customers love the brand, they are willing to go out there on social media, and they are going to be so proud and claiming that this is the brand that I absolutely love. So yeah, so definitely, you are absolutely right there with respect to your customer experience assessment.

Paul Sklar 25:49

Yes, I believe that social media, whether it’s TikTok, Instagram, Facebook, Twitter, have become very, very powerful vehicle tools for the consumer, and they are for brands and retailers. But they kind of social media kind of flipped, who’s in control somewhat upside down.

So it’s almost like the customer has more control over what it was. The customer always controlled how good a brand was always. But now it’s so evident and so prevalent, and so visible. And so out there, it’s like, there’s no hiding. So it’s like, you want a great customer experience to be out there to be tweeted, or to be put out there on Instagram, you want that out there. But in the same token, your bad experiences get put out there, too.

Sam Gupta 26:44

Yeah. And in fact, one of the things that I would like to highlight here is going to be the magnitude. I guess, in the older days, people did not have as much influence or as much penetration of their voice. I mean, let’s say if a customer is mad, they might talk to their friends, maybe 200 people might know about it.

Paul Sklar 27:04

You would write a letter to the chairman, to the Better Business Bureau. Today, you’re not writing a letter to the chairman. You might write a letter to the chairman and then post that letter on Twitter.

Sam Gupta 27:14

Right, and the impact of that is going to be your stock price is going to go down. That’s the magnitude we’re talking about you.

Paul Sklar 27:23

If I was a CEO, or president of a brand, or retailer, I don’t know how I would be able to sleep at night because I would be up worrying about my customer service team, my customer experience team, every single minute of the day. And are we doing the right thing because all it takes is one bad experience with one customer to put it out there? And you’re in recovery. You’re like in recovery mode. You’re kind of like you’re playing defense as opposed to offense.

Sam Gupta 27:56

Yeah, I couldn’t agree more with respect to your assessment of the customer experience. So that’s it for today. Paul, do you have any last-minute closing thoughts, by any chance?

Paul Sklar 28:05

Sam, I enjoyed talking to you today. And I hope that we’ll have a chance to talk further about this because I could go on and on and on about customer experience, and how it’s in customer service, and how it’s impacting. I think there’s a tremendous opportunity for brands and retailers to monetize every part of the experience at every touchpoint with the customer. So you know, I hope that we have time again in order to spend talking about it.

Sam Gupta 28:29

This is the thing that I have been telling you, Paul, that you know, I love talking to you because number one, you are super real, and they are real challenges, and definitely CEOs need to know about it. And you have so much insight that you bring from the field. And that’s what I care for, and my listeners care for. So I thank you for your contribution.

Paul Sklar 28:47

Awesome. It was a great show today.

Sam Gupta 28:50

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’ll learn something new today.

If you want to learn more about Paul, head over to thebeaconconsultancy.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 Michael Begg from AMZ Advisers, where he discussed the growth strategies for ecommerce businesses through the Amazon Marketplace. Also, the interview with Chase Clymer from ElectricEye, who brings a unique perspective on D2C from the angle of ecommerce toolset and Shopify.

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 30:01

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 Randy Johnston from K2 Enterprises, who discusses why process documentation is essential to manage growth. He also touches on different manufacturing organizations and how process changes in those organizations with straightforward examples that anyone could understand without an accounting or manufacturing background. Finally, he touches on some of his secrets on what makes Randy so efficient to be influential in the accounting and ERP community.

Chapter Markers

• [0:00] Intro
• [3:57] Personal journey and current focus
• [11:17] Perspective on growth
• [14:41] How to start mapping business processes?
• [19:52] Advice for businesses with no documented processes
• [25:12] Different manufacturing types based on products and geography
• [35:05] Closing thoughts
• [38:12] Outro

Key Takeaways

• If you say you’re going to do something, your word should be your bond. You don’t need a contract for that. If you say it, so it should be so.
• You can talk through a process by simply asking questions. What do you do first? What’s next? What comes after that? And then what happens? And if there are exceptions, you can say, Okay, if that happens, then what do you do? All right, then what happens and, and so realistically, your process maps are single steps with decision blocks.
• If it’s not in writing, it doesn’t exist. If you think you’ve got a process, and it’s not documented, you probably don’t have a process. Further, you can’t teach a process to somebody else if it isn’t documented in some form.
• If you want to simplify your lifestyle business, that’s when you document your processes, because you realize that you have to work a lot less hard.
• Most experts claim that there are seven different styles. And that ranges all the way from discrete manufacturing on one end to continuous processing or continuous manufacturing on the other end. If you back up just a little bit, batch processing would be a more limited style of continuous. And if you step through from discrete, you’re going to find made-to-order and make-a-stock and so on.
• In some areas of the country, you have very legalistic contract compliance that has to be done. And in other areas, it’s much more of a handshake style of business, a relationship style of business.

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About Randy

Randy Johnston, MCS has been a top-rated speaker in the technology industry for over 40 years. Inducted into the Accounting Hall of Fame in 2011, Randy is listed as a Top 25 Thought Leader in Accounting from 2011-2020. His influence throughout the accounting profession is highlighted once again this year by being a recipient of the 2020 Accounting Today Top 100 Most Influential People in Accounting award for the seventeenth consecutive year.

Among his many other awards, he holds the honor of being one of nine technology stars in the U.S. by Accounting Technology Magazine. Randy writes a monthly column for The CPA Practice Advisor, features for the Journal of Accountancy, and creates articles for both accounting and technology publications, and the author of numerous books.

He has started and owns multiple businesses, including K2 Enterprises in Hammond, Louisiana, and Network Management Group, Inc. in Hutchinson, Kansas. NMGI has supported CPA firms for 30+ years and is the largest managed service provider serving the CPA profession in North America.

His wife and four children enjoy many experiences together, including theatre, music, travel, golf, skiing, snorkeling, and model trains. His experience as a college instructor, management and technology consultant, and advisor to the profession will be evident to you in today’s presentation.

Resources

• Connect with Randy
  • Website | LinkedIn | Twitter
• Connect with Randy’s businesses
  • AccountingSoftwareWorld | NMGI | K2

Full Transcript

Randy Johnston 0:00

If you’re interested in success, and if you’re interested in growth, you’ll find that process is actually freeing, not limiting. So many of the entrepreneurial types and lifestyle businesses think that not having processes freeing, and frankly, I’m pretty sure the opposite is true.

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 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 0:55

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.

Without adequate planning, growth could fire back with chaos and confusion. As you navigate each stage of growth or inflection points, you will have an enhanced need to document your processes to discover bottlenecks and find areas for improvement. The accounting processes may also differ among manufacturing organizations and across geographies. Understanding these nuances and the need for process documentation will help manage your growth.

Sam Gupta 1:34

In today’s episode, we have a guest Randy Johnston from K2 Enterprises, who discusses why process documentation is essential to manage growth. He also touches on different manufacturing organizations and how process changes in these organizations with straightforward examples that anyone could understand without an accounting or manufacturing background. Finally, he touches on some of his secrets on what makes them be so efficient to be influential in the accounting and ERP community.

Let me introduce Randy to you.

Randy Johnston, MCS, has been a top-rated speaker in the technology industry for over 40 years. Inducted into the accounting Hall of Fame in 2011, Randy is listed as a top 25 thought leader in accounting from 2011 to 2020. His influence throughout the accounting profession is highlighted once again this year by being a recipient of the 2020 Accounting Today, top 100 Most Influential People in the accounting world for the 17th consecutive year. Among his many other words, he holds the honor of being one of the nine technology stars in the US by Accounting Technology Magazine.

Randy writes a monthly column for the CPA Practice Advisor, features for the Journal of Accountancy, and creates articles for both accounting and technology publications and the author of numerous books. He has started and owns multiple businesses, including K2 Enterprises in Hammond, Louisiana, and a Network Management Group Inc. (NMGI) in Hutchinson, Kansas. NMGI has supported CPA firms for over 30 years and is the largest managed service provider serving the CPA profession in North America.

His wife and four children enjoy many experiences together, including theater, music, travel, golf, skiing, snorkeling, and model trains. His experience as a college instructor, management and technology consultant, and advisor to the profession will be evident to you in today’s presentation.

With that, let’s get to the conversation.

Hey Randy, welcome to the show.

Randy Johnston 3:53

Well, thank you very much, Sam, and Good day to you and all your listeners.

Sam Gupta 3:57

It’s my pleasure to have you, and I’m super excited to have this conversation. Because of the kind of depth and insight you are going to bring, it’s going to be super helpful for our audience. Just to start off, can we start with your personal story and what you’re focusing on these days, Randy?

Randy Johnston 4:12

All right, happy to do that. And probably Sam, because I’ve been around a long time, the story will get a little long. And I’m gonna leave out a lot of details. But as it turns out, I’ve been doing technical work for over 50 years. So I’ve started programming in the early 60s. And that led to covering a lot of the big computers, mainframes, and minicomputers as I used to refer to it, IBM in the Seven Dwarfs, so it was IBM and digital and Burroughs and I’ve written code on all those platforms. And that led me down from mini computers into personal computers when they were first being created.

Randy Johnston 4:50

So a lot of the people that made the earliest of the personal computers, so Morrow Micro Decision and Osbourne, and all those guys who have known him for a long time, we wound up doing that and also wound up participating in the evolution of DOS and Windows. And then a lot of accounting software. So I had the good fortune of helping design, number of accounting software products used in North America and around the world today.

That really led me over to paperless. And then finally into CPA firms’ software. So today, I normally will tell people that I have infrastructure expertise, including the internet in the local area network, and then all these applications. And, frankly, because of the relationships, I know most of the CEOs, VP of development, and VP of Marketing, and most technology companies that you can name.

And in that light, it’s been a very interesting life. I do a lot of consulting on a regular basis around dominantly North America but have done work in Dubai, in India, and in Europe, as well. And our primary business is really twofold. I have a business called K2, where we produce continuing professional education in the US and PD in Canada for CPAs. And then, the NMGI business is consulting and managed services supporting CPA firms, banks, and healthcare entities 24X7 from Boston. So that’s a kind of a short version of what could be a very long story, Sam.

Sam Gupta 6:33

Well, that’s a very humble introduction. In fact, I was actually going to move to the next question. But before that, I want to bring one topic that is really important for your intro. So obviously, when I look at your bio and introduction, I cannot see anyone accomplishing what you have done, even though you have had a long journey. So let’s talk about some of those awards. Okay, so top 25 accounting influencers for straight-up ten years. How many awards do you have? Please tell me more about the awards. And how can one accomplish this much in one life? Please tell me.

Randy Johnston 7:11

Well, my wife points out to me, particularly since I’ve been home during the pandemic, that I don’t seem to meet a need as much sleep as she thought I did. I’m fortunate to really operate effectively on three or five hours of sleep. I know that’s not healthy, people tell me, but I’ve done it for years and years and years.

Frankly, from an award perspective, I really go into almost any situation, assuming that everybody around me knows more than I do. And I try to listen carefully and then make suggestions based on the experience. So you are correct. I’m in the top 25 thought leaders since 2011. I’ve been on the Accounting Today top 100 influencers in accounting since 2004 and nominated again this year. So we’ll know shortly if I’m included on that list. Again, I have outstanding technologists in the United States. And I could keep going on and on and on.

But the fact of the matter is, I am honored and humbled by the awards. But it’s not like I’m striving to achieve them either. So the bottom line is quite simple, Sam, you always go in just trying to do the best you can to help everybody around you. And recognize that what goes around comes around. And I very rarely ask for a favor. But when I do, the people that I’ve helped in the past are usually more than happy to jump in and assist when I make a request.

Sam Gupta 8:40

Oh, my goodness, I would love to help you. I mean, I don’t think you have ever asked. I was asking Randy. Could you tell me what your CTA is for this show? And you’re like, you know what, I don’t really have anything because I know so many people, I don’t need a CTA.

Randy Johnston 8:57

Yeah, well, and you know, I enjoy it, because I enjoy meeting people enjoy helping them solve problems. If I go back to my personal mission statement, which I wrote in the late 70s, as it turns out, I haven’t modified it much either. It’s to help as many people as I can use technology in the way that benefits them the most. That’s pretty simple. And you know, basically, I can listen to a situation and say, Alright, based on what you’re trying to do, here are the best solutions. I know, here are the best people I know, do an introduction and party on and you’ll have a pretty good living doing that.

So, you know, along the way, those types of philosophies have served me well. Because again, you get the opportunity to hang with a lot of really smart people that way, you learn from them. And the next day, you can act like you’ve known it for 40 years, and everybody thinks, wow, you know so much stuff. And it’s just because I am kind of like an elephant. I have a pretty good memory. And I never burned a bridge. Again, I’ll do anything I can to help people that are legal or moral. I tend to avoid things that I consider to be illegal. And I’m not the moral judge. But I don’t really try to assist people very strongly if they’re doing things that I would consider unethical.

Sam Gupta 10:19

Yeah. In fact, to me, when I talk to people who are on the top 100 influencer list, I get very different energy. To be completely honest, when I approached you, obviously, our podcast was not even live. And you responded to me right away. You were ready to do the interview, which was phenomenal.

I mean, for some people, it might be frightening to approach somebody like Randy. Obviously, you have a humongous accomplishment there, the new podcasters who are maybe starting. It could be a frightening experience for them to talk to people like you, people like Sarah Barnes-Humphrey, and I don’t know if you’re connected with her. She is a top 100 influencer in the supply chain space. We did an interview with her. There’s a lot to learn from her too. So I would highly encourage you to check out her episode. And I’m gonna include the link to our episode as part of this one.

Randy Johnston 11:12

Yeah, that sounds great. And so you know, everyday part I’m very, very, very pleased with.

Sam Gupta 11:17

Yeah, there’s so much to learn from you guys. And I’m blessed that I’m so lucky to have you guys as my guest. So now let’s move to the next question about the growth that I really wanted to cover, Randy. So tell me, what is your perspective on growth?

Randy Johnston 11:32

Well, clearly, I’m a bigger Pie Guy. So I believe that it’s not a matter of beating the competition, I think it’s a matter of doing the best you can possibly do yourself. And out of that will come new opportunities to serve more.

So when I look at growth, I’m looking at how we can serve clients best. And usually, I frame it with that thinking in mind, what’s services or products that our customers need? Or want, how can I provide that to them in the most seamless, easiest way possible, then the next thing that I’m looking at is how I can make the work environment of all my team members the most optimum, the most favorable, in other words, make it a great place to work. Then, I will look at the impact on the bottom line.

And what I’ve found through the years is the bottom line tight tends to take care of itself pretty well when you’re taking care of the customers. I typically will ask customers where I’ve got installation work done, if they know of other people that I can help with a common referral technique. In some cases, they say, Oh, no, in other cases, they say I’ve got a couple here. And so I’m very consistent about follow-up.

Randy Johnston 12:49

And I asked my team to be very consistent about follow-up. If you say you’re going to do something, your word should be your bond. You don’t need a contract for that if you say it, so it should be so, and so that’s another element of growth. Now, I probably can give even more formula along that line. But if you think about your, your listeners and how they are, they’re focusing on their own operations if they turn outward-facing rather than inward-facing, I think they’ll find the opportunity to grow as natural. On the other hand, when it comes time for working internally if you can optimize your processes, that’s a big deal, too.

Randy Johnston 13:28

I know that a lot of your listeners might be in manufacturing. For example, it is clear that process optimization through six sigma has changed the way the manufacturing world works. But I’m kind of a process thinker in general. So I use processes in all segments of my personal life and business life. And if you’re doing and following really good processes, it makes jobs easier, more repeatable, more scalable, and so forth.

So again, we could have another whole conversation about process optimization. And you know, I’ve been helping businesses with process automation for 30 years. In fact, that is an area now that I’m enjoying very much with robotic process automation, a technology to really make things happen with less human intervention. So the good news is most accounting software products today, most ERPs have processes in the systems. And when you’re going to buy a new system, one of the best things you can do is map your processes and use that gap analysis to select the systems that you’re going to implement for the next few years.

Sam Gupta 14:41

Okay, so what would be advisable for someone who is trying to map their processes for the first time, and they don’t know how to be organized, because mapping the processes sounds easy, but it can be difficult, especially if you don’t know how to go from point A to point B.

Randy Johnston 15:00

Well, through the years, I’ve evolved a process of teaching process mapping that takes about 20 to 30 minutes, maybe 50 minutes max, and enables people to do this. So I’ll describe it verbally for your listeners. And for you, Sam, and I’m going to talk about it in terms of levels.

Because if you think about airplanes that are flying at 30 or 40,000 feet, you have this super high view, the 40,000-foot view, basically is very broad statements about your processes level, you know, the next level down, the 30,000-foot view gets you a little closer. And then, as we go to level three mapping, we start getting into more specific processes. And then, at level four, we get very specific around.

Now, that probably a simple way that you can picture that is all of us deal with processes. I don’t know if you’re a big breakfast eater or not, or Sam, but most of us know something about how to make breakfast, even if we don’t like the meal. There’s several of us that will have cold cereal, or we’ll have oatmeal, or we’ll have eggs or whatever. And if you picture, you know, a level 1-2-3-4 mapping process of making breakfast, you would have inputs of, let’s say, eggs, and Canadian bacon and potatoes and so forth.

Randy Johnston 16:18

And maybe your level one map has just a simple statement, make breakfast, and the output might be scrambled eggs, or omelets, or fried potatoes or cooked bacon, for example. Now the level two map may be preparing ingredients, cook ingredients and serve ingredients. And so that’s still pretty high level. But if I take you down another level, notice that we could have something about each of the steps of making breakfast, for example, how to make toast or how to cook bacon, or how to make eggs.

And we could lay in a line out the steps on that. So perhaps for making eggs, it might be that you combine the ingredients and prepare them you stir the ingredients while cooking. And you serve the ingredients on the plate. And I could give you a lot more steps.

But the fact the matter is combining the ingredients probably requires a level four map. Because in that particular case, if someone’s never cooked eggs before, perhaps they have to have instruction, as you know, obtain a bowl. So you can crack the eggs. And, you need to have X number of eggs per person and what you put in there. They might not know that you put in salt and pepper. And in our household, we tend to do cream cheese.

Randy Johnston 17:36

And you know, so it’s all those detailed steps that we sometimes take for granted. Process maps are the same type of thing. There’s high-level level one, and then a little lower level two. Again, I call those the 40,000-foot view and the 30,000-foot view. Then you get down to level three, which typically does have a process map more like a flow chart. And then, in level four, you typically will use deployment maps, sometimes called swim lane charts, which really have a similar take, but it talks more about who does it, when they do it, how they do it, and so forth.

So the fact of the matter is you can talk through a process by simply asking questions. What do you do first? What’s next? What comes after that? And then what happens? And if there are exceptions, you can say, Okay, if that happens, then what do you do? All right, then what happens and, and so realistically, your process maps are single steps with decision blocks. If the ends are true, false is only binary are two answers, if you will.

Randy Johnston 18:38

And by the time you map that out, you will have your existing process. If you’re trying to improve it, then you might do a To-Be chart and define what the new process should be. Now, just simple guidance for your listeners. You know, my NMGI business, by the way, we’ve had for a few years. But I reduced and simplified my processes this past year down to about 181 processes. In the prior year, I think I was running off of 212 processes. And through the years, we’ve worked on different things to optimize our processes along the way for small businesses. It’s not unusual to have as many as 150 processes.

For manufacturers that I’ve worked with. We’ve mapped out nearly 500 processes 425 and one client case I’m thinking about, and we simplified their processes down to 350. That’s still that’s a lot of process maps, a lot of things to maintain it but when we optimize the process maps, exceptions, fault errors were reduced. And the processes were simplified. And we could implement those inside the accounting software too.

Sam Gupta 19:52

Interesting perspective. And I’m curious now because I don’t know how many manufacturers or distributors, especially in the lifestyle business ( some of the guests have defined the lifestyle businesses, anything below $25 million. Guests like Jim Gitney talk about this. He talks about the inflection points. There is another guest who’s coming to the show. His name is Nick Jackson. He talks about lifestyle business as well).

So I don’t know how many lifestyle businesses would actually have their process documented. And I can see so much value in documenting that because that’s how you, you will get to know if you have an opportunity for improvement. So what would be your advice to businesses that don’t document their processes at all?

Randy Johnston 20:39

Yeah, this is a very simple piece of advice, Sam. If it’s not in writing, it doesn’t exist. If you think you’ve got a process, and it’s not documented, you probably don’t have a process. Further, you can’t teach a process to somebody else if it isn’t documented in some form. So on lifestyle businesses, you know, a lot of times people think, Well, you know, we just kind of are loose and respond, and so forth. And again, I know a lot of lifestyle businesses.

But if you want to simplify your lifestyle business, that’s when you document your processes, because you realize that you have to work a lot less hard. So maybe this would be another way to say. If you want to work hard, don’t document your processes. If you want to work easier, document your processes. And I have learned in process mapping over the last few decades that the fact that matters is if you’re delivering a great client deliverable, there’s a lot of process behind it. And the laziest person often will find the easiest way to get the job done. So don’t criticize people that look like they’re lazy. They’re probably just being super efficient, as long as they’re always delivering a consistent product or service.

Randy Johnston 21:48

And if you think about shipping companies and the logistics of moving products, and we’ll just pick on the big boys here, the FedEx, the Airborne, the UPS. Those types of package delivery companies all over the globe, their processes are very tight and very optimized. And if we take another big distributor like Amazon, you know, they’ve refined the processes in their warehouses, the last report, I know 21 times, and today, they’re trying to use more robotic, more robotics in those warehouses.

Unfortunately, in warehouses where they’re using robotics, the injury rates are higher because the people have to work faster to keep up with the robots. And so yeah, they’re reflecting on those processes. But now, let’s take it all the way back down to the smallest of small. If you’re running a little home Etsy business, for example, you’re gonna receive orders, and you’re gonna have to ship orders. How do you optimize your shipping processes? How do you package things so they’re not damaged?

I mean, if you just start thinking about it, you’re gonna realize pretty quickly, you’ve got processes. And I know, this is really a business podcast. But the fact of the matter is, think about your personal life, you have processes that you do every day, and you do those processes over and over again. And if you begin to become a process thinker, and you optimize your processes, you can realize life’s a lot easier when I have an optimized process, and I waste a lot less time.

Sam Gupta 23:20

Yeah, I could not agree more with that assessment. To be honest, I mean, documenting does help because that actually helps with reflection. If you don’t know what is going on in your processes. And if you’re never going to document, it’s going to be tough. And especially if you have multiple people in the team who are collaborating on the same process, they are probably going to define the process the way it feels comfortable for them. So you are never going to have a sort of decentralized process overview. And because of that, there could be a lot of issues,

Randy Johnston 23:51

A lot of issues, you’ll have dropped balls, you’ll have contingencies, you won’t have a team effort. You’ll have a bunch of individuals. I don’t know if you’re much of a sports fan but just think about the concept of a team versus individuals. And you know, in most team sports, if there’s no superstar unless they know how to play as a team. That team is going to be successful. So, this business is, in that light, a bit of a team sport.

And yes, you can have individual sports. Let’s just pick on Golf as an example. But the fact of the matter is that even for an individual sport, like Golf, there’s a lot of team players that make it possible. It’s not like you go out. I mean, how many of you manufacture your own balls for any sport? They cannot. You might make your own arrows if you’re an archer. You might make your own darts if you throw darts. But most of us don’t manufacture our own soccer balls, for example. It’s just not what we do. So that’s a little bit of stretch there.

But I do believe if you’re interested in success, and if you’re interested in growth, you’ll find that process is actually freeing, not limiting so many of the entrepreneurial types and lifestyle businesses think that not having processes freeing. And frankly, I’m pretty sure the opposite is true.

Sam Gupta 25:12

Okay, amazing. And I actually wanted to talk in a bit more detail there with the examples that you gave. They’re so exciting. I wish I could talk for much longer on that topic. But we want to make sure we are covering the other important topics as well that we wanted to cover.

So I know that we wanted to cover the different manufacturing types and how the process is going to vary in those manufacturing sales. And also, you mentioned that geography is also important from the process perspective. So how North East is going to be different from the West. So would you like to talk about those two topics?

Randy Johnston 25:48

Yes, Sam. So let’s pick that up for manufacturing businesses. There’s a spectrum of manufacturing styles. Most experts claim that there are seven different styles. And that ranges all the way from discrete manufacturing on one end to continuous processing or continuous manufacturing on the other end. If you back up just a little bit, batch processing would be a more limited style of continuous. And if you step through from discrete, you’re going to find made-to-order and make-a-stock and so on.

Now, it turns out that there are products that are made to satisfy these different segments. So there are products whose original design basis was for discrete manufacturing, there were some that were made for batch manufacturing, there were some that were truly made for continuous or process manufacturing. And, if you’re going to buy products, you need to match the product to the style of manufacturing that you have.

Randy Johnston 26:57

So let’s use as an example, the Milwaukee area or down into Indiana or Ohio or up into Toronto, you kind of the center part of Canada in the US this traditional heavy manufacturing of some people called the Rust Belt, because it’s been around so long, and some of the manufacturing facilities have deteriorated. There’s a lot of capability that’s been done there. And a lot of very innovative work in manufacturing has occurred there.

So, if you think about car manufacturers and isn’t as an example, and your listeners may not know, but I’m from Kansas, which is the center part of the US over in Wichita. Most of the general aircraft companies have bases there. So Learjet and Boeing and beach, and Cessna, and so on.

So there’s a lot of aircraft manufacturing. And in Wichita alone, there’s a little over 200 machine shops that support the Boeing operation, the 737 fuselage operation there. The same thing has happened over in Charleston with the 787 Dreamliner. In Charleston, there were not that many machine shops to support aircraft. But once Boeing set their plan up there, again, there are 200 plus job shops.

Well, across the Midwest, if you will, there are hundreds, I would probably venture to say 1000s of job shops that do particular functions for these various large-scale manufacturing operations.

Randy Johnston 28:31

And each of those job shops actually does most likely make-to-order or other types of operations. And so the scale that’s involved here also determines the size or type of manufacturing software you might buy.

So on my website, which is accountingsoftwareworld.com. I had maintained that accounting software site for 35 plus years at this point because I actually created it before the internet was very popular. Then it got a lot easier by the time we hit the 90s. And we started seeing a lot more of the web browsers and things like that.

But no, I have a model of a pyramid that describes five tiers of accounting software. I like a number of tier one through tier five. So tier one is enterprise. Tier two is large SMEs, and tier three, four, and five, the same type of deal. And my rule of thumb is, if you’re smaller, you’re probably going to use a tier five product that’ll probably handle you up to one, maybe as much as $5 million in revenue. A tier four product is likely to get you from one may be up to $50 million, maybe as little as $10 million.

Randy Johnston 29:47

The Tier three products will tend to do $10 to $100 million, and the tier two products will tend to do $100 million up to a billion and then a billion-plus. So it is quite normal that we could look at products that fit different tiers. I will call a few by name, Exact or Acumatica or Epicor or Open Systems or Macola or Job Boss or Deltec or Syspro. Each of these different types of products has different capabilities. And when you get up into upper-tier two and tier one, that’s where you get your Infor, and your SAP, and Oracle’s.

So the real question is, how big are you today? How big would you like to be? How big do you think you’ll get over the next ten years? Because generally, if you implement them in manufacturing or an accounting software product correctly, you’ll be able to use them for upwards of 10 years. And frankly, the only reason I switched at the end of 10 years is for technology advancements if the accounting vendor does not keep up.

Randy Johnston 30:52

Now, Sam, I think the second part of your question was about style differences. So in that particular case, notice that the way we do business in the Midwest versus the way we do it in the East, or the West, or for that matter, the South, North, in other words, the various areas, there’s a bit of culture around that.

And in some areas of the country, you have very legalistic contract compliance that has to be done. In other areas, it’s much more of a handshake style of business, a relationship style of business. Now, business is competitive. And I don’t know that some of the relationships are honored as much as they may have been in the past.

But the fact of the matter is, if you’re trying to grow your business, you should be able to make a relationship. And remember that if you meet or exceed what you say you’re going to do, you’re more likely to be invited back. So the way I usually talk about that is I like to underpromise and overperform.

Randy Johnston 31:54

So you want to go beyond what the client expected. And some would argue, well, that means you’ve got excess costs, and you’re throwing extra labor or material in a way that you shouldn’t. And I would argue the opposite. What you’re doing is you’re delivering a higher value product or a higher value service, and you’re less likely to be offset by your competition.

So if, in fact, it’s an all-out bidding war, perhaps you’re not in the right segment. Because if you have the very specialized capability, or you can evolve and develop that, you’ll wind up with a niche market. And I’d like for you to think about what’s your specialty? What do you like to do? Is it something you’re passionate about? How do you grow that?

So I’m actually picturing three different manufacturers for our conversation. I’m not going to name them. But I can see that your listeners use all three of these manufacturers’ products because they dominate their market share. And I believe it would be impossible for your listeners not to be using their products. But you probably don’t even know that they exist because they’re large-scale manufacturing that fits in the supply chain in products that I think all of us use. That’s kind of interesting because when I start, if I’d start naming them, you would most likely never have heard of them. But how did they get there?

They focused on a single area. They got better and better at it. And they continue to just dominate the market. In a few cases, they’ve made acquisitions of competitors. But in most cases, they’ve grown their businesses organically, and they do not have significant competitors. And they just continue to fly under the radar, making exceptionally good profits running a very interesting, we’ll use your earlier words, lifestyle business, it just happens to be a big lifestyle business.

Sam Gupta 33:50

That’s an amazing story. And I wish I could check them. To be honest, that’s going to be so inspiring to know about a company that we do know, but we are using their products on a daily basis.

Randy Johnston 34:02

As a matter of fact, I can guarantee it. And it’ll be an interesting conversation. But even I was just describing that I’m actually picturing another three or four or five providers that are in different parts of the US market, that I got the privilege of meeting them because I taught their CFO, continuing professional education.

And then they pulled me in to introduce me to the business and to help optimize it. It’s like, wow, this is a really fascinating business. I didn’t know you guys existed. And then when I realized what their sales volumes are, and their margins are, it’s like, wow, it’s a very interesting business. And, again, I would just say for, for one example, in Texas, I can almost guarantee every one of you are using products that have been handled by that particular business. But it’s a relatively small operation and a very interesting setup, and because it’s nondisclosure, I can’t tell you what all it is, but it’s like this is very, very cool. I didn’t even know such a thing existed until I was invited indoors.

Sam Gupta 35:05

Yeah. And the beauty of, you know, podcasting is that we get to know a lot of businesses and a lot of guests, and I would not have known them if it were not for podcasting. So I love this. On that note, I think, you know, it’s about the time right now. Do you have any last closing thoughts?

Randy Johnston 35:24

Well, I know a lot of your listeners are interested in growth. And with that in mind, I would suggest that you be very clear about setting your goals. That’s very common advice. But when you set your goals to make sure that you’re very passionate about what you’re choosing to do. Some can take a hobby and turn it into a business. And the fact of the matter is, the goal is not to make tons and tons of money.

In my mind, the goal is to do something that you love so dearly. You would do it without getting paid for it and that you do it so well that people are glad to pay you for your expertise, products, and offerings. And so be thoughtful about it may take you a while to come up with that. But listen to your potential customers. Listen to your gut or heart, depending on which way you want to say that.

I think you’ll find a new opportunity because new products are being developed all the time. The opportunity is great, whether it’s local, national, or global. And you may be one of the next big players in the market, even though today it’s just a sparkle in your eye and an idea in your mind. Just create it and share it with others.

Sam Gupta 36:44

Okay, amazing. That is such beautiful advice. And I’m so lucky to have you, Randy, on our show. Thank you so much for your time.

Randy Johnston 36:52

Pleased to do it, Sam and I wish you and all of your listeners’ ongoing success and good health.

Sam Gupta 36:59

I cannot think of guests enough to come to 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 Randy, please visit randyjohnston.com, accountingsoftwareworld.com, nmgi.com, or K2e.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 Brian Goffenburg from VitalHub, who touches on the differences between accounting in a public and private company and why auditing is essential for most companies. Also, the interview with Wayne Sadin, who brings a unique perspective on why business processes are more important for growth than individual business systems.

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 38:12

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.