Are You Ahead of the Curve or Behind It?
As the adage goes, there is nothing more constant than change. As business leaders, we aim to drive change as we implement our vision and long-term strategies. If we plan thoughtfully and with intention, our purpose can give us more control over the ways we change, the pace of change, and the extent to which the changes create a competitive advantage for our companies. But sometimes, change is forced upon us by forces beyond our control, and we have to change in ways we would not necessarily have chosen. Insofar as we can see these forces coming, it is better to get out in front of them and chart your own path forward, rather than wait until you are pushed to change and have less control over the process.
So, let me ask you this: What are you doing about environmental sustainability?
At Greenfield Global, our vision and purpose are simple: “<350”. It’s on our t-shirts, it’s on our hardhats, it’s on posters throughout our offices, and it’s at the top of our minds when we make even the smallest decision. It represents our goal and our purpose – to do everything we can to help the earth return to CO2 levels below 350 parts per million in the atmosphere – the level required to return to equilibrium and sustain life on our planet for thousands of years to come. Therefore, our purpose is in tight alignment with the drive toward more sustainable life on earth with the products we make (biofuels, beverage and industrial alcohols, and solvents) and how we make them. But even companies whose direct purpose, enterprise, and identity are not directly tied to this initiative will soon be forced to think about the sustainability of their activities. Many already are.
Why? Because governments will tax carbon emissions, customers will demand lower carbon-intensive products, carbon-borders will be formed, our businesses will be impacted by the environmental consequences of climate change (floods, fires, droughts), and our children, grandchildren, and future generations will depend on it.
There is still time to ask the question, can we get out in front of this movement and drive our path forward, or will we be pushed in certain directions because of it? At Greenfield, we have been able to retain control by getting out in front of it and we have been able to create significant competitive advantages as a result.
Greenfield is the largest privately held ethanol producer in North America. We are one of the only companies that makes ethanol for the full range of products that contain it or require it for production, from fuel, to pharmaceuticals, to adhesives, to fragrances, to inks, to flavors, to hard seltzers and more. There are already regulations and mandates around reducing the carbon intensity score of fuel-grade ethanol, and of course we are doing that, but as of today, there are zero requirements in place to reduce the carbon intensity score of ethanol produced for other purposes. Because of our vision and our purpose, however, and because we expect it’s coming in the future, we are doing it anyway.
We have a plant in Chatham, Ontario, Canada where about 80% of the ethanol we make is high purity alcohol that goes into hard seltzers, vodkas, gins, flavors, pharmaceuticals and so on. Not one of the companies that buys our ethanol from this distillery has ever asked about our carbon intensity score. We saw an opportunity to lower it, however, and because it is right in line with our <350 mandate, we jumped on it.
When you produce ethanol, you separate corn into its three parts – protein, starch, and CO2. The starch is fermented with yeast to make ethanol, the protein is dried and made into meal for animal feed, and the CO2 is, typically, vented into the atmosphere. Because we hold all our initiatives and processes up to our <350 standard, we wondered if we might be able to find a better outlet for this excess carbon dioxide. Across the street from our plant, there is a large, 85-acre greenhouse for growing tomatoes. We all learned about photosynthesis in school; plants need CO2 to photosynthesize and release oxygen. Why not send our CO2 over there? In cooperation with the Canadian government and the greenhouse owners, we embarked on a project to design and build a system that would capture and send not only our CO2, but also the excess heat generated by our plant, across the street to the greenhouse.
Despite our partnerships and several grants we received, this initiative was expensive and a lot of work. It certainly would have been cheaper and easier to continue to vent the CO2, like other ethanol plants continue to do. We were not under any pressure at all to make this change, but we believe it was the right thing to do, and now we have the further advantage of having created something that can serve as a model for future projects. Since we built the system, the greenhouse has been able to secure grants to expand its operation and soon we will be able to send them even more of our CO2! It’s a win for us, a win for them, and a win for the planet.
Outside of ethanol, we have also turned our attention to green hydrogen, green methanol, and renewable natural gas. Very few companies are producing these critical products currently, and there isn’t even a market price for these sustainable commodities. But we know there will be, and we will, again, be ahead of the curve.
It has not always been an easy decision to strike out in these new directions. The engineering is very challenging, getting customers, investors and government on board is time-consuming, and even convincing some board members can be difficult. But when we remind them that we have a set of core competencies that are transferrable and that allow us to be pioneers in this work, the rest becomes execution. This important work is in line with our mission and our vision, and it will set us up to be leaders in the new low carbon markets that are certain to arrive in the near future.
The bottom line here is twofold. First, decarbonization is not a fad. It is going to shape businesses, across all industries, in the coming years and decades. As Evergreen® leaders, we lead multi-generational, private companies. Whether your purpose includes environmental sustainability or not, we have an opportunity to take the lead in decarbonization and, for now, report to ourselves on those achievements. We don’t have to report to public shareholders who prioritize short-term profits over long-term success or compare us to competitors that yield larger dividends or share buybacks. With this flexibility, we are well-positioned to lead the charge and take our places as industry leaders in sustainability when the mandates come and when customers demand it. And second, if we are truly thinking about being multi-generational, if we are looking at our families benefitting from these great companies we have built, we have to be ahead of the curve and not behind it. We know what happens to companies that fall behind the curve.
All businesses are going to be challenged by climate change and the need to decarbonize across industries–supply chains, feedstocks, commodity prices, reporting requirements, customer demand, regulatory burdens, raw material availability, etc. No matter our industry or the orientation of our purpose, it’s time to get plans in place and execute.
Modern Leader
This article draws heavily on JeVon McCormick’s recent book, Modern Leader, published in July 2022.
Can you be a leader if you are following a well-worn playbook? Doesn’t that make you a follower? Further, what if that playbook is broken? For too long, in education, in business, and in society, we have been following a playbook that is indeed broken. The good news for leaders of companies is, stepping outside of it is not only the best way to right the wrongs it perpetuates, but also a fantastic way to reap the benefits of a larger and better pool of applicants for your company. It is the only way to lead us into the future.
Before we continue, I want to clarify that I think any discussion of blame must be laid aside. The question of fault gets us nowhere. But we must agree that although it may not be our fault that the system is broken, it is certainly our responsibility to fix it.
The essential problem with the playbook we have been following, specifically as leaders of businesses, is that it leaves no space for an enormous portion of our population. As Evergreen® leaders, I think we are better poised than anyone to agree that good people are the key to a successful business, so why wouldn't we want the deepest pool possible of good people?
There was a time when it was “business first,” but it’s become obvious that it must be People First; you need great people in your business to build great processes, and therefore drive Profit. And Profit, while always a partner to Purpose and the other 7Ps principles for Evergreen leaders, is a wonderful thing! It allows our companies to grow and thrive, it allows us to support our employees, and it allows us to do good in the world in the best way we can. So how do we move toward a place where we preserve, or even increase profit, all while stepping outside of the broken playbook? I propose three first steps.
Open Your Eyes
First, look around and acknowledge that we live in a society characterized by extreme inequality. It’s easy enough to talk about merit, about the value of hard work, and about the very few, visible, and wonderful examples of people who have managed to transcend the life they were born into. But it’s not as simple as equal effort = equal opportunity. And it starts early. A child born into poverty, as I was, or even just born poor will be exposed to 2,000 words by the time they are two years old. This becomes their base as they develop their linguistic functions, their brains, and their ability to learn. A middle-class child, in contrast, will be exposed to 30,000 words in the same time frame. Imagine the advantage these children have already, at age two. They are still years away from school.
In order to begin to make change, we must first accept that change is necessary. Open your eyes.
Open Your Doors
When the two children described above–let’s call them ReVonté and Blake–grow up and one day send you their resumes for an open position in your company, the old playbook and the habits formed around it kick in. Both candidates have undergraduate degrees, but they are far from being on equal footing.
ReVonté managed to complete four years of college, spending the first two in a community college and the last in a four-year state school. All throughout, he had to work to pay his way, which meant it took him more than four years to get his degree. Further, in the summers, he had to make as much money as possible, which put him out of the running for an unpaid internship in your industry. And finally, his name is ReVonté, which clearly identifies the world he comes from.
Blake went straight from high school to a four-year college and finished in four years. He did not work during the school year and was therefore able to focus exclusively on school and earn top marks. During the summer, his dad’s friend helped him get an internship at a great company, and though it was unpaid, he was able to live at home. He has, as a result, real work experience.
It’s easy to see which candidate is most likely to get an interview, and for reasons that, under the old playbook, seem reasonable and fair. But let me ask you to consider this: Which young man had to demonstrate more perseverance, more grit, and more resourcefulness to get where he is? You won’t know for sure until you invite them both in for an interview. Open your doors.
Open a Backpack
The old playbook, as we saw in the example above, rests upon the logic that education is the key to preparing people for jobs. Yet the inequality that began when ReVonté and Blake were two years old just got worse as they moved into school. It’s reasonable to expect that students make an effort, work hard in school, and strive to learn. But what if they don’t have the most basic supplies to complete their assignments? What if they don’t have a computer? Or what if the school gives them one, but they don’t have internet at home? The list of reasons that school is not the great equalizer we assume it to be is extremely long. If we want to continue to point to education as the key, we must make sure good education is possible. For everyone.
At Scribe Media, we saw this problem and decided to literally Open a Backpack. We found the school in our area with the highest number of kids getting free lunch and we decided to provide a backpack filled with ALL the supplies on the school’s list for all 500 kids in the school. We all came together and filled the backpacks ourselves in what became an outstanding company-wide event. It cost us $18,000. And it was a write off.
If you are going to continue to preach and believe that education is the key, then help make education equal. Open a backpack.
As you begin the work of opening your eyes, your doors, and a backpack, there are concrete steps you can take to move away from the old playbook. For example, as you prepare to write a job description for a new opening you are about to post, ask yourself, is a college degree really necessary for this job? What are the skills, rather than the degrees, that will make a person successful in this role?
As you prepare to head into an interview, instead of creating a list of questions focused on education and work experiences, step back and think about the characteristics you hope your new hire will have. Are you looking for curiosity? Are you looking for someone who is a self-starter? You might have more success discerning whether a candidate possesses these characteristics if you broaden your scope and ask about life experiences in general. The keys to perceiving the true strength of a candidate’s character might not be far under the surface, but your questions need to leave room for them to rise to the top.
The modern leader will be the leader who looks to others to help understand the big picture, and who designs a playbook that makes space for both ReVonté and Blake. The modern leader will not simply tolerate or accept, because both of these terms still imply insiders and outsiders. The modern leader will push past his or her comfort zone, invite ReVonté and Blake in for an interview, get to know them both, hear both of their stories, and then decide who has the skills necessary to do the job.
Carving Out a Space to Give Back to Science
A typical Contract Research Organization, or CRO, will contract with companies in the pharma or biotech industry to help them design, manage, and analyze various aspects of clinical trials that are conducted to study the safety and efficacy of new drugs. Most small to medium-size CROs will typically grow until a point when owners or investors will look at selling to either private equity firms or a larger CRO. It’s a lucrative path, but it’s not the path of my Evergreen® company, Innovaderm.
I began my career as an academic researcher. Twenty-two years ago, I started Innovaderm, and five years later I left academia to devote my entire time to my company. We are a CRO that specializes in dermatology, and though our headquarters is located in Canada, we also have employees in the U.S., Spain, India, and Poland. Like most CRO’s, we contract with pharma and biotech companies on studies, in our case involving treatment for diseases of the skin. A client may come to us with a drug they think may improve a certain disease like psoriasis. We might help them design the study, write the research protocol, obtain the proper approvals, manage the project, coordinate and monitor the sites conducting the study around the world, and have our biostatisticians and data managers analyze the data.
There are 3 phases of clinical research: phases 1, 2 and 3. Phase 1 is usually the first study in human beings and focuses on drug safety and tolerance. Phase 2 is the first study in a patient population having the disease for which the drug is developed. Phase 3 is a larger study, or often two identical larger studies, that are needed before a drug can be marketed, to characterize the safety and efficacy of the drug.
Most of our time is spent managing phase 2 and 3 studies, which is typical CRO work. However, between 5-10% of research projects that we manage are where we are unique and different from our industry peers. This is where our Evergreen philosophy sets us apart.
Often, we have ideas for studies that may not interest our clients, but whose results would be important for advancing science and treating people more effectively. In what we call Internal Studies, we fund and conduct these studies on our own. Here’s an example.
A significant number of people suffer from eczema on their hands. It can be very painful and can prevent people from working or functioning normally. Studies to better understand the cause of hand eczema have been limited because patients often refuse to have a biopsy from their hand, which is a very painful procedure. We recently initiated an internal study on hand eczema to better understand this condition, using non-invasive imaging techniques and techniques to study gene expression and bacteria on the skin. If we can advance understanding and treatment of this condition, we would be able to help a great many people. This study is entirely internal; we have no sponsors, no partners, and no one company will profit from our work, including ours. We simply hope to advance science’s understanding of this disease. It’s a People First initiative in the broadest sense of the term.
A few years ago, I wanted to find new ways to be able to fund and protect the future of non-industry-sponsored drug studies so we created the Montreal Dermatology Research Institute (MDRI), a non-profit through which some of this work can be done. Innovaderm makes donations to MDRI which can fund studies related to skin diseases that are conducted in an academic environment. An exciting MDRI initiative that was announced in 2021 is a multi-year grant for research in skin-related, neglected tropical diseases. A disease is typically categorized as ‘neglected’ when it exists in a country or region where it is difficult to adequately fund research, in other words, lower-income countries and regions.
Every week, I receive emails from people that want to buy our company. I say, “No. That’s not what I want to do.” Because I know what will happen. If we sell the company, the 90-95% business that we do that is making money will become the focus of the company. The 5-10% that is for the advancement of science will not be interesting to them because it is more of an expense. It will disappear. In addition, the buying company would not donate money to a non-profit such as MDRI, would restructure Innovaderm, and a large number of people would lose their jobs.
I don’t want Innovaderm to be like the other CROs. My philosophy is aligned with the Evergreen 7Ps® principles. With the non-funded internal studies we conduct and the donations we make to the MDRI, we are deeply committed to giving back to science. Because of this, we are unique in our industry. Most CROs are driven to make as much profit as fast as possible and do not embark on projects that don’t generate profit. That’s what makes us different. And that’s the reason I am a member of Tugboat Institute®.
The Key to Building a Global Business
Before becoming the seventh generation President & CEO of Hollingsworth & Vose, an almost 300-year-old global leader in filtration and energy storage solutions, I spent seven years living and working in China. The experience changed the way I think about business and the world and taught me one fundamental lesson that drives my work today. It’s not your revenue, your number of employees, or even the addresses of your offices that make you a global company. If you want to truly be global, you have to be global in your thinking, in your mindset, and in your infrastructure.
My journey to this realization started in 2007 when I was working for General Electric and signed on for two years abroad. The initial plan was to go to Belgium, but about six weeks before we were slated to depart, my wife and I found out that plans had changed and we were off to Shanghai, China instead. We had both been eager to spend time abroad, so we adjusted to the new plan and set off with our children, who were four and five at the time.
The original assignment was for two years. We wanted to make the most of the experience, so we made a few choices right off the bat that were not typical for expats. We enrolled our kids in a local international school, rather than the American school, and despite the fact that most of our Irish, English, and Australian friends lived in heavily expat neighborhoods, we chose to move to a very local neighborhood instead. We did do most of the other, usual expat things: language lessons, classes on how to assimilate, and classes on the culture of China. In the early months, I would have told you I really understood China and was becoming an expert. But as we neared the end of our two years, I found that the more I learned, the less I understood. I was not ready to leave.
Around that time, I had the good fortune to meet Val Hollingsworth, President and CEO of Hollingsworth & Vose, which today serves the global market with 13 R&D facilities strategically located in the Americas, Europe and Asia. At the time, Val was looking for a new managing director for H&V’s expanding operations in Asia. Drawn by H&V’s reputation for innovation and its commitment to creating a cleaner, healthier, more sustainable world, I left GE in 2009 and joined H&V. Over the five years I spent in the role of Vice President and Managing Director for H&V’s Asia operations, my learning and understanding of what it means to be a truly global company shifted dramatically.
My years at GE were a great start to my career in China; GE was extremely well-established in China, and I learned a lot from being part of their large team. When I got to H&V, which had a smaller presence in China at the time, I started to really learn the complexity that is China.
For one thing, GE was firmly a western company operating in a foreign country. I learned a lot about managing a business, but I was managing a western business with a western mindset. The members that were not from the west were expected to adopt the culture and practices in place. At H&V, we were, as we always have been, heavily innovative and interested in creating something new. Initially, our strategy was to serve our western customers in a western market, but we were struggling. As we looked for ways to innovate and improve, we started listening to the local markets as well. We saw great opportunity there and started moving to become more global – or to become global in a different way. Doing so would make us a valuable partner and a true worldwide leader.
In terms of the specific skills and lessons that I learned as I moved through this experience, the biggest ones are related to communication. Of course, learning the language of a country affords an important window into understanding a culture. But it’s not all about language. Probably because I didn’t have a perfect understanding of the language, I found that I started to develop other ways to try to understand what people were saying to me. I paid close attention to tone, to body language, and to other non-verbal cues.
In China in particular, people will always be unfailingly polite and will tell you things in a way that sounds pleasant and positive. But there is usually a subtext. In the west, for example, once you have a contract, you have a deal. But in China, it’s all about relationships. A contract is just the start. I learned to pay attention to people’s behavior and take the time to develop that relationship, to ensure a good outcome for our endeavors.
Within the company, I started to see that we had been hiring the wrong people, too. It is typical for a foreign office of a U.S. company to look for the people who speak the best English and to assume that they will fit in the best and therefore be the most valuable. But I learned that intellectual curiosity and a willingness to dig in are by far the most important characteristics in a new employee. And if they come from a different cultural and linguistic background, that is actually a bonus, not a hindrance. I understood that if we wanted to succeed in Asia, we needed people who could understand the local markets and think in an eastern way.
Now that I am back in the States, I see that that the value of a diverse team with a diverse mindset is important no matter where you are if you intend to be successful on a global scale. Yes, it takes a willingness to make an effort and a willingness to get past the discomfort of not understanding everyone’s perspective right off the bat. You have to pay attention to things such as not over-using colloquialisms in meetings and being sensitive to the fact that a meeting you schedule for late morning will fall late at night for teammates in Asia. But the rewards of working with a diverse team outweigh the challenges many times over.
This goes for gender equity on your team too, by the way. They are great at this in China; having had a diverse and gender-mixed team, I never want to go back. If you are not actively recruiting female candidates, you are missing out on 50% of the great people out there.
Since I’ve returned home, I have also realized how diverse this country is. I hadn’t seen it before, but we can be very regional and factional, which also adds strength and diversity to a team.
At H&V, we have been moving toward a more open and diverse mindset and building a workplace where all are welcomed and heard for some time. It’s a process. I am excited to bring my international perspective to the table to strengthen the work that was already underway and to help us become even better. Study after study has shown that diversity strengthens a team, but now that I have lived it, I don’t need to read the studies. It’s happening right in front of me.
Purpose Plus Learning Can Make the Impossible Possible
“People who say it cannot be done should not interrupt those who are doing it.”
- George Bernard Shaw
I am Chairman & President of Shasa, a fashion brand with more than 100 stores in the best shopping malls in 31 of the 32 states in Mexico. My brother Carlo is CEO and together, we founded the company in 1990. We started from scratch. Today, we are a strong and proud Evergreen® company, but I can’t say that the purpose that drives Shasa in 2022 is the same one that has driven us from the beginning. It has been a journey characterized by challenging odds, daunting obstacles, and, above all else, constant learning.
My early childhood was spent in a town on the Gulf of Mexico, and I remember life there as very happy. When I was still young, however, my mother got sick and needed a transplant, so the family moved to Mexico City. Suddenly, life was hard and unhappy, and even more so when my mother passed away. I was nine and Carlo was six. A couple of years later, our father re-married and this brought even more challenges. Everything had changed drastically within a few short years, inspiring Carlo and me to set our first life goal: somehow earn enough money to run away and become independent. Thus began our journey.
The most obvious way to make money seemed to be by selling something, so we started selling. In the beginning, we bought handmade fashion jewelry and sold it. I was about 11. After a few years, our dad, who is a chemical engineer, taught us how to make a Pine-Sol-type cleaner, so we made that and sold it. We sold it to friends, neighbors, anyone who would buy it. Although we didn’t get rich and we made a lot of mistakes, we learned a lot about how to collect money, about the struggles maintaining consistent quality in our product, and about balancing the cost of materials with price. At that time, I was 14.
Although things were tough at home, my brother and I did have the opportunity to go to college. Nevertheless, we remained fixated on building a business. When I was a sophomore in college and Carlo was still in high school, we started selling clothes. Miami Vice was wildly popular at the time, so we had the idea to manufacture clothes inspired by the ones they wore in the show. Remember the short, square pants and the neon t-shirts? We started making those and it turned out that we had hit on a good item. We bought the fabric, found a manufacturer, and created our own brand.
Our vision really locked into place with this venture. Carlo and I had discovered our Passion for Fashion; it’s driven us and been part of the organizational culture of our company ever since.
We sold the clothes to students at the high school and the college, and we were very successful. Soon we started selling wholesale to retail stores. As a result of this success, we finally made enough money to leave home, so we did. It had taken a long time, but we had earned our independence.
Moving through this process, we learned the hard way, by doing and failing–sometimes dramatically–but we never quit; we kept learning and trying again, figuring out over time how to minimize risk and maximize the upside.
In those days, because we were bringing our product to our customers, we needed a place to display our clothes. We had a yellow Volkswagen Beetle, so we filled the trunk with the clothes, drove around to the schools, and sold out of the car in the parking lot. That was, I suppose you could say, our first store.
That Beetle took us to many fun places, always combining business and pleasure. We loved going to Acapulco for the weekends, parking the car, and selling our clothes. Only after we had sold all of our merchandise and hit our goal did we head to town to have fun; it was our reward. Then, Sunday night, we drove back with all the cash we’d made.
Soon, we started traveling farther, to Canada and the US, always with the same plan: travel, do business, make money, and learn along the way. As we traveled, we would bring materials from wherever we had been and sell them. We learned about tariffs and the ins and outs of importing and exporting products. By the time I was 22, in 1990, we created our first corporation and, one year later, we opened our first real wholesale store. We started sourcing internationally – from India, Spain, the US.
Crisis equals opportunity. In the mid-nineties there was a huge economic crisis in Mexico, and everything collapsed. Although it was a hard time for our country, the market had cracked open, and we saw an opportunity for the business. Within less than two months, we turned all our storage facilities into manufacturing facilities, and we were finally poised to start building the company we dreamed of, turning Shasa into a private brand, exclusive to our stores, and controlling the whole supply chain.
On the day we opened our first Shasa retail store inside a mall, in the midst of the crisis, we announced to the friends and family we had invited that we were going to open 100 stores. Our dad was dubious; maybe one store each, he predicted. That was in 1995. Today we have 108 stores and over 500,000 sqare feet of retail space.
As we grew the business and grew up ourselves, we experienced our fair share of growing pains. To move past them, we did not rely on confidence and determination alone; we also sought more formal opportunities to learn. In 2000, for example, our company was growing fast, and we decided we needed to educate ourselves more about running a business, so we enrolled in IPADE Business School, in Mexico. We completed their management program, one year apart from each other.
In 2012 we again felt we had more to learn, so we applied and went to Harvard Business School, me starting in 2012 and Carlo in 2013. We have come to firmly believe that we can’t stop learning – there is no end to learning in this story.
Since the beginning we dreamed big; we visualized ourselves as very successful entrepreneurs. Despite the many obstacles we faced, we always believed we would make it happen.
Over time, our purpose settled into what it is today: to inspire and empower people to unleash their potential and accomplish stretch goals. We ourselves have managed to accomplish something no one thought we could. We hope to inspire others with our contagious passion because we have learned that, when united around a shared purpose, the potential for impact grows exponentially.
Switching From Defense to Offense
As leaders of companies, we have all experienced downturns. The economy, the markets, the political climate, the weather, or an invisible virus can all crop up and cause things to shift in unexpected directions. An instinctual response to adversity is to pull up the drawbridge and prepare to hunker down and wait out the crisis, minimizing expenditure and risk. But as I look back on my last few years as President & CEO of R.A. Heath Construction and Millwork, Inc, I have learned something about myself; when the going gets tough, for better or worse, I switch from defense to offense.
Taking a risk and trying something new as the knee-jerk response to a slowdown is not what I advise. Recklessness is never recommended. However, I have learned that when certain conditions are met, it can be right to favor the bold move.
It might be fair to preface this story with the admission that a strong willingness to be bold and try new things has been part of our culture at R.A. Heath for years. I have gained confidence from some early moves that were a little risky but that turned out great. One example is from a several years ago, when remodeling was still the core of our business. We were strong in general and had even pioneered a method for remodeling a café or restaurant that allowed us to guarantee it would take no longer than two weeks. Starbucks, among others, has adopted this method for all its remodels, incidentally. But I thought we might be able to find ways to serve our customers even better.
Closing a restaurant or café for a remodel necessarily means lost business, which is a hardship for our clients. I started wondering if there might be a way to mitigate that. We were building temporary cafés for our clients so they could recoup sales while they were closed. This was time consuming and a big expense for each project. I joked with our client that I could just build out one of our construction trailers to sell coffee. That seemed like a great idea, so I took it one step further; we bought and built out a fleet of trailers to rent to our clients to use during their remodels. It was a big cost to us up front, but then we had a plan to help our clients retain some revenue, and to make money ourselves at the same time. This is an example of the mindset I strive to model and inspire at R.A. Heath, and certainly laid the groundwork for how we fared through a really big crisis.
As an Evergreen® leader, the first thing I need to know is that I can take care of my team. This priority drove some of the decisions we made in the weeks and months after Covid hit. Our industry, as everyone knows, all but ground to a halt in 2020. Many of my competitors started laying people off immediately to cut costs as revenue disappeared. Driven by the desire not just to hang onto my employees, but to create opportunities for them to thrive, I started looking for new ways to deploy our manpower.
My sister is in the restaurant business and early on, she started struggling to meet the new standards that might allow her to remain open. Dividers for her booths and tables suddenly became a high-priority item, but she found they were in short supply. I reflected; we had millworkers, construction workers, and construction equipment. I thought–we could make those! It soon became clear that the demand for these dividers would continue to grow, so we considered how we could make this product even more profitable. At first, we were buying a piece of molding from the guy down the road, but I thought–we could make that, too! We bought more equipment, invested in training and were soon producing every aspect of the dividers. We brought all the profit margin back in house, our team was busy and productive, and we had a new product line and revenue stream.
Another opportunity I saw as we moved into the slowdown was time. We had been so busy, and things had been moving so fast that we rarely had the luxury of being introspective. But when things slowed to a crawl during Covid, instead of sitting around wringing our hands, we decided to take the opportunity to study our processes and expose some of our weaknesses.
One thing we realized was that our entire cabinet-making division, which had been automated at great expense several years earlier, was not optimal. It depended on all parts of the process working perfectly, and a small glitch in one area could stop production completely. I was also conscious of the fact that running this automated process was not ideal for my employees; I am dedicated to helping them learn a trade, but we were instead just teaching them to push a button.
With the help of my accounting and finance teams, we looked at the numbers and decided to make a bold move; we shut down the automated process, got rid of the hundreds of thousands of dollars’ worth of machinery, and reverted to making our cabinets by hand. If we weren’t an Evergreen company, we never could have done this because it took time to build back to profitability. But now we are teaching a trade again, we are less vulnerable to work stoppages, and frankly, the quality of our cabinets has vastly improved. It was a good decision.
When the crisis started to abate and regular business returned, many of my competitors were not ready to meet the demand. But we had kept all our employees, diversified our products and services, and planned for the price increases and the surge that hit us. We were in a strong position to roar back to life–even stronger than we had been before the crisis.
As a result of our successes with offensive rather than defensive moves, in both the good times and the bad, I am proud to say that at R.A. Heath, I have led the establishment of a culture of open-mindedness; I am constantly coming at my team with new ideas, and they are ready to run with them. We don’t need a crisis to innovate and try new things. We’ve gained confidence from past successes, and we have a strong process for vetting new ideas, to help weed out the ones that are impractical and troubleshoot the ones that have promise. It has created a mindset of creativity and problem-solving throughout the organization, and has been the key to our success, even through challenging times. At R.A. Heath, we are not content to survive; we aim to thrive.
Tugboat Institute Summit 2022: Magic in the Mountains
Something extraordinary happened in Sun Valley last week. After two Tugboat Institute® Summits adapted to COVID, we were back in person in record numbers. The magic that happened throughout the week was clear evidence of the power and importance of our wonderful Evergreen® community.
Wednesday and Thursday mornings were spent hearing from 18 outstanding speakers on topics ranging from the exploration of different mechanisms to scale, to the sharing of personal challenges and journeys, to consideration of philosophies of leadership, to the importance of love.
The talks left us thinking in new ways, feeling deeply, and profoundly enlightened. Jeet Kumar of In Time Tec opened the talks on Wednesday by sharing his thoughts on love and leadership. His story opened our hearts and brought the audience, both in the theater and online, into a space of intimacy and support that was sustained throughout the rest of the experience. Lisa Ingram of White Castle shared what innovation looks like over time in a 100 year-old company. John Garrett of Community Impact Newspaper whetted our appetites for more conversation about the possibilities presented by partnerships with economic development groups in a short, 5-minute talk and then Dennis Jaffe, Senior Research Fellow at BanyanGlobal Family Business Advisors, shared his considerable wisdom about how to think about future generations as we consider the path forward for our businesses. We had an astounding and unique experience led by the entrepreneur, musician, and magical human being Murray Hidary. Murray shared his thinking on creativity and then invited us to connect with our creative centers as he performed an original, improvised piano concert. The experience was moving in unexpected and deeply profound ways. Following Murray’s performance, John McCullough of James Avery shared how and why James Avery became a vertically integrated company, and the competitive advantage it has given them. Mel Gravely of Triversity took the stage next for a 5-minute update on his thinking about conversations about race in America since he last presented on the topic at Summit 2021. Mel was followed by Courtney McKee of Headframe Spirits who shared her inspiring story of extraordinary perseverance and triumph in the face of challenges. Finally, Dave Thrasher of Supportworks shared his family’s journey scaling their company in a variety of ways, and the lessons learned through each experience.
The talks on Thursday were equally outstanding. We began the morning with a pre-recorded conversation between Dave Whorton and one of his heroes, the legendary Tom Peters, who spoke about his book In Search of Excellence and his current perspective on the topics he discussed in the book. Jane Blain Gilbertson of Blain’s Farm and Fleet told the story of fighting a private equity entrant into her markets; in her talk, she shared her disturbing and inspiring story of pulling her entire team together to beat a private equity-driven attempt to undo the Evergreen company her family had built over three generations. Bobby Jenkins of ABC Home & Commercial Services gave a 5-minute talk that offered insight into the opportunities available to businesses when they partner with their Chambers of Commerce, and then Samson Liu of SOH Dental shared his story of starting his own Evergreen company after the disillusionment of working in a company bought by private equity. We were then honored to invite Kevin Cahill, Executive Director of the W. Edwards Deming Institute, to the stage. Kevin shared his grandfather’s Deming philosophy with us, in particular the importance of looking at the shortcomings of the system, not team members, in People First companies. After Kevin, Brad Cleveland took the stage for a short, 5-minute talk on Leading the Customer Experience, which just happened to be inspired by a conversation he had with W. Edwards Deming very early in Brad’s career. Finally, Tugboat friend Anese Cavanaugh, Founder and CEO of Active Choices, brought us back to ourselves and invited us to consider self-care and self-partnership as essential leadership skills. Following Jeet’s powerful opening talk, Anese’s talk served as a wonderful bookend to the two days, during which we were exposed to ideas, practices, and stories that will help bolster our businesses, our families, and ourselves.
The afternoons were spent in dialogues with speakers over lunch, and then in a variety of activities that allowed attendees to share time in the beauty and magic of Sun Valley. We celebrated the friendships we cherish and got to enjoy, the new connections that we look forward to nurturing and growing over time, and the support and love of our incredible community.
Tugboat Institute Summit was magical, as it always seems to be when Evergreen leaders gather. Fortunately, we have more opportunities to gather again on the horizon!
Finding Room for Innovation in an Age-Old Industry
When you are selling a product that has been around for 4,000 years, it’s sometimes hard to see yourself as innovative. But even when your product–in this case milk–doesn’t evolve much, there is plenty of room for innovation in your processes and your business.
The milk business is a low-margin, commodity-based business that is highly regulated. Therefore, it can often seem like the right move to constantly look for ways to lower prices just a little, take some business from the competition, and drive volume up to increase your margin. But in my time as President of Turner Dairy Farms, I’ve learned that the seemingly ‘safe’ path is not always the best. As an Evergreen® business that is willing to innovate, pivot, and try new things, we have continued to grow and thrive since we were founded 92 years ago. In many cases, we’ve had to resist the urge to reach for what seems like the obvious answer because, just as often, it turns out it is not the best.
The first mistake many in our industry make is cutting corners and sacrificing taste. In the food industry, the results of customer surveys consistently tell the same story; the number one reason a consumer buys a food or beverage item is taste. Always. As soon as you start looking to cut corners, taste suffers and any advantage you may have gained evaporates. If your product doesn’t taste good, even at a lower price, customers won’t stay loyal.
A great example of this is chocolate milk. One of our biggest markets for chocolate milk is schools. A number of years ago, we had a competitor who gave us a lot of trouble because their prices were so low. They were winning a lot of school contracts. One day, we were doing a taste cutting of the chocolate milk brands in our market, which we do often, to make sure Turner’s Milk always tastes the best. The one from our competitor, who was beating us in the schools, came out of the carton and into the cup and it wasn’t even brown. It tasted awful and we couldn’t believe anyone would market that product!
Right as we were doing our taste-test, our chocolate supplier happened to stop by. We didn’t know it, but he was selling that substandard chocolate to our competitor. He didn’t say anything to us at the time, but he went home and talked his family into discontinuing that low-end product. This is an example of compromising values, and when you do, it eventually damages not only your relationships with your customers, but also with your suppliers and industry partners.
Another risk in our industry is customer boredom. Dr. John Stanton, Professor of Food Marketing at St. Joe’s, says that “the milk case is the great white tundra of the supermarket because it’s cold, white and nothing ever changes”. We accepted his challenge a few years ago and started playing with Limited Time Offerings (LTOs) on flavored milk–flavors like Chocolate Peanut Butter, Cookies N Cream, Chocolate Covered Strawberry and Birthday Cake! Initially, we made these to coincide with the big holidays. They were a hit, so we added some more at different points in the year. It was expensive and unpredictable, and we were always guessing about the demand and the supply we would need. Aside from creating little boosts in our sales periodically throughout the year, it did something else really positive; all of a sudden, customers had a reason to stop in front of the milk section. Imagine that! We found that sales of white and chocolate milk increased when we offered a fun flavor. An area of the store that historically held few surprises suddenly caught their attention and offered a novelty.
The LTO initiative was such a success that we have since brought it to the schools. We partner with the school nutrition teams to bring in a low-fat version of our best flavored milks a few times a year, just when interest in school lunch is waning, and kids are falling into a slump. A month or so into the fall semester, for example, when the excitement of going back to school has died down and routine sets in, we bring in a new milk like Cookies ‘n Cream. It’s fun, it’s different, and it gives them a little boost. Although we don’t charge our schools more for this milk, and you could therefore argue it’s not a very smart initiative, we have found that on at least two fronts it’s a win. First, the schools love it, and we win more contracts. Second, we are forging a relationship with kids who will, before we know it, become young adults and young parents. They are our future customers, and they will know and trust us and keep coming to us when the choice is theirs to make.
To be successful for 100 years we make different choices than we would if we only aimed to be successful for this year. When we shift the lens from the consumer to the employee, we feel strongly that many compromises that might save us money are not worth the cost. As an Evergreen business, we pride ourselves on taking great care of our employees, treating them like family, paying them a better wage than our competitors, and making sure they feel valued. Some of our huge, industrialized competitors run shifts 24 hours a day. We do not. We run one long shift each day so that we have the margin to do things right when problems arise. We are a medium sized operation, so our competitive advantage does not live in the high efficiency of the larger industrial dairies. Rather, it lives in the high quality of the personal attention to detail.
In the last ten years, the milk industry as a whole has only seen one year of sales volume growth, but Turner Dairy Farms has grown eight of those same ten years. As an Evergreen company, quality and values matter more than anything else. Obviously, we must be profitable to stay in business, but we focus first on protecting our constituents, and then on protecting the bottom line. Over the years, this strategy has been the key to our long-term success and growth.
Lessons From a Turnaround CEO
When I agreed to come on board as the turnaround CEO of SKG, the exclusive dealer of MillerKnoll furniture in Central, South, and West Texas, I understood two things very clearly. First, there were problems to fix. Second, the potential for a great company was there.
Although I had not yet adopted the lens and language of an Evergreen® Business, I can tell you now that when I joined SKG, they had several of our principles solidly in place, but were in great need of improvement on the others. SKG has always been a people first company, they have always had a strong culture, they have always been highly focused on the customer experience, and they have always been private.
My explicit task when coming on board was to help advance the profit and growth of SKG. I discovered, however, that there were other issues that needed to be addressed to get the turnaround underway. SKG lacked a clear purpose, and they were not an innovative organization.
The fundamental problem with the purpose of SKG when I joined was that not everyone agreed on what it was. The founder had a purpose that drove her work – people first – and some key board members had a different purpose – growth and profitability. To me, those were all important but sometimes came into conflict. We needed to unify around one clear purpose. I started driving change from the articulation of our new core compass: At SKG, we are innovative, we take care of people, and we drive impact in our community, both locally and globally. As I stepped into the work of rebuilding this company, I led with this vision.
I started with people. I had some great people on my team and many of them are still here today. But the organization, down to the physical space of the office, was all wrong. I had to get the right people in the right places, both literally and on the org chart. The process felt like a shake-up to some and was further complicated by the fact that the company’s founder was still in leadership and very present. I don’t think there is any other place to start when you set out to re-build a company and it was hard work.
I am an operator, so after the initial reshuffling was underway, I turned my attention to the team that would drive the profit and growth. As a growth-focused leader, I was able to see where the market potentials were and I focused my attention on making the changes and setting expectations in the sales department that would set us on a path for the growth I was targeting. This work was no easier than the work on the people front and I found myself spending as much time and energy dismantling the structures that were in place as I did on the rebuild. It was effective and in just about three years, we moved from a $13M business to a $60M+ business.
Once I had the organizational structure, the physical office, and the sales teams where I wanted them, I started a systematic review and restructuring of each department. I found as I went that we had to break down almost everything and rebuild it, from our target focus to our marketing and branding, our core operations systems, our service platforms, our trucks, our uniforms–everything!
We came out of the rebuild strong, focused on our purpose, and in a great place. Around this time, I was able to become a majority owner, so internal friction with the founder finally eased as well. We were able to charge forward on the innovation front, inspired by our new purpose, and I was extremely proud of the progress we had made. Then, Covid.
Through the pandemic, we lost a lot of ground and in the last year or so, I feel in a way like I have had to do the work of rebuilding SKG all over again. But this has also afforded us some great opportunities, especially on the innovation front. Business looks different than it did, so we should be a different company. We not only have to think about the changes to our own work environment, but since we are in the business of creating work environments for our customers, we are also able to engage in exciting re-visioning of what “creating a workplace” means. Although it’s been frustrating on some levels to do it all again, I am grateful that we had the new opportunity to improve and I love the way we are emerging from the pandemic – refreshed, new, and stronger than ever.
I am extremely proud of the work we did and what we were able to achieve, but hindsight allows me to see areas for improvement if I had it to do over. Our work meant a great deal of change for our employees, and it was tough. I assumed that as we re-structured, the culture and purpose pieces would naturally fall into place, and they did, but slowly. I spent an enormous amount of time and energy managing people in the early phase of the turnaround. In retrospect, if I had I brought on my HR Director right at the beginning, it could have helped us be more intentional about that work and lay out the vision before we started moving everything around. As soon as everyone came on board and understood the why behind the changes we were making, things got easier.
Aside from learning a lot about rebuilding businesses through this process, I learned a lot about myself. I am a charger. In some ways, coming in as a turnaround CEO is harder than starting a company from scratch. Before you even get to the building, you first have to dismantle a great deal. But I love it. The rewards are immense. I am invigorated by this work.
Leading for Innovation
Innovation at Michelman is unique; we do it highly collaboratively, both with outside partners and within Michelman, using the three elements of creativity, connection, and execution as drivers. Furthermore, innovation doesn't happen by accident; it begins with leadership.
Michelman is a people-first, purpose-driven, Evergreen® family business built for long-term sustainability. We are a global developer and manufacturer of specialized sustainable chemistry used in agricultural and architectural coatings, digital printing, foodservice packaging, and advanced composites for automotive and aerospace. And innovation is central to who we are; our purpose is Innovating a Sustainable Future. So, what does this look like?
Creativity is the Big Idea
It starts with creativity, and it starts at the top. At the leadership level, we set a strategy and identify areas of the industry we are poised to win or areas where there is a need or a problem to be solved. This strategy sets up guardrails for our teams to keep them pointed in the right direction. Once they have direction, they are free to imagine and create. We have worked hard to establish a culture where new ideas are welcomed and encouraged. Above all else, we want to make sure our associates share all great potential ideas. We know that innovation is not a linear process, so there has to be room for ideas that fail and ideas for which the markets are not quite ready.
In addition, we have found that building cross-functional teams helps problem-solve in the early phases of innovation. For example, a group of chemists may approach a problem from one angle, but then someone in HR or marketing might come in and see a possibility or an issue that was not obvious to the chemists.
I call these "cold eyes." Having someone who hasn't seen it before–who has cold eyes–study an idea is a highly effective way to identify and solve problems quickly before getting too far into the innovation process.
Connection answers the question ‘Why does it matter?’
Once we have a great idea and have developed it to a point where it is practical, we enter the connection phase of the process, which involves collaborating across functions and business segments at Michelman and with other stakeholders in the industry. As an Evergreen company, we are in an advantageous position because of our commitment to Paced Growth. During the connection phase, our focus on the long term inspires confidence in potential co-collaborators and partners. Furthermore, it assures both internal and external parties that we will devote the time and effort necessary to bring the innovation to fruition.
We have found that bringing partners in at this early stage of innovation is the best way to move the process forward efficiently, identify and solve potential problems, and create a competitive advantage. A powerful example of this was our innovation in the digital printing space. Digital printing emerged as a highly customizable and rapidly moving market, but the technology did not provide excellent print quality to a wide range of plastic film and paper types. So, we set to work innovating to develop advanced material and technology to improve ink receptivity, rub resistance, and image quality on paper and film material for labels, packaging, and other commercial printing. Early on, we reached out to partner with Hewlett Packard and developed the idea together; they produced the digital print presses while we developed the print-receptive technology. Together, we quickly positioned ourselves as leaders. The connection in this particular case was that the industry wanted high print quality with variable printability, such as the Share a Coke campaign, where each can has a different name.
Overall, Michelman's six corporate values of curiosity, collaboration, giving, integrity, respect, and success outline our highest priorities as a company. Our goal is to maintain and develop long-term, fair, and trusting relationships, and this culture of trust and respect allows innovation through collaboration to happen. We also utilize nondisclosure agreements (NDA) and other partnership agreements to protect innovations and other trade secrets to remain sustainable and Evergreen.
Execution facilitates commercialization
Finally, the execution phase is where the idea's value is realized. Provided that the market is ripe for innovation, we lead our teams to manage the details of the production, supply chain, distribution, and sales. Execution allows consumers to gain value from the innovation, resulting in Michelman's revenue growth. We find that our partnerships formed during the connection phase enable us to execute reasonably quickly. The right partners can help solve any logistical issues and help commercialize the innovations.
At our Evergreen company, which is driven equally by Pragmatic Innovation and our strong sense of Purpose, collaboration is a critical element of all three phases of innovation. In the creativity phase, the cross-functional teams ensure that a new idea will add value in the real world. During connection, collaboration is the driver. And during execution, the closer you can work with the partners you need to bring your product to market, the better and more efficient your execution will be.
Innovation is not a product. Nor is it simply an interesting idea. As leaders of Evergreen companies, our job is to create the right environment, characterized by a culture of curiosity, room for experimentation and collaboration, and clear guardrails. Once this is in place, there is no limit to where innovation can take you.
