Learning Without Scars
As a third-generation educator, it is easy to say that teaching and training are in the blood for Ron Slee. From his beginnings as a coach, through his time at McGill University, Ron developed a foundation for the work he does today. From working within dealerships, to operating a consulting company, creating a training business and running twenty groups, Ron has been directly involved in this Industry since 1969. Ron has been known as the industry expert for years, and has brought this expertise to bear through his training programs. Today, Ron provides specialized, job function based internet based subject specific classes, job function skills assessments, as well virtual seminars and webinars. These courses are designed for manufacturers and their dealers, as well as independent businesses in the construction equipment, light industrial, on-highway, engine, and agricultural industries through Learning Without Scars (www.LearningWithoutScars.com). This platform is a continuation of the work begun by Quest, Learning Centers which was established in 1996. This training is aimed at improving dealer parts and service operations through qualified people that are knowledgeable in using operational metrics and current market and operational best practice methods.
Learning Without Scars
The Fourth Industrial Revolution: Navigating Change
Are you prepared for the unprecedented transformation sweeping through the equipment dealer and rental landscape? In this eye-opening conversation with industry veteran Nick Mavrick, we dive deep into how technological advancement, market consolidation, and changing buyer behaviors are reshaping the entire industry.
"If you continue to do what you've been doing, you will not last the next 20 years. Period. Without any question, without any doubt." This stark warning from our discussion highlights the urgency facing business leaders today as they navigate what some call the Fourth Industrial Revolution.
We explore why traditional dealer management systems and CRM implementations so often disappoint, costing millions while delivering minimal value. Nick shares how predictive buyer intelligence can provide a complete picture of customer behavior across rentals, purchases, and parts consumption without competing with existing technology investments. Through real-world examples, including a parts inventory management case that increased return on capital employed from 40% to 165%, we demonstrate how rethinking established practices can yield extraordinary results.
The conversation tackles troubling trends in industry consolidation, where approximately half of competitors disappear every 20 years, and examines the growing misalignment between manufacturers and dealers. We discuss how rental companies are capturing increasing market share, how education deficits are creating workforce challenges, and why curiosity and continuous learning have become essential survival skills.
Whether you're running a dealership, managing a rental operation, or working for an OEM, this conversation challenges you to question your assumptions and embrace the changes reshaping our industry. Join us for insights that might just help your business not only survive but thrive in the decades ahead.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another Candid Conversation. We're going to continue with my theme or interest in artificial intelligence, data analytics, and this morning we're going to have a conversation with a fellow by the name of Nick Maverick who has a very deep background at the manufacturer's level and the rental industry and at the dealer level, using analytics, and that's all I'm going to say as far as the introduction, other than to say good day, sir, or good afternoon from you, from the East Coast and Nick, it's good to see you soon. Yeah, yeah, he's going to come out and visit Hawaii. His sense is going to start entering his brain and visit Hawaii. The sense is going to start entering his brain. We've started last week a podcast with Rodan Wilson where we dealt with artificial intelligence and how it was going to impact dealers. We did a podcast on it.
Speaker 1:Built data, your company that analyzes and evaluates and advises people, analyzes and evaluates and advises people on market coverage, deals in certain manners with artificial intelligence, but also it deals with change at a dealer level, and that's kind of what I'd like to open the door to. I don't see a lot of companies that are changing anything. I see a transition of leadership that's been delayed by a generation, maybe 10 years. I see a lot of senior managers, executives, that are leaving their companies because their career path has been blocked, because their boss is still here and I don't know how to break that logjam. So I'm hoping that you and I can have this discussion. Your perspectives and thinking and my perspectives and thinking can provoke the audience to look at things in a little different manner. So, with that as our introduction, is that something you're experiencing with your clients? How do they what do they say? No, a lot, or do they say yes, or you bring them all this stuff. How much do they do?
Speaker 2:Great question they tend to gravitate towards. Well, we have two main entry points with a prospective client. One is the one I can say if I worked for you, Ron, I would say it would be the one that would make you money, and that is a deep kind of persistent analytics that enable predictive buyer intelligence. It gives you a complete view of the buyer that we just discussed. And a buyer to us rents, purchases, consumes, parts and service Maybe there's a better word than buyer but they do all of those activities generally. They may not do all of them at the same time. Or as Steve Kleig gets into the deep transactional research, that suite that we offer to folks competes with decisions that they've already made that they may not get a return on. By example I mentioned to you a pretty substantial operation dealer is just installing Microsoft Dynamics.
Speaker 2:I'm a little cynical from what I've heard about this. I love CRM, but I can't say I've ever met somebody in this industry who says I can't live without it. I hear more. I don't use it, my people don't use it, and it's sort of like keeping it in a closet. The other product we offer is better predictive intelligence, not using their intelligence, using our intelligence. And they gravitate to because it's new to them. So we are prospect data. We can give a complete picture of what somebody rents, the parts and service they consume and, of course, what they own. That is usually where somebody enters the relationship with us, because it doesn't compete with other decisions that they've already made. And I understand that. I've been a corporate person and when you really put your shoulder behind something and you think you're right, you need to hold your ground so you can bring people along with you. So you.
Speaker 1:That lets you see RM as an example. People along with you. Let's use CRM as an example, where management, I believe, used CRM to control the salesman. They wanted to see how many calls to whom the calls were being made. And then they got a little sexier. They wanted to know what they talked about, how often they talked about it, what's the number of calls to close those kinds of things? Because that's all old fashioned things I used to do manually for the small number of salesmen and I'm comfortable with that.
Speaker 1:And then here comes Salesforce, which I'm going to say is CRM on steroids. It gave an awful lot of the same stuff, but it added profile data of the client. That made a much better picture of who to use your term the buyer was, of who to use your term the buyer was. But in no case does either CRM or Salesforce look at lifecycle management To say that I have a widget here that has a life of 25,000 hours and I've got sensors and GPS that tracks the number of hours on that widget, so I know exactly when that thing is going to die. I also have analytics that tells me that if I can do a repair or a rebuild prior to failure I can cut the bill in half. So I want to do the repair, rebuild before it fails. So those predictive analytics become absolutely critical. Crm and Salesforce don't touch any of that. So it's it's kind of you know, we're just continuing. When I also doesn't touch, go ahead, it also doesn't.
Speaker 2:I was going to say, though it also doesn't touch Just this morning we're working on, we have an industrial client and there's this company focuses on providing electrical services to plants across the United States. There's, their focus is the top. I'm going to change some of the numbers 150 accounts, call them. They call them, think Exxon or Tesla, right, parent level, who has multiple factories, and it's a national account strategy. Fundamentally so, if you're doing business with Exxon in LA, why wouldn't you call Exxon Houston and say blah, blah, blah? And when you look at, and as a subset of that, data centers, whether it's Meta, oracle, intel, nvidia, on and on and on, and the amount of private capital that work is being sucked up to the biggest players in the industry, a lot of the cheese is being moved and the big contractors are sucking up more, are sucking up more. And in one of our clients in a market there's a massive data center and the GC is a fully integrated venture. Now he has they have a tilt-up wall division, they have their own rental division. It is virtually now keep in mind this data center project five plus billion. They formed their own fake NGO to protect it. It's called Alliance for something right and Alliance for this area and essentially it's a and the project is funded by one of the biggest investment funds in the world and it's co-owned between two of the biggest companies in the world and it is a closed project.
Speaker 2:So we can talk about buyer cycles and this and that In this market forces would be. You have the major rental companies taking increasingly amount of business away from dealers. In my opinion, you have OEMs having to buy their distribution because they're distressed. The OEMs are shortly I think you've said it before are going to have to go direct, if they're not already going direct, and then they're being somewhat relegated to do I buy Coke today because it's on sale or Pepsi because that's a better price today? Right, that's certainly how I shop for carbonated water.
Speaker 2:If somebody's margin compression, the growth of the rental companies and the shift of the United States economy today, like you could look at the, it's sort of cliche to say data centers are a thing. If you look at it it's. I first thought it's kind of cliche. Like big deal, you build this thing and it actually doesn't create that much economic activity, but it sort of does. If I look back at this industrial client we have, there's focus on the top 150 parent companies that control or own thousands of factories across the United States is pretty damn smart so a lot of things are moving.
Speaker 2:A lot of pieces are moving With that.
Speaker 1:and let me go further. I'm going to say every industry in the world is going through exactly the same thing. Every industry in the world is going through exactly the same thing because we have people that are leading the parade, that are making significant impact in the market, and rental was the the start of this. Light industrial is another piece of it. But you're having consolidation take place, not because it makes economic sense, but because there's too many people that are failing. And I'll look at the capital goods industries and I'm going to say that every 20 years we lose half of the people competing in the market. So in 1985, if we had 1,000 dealers of lawnmowers, washing machines, on-highway engines, containers, whatever it is, 20 years later there's going to be 500, not 1,000. And the 500 that went away went away because they weren't good at what they did, and between 2005, 2025, it went from 500 to 250. And, coincident with that, what has caused a lot of this is that we've put profits in the businesses ahead of people, in the businesses ahead of people. So if you look at calculations of GDP, which is the number of units of work, population, working force, et cetera, the units that are produced do the arithmetic the fewer people you have, the higher your GDP growth is going to be. The higher your GDP growth becomes, you can attract money into your country.
Speaker 1:So, tied with that, go back to the 1950s, when there was a conscious effort in the Cold War by America to try and bolster countries around the world in face of the opposition, which was viewed as the Soviet Union. So we wanted to bolster the economic activity within the countries Eastern Europe, south America, wherever. You want to talk about it as a defensive mechanism to protect against the Soviet Union, influencing Cuba, venezuela, whomever. Well, the Cold War is over and here comes Trump and he says well, wait a second, we're not going to do that anymore. The trade situation that we've got now was created to allow this activity defense against the Soviet Union and the Cold War. We don't need that anymore. Now I want to concentrate on the biggest market in the world, which is the United States, and if you want to do business here, we're going to have fair trade back and forth. You're not going to be able to charge us 400%, india on anything, or cheese in Canada 300%. This is going to change and he's causing all kinds of disruption, scaring the hell out of people. So you've got two kinds of people now. You've got people that are victims, who just respond call it the Trump derangement syndrome, if you want to get into political terms and you've got people that look at it and say, well, wait a second. That's a good opportunity. That's a good opportunity.
Speaker 1:So this consolidation that you're seeing is happening everywhere because of another transition. There's some people call this the fourth industrial revolution. That's fine, I don't care what you want to label it. There is a huge transition taking place and a lot of it is very immature. A lot of people that are making the decisions as to whether this is a good thing or a bad thing use the crm, salesforce, etc. Example don't have the skill set to be able to make that decision, because they haven't kept up to speed on what's going on, they're not involved in, they're not curious, they don't read a lot. They just continue to do what they've always done, which is Einstein's or whomever you want to call it insanity, and we're seeing that unfold right in front of our face. You're seeing that with your clients, I'm seeing that with my clients. So, example, we'll we'll do a skill set review. We've got three certification programs now 120 questions, 150, 180, multiple choice. You want to be a master at a specific job function, you're going to take 180 questions and you've got to get 80% in order to get that certification. So all of a sudden, job descriptions are no longer just duties and responsibilities, they're specific job functions.
Speaker 1:So, for instance, you made a call yesterday.
Speaker 1:You spoke to somebody yesterday.
Speaker 1:You talked about the specific product.
Speaker 1:They said they were going to think about it. Nobody follows up that phone call the next day or the next week. Or somebody goes in on your internet portal and does an inquiry. They check a price, they check availability and they don't buy. And nobody calls them the next day to say noticed you looked at this last night and that you didn't buy. Have you purchased that or would you like a little bit more information? Nobody does that. And David Griffin, who's 70 and retired but not still chairman of a large material handling company, says we're putting short-term profits ahead of the future of our grandchildren, which is true because we're trying to make all the money we can now to protect us and we're not investing in the future for the next generations or the next workers and all the rest of the nonsense. Which means where you are with built data is right on the front edge of that wave, and there's a lot of people that are going to say I don't understand that, nick, they're not going to say it that way, but I don't think we're ready for that.
Speaker 2:So a lot more people are going to say no to you than say yes. Am I right or wrong? I don't know if the answer is yes and no. Yes, we're. You know, we're a little over a year old, been in the business a while, but one is, I think, just time and familiarity. Right, it's forming a friendship. So I can't discern that yet. To answer your question, I will say this because I alluded to it, which is we are competing like and that's not the first one with entrenched interests, and you and I talked about cost structure, but it's not about serving built data. I just I would encourage folks to be ruthless about their, the promises people have made to them, and whether they can throw that cost overboard. Right, divorce from those relationships. I would say it's a great opportunity to rethink the expense structure of a rental business or a dealer business and see what you can live without Be curious.
Speaker 1:That's a big attribute Curiosity is critical.
Speaker 2:I mean because if you're stuck with a software stack that in theory is supposed to make you much more efficient and you're just beginning to live with who likes that relationship where you can't get what you want, I don't know about you, but when that happens in my life I'm like shit, I got to do it myself again, right, and you just learn and then you become a little bit separated. So if you're living with this high expense structure whether it's through your software subscriptions or through data that you subscribe to and if you're frustrated to some extent, be curious and see if you can find something faster, better and cheaper.
Speaker 1:Yeah, and let me let me pick on that one for a second. Relative to business systems, I've used the paper to glass statement. When we brought computers in in the fifties, what we did is we took a piece of paper and we put it on the screen. So instead of handwriting something with six part piece of paper, we put it on the screen and we put it on the screen. So instead of handwriting something with six-part piece of paper, we put it on the screen and we printed six copies. All we did was speed it up. But we also found out people didn't know how to type and as time passes, a friend of mine's got 13 patents pending. He can move the screen, the cursor on the screen, with his eyeball, so the keyboard needing to type is going to go away. I'm just giving you a weird example of where technology goes. But when we look at the stack of software, dealer business systems, dealer management systems, whatever, erps, whatever you want to call them Today, those people don't know the companies, their customers, business.
Speaker 1:They know data processing, they know information technology, they know software. So they can make elegant solutions, but they can't do the business properly. For instance, nobody should have fixed locations in a warehouse today, you should determine where you're going to put the part by what's available in your warehouse locations, by size, by activity, by location, and you place it according to what the efficiency and effectiveness of that space use of that space is at that moment. If you and I got on a plane and visited a thousand dealers, there's a thousand dealers that have fixed locations and don't change it. And this takes us to a place where the people that are giving us the tools to make ourselves better don't understand our business. How can they make our business better?
Speaker 1:And we have that with every aspect. You know. Here come sensors and GPS. All of a sudden I know the condition of my car Every bloody half hour hour, every 10 miles I drive, and how many people pay attention to that, because you know I should change my car. You know I've got 22,000 miles on my car. I've had it five years. I don't need another car for the rest of my life. So I'm dead meat. As far as potential market right, you can't drive between islands.
Speaker 1:Not yet, at least not by me, but the other. If you think about it, walmart, sam Walton created a different business model. Jeff Bezos and Amazon created a different business model. Which one of those two companies is the largest retailer in the world? Do you know?
Speaker 2:I presume Amazon. I do know this because it was actually a lot of fun to read. It's so interesting what people learn from other people and, according to what I've read, bezos carried around Sam Walton's autobiography, made in America, and he had it underlined and posted, noted and in essence that was his business plan and whether I presume that's true. And if it's not true, he certainly did all those actions right. He implemented Walmart's logistics.
Speaker 1:Do you know what Sam Walton did? That was different than anybody else. You tell me, I don't know. There's two things he said to every supplier he dealt with, and this is in the 40s 50s. He said, Nick, I'm going to choose you as my supplier. You're going to be the only one I'm going to buy from, but I have two conditions for you. Number one I never, ever, ever want to run out of that inventory ever. Number two I won't pay you until my customers put it through my cash register and, as a result of that, he didn't have any inventory carrying costs. I did not know that. And why do you think he became a low-cost supplier? Not only did he not have any inventory costs, but he had a 30-day float. He would send an invoice to the supplier, or he would send a check to the supplier, or they would send him an invoice when it crossed his cash register.
Speaker 2:You know what's interesting, because you nailed it. I mean I'm going to say they were, they had alignment. If that's fair, if it's fair, I'll tell you a funny story and you may not find this funny, and I'm going to see if I can sanitize this a little bit because I'm going to show you a contrast. I was recently at a substantial rental and dealership. Right, I'm gonna say they have some challenges, okay, and major OEM, and they're busy trying to feed their people, right, you feel it. Right, they feel that pressure. That evening I got together with the executive at an oem major oem, I shouldn't even say evening, it was um three, four o'clock, um, no urgency. I won't even tell you what was consumed.
Speaker 1:I'm sure I could tell you.
Speaker 2:It doesn't matter, but my point is there, it was just so. The contrast to me like one guy's fighting for his life and the other one has is not. Let me say that, and it's, whatever we can do to get OEMs and dealers more aligned will serve both of them, If I can say for an OEM because we touched on this briefly, but whether it's, there's many great companies out there Steve Clegg's and Toro's, one of them, I would say, you know, I can't think of another. Certainly. We aim to solve a similar problem.
Speaker 2:If you're a dealer, if you're an OEM and you have distressed dealers, one way to get alignment is through systems, and we, and companies similar to us, you know who can provide a surrogate system that doesn't require it, requires a 30-day project plan and allows for sharing of data and for them to operate on one plan, just like Sam Walton did with hidden suppliers, can be done. That's the truth. So in 30 days, if you're Case New Holland and you've got issues with your dealer network, you could be using the same data set to make predictive decisions and drive your actions and prioritize your actions today, Today. And if you don't do that, you get lumpy supply chain, you get zero margin machines being sold. You've get lumpy inventory issues right. You're out of stock on some of the things you need. You're overstocked on other things, the OEMs bailing the dealer out. It presents massive amounts of inefficiencies and it's worth rethinking how business is done.
Speaker 1:Well, it's not worth rethinking. It is an absolute necessity to rethink how business has been done. Let me come back at it a different way. Yeah, who's the largest manufacturer with the greatest reputation and the highest market share in the construction equipment mining world? Who is that? I? Don't know, I'm actually going to know who do you view as number one?
Speaker 2:I don't know. I saw something recently, but I don't have the experience in that segment.
Speaker 1:It is cat and yesterday cat stock took a dump and everybody looked at tariffs and supply chain and those types of things as the cost, because it's an easy punching bag. Because it's an easy punching bag, about 40 years ago, don Fights when he was chairman of Caterpillar in the 80s, so it's 45 years ago had an article in the Harvard Business Review about their dealer number.
Speaker 2:That's one of the best articles I've ever read.
Speaker 1:And the point he makes is they're partners yeah, they. And the point he makes is they're partners, yeah, they're on the same team. That's your, your statement. In spades, almost everybody else has a conflict. They're in competition with each other. They do not have alignment, and I'll I'll throw names Komatsu, volvo, case. Uh, they're in competition with each other. They do not have alignment, and I'll throw names Komatsu, volvo, case. They don't have alignment.
Speaker 1:The manufacturer wants one thing, the dealer wants another. So, case in point is last year and it continues this year, there's a worry that there's not going to be enough equipment bought to keep manufacturing running. So there's a whole bunch of people whose jobs would be exposed 100%. So what's the manufacturer doing? They're giving you terms and they're giving you preferred interest rates and they're giving you deferred payments. So all they've done is they've kicked the ball down the road six months, nine months, 12 months, whatever the heck you want to call it.
Speaker 1:And now the problem is coming back again. And guess what? Now we've got people that can't afford to pay the interest because interest rates, which is why in America, everybody's upset about it. We're not seeing interest rate reductions in Britain. The labor department has reduced interest rates in London and the UK five times so far and it's not going to be enough to save them. They're out of there. But we start having a world where supply chain, gps sensors, lifecycle data, analytics, technology is all available to be a guide for us, but we don't have people that understand how to read that map yet. We have a few, but not many.
Speaker 2:Yeah, I, I wish here's if I could proffer any peanut gallery advice from the the cheap seats is just do it right, Just get going and if you're any of those manufacturers you mentioned mentioned, try it. Try a pilot with 10 X number of dealers by the way, there's less than I ever thought I didn't realize the extent of consolidation but try it with three of them and seek alignment and form. When I worked for Volvo Rents, we were partitioned off from the mothership. We had the resources of the mothership, but not the historical. You know red tape, that you know that happens and we were allowed to do things.
Speaker 2:Now I don't want to glamorize and say we were perfect. We weren't, but we certainly weren't gummed up with legacy decisions. Let me say that. So if, if a dealer maybe I'm not seeing it, it's probably happening An OEM partitions off a special forces group to work with five, picket at 20% of their distribution and be ruthless in doing what you said with sam walton establish a common data set, real-time data set, so you can take action, not beat you up market share what happened three months ago and be ruthless in cutting costs Ruthless, I don't know.
Speaker 1:It's just a thought. I think it's a great thought, the ruthlessness of cost, you know. Take a silly example, and this is really weird because that's kind of who I am. I believe that parts inventory turnover should be north of 10 times a year, because all I'm really interested in is return on capital on Floyd. So I'll give you an illustration of a company I work with that did about $150 million a year in part sales and had about a 33% gross profit. So their cost of sales was $100 million and they had $75 million of inventory. So their turnover was like 1.3, 1.4. Multiply that times your 33. That's your return on capital employed. Maybe it's 40%.
Speaker 1:So I took the inventory for $75 million to $15 million by getting rid of every part that didn't sell 12 times a year and saying to the market if we stock it and we don't have it, it's free. So all kinds of people tested it. It had the desired and we never ran out. Why? Because we kept two and a half months worth. We had 75 days of inventory on hand and that was the simple, easiest way. That's a turnover of five. So just doing that, leaving everything else the way it was, we took our return on capital employee from 40% to 165%. Now does that make more money?
Speaker 1:Oh man, that's huge, huge, it's unbelievable. So let's go further. Yeah, sat down with the group of people big company, many stores, many parts managers we sat down as a group and said, okay, fine, we sell this part eight times a year. This family of parts, you know all kinds of information. How many should we have on the shelf? One, two, eight, what do you want?
Speaker 1:So we determined for 10, nine, eight, seven, six, five, four, exactly how many we were going to have, and everything turned into a buy as sold. Everything we sold today, we bought today. So we had a lead time flow and anything that was four or less didn't want it at all and we didn't. And we took the turnover to 10. We went from 75 million to 15. My working with the company ended. As all things do, you drain my brain, there's nothing left, so move on, find somebody else. That's cool. It took them less than a year to have that 60 million go back into inventory because it's too damn much work to keep it at 15 yeah, and that goes to your notion of and I have a kind of a question that I don't.
Speaker 2:I'm not wise enough to understand, but your notion of outsourcing certain things I think is super hard net or super smart. My, my, my question, being maybe a um naive soul, is I know what it's like as a business owner. Um, there are um, I can only imagine how lonely it is. As you know, you're the CEO of a, of an OEM, which is a social enterprise, or a dealer that is also a social enterprise, and somebody's presenting you with an alternative, or let's call it a hope, and you get to make the decision whether that guy's telling you the truth, whether you think he or she can deliver, and you're investing your money there and you're praying that your precious capital gets deployed properly. So I can't it's easy for me to say, you know recommend that an OEM and a dealer take an alternative approach to their business. I don't know what it's like being in their position and the social pressures that they have to keep the peace with the establishment while they make the change. And for the future, I don't know. I don't know how you do it and typically that's done through. Who was it, schopenhauer who said you know destruction, right, the creative entrepreneurship is destruction, creation and destruction. I don't know. I don't know the answer.
Speaker 2:I do think outsourcing is an approach, but you can also I could you know second guess myself and say there's one of the biggest consulting firms in the world working with one of the biggest OEMs in the world to install a new dealer business system We've worked with. I'm not even going to say the name of the firm. I can say they're high-priced people, right, they are the Neiman Marcus of consulting. They're as smart as you and I, but with a 10X price tag and it doesn't sound good to me. It takes too long. They're incented for it to take a while. Everything's a year. It's a year and we're piling in here and we got to get buy-in. I don't know what it's like to be the CEO of a major OEM and having to know you have to change. But you've got X amount of. How much energy do you have? Or are you just going to leave it to the next guy?
Speaker 1:You know, I don't know. Yeah, it's really interesting. Go back to the Walmart and Amazon illustration. The largest retailer in the world is Walmart. Walmart has the highest customer satisfaction, has the fastest delivery system, has the highest availability. In other words, they beat the heck out of Amazon on every aspect of the business, the heck out of Amazon on every aspect of the business. Amazon beats the hell out of Walmart on sales and marketing. So they track every client, what they look at, how often they look at it, when they last bought it, when they you know all that stuff.
Speaker 1:But Walmart does that in the form of you bought this last month, are you ready for a new one? They do the same thing, but in a different way. So then let's, let's come forward, and I think this discussion should, this conversation should get people thinking about am I at risk? And to 99 point something percent of them, my answer is yes, sir, ma'am, you are at risk. If you continue to do what you've been doing, you will not last the next 20 years period, without any question, without any doubt. I'll bet you on it.
Speaker 2:And I don't know where this occurs, but one of my mentors who built it is named after an amazing man of integrity named Don O'Neill who now has passed on to a higher place. I can say that with certainty. And Don was part of a group called GORB Don. What's GORB? Good old rental boys and he and a few uh x number of people would come together and they would exchange real business advice and I would. I don't know if this is done. You have a bigger vista than I have. You have.
Speaker 2:More success is is there a private setting where people can gather and just shoot the shit and sort of be naked, you know figuratively, not physically? Let's reimagine, let's look at our cost structures and like do they have an independent, safe place they can go to? That's diverse enough. Where they're not, you know, they're caught. No, no, commerce is done, right, just go and exchange and leave and become better. And it would be fun to do if you set up a weekend and just, hey, one rule no business. Or you can't do business together, right, re-imagine, right. Right, reimagine, right what this cost structure could be. And, as many of the books that I read, the notion of the quote that is made is bad. Boys move in silence, right. So we keep, we stay quiet, we stay quiet, we help five people, I don't know. Be kind of fun.
Speaker 1:So let me go backwards and that is true in a mechanism called 20 Groups, which was started in the Packard Company in the Northwest in Seattle by a man by the name of Malcolm Fares who was the vice president of dealer development for Packard, and he created groups of 20 dealers that were of similar size market and they met three times a year and he had a data input form that they filled out and shared every month. Mac and I created a company called Insight in the 90s and instead of 20, we did it with 12. So I'd have Komatsu, volvo, caterpillar, john Deere, bobcat, and we'd meet twice a year, john Deere, bobcat, and we'd meet twice a year and the object of the lesson was to increase the net profit of those organizations and we did between three and five percentage point increase over a five-year period of time by sharing best practices. And every meeting we had a little tool I called dollar time. I wanted everybody to put a buck on the table and make a presentation to all the different dealerships. Stand up, use slideshows, whatever the hell you want, and we're going to vote on who has the best presentation and you're going to get the pot. You're going to get the $12. But you're going to buy drinks tonight. So it was a good news. Bad news, bear, because if you won, it cost you a hell of a lot more than the $12 you earned. But we took the net income of the group Nick up by three to five points over five years. I mean, that's huge, unbelievably huge it is. What I said to them was oh, I have a shelf life with you guys of 10 years. After 10 years, I'm gone, because if you haven't already sucked everything out of my brain in 10 years, shame on you, because I'm not doing it anymore.
Speaker 1:And I had 50 different dealers and I stopped it in 20, call it 2010. I can't remember exactly when, but coincident with that, we put it online. We took parts, service, selling, rental administration, different brands, and we put a company together called the Capital Goods Sages where dealers could put their own data in and they'd get answers back, or we could suck the data for them and give them the answers. But we didn't give them numbers, we gave them graphics. So you had a frowny face, you're being greedy. You had a red light, you're in trouble. Better make some changes. Orange light, green light, smiley face and then a greedy face. So if you're making too much money, you're at risk just as badly as if you're not making enough money.
Speaker 1:And then for every single, we had 200 different measures. For every one of those measures, I created five tips. You could buy the tip online for 10 bucks, 25 bucks, 50 bucks, a hundred bucks, depending on what the significance was on helping you improve. We sold it all online. And if that didn't work if you tried it but you needed help to do it we created a group of people called ACEs, who are all retired executives, just like you know, the American executives overseas routine, and you can get in touch with these guys and they could come out and help you implement or be a sounding board or counselor or whatever. And we put that whole thing together. Unless I intervene with a dealer, they will not do it on their own. Now, is it because they don't want to know what the answer is, or they're happy with what they've got? And I think that's where the rub is. I think the status quo is something that the leadership today vigorously protects that the leadership today vigorously protects.
Speaker 2:Yeah, I would say I don't have the same level of depth and knowledge that you do. I see it. All I can see from my side is man, there's some great companies out there and there's great OEMs and there's great dealers companies out there and there's great oems and there's great dealers, and I can only imagine being in their shoes with business. Conditions are changing and many people are um, selling them overpriced or, and you know, these sales people show up. They probably make more money selling them the Microsoft software stack than the president of the dealership makes. There's a reason and it's wrong. It's not a fair exchange and you need Accenture to go and install it and it's not aligned. It's not fair.
Speaker 1:Well, stay there for a second. Let me ask you a question who do you think is the largest, most respective consulting company in the United States?
Speaker 2:I, I'm, I can say I, I don't. You don't follow that enough to be able to make a comment.
Speaker 1:I don't, you don't follow that enough to be able to make a comment.
Speaker 2:I don't follow it. I have an opinion. What is your opinion? Who is?
Speaker 1:it.
Speaker 2:I would probably say I mean, I'm going to just throw them out there because I don't really care who's first. Mckenzie Bain. Mckenzie's number one.
Speaker 1:Alvarez Marcell. So stay there for a second today. Today, across the wires is the statement that McKinsey is completely changing their business because with artificial intelligence, with copilot, with chat, gpt, with other tools that are out there, their clients don't need them to crunch the numbers anymore. They can do it themselves. What they need is the analytics, the conclusions, the recommendations, the projects and a roadmap of how to get them done. So they're changing their whole business. It'll probably take them a year, maybe less if we're lucky. That's a consulting project for a consulting company. Isn't it Redefine us so that we continue to exist? So let me give you another example of a similar situation.
Speaker 1:Ibm hired a guy by the name of Gerstner to become their chairman. This was a long time ago, in the eighties. He had his first. I don't know if you and I talked about this. Yeah, gerstner has his first meeting with all his direct reports and he's a superstar. I mean, his reputation is impeccable and there's about 20 guys and gals in the room and he goes around the room and he says who are your top three customers? After four or five responses it became clear that they didn't know. So he ended the meeting. He said we're going to convene again in a, in a week, and I want you to give me the top three, the three most important clients that you have. This is the whole corporation. This is the largest computer company in the world with the highest market share of technology in the world, and they couldn't tell who the top three customers were. So he goes back. Here comes the meeting. He gets the top three customers, has a perfunctory continuation of the discussion, thanks them very much, ends the meeting.
Speaker 1:What do you think he did next? He's got 60 names. He got on a plane and went to visit every single one of them. In three months he came back. He's got his 90-day project out of the way. He's been given input from the 60 most important clients that the company has, according to the leaders. And he asked them what do you like that we do that you want us to continue? What don't you like that we do that you want us to continue? What don't you like that we do that you want us to stop? What do we do that doesn't really matter to you and what would you like to see us do instead of everything else? Those four things, and he distilled it down to two or three things for every single one of those four from those 60 customers. And then he went out and executed it and saved the company, doubled the volume of the company within the first 18 months. So there's a man who, like McKinsey, comes in with fresh eyes, which is an expression I use.
Speaker 2:I think when you were speaking, a couple things went through my mind is, first of all, a really cool story. Second is jake, brad jacobs, you know powerhouse and pretty. Um. The third thing that's in my mind is umEMs are either going to fail or go private. It's the only way you can do it is to fix it. You're going to have to take control of it and it's going to be interesting.
Speaker 1:And that's a great word. I love that word. It's interesting. Let me go a little bit further here for a second. Let me go a little bit further here for a second. We're not okay. Let me get really nasty. Grade eight American education. There's a grade four and grade eight standard testing that takes place with every student in America every year 2024 grade eight and they test arithmetic and English. 70% and 72% of the students in America at grade eight cannot read at grade eight level and cannot do mathematics at grade eight level. Interesting, oh, no question. Like what the hell's going on here? So go up further in the helicopter or the hot air balloon. Somewhere in the 50s it became determined by American government that they wanted you to have a university degree because you'd make more money that way, and the whole education community turned around because the product that they're trying to create is a work ready student and employee for the community and they've been failing.
Speaker 2:Keep talking. I'm going to. I'm going to go grab something I want to show them.
Speaker 1:Okay, and in the process of that failure in the 80s, a new program came out of California called AVID, which is Advancement Via Individual Determination, and the illustration that I use is we're all 10 years old, we go to school for the first day and we have three hours worth of testing, and then we go home and we come back a week later. We're all 10 years old and we're all assigned a class. You could be in grade three to grade 10, based on your specific skills and knowledge level. Now we're starting to educate according to the capacity of the student.
Speaker 1:My daughter's the curriculum is responsible for the avid curriculum in her school district and she says Dad, students don't have critical thinking skills anymore. So we create assessments like those tests for the 10-year-olds, so that I know exactly who's good and who isn't, what they need in order to get good, how they can get better, what are the different options of them in their career, and we can create a complete, individualized, personalized learning path for them. However, employers look at employees as tools in the toolbox. I'm going to hire you to satisfy this need with your skill set, your tools, and if those tools become outdated, I'll replace you.
Speaker 2:yeah, and when you contrast that with rockefeller who said it, you know I'll buy talent, put them on my team, or Brad Jacobs, and I want the best people and I want I'm going to pay them so much they wouldn't dream of going anywhere else. And this whole notion of a quote, unquote a player is interesting and it kind of ties to your outsourcing model. I guess if I had to add something on is I would encourage OEMs and dealers to the sense. If you know, I have this book. I'd like to send it to you. I'll show it to you in a moment. But what does information really measure? It measures the uncertainty we overcome. It measures our chances of learning something we haven't yet learned, and it's kind of that simple. What does early information really measure If it's not helping you overcome uncertainty? Cut your arm off. I think it's a really fun book. Send me your address and I'll send it to you, okay.
Speaker 1:We have a suggested reading list for interested people on our website. There's a couple of 300 books in there. One of the guys that I list in there is Patrick Lencioni, who's got about 10 books out there. One of them is called Getting Naked, because you used the word naked earlier on and what that is is that you're starting a consulting business, so you go into a client, you're completely naked because they have no idea. They want to know who you are and what you are and what you can do and how much you're going to cost and all the rest of that stuff and you got to become naked. In it. He has three signs of a miserable job um, a whole. And they're all fables, easy stories 100 to 150 pages, small format, big print, easy to read, Absolutely wonderful. But in almost every class I did.
Speaker 1:I'm not doing classroom training anymore, but I always used to start with okay, who's read a book in the last year? A lot of hands went up. Who's read a book in the last six months? Who's read a book in the last three months? Who's read a book in the last month? I said you know, if you're not reading books, you're dying. And then I would ask the room. I said how many books do you think I read a month? And everybody guesses one or two or whatever. I have two going every week of all manner of stuff. Might not have anything to do with anything that I have any interest in, Might be astronomy, Might be astronomy, Might be SpaceX, it might be Neuralink, it might be it doesn't matter. It's just trying to exercise my little peanut so that I can stay relevant.
Speaker 1:I've got two grandkids. My daughter's got a master's in education. My daughter's got a master's in education. My granddaughter's got a master's in animal science. My grandson's in the Navy, the nuclear Navy. He's the brains of the family. He's going to have nuclear engineering and astrophysics degrees by the time he's 20. He'll have master's in both of them by the time he's 22.
Speaker 1:I said what are you going to do with that by the time he's 22.? I said what are you going to do with that? He said, well, they want me to go to officer's training school. They want me to go to Annapolis. I said okay, what are you going to do? He said, well, he was the head of the ROTC in his junior year in high school. He says Bobby, this is nuts. I tell them to do something. They don't do it. It's driving me crazy. I said well, you're in the military, you know if you ask them to do something, it's not optional, it's get it done, so you don't need to worry about that.
Speaker 1:When you're in the military, However you get in the private sector, you kind of have to learn how to motivate people, manipulate people whatever the hell you want to call it to get them to do what you want them to do. He said is it really that bad? I said it's worse. That's why I got into consulting in 1980. My job was babysitting, and politics I don't like and I'm not good at either. I like solving problems. So we've got a whole world out there of people that don't know how good they are or how much they're missing. Companies are using training and employee development as discretionary funds, which is a huge mistake, and we have this fourth industrial revolution taking place. That's changing the complete supply chain and all trading between all nations on the planet.
Speaker 2:Yeah, I'm going to say I've changed an opinion since I entered this call. If I were an OEM, I would accelerate in buying back your distribution. Then I'd take the company private.
Speaker 1:Okay, so while you're doing that, I'm going to go down another path. I'm not going to be affiliated with any OEM. I'm going to get a replacement for every damn machine there is out there and I'm going to sell it at 25 percent lower than you can buy it.
Speaker 2:You know it's funny. That went through my mind before I mentioned that to you. That last comment to you. I think that's brilliant. So let me go a different way. Hang on a second. You would bleed them out, of course.
Speaker 1:Of course they wouldn't even. I mean at the beginning, they would think it's crazy. But customer review, well shit, tvh right. So you know what's really funny? I started consulting Another.
Speaker 2:Harvard Business Review case study. Yeah, they gutted that industry.
Speaker 1:Of course, and I use those Harvard case studies as training films in my classes. Yeah, and they use that as okay. Here's a case Southwest Airlines, herb Kellner. He's the Sam Walton of air travel. His business plan was on a napkin in a bar. There's examples all over the place. The trick is we have to get critical mass and we have to continue to see the breakdown. So here's an interesting statement. The first machine owner is owned by the supply chain. That starts with the OEM. Maybe it'll be a private network, maybe it'll be private dealers, doesn't matter, but it starts with the OEM. Who owns the second machine owner?
Speaker 2:An auction. Richie Brothers, yeah. And if you look at the Larry K, Right, you know Larry K, yeah, here's an example of how little I know and it's shocking how I lower how much I know on a daily basis. The half-life of what I thought I know is declining or accelerating. So, Larry, at last year's AED he presented something and it's like you know, when you see something like I'm the village idiot. How did I not see that before? He put up the disposals like CapEx for the three or four major rental companies is what? Five, 10 billion a year? Right, it's a huge number. And it just never occurred to me they dispose of a similar amount. Never occurred to me, it just never occurred to me. They dispose of a similar amount. Never occurred to me. Like you talk about crushing a market, I mean like it just never occurred to me you flood the market with late model, well-maintained equipment. It doesn't help. I mean it's nuts. I like your, like your idea.
Speaker 1:Yeah, let's just drop it like your idea and and say that's enough for one. I think we probably overloaded too many people and in too many thoughts. I hope that's the case and I I appreciate your perspective and you know.
Speaker 2:Thank you for being with us well.
Speaker 1:Well, your statement that you don't know. Remember Rumsfeld, when he was secretary of defense, made the statement that we don't know what we don't know. That's a very significant statement, oh yeah, and we don't know, you and I don't know. Nor does the industry, nor does the world know what we don't know you and I don't know, nor does the industry, nor does the world know what we don't know today. We do know that there is unbelievable challenge. We do know there's a consolidation. We do know there's a forced industrial revolution. We do know technology is changing faster than we keep up. We do know that we feel like we're victims, but we got to try and get control of our lives again. So my grandkids I tell them all the time I want you to be in business for yourself. Find out something you're passionate about, something that you think you can help people make money at, and give it everything you've got, and understand you're going to change that every 10 years for the rest of your life, yeah, and I want to see American companies.
Speaker 2:I don't you know I? America means a lot to me. The ideals and the freedoms I think we enjoy, and certainly the people who laid their life down for us enjoy, and certainly the people who laid their life down for us and to the extent we can bolster the prosperity of future families in this country is something I'd like to do and I think it's fun. By the way, I've got your service. I hope you know this. You are frequently in my prayers of gratitude and I appreciate that, because I feel them my friend.
Speaker 2:Well, you are a blessing and I will report back on Helen's birthday.
Speaker 1:Way to go. Okay, so we'll see you in the fall in Hawaii.
Speaker 2:See if I can pull it off I think I can.
Speaker 1:Okay, so on that I'm going to say thanks very much, nick. I think this has been a really valuable hour.
Speaker 2:You're a gift and a blessing. So, oh, I had a lot of many good conversations with Troy Otmer. Yep, he's world-class. Oh yeah, he is a. He is a Titan.
Speaker 1:So thank you for that oh, there's, there's, there's Troy, and there's a whole bunch of others that are, that are coming. There's a bunch. There's an amazing amount of talent out there and, to the audience listening, I hope you got something from this candid conversation. If you have any thoughts or comments, we give you. When we send this out for consumption, we give you an email. You can send any questions or things that you want, and we're going to be following down this path for the next six months, for sure Until I get some indication that we're starting to make some progress. So thank you very much, everybody, and I look forward to having you with us at the next Candid Conversation Mahalo.
