Roy Lapa and I talk about branding as a critical element in this Candid Conversation.

I think that's an important circumstance. One of the things that we have is a class called Make It Matter. And it's all about you as an individual and how you make it matter to the customer. And it's about identifying yourself as a brand, creating your own brand. And the image that we used was from a, oh, I'm not sure, a film from Harvard or... MIT or one of the different universities on using a hotel room as an illustration of how a brand makes a difference. A hotel room is just a box of air, but all of the furnishings, the decorating, the furniture, et cetera, et cetera, make it either a 300 euro a night or a 50 euro a night room. And people... I think, need to think of themselves a little bit more as a brand. The first person that touches the customer is the employee on the phone or in the field or in the store. And that's an important interaction. I think that's the critical interaction. And I don't see a lot of people thinking about their own personal brand. Do you?

How do we change that, Roy?

Yeah, I've often said the person who's closest to the customer is going to win. Yes. And your statement about if we painted all of the excavators or loader backers or tractors the same color with no decals. it would be very hard to distinguish one from the other. So the machine itself is not a differentiator like it used to be 20,40,50 years ago. The dealer is a little different, but we've seen so much consolidation, Ray, that, you know, the geographic reach now of a dealership, you're covering a whole country in many cases. or a whole continent in many cases with the same dealer. So the brand differentiation there goes away. And then we come back down to the person.

Yeah, it really does. The other thing that I think we're running face or head on into is that many. companies selling equipment, whether it's washing machines for your house or barbecues for your backyard or cars, whatever it is, they have reverted to looking at employees like tools in a toolbox and they perform a function. They haven't really come around to the place that the person who touches the customer is the glue that establishes and maintains the relationship. And I don't know that I've seen many dealers make that, and it's significant, make that connection that the person on the phone, the person in the field, the person at the store who interacts with the customer is the single most important person in the transaction.

That you're pointing at something that is really dramatic. You know, go back to the 80s and the advent of Japanese. total quality management, customers for life, that philosophy, their Kaizen approach. It was about 20 years that they would have a head start on, say, Korea or other countries in the manufacturing world. Then we got Sony with the Walkman that maybe was 10 years. Now we've got the telephone. iPhone's been around not that much longer than. 10 years. But in the last three months, chat GPT has gone from zero to a million users in something like five days. And that pace is, it's brutal because everybody who's in the retail business has to be able to provide a digital platform. But that's when everything goes right. And you're not going to be measured by when everything goes right. You're going to be measured by what happens when things don't go right and how do you respond to that. That's problematic.

yeah. And I think, I think that's really kind of perfect. The we're walking into country that we've not been before and it is intimidating to a lot of people and not all of us in my generation, for sure. I'm, I'm in my late seventies of 50 years ago. When I started, I was, coding, I was designing systems, I was doing all kinds of stuff. I can't keep up anymore. It's impossible unless you're working in it directly. And, you know, I was talking to a product support executive a couple of weeks ago, and he said to me, I really don't like the internet as a platform. It's not personal. And I said, well, How do you square that with the fact that the customer wants to be able to do it at 11 o 'clock at night or 3 o 'clock in the morning? And he doesn't care if you're involved. He said, well, but we lose on that. And again, I think that highlights another important part of branding. What does the customer want? What does the customer need? And how you satisfy that. So we do have the colors, the logo, the platform, the website, all of that's an important piece of it. But that's like the clothing you wear.

Yeah. Yeah. I call them customer service delivery systems. And, you know, we've got a walk-in system. We've got an internet. We've got a phone in. We've got all these different ways that the customers choose to interact with us. dear Lord, make sure you have those options available or the customer is going to find an alternative and replace you. And I don't know that we're paying enough attention to that. We're still stuck on, you got to have the right inventory. You got to have the right price point. You got to have the right looking facility. I don't think the customer really cares about that anymore. Yeah.

I remember I started in the industry in the late 1960s, and I was with a Caterpillar dealer in 1965. Caterpillar face-to-face talk with every owner of a Caterpillar machine everywhere in the world, asking questions face-to-face. Now, that was the last time they did it because of the cost, and they then did 20% every year for five years. And one of my friends used to do that for Caterpillar. And imagine the power of that information. Because then you can design things specific to what the customer is asking for. And there's an area that I don't know that we do enough of. You know, the definition of customer service causes a lot of people a lot of problems because they don't know what it is. And in my view, customer service is measured by what the customer expects to receive from you before the event. And what the perception was that they received after the event. And that's owned by the customer. And unless we ask, we don't know. And I don't believe we ask.

And somehow, Roy, and this is a bit of a slam, I guess, but I think Europe and Europe, Middle East, Africa, EMEA, and Asia Pacific, I think they've got a much better hold on the relationship with the customer, the machine owner, the housewife, whoever it is that... We have to try and satisfy it than we do in North America. In North America, we're more interested in making money. And we've lost sight of how and why we make money.

Yes. Yes. It's that simple, really. Yes. Yes.

Yeah, it's a French expression, isn't it? The more things change, the more they remain the same. You know, it's really interesting how these things evolve. Another aspect in society today, again, it's going back, and this is my perception, and it might be dead wrong, although I don't believe it is. Employees are being viewed as toolboxes, as tools in a toolbox. And it's a static tool. It doesn't change. They're not helping to develop it. And the employee becomes less satisfied as time passes. Harvard did a study in the late 80s, early 90s, same type of thing as Caterpillar did in 65, where they talked to over 200,000 distribution businesses and that there was a direct correlation between employee satisfaction and loyalty and customer satisfaction and loyalty, which intuitively makes sense. But I don't know that we pay enough attention to that. Keep your employees happy and everything will be good. And you don't do that by money. You do that by paying attention to what they think, valuing their opinion, saying thank you. Very basic, old-fashioned things. But I don't think we do enough of them anymore.

Yeah, it's been a character flaw of mine. I'm never really happy with how things are done. There's always a better way. And one of the exercises that I've done with dealers for decades is getting everybody to write down five things. And it's deliberately five things on three subjects. What are five things that we do that you want to change that would make your life as an employee better? What are five things that we do that if we were to change would make the company performance better? And what are five things that we do that, you know, we really don't need to do them? Why do we do them? And what is remarkable to me is when you... Look at the list at the end. And we do this with 20,30,40 people in a room. And you put them up on a whiteboard or on a flip chart or whatever, and you start consolidating them and looking at them. The same things are on all three lists. And you kind of say, well, look, if it's better for the company, it's better for you. How come we're still talking about it? Why don't we do it? And that becomes the next trap, I think, Roy. We're stuck in ruts. We continue to do what we've always done the same way we've always done it and expect things are going to be fine. And with the rate of change in the world and society and technology and education and every aspect, that model doesn't work anymore, if it ever did.

No, that's for sure. It's content for future discussions for sure. Sonia Law, who's in Australia, who does, blogcast and podcast with us on human relations, wrote one a couple of months ago about job architect,

is the HR of tomorrow. And you highlighted it perfectly. We're comfortable when we hire somebody who's got good education resumes, who's got good experience resumes, but that's all yesterday. It has nothing to do with tomorrow. You mentioned that that might be my brand itself, and it's probably true. When I left the dealer world, I was running the parts business for a Catechord dealer that had 53 stores, and I used to say that my job was babysitting in politics, and I'm no good at either, and I don't like them. And then I went into consulting where almost every week I was challenged with a different issue. So there's the, yes, the innovator, the analyst. But then the critical piece is implementation. We have to have people that can implement things. And that means they're good working with people because change management is difficult, no matter how you select it. And I don't know, and I think you touched on it nicely, we don't look at employees that way. One of the gentlemen that we work with a fair amount is Steve Clegg. very well-educated, very experienced man who deals in data analytics and artificial intelligence. And there used to be a thing called an executive function evaluation for universities to determine the probability of success a student that was going to university was going to have in his career. Would he be able to hold a job six months from now? And it was an incredible view of people in a different way. It didn't matter that you got all A's or 3.5 or whatever the scoring was on a subject, because that's only one piece of the puzzle. What were you going to do with it was what that executive function was all about. And we're trying to put together a model that evaluates business performance with team performance. Are there skill sets? that become clear in successful organizations? And are those skill sets lacking in organizations that are not as successful? And again, it all goes back to brand, Roy. The brand that the company has should be aiming at securing and maintaining retention of customers as a result of satisfying their needs. And I think that's what you're identifying with. the starting point of the OEM brand and the dealer brand and moving into the employee brand. But I don't think there's enough people that have given it as much thought as you have, which is why I'm so pleased and happy to have you joining us, writing about these types of things, along with everything else that you can contribute. Am I getting too far ahead of myself?

Yeah, I take those same two brands and I've worked all around the world for a long number of years. And I used to be able to come out of an airport, go to the curb and get in a taxi and say, take me to the Caterpillar dealer. And that was the end of it. The taxi driver took me wherever the Caterpillar dealer was. I would come out of the same airport, get into a different taxi and ask them to take me to the Comatsu dealer. And I had to give them an address.

It's really interesting. So you start looking at, okay, what provokes that brand? And I go back to the early days of these businesses because the brand or the personality of Caterpillar, I believe, was set by a man by the name of Bill Blackie when he was chairman in the 50s. And he created a book, Roy, that you might have seen. called Partsgrams, another book called Servicegrams, that had every single process and procedure in the product support world that any dealer would ever need. And they became a product support, look after the machine, we're here to reduce your owning and operating costs kind of company. Komatsu is an engineer's manufacturing company. They make machines in heaven. Nobody needs to sell that machine. It's the best machine on the market. And that perception is how they are viewed. I'm not being derogatory in either case. You know, Komatsu makes very, very good machines. But the focus that the Komatsu dealer has on product support is not nearly what the focus is that the Caterpillar dealer has on the product support side. And we can do the same for JCB and Case and Volvo and John for everybody. Workin is a wonderful example of, you know, take automotive. Volkswagen is the number one car manufacturer in the world. They displaced Toyota, who was the number one, who displaced General Motors, who was the number one. And each of them have a different personality. Each of them have a different brand. And that starts driving customer perceptions. And once you get into that rut, I call it, it's hard to look over the wall to see what you should be doing. Because Volkswagen hasn't been number one all along. Neither was Toyota. Neither was General Motors. How do you change? Coca-Cola and Pepsi-Cola, Kleenex, Kodak, Fuji, all of these different things. It's a brand that drives the whole darn thing. And we don't pay any attention to it.

I agree.

And disruption is the right word. You know, Massey Harris, Massey Ferguson was one of the top agricultural manufacturers in the world. They're almost gone completely from the planet. Blackwood Hodge was the largest dealership in the world. They don't exist anymore. And, you know, some people that I've worked with, Vincent Bia in Belgium, who's a Komatsu dealer in Belgium, has half of Africa from the Belgian Congo days. He is a customer service killer. He's a wonderful gentleman with a whole bunch of people that have the same attitude. Otto Sueco started in the on-highway truck. Ascendum today, Portugal, a very powerful dealership in Volvo in Africa, North America, Europe. The trading companies out of Japan, Mitsui, Merobini, they do. interesting things, and they all have a personal brand. And like you said, there's not very many independent dealers that, you know, Hulk Tractor, the Caterpillar dealer in Texas, whose current president, excuse me, is the great grandson of one of the founders of Caterpillar Tractor, they're still here 100 years later. There's some really interesting things going on that That disruption is really going to cause us a problem, the relationship. There's a man in North America, you might have heard of him, called Mike Rowe, who's been a blue-collar advocate for decades. He has a television show called Dirty Jobs.

He made a comment a couple of weeks ago that said, if you are not working with your hands or building something, Your job's going to be replaced with artificial intelligence sooner than you know. And I believe that 100%. So building something or working with your hands, that's the relationship to me with the employee and the customer. You can take everything else away. The employee who's selling something or servicing something or supplying a part to something, that's the person that makes it happen.

Alex Kraft.

You know, it's interesting you mentioned, Alex, the dealer. who sells the machine, owns the relationship with the customer who bought that machine. The number of times the customer who bought that machine, five years,10 years,40,000 hours, whatever the measure is, ago, where it's replaced by another brand, I don't think enough people pay any attention to that. So let's look at the secondary distribution channel, talking about disruption. The secondary distribution channel starts with an auction. And the person who runs the auction owns that second owner's relationship. And rental companies have the same type of thing where they've taken the relationship away from the dealer. They buy the machine from the dealer, but they have the relationship with the customer. Again, another indication of a change. a disruption in the marketplace that the brand OEM dealer doesn't recognize.

You know, I hesitate to use that word because it's a rather sober view. But if you think about it, I did a talk at an association meeting in January, and I've been writing about this for some time. I don't believe that the OEM slash distribution channel. is about selling things anymore. I think it's about selling services. You're not going to sell a machine. You're not going to sell a part. You're not going to sell an hour of labor. That's not what the customer is going to be looking for. They're going to be looking for things, services that you provide as a member of a distribution channel, as a brand that helps them make money, that helps them be better at what they do. So all of this technology, telematics, sensors, diagnostics, repair options, repair instructions, the right to repair, electronic catalogs, drag and drop shopping carts, all of those things are aimed at making us more efficient. They're not looking at making us have a better market share, having more retention, satisfying more customers. And that seems to be... the mindset that needs to change. It's not about efficiency as much as today as it used to be. It's about much more bonding, the glue holding us together with the customer. And you're looking right down the throat of that with your branding papers. It's wonderful.

it's funny. Yesterday was Easter, and we had a lunch with our granddaughter who's going to school here, and she's taking animal science. And she's having trouble with a particular branch of statistics, which ties back to research and significant details of scientific data. It's called R-processing, and it's a very complicated aspect of statistics. And she said, I'm never going to make it. I can't understand it. I said, well, tell me what it's trying to do for you. And it's validating my research. I said, cool. So think of it a different way. How do you need to validate your research? How do you want to do it? And it's the same damn thing, Roy, as how we look at our customer. A customer leaves us. They stop buying from us. Their buying pattern changes. We don't even know it. We don't call them. We don't ask them what happened, what went wrong. So there's a starting point. So with Neve, my granddaughter, okay. Did you do the experimentation correctly? Did you record things properly? What does it tell you? Now you go look for the tools. Mr. Customer, how can I make you happier? What do you need from me? And they'll tell you. They try and help. Then it's up to you to go find something that'll answer that question for them. But it all goes back to asking the customer, what do they want? What do they need? And then. giving them back options. Oh, I can do that. What do you think of this? Or what do you think of that? Which one would you prefer? And it's no longer one size fits all. It's one size fits one.

With that requires very good, talented employees.

Yes, sir. It's a big circle. And, you know, I use this example all the time. The first mechanic was a blacksmith. That blacksmith was the biggest man, strongest back, strongest, didn't have to be smart at all, just had to physically be able to do things. There was typically only one blacksmith in a city, a town, a village, whatever we want to call it. The market share of technicians in Europe and North America is somewhere in the range of 15 to 20 percent max. Meaning we've lost 80% of the business. So Alex Kraft with Heave is organizing the independent mechanics and giving them an option of more customers. And it's giving the customer access to more mechanics. And why did the customer have to seek out another mechanic is because we had to have them wait too long. And we did that on the basis that if I have a backlog, I can be efficient. If I don't have a backlog, it's going to cost me money. And look what the end result of that thinking delivered. That four out of five jobs, we lose. Isn't that amazing?

Yeah, but you know, that's the way it started. But we get stuck, like you said, Roy. That's what it's always been. And we haven't looked over the wall to say, darn it, I'm losing four out of five jobs. And those other jobs are, oh my goodness, it's other machines. If you're in the Comanche dealer, the JCB dealer doesn't call you for a repair at all. And vice versa. But the independent mechanic looks after both or all. Same thing with parts. There were two Caterpillar dealers in Italy, Roy, years ago, one in the north, one in the south. And most of the replacement parts manufacturers, hard parts, gears, and that type of element were manufactured in Italy. And I sat in a... heat treater, the only one in Northern Italy for a couple of weeks, looking at the people who had their work done there and talking with the people, who has the best chemistry on the steel? Who has the most precision on the heat treating? Who has the toughest depth of heat treating that we're going through? And then I went to go see those folks. And every single one of them sold to Caterpillar or Komatsu or Deer or everywhere in the world. And I remember in British Columbia, we're selling Caterpillar parts at a company called Finning that does about $8 billion a year now as a dealer. And the loader linkage pin, it's a cylinder, nothing fancy, six inches to 12 inches in length and maybe two and a half to three and a half inches in diameter, chrome polished, made in Italy. And I remember one specifically, I had to pay $100 for it. And my recommended selling price was $150. This is 100 years ago, in the 80s,70s. And I had a competitor that was selling it for $75, half my price. And I knew where they were made. So I made a deal with where they were made, and I could buy it for $10. And then I went to Caterpillar and said, look, this is guys beating my brains out. I need to be able to sell this. Will you let me do it? And they said, Yes, but you cannot make any more gross profit than you would on the original part. So the 33% buy for 100, sell for 150. I had to buy it for 10, sell it for 15. So my brand position in the marketplace went like this. They took away our business by saying that they had the same product that we did for half the price. But they don't have the same product that we do. Now I've got the same product that they do. And I'm going to sell it to you for 15 bucks instead of 75. Who's gouging you on price today? And that competitor went out of business within two years. And we don't think that way anymore, right? No. Carl Schmitt in Germany makes really good pistons and liners. Most people don't know about them. The parts supply world is about to get a kick as well. Amazon and other companies now. taking out the middleman. It's a very interesting time and brand and customer loyalty are the two, I think, the two most important aspects of life. And again, that's your wheelhouse.

I think we beat this subject up a lot. What I'd like to do, Roy, if I could plant something with you, I think the electrification of equipment is going to kill the distribution channel, the dealer network. Because if you take the parts business out of the dealers, they don't make any money. They'll never survive. How do we approach that from a branding perspective? And what I see happening is we're going to have a bunch of dealers out there who do not have a single brand. Like automotive, you go into an automotive dealership and they might have 10 different brands now.

Is that coming to the construction world, the engine? Well, the engine world is almost there now, aren't they? Cummins and Daimler are the two drivers.

I agree. And I don't know that anybody's really thinking about that. Tesla started the problem, didn't they?

It's a good subject for all of us to be thinking about. Roy, I think this has been beneficial. Have we missed anything, do you think?

I think so, too. And I'd like to thank you very much. for this conversation. I hope that everybody who's been listening to it, that this gives you some food for thought. And I look forward to having another conversation with you, Roy, and to another candid conversation with everybody in the near future. Aloha, everybody, and thank you very much. www. learningwithoutscars. com The time is now. Mahalo!