Transforming the Technician Industry: A Discussion on Challenges and Solutions

Not too bad. Not too bad. So... Go for it. Why did you say what you said? Why did you write what you wrote? I think you're right 100%. Thank you.

So why are we stuck with the way we are?

We've got the same thing on the parts side in a different direction, the constant reduction in headcount. Shills per employee in parts is obscenely high, and it's all about driving profit. We seem to be completely in the... in the camp that we're the equipment people. Parts and services, back there somewhere, most of us don't understand it, but we're just going to leave it the way it is, and we're in a rut.

Yeah. Yeah. It's really a remarkable occurrence as we move forward. And as technology changes and people like he bring the customer and the mechanic together in a different way. One of the other things we're stuck with. At the OEM level, at the dealer level, they don't want to work on anything other than their own brand. And that creates an obstacle for a lot of customers, which is, you know, market share and labor, if you're a really good dealer, might be as high as 25%. A lot of dealers, you know, are down around 10. Maintenance is under five, which tells us, you know, we charge too much. And the other side of that equation, which you're bringing up, is we pay too little. And as you say, we start out, okay, here's $200,000 for a truck and some tooling. And, you know, there you go. See ya. At least you're wearing my uniform. You know, and that looks like prison. You know, it's remarkable. Absolutely remarkable.

They split in business, in dealers. As you know, I've always been after having half of the business in parts and service, half in equipment. I'm happy if I get to 60,40,60 equipment,40 parts and service. And with that, I can make a fair amount of money. But when I'm looking at 20% to 25% parts and service, it's a struggle. And the leadership of dealers doesn't seem to want to change it. They're in a rut.

Before people finally get it? I

Yeah, that's almost gone. The first dealership I worked for, the president was a mechanic at one time. But he got things done. And we were very progressive. Then when I went out to British Columbia, it was co-executive VPs, the vice president of parts and service and the vice president of finance together were both executive VPs. Of course, the president was a sales guy. so it was it was an interesting troika but as i go around different dealerships and work in different dealerships the number that is driven by parts and service is very small and i don't know whether it's to your point or whether it's just the manufacturer influencing that

And yet, if you're truly a financial dog and you look at the DuPont model, which has been around for 50 years, more than that. The number one issue in a dealership, the number one metric we should be paying attention to is gross profit percentage. And what drives that? Parts and service.

The next one is return on assets. And what drives that? Parts and service. I mean, it's ridiculous. So shifting gears, take me over to Heave. You're in Florida. You're in Texas. Where else are you now?

Yeah. Yeah. I think that's a good strategy. How many jobs would you say a week are coming through these days? Work orders.

Yeah.

How much does it cost for a customer to grow?

Zero. So you're taking the same stance that Uber and Lyft have taken. We're going to provide our service for nothing. We want to make money on the transaction after the transaction is completed.

Do you have testimonials yet to the point that you can have them up on the website from customers? We

To make?

To make an additional $500,000?

So roughly $40,000 a month. How many machines in his suite?

Yeah. To me, that's, you know, we've, we've got the general practitioner in medicine, which is what I submit is the first place. for heave with technician. And we've got specialists that you're going to start recognizing and customers will start recognizing there's some guys that are spectacular on certain things. And that's going to start changing the wages and the priorities and all the rest of the stuff. So it's going to be an interesting thing.

So go up further in your helicopter. You started out trying to facilitate the sales transaction through the internet, which worked, but didn't get the kind of action that you were looking for. So you shifted over to technicians. What's next?

No, I agree. I just wanted to put out in the air that you're focused on something and you're not going to get distracted from it. Just as an update to you, I think Catapult's latest number is 17 for North America.

Yeah, there's two in Canada already. When I was there, there was 10. There's two Volvo dealers in Canada now. There's one Hitachi dealer across the country. There's one John Deere dealer across the country, not including ag. It's a very, very different world. And as the dealers become bigger in size and smaller in number, their financial statements mislead them because their sales are going up. They feel comfortable. But it's because their competition is shrunking.

Well, the other side of it is customer retention. You know, I do a lot of work with data analytics and artificial intelligence. I've been pounding the table for customer retention for 40 years, and people still don't even measure it. No. And changes in buying patterns aren't acknowledged, and mystery shopping to identify the customer service issues has almost disappeared. There's very few people that do that anymore. And the whole thing becomes, how can I fool myself into feeling? How can I make myself feel better?

Let's take that premise and that we don't have to fight for service. And the customer makes the decision on service when he buys a new machine. The new machine per year is. probably less than 15% of the total working population. The second owner is not owned at all by the dealership. When the customer sells a machine, perhaps at an auction, who takes control of the second machine owner? Nobody. So now we're waiting for, and it's coming, real serious competition on replacement parts. Because you take the replacement parts away from the channel. Now you've got the manufacturer's attention because that's the only place they make money. And when they start losing money, which has happened in the past, had different anomalies in the marketplace, it's not a happy circumstance. So we end up with the big guys in mining, Komatsu Caterpillar, Hitachi. The big guys in the large equipment size, add John Deere and perhaps some others out there.

So you've got four or five in the... mining, large. Then as you come down, the number of competitors changes. And then as you get to the small, light industrial, it's maybe 30 to 50 different. So we've got 50 people in the supply chain on the small, maybe 25 in the medium, maybe 10 in the large, and three in the super. That's what we're dealing with. If you look at automotive, when they went that way with General Motors, Ford, and Chrysler, all of a sudden Japan and Germany became number one, number two market share people. And we're going to see that kind of disruption here. The Chinese, Sani, Wee Gong, et cetera, they're there. They've got good equipment. They just don't have distribution. Correct. If I was Sani and Wee Gong, I'd make a deal with you guys. Do all of our prep for delivery. We don't want mechanics. You've got them.

It's better to buy it. I've been saying that for a long time. By the way, I gave you a hint, you know.

I'm pretty tickled with what you've done and your success. So keep it up. It's wonderful. It's very rare. You know, you're not a bit of an anomaly. I'm never particularly happy with the results I see. I've never been. that way. And I'm always looking over the hill. And I wrote a blog this week, I don't know if you saw it, about the changes in learning, where my granddaughter gave me a book called The Narrative Gym, Gymnasium, that deals in three words, and, but, and therefore. And if you look at the English language and you'll throw pronouns away, but is the most commonly used word in our language. And it's the only word we have that allows us to contradict ourselves. I love you to guess, but it's a great idea. And here we go. And then my daughter, who's a teacher here in California, has a new approach to life called AVID, which is advancement by individual determination, which means each kid essentially drives their own progress.

So whatever their potential is, it's up to them to make a difference. And the book that she brought to me this couple of weeks ago or 10 days ago is a thing called Ruthless Equity, where we have not approached life situations, problems, relationships. Honestly, we've made them into little partitions, which is exactly what the dealership OEM relationship has done. It's partitioned the market. It's not necessarily promoting their benefits as the reason to purchase. Rather, it's the negatives of the competitors. They don't have this. They don't have that. They don't have the other thing. So they're segmenting the market not based on a true preference. It's kind of a weird perspective, which took me by surprise. You know, all men are treated equal is baloney.

We are, but society, as soon as we get going, if you're poor, you've got one channel, you're colored, you've got another channel, you're of a certain religious persuasion, you've got another channel. And we pander to those different channels rather than to the universe. You're pandering to the universe. The OAM dealers are pandering to a sector, a segment. And that's destined to fail. Bookstores in North America, almost gone. Amazon replaced them. Bookstores are very prominent still in Europe. Interesting.

Because it's a different relationship in a bookstore in Europe than it is here. There was a store I went to in Durango, Colorado, down in the southwest corner, where they had couches and easy chairs. And you could take a new book off the shelf and sit down and read the whole damn book and then leave without buying it. It was an incredibly popular bookstore. So, you know, for a guy like me who doesn't know whether he's going to like a book or not, give me 50 pages. I know. So let me read that much and go away. And I'll tell you whether I want to buy it or not. You got the same thing. I got a taste treat. I have a repair or a maintenance job. Let's see if there's somebody at Heave that can do it as a taste treat. And son of a gun, they did. And it replicates. And it starts growing exponentially if you let it get ahead of yourself.

So what do your technicians need most now as they get busier, as they work on more brands, as they don't have to worry about getting business next week? What's their biggest need? I

Actually, what's happened since COVID much more markedly than anything else I've ever seen is people's quality of life and quality of work have become primary drivers.

You're not interested in quality of life or you've always had it?

That's not a good thing, my friend.

Yeah, it's funny. We had a client yesterday who's had a problem with classes with students. with the software. And we found a solution at seven o 'clock last night, which is 10 o 'clock back East and got a response on the email almost instantly. And I said, wait a second, what's going on? She said, well, I like what I'm doing and I want to do that. And I said, well, balance your life, kid. You got to, you know, you got to look at it a little differently. And you need to remember that too. So go back to your guides. It doesn't surprise me that they're not after the two,300,000. What they want is consistency so that they can choose what their life is going to look like. And that's the shift. The consistency is I own you and you're going to work 12 hours a day, maybe six days a week. And to the customer, the backlog is still two weeks.

And the shops are still single shift because we don't want to work. double shifts.

It's a real interesting place. And as you look around, look at appliances, home appliances. Remember the Maytag man? Yes. We've got two appliances here, washers and dryers. They're completely computer driven. Anything that goes wrong, we get a message on the machine in an audio. And it tells us what we need to do. So there is, you know, if I call to get somebody, they're 200 miles away. I got my suitcase was damaged coming over from Hawaii at this time and the locks are destroyed. The nearest repair shop is 150 miles away. You know, so all of these things that's happened is we're trying to make money on the back of the support of the product that people sell. And there is not enough money in the prime product to justify that. So, you know, right to repair is that, you know, you got into trouble, I think, with part of that at a while, didn't you?

But it's also that you can't do it yourself. Right. You know, it's remarkable. And, you know, warranty reimbursement. There's a checkerboard across the country as to what the reimbursement rates are. State law dictates you've got to repair, you've got to pay retail rates. It's kind of a funny story. We're in a hell of a transition, Alex. I know. And it's not certain to me where this is going to end up. I'm not sure that dealers are going to exist anymore.

Over time, yes.

Well, look at Disney where you are. They're in trouble these days. Look how much they charge for a day at Disney World.

And how about a family of four? It's kind of like going to a sports event, you know, a football game. We used to watch tennis here. We had one of the best tennis tournaments in the world. We had seats that were six to eight feet off or rows off the court.

From the very beginning, I used to teach tennis. So I've always been interested. A lot of folks that I've worked and played with out here are tennis players. It was remarkable. We're talking San person earlier. You know, you're 15 feet away from them on the court, for goodness sake. It's remarkable. However, you know, go get two seats at Wimbledon or French Open or Australian Open or U.S. Open. It's impossible today for normal people. So, you know, here we go again. If you think back, the first mechanic I've always said was the blacksmith. He worked on horseshoes and he worked on sores. Now, you could also say he was the OEM because he made the sword and he also made the horseshoe. But if you say that was 100% market share, because there really was only one guy in a village. Today, there's hundreds of guys. We had, I think it was called a leak in the material handling world in Ontario, where the guys that were paid.

above what the wage scale was, the only way we could live with it was to increase the wage, but let them be independent contractors so that we didn't screw up everything salary and wage wise, which is, again, another consideration inside an OEM that you don't have to play with.

Yeah. You know that I took a minor in computer science back in the 60s, which meant that I was wiring unit record equipment. And you also know that that's what I wanted to do as a career. But in 68,69, when I came out, there really wasn't a lot of opportunity. And I think you also know that there was a guy by the name of Ian Sharp who had a programming language that dealt with arrays as far as code. And I was on the internet with him in 1971, where there was nobody out there. It was just governments, financial institutions, et cetera. He sold his business to Reuters. Reuters sold the software side of the business to Bloomberg. So what Bloomberg is offering today with the terminal, he and the head 50 years ago.

Isn't it though? So if you look at that transition of 50 years, I'm going to say the tipping point on labor. You know, I was talking with Ed Gordon yesterday, the fellow that talks about job shock and says that 50% of the American workforce won't have skills to be employable by 2030. He said it's almost to the point he doesn't see it being recoverable anymore. It's that the society is going in such a way that it's gone so fast, so far, the wrong way. And educators are doing it. It's the same thing you're talking about, software engineers. If you find a good technology officer or information officer, those boys are half a million bucks a copy. And they're worth every penny. I don't know that I found a, and I've worked with some pretty talented technicians, but I don't think I found anybody over 300 grand. No. And that's ridiculous because today with the complication of a machine.

Anybody who doesn't think that a technician is the smartest person in their employ is nuts.

I think it's purely economic. They don't know how to change the balance of that switch. I don't know that I want to change the equipment side of the equipment, but some dealers now aren't paying commission to a salesman who replaces one of their brands. They're only paying a commission when they displace a competitor.

Oh, that's been around 10,15 years in some places. They were way the hell and gone ahead. They pay a lot of money when you displace a competitor. Now, that makes sense. You know, I'm taking it away from George and I'm getting it all. And if you think about a technician at roughly $500,000 a year and 200,000 labor,300,000 parts, and I'm being gentle, hello. The problem, as you say, though, is there's a cost component to it. And the biggest problem is management, leadership. Yes. I got into consulting because I'm not good at politics and I don't like babysitting. And that was the primary job that I had. Politics, trying to get things done, changed, etc. You've heard the story, I'm sure, that I told you when I was hired at Finning and we went fishing for three days. It's nuts. You know, what would you like to change? It'll make a lot of money. You know, okay, we get together, we get it done. Now let's see you do it. And they didn't think I could.

I mean, they're nuts. Same thing with you. So fine, we got 30 guys regularly,30 work orders, whatever. In the next three months, it'll be 50,60. And nobody's going to get attention. You're not even a blip on the radar yet. No. I wonder what the number is in Florida and Texas, if that's your two competitive points, before somebody says, wait a second, what's going on here?

We got a very large dealer and a small dealer in Texas, Caterpillar. We have one primary Comatsu dealer in the north and one in the south in Texas. We've got one primary John Deere dealer in the whole state in Texas. The Volvo dealer has just been purchased by Portugal. There's, to my mind, only one there. I mean, this is interesting. And that's the hottest market in the country.

question. Florida is not far behind. No. Well, congratulations, young man. I think we beat this thing up. And keep writing those things. It gets people's attention. It'll be interesting to see what kind of hit we get on this.

Quite frankly, popularity isn't what I'm looking for. I want provocation. I

So here we go.

Anything you want to say in closing?

I have been known to be a pain in the butt. But, you know, thank you, Alex. This is always refreshing to me when I find people that think out of the box and try and approach life differently. And I hope everybody who's listened to this candid conversation feels the same way. I give you a huge thank you very much and I look forward to the next one. You got it. Mahalo, everybody. We'll see you next time.