“I don’t know if there’s any secret sauce” to ABC Supply’s growth to a $20 billion company, President and CEO Keith Rozolis says. But in a session Sept. 12 at Modern Distribution Management’s SHIFT Conference, he served up several ideas that worked for ABC Supply and may be worth emulating by others.
Promote Local Entrepreneurship. “We’ve always aspired to be the biggest small company that there is,” Rozolis (pictured above at right) said. Key to that notion is ABC Supply’s admonition to its local managers to “run it as if you own it.”
“The best decisions are the ones made closest to the customer,” he said. “I don’t know what’s going on in Seattle. My manager there is better, and my truck driver making the delivery to the job site is probably the best.”
Know What Business You’re In. Rozolis said ABC shifted dramatically when it stopped thinking of itself as a products company and began regarding itself as being in the services business.
Make Decisions Based on Facts. “We thought of our customers as a roofer with a son and a pickup truck. And we thought everyone was a price customer,” Rozolis said. “We had to find out if our feelings were true.” It turned out that only 40% of ABC’s customers are roofers. “We have an opportunity to with 60% of our customers to sell something else,” Rozolis continued. “We also found that only 27% of our customers wanted the lowest price. That means 73% are willing to pay more for service.”
Responding to Market Shifts Isn’t Leading. “We have a saying: ‘We don’t want to compete with anybody. We want them to compete with us.’ … Instead of responding to the market, we want to make the market.”
Good service often is about reducing friction, so introducing an innovation that reduces friction can enhance your value, Rozolis said. But he added there’s also a problem with innovations: they quickly become an expected service, especially when competitors copy the idea. So you have to improve constantly.
Rozolis also cautioned attendees to make sure their financial data includes lots of insights into customers, segments and products. He said there once was a time when the company had very little financial information on income but lots on expenses.“If you’re lazy, you’ll use the general ledger to guide your activity,” Rozolis said. “And that is a disaster.”
Culture vs. Values. “I don’t believe you can create culture,” Rozolis said. “Culture at its core is the domain of the leader of whatever your unit is. If I have 1,000 branches, I have 1,000 cultures. If the leader is gregarious and outgoing, he’s going to attract that type of person. If they’re a commander, type they’ll attract people to the tribe.”
Instead, ABC Supply stresses seven core values, including “Respect,” “Opportunity,” “Family, and “Work Hard, Have Fun.” “Style doesn’t matter if, underneath it all, we believe in the same things,” Rozolis said. He noted that the U.S. military looks and operates dramatically differently today than it did in World War I. But if you asked soldiers then and now about their values, they would say the same things.
Innovation Comes from the Ground Up.“If I have 1,000 branches, I have 1,000 opportunities for innovation.. If it fails, I’ll probably never hear about it. If it works, I want to scale it. “ He pointed out that the company’s Customer Service Delivery System came from an Arizona branch manager who wanted to make sure ABC delivered on its promises.
Management vs. Operations. “Management’s job is to think of what’s coming.” Rozolis said. “I’ve got to pour money into s—t that may not work and I have to be OK with it.” One reason why is that innovations take time. “Our data science department was created from thin air. The operations team team asked why. You have to be patient and wait for the kid to grow up. And then they can’t live without it.”
Get Out There. When Rozolis was ABC Supply’s COO, he would visit up to 70 branches and five district offices every year. He still tries to travel as much as possible, in part for two reasons. First, some messages issued from company headquarters might not get heard in far-off branches. And second, when you’re CEO, people want to please you. Thus, “the best way to be displeased to is to see it yourself.”
It’s About the People..“The only sustainable strategic competitive advantage a business has is its people … the passion they have for the business,” he said. One sign of this people-centered approach is that every branch manager at ABC goes through five weeks of training over their first five months in the job. “If you take care of your people, they’ll take care of your customers, and your customers will give you money.”
