Guillaume: Hello everyone Guillaume Le Tual here, host of the E-commerce Wizards Podcast where I feature top leaders in ecommerce and business. Today’s guest is Shawn Johal, who’s a very accomplished entrepreneur, he co-founded DALS Lighting and built it up to an eight-figure business. Now he took some distance from that business and he’s a business coach, and he’s using the scaling up methodologies as a certified scale up coach. This is a technique for which I have great respect, because I just love the stuff from Verne Harnish. Very famous book mastering, the Rockefeller Habits, and then the second version came up with a version called Scaling Up. This is a methodology that he’s implanted in his previous business, and that he’s now coaching, obviously. We’re going to have a very interesting talk today, probably about a lot of stuff on how to improve a business. From my personal experience when I’m helping ecommerce merchants, even though we help with digital strategy, digital transformation, how to send more traffic, conversion rate optimization and all kinds of automation work, it often comes down to the entrepreneur being in his own way. And that’s what’s really preventing the business from growing rather than the fact that it’s an ecommerce which is sometimes secondary to what needs to be addressed. I believe we’ll have a great talk with a focus on scaling up from seven figures to eight figures and various other topics.
Before we get started, I have two more things to do. First, I want to give a shout out to John Corcoran of Rise25 Media for introducing us, otherwise this podcast will not be happening thing. The second thing is our sponsorship message. This episode is brought to you by MageMontreal. If a business wants a powerful ecommerce online store that will increase their sales or to move piled up dormant inventory, to free up cash reserves or to automate business processes, to gain efficiency and reduce human processing errors, our company MageMontreal can do that. We’ve been helping ecommerce stores for over a decade. Here’s the catch, we’re specialized and only work on the Adobe Magento ecommerce platform. We do everything Magento, if you know someone who needs design, development, maintenance, training, support, new website, we got their back. Email our team, [email protected] or go to magemontreal.com.
Alright Shawn, thank you for being here today.
Shawn: Thank you so much for having me, Guillaume.
Guillaume: Can you tell us a little bit about you before we get started?
Shawn: Absolutely. I have a very different background than most people would expect, I actually studied Documentary Filmmaking at university. I was going to change the world, talk about social, political, economic issues, a lot to do with racism and arranged marriages. When I came out of university, that lasted approximately one month, and I realized, you know what, this industry, there’s no money to be made, it’s really challenging. I was given an opportunity by a friend to work for a company called Rubbermaid. I’m sure your listeners have heard of this, you probably have a garbage can at home or a shed or some type of Rubbermaid product, Sharpie pens, those are all owned by Rubbermaid as well. I started working as a sales rep for this company, did that for four years.
The reason I mentioned is that it was the most amazing leadership school anybody could ever go to. I was flown to Dallas, at the Aspen, into Atlanta, Phoenix. We were given leadership training, really learning how to be the best salespeople or the best leaders in North America, they really took care of us young university grads, to teach us the ropes. Four years after that, I get a District Manager job in the company, A family business came to me and said, ‘You know what? We want you to join the family business.’ These were my in laws, father-in-law, mother-in-law and brother-in-law, they started a lighting company. At that time, it wasn’t even LED, it was that long ago, they started 1999, they recruited me in 2004. I went into this LED lighting business that my father-in-law was growing exponentially fast. Taking a bankrupt company, and he put it on the TSX Stock Exchange, which is actually very bizarre because the company was bankrupt. No one understood how he did it, no one understands even today, how he pulled that off. He grew the business from 1999 to 2007.
He took it from zero to 50 million in revenue. A very amazing success story in Quebec, it was all mergers and acquisitions. Unfortunately, in 2008, when the recession hit, there was a bad company purchase made and the company came crumbling down, it wasn’t able to sustain the recession. At that time, my brother-in-law and I had a choice to make. We decided to basically buy back three divisions and start from scratch and that’s how we started our company DALS Lighting, which is an LED lighting company as well, it’s been 12 years that we’re doing that business and it’s still going strong today.
Guillaume: That’s an interesting story. I don’t know how you were able to list on a TSX for a bankrupt business.
Shawn: Totally a bizarre.
Guillaume: It probably had the major watch sign that appears on business that don’t do their filing on time.
Guillaume: Okay, let’s get started here, what is top of mind for you, when we want to help an ecommerce merchant, going from seven figures to eight figures?
Shawn: You and I were speaking about this in the past, there’s ecommerce business, there’s overall business, there’s going to be things that are very specific to ecommerce businesses and the way they function and how automated things need to be and that have that online presence. At the same time, I also truly believe that there’s business fundamentals that need to be put in place to every single business, and you can’t get away without having these in place. A lot of times seven figure businesses won’t have necessarily as many of the tools in place as eight figure businesses. What we came to realize along our growth was a couple of very key things. No matter what happens, culture will eat any other part of your business for breakfast. You need to be building a world class culture in your organization, if you want to get anything accomplished.
From our story, we had three businesses that we purchased, we inherited all the people from those businesses. And as we were growing and implementing the Rockefeller Habits, we came to realize, wait a second, there’s a lot of people in these businesses that don’t fit, are not living our core values, don’t understand what we’re trying to do as a business, don’t believe in the vision, don’t believe in the alignment. And we ended up changing 85% of our team, we have 50 employees, there’s only about seven people left from the initial group of 50 that we had, all of the others are brand new people that we switched and brought in. It sounds dramatic, and it sounds like a lot. But we had no choice because we started realizing as we were changing people and bringing in what we consider to be called A players or promoters, as we like to call them in our business. It was very obvious for us that these people were much more talented, they were much bigger and better in terms of believing in company culture, and following the vision that we were setting for them. Other people who weren’t on the bandwagon, unfortunately, they didn’t make it along the way.
For us, I would say that’d be the number one lesson that was learned from it. You have to have the right people in the right seats, you have to work on culture first. Now Jim Collins, for those listeners, I’m sure they heard of him from Good to Great and Built to Last. That’s what Jim Collins always says, ‘first who then what’. I think that’s the number one step of any business trying to go from seven to eight figures, even if you’re going to be very automated along the way, your core team and matter how big or small it is, has to be the right people steering in the right direction.
Guillaume: That makes a lot of sense. I guess you probably vet them some system like, do they want it? Do they get it? Can they do it? Something like that?
Shawn: Yeah, exactly. You’re talking about EOS.
Guillaume: Yes, the EOS, which is a spin-off of Scaling Up.
Shawn: Yeah, exactly. They’re very similar and they’re both amazing systems that work very well. But yes, I help my clients implement very specific ways of working, which is the hiring process, which is a little more detailed than people are used to, but what we really focus on our success metrics and KPIs. We change your ecommerce, clients will love to talk about, you have to be measuring data, you have to be ensuring that you’re hitting the targets and goals that you set for yourself, which shockingly, a lot of companies don’t do, believe it or not. But even when you’re building what we call a scorecard at the beginning to hire new people, you have to talk about success. What does success look like for them in six months and what does it look like for them in 12 months? You need to make it a story as if they’ve already accomplished it, in the case of an ecommerce business it would be okay. Let’s say you’ve already got the new ecommerce store up and running, you’ve built key partner relationships with other suppliers and you’ve also signed contracts, you’re explaining it in a future tense as if they’ve already done it. So, when that potential candidate reads that job description, they’re looking at it and say well, they’ve given me a roadmap of exactly what I need to accomplish. And then you back that up with very specific KPIs. What are going to be the KPIs that measure their success? I think that piece is often something that’s missed in organizations and that’s made a huge difference for us.
Guillaume: Yeah, I agree. You want everybody to have their numbers which can be hard to find sometime or you may not have the proper data or reporting system in place in the company to even be able to. Each employee has a key number that they can look at, visit daily to know how they’re doing. I guess we just fall back to Okay, let’s have a number for maybe quarterly performance or something like that, but doesn’t stir you as much as daily, today did I have a great day or not?
Shawn: Yeah, I agree. It doesn’t need to be automated, it needs to be easy to find. If you’re in a company and you can’t pull out the numbers the right way, chances are you’re not measuring what you’re doing. If you’re not measuring it, how are you going to improve it? How are you going to be better as an organization? So even for smaller companies, I highly recommend, get on top of your numbers. That’s the number one thing we see going into businesses, they don’t have a good grasp on their cash. They don’t understand if they’re making money or not making money. They’re not able to measure what they’re accomplishing as goals, especially from a team member perspective. So, you got to give them those tools. You got to make sure that they have ways of measuring those KPIs.
If anybody’s ever heard of a website called kpilibrary.com, there’s actually about 40,000 KPIs. If you’re never sure what you should be measuring, just go to kpilibrary.com. I’m not a sponsor for that website or anything, I was just pretty impressed that they’ve put all the KPIs that exists on the planet at one place, it’s a pretty cool place to work.
Guillaume: It’s good for inspiration. Of course, I believe you want to keep things simple for the employee. They say that the employee needs the scoreboard but like a hockey game, it has to be super simple, just one or a few metrics. Then you can have the manager, to coach the scoreboard that can have way more metrics if you want to.
Shawn: I completely agree with you. In our business, we add a bit more manufacturing business to it, although we do quite a bit of ecommerce as well and it applies as much to ecommerce as it does to brick and mortar. We have a number of orders we have to ship out every day. People seem to forget a lot of times that an ecommerce business, you have products to still deliver even if you’re ecommerce. So, we have something called the OTAC, which is the On Time And Complete ratio. What it would mean is what percentage of orders are we shipping both on time and complete? Our goal was to get anywhere between 90% to 93%. And people ask me, why not 100%? Well, you have to know that when you’re in a business and you have inventory on the shelves, if you just blast your inventory to ridiculous levels, of course, you can get 100% OTAC, but you’re probably going to go out of business, because you’re going to have way too much inventory. No more cash flow and what if you make a bad purchase, and get the wrong thing on the shelves for your clients, you have to have that balance between being able to ship enough product, but also having the right mix of that product along the way.
The way we always measure it, we said to ourselves, let’s say a client orders 20 products from you on one order, and then you deliver 19 out of those 20. For us, that’s not a 95% hit rate, for us that is literally 0% because now you’ve left out one product. And no matter what, that client’s still going to be annoyed, right? Because they only got 19 out of 20 items. That’s also something very important that they’re missing there. For us that’s how we measure it.
Guillaume: Exactly. Even for small orders, like restaurant delivery is big these days, UberEats and whatnots. If you forgot somebody’s meal at the table, like not fine 19 out of 20 on the delivery, that’s not fine.
Shawn: That’s a great example. I know I had a really bad experience within UberEats. I live an area where there’s not a lot of restaurants near me. I’ve been using UberEats for a few things and I ordered something on UberEats and they said, can it get to you between 7:30 and 7:50? And I was like, okay, that’s an hour, but they’re telling me a timeframe, it’s totally respectable. Uber ended up showing up at 8:20. The food showed up literally an hour later than their earliest time and just about 30 minutes later than their longest time and it was completely cold. And I thought to myself, what a failure in this platform? It had a driver, and they’re telling me it’s going to be connected to me at the right time but realistically, the algorithm should have told me listen, we’re not going to get your food to you for an hour and a half. Do you still want it? I became a very angry and frustrated customer. It’s another lesson learnt, be sure you’re delivering on what you promise.
Guillaume: Yeah, angry and hungry for sure. We started with the people component, do you want to deep dive more on the people component here? Sure, I want to have the best team there is, everybody knows that. But how do I go about it?
Shawn: The hiring system that we’ve been using is just foolproof. Honestly, we’ve taken companies that do anywhere between hiring 10% and 30% A players, now we’re at about a 92% hit rate. What happens is when you’re building and you’re recruiting the right way, there’s a lot of key things you have to do that I see a lot of companies are not doing. First of all, you really have to take time to build what we call that scorecard. So not only your success metrics, you have to have your top five responsibilities, the competencies, everything you need. When you’re building your job description, it’s a bit of a selling tool. You need to have the DNA of the company, your company core values, what your company is all about, what their role is all about. A lot of those things could be very clear and appealing for the person right at the beginning of the process.
When you’re going out there and you’re recruiting people, where are you going? Ecommerce companies have a bit of an advantage, I think in a sense that these days, labor is very tough to find, especially manual labor, which is something that is disappearing. If you have more office of people that are finding themselves on LinkedIn, there’s so many creative ways right now to go out and hire these people. Now, just LinkedIn Recruiter how amazing it has become over the last couple of months is blowing my mind completely. We put up a job recently for a digital marketing coordinator, and we received 228 applications and it cost us by the way, $202. It was incredibly inexpensive, get an amazing bag of candidates, it was just a great experience overall.
Once you start getting these CVs in, then your process really starts and the question is, what are you going to do? And what do you have as a process? Again, most companies I meet don’t have a very good process, they just start interviewing and they hope to find the best candidate. We really recommend doing the interview process in multiple steps.
First, you want to filter to make sure that you’re filtering out the people that make no sense for your business. You are going to have a quick zoom interview, 15 minutes, you’re asking key questions like What are you good at professionally? What are you not good at? Don’t ask the biggest weaknesses, because everybody has the same thing. They’re perfectionist and they’re workaholic, it is the only answer you could ever get for that. But you really want to ask, what are you not interested in doing? And then you want to get the salary expectations. Why are you waiting to get that information till the end, if you’re only willing to pay someone $50,000 a year and they want $100,000? The conversation is over. You need to be clear on your expectations and on their expectations.
Then we’d like to push companies to have an in-person interview, it could be by zoom these days, we know it’s not as easy. But then what we recommend is doing team interview where you would have four different people from your company meet this individual, two people at a time. Why is that important? It’s important because if you want to protect your culture, and you want to protect your values, you cannot have only one person hiring the candidate, you absolutely need to have multiple people who already live your culture and believe in what you’re doing, meet this candidate. By having four other A players meet the candidate, and talk about different key subjects, you get a much better understanding if that person fits your values and cultures.
The last thing we like to really push is doing a position specific test. Because what happens is, people always say that they’re really great at everything that they do but are we testing them before we hire them? If you’re going to hire somebody, this is an example of our digital marketing coordinator, we ended up with four really strong candidates at the end. We asked them and said, you know what? Go back home for maybe four days, put together a digital marketing plan for the next 12 months. It could be as long or as short as you want, as detailed as you want, graphics, no graphics, we don’t care. You put together what you think is best for our business. And can you imagine the differences in quality that we got? We got four different PDFs back, and one of them was just amazing, two were mediocre, one was terrible. But that person that put together the most amazing PDF, they weren’t even the first choice but then by giving them the test, we realized this person is going to be amazing.
Guillaume: Yeah, hands-on work, for sure, I agree with that. At the same time, there’s always that gray zone, you don’t want to ask for free labor, or not too much. But it as to be something reasonable or sometime we’ll just like, pay them a little gig, especially for programmers. We will pay them a useless job as a test, we give the same to everybody. We pay you up to four hours to do this job, just send it back and we’ll analyze the quality of the work and give the response and see how fast do you send it back. Did you answer the message? Did you follow instructions? Did you deliver the way the instructions we’re saying?
Shawn: I agree with you, I think that’s a great idea. You could pay them for that. I’ve seen companies bringing out an employee for a whole day to work and pay them for the whole day. If it went well, they’ll keep them, if it didn’t, they move on.
Guillaume: Yeah, I agree with that. It’s a huge difference. And the methodology you’re talking about, Topgrading?
Shawn: It comes from Topgrading, it comes from Who. We’ve adapted it because both those methodologies are too heavy. If you go through Topgrading, they want you to measure 50 different competencies per candidate. I think that’s way over the top. I don’t think you need to go that far. They do talk a little bit about testing, but we’ve integrated that on our end in our own system. It’s inspired by them but we’d like to call it a lighter version.
Guillaume: We do a lighter version of both as well, Topgrading and Who. Okay, so you’ve been filtering at the hiring process, which is of course critical, but then often, you just don’t know how well that person would perform until you see work. If it’s possible to have a small test and that’s amazing, or sometime we pay for small tests for super developers because it’s very different. We have to hunt developers one by one while when you post a job for a project manager, you get 200 CVs. It’s very different reality. After that, there are more complex positions, like executive types of positions that you cannot expect the person to deliver you anything concrete or clear and they first need to learn the business and all that, there’s a huge onboarding process. Do you have any personal story on how to better hire at the executive level?
Shawn: Executive level is usually more in depth. For example, we’re hiring a VP sales, we’ve asked that person to come back or a few of those to come back and actually give us a full presentation. We said, you have to give us your whole sales methodology, the way you’re going to do it for us. The thing is, the top people in the market, the top players, the ones that are really good at what they do, they love this type process because they realize that a company is structure, they see it’s serious, and they want to win the job. For them, they actually put a lot of effort into it. They say this company is really serious, I want to impress them, I want to show them that I’m going to be able to win this process and come out on top. Often we’ll see even more effort made by these individuals. The process works at all levels. When you start getting into more entry level positions, you can eliminate a couple of steps. But as much as there is the mid-level all the way to the executive level, it is a very similar process, you can start layering on a little bit more intensity, if you want to call it that way. It makes sure that you’re really vetting the right way.
Guillaume: The scaling up system has four pillars. You have People, Strategy, Execution and Cash. Do you want to deep dive more into people or do you want to move up to another pillar?
Shawn: The last thing I’ll say to you on People is that when you’re building an amazing culture, it’s not good enough just to hire, you have to think about a few other things. When you’re bringing on these amazing people, you have to have an amazing onboarding and integration program. I highly recommend companies think about that. I’ve almost seen no companies truly onboard and integrate people the right way. When they start working, are you giving them some swag? Are you introducing them to all the people in the business? Are you taking them out to lunch with their department or their colleagues? Are you giving them a six-week, eight-week, ten-week training plan to make sure that they integrate perfectly into their role? These are all things that you need to think about.
Most of the time, we see they’re given a computer and they’re like, good luck, here’s the company handbook, figure it out. That’s not going to motivate a person on the long run, you really have to make sure that you integrate them the right way. I don’t know if anybody’s ever heard of Jack Bilyeu. When he gives his conferences, he says we have huge parties that are going away party. When people are leaving the company or leaving a business or retiring or whatever it is, you have a big party. Why aren’t we having big parties when a new employee is hired? That should be a celebration, you’re bringing in this new person into the business. Why don’t we celebrate their arrival? That’s another really key part.
There’s something that I like to call systematic recognition, which means that every single quarter, you should be looking at the composition of your team and looking at those high performers that are not only amazing on productivity, but that are also great values. The best way to test this is if you imagine having a human cloning machine and if you could clone that human being, would you be willing to do it? Would you be able to take Guillaume, stick him into the cloning machine and have a million Guillaumes running around the office? That’s your test to know if that person is really an A player. You want to be recognizing those people on a quarterly basis. When I say recognizing, it doesn’t have to be financial, you can be offering them a card signed by the entire strategic leadership team, thanking them. Guillaume, you’ve been amazing over the last 90 days, do such great work all the time, you’re engaged, you’re committed, we just want to let you know it means a lot and you’re a very key part of a team. Giving something like that to someone makes a huge difference in how they’re feeling appreciated in the business. That’s the last thing on the people side. I would say it’s not good enough to just hire, think about onboarding, integration, training, leadership, and especially recognition.
Guillaume: I agree that they need to feel like they belong and that you appreciate their work and of course, that has to be genuine, otherwise, you have the wrong person there. One thing I will add to this is we added the LMS, Learning Management System that has a structured video for onboarding. And the video is not enough, you must have a quiz as well, because otherwise you don’t know if they watched it, or if they watched it, they might not have watched it with much attention. But then as soon as you know there’s a quiz, in the second video you’ll pay way more attention so that you perform in the quiz and you get a score. So, I think that works well.
Shawn: Great idea.
Guillaume: Okay. Let’s move on. Which of the next pillar do you want to talk about?
Shawn: It does go in a little bit of an order. People always start first then we’d like to move on to strategy. Strategy really comes down to what is your strategy, both long term and short term? You have to have both figured out quite early in your journey. When we come into businesses, we’d like to work on what we call them the fundamental parts of the business, which are core values, your reason for existing, and then we’d like to jump into the B hag. If people don’t know what that term is, that’s your big hairy audacious goal. What is it that you want to accomplish in 10, 15, 20 years from now? I can tell you this is one of the most challenging things that we do when we get into businesses. They really struggle to figure out that long term big hairy audacious goal, that’s scary, that’s motivating, that’s inspiring and that’s non-financial.
A lot of entrepreneurs can easily come up with a number but when you start asking them to come up with a goal that’s non-financial, it’s much more challenging. It has to be measurable. A lot of times we’ll hear companies say we just want to be the leader. I say, what does that mean? Being the leader, how are you going to measure that you’re the leader? It doesn’t really mean anything. But you got to figure out a way to have that big hairy audacious goal determined in a very different way and then typically we’ll deep dive into everything. We want to know, who are your core clients? Who is it that you’re going after? How are you going to sell to them? Are you going to have sales reps? Is it going to be internal, is it going to be external, is it going to be marketing, branding? We like to ask what are you going to sell? What are your services? Are you developing a software? Is it going to be through ecommerce? Is it all going to be online? Is it going to be a brick and mortar aspect to your business? These are all the key things that we’d like to go through really carefully. And then we’d like to usually end that strategy part on brand promises, we really like to push companies into having a brand promise with guarantee. The big difference is not just telling someone, if you work with us, you’re going to receive exceptional service, or what? Are their consequences if I don’t get exceptional service? You’ve told me I’m going to get exceptional service. A brand promise doesn’t mean anything, you can back it up. We teach clients how to ensure that they’re implementing, not just the promise, but also something that’s going to be respected and guaranteed along the way.
Guillaume: The brand promise can make a huge difference, differentiate yourself from the market and all that, creates a bit of stress to put in place and then it’s difficult to have one brand promise like that. But I agree and it’s a good point. The strategy is very challenging because there’s a lot there. This is a loaded topic, it’s more crafty, it’s more fine. And then there’s all the tactics after that. How you’re going to apply that strategy, because you can have that grand vision and how you’re going to do it and how you believe people execute on it. But just the strategy layer, I mean the TLC, perhaps from your own personal experience, what would you like to share? Maybe it was strategy for the place, or change of strategy or strategy that didn’t work or anything like that.
Shawn: You are totally right Guillaume. The strategy part is very heavy and if you get the strategy wrong you could be going at 1,000 miles an hour in the wrong direction. Sometimes they’re working really hard, they don’t understand why the business isn’t working, because their strategy is wrong. You can work as hard as you want, but you’re going to be literally putting your business in the ground. I like to work with strategic teams, because I feel like sometimes just the CEO might not always have all the answers. We think that we always do as the main entrepreneurs, but it’s really good to have a strong team around you, and have that collaboration. The whole team working on strategy at the same time, usually gives different perspectives.
The VP ops might be different than a Director of Sales might be different than a controller, they’re all going to bring a different angle and a different image. But I think it’s really important to really have all those different opinions in the room, and be open minded enough to hear those different ideas, because I think that’s usually where the breakthroughs can happen. And, I think at the end of the day, you’ve got to stop overthinking. Sometimes people try to just overthink it and try to go really complicated. We like to come and say let’s just start by building a clear strategy. That’s not complicated, let’s not go into detail, let’s just get into the picture of what you’re trying to accomplish. Let’s just make sure that the vision is clear for everyone in the organization, and let’s take it from there.
Usually, we’re able to, in our first couple of days together, really nail down and get all the details sorted out. But it takes time. In our LED light business as an example, we changed a ‘big hairy audacious goal’ for business about five times in five years. Every year we build one, and then the next year, we get back to our annual meeting, we say, is there something wrong? I think we screwed this up. And so we’d have to revamp it and rework it and start from scratch. So it is a work in progress. I always tell people you’re not going to do something, build it and put it on the shelf and think it’s going to be there forever. You have to be ready to adapt and be ready to change because along the way, things will be different.
Guillaume: Unless you pick like [Inaudible-00:28:41] and you’ll be happy or something.
Shawn: Exactly. There you go. That’s a good one.
Guillaume: Yeah, okay. For the e-commerce aspect, sometimes it tends to be a more simple business if it’s B to C, but sometimes I see the business model to be slightly broken or clunky. They say okay, it’s operational if you get to seven figure, you haven’t a functional to some degree business model and strategy. But it doesn’t mean that it’s slick and smooth and very often I feel they’re clunky and there’s missing a few key elements. Sometimes those key elements can be as simple as a loyalty program, especially if you’re a retailer because you’re selling the same stuff as everybody else. So in a way, it’s almost like how much are you willing to not bribe but to give your customer to acquire that customer because he can buy the same product at the other store as well as this is a retail store. So that can be a critical aspect of the loyalty program in driving growth, for example, in those kinds of consumer retail stores.
Shawn: There’s so many different ways to look at it and you’ve got to get creative, and I know it’s not directly e-commerce necessarily related. When you look at a company like Costco, we take it for granted now that we’re paying $50 or $100 for whatever kind of membership that you have at Costco. Costco brings in over $3 billion a year in bottom line profit not revenue, just from their membership program and that wasn’t even thought about outside the box. It wasn’t something that existed at Costco. When it first opened, and it wasn’t on a membership, you could just go in. And then one day they said we should start charging people to come into this place.
Guillaume: Which is amazing if you think about it. Imagine a startup store or startup e-commerce store that you would charge people to be able to come into your store. Like people in the country especially if it’s a startup situation they’re desperate for traffic and visitors and buyers. So there’s switching the table or flipping the table on the customer. What I was reading also is that Costco can sell and finance each new Costco so that the membership sale of the previous Costco doesn’t need the bank leverage financing as much. So it’s really brilliant what they’re doing with that membership card. It doesn’t seem like much. They had that $100 membership card, I don’t remember the exact number I think was driving like half their yearly profits or something like that. So it’s huge, it’s like it’s genius.
Shawn: Yeah, and I think we could look at other examples out there. You know there’s a lot of e-commerce companies that are forcing you into certain memberships and you’ve got to build your name. You got an amazing reputation obviously, I was buying furniture today and there was a company called Restoration Hardware. If anybody’s ever heard of that, it’s a very nice website. Beautiful high quality furniture pieces, but they give you a true price. They say it’s going to cost you $3,000 at the regular price. If you come in as a member, you have to only pay $200 for the year, that furniture is going to go down from 3000 to like 2400. It was a no brainer, it’s like wait a second, are they tricking me? They’re getting me to pay $200 for a membership? I really have to pay this regular price. So they figured out a model as well or they’re getting all these people to pay a membership fee and come back and think, well now that I have this membership I can keep buying these at discounted prices. But really you know, everybody’s buying the membership.
Guillaume: So at first nobody’s going to buy the $3,000 option?
Shawn: Exactly. There are a lot of ways to speak about it.
Guillaume: It feels like it’s not even an honest price, the 3000. It’s like they just bump up the price to make it obvious that they need to buy a membership I don’t know.
Shawn: Yeah, I know that’s where it’s tricky, but we can’t know because I’m not behind the scene.
Guillaume: Yeah, exactly. Okay, did you see any kind of great example of strategy that comes to mind?
Shawn: There are many, I’ve got to be careful to say when that’s not the proprietary answer. But I think there’s a lot of them. If you look right now, one of our biggest clients that we were helping a lot for strategy is dialogue health, which is not quite e-commerce but it’s telemedicine and it’s obviously on an online platform. And you know, it’s worth it for the people to go check it out and see and read about their story because they just recently IPOed one of the biggest IPOs in the history of Quebec. They had $100 million of stock requests and probably a billion dollars in overall stock requests. So that’s just an unbelievable initial IPO launch and they’ve revamped the entire medical experience.
Strategically speaking on how you go speak to a doctor or nurse and they’re hiring all these doctors and nurses directly internally. So if you think about how crazy that really is, acquiring all these doctors and all these nurses directly into an organization that will be speaking directly to that end user of the application and they’ve really redefined the biomedical industry by the way they’ve gone out and built their platform and built their online system. But I think there’s a lot of ways to do it, there’s a lot of ways you can be disruptive and that’s if you have to be disruptive because sometimes companies get lost in disruption as well or they just want to be the best in class but you’ve got to be working on that strategy all the time.
Guillaume: We have dialogue here in the company. It’s amazing it’s not that expensive. It’s a revolution for the medical industry. Otherwise, you would always have to go to the clinic and there’s no space or even if you call at seven in the morning, and very often you cannot even have the line and then they say sorry, no more space today if it’s the no appointment clinic. So with this, the resource management system in a way because you have doctors, they’re available, but they’re remote or up north or something like that. So with telemedicine, you have access to the whole staff, everybody everywhere in the whole country, can be providing medical services, if they are available.
So it’s wonderful, then you have the whole country’s resources available to just dispatch from anywhere in the country to serve somebody, a potential patient. Of course, you still need to go in person to do some problems, but it’s wonderful. I used it for my little kids and was really happy to have that.
Shawn: Yeah, it’s amazing, you could imagine the discussions we were having as a group and their argument, how we’re going to design the strategy around it. But at the end of the day, it was really about creativity and understanding where the medical market was going, and really ensuring that we adapted to it, a lot of regulations, you have to work with government as well. It wasn’t easy to do but again, it was that whole thinking outside the box, really taking your strategy to a whole new level where no one else has thought about. Again, it’s not for everyone but I like to mention that because not every business has to be a disruptor. Not everybody has to be a Dialog, not everybody has to be an Uber, not everybody has to be an Apple. A lot of us aspire towards that but as a business owner, especially of an SME business, I don’t think you should be obsessed with trying to be a disruptor, your strategy might just be, you know what? We could offer exceptional service and the highest quality, and we’re going to beat all our competition, because no one’s offering that today. Maybe that’s all you need to do as a business. But you need to determine that as a strategy.
The one most important thing I would say is stop trying to be good at everything. Entrepreneurs have this… I had it in my blood too, but you want to be the best price, best service, best quality, best technology, best innovation, best automation, you cannot do it all. I’m telling you right now, you need to pick your battles and pick what you are going to be really good at and make those your brand promises as a company. What Francis talks about in her book on Common Service, a great book to read, she talks about anti-brand promises. Tell your clients, if you’re looking for the cheapest price, don’t come to us, we will never be the cheapest price. Don’t be shy about saying that, because you can tell them, but we will be the best quality or the best service, and you won’t find that elsewhere so make your decision. You want the cheapest price, go to competition. You want to be served the right way and you want to ensure that your ecommerce site is working the right way, or you’re getting the right type of automation from us, well come with us and we guarantee that part of the business. I think we need to make trade-offs and decisions as companies, which we often don’t like to make.
Guillaume: Very good point. To be a disruptor, you typically need to be extremely well capitalized, which is the case for Dialog. I don’t know how many millions they have in capital, but it’s huge. How else could you possibly hire all those doctors and those specialists and nurses? They’re almost opening a private hospital there. Then they make it virtually available to everybody, it’s pretty crazy what they’re doing. Strategy, really good. Anything else on strategy or do you want to move on to execution?
Shawn: I think we’re good to move on to execution.
Guillaume: All right.
Shawn: When we’re talking about execution, what is execution? There’s a lot of different elements of execution. Number one is we like to say, do it once, do it well. Making sure that you’re setting yourself up for success in everything that you do the right way. Another big part of it is picking the right priorities. Again, this idea of trying to do too many things at once, to be really good at execution, you have to limit how much you’re doing. The more you do and the wider you make that scope, the more mediocre you’ll be at everything that you do. But what you need to do is say, Okay, what are the key things that we need to work on as an organization? Go all in on those one, two or three things on an annual and quarterly basis. Let’s stop trying to do everything, we see this all the time, speak to companies that are trying to do everything at once.
Another big pillar that we talk about in execution is lean. I think some of your audience will know what lean is. The lean methodology comes from Toyota, from Japan. Lean really means eliminating any waste that is not bringing value directly to the customer. When you look at your processes, are you doing certain things that are just a waste of time that is not bringing value to your customer? A lot of times you ask companies, why are you doing this? They say it’s always been done this way. That’s not a good answer. It’s always been done this way, what are we going to do to change it? We’re doing things differently. You need to encourage people to think like that and say let’s not accept the status quo, maybe it needs improving.
We like to ensure that companies are really going through that process improvement. It’s called continuous improvement that we’re doing all the time. We’ll even often create a committee in the company called the lean committee, where every month the lean committee will look in the company and say, What are the things that we can improve, reduce cost on, reduce waste on and bring immediate return on investment ROI, and profit back into the business? It’s stunning, how often we can find ideas. I saw a company save tens of thousands of dollars by just printing double sided on the sheet. They’re a very paper intensive company and they said why don’t we print double sided? And they realized that it ended up saving them, I think it was about $18,000 a year, just on doing that little lean initiative. That’s one very basic example. There are so many things you could do and there’s a myth out there that lean is only for manufacturing companies. It’s not true. Lean is something that’s implemented deep down in every company, you could have lean as simple as a phone call. When a client calls your business or an email comes in, how are you handling? Are you lean? Are you eliminating any waste along the way that’s not helping your client?
Guillaume: You’ve covered lots of points. Execution is actually where most businesses do or die. You can see a lot of businesses that have great execution, they might be super weak in strategy and other stuff. And they just have their nose down and their head down and they just keep doing day in day out everything that’s hard work and they have great success, but they seem to be missing the big picture. For some businesses, that’s one type of profile. The other type of profile is to have a great big picture and then the execution is just terrible. You need to find of course, the right balance, have both and then you have that super power that’s coming on. Execution for sure, I believe for majority of the business, is the number one problem that they will face. If you understand reasonably well your industry, if you start business probably had an angle already or something or perhaps a satisfaction, how things were done. I’m going to create my business with my own values and we’re going to do things differently. You probably have an angle or some kind of strategy, execution is where it breaks down. You’ve covered some great topics like trying to do less, not trying to be the one stop shop that does way too much stuff. Let’s say a company has an execution problem, and they come to you, what would you dive in?
Shawn: Especially in this day and age where we are, I think you have to look at your systems and technology. Where are you at in terms of automation? Where are you at with your systems and technology? A lot of companies are still slow. On that, I think your audience is a little more advanced on that. But it’s shocking how often we go into businesses, and even ecommerce businesses that are just not quite up to date with their competition into what the market has available to them. We like to do a big audit and say, is your technology as sophisticated as it can be? Sophisticated yet simple. You want to make sure that it’s not over the top either. But we want to make sure that companies can go out there and review their technology, review their innovation, and do an audit and say, Okay, what are the next steps that we need to make sure that we’re ahead of our competition, ahead of the market, on this level?
I think looking for ways to automate, looking for ways to improve the systems and maybe also looking for ways to merge, as we all think of in the companies now. They have a CRM, they have an ERP, they have something for emails, they have something separate for their strategy, they have just like 10 different platforms. And it’s like, wait a sec, are you sure you’re as efficient as you can be as a team and as a company? Because again, from an execution standpoint, you’re probably losing on a lot of steps here. You want to make sure you improve that as quickly as possible.
Guillaume: Yeah, for sure. With system integration entering manually 5000 invoices per year from his ecommerce system into his accounting center, let’s fix that right away. For sure, having all the system integrated together is one of the challenges I believe of this decade that we’re going to keep seeing. The digital transformation, been around for a while, it’s still going to be there for the next 10 years without a problem and over. If you can have one central system that sort of has everything in one place, it’s ideal. But often those systems tend to have weaknesses, because they try to do everything, like we were saying a moment ago, and they will go mediocre in some section. If it’s trying to do your great ledger, your accounting, your ERP, your sales, and also to be doing your project management. Maybe the Project Management module is not strong enough for what you’re trying to achieve. So, you probably often have to still work on having great system integration so that those systems will communicate well together.
You’ve touched another point I find is important. For example, have your lean committee and every month you have that cadency in place, that process in place. It’s not like when you feel like it or when you think about it, maybe every six months or something you do a review of the expenses and see where you can cut or are we working the lean way, you have to take in the process that’s happening at that regular schedule and cadency going on.
Shawn: Yeah, and that’s why lean works so well. Because when you go and put together a lean committee or do lean initiatives, you immediately have to explain what the ROI is going to be. For companies that are scared and thinking they are just going to spend money, they’re going to redesign something or invest. It’s like, wait a sec, no. The whole thing about lean is less not more. What can we do differently? What we can we eliminate? First, optimize, and then have some type of return on investment on that. That’s why lean is so effective.
Guillaume: Okay, another big challenge in execution, it comes back also to culture and people together. The execution is done by robot but most of the time is done by people. You can have all kind of issues toward accountability. We see that a lot, they have good intentions, good people, they say yes, yes and then they don’t do it. How do you handle improving accountability for the improvement of execution?
Shawn: It’s a very, very simple system. We ensure that every single person not only has scorecards we spoke about earlier in the podcast, very clear definition of success metrics, responsibilities and competencies, then we have a maximum of three key objectives. They’re always smart objectives per quarter. And we absolutely demand that on a formal basis, every single director manager meets with their direct report quarterly, go over the scorecard quickly, and go over those top three objectives. That’s it, you hold them accountable to those, you’re constantly having touch points. Obviously, in scaling up, we have a meeting rhythm. In scaling up we have daily huddles, weekly meetings, monthly sessions and orderly planning meetings. Because we have this rhythm of communication that’s happening daily, everybody’s aware of what others are working on. It’s very hard for you to kind of go off track. You have to be following division, you have to be following the plan, you have to be following the company’s mission. By having that discipline, typically people really stay track on plan.
Guillaume: So, it’s simply like a quarterly meeting that you’re saying, to review those three objectives with the employee, did you do it? Did you not do it? And if he’s not on track, I guess you just start some kind of HR process. There’s a first warning, take this seriously or you’re out.
Shawn: Yeah, typically, if you’ve hired the right way, and if you’re giving the right type of leadership, and the right type of guidance, hopefully doesn’t get to that point. I’ve ever been a big fan of these performance improvement plans. I feel like they’re all just the first step to someone being let go. Hopefully, if you’re building your team, you’re building the culture the right way, you’re doing that scorecard in a way that’s very fair, and that’s built with the employee, you should be able to avoid those situations.
Guillaume: Right. I was thinking some kind of official verbal warning that is documented in the employees file more than an improvement plan, which is indeed often perceived by some people in the real way that it is, if it’s done honestly, there’s an improvement plan and it’s there to help. But yeah, it can sometimes be more of a firing plan. It’s case by case, let’s hope people use it in the more fair way. Do you ask them to report more often than just quarterly on this?
Shawn: Yeah, that’s the whole thing with this scaling up is that because you’re having these daily huddles, and these weekly meetings, and even monthly reviews, you’re constantly having feedback on the priorities. You’re going back and forth with it, you’re always aware what everybody’s working on, it never really happens that you’re in the dark.
Guillaume: Right. Let’s say those meetings like the daily huddle, as a company grows, you will change. And if anybody’s not doing the daily huddle, I highly suggest it. I saw very good improvement in the company then we stopped doing it for a while and then we saw that we got slower, we started doing it again. Daily huddle is there to stay even longer, that’s for sure because you pulse faster as a company, you talk every morning, and then you unblock anything that needs to be unblocked and so on. As a company is growing at one point, how do you split this because the huddle won’t make sense if you have like 30 persons you need to speak to within 15 minutes. You start by department or how do you split them?
Shawn: It’s always by department. You usually have your executive strategic team and then they’re bringing it into each of their departments. The huddle should only last seven minutes, good news what I’m working on and what’s holding me back, that’s it. You’re just going through those three things, super clear, super obvious. Usually, a daily huddle will be anywhere between six and 10 people but that’s the cascade that happens. Normally, when you’re a big warehousing company, or if you have a lot of people in a shipping department, that you could do one big huddle for 20, 30, 40 people at once. You’re giving more KPI review and giving them projects for the day. But if not, typically the daily huddle will really be super short, super-efficient and works very well.
Guillaume: Seven minutes, I had in mind 15 minutes, not too sure why.
Shawn: We’re down to seven now, we’re telling people it’s got to be fast. It should be 30 seconds per person. If you have 10 people in there, that’s only five minutes.
Guillaume: Because otherwise it becomes too long for everybody. Everybody’s just waiting around for their turn to come and then it’s that long, 15-minute boring meeting.
Guillaume: Okay, interesting stuff. Do you have multiple of those weekly meetings going on, or is this like one per department, is it kind of an executive meeting?
Shawn: You could typically have the scaling up meeting per week but you could also have departmental meetings. Scaling up meeting will really be about the good news you’re working on, and there’ll be employer, employee and customer feedback, working on priorities, logging a little bit along the way as well, about any big topics or challenges that you have as an organization. Eventually that’ll end up cascading down into all the different departments as well. The goal of scaling up is not to have more meetings, just to have more efficient meetings. You still have to make sure you’re eliminating a lot of other meetings along the way.
Guillaume: Yeah, that’s why you’re doing this. We don’t need to have those impromptu meetings that are just like a waste of time on structure or don’t have an agenda. Let’s just wait for the weekly meeting about marketing and do it there.
Guillaume: I believe execution is such a deep topic, we’re still saying fairly high level. But I think it’s pretty good coverage. We probably won’t have enough time to cover the last one here that would have been normally cash, especially if we want to cover it properly. But we have covered three of the four pillars today with this first podcast. Maybe we could just do another episode and bring you back for the discussion on the fourth pillar.
Shawn: I could tell you that the cash portion could probably take a full hour on its own.
Guillaume: Exactly. Thank you, Shawn for all those very useful information today. If people want to get in touch with you, how can they find you?
Shawn: They go to two places, they could go to LinkedIn, Shawn Johal at LinkedIn. On LinkedIn you’ll find me, I’m the only one with that name, it’s pretty easy. And if you go to elevationleaders.com, you’ll find me there and all information for sure.
Guillaume: All right, thank you for being here today, Shawn.
Shawn: Thank you Guillaume, I really appreciate it.