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Reimagining Industry Growth Amidst Supply Chain Uncertainty

Sarah welcomes Dan Varroney, President and CEO of strategic consulting firm Potomac Core and a sought-after expert on economic performance with appearances on CNBC, Fox, Dow Jones, MarketWatch, Bloomberg, Forbes, and the BBC. He’s recently authored new book Reimagining Industry Growth: Strategic Partnerships in an Era of Uncertainty and talks with Sarah about the need to evolve how we think about and approach partnerships in business to meet modern needs.

Sarah Nicastro: Welcome to The Future of Field Service podcast. I’m your host, Sarah Nicastro. Today we’re going to have a conversation about reimagining industry growth amidst supply chain uncertainty. I’m excited to welcome to the podcast today Dan Varroney, who is the president and CEO of a strategic consulting firm called Potomac Core and an expert on economic performance. Dan has been on CNBC, Fox, Dow Jones, Bloomberg, Forbes, and many others. He has recently authored a new book titled Reimagining Industry Growth – Strategic Partnership Strategies in an Era of Uncertainty. Dan, welcome to The Future of Field Service podcast.

Dan Varroney: Well, Sarah, thank you very much. It’s a pleasure and an honor to be here with you today.

Sarah Nicastro: Thank you. All right. Before we get into the discussion at hand, tell our listeners a little bit more about yourself and your journey.

Dan Varroney: Sure, absolutely. Well, I’ve had a remarkable career starting out in the trade association universe for almost three decades and 23 years of that career was with the national association of manufacturers. It was an absolute joy to work with small-medium and large companies on issues that help shape a favorable economic environment for all those companies and all those manufacturers. I left about oh, 16 or 17 years ago, and in my final role, I was a senior manager on the senior management team. I ran the grassroots advocacy. The membership component and I helped the then CEO recruit a senior-level executives to the board of directors. Following that, I served as the first-time president and CEO of an association known as association for corporate growth. Following that, I went to work for Newt Gingrich, where I ran his American solutions, policy, and advocacy organization, also very fascinating work. 10 years ago, actually, in May, I decided to finally give into my entrepreneurial approach and to say, I’m going to open up a company.

Dan Varroney: What I wanted to do was to open a company that was going to be a strategic value. That would have a value imperative that represented the marketplace. After the great recession, I saw a number of significant changes happen. There were fewer people in the C-Suite decisions about whether or not to engage in outside activity would be based on the direct and immediate return to the bottom line. Is it helping us save money? Is it helping us make money? Is it shaping more favorable business environment and created a strong research component? That research component helped industry trade associations first realize and recognize the industries awake at night challenges. The long-term business outcomes that they wanted to achieve and understand how aligned or how connected they were with those challenges. From that, be able to build a strategic industry plan that leveraged the trade association as a strategic business unit. A strategic business unit that over the long-term could make the industry more durable and better position for growth in the marketplace.

Sarah Nicastro: Great. All right. One of the things I wanted to talk about is in the book, you talk about the fact that volatility isn’t a new concept, but the immediacy of our awareness of it is. Let’s talk a little bit about that and why it’s so relevant.

Dan Varroney: That is an absolutely perfect way to start this conversation. When I started my association career in the 80s that like many of us, it was a talk radio or it was the newspaper. Cable news was just coming into being. Now there’s Twitter and all of the other social media platforms. The minute something happens in one part of the world, we know about it immediately, and it has impact immediately. What that’s done is it’s created what I call an Era of Chronic Uncertainty. We never know when the next shoe is going to drop, but we’re confident the next shoe is going to drop. For example, if you and I were to say, did either of us envision five years ago that there would be a military conflict in Ukraine, a global pandemic, runaway inflation, and on and on it goes. The answer here is we wouldn’t have imagined it. Here’s one thing we did know that when the global pandemic hit, we knew about it immediately. We know about everything immediately, and what that’s done, Sarah, is that it’s changed the way every business executive thinks.

Dan Varroney: We’re all wired differently now, and we’re wired differently because we know that when change happens, we know about it more quickly, and we have to respond far more quickly.

Sarah Nicastro: Do you perceive that awareness as a good thing or a bad thing?

Dan Varroney: I’m going to answer it this way. It is what it is. It is what it is. I think what it’s done is, it has forced an evolution of leadership and communication skills. Good communication skills, soft communication skills are more important than ever. We have to be able to connect and communicate with one another. We have to be able to leverage those soft communication skills to build alliances and partnerships that will help us get through whatever challenges comes next. We’re in a new era, and that era is a call to action for leaders who have soft skills. Who have strategic skills that can see five feet in front of them and 50,000 feet around the corner?

Sarah Nicastro: All right. Another thing that you talk about in the book is that those who do best are those who view change as an opportunity. That’s something that I would say is a persistent theme in this podcast and the content we create. What I want to ask you is, do you have a sense of what shapes that perspective? What is key to the mindset that change is an opportunity, not something to be in opposition to?

Dan Varroney: Also, a great question. What’s interesting, during the pandemic, I’d say the first six to 12 months, I had a number of conversations with executives who said, I’m looking forward to things going back to the way they were. That struck me as disconnected because this is the definition of a Black Swan event. This was intended to change. The way we look and the way we think and act and react about everything. Nothing would ever revert to what it was. I mean, look at it right now. I mean, look at how things have changed. There are 4 million quits in the job market in the month of February. There are over 11 million job openings. Some of the things that are driving that is it’s forced people to reevaluate their lives. Some people said the way we’re going to respond to what’s happening in the world to chronic uncertainty is we’re going to shift the way we see the world.

Dan Varroney: Others are embracing the opportunity and saying, this is the time to really put our foot on the accelerator and go all the way to the floor and say, we are really going to leverage this opportunity and that change. What I learned as I was writing the book is that those industries that saw it as an opportunity that built upon their partnerships seemed to fare better, and they had history of doing that. When I looked back so recent examples, I have the ability, as many do, to trace back to things like 9/11 or to the great recession. How to what extent did people say this was a horrible situation, but we rallied and saw this as an opportunity. Those who do, thrive. Those who don’t. Don’t do very well at all.

Sarah Nicastro: Yeah. It’s a really interesting question. I mean, you can look at it by which industries embraced the opportunity best. You can look at it. Which companies, which individual leaders, but it’s certainly inevitable. Resistance is futile. All right. The book is just discussing the need for and value of partnerships. One of the things you say that I really like is communities fair, better than individuals. Talk a little bit about what you mean by the community approach in this sense and why it’s helpful particular early at the point we are today?

Dan Varroney: Because we’re in an Era of Chronic Uncertainty, you can never have enough partnerships. Those partnerships give you a sense of perspective. They extend your reach. They give you a level of durability you wouldn’t have had otherwise. What you find interesting, and I’m going to talk about the book in just a moment, but to give you a sense of it. What you might find interesting is that at the start of the pandemic, I started a brand new CEO group called the strategic guidance lab. These are 55 trade association CEOs from every possible industry, and we utilized this platform, meaning Zoom and other social platforms to stay connected to one another or telephone or whatever it was, but we found a way to stay connected. We built a community that said that we would rely upon each other. We would trust each other, and we would utilize it to learn from one another and share knowledge. It worked out exceedingly well.

Dan Varroney: Actually, it worked out, especially well for me because, at the start of the pandemic, I began to write my book, and I was able to leverage the community that I helped create to do that. What I found interesting in the five industries that I wrote about in my book. By the way, I looked at a number of different industries is first and foremost, these were industry leaders that said, we understand the value of company-to-company, strategic partnerships and now what we want to do is try a different iteration of that between an industry and a trade association. They did that because they learned from their own experiences in company-to-company partnerships that you can far leverage each other’s strength and minimize and mitigate your own weaknesses. You can get to markets in places you’re not currently in. You can leverage strength, talent, technology, and resources that you don’t have. An example that would be in a strategic partnership. Again, I’ll get to the case studies.

Dan Varroney: An example of what I mean is, look at Starbucks and Barnes & Noble. Starbucks is an experienced company. It’s not a coffee company. It’s based on building communities. Its motto is outside in, focused on the marketplace and creating a third place between work and home. Barnes & Noble is a book store. It’s a bricks-and-mortar bookstore. What this partnership did is, it created an opportunity to bring the Starbucks experience into the Barnes & Noble bookstore. When we walk into the bookstore, it’s the smell of fresh coffee brewing. It’s baked goods, and it is a third place, but between work and home, it’s very comforting. We can meet friends or family or neighbors there and have coffee, or we can go and get a book and sit and read a book or a newspaper or a magazine. What that’s done is it’s created a boon for Starbucks. They’re able to sell even more coffee and further extend their brand.

Dan Varroney: Barnes & Noble has been able to extend its brand into Starbucks, and some more books attract more people into the bookstores. It ended up being a win-win. What I’ll add to that point is this, that Barnes & Noble is one of the few remaining brick-and-mortar bookstores, so that’s an example of a strategic partnership. When you look at an industry today and the challenges that they face not just domestically but globally, how can they build a strategic partnership with the trade association and position it as a strategic business unit?

Dan Varroney: What I detected in each of these case studies, I interviewed five or six business executives from these industries. Did a good bit of research on these industries is that they needed a strategic partnership to help shape the external environment on pre-competitive challenges and utilize that. Leverage it as an opportunity to also promote the industry, position the industry in respective marketplaces and make industries more durable for the long term. All five are powerful examples, but the deeper I get into it so for example, the recreational boating industry, because of its massive ecosystem so these communities are ecosystems. They’re every, every, every entity in its value chain. It had a partnership through the National Marine Manufacturers with the recreational boating and fishing foundation.

Dan Varroney: At the shutdown, the industry literally went to their strategic partner, the National Marine Manufacturers Association, and said, “Hey, we need your help. We’re all stuck inside. We can’t go anywhere or do anything, but we know now from the Centers for Disease Control that we can go outside. We can enjoy the outdoors.” The National Marine Manufacturers Association and the recreational boating and fishing foundation did a targeted digital promotion campaign. Interestingly enough, what the result was is that there were double-digit year-over-year sales growth because people just flock to the outside. They bought boats, and they engaged in outdoor recreation and boating. What was fascinating is, and I’ll go back to an earlier data point. Leaders in the industry said they never expected to see that sales or top-line revenue growth after the end of the great recession. Because of this strategic partnership, they far exceeded that.

Sarah Nicastro: Yeah.

Dan Varroney: That’s absolutely critical. Absolutely critical. Similar thing in the frozen food industry. Back in the day, it was French fries, burgers, and pizza. Now you can get Thai food, Mexican food, Chinese, you name it, frozen Italian food. What their strategic partner organization did, the American Frozen Food Institute is they partnered with another industry organization called the Food Marketing Institute. They generated data and research and it’s called the Power of Frozen campaign. They literally identify among consumers through consumer companies called IRI to identify what types of frozen foods that consumers are looking to buy. They share that data with the retail stores. That was especially meaningful at the start of the pandemic because everybody had to stay home. As we all know, we all had to work, so if you’re a single parent, a working couple, you needed to provide three meals a day at home, and frozen food was a healthy, healthy, tasteful, alternative double-digit sales as a result of that effort.

Dan Varroney: Strategic partnerships absolutely matter. Trade associations are evolving into strategic business units for the industry. They do have the ability to shape the external environment on environmental issues, tax issues, trade issues, and they’re making a difference.

Sarah Nicastro: Can you share another example or two of the case studies that you reference in the book?

Dan Varroney: Sure, absolutely happy to do that. Who doesn’t like baked goods? Who doesn’t like baked goods?

Sarah Nicastro: Not me. I mean, meaning I do like them. I try not to eat too many of them, but I definitely like them.

Dan Varroney: Understand. Chapter four is the chapter on the baking industry. As we think about the baking industry, the baking industry has always had a number of challenges. I want to share their challenges and their strategic partnership from the opportunity of the pandemic. At shutdown, the Centers for Disease Control and the Food and Drug Administration said, lockdown, everybody, go home and stay there. This is a dangerous disease. Except they forgot something. They forgot that we still needed to eat. The American Bakers Association through its own ecosystem comprised of organizations of the Food and Beverage Industry Alliance. This is absolutely fascinating, by the way. This is an ecosystem that starts from the farm and goes all the way to the fork. Leaders of the Food and Beverage Industry Alliance convened on a Zoom platform, and they said so they forgot we still need to eat.

Dan Varroney: They leveraged all of their contacts. They got the CDC and the FDA connected on media platforms similar to this, and they said, so we still need to eat. We’d like to work with you to develop worker safety protocols all the way and up to the logistic of delivering the food into the retail stores. They were successful, and as a result, we were all able to eat during those months of quarantine and shutdown. It’s a very, very powerful story but a strong reminder of the importance of strategic partnerships and why they’re important in an Era of Chronic Uncertainty.

Dan Varroney: Just another example from that. There’s a new CEO of a multi-billion dollar company who had just gone on the board of the American Bakers Association and not a believer, so it shut down. He called up the CEO of the American Bakers Association, whose name is Rob Mackey, and said, “Hey,” at nine o’clock at night and said, “The state of Michigan is going to shut down my company tomorrow, and I need your help.” What would happen was the American Bakers Association and the food and beverage industry Alliance was able to get the industry designated as critical infrastructure. That was part of what needed to be done to keep the industry open and keep the American people eating. They got them to complete the paperwork, and they were able to stay open in Michigan. Same thing happened in the State of Ohio, and low and behold. They were able to stay open in the State of Ohio.

Sarah Nicastro: When we think about the power of these partnerships, as it relates specifically to supply chain uncertainty, how can it help safeguard organizations in that way?

Dan Varroney: I think all of your questions have been spot on, but you nailed that one, and I want to share why. There’s this notion that the cracks in the supply chain just happened, and what I’ve learned through some research and getting ready to do additional research and write a white paper. Here’s what I’m learning as I go through this. There were cracks in the supply chain before the pandemic. Here’s what I really learned is that we were in a just-in-time manufacturing mode when we really need to be in a just-in-case mode. They were no fail safes. There are no alternatives. No fail-safes and no alternatives. Then the other thing is that when I look at how solutions are being developed, they’re being developed on a company by company basis, and with a challenge of this magnitude, it needs to be industry-based solutions.

Dan Varroney: The entire higher supply chain must and should come to the table. I’m defining this part of the conversation as a serious call to action. They must come to the table through their industry trade association and focus on the pre-competitive solutions that will address the cracks in the supply chain that can develop. Fail-safe alternatives that can make sure that five or 10 years from now, we’re not back in the same place. I swim in a swimming pool, a couple of miles from my office, and one of the pools, the heater broke, and they need panel circuits to fix it, circuit boards. Because of the supply chain issues, it could be weeks. When you think about that in this day and age, it sounds ridiculous because it is, because it is. When we talk about reassuring or near reassuring, there is enormous leverage by bringing the supply chains together. It can be created through the trade association. The trade association can be the leader in the convener.

Dan Varroney: It can be the neutral integrator to bring all parties together and focus on pre-competitive solutions. Whether they be legislative, whether they be regulatory, whether they be executive action-focused, whether they be state-focused, community-focused, whatever they are, but the time is now to get this going. I absolutely respect and appreciate the administration coming up with additional funding to support poor expansion and so on. What we’re looking for is collaboration that leads to innovation, and the innovation can be achieved by bringing these communities together, bring these communities together. A very visible manifestation of that are the mRNA vaccines. Look at the collaboration, the private-public partnership that came together, and look at what was achieved as a result of that. We are looking for massive collaboration through a neutral convener, and that would be an industry trade association where all elements of the supply chain come together and say, what innovation can we develop and what pre-competitive solutions do we need to develop and implement.

Sarah Nicastro: Explain what you mean by pre-competitive solutions.

Dan Varroney: Sure. We live in a country that has laws, and these laws are absolutely important and they’re all about remaining competitive and no one can take advantage of anyone else, and they’re about antitrust. At trade associations, they’re attorneys in every room at every meeting. They read antitrust statement that says we can’t discuss pricing. We can’t discuss competition, and nobody talks about their customers or anything in those conversations. Pre-competitive is as follows. Think of things around environmental regulations, things around workforce or workplace regulations. An example of a pre-competitive issue would be, so we know there’s a trucker challenge. There’s an hours of service regulation that limits the number of hours that a truck driver can drive their vehicle. Doing things like waving that is a pre-competitive solution. Coming up with ways to mitigate environmental challenges or temporarily postpone regulations as we build bigger solutions would be pre-competitive solutions. Tax incentives to encourage additional investment in innovation, pre-competitive solution.

Sarah Nicastro: Okay.

Dan Varroney: Tax incentives to allow expensing and write-off of purchases of new equipment for those industries that want to onshore is a pre-competitive solution.

Sarah Nicastro: All right. We’re talking about the value of these strategic partnerships, but there has to be some that don’t go as planned. What are the characteristics that a company should be considering if it wants to look at strategically partnering to achieve some of the benefits that you’ve talked about?

Dan Varroney: In the book, I write about the characteristics and traits of successful strategic partnerships. Clearly, we don’t break any new ground, but you want to enter into a partnership where you share the same values. There’s a level of business acumen on both sides. You both understand what you need to do. You know that you need to act in an informed way and not at the drop of a hat that you’re collaborative. In addition to that, you’re setting up terms and conditions that you’ve got governance that says this is the way we’re going to conduct the strategic partnership. These are the metrics and key performance indicators that we’re going to utilize to understand how effective we are or we aren’t.

Dan Varroney: Partnerships do and will fail when people don’t come to terms on the front end. How are we going to work together? How are we going to communicate? How are we going to judge our effectiveness and our success? Your chances of being successful are far greater if you define those terms upfront and you understand that you really see things in a similar way, not exactly the same way. Because you want to bring skillsets to the table that you don’t have, and they have and vice versa, but defining the terms and conditions of what it’s going to be and how it’s going to work.

Sarah Nicastro: That makes sense. All right. Dan, thinking about what we’ve talked about so far and the call to action, as you said, that you want to lead people with. What other thoughts or advice would you want to share?

Dan Varroney: I understand, I absolutely understand, and I’m very sympathetic to the fear and all the challenges, but this is the best possible time to see this is an opportunity to transform and evolve and take full advantage of what’s next. Customers in every industry, users and end-users, and the end-users or the end-user are seeing the world very differently. Coming together through these strategic partnerships to understand what that is and to help the end-user and the end-user end user be successful will help position every industry to be more durable and more successful over the long term. We need to be thinking about when the next shoe is going to drop and being ready for it. These strategic partnerships will help achieve that, but now is the time to transform. Now is the time to grab the baton of the future and go for it.

Sarah Nicastro: Good. Let listeners know where they can find the book.

Dan Varroney: Absolutely. You can find it at potomacore.com. There are links to it. You can order it on amazon.com. It’s Reimagining Industry Growth. You can also find it at Barnes & Noble online and in the store. You can find it at Books-A-Million, and it’s available immediately.

Sarah Nicastro: All right. Good. Everyone check out the book, and Dan, thank you so much for coming on and sharing. It was great talking with you. I appreciate your insights.

Dan Varroney: Likewise, this was a great conversation. Thank you for the opportunity.

Sarah Nicastro: Absolutely. You can find more by visiting us at futureoffieldservice.com. You can also find us on LinkedIn as well as Twitter @TheFutureOfFS. The Future of Field Service podcast is published in partnership with IFS. You can learn more @ ifs.com as always. Thank you for listening.