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Chapter 6

It’s All About the Customer

Over the following two years, our company continued to grow rapidly. Sales revenue was still increasing at 50% a year! We knew we could not sustain that kind of growth, yet we were trying to manage it as best we could. Keep in mind, we had no outside investors, no bonds to sell to raise capital to buy equipment, and no stock offerings to maintain adequate cash flows and expansion. All this growth had to be financed by John and me, using our available bank credit lines and debt, which added interest expense. Our valued suppliers also participated by allowing us attractive purchase terms on inventory.

Why were we growing so fast? Why were we able to capture so much market share from large international competitors as well as long-established local competitors? What were we doing differently? Well, for starters, we were not selling our products at reduced prices as so many competitors were doing. We were following the plans that we laid out at the beginning of our business: focusing on what the customer really needed. We were passionate about the business of showing customers how we could save them money in their operations. That passion was a proven belief that all customers wanted to spend less money on tires, and we could show how changes in operations could accomplish the savings. By educating the customer on several aspects of their operations as they relate to tires, we could save the customer money on labor cost and related expenses in addition to having to buy fewer tires by making our recommended changes.

Think about that last sentence. If you or your company can show a customer a better way to operate their business that saves them money, you become a trusted and favored supplier. Even if the customer might have to pay more for your service or product, if you can show them how to operate their business more cost-effectively, it would only be logical to choose you to supply the products they need.

Implementing this sort of model requires knowledge and training that exceeds that of the competition—training in understanding the customer’s operations and needs. While John had the knowledge and technical expertise to build and successfully run the retread manufacturing plant, I had the expertise and knowledge of the trucking industry and how we could improve operations for our customers as it pertained to tire applications. It was a perfect example of a great partnership as laid out in the previous chapter, a division of responsibility and complementary skillsets.

We had an employee base of individuals from outside the marketplace with little experience in tires. As I mentioned before, most sales and service people already working in the industry had some less than stellar habits and were not trained the way we desired. The salespeople we were looking for had to be professional, able to learn technical skills we would teach, and keep excellent records. We would train our truck service personnel in customer fleet operations so they understood what the customers needed.

The ideal service person had to be able to work with the customer as if they were running this aspect of their business for them, almost as if they were an employee of the customer. That means they would always make decisions that made the most sense for the customer, not for our company. Decisions were to be based on the long-term benefits to the customer which, would, in turn, benefit our company.

A humorous example of this strategy involved one of our largest customers. To take it a step further, it was the same customer we lost for a short time during the lawsuit debacle. The customer owned thousands of trailers spread all over the northwest and Alaska, as well as in Texas. They were heavy into the transportation of the oil industry’s goods and equipment, and used thousands of tires a year.

In their main yard and maintenance facility, the tire service person was our employee. That meant that the customer understood the value of outsourcing, meaning they were not being tied to the expense and liability of additional employees. One of our tire suppliers had a special short-time discount on tires this company used, which meant it was a great time to stock up. I went to the maintenance director, who was not my employee, to share the opportunity. I let him know there was a special discount if they ordered 100 tires or more.

His reply to me was, “Go ask Zane. If we need them, put them into stock.”

That should have been an easy sale, as Zane was the service person that worked for our company. It is important to note that Zane, our employee, would also receive a commission on this sale.

However, Zane told me, “We really don’t need these tires now, Kim. I am using a lot of tires from trailers they have in excess for a while, as they are not currently being used. When these trailers get back into service, then we will consider buying. Right now, they really do not need any additional inventory.”

While I might have been disappointed, it was clear that our training was effective. Zane was acting as if he was an employee of the customer, and made the decision accordingly. This was exactly what made us more successful than the competition, and the customers could see this in action. I went back to the maintenance director and said, “I used to think I was a pretty good salesperson, but I can’t even sell to my own employee—I couldn’t get him to spend your money!”

His response confirmed we were doing business the right way when he remarked; “Kim, that is precisely why we do business with you.”

What he meant by that is we were not simply selling tires; we were partnering with the customer, showing them ways that reduced overall costs and increased productivity. We were building market share by saving the customer both money and time in many ways. This customer didn’t need a bulk discount—they needed our expertise and training in how to manage their services more effectively, saving them infinitely more money in the long run. We had a passion and goal that we could become the dominant market leader if customers were willing to listen and learn. Examples such as this were proving we were doing what we said.

In any case, we were well on our way to building a well-oiled machine. It was time-consuming and costly, but it was worth it in the long run. This was because we not only had to train employees from scratch about the products, but more importantly, we had to train them about the customer’s operations and why and how our sales and service employees could make this a success for themselves personally. Our competitors often spent their time training people on the product, explaining all the reasons their tires were better than other tires and always giving some incentive to the salespeople or a discount to the customer. What we were able to see is that tactic is not what was best for the customer, though the customer would not know this unless we could teach them our vision of a better way.

As we continued to gain market share, we were able to start doing business with many of the largest transportation and truck-related industries in their respective markets. We had been building up an excellent reputation and building a portfolio of satisfied customers that could be used as examples and references. The way we were marketing, selling, and servicing didn’t make much sense to our competition as we continued to rise to the top. They couldn’t understand why people would be doing business with our company, even when they offered a lower price for a product. The saying, “You do not know what you do not know,” defined our competition, and we hoped it would stay that way. Meanwhile, little by little, their customers started coming over to us.

Our strategy is nothing more than using common sense. Our method of doing business was right in front of our competition, yet unseen or possibly not understood. Our customer-focused strategy could be applied in any business today as it was then. For us, in our industry, the customer had to buy tires in order to operate. They could buy from anyone. They had lots of choices. But our company developed the knowledge of their business and was able to show the customer better ways to operate as it related to tire usage. Simply put, we could show the customer how to spend less, buy fewer tires, and save money in operations. We became the trusted, value-added supplier.

Your business could be an industrial application or even a cloud-based service. People, in any industry and from all walks of life, have the ability to see something right in front of them and wonder why it is that way if only they try. Anyone can think through the problems around them and see solutions. Often, they can visualize a business that can profit from what they see that others do not. Every business needs continuous improvement and to strive to find better ways to operate and be more profitable. No matter if you have that idea to improve something where you work now, or where you can improve the operations of your customers, you have the ability to see things differently and consider the question “Why?”

In our case, we had taken our operations from a fledgling company facing a large Federal lawsuit to an enterprise that grew almost too fast. Smarter, more business-savvy individuals might have taken this company public, expanded the proven concept, gone into franchising or brought in private equity. A Harvard or Stanford MBA case study could be developed around our business, as all those options were a distinct possibility. The study would be on what alternative made the most sense. As we grew, we had discussed some of these ideas early on with our banker, Andy. Unfortunately, Andy was no longer in the banking industry by the time any of these ideas could have become a reality. The bank he worked for had been sold, and he accepted an offer to become the CFO for a large company. Although we had a new banker, the discussion on alternative means of financing the growth just did not happen. And besides, our time was consumed with the growth: training, hiring, buying equipment, and learning what the competition was doing. We were also opening new markets. We now operated six locations, and market share was growing in all of them, and all that new business was at the expense of our competition as we were taking their customers from them.

A few years later, we saw another huge opportunity. From a simple, insignificant transaction in our business with a global Fortune 500 firm, we saw something in that company’s operations that could be improved that might lead to a whole new enterprise. This customer was an enormous and successful Fortune 500 firm. I had been studying W. Edward Deming and his “what, why and how” strategies. He had transformed manufacturing processes that resulted in increased profits and sales starting with Toyota after WWII. Both John and I were studying his work as it related to our own manufacturing operations, but the same knowledge could also be applied to how we see other opportunities and improve customer operations through our services. This new opportunity we visualized was with PACCAR, one of the world’s largest manufacturers of large trucks. There is a more detailed story about this later, but we did end up starting another business surrounding this vision that ended up going global. This new enterprise created another drain on cash initially, but became an extremely profitable, cash-flow-positive operation in a very short time.