Peter Sallick on Waterworks' next chapter, and the biggest challenge the design trade faces today

30:39And there's other of these physical touch points. And yeah, the visual images that go with press and social media and all can help, but it's not the same thing as that real kind of moment where you walk into someone's shop or you have the chance to really touch and feel what could be. Yeah. It's one of the biggest missions that our industry collectively has. And I hope that we can do a better job of figuring it out. But I want to talk about product because part of why you've been so successful and why the company has grown as much as it has is great product. So talk to me about how your thinking about product design has evolved.

31:28I know you've brought in partners at various times, but I know you do a lot in-house as well, and you get very involved in this process. So tell me. In-house design is super valuable because it's fast, it's nimble. You build on every project becomes a building block for the next one. And the shorthand gets developed and you can sit there and side by side and make changes to the drawings in real time. And it just really becomes part of the culture and part of the inherent sense of what the company does. It's also interesting to go outside sometimes when you're looking for something different and new.

32:12And I always try to tell people that I've never viewed working with an outside designer, whether it's through a royalty licensing type arrangement or through more of a behind the scenes kind of project-based work. We've never ever as a company been interested in hiring a design firm for their name. We've only ever cared about the actual design work that they do. And that's something that, you know, feels really powerful to me as an idea because it is about the design and the names, you know, I always say like the names come and go, the firms come and go. What never changes is the, you know, the actual like quality of the design, the quality of the work.

32:58And I always say for designers, you know, much like I'm describing at Waterworks, do great work and everything else will follow. Putting marketing first or putting that kind of storytelling first ahead of the work never feels as powerful to me. Let the work speak for itself. Well, and do you find, I mean, I think I came on board at Waterworks when we were first launching Arrow, Thomas O 'Brien's collection, and I thought there would never be anything better than that. But I don't know if over time, you know, how that has evolved, but do you sometimes retire things after a time, or do you look at things and say, oh, does this really represent who we are today?

33:44How do you think about that? Yeah, well, first of all, I think Arrow celebrated its 20th anniversary with us. Maybe it's probably coming up on its 25th anniversary with our company. And of course, we still offer the product and it's still a very important touch point within our history in terms of design. And I'm really proud of that. Of course, you can always do better, meaning that a lot of companies, sometimes I talk to CEOs and they're saying, well, I'm looking for my next new product category or I'm looking to acquire a business in order to move to the next place. And what I found so often is that if you look hard enough at what you have today and you really think about not what it is now, but what it could be if you went back to it and really rethought it and really reimagined it, there's just huge opportunities in that.

34:38So, for example, right now, we're in the process of entirely reimagining our washstand business. So this is sort of an interesting space because it takes the metal work that's so important to our kind of know-how and it brings it into a larger scale than, let's say, a plumbing fitting, a faucet or something like that. And it makes a piece of furniture out of it. And for a long time, we've sort of taken for granted, I think, that category. Now, what we have today largely will stay intact, but we're super energized about some new ideas that we have to sort of make that category more relevant, make it more interesting and more exciting for us, and we think for our customers.

35:19Earlier, Peter, you talked about you're influenced by everything from travel to what you read to what you watch. What ultimately have you found is where you get the best information about what ends up being meaningful in new product introductions? Well, I'll tell you two things. These are really kind of my couple secrets. Okay. Okay. So I'm maybe sharing too much here. I like it. I like where this is going. First of all, I love, love restaurants. I love restaurants because it's the most public space that you can really watch people doing stuff in. And so some restaurants are very quiet and stayed.

36:01Some restaurants are very lively and exciting. The presentation of the food or the lighting or the music or the relationship between the food and the beverages, all that stuff is like a big stew and a mix. And somehow or other, I love thinking about how people are interacting with that environment that I can see and touch and feel and how that might inspire me to think about where to go with product. And then the second is that if you want to design something that doesn't need a home, perhaps you probably should be like an artist, right? You can just make art and it can live wherever someone thinks it should live.

36:41But if you're trying to make design that people are going to use, you have to look at the environments that people are living in. And so I personally love really tearing apart really the anatomy of a room and asking why is every single thing in the room? And also, if my thing was going to come into this room, how would it fit? And I think it's like that sense that you're not just designing in the abstract, but you're designing for someone's life, for their home, for their very personal interaction with it. That is something I really care about. Yeah. So let's talk about the Design Leadership Network, which is an area that you spend quite a bit of your time and you can tell me.

37:28It's one of the ways that you get to interact with a lot of designers and support some of their efforts. Let's explain to people what the Design Leadership Network is, first of all, and then you can tell me about it. Yeah, well, I always tell people the Design Leadership Network started because I'm not good at cocktail parties. And so I recognized early on in my avoidance of cocktail parties, it brought me into one-on-one conversations with super interesting architects and interior designers who are quite serious about their business. And I started to realize, wow, everybody has the same problems.

38:04Everyone is a creative and running at the same time, trying to run a business and trying to have success running a business while being creative. And so the idea was we were going to begin to start talking about how, as a principal of a design firm, you actually figure that out. And that's the genesis of Design Leadership Network, whose mission now says something to the effect of it's about education, inspiration and connections for the principles of design based firms. And its success has been incredibly organic. You know, we've it's grown over time, but it's only grown because the interest level in this conversation has grown over time.

38:46And I think that's a great sign that the market is healthy and the market is evolving and the market is becoming stronger because more people are interested in, you know, connecting over conversations of substance.

39:05We're taking a quick break from the show to remind you about Lalloy, who recently introduced Love Lalloy, a commitment to doing good for their community, industry and environment. Through this initiative, Lalloy has recently worked in India to promote female education, donate a thousand tree saplings, and provide free eye exams and glasses to hundreds of craftspeople. Learn more at lalloyrugs.com. That's L-O-L-O-I rugs dot com. And follow them on Instagram at lalloyrugs.

39:46The issue that we were discussing earlier, getting more people to use interior designers, getting more people to think about hiring them, is that an issue that comes up with your membership? And do they have thoughts about that? I mean, I think it's always a conversation that everyone running a business has. When I think about design firms, I absolutely think that professional services firms of all kinds struggle with these same kind of issues. You know, how do I grow? How do I scale? You know, am I a doctor, a designer, a lawyer, a consultant? You know, these are the kinds of firms that we're talking about.

40:25And how do I balance that with growing and running a business? And so we absolutely try to think about what we can learn from each other and what we can learn from outsiders to try to have a positive impact on sort of this, what I call the professional aspects or the professionalization of the design firms. And the correlate to that is how clients of design firms value the service, right? So everyone values their doctor. Everyone values their lawyer. I think architects are sort of in that group as well. There's a clear understanding of like, what is the service being provided? What's my expectation of that level of expertise?

41:06I think for interior design firms, sometimes I think there's a sense it's a little bit murkier. And so it's a very relevant conversation though. And it's certainly a relevant conversation about how do I run that firm? In terms of people's perception of working with a designer, as you were saying earlier, that person who says, oh, I'm not that person. What do you think is people's perception of it that we need to help realign somehow? First of all, I think we need to be clear about what is the value of design firms. because I've been in this industry for a long time. I know the resources. I know how projects are organized.

41:42And I think it's really hard to do a project yourself without a professional and have it be great, right? So design firms in and of themselves create enormous value through the services they provide. And then on top of that, of course, there's the creative part, the integration of all these ideas into a whole that looks beautiful and really works for the person in terms of their lifestyle. But I thought a little bit about what it is that design firms can do to make sure that they create success for themselves. And the first thing I came back to in trying to make this super clear is you got to only do great work.

42:18And if you have a potential client who's not going to let you do great work, you have to say no, because that's going to dilute the level of work you do. And it's going to dilute the experience that your team has, and it's going to dilute your attention from opportunities that are better. So take on great projects, do great work, and that's always going to be number one. The second thing I thought about, which is that as a principal of a firm, you have to see yourself as essentially the leader of the firm, the boss. And you have to imagine that a firm needs a vision and it needs values. You need to kind of know that your role is to set those standards and communicate them and really play the role of the leader.

43:07And great leaders build great firms. And then the third thing I thought about is that firms need a good structure. People on the team want to know that there's what's expected of them. They want to have a team meeting. They want to have performance reviews. They want to feel like there's a career path for them. And so there's some real basics that I think design firms can undertake that will make them better firms ultimately in the service of the clients that they want to have. DLN recently is in the process right now of introducing a new book called The Living Room. It's a compilation of hundreds of images of living rooms.

43:46You might like one or might not like another one, but behind the scenes of those rooms, I know that the work that went into conceiving it, planning it, measuring it, ordering it, installing it was incredible. And that's what I think the great ones really make happen, even if it doesn't look like that from the outside when you have those shiny pictures that you see on Instagram of what they're up to. Behind the scenes, There's just a lot of really careful and good work. Yeah. Gary Friedman doesn't sound like he's a fan of Instagram and having an account for RH. Is digital marketing helpful to Waterworks?

44:31Do you find that that's important? I respect Gary's view on that. I think it's super interesting. Yeah. And it's very hard to kind of pay attention to everything. And I think that's what he's really saying is that to do your best work, you can't be everywhere. You can't chase everything. And so he's focused on where he thinks he can add the most value. And when push comes to shove, it's not the most important thing. The most important thing is to really create the very best product and really invest in the service experience that your customers are having. And other things are nice, but without those core fundamentals, it just doesn't matter.

45:12And I will say, from the inside, I think Gary said the massive product transformation is taking place at RH. I think the product looks good. If you think about where it was at RH back eight years ago when we got there to today, it's evolved a lot. And I think I applaud that that's his focus. Staying with the DLN just for one more minute, Peter, I'm wondering what are the other pain points or what are the other struggles that you sense are going on in the industry that seem to come up time and time again? I don't think the other issues will surprise you terribly. There's enormous challenges in hiring and retaining talent and cultivating talent.

45:57I think that there's enormous challenges and frustration in the lead times associated to products and disruptions to supply chains that really cause headaches on projects. And I think there's a lot of frustration with the cost of construction and how that impacts demand and the compromises that might have to take place on projects. But these are the kind of real world problems that we're paid to solve for. And that's why I go back to those basics, which is that if you have a great client, it doesn't matter if they don't have the biggest budget. You can do amazing things, but you have to have that collaboration and you have to have that shared understanding of what you're trying to achieve.

46:41And great projects can take place at different price points. It's interesting that you mentioned the construction costs and of the many different issues that you outlined and that we all know are the various realities. I have been struck. When you're having a conversation with Jamie Bush or Nicole Hollis or designers at such a high level telling us that clients have just put a pause on a$15 or$20 million project, this is obviously a real issue. do we imagine falling rates or anything undoing all of what's going to make that better? What's going to fix that? Or do we just need to get used to those prices and all of that over time?

47:25I'm not really aware of too many instances in which prices go backwards. So I don't think we're going to see significant reductions in costs unless there's some massive economic disruption that is probably worse than high prices. And then secondarily, interest rates are only relevant if you're financing the project. If you're not financing it, you probably don't really pay that close attention to what mortgage rates are. So I think high prices are here to stay. And fortunately for Americans, the equity values are high and real estate prices have stayed high. and we have a lot of growth in our economy within certain key segments that are really important to where our clients come from.

48:18So technology and finance and media, there are a lot of segments that are really vibrant, biotechnology and medical. These are where our clients come from. These are vibrant segments of the economy and they're doing well. And at the end of the day, Um, people are, I think just adjusting to high prices, but, uh, there's no, I don't think there's a solution to that. Well, so staying with that, Peter, I mean, interest rates coming down, does this have a meaningful impact at your level of the, of the business or, or it sounds like you don't think it, it really does. You know, I, I don't spend, I can't really think about, I don't spend a lot of time really thinking about this, you know, deeply.

49:03I do know intuitively that if more houses are selling, more renovations will happen, more decorating projects will happen. That's kind of a fundamental idea that, yes, I absolutely think is true. How much they need to come down or when they're going to come down or make a difference, I can't really say. I wonder internally what you do look at to guide you. Do you look at what some of your big customers are doing and telling you? Do you look at how people are responding to relatively new product? What is a North Star for you? A North Star for me is looking out at the models that I think have proven the test of time.

49:50That's why I come back to, and I think you mentioned Gary does the same, Louis Vuitton, Hermes, Rolex, Porsche. These companies are, that's my model. That's my North Star. And what I also know is none of those companies have had a straight line to success. They've all had bumps in the road. They've all tried things. And looking at the way they've built their companies over really like 100 years or more, that's inspiring. And that's my North Star. Yeah. Yeah. Well, and you and I were talking recently about the Acquired podcast about Hermes. And it's interesting to go back and listen, if you have four hours to go back and listen to even some of the ups and downs there.

50:43Well, we have three more hours to go here, don't we? Yes, exactly. We're going to be talking for at least three more hours. But you know what I did mention from that podcast, which I found interesting, I mentioned this to you, was that this comment that says that there are many people that make leather in oftentimes very attractive ways, make things with leather. but none of them are Hermes. And I think that's an interesting thing to ponder because, you know, there are plenty of companies that make faucets or fabric or rugs or whatever category in the home that you're interested in talking about here, but very few of them are a waterworks or, you know, pick your favorite brand.

51:19And you have to ask yourself, what is it that makes, you know, that company that you admire, you know, really so special? And I think it's a combination of the heritage and the dedication over a very long period of time to what they're doing. It's a deep commitment to true quality and the integrity that goes with that. It's about experiences and that gap is super important. And I think that there's an opportunity for a lot of firms within the trade space or the design space to really elevate further and as a result, be really attractive, super desirable, really magical to the people that we want to buy things from us.

52:05And that's exciting to know that the opportunity of that level still exists out there in our market. I think that I'm very optimistic about design as a marketplace because once, as you said it yourself a few minutes ago, once people see something that's just better, they don't go backwards. The biggest challenge we all have is not enough people see what we do. And so the more we can get out there, the more we're going to attract more people into our world and the more we're going to see success. Well, and that's why, I mean, again, that's where I do think how great to have RH saying they want to put you in more places and give you more exposure because I do honestly think that when people see the product, they're just going to understand so much better the difference.

52:59And they're going to see it in a beautiful environment. Yeah, I agree. And there's a great new menu that's being rolled out. So I mean, there's a lot of reasons to come to your local RH. But I'm curious, Peter, and I want to shift gears a little bit and hear from you sort of personally on some of these things. One of the things I've been asking people recently is this sort of magic wand question. If there was one thing that you could change, if you could wave a wand about our industry to make it better, make it more efficient, what would it be? What comes to mind is that our industry has no shortage of creativity and no shortage of talent.

53:36What we really struggle with, I think, as a marketplace is we have no good venues to really see product and for us to gain exposure. I always say there's no Neiman Marcus or there's no Saks, that place where there's a point of entry where people can go and really get it that all these different brands are doing cool stuff and they can find their way to the brand that they love. And then from there, the relationship can blossom to all kinds of relationships over time, where you go from being casually shopping at Saks for a brand that you fall in love with, and then you end up in their flagship, and then you end up online with them, and then you have a personal shopper and a real relationship.

54:27We don't have that. And so what happens is that the world doesn't know. And that's my biggest frustration. So whether it was a trade show or a big department store or some venue that really felt accessible and really felt like a place where people could check it out, I think we'd all be better off. And that could take place at a massive level like a big department store experience, or it could happen at a more niche level where you do have multi-brand experiences that are even more tailored, but where people can find brands and learn about them. And while you might say, well, design centers can play that role, or there are some very particular multi-line experiences, the reality is they're relatively closed, not really that accessible, hard to navigate.

55:23No one's playing that role of really introducing the world to what's available out there. So a great retail experience, it sounds like. a great point of entry so that people can really understand what does a design firm do? What does their work look like? What product is available in that space? How does it really come together? That's really not there. And so people are left to wonder and end up in that situation that we described earlier in which they just don't know how to start. And so the result is, I always think of it this way, if you want to know the result of this, go and look for homes on Zillow.

56:03You'll find that very, very, very expensive homes have terrible interior decorating, and in many cases, not good architecture either. You'd think that every$10 or$20 million home on Zillow would be spectacular, right? That's just not the case. The reason is that not enough wealthy people really know how to put all this stuff together. Yeah. No, no, no. You're so right, Right. And that really drives it. It really drives it home when you see the horrifying listings there. Speaking of Zillow, which makes me think of technology, which is also what I wanted to ask you about. Do you spend a lot of time thinking about technological tools, about AI?

56:51And we got so excited for a time about augmented reality and virtual reality, and then we got less excited about it. But where are we now in your mind and how do you think about it? Unfortunately, I have to spend a lot of time thinking about technology because it really is a critical aspect of the business, but it's unbelievably complicated to navigate through. But the way I break it down is I think there's three baskets worth thinking about as I think about what my Waterworks had on. But I think this is relevant to all firms. There's the systems on which the company actually runs, right? this is how you do business we're in the process right now of massive upgrades to our core technology that's a huge investment and has required both capital but a lot of thinking and a lot of people involved to make that happen the second part is what i think of as like the user experience aspect of it where you're actually interacting with your customers through that technology that's in large measure like the web experience you might have but it also may be in the touch points with like getting a quote or getting a order or something like that that's a really exciting area because i think big improvements are happening there and can happen there to make just so much easier for people to sort of understand what they're going to buy and pull projects together so that's a really cool area and then the third bucket would be like what's next and that might include you know the ai conversation which i think is going to be very relevant to our our industry because i think ai can help us to organize you know what goes with what and to really anticipate you know make make our people more productive think of it that way i always think you know and you know this from your own experience at waterworks you have to go and identify every line item that a customer might want for their project.

58:52And you have to think about this trim with that trim with this supply kit, not just the fun stuff, but if an AI tool could really help to facilitate, well, everyone else who bought this also bought this and made that super effective through the ability to have the learning aspect to it. I think that's very exciting and has many applications to our business. And that's just one small example. So I think that technology is a big deal and there's huge opportunity there. I would say the reason I think that something like augmented reality was a challenge is it required people to do extra work. And I think that anything that forces people or asks people to do more work rather than less is not going to be helpful.

59:38Everything that I'm referring to here is about making it easier and doing less work to actually specify your project. And I think that's where the opportunity lies. Interesting. Finally, Peter, I'm wondering when you're not working at Waterworks and you're not working with the DLN and you've got some free time, is there a show you love watching? Is there a book? What pulls you away? What do you get obsessed with when you're not doing all this work stuff? I've learned to replace my Instagram scroll and get away from the world that way with Duolingo. Duolingo. Oh, good. I like that. So I'm working on my Italian right now.

1:00:21Really? Every time I pick up my phone and I think I should scroll and see what's latest in my feed, I go and I learn some Italian. And that feels really good to me. But I have a 52-day streak going. So that tells you something. And is that in preparation for a big vacation to Italy, or is it just a fun thing to do? Well, I think it's inspired by the fact that our partner in a really important Italian factory doesn't speak English. So everyone around him does, but he doesn't. So when we go to meet there, I always feel so badly for him because I want to talk to him directly and I want to feel connected to him.

1:01:00He's a very interesting person. but when I have to do it through the translation, it doesn't feel as personal as I would like it to be. Oh, I'm really glad to hear you're doing that. Peter, this has been such an enjoyable conversation. I can't thank you enough for your time. Well, thank you, Dennis, for having us and maybe it won't be five years to the next conversation.

1:01:22Thanks for listening. If you'd like to keep up with the latest design industry news, visit us online at businessofhome.com where you can sign up for our newsletter, browse job listings, and join our BOH Insider community for access to online workshops, a free print subscription, and much more. If you have a note for the podcast, drop us a line at podcast at businessofhome.com. If you're enjoying these conversations, please leave us a review on Apple Podcasts. It helps others to discover the show. This show was produced by Fred Nikolaos and edited by Michael Castaneda. I'm Dennis Scully. Thanks again for listening, and I'll see you next week.