How Businesses Can Thrive in Uncertain Times

0:08Hello and welcome to another episode of the Duct tape marketing podcast. This is John Jantz My guest today is Bill Kennedy. He is a seasoned global business executive with 30 plus years of leadership in industrial and consumer markets. As chairman of OTC Industrial Technologies and CEO of Arrowhead Engineering Products, he has driven significant revenue and profit growth. He's passionate about business strategy and founded the 8020 Institute to help companies scale profitably. We're going to talk about his latest book called From Panic to Profit. uncover value, boost revenue, and grow your business with the 80-20 principles.

0:48So Bill, welcome to the show. Hey, it's great to be here, John. And you're a fantastic hype guy. So I should... I'm just reading what you gave me. You did perfect. All right. So I like to sometimes start with words that are in the topic or the title of a book. So what does panic mode generally look like for a business? Yeah, you know, that's a really interesting question. And if you think of the scale from your house is on fire and your boat is sinking to, hey, maybe you're just not making enough money. Right. But a lot of times it's situational and companies are looking out and they cannot figure it out.

1:27And in today's world, what that means is interest rates have gone up, can't cover your debt. Cash is not coming in the pace you need. You know, I probably wasn't going to go here first, but I think I will now since we talked about I'm talking to a lot of business owners that in 2025, even if business seems okay, are feeling a little panic of uncertainty. Like change is happening faster than anyone can keep up with it. And of course, we could unpack the whole political scene that is causing a lot of disruption as well. So can panic mode actually be, I just don't know? I think for most of it, it really is that.

2:08Being a CEO or an owner or founder, I've heard other people use this, so this is nothing original for you. It's like staring in the abyss, but having someone throw rocks out of it that you can't see them coming and chewing glass from time to time. So when you're in this chair, no decisions that you get to make are the easy ones. All the fun stuff, like where we're going to dinner and how big a bonus to give. Someone else makes those, right? It's the I'm not sure what to do next. That's what arrives here. And today, maybe it's always been this way. I don't know, but it moves so fast, right? Whether it's a tariff that's in or out, whether it's an interest rate that's going up or down, you think you're going left, you really, maybe you're going right.

2:51Perhaps you're not even sure. So it's the lack of control that causes us staying awake at night. You know, I know a lot of business owners, leaders of organizations feel that part of their job is to exude the posture and everything's going to be just fine for the team. But when you're in panic mode, how do you do that? It's an interesting piece. So I kind of go the opposite. Not like I don't know what I'm doing, but more about the unvarnished truth. This is where we are. It's what we're facing. However, we have a plan to deal with this. And our plan deals with understanding where we're going because our destination hasn't changed.

3:29But, you know, like to use a sailing metaphor, for. Sometimes the wind blows from the left. Sometimes it's from the right. We have to be able to deal with that. And that's really what the book is about. It's how do you actually get through it? What's the simple, basic stuff that you need to do? And most of your money, most of all the good stuff comes from just a few pieces of that. So having a destination, being able to articulate, that's what people want. This might be a good time to visit one of the principles in the book. You talk about the Stockdale paradox. I think that's a little bit of what you described there.

4:01A lot of the listeners may have encountered that. The first time I've heard that term was maybe in Jim Collins' work. I don't know if he created it, but you want to define that based on what we just talked about. Yeah, absolutely. So your own point there. So Jim Collins was interviewing a gentleman by the name of Admiral James Stockdale or Jim Stockdale, and he had been a prisoner of war. And he was the highest ranking one. And he'd got a lot of men through it. He did a fantastic job. And he asked him, so who didn't make it? And Stockdale goes, well, that's easy. It was the optimist, right? And what he meant by that was you have to have a sense of unvarnished truth.

4:43This is what's going to be hard, but you have to believe you're going to get through it. And when you set false expectations or really unknown expectations, we're going to be here on Friday. We're going to be here by Easter, whatever it is, you don't really know. So you're better off to share that, but give people hope, the confidence that you are going to get them through. And that was what the Sockdale Paradox was all about, is it's going to be hard, but we're going to make. There's another end of that, of course, is the pessimist too, right? Who's just, we're never going to make, you know, I mean, it's kind of like you just have to balance that optimist pessimist, right?

5:18You do, you do. And some of us, you know, we like to think we're real list and all that. And, you know, it's funny. I see this in so much. You see it in today's climate. It's like when you're a CEO, you need a goal you're going for, whatever that goal is. So it's a destination. You need a strategy to get it there. Your highest chance of success is having your team come in, buy into that strategy, even if it's just an okay strategy. It's perfectly fine for it to be that way. But if you're all pulling on the same or rowing in the same direction, you'll get there. You can have a fantastic strategy, a wonderful strategy.

5:53No one buys in. You're not going anywhere. So this is where the negative person kind of falls apart a little bit. You're trying to get everyone together, but you have this, a lot of times they think they're doing you a favor, like a voice of reason. That's good early because we need a challenge and pressure test and be a little battle tested, if you will. At some point, you got to put all your hands in the middle and stack hands and go after it. If you can't get that person on board, this is probably not the place they should be. Again, going back to, I guess, in this case, the subtitle of the book, you spent a lot of time talking about the 80-20 principle, the Pareto principle.

6:29You know, it almost sounds cliche because every business book, not every business, a lot of business books, a lot of business blogs, you know, people talk about that principle. But why do you think that it has become so universally accepted? Honestly, I think it's a couple of things. One, it's really kind of a universal law, right? It turns out most of the good stuff comes from a very few pieces. And we use 80-20 Aparado, figured that out, looking at pea pods and farming and all sorts of things. I use it because I tend to wear a blue shirt every day, even though my closet is full of red shirts and pink shirts my wife has bought me.

7:03So we tend to do the same thing over and over, and it tends to be where we get it. What happens is is that we get distracted by other things. Now, the reason 80-20 is so attractive is it's quantitative. It gives you the sense you can actually figure it out. It's not just the black art. Eisenhower said, you know, plans are useless. It's the art of planning that's critical here. Same thing with the data. You get that data. It is just factual. It just is, right? You can argue with it. You can say you're different. It just is the data. You have to decide what you're going to go do with it. And you recognize everybody you're involved with gets a vote too.

7:43Yeah. And one of the pieces that you mentioned here, but I'm going to allow you to mention it more directly, is that if the agreement is, yes, 80 % of our profits or whatever come from 20 % of our customers or 20 % of our efforts, you kind of have to define which 20%, right? That's right. It won't tell you what your strategy will be. It will tell you where you're making money. And even more importantly, sometimes tell you where you're losing money. It's funny. You may think, well, I got to go get more out of others. Sometimes if you just stop losing money, it turns out to be pretty, pretty powerful.

8:18Right. So so looking at that data. And so there's there's no surprise. So I always use an example. We talk about fair, but not equal. Right. And the example I use is people with their spouse and their and their sibling. You think about what you what you give or your spouse on their birthday versus what you might do on your sibling. My sister, I send her a text. Right. And sometimes I'm like, my wife, do I take out to eat? I buy nice things. Why do I do that? Because my life is surrounded by my wife and my children and things like if I don't take care of her, I don't look after her in a way that she's got options.

8:56She can go somewhere else. Same way with our customers. If you identify your best customers, the data will tell you that. And you know they're your best because they buy a lot and they pay their bills. Go do more with them. They already value because they're in. The one that you're buying very low or is buying very low, you're probably their B's vendor, right? They're getting it from somewhere else. So identify with the data, then figure out how to take care of them in a way that they care. Could you also bring that, say, to operations or even to how a CEO might use their time? You know, we all keep really busy because the clock says we're supposed to be there from X to X.

9:32when in fact I know years of doing this myself that I would say 10, 15 % of my actual efforts deliver all the money. So maybe I ought to just go fishing. You know, there's a lot of truth in that. I see people who are really amazingly efficient and do a lot of fishing too. I'm not that good, right? I think I'm still wasting a good portion of my time, but I try to get better at it. It's identifying those pieces, surrounding yourself into it and getting after it. It is so hard though. And when you start out, if you're an entrepreneur, what's the first thing you do, right? You'll take any order. You just need to get started.

10:14As time goes by, there's only one of you. We'll just make it a solopreneur. And there's only so many hours in a day. At some point you go, I'm maxed out, right? I don't have anything left in the tank. I don't have any time. I don't have resources. You then have to start making decisions, right? You have to start those folks and you have to start saying no. And it's important to say no to the right area. What typically gets our time is the squeaky wheel. And so if you have a small customer, they can wear you out. You're doing all these things. You look at results at the end of the year, it was de minimis.

10:47That big customer, they may be self-sufficient. They're clearly happy because they're a big customer, go get more of that. Go spend that time around. Then you can go fishing all you want. So you just revealed, I haven't named this universal law yet, but one of my universal laws is that there's this inverse relationship between how much somebody pays you and how much attention they need. Absolutely. Yeah. You know, there's something, there's something about it, right? We all have the story of that tiny customer. So Motel 6, you remember that? We'll leave the light on you, Tom. So Motel 6, when I was in grad school, we did a study on it, or there was a case study that we read.

11:31And they ran that whole hotel with one person. There was only ever one person, which by the way, if you ever stayed in it, you believe. So it was a wonderful hotel and all that, but they were so efficient. So we're doing the case study. And then they said, how do you think they did it and what they did? So if you came into a Motel 6, there was a counter there, a person behind it. That was the person running everything. Behind them was the laundry, right? They could just turn right around. It wasn't a pretty wall. It was laundry machines. This was back in the days when I was there, when you had VCRs.

12:06And they would at eight o 'clock, they'd put the VCR, the video in. Right. And things like that. And so the biggest issue they had with their employees and they would fire them for this is an employee would get a call from a room, say room 10. And that person would be having a problem and whatever the problem. Right. The employee would leave and go check on it. Now, what would happen is during that time they're going to solve this one issue, they'd have 10 people come in. No one's at the front desk. Phone or ring, no one can answer the phone. So they had to put in hard and fast rules that you cannot get distracted by trivial things.

12:43And so it's a really stark example of that. But they ran a whole hotel with one person. And I don't remember now what was it they would charge and probably 30, 40 bucks. But they made money at it because they were efficient. So there's a line in the book somewhere, but I wrote this down that you talk about businesses needing to earn the right to grow before they can scale. And I think that's fairly nuanced. So I'd love it if you kind of unpack what you mean there. So my favorite line with that is a baby does not make a bad marriage better. Right. Right. So what we mean by that is it's interesting.

13:26You can be really good at getting customers, but if you can't satisfy them, what you wind up with is a whole bunch of short-term unhappy people. When you come into an operation and you're looking at it and there's problems, it's generally not just the sales problem. There's operational problems. There's inventory problems. There's supplier problems. You need to correct a lot of those as you're going so you can actually earn that right to go get the business. because, you know, a customer, they don't care what our problems are. They just want what they want, just like anyone else, and as they should, right?

13:59So if you can't ship on time, if you have quality defects, before you go get more people to see how bad you do, perhaps you want to go back in your factory and clean it up a little bit and do some tack time studies and look at your sourcing and on and on because there's very few of us that have products you can't get anywhere else, right? Most of us have something that's easily attainable, no matter what our differences are, make sure you start with getting the machine running well. Get the engine in the car capable of getting where you need to be while you're out getting those customers. It'll make a big difference for you.

14:32I'm not sure where I heard this. It reminds me of the line, we're losing money on every sale, but we're making it up on volume. In volume. That was the old spark plug thing. We're going to sell spark plugs for$1. We buy them for two, but we're going to make it up in volume. We used to say that. I started out as a sales guy, right? And I love him, but I always felt like it gave me a license to make fun of him, right? You know, there was never, I like, I just, man, if operations can make this thing, I can only sell it for a dollar. That two bucks seems to be their problem. When you own the business or you're running the business, you got to look at the whole P &L and you got to figure it all out.

15:06Just because you can get it out on time doesn't mean you can make that money at it, right? It takes a lot of effort. So if I was a business owner, I had a variety of issues that I'd identified that had me in panic mode. And I said, Bill, come on down and take a look at our company, fix us. Where do you generally start? You know, it's the most amazing thing. So I get everyone together. I get them in a conference room. And the first thing I ask them is, what is our goal? What does good look like? And not some, we're going to be better human beings and treat people with dignity. That's all important too.

15:38But where are we going? What's the destination. I have yet to have the same answer out of two people. You go around that table and operations will say something operations like, we got to be on time. The majority of times, the goal is set by whoever owns it. In private equity, typically they want to get at least three times whatever dollar of equity they put. It's called MOIC, multiple loan invested cash. A private company, it's whatever the values of the owners are. Sometimes it's parochial, and take care of my employees in my town. Almost always, it's the dividend as well. That's how they take care of their family and themselves, what they live off of.

16:14That's generally very important. In a public company, it can be all sorts of things. You can get, that's why it's so hard to run a public company. At the beginning of the quarter, it's one thing. At the end, you need that penny to make your earnings per share. Start with that. If you start with what the value is, what that goal is, your job as a CEO is then to figure out, make that goal, and you and your team figure out the strategy of how to get there. Most people never do that. I believe that we're going through, you know, I've been doing this 30 years. I know you said you'd been doing this work for 30 years.

16:50So we've seen some, the world is ending moments and, you know, ups and downs and cycles and whatnot. I feel like, and here this is maybe a record, I'm 17 minutes into the show. I'm just now mentioning AI. But I think I feel like what's going on with AI and how that's going to change business is really, we'll get through it. There'll be new industries. There'll be new jobs. But I feel like we're in a time where people have to decide, do I go this way or that way with my business? Standing still is not an option. How do you feel like that's going to shake out? You know, this is just a guess. But what's your view on how that's going to shake out the next two, three years, maybe?

17:28I remember in the 80s, late 80s, I didn't have a cell phone and never heard of a computer. And then I get a cell phone and my first cell phone was analog. Right. And they were coming out with digital. I'm like, I don't know if I want to switch. Right. Same thing with computers. Right. If you're old like I am, you've gone through all this. AI is not only coming, it's here. Right. It is absolutely going to have an effect on us. And already in our businesses, it is making an impact. Not in maybe some of the really meaningful ways, but I think I saw the other day on, you know, we've got a terrible wars going on around the world.

18:04I think I saw where they're trying to fight the war with robots. Now, I don't know if you saw that in there. So, I mean, look, we are definitely in the future now. AI, just like we thought computers would get rid of everyone and cell phones all of a sudden would kill all these, it changes things. But it means we can do more. And you as a person, if you want to do it, maybe you got to get new skills. Sometimes that's that's the case with it. But you can continue to grow and go on and on and on. So whether you embrace it or not, doesn't matter. It's happening. It's happening around us every day.

18:36Everybody I know now either has if you got Microsoft co-pilots in it, this is a very simple example. If you're my daughter, it means I'm paying for her subscription to ChatGPT. Right. So everyone's got it and they're using it to just even write simple documents now. We're doing faster and our turnaround time is it will allow more throughput forms. It will cost us some jobs for sure, but we'll also create a whole new industry we haven't even thought about. So embrace it, whatever level you're comfortable with. This rocket's leaving the platform here. Yeah, no, I've said that at least for the last couple of years that, you know, the only risky move right now is to just try to stay put and hope it goes away.

19:17It's never worked, even without AI, even, you know, there was not going anywhere is making the decision. You're basically punching out. So you're going to go backwards or forwards. My thought is go with it. The other thing I would add to it is, you know, for most of us, I mean, there's some big fancy companies out there to do all this. most of us are at best fast followers, right? I'm just really starting to embrace it and use it. I sit on a university board. We have students from all over the world. Now, when you call our number, they actually interact with AI because they can do over a hundred different languages, right?

19:53And can you imagine having a hundred different people available at any time and they'll send it all out? You still need people, but it's really enabling a lot of different growth opportunities. Well, I was going to say opportunity is really the word because a lot of people fear change, but change always brings opportunity. And that's really where I think we are. Got to be agile. Got to be flagged. It hurts though, right? I mean, Jesus. What else? I had someone like today, I don't know if you experienced this, but you can get ahold of me on a cell phone, text, email, Teams. I've got a new thing they call a notion they're sending me things on.

20:28So I've got all this stuff and I'm like, can't they just pick one? Well, they're never going to pick one. That problem is a bill problem, not anyone else. I'm going to want to ask you. Yeah, absolutely. Well, Bill, I appreciate you taking a moment to stop by the Duct Tape Marketing Podcast. Is there anywhere you'd like to invite people to connect with you and find out more about From Panic to Profit? Yeah. So first of all, I can just go right to my website. It's my name, BillCannody.com. You can see it right here on the screen. Encourage everyone to come there. You can look at the book, look at my other stuff.

20:57Happy to help in any way possible. Awesome. Well, again, I appreciate you stopping by. Hopefully we'll run into you one of these days out there on the road. Sounds good, John. Thank you so much for having me. This was fantastic.