Episode 6: Juan Carlos Alonso

Foreign.

Welcome to the Factory Ops Exchange podcast hosted by the US center for Advanced Manufacturing and Guidewheel. I'm Lauren Dunford, CEO of Guidewheel and executive committee member of the US center for Advanced Manufacturing. Today I'm joined by Juan Carlos Alonso, most recently Chief Strategy Officer at Best Beckert, a leader with decades of experience in manufacturing at the highest levels. He shares some great stories from how he actually identified 15 to 20% energy savings across their 80 plants by bringing together people with different levels of expertise, kinds of expertise on the factory floor and then was able to align those teams around delivering on the savings in general. He has some fantastic insights on how strategy meets execution, how to drive change while bringing people along for that journey, and how focusing on the fundamentals can unlock big impact. Let's get started. Thank you so much for making time today and excited to dive in. First area, if you wouldn't mind just describing, how did you get into manufacturing? Were there moments you remember when you've just kind of got hooked on the industry?

Thank you Lauren. Thank you for the invitation. It's fantastic to be here. Certainly I started my career in management consulting actually, but very early on had a lot of experience or a lot of projects in the industrial goods area industry. I've always enjoyed the industry. I like the, of the tangible aspect of it. The transformation of materials into something useful, something that we use day to day. It's something that always caught my eye. Maybe not the most exciting industry for many people nowadays, but so, so, so important and so basic in how we live that I, I always enjoyed that part of that industry and always enjoyed looking at well how to make it better, better. Not only kind of on the pure operational side, but more kind of thinking well what does the market need? What do people need? How can we resolve those needs by then technology in manufacturing or and linking then strategy to, to post the. Of course coming from the market but through the operational side, through the manufacturing operations at the end that have to deliver what is needed in the market.

Yeah, yeah. So many challenges and so many opportunities to really make a big difference through what manufacturing can do. Any defining moments for you, things times you remember that really reinforced that area.

Yeah. For me maybe two, two moments I think one talking about that need to link to the market. I remember when one of my first projects in BCG at the time was with a building materials company and our project was basically working with their commercial distribution side on helping them how to grow the market. And one of the things that I realized at that time is that what we Thought from the strategic ivory tower side, that looked very nice on paper when you went to talk with customers and with the distributors, which were independent, dependent entrepreneurs that took the brand to the market was so different. That's what at the end made me move from the consulting side into what I call real life. Because in reality, there's many things that are many concepts that are simple. If you think in that particular case we were talking about the CRM implementation, so simple the concept, when you have to implement it with real people, salespeople on the ground that have each of them, their own way of working, each of them their own background, education, their own beliefs on what you're going to do with the data that they will input, it becomes really complex as an implementation execution. In reality, it becomes much more complex than one nice slide that you had as a consultant. Right. And similarly kind of in manufacturing. Maybe a second story that for me was quite revealing when I, when I joined back out in 2019, one of the. One of the topics that I had in mind in my early tenure as an area of opportunity was energy efficiency. Now, for a company that is heavy manufacturing uses a lot of electricity, I thought, well, electricity should be something that is top of mind, that there's programs established, et cetera. And it was not the case. There were indeed in different factories, there were some initiatives. But it was kind of a shock moment for me when I realized that there's no real organized program to work on energy efficiency being such a, such an important input, such an important part of the cost, such an important element of our day to day, that it was not something that anybody was looking at with real strategy, real ambition to change it. And that made me realize that how many you could say even quick wins you could have even in a business that has been running for 140 years and that you would imagine that everything is optimized, not at all far away from that. So many opportunities to tackle. So those two, I think some key moments in my career of kind of realizing how much opportunity and how much you need to be really on the ground to make things happen, and not just kind of in the boardroom defining strategies, but really how do you end up executing, implementing them for them to make impact.

Yeah. Oh my gosh, I could not agree more with so much of that. And it's fascinating. So much of the contrast between theory and reality and also so much of the excitement of discovering how many quick wins there still are to capture where people wouldn't expect just resonate so strongly. I'd love to learn more about how you approached the energy efficiency side, both strategically quick wins because you were in a really exciting role there. I think you were coming in as chief strategy officer. So you had the opportunity to look at the entire or differently. How did you approach it?

Two different things. And I'll talk first about energy efficiency, since you asked about that. But the second one that I wanted to talk about is also about kind of the strategic market side of the business.

Yes.

So on the, on the energy efficiency side, as I mentioned, we realized, well this, this could be an area of significant impact both from. For me, one of the things I really like about energy efficiency is it helps on the economic side. Clearly any energy you don't use, it's a saving, but it helps so much on the sustainability front as well. You don't need to use any resource to generate that electricity that you will not use. So and it can be electricity, it can be any energy source. But that's a topic that for us it came both sides. On one side, from the cost efficiency side, on the other one from our sustainability strategy perspective. And the way that we decided to tackle it was as I mentioned, there was no organized effort at that time. So we decided to, well, initially the thought was well, let's discuss with the operational heads, incorporate the heads of manufacturing, the head of engineering and let's figure out what do they believe is possible. In their view, yeah, there were improvements possible, but in the order of, let's say 2, 3, 4% improvement. And in their view it required significant capital, it required a lot of effort to do. So we maybe a bit naive at that time. We thought well now this, two, three, there should be more. Because if, if there's no organized effort and we have 80 manufacturing plants around the world with more or less same operations, there should be, there should be opportunities to find out best practices and do more. So what we decided to do was to do a small pilot. We took one of the, one of the plant managers that was more open to, to explore and more that had a kind of a strong belief on sustainability as a value. We, we, we took, we work in his plant and we brought people from different plants, experts, you could say experts or people with experience, but from different generations. We had people that had been in the business 30 years, some people that had good education as engineers and had just two, three years of experience, but that were in the plant day to day and, and with no, let's say no limitations in their thinking because they were relatively new and they saw this as an opportunity so we put them to work together for a week or two with the head of the. Of the plant and to explore with no, no limitations. Capital we will figure out afterwards. And what they found was that they could find 15 to 20% energy efficiency opportunities. Now some of them indeed require quite significant capital, but many of them just required a different way of thinking. Just small adjustments in the plant identifying where leaks were that the, that nobody had looked at. A lot of, a lot of, I mean ended up being 200 initiatives. A lot of small things, but that when you add them up they become very significant and just a couple of big things that require investment. But typically those investments were quite, with quite an interesting return return of three, four years, which is, which is not too bad. So after that pilot we decided to extend it to another four or five plants and we found the same between 15 and 20% and then we extended to not all the plants, but 30 or 40 of the plants and we started executing on many of those opportunities. At the time that I left a few months ago, we were half of the way on the implementation of it. So we got about 9% energy efficiency improvements versus the baseline at that time, which is from a cost perspective, again quite important, but from a sustainability perspective, super impactful. So I think in my experience just kind of removing a little bit the, the, the typical limitations of the way that we used to think and the experts that know everything and bringing a variety diversity of opinions of experiences. And without those boundaries boundaries, you. You end up with a. You can end up with very nice improvements that, that are really significant and are really impactful.

Yeah. Wow, I love that story. And specifically the way you approached the change management aspect of folks having a perception that ended up being different from reality. Anything as you were going along that journey that you tried and it didn't work or that you are glad you did from a. How do we get this to, to bring people along on the journey perspective.

I I would say maybe a learning that, that I find it quite useful to reflect on afterwards. We did, I think we did one good thing which was on the change management side. What I, what I mentioned of involving a lot of people from, from the operational side from different. Different plans, different geographies, different experiences. Maybe one thing that we, that we overlooked kind of in our, in our willingness to move fast and to make impact was that we stepped on quite a few feet on the way and that after several years there were a lot of hard feelings around the perspective that we had really rammed through with the sustainability strategy without really involving or bringing everybody along and, and we certainly make a lot of impact. But good, I would say for it to be more sustainable and for it to really get to the, to the potential, we should have brought more people along. And we overlooked some people that eventually ended up moving positions that have quite some influence in the future strategy of the business and the future operational priorities of the business. And, and the fact that we kind of pushed through sustainability so strongly became a bit of a painful point still today. So maybe if I would do it again, I would take, I would take more people along and would take a more diverse set of opinions and okay, well, you can never please everybody. Right? But, but I think it's important to take a step back and think through all the different stakeholders not only of today, but that could be stakeholders in the future and how to bring them along. Maybe Lauren, if you allow me, one of the other things that I wanted to mention besides the energy efficiency side, I think one of our other important topics when I joined Beckhart as Chief Strategy Officer was what is our strategy? And one of the elements that I think many manufacturing companies find failed to do is to really bring the marketing. We are, we're full of technical experts that love to design new products and to, to push the, the plans, to push the operations. And many times you, you produce, you bring new products, but nobody wants them. Nobody. They're not really meeting a true need or an important need for anybody. So, so one of the things that we decided to do because after many, many years of that many times you get it right, but not, not always, but after many years of following that kind of product out perspective, we were very basically in 23 different markets on a global basis, 23 different industries that we served with hundreds and hundreds of products. Profitability wise, that was a big drag. You don't know, all your capital gets really dispersed into, doesn't really make impact. Those people don't know where, what to, what to prioritize. So one of the first things that we did was well, we need to understand better the market.

Yes.

Even if we've been in the market 140 years, there's many things we don't understand. So we went to the market and we gathered much more clarity on where the needs are. And then we worked on defining priorities. So we trimmed our portfolio very strongly. We decided there are three industries that are really interesting from a growth perspective, from a needs perspective, and let's focus on those. There's others that yeah, we have maybe good products, etc. But but we're, they're really creating too much complexity for the, for the benefit that they bring. And we trim those down. We, some of them we maintain but just with little attention, little capital and really refocus our resources into where can it make a difference. So we, we decided to focus on energy and this energy industry of course under big transformation. And that brings new needs and opportunities into construction which for me is. Is one of the most interesting industries or most interesting interesting towards the future. Because if you look at any of the big industries, construction is the one that has really not advanced in productivity with if you take a view of a century, all other industries have really advanced construction. We still build very much as we did a century ago. Yes, with some improvements, but in the order of magnitude towards compared to other industries, very limited. And then from a sustainability aspect as well with the great opportunity to make, to make progress. And the third one on mobility because of course another industry that is under big transformation with a lot of moving pieces. So we decided to focus on those three and develop our growth opportunities on those markets.

I love it and I love the combination of seeing not only similar to your other example you shared of thinking not just about today, but where things will be in the future and then aligning your strategy to that and that principle of focus as well. One of my person I respect a ton shared a book the other day, Islands of Profit in a sea of red ink that I have been diving into and finding extremely valuable towards that concentration of SKUs and understanding truly what are the most profitable areas. Yeah, love it.

And you could say that about almost any area of the business. Right. Choosing priorities, especially choosing what not to work on is difficult. But it's super important because we have limited resources, limited time focus where you can make the most impact. Yeah, it's simple, but it's difficult.

It is easy to say hard to do in practice. Oh my gosh. Okay, the time is flying so I want to make sure I can get us into the topic of digital and AI. And your thoughts on that, how are you thinking about that area? What advice would you give to other manufacturing leaders? Think about strategy for that.

Right now I think it's a difficult area for manufacturing industry. I think it's certainly relatively simple when you talk about the operation itself. Yes. We did a lot around with artificial intelligence for many years on optimization of materials for galvanization, for example, or of optimization of motors or many things operational wise for engineers, for technical people. This is kind of natural way of thinking.

Yes.

Now when you think about well the other areas of the business. Where can you bring, where can AI make a significant impact? There's some areas that I believe that there's a lot of potential to be made areas that have us in manufacturing repetitive tasks. If you think about anything around back office, if you think about internal sales, if you think about in research and development a lot of the activities are very repetitive activities where they are complex that have many inputs and where artificial intelligence can really help to, to make it more efficient to, to then again to try to find out what are the, the things that really matter and to focus on those. But I find manufacturing industry very backwards thinking in, in or at many times of course there's many exceptions but in my experience many times thinking very conservatively, very risk averse about experimenting with AI in all these other areas of the business. So I had that belief at Becker that we could make an impact but I couldn't get traction. It's one of the things that I left with kind of the feeling of we could have really impacted much more if we had moved along. But I couldn't get traction with many of my peers in the executive committee. It was never one of those priorities on which we focus and therefore we didn't make much impact progress. I I would say kind of as an advice I think, I think there's a, There's a lack of knowledge overall in. I would say myself as well but in, in management overall lack of knowledge of the potential of the really what is. What is possible. So exposing executive committee members that at the end have quite an impact on the, on setting the priorities, exposing to. To good examples to go and see what other people in not maybe in other industries are doing how they're, they're, they're making impact with that. I had the opportunity recently to, to go to a artificial intelligence fair and to see just simple, simple things like sales agents. The way that artificial intelligence can bring the really the. The key topics, key questions to make kind of a. In a really very efficient way. When a salesperson is making a pitch where reaching to a customer it's if you think about doing it manually or the traditional way you don't do it because it's, it takes a lot of time. It's complex. Most people don't do it. If you think that you can have it automatically there by putting really not a very complex solution behind it can be quite impactful just looking at it that somebody actually working on it. It's not rocket science at all. But many times people think oh this is super complex. I'll wait, I will understand it later and I will implement it later. But it moves so fast that you don't start today. You're already very late but you could only be much, much later.

Yeah, amazing. I wish we had hours. This is great. Maybe just any last words of things that you're following in terms of podcasts or books, advice that you have before we close?

Well, I would say maybe there's, I mean there's a lot of moving pieces today especially around trade and that, that makes a big impact on, on strategy. Where, where do you look, where do you put your investments, where do you locate your manufacturing plans, how do you evolve your footprint? And it's really complex now. So for me that's one of the topics that, that I'm quite interested on. Still don't, don't have a magic solution for that. It's a. Really changes every day and with no or difficult to see the logic to how it's evolving. So difficult to plan for that. But of course extremely important to follow up how this is developing. I think I've moved from reading books and podcasts to watching the news and reading analysis of what is happening because there's so much change happening today. But my advice would be don't stay in your bubble. Connect with people outside in industry, customers, suppliers. Because there's, there's at the end. We need to resolve these kind of situations as an ecosystem with, with partners with which are. Which have, which are seeing different elements as well of the. Of the same environment and trying to figure it that way. I was not a big fan of scenario planning in the past, but today I'm becoming a big fan of scenario planning because indeed with so, so much movement, at least figuring out what are the two, three things that you need to do in whatever scenario is it helps to. To keep moving. So my best advice would be not, not to sit on it, not to wait for let's see what happens. You need to start doing some things now to figure out what. What would work in on their most horrible scenarios. Work on that and keep an eye on an ear out and an eye on with your. With your partners around on what is. What is happening and what will be the best way to continue making that impact.

A huge thank you to Juan Carlos for sharing his insights. It's a great reminder that transformation needs to start with listening to people closest to the work. If this episode sparks ideas, share it with a colleague and follow the factory ops exchange for more conversations on driving real impact in manufacturing. Thanks for tuning in.