Steven Richman, President of Milwaukee Tool Corp on the Louis Carter Show

Hey, it's great to have everybody on here today. I have a special guest, Steve Richman, who's CEO, President, Group President of Milwaukee Tools, which is an awesome, cool company. And I've learned a lot about it. And it's really, it's a great place. And Steve is a great guy and really leads not just disruptive innovation, but also this community of customers and a community of employees. Who really get it, if you will. They understand what it takes to provide the very best to customers and create the best and most innovative products and create a brand that's lasting, living, and just very cool for people as well. It's just, it's such a neat place to, to be and also want to buy from. Steve, great to have you with us today.

Louis, great to be here today.

You know, Steve, I was, I was thinking about Bernie Marcus and why he he created Home Depot the other day, and he created it really because of a kind of an ecosystem he wanted to develop at Home Depot. And one of the biggest part of his ecosystem was people like you, Steve, who create awesome tools and equipment for Home Depot and who can, in the second part of the ecosystem, support entrepreneurs and people and construction workers and, and people who build houses and who are really running their own businesses. That's essentially what it is. And as they say, put food on their plates and on their family's plates. That's really what it comes down to. So you're a big part of that. And there's so many people that really believe in that in, in the, in the community, the construction community, the homebuilding community, which really built Home Depot. And you know why Bernie started it with, and Frank started it all.

Absolutely.

You know, what's neat, like, I want to, I want to kind of jump into something here because we were just having a good talk about it. Just the whole YouTube community and how, and builders. The way I kind of look at you, Steve, is that you, you're, the way that you bring customers together in community is a little bit like how Salesforce did it back about 10 years ago, or a little bit like how CRMs do it or marketing companies do it. You associate your customers with, as if you were helping their entire sort of value chain. Of, to their customers. So you not just think about them as a purchaser of your goods, really, you provide them service as well. That kind of vision really, I would think, sustains you here and now and beyond.

Well, you know, to that point, when we started this journey 14 years ago, when we were a $450 million company trying to compete against Goliaths, you know, Stanley Black Decker and Bosch and Makita and Fluke and large global global companies, we had to focus and we had to go back to our roots. And our roots were post-World War II, where we focused on mechanical, electrical, and plumbing end users. And we had a dream and a vision then, and that was that if we could become partners and start with them and understand what they did from the time they woke up in the morning to the time they went to bed at night and really help them drive productivity and safety solutions on their job then we could earn the right to really be viewed as their partner. And that was the beginning, and that was the impetus from having great people and the right culture. And those two are the bookends that really have driven this year after year after year with an outside-in perspective to be able to make it happen.

And you've done that well. And you, if anybody goes on YouTube, you'll find ToolTubers, people who love Milwaukee tools. There's actually people who do this. They've done this for over 10 years. Steve can tell you more about it. Um, It's incredible. They, they, they miss going to— if they ever missed a conference, it's like they missed part of their life. And it's, it's actually built into the way that they do business. And this year it was virtual. How is that going, Steve? You're in your fourth day right now.

Well, you know, it's been quite fascinating. As you said, we had what we called MPS 13+ years. Actually, Carly Tyler and Tim Brashear were reflecting on that in an internal podcast this morning. And what they were talking about to our internal team was that when we first started, it was a small group of YouTubers and bloggers and individuals in the trades. And we went from that small group to where they became a family. And they would come in and they'd harass us. Why can't we have this other product towards a mechanical contractor or towards a remodeler? And when are you going to bring it forward? And we would have dinner at night and meetings during the day and drinks in the evening and on and on and on. And it was a family that would have a lot of give and take and a lot of fun. We'd have our band, the Milwaukee Toolshed Band, playing at the event every single year. And then we brought our users in and our distribution partners in as well to be part of that. And we had to pivot and the team did, you know, the cross-functional team at Milwaukee, which is one filled with agility, filled with a culture of making it happen. They came together and they came up with a perspective to say, how are we going to make this live? And they called it Pipeline. And we're on the 4th series of Pipeline now, uh, that will launch tonight, uh, and that goes out to the entire community. And now it's not only to them, to the bloggers, to the key trade publications, to the YouTubers and that, it's to Milwaukee Tool Nation, those people that love us. It's to users across the board, and it's going extremely well. And we've learned a lot, and we're already looking at what we're going to do differently for next year. I shouldn't say I'm clearly not doing it, but the team, that cross-functional team, is really pulling it together and looking at how we can change the game again and again.

And you talk about that with disruptive technology and disruptive innovation, really. And, you know, I know you like the Netflix example, Blockbuster, Netflix. Netflix example. And we were just going to throw that up here right now about disruptive innovation. You look at this with Netflix and Blockbuster. Netflix went up at an inflection point of 2011. If you see that, you know, when they had hockey stick growth when they went to this streaming. And then Blockbuster went bankrupt after they introduced the DVD-by-mail trial. You know, tell me more about your innovative disruption and how that happened for you.

You know, if you think about us as a business, we were fortunate. We were small, we knew we had to change the game. And most of the KeyMilwaukee team are big fans of Clayton Christensen, the Harvard prof who passed away in January, that wrote "The Innovator's Dilemma" and "The Innovator's Solution." And, you know, part of that mantra of Clayton was that the world is moving so fast that incremental change can't really work. And how are you really, as a business, as a company, as an individual, gonna change the game in a very, very different way? And when our team came together, we realized that not only did we have to work harder, we had to work smarter, we had to take more significant risk, but we had to leverage our agility and our speed and lack of bureaucracy that our parent company, TTI, allows us to have and how we can drive that with people. And the two bookends for success were people and culture. And we did that and we launched what people said was not possible. We launched a comprehensive range of M12 and M18 products, two different ranges of lithium-ion power tools. Now you fast forward today and you hear lithium-ion and you say, oh, everybody knows what lithium-ion is, you know, Tesla and cars and, and phones and everything else. Well, back then the entire industry views lithium-ion as poor cycle life, no cold weather performance, not hot weather performance, you're— it's not going to work. Why should I do lithium-ion? And our development teams created IP around global patents around using lithium-ion and power tools and attack people that believe that the only thing they could do was continue because they were making so much money, our competitors, off of NiCad, old technology. And they weren't willing to take that risk. And then we combined that— those teams had the foresight to be able to leverage that and say, how can we create technology that would eliminate a corded power tool and turn it into a cordless power tool? And that became a category, a new business, a sub-brand that we have called FUEL that launched the latest in PowerState brushless motor technology, the latest in electronic technology, the latest in lithium, red lithium technology, and pulled all that together to really solve a user's problem. And then what the team did is said, okay, what are the pain points? If you're a mechanical contractor, an electrician, or a plumber, if you work for a large corporation or an individual, if you're starting your own company as a remodeler, what are the pain points that they have and how can we use this M12 platform and this M18 platform to do on and off the job site, eliminate that. And then we did the same thing year after year after year on power tool accessories, now hand tools and safety and storage with our Packout system. And that's the kind of— I'm fortunate to be able to work with these people every single day and see what they can create and partner with those users that you talk about who are so passionate about the brand. To understand those pain points and really deliver disruptive innovation that changes the game. Not just adding an incremental feature, or not like some of our competitors do, buy stuff off the shelf from somebody and put their brand on it. That's not who we are as a, as a brand, because our mantra is real clear. It's how do we, how do we really come together and help that user solve their problems?

Absolutely. And, and I— what is incredible also, if you think about the way that you develop the innovation. There's innovation that sticks, and there's innovation that just doesn't become a reality for anybody. What you did is you, you brought them together. You brought innovation with actual, actual tools and products that stick, right? And you think, just real quickly, and it's totally different, you just look at this real quickly, look at the ones that actually go up here: Robotics go up, Nanotechnology, Cognitive Systems. But the other, and those are real, they're actual accelerators. And the other ones are disruptive scenarios. They don't actually happen as much, right? So the reason why they don't happen, right, they don't happen because they're not related. They don't, they're not enabling, right? What you did was you made it enabled for a product. So do you, when you create these, when you create teams, and they get it done, do you say to them, "I want you to create something that can actually power up what we do; give us more power; enable us to, to become different"? How do you set it up? How do you set up that sort of a team facilitator?

I think the first thing that we believe is that this all revolves around culture. So number one, if you recruit, retain, and invest in the most diverse, most knowledgeable, best people, and you believe that they will assist you in driving the business, that's one core, and that's one bookend that we say over here. The other bookend is how do you create a culture where people are really obsessed? Where they care about disruptive innovation, where they care about the user, where they care about the brand, where they believe candid dialogue about what's going to work, what's not going to work will assist, where agility and a sense of urgency is a requirement, where the perspective is you have to have one team together, them all working together to be able to pull this off will lead to the success. It's not individual performance, it's how does this team deliver on what that that objective is and a philosophy that, that, you know, you look at that Blockbuster versus Netflix. When Netflix started, they said they were going to be an entertainment company. Blockbuster believed that they were good. They were still a brick-and-mortar retail. And, you know, that change in that mindset is very, very different. In our viewpoint, that we're never ending, we never settle, is a big part of that. When we look at those teams, our teams, if it's an accessory team looking at how we're going to solve a problem with the latest in technology on a Sawzall blade to be able to, uh, help that plumber do their job more efficiently with our nitrous blade out there. Or if it's a Packout system where our, our concept teams and our development teams and our new product development people and, and our marketing people and our engineers are all on a job site, so they're seeing when that construction worker, that GC, that mechanical contractor, that remodeler, when they're taking their, their current rolling device and they're rolling it over rocks, that the wheels are breaking, that parts are falling off, they, they're using different kinds of rope or pieces to be able to hold them together. And what do they do to be able to come up with an approach to be able to change the game there that will allow them to be more productive and efficient? And that's what Packout— that's what led to Packout, which is the most advanced, best received storage system in the world today. And that's what we do in our M12 platform or new, new areas like hydraulics, where if you think about somebody doing a data center, very complex work, a Facebook data center, how do you have the most intense technology that's going to allow you to understand that every single bolt that you're driving is to the specifications that is required. And that's what One-Key allows us to do, as well as track where that device is on the job. And those are the kind of people we're fortunate to have. And it's, it's that relentless kind of people and culture which have allowed us to continue to grow and flourish year after year after year. And really, most importantly, growth is the outcome. It's really solving the user needs. It's really being a partner with those users and our distribution partners to be able to make, make it happen.

It's just great. And many people create a product out of the box. They don't check with the customer to see if it's even needed, right? And or create an experience that is specific to what the customer wants. You do the opposite. You're going straight to the customer. You're creating innovations with them in mind and also your own innovations in mind. And so it very much sounds like an Apple, more of an Apple approach, where it's, it's, and beyond. It's, it's because, because it's one thing Apple will help, you know, graphic designers, will help people to do more podcasts, whatever it may be. And at the same time, and we have an emotional connection to that brand, right? So you've created that emotional connection by deeply understanding the values and behaviors and needs and outcomes of your customers, as well as your employees.

And our, our team, to your point, it's, it's not only that product side and the user, but it's also our technology teams understanding how we partner with the best electronic providers in the globe to understand how we can work with them for the next generation of technology to enable what we are doing today. Same with the battery side, same with the motor side, same with sensors. And how do we do all that also from a material side? How do you understand where the material changes are going to happen? And you talk about the accelerators, oh my God, the changes that are going to happen over the next 5 years are consistently there. And, you know, that's a big piece of it. The people and the culture and the fact that we've got people that have been together for 13, 14 years that know each other, that can have candid dialogue to be able to talk, you know, people in our sales organization like Chad Hansen and Jamie Christian and Darrell Hendricks and Bill Hughes and, and more there, you know, our business unit leaders like Shane Moll and Rick Ray and Tim Albrecht and Scott Griswold and our CFO, Ty Stavisky, who's not your typical bean counter CFO, by the way. He's an enabler to be able to drive innovation inside the company and our supply chain leaders and James Wamsley, our manufacturing leader, you know, we've been together, this team, for 13+ years. And our TTI parent, Joe Gallai and, and Horst Putwell and Stefan Putwell, have enabled this team to stay together, to be able to drive what is required, and all of the thousands of people in our manufacturing locations, engineering locations, and the rest to be able to make it happen. But most importantly, all that sounds great without the people in the culture and the fact that those relationships with The user, we all understand, so important.

It sounds like—

it's— if those users don't want the product and don't believe we can help them drive productivity and safety on and off the job, if we don't have the relationships with the National Electrical Contractors Association and David Long and MCA with Tim Brink and all the other relationships we have throughout PHC and you name it across the board. And then our distribution partners, which go from, you know, the key decision makers at The Home Depot to the other key distribution partners around the US, which are local and national along the way to allow us to be able to accomplish that.

It's a huge network, isn't it? And you think about the economics of that network. And relational economics, it's incredible because everybody wins in these scenarios. And not just financially, culturally, emotionally, Maslow's hierarchy of needs, it's fully connected. And some of the ways that people look toward the future too. And I think there's going to be a lot of people who are interested in your tools, really Milokou tools, who are watching this. So I kind of want to shift to something that's interesting. You know, when people look at Apple and they want to find augmented reality glasses or virtual reality glasses, they want to see who's going to do it first. They look at the relationships and the ecosystem and they say, oh, Apple is partnering with this new glass company, or, and they're partnering with this new eyeglasses company, uh-oh, we know what they're doing, or what, or great, we know what they're doing. And they're transparent about it, so people begin to do pre— they do pre-marketing, right? And the teams become begin to do that. Do you have things down the pike that you're innovating right now where you're enabling new partnerships that you want to share with people? Anything you want to share with people?

All I can say on that front is that we have new categories that we are changing right now. So we've just launched a program called MX Fuel, which you think about anything that's gas or electric. That is on a job site today, we believe will be powered by cordless. Outdoor power equipment, we've, we believe that our core trades want to have that product, as well as people that are passionate about products as well off the job site, as well as maintenance people on a job site, and then eventually landscapers as we change the game of that. In terms of who we partner with, I have to tell you, that's our secret. That's our secret sauce.

I knew that was gonna come up.

Our secret sauce in terms of we viewed the relationship and the partnership on the technology front and who we partner with to be able to drive that is from universities to different startup companies to clearly technology companies and electronics. We believe that's a key piece of why we're so successful today.

Hey Steve, if you were to say, you know, what makes the perfect partner for you, you know, their kind of behaviors, their attributes, their values, their culture, sounds like it's very much entrepreneurial, but how would one partner with you or come to you and say, I want to be part of your team? You know, what do they, how do they need to think? How do they need to be? What should they What should they be thinking?

You know, it's kind of like our people, Louis. You know, our viewpoint on people is that if you're the smartest, brightest, most intelligent, advanced individual in the world, but you don't fit our culture, you're not going to fit the company. It's got to be that blend. And we have some partners. We have a large electronic component supplier out of Europe, a few of them out of Europe, but we have one out of Europe who's really special because from the CEO level, down, they will bring an entire team of people with us to brainstorm on how we drive technology to really solve the user's needs for the next 5 years. And what is that going to look like? And that's the kind of partner we're looking for. We're not, we're not looking for transactions. And same with our distribution partners. Our, you know, the, the people that we partner with you know, sit down with us and talk about what we're going to do when 24 and 36 and 48 months down the road. You know, a lot of people ask us why we partnered with The Home Depot and not, not companies like Lowe's or Menards or Amazon.com, and it's because that partnership from the top down led us to be able to do that. And same thing in the with our other customer bases like Grainger and Fastenal and MSC and those kind of players and hardware distributors like Do It Best and Ace Hardware and Orgill Brothers and others like that. And then same in our electrical place where you got large global players like Sonopower that are really strong to be able to do that, as well as the regional players that have taken that. Those partnerships with people like Ram Tool or Colony Hardware or Fasteners, or, you know, we go on and on and on, Acme Tool, you know, they allow us to be able to get where we need to be, not only today, but in the future. And listening to be able to do that is absolutely essential.

You know, and I do hear a lot of what you say is it's a team as well. It's not just the relationships on the outside, it's team. It's your team, it's your culture, it's the ability for them to follow through, get it done, and enable their innovation for the future. How do you keep that going? Is it you that keeps it going, or it's just the sheer kind of momentum of the team itself? Because there's, there's a lot of various thoughts about that. Does it take the facilitation consistently? Does it take some sort of way of measuring? Tell me more about your thoughts.

Well, we, we clearly believe that it all starts with culture, right? So if you join the company, I I'm later on this afternoon, I'm doing what we call a 5-20-20, which was our big mantra. So new people that have joined the company, 20 of those people, and I'll be doing a session on where we came from, what's made us successful, what do we not want to be, what companies do we not want to be like, the Blockbusters, the Nokias, you know, it goes on and on from that standpoint, and what companies do we want to be like that. You know, the Apples, the Lululemons, the Coca-Colas even. And what companies can we learn from that thought they were going to be great, like the Under Armors that completely fell apart after they were, they were having that kind of success? And then how does our culture fit and what's our culture about? And that communication is what all of our leaders, all those people that named earlier, bring to the entire company. And then Our challenge today is how do we keep making things smaller? Because we have so many different business segments today versus when 13 years ago, we had 207 people in Brookfield, Wisconsin, that was it. Today we have in our R&D headquarters, way over 2,000, significantly more than 2,000, opening up facilities in the US and Mississippi and Wisconsin and and the, and the rest of the globe to be able to get there. So those teams know they have to be empowered, they have to be accountable, they have to be responsible, and it all has to tie back to culture and driving what we need for our user at the end. Because doing great stuff for the sake of Austria doesn't really matter if it doesn't hit our users and our distribution partners, then it, it's not success.

It's awesome, Steve. Steve Richman on Louis Carter Show. It's awesome to have you on. It's just, it's an epitome of a leader. And Steve is epitome of a leader and CEO who has a great vision. He's able to enable it through collaboration, through shared values, through, through respect for customers, himself, others, and really drive those kinds of outcomes for, for everyone in his own, in his ecosystem. Steve, it's wonderful to have you on, and it's a pleasure to have you as one of our nation's greatest CEOs. Thank you so much.

Thank you, Louis Carter. And one last comment is this all ties back to leaders. And I'm just fortunate every day that I have the opportunity to be surrounded by, to be with a team of leaders that are the best of the best. So this is not me. This is the leaders that we have cross-functionally throughout our business. That have this relentless drive, understand the culture, have driven it from the beginning to the success, and new people that are joining the company every single day with the opportunity to have that kind of leadership in the future and driving technology, drive the focus on the user and make it successful. And that's something I've never seen in my career like I have in the past 13 years here. And I've been around the block a couple of times now. So This is a special time and a special group of people to be with and fight with every single day and really attack those pain points of our users and our distribution partners on a consistent basis. So thanks, Louis. Thanks for having me. It was a fun time talking with you and I enjoyed it immensely.

I did too, Steve. It's great seeing you and we'll be able— we'll talk soon. Thank you so much again.

Take care. Thank you. Bye-bye.