From awkward analyst to CEO with Kevin Hillstrom

Hi, everybody.

I'm Ramit Sethi from I Will Teach youh to Be Rich. And today, thrilled to have Kevin Hillstrom. He's president of Mind that Data. He's worked at companies you've heard of, Land's End, Eddie Bauer, Nordstrom, and he taught me a ton of what I know about business. He totally challenged my views on loyalty, on customer behavior, on all kinds of different things. And today we're going to dig into those.

My name is Kevin Hillstrom, and I am president of Mind that Data, where I help CEOs understand how customers behave.

Kevin, welcome. Very excited to talk to you. I think we've been Twitter friends for many years, and I've learned a ton about business from your blog, your tweets, your book. And I really want to understand more about your career and some of the things you talk about along your career in retail. So I want to start taking us back to 1992. You're sitting at Land's End, and you overhear your boss saying that you don't have. You're a good analyst, but you have no business or communication skills. What's going on in this room?

So I am talking to a co worker. I'm gossiping about something ridiculous and pointless, probably about somebody parking in spot B24, something just ridiculous. And there's a partition, and behind the partition, my boss and my boss's boss. So my manager and my director are having a discussion, and they're talking about a meeting that just came out of where they talked to the CEO. And the CEO had a business need that he needed to have explained. And my boss was supporting me as the person who could help explain that situation to the CEO. And the CEO said, well, Kevin is a nice person and he's wonderful, but he can't communicate to save his life, and he has no business skills. And what we need to do is we need to hire somebody with an MBA and the business skills to take our business forward. And Kevin's not the person to do that.

So how did you react when you heard that?

I was grumpy. I mean, I was really not happy. Yeah. And for me, it woke me up, really, because I thought I was doing a good job, and I was doing a good job on all the math, you know, But I was not doing anything to really to help the business.

So at that time, you were an analyst. Give us a sense of what that means for the business you were working in.

So in my case, I was called a statistical analyst. So my job is to run a bunch of Geeky mathematical equations that decide who should receive a catalog or not receive a catalog. So ultimately, I'm deciding who gets mailed catalogs, and I'm responsible for generating a lot of business. But my focus is really on all the geeky math and not on what's good for the business or not good for the business.

So this is interesting. So you're doing good analyses, you're presenting convincing proposals, but you realize at that moment that that's actually just a small part of the job.

Very small part.

All right, so let's fast forward. You're still at Land's End, and you go in to a meeting with a bunch of people, including the CEO, your director. And I remember you talking about this. You made a proposal that would generate more profit for the company, and even the CEO backed you. But it didn't quite turn out the way you thought it would. I wonder if you can take us through that.

So when I went through the meet, or when I heard my boss talking about what I was lacking, started invest in my career a lot more. And one of the things I did is I set up this big test. So we mailed a lot of catalogs, hundreds of million, maybe more than 100 million catalogs a year. And I tested different combinations of mailings to understand what the most profitable strategy was for the business.

What's an example of a test you do?

So an example would be we would had a business for, you know, dress men's dress, shirts, suits, slacks, dress shoes, that kind of thing. So for a full year, I would take a group of customers and not mail them any of that merchandise at all. And then I would see how those customers responded to another group who received catalogs with that merchandise.

The first thought is, of course, the people who get more catalogs are going to buy more.

That's correct. So the customers who got more catalogs were going to buy more, but they didn't buy enough to offset the cost of that mailing. And so I set up this test that was really complicated. I had all these different combinations. Kids, mailings, yes or no. Women's mailings, yes or no. And I essentially figured out the right, the optimal way to run the business. And I knew there was a meeting with a large executive group on a Thursday. So I purposely set up a meeting with my department to go over the findings on a Tuesday. And my objective was I wanted to communicate with what I had learned and have my manager, my director, see that and then have them invite me to this meeting with all these executives.

Okay, you're laying the groundwork.

So I'm laying the groundwork, all right? And so I share all my findings and they like it, and so they support me. And so they invite me into this room with all the executives in the company. And I was probably a bit naive. I did not. I was not ready for all the office politics and the dynamics between people. I was not prepared for the fact that certain executives didn't get along with the CEO and the CEO didn't get along with other individuals. So I started sharing my findings. And I am, because I'm a mathematical person, I'm trusting what I'm saying, and I'm really not paying attention to the room. And I start to get questions about is the methodology fair? I think the questions are generally fair. They're trying to understand if what I'm doing is reasonable or not. And we get about. It's a two hour meeting. At about one hour into the meeting, I all of a sudden realize that half of the room doesn't like me. And I don't understand why. I'm too naive to understand why they're not on my side. But I start to see they're not on my side.

How do you know this?

You can see it in body language. So you see a lot of the heads going like this. You know, I don't agree with this. I would share, you know, here's the math. I put up a slide up on the, the wall. It says, look at this, your business is less profitable if you do what I'm suggesting. You're more profitable. You know, someone say, I don't care about profit? Well, no, we all have incentives. You know, we get paid a bonus if we're more profitable.

Okay?

And so instead of listening to why somebody's not happy, I'm like, I have to prove to you I'm right.

Look at my math. It's so simple. It's just math.

And it was very simple.

Okay?

Yeah. So I'm focusing on the math and I can literally see the room starting to split. And there's one camp that is all about profit, and there's another camp which is let me do my job my way. And I can see the room splitting. I can see the CEO going over here. I can see my boss and my boss's boss over here. And so I'm saying to myself, I'm right. All my management lines up with me. Instead of being on the side of the customer or on the side of just knowledge, I. I chose to be on the side of these people. And so as the room is splitting in half, I go over here, and the minute I go over here, this side of the room now tunes me out. And that's gonna cause me a problem ultimately.

So what happens?

So what happens is we leave the meeting and I feel like I've won.

Yeah.

So I've won a short term battle. And about 30 days later, the CEO is fired, and a person from this camp over here is now running the company. And within seven days, I no longer have a job.

You're out.

They took me off the org chart, so they didn't fire me, but they didn't say I had a job either. And so they left me just hanging. And then within a month, I had an apartment with maybe eight people. I lost all eight of my people. They were moved to other groups, and I was pretty much isolated and set on my own.

So basically, this is Game of Thrones, Lands End style. But there really is the deepest of power dynamics happening, but it's shrouded in a conference room, people wearing nice clothes. Nobody's being killed, but it's very.

Careers are being killed.

Careers are being killed. And that ultimately ended up leading to your transition to Seattle.

Yes.

And into other businesses like Nordstrom and Eddie Bauer.

Wow.

Okay, so this is amazing. I want to talk today about the power dynamics. I want to talk about the communication styles. I want to talk about the fact that your analysis may have been right, but you ultimately lost the war and what happened with that, because I think so many of us might be technically right, but it's irrelevant.

Right.

All right, so when you originally heard that partition comment with the boss saying, kevin doesn't have any business skills, did you do anything to actually improve the business and communication skills that you'd gotten?

There's a couple things I did. One of the things I did is I paid attention to the people who were successful, and I looked to see what were they doing that caused them to get attention. Okay. My boss's boss, one of the two people who were in this discussion, she was always focusing on how profitable the business was. And what I would see is she would get herself invited to meetings that she had no reason being in because she always had facts and information that would help other people be more successful.

I see.

And so I started to see that what she was talking about made a lot of sense, that if she would literally micromanage the business down to the tenth of a penny, and she would, by doing that, she aligned herself with the finance team. So the finance team would say she knows what she's doing. And she was a former accountant, so she was able to. You could see how, from a political standpoint, she was aligning herself with certain people that thought like she did and that gave her more clout.

Got it.

So I started to say, well, I don't have to necessarily model my behavior after her, but I have to do things that are similar to what she's doing and align it with how I like to view the world.

Okay, so you started noticing what successful people are doing, and then what else did you notice once you heard the boss say, you don't have those skills?

I acknowledged pretty quick that I was a poor communicator and that I had no ability to convince anybody to do anything. So eventually I got promoted and became a manager. And the CEO who made the negative comment a few years earlier said that he wanted me to go to Dale Carnegie sales training.

Cool.

And at first I thought that was just the dumbest thing I've ever heard. It's just ridiculous that I would have to go and sit with a bunch of salespeople to learn how to sell things.

Why? Because the numbers are the numbers and they speak for themselves.

I had a bias that the data should speak for itself and that I don't need to be, like, a vacuum cleaner salesperson. You know, to me, that seemed kind of schmucky and just not who I was. But it turned out it was exactly who I was. So when I went to this training, and for eight weeks, they teach you how to get an executive to say yes. Okay, that became invaluable. So one of the techniques they used was you're supposed to get an executive to say yes to your argument three times.

Okay.

So you start with the argument very small, and you ask a simple question, and the executive says yes. Then you ask a more complicated, complicated question, and you ask them in a leading manner so that the answers all connect at the end of the third yes, you then do your punchline. And if the executive says no, you now have three data points of yeses that you go back to and say, you said you agreed with this. You agreed with this. You agree with this. Why don't you agree with my conclusion? When you agree with every step leading up to the conclusion.