The Durability of Making — Jim Loree, Stanley Black & Decker
The Industrialist’s Dilemma — February 18, 2022
As we approach the end of our journey in The Industrialist’s Dilemma, Maxwell Wessel and I were fortunate to host Jim Loree, CEO of Stanley Black & Decker, to our classroom last week. With a market capitalization of $26 billion, revenues greater than $15 billion, EBITDA over $2 billion, more than 60,000 employees, and a history that can be traced back almost 180 years, SB&D is an almost archetypal example of a company confronting changes in a world that increasingly blends digital and physical. As Jim walked us through the activities and challenges he and his team are confronting, we saw a company simultaneously grappling with the dichotomy of inevitable change juxtaposed with the consistency that has defined the organization’s existence for almost 18 decades.
Making Change Explicit
In one part of the class, Loree talked about how the company is redefining itself from a diversified industrial to a more focused tools business. It was interesting to hear him explain why he thought this transition was better for the company in the long-run as it would create a more concentrated and linked set of goods, but that at the same time it might not be rewarded in the near-term by the financial community.
Loree’s analysis provided insight into the ability for companies to stay committed to long-term change while making transitions that in the present might come with near-term turbulence (e.g. in the company’s relations to Wall Street). When we think back to Clay Christensen’s writings on The Innovator’s Dilemma, we understand how the pressures that companies face to continue to move upmarket as they look for higher margin products creates opportunities for disruptors to come in from underneath. Loree and his team are explicitly going against this force in order to set themselves up for longer-term success given the many changing parts of their ecosystem — from their channels, to their supply chains, to the what and the how of these products are sold and manufactured. And Loree’s willingness to be clear to employees, partners and investors is a critical requirement to evolve vs. transform a company so that the inevitable challenges that come with moving an organization in a new direction do not derail the efforts.
This need to be explicit about change — about saying clearly where an organization needs to head — is critical for incumbents when dealing with a dynamically changing industry. What Loree exemplified was a clarity of thought and a commitment to move towards the disruption without being weighed down by the success of the past. And he did so with a calm, clear and transparent style that showed he understands both the opportunities and the challenges confronting his organization.
A Commitment to Lifelong Learning
As Loree was talking about the changes going on inside of his company he made a statement about the importance of lifelong learning. It was almost said as a given as a throw-away line— an experienced leader at the front of the room encouraging younger students to stay committed to educating themselves throughout their careers.
As I look back on the last seven years of teaching this course, one thing that strikes me is how the disruptors we studied broadly seemed to have a harder time accepting, or even an interest in, what they could learn from the past. It was as if they believe that once they are successful they can’t imagine that they would be the target of the next generation’s Schumpeterian creative destruction.
One thing we know — the speed of change in society is not slowing down. As communication and collaboration tools increase in their use and capabilities, we can and should expect that the impact and pace of technological change will only increase in the future. Loree’s advice, which was likely not truly internalized by our students, is that the need for one to stay committed to educating one’s self, to remain dedicated to learning about new technologies, to studying patterns in the past — never stops in one’s career. His wisdom applied not only to himself and his team, but also to the young, bright minds sitting before us — someday they will be the experienced leader in front of the room, and they, too, will have to contend with the disruption coming from outside forces. And only by staying committed to learning new things can anyone stay relevant and effective in an ever-changing world.
The Durability of Making
Across seven years of teaching this course, Maxwell Wessel and I have had numerous debates and discussions about strategies, key lessons and leadership after our sessions. But our debrief this time took an interesting turn when we both landed on our foundational belief that the making of physical objects will not be diminished even as the world is increasingly digitized, and that even though how things are made will change, the criticality of making will not decrease.
This forced us down a path of trying to understand our role, and Stanford’s role, in educating others on the impact of a university and a culture that (some have argued) has grown increasingly out of touch with how the other 7.5 billion people on the planet live. At one point in class we played a video that showed both the people that SB&D serves and also employs. Truth be told, the activities and behaviors in that video do not look like our students, nor like their planned careers. Our students won’t have jobs like those on the screen — they won’t be familiar with the intricacies of making the tools that SB&D sells, and they won’t live in communities where making things is a fundamental part of the ethos.
Our students are, not surprisingly, largely drawn into industries with strong tailwinds such as software-based businesses or finance. But if we learned anything from Loree and his team it was to appreciate the durability and longevity of making things. Our physical world is not going away.
And perhaps the opportunity is to engage and embrace these sectors — and even work in them — to drive continued change and improvements for all of us.
