Trash Talk — Jim Fish, CEO Waste Management
The Industrialist’s Dilemma — February 26, 2021
As we prepared for our session with Jim Fix, CEO of Waste Management (WM), Maxwell Wessel and I were debating the angle we should take for the session. To me it was obvious: We were going to talk about the transformation of an industrial giant. With revenues of $15 billion, a healthy EBITDA and a market capitalization approaching $50 billion, this seemed like a company that was made for the title of our course. We’d discuss how data would improve their business, how technological transformation would help make landfills more efficient, etc.
Max, in his indomitable manner, looked across at me, and said, “No, Rob. This class session will be about the climate.”
Do you ever work with someone, and you really hate it because they are always right? And when they are really nice, too, it makes it so much worse.
A Conglomerate of Operational Excellence
As we dug into the discussion of WM’s business, we found ourselves focusing on the notion that WM is a vertically oriented organization around components that, in and of themselves, could be viable independent companies. WM manages waste pickup from consumers and businesses, operates a fleet of vehicles that are operationally complex in nature, navigates government relationships across numerous municipalities and states, and owns and runs over 245 landfills. In many ways, we could think about at WM as a vertically integrated distribution business — a channel by which waste moves through society as they string together all of the components needed to take care of their customers’ needs.
One thing that makes the WM model work is the synergies that exist between the components of the business. As an example, due to the pandemic the company’s waste has shifted to a higher percentage of consumer versus business sources. Even with a staggering change in the volume from the company’s initial source of input material, the value chain and parts of the company’s operations provide clear synergies along the way. Being proficient at picking up waste, operating fleets of trucks, and responsibly disposing of the inputs reduces friction in the operations of the business. Of all the companies we have had so far in our course, WM’s operational excellence may stand out as the most thoroughly integrated and managed with a tremendous number of interwoven touch points in their ecosystem.
And even as technological change arises around autonomous vehicles, more efficient disposal of waste, and in how the increased use of data will change parts of their business, ultimately the smooth operational aspects of what the company does seems to be what makes the company such a compelling organization.
Trash Is a Dirty Business
When we shifted our conversation to the threats to WM’s business, we went over the “usual suspects” of possibilities: continued improvements to reduce waste via new packaging, regulation changes that could squeeze profitability, international tensions that impact the flow of goods and materials, etc.
When we explored the set of companies that could enter the market and might threaten WM, we kept coming back to those organizations that are great at operations and logistics: FedEx, UPS, and even Amazon. And while those companies have the potential to enter WM’s market, and could probably find some of the same distribution/operational linkages that WM has, no one was convinced that the waste industry would be seen as a close adjacency to where those potential competitors compete today.
The complex and “unsexy” nature of WM’s business is part of what makes it a compelling business — waste as an industry and topic creates its own barrier to entry which acts as a natural moat prohibiting others to enter. As Fish pointed out, he is often told by his peers that WM is a great business that so few people understand why it is so great — that they are “punching below their weight class” for people to internalize what a compelling business it is. WM provides a service that most in society take for granted, that we as a species have depended on since early Roman times, and is critical to how society functions. WM is a hard business to run well and it keeps competitors at a distance because of the nature of what it does.
Which, to me, actually sounds like a very sexy business.
Max Was Right
We asked the students how many of them would want Fish’s job or even to work at WM when they graduate, and we received some surprising comments. Perhaps most interestingly was that for those of our students who were interested in joining an organization like WM, the passion with how they discussed climate issues and climate change kept coming to the forefront. While it is not a surprise that a class of students in their late 20s and early 30s care deeply about the environment, it was the first time I heard a fierce desire to apply one’s skills and talents to trash in the broader context of keeping the planet clean.
When I wrote my first case on Waste Management in 2012, the discussion revolved around technological innovation in areas such as Waste to Fuel and the potential for transformation at a technical level. But what struck us in our session was that the importance of this business in the context of climate change seemed as or more critical and energizing with the students than previous discussions around electric vehicles and renewable energy in prior sessions.
Now, if our students end up developing as much passion around trash as Teslas, we might find that the younger generation can really have a substantive impact on the environment. Wouldn’t that be cool?
It Was Really About Toys, Not the Climate…
Just sayin….
