Rick McDonald from Clorox - The $7B Cyber Attack That Exposed Real Leadership

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We had a cyber attack, unfortunately, that started in August of twenty twenty three, and we ran the company on paper for five months and couldn't pay our suppliers for a good portion of that.
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That's when you learn about how important your relationships are.
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You have to be ten thousand times more careful when you're thinking about payments to suppliers.
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I mean But when you're down for literally weeks and then months, it's it's a whole different story.
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And so you were at Clorox for almost 33 years.
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I'm I'm kind of curious, like, how did you how did you make the decision that okay, now is the right time for me to actually step away from the business, pass it to another generation, and focus on the other things in your world.
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Why at that moment?
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Why not later?
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Why not earlier, you know?
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Yeah, that's a great question.
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You know, I um I had in my mind that I wanted to go at least four years in the role.
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I think the company would have probably preferred if I'd gone, you know, five or six and through the SAP transition.
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But, you know, a number of things that the company changed, my role changed a little bit.
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There was a new operating model.
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Uh I was very familiar with how that operating model worked.
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And uh I just thought it was probably time for somebody else to uh, you know, to give it a run and put their energy and their passion and their expertise against it.
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And I also had other things that I was interested in doing, and more and more there were itches I wanted to scratch that I just couldn't justify scratching at Clorox, you know, and in conversations like this with uh, you know, great guys like you, getting on stage and keynoting or having a panel conversation.
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I was doing some mentoring, but not as much as I really wanted to.
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And so, you know, stepping away from such a I mean, honestly, and you know this, at these levels, you're on you're on 24-7, pretty much 365.
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And getting to step away from the grind freed up some time for me to do some other things.
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Yeah, I can absolutely imagine.
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I agree, I agree.
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It's a and and and to be honest, in some in many ways, I mean, yes, I'm a I'm a leader of our business, but our business is is smaller.
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It's not Clorox, you know.
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So you're dealing with a lot more fires to put out.
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And it's sort of funny, if you got a thousand employees or something, you know, that means that a once in a one in a hundred percent chance something happens happens every day, you know.
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So there's always something going on.
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I'm kind of curious, like also a little bit about your trajectory within Clorox, because you originally weren't in the supply chain side or procurement side.
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Originally you were, as I understand it, in the manufacturing side of the business.
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So I'm kind of curious how you how you came to that and how you made the transition to supply chain and how much of your world was was really procurement versus the broader supply chain universe.
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Right, right.
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Well, um, I'll I'll take you back a little bit farther.
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So when I graduated from Georgia Tech, I really didn't know what I wanted to do.
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I had worked a few summer jobs, uh, you know, a golf course, a metal fabricating plant, uh, McDonald's for a little bit.
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And I like the the metal fab plant the best because it was like immediate results.
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There was this whole, I didn't know it was called efficiency at the time, but like this sort of this clock inside me ticking around how how much could we do and how fast could we do it?
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And the very best offer that I got was to work for Frito Lake.
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And so I started there, I was in five different manufacturing plants, salty snack manufacturing over 10 years.
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And I just learned so much, and I have so much of my career and leadership trajectory based on what I what I learned at Frito.
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It's just a great incubator for supervisory and leadership skills.
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And about the third or fourth time Clorox called, I pick up the phone because some things were happening at Frito, and I thought, well, now's probably the right time if I'm gonna do something.
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And I like the people I talked with.
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It was a much smaller company at the time, Spencer.
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You know, today I think the company is 7.1 billion.
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At the time, it was 1.7.
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Okay.
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So the inverse.
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And it was only a U.S.
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company, it was very paternalistically run, I think I would use that word.
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You know, just a little bit larger family.
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Plants were not very big, and they were looking for some more supply chain, more business sophistication.
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So they were hiring marketing people from Proctor.
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They were hiring, you know, the free-dolly people of the world to come in on the supply chain side.
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And so I was in manufacturing for the first five years, ran a plant in Los Angeles with three of those.
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And then the very next job I had, one of the biggest responsibilities was procurement for Kingsford Charcoal.
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It was about a$400 million business at the time.
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I think I had$70 or$80 million underspend.
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And that was back when strategic sourcing was kind of gaining a lot of uh a lot of altitude.
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And the company piloted three pilots, one of them I volunteered for.
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It was only a$13 million spend, but we were able to save$4 million for sourcing some new materials.
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And we ended up uh helping the company put a claim on the bag based on this new technology we developed whereby we super saturated sawdust, got that to mix into the charcoal briquette, and created a lot of great smelling smoke for the for the cooking experience.
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So that was kind of my first foray into procurement.
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You know, at the end of things at Clorox,$4 billion of spend under management through my CPO, Ava Cho.
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And, you know, global responsibility, 6,000, 9,000 people in the company ruined the supply chain.
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And procurement became a huge part of my world, especially as we went through COVID and hyperinflation.
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And then, you know, we had a cyber attack, unfortunately, that started in August of 2023.
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And we were on paper for five months and couldn't pay our suppliers for a good portion of that.
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And they wow, you know, that's that's when you learn about how important your relationships are, how important how important the way we treated your suppliers over time.
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They stuck right with us.
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They kept producing, they kept shipping, we were able to keep producing, and eventually we worked ourselves out of the, you know, out of the cyber event.
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That's amazing.
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I mean, that's a remarkable situation.
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I mean, I'm kind of curious, like, how did those conversations go?
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Like, you know, how did you how did they notify you that, you know, because I'm sure that somebody found out first, you know, but but how did they notify you?
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How did you then think through like it's sort of like uh, you know, war room this situation?
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And then how did you approach the suppliers?
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I mean, did you have the category managers do it, or did you step in as a leader and say, hey, look, like this is a real pain, this can be a real painful period for them.
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Like I want to showface myself as the executive and do sort of exec to exec conversations.
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I just love to hear how that how that process went.
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You're just kind of shocked, and uh, and then your mind immediately goes to, okay, if I have no systems access, what are we going to do?
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We have just changed operating models and moved some manufacturing and planning responsibilities over to general managers.
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And you know, GMs are really good at a lot of things, but most of them didn't grow up as supply chain people.
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And so we agreed that we would revert all those responsibilities and capabilities back to me and my team for all decision making.
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We needed one place to make decisions, not 12, 12 BUs at the time.
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And, you know, so we immediately dug in on our business continuity plans.
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I said a couple things right away.
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I said, first of all, because there was a there was a push to close down our factories and not run them because we didn't have any systems.
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I said, absolutely not.
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We're gonna run our plants, we're gonna maintain inventory manually.
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And because as soon as we are able to ship product, we couldn't ship for the first couple of days.
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We hadn't had that, we didn't have that figured out.
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As soon as we're able to ship product, there's gonna be some latency to the demand.
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And we're gonna wish we'd run as hard as we could run during that time period.
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And I said, if you need to, if you're running manufacturing plants and you need to go get outside warehousing, go do that.
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And so we did some of that.
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We kept our plants running, we kept building inventory.
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That turned out to be a really good decision because the trend was still there.
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We still had to fill some.
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Yeah, we just worked our way through our BCPs.
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We found out quickly there were a lot of them that were really well written and really well done.
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There were some of them that weren't necessarily as good as they could have been, and so we had to just adapt and adjust on the fly.
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Sometimes that happens.
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We had great response from our retail customers.
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Every single one of them wanted to know what they could do to help.
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Like day after day, certainly week after week, it helped kind of plan through how we could get them as much product as we could get them as soon as we could get it to them.
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Suppliers were great.
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You know, you asked the question, how'd those communications go?
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They were surprisingly smooth.
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I think in almost every case, it was handled somewhere in our procurement group.
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You know, I think at one point in time we sent a letter.
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I sent a uh a letter to all of our key suppliers, strategic suppliers.
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And I said, look, here's what's happening.
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As much as, you know, we could tell them, because we didn't know everything at the time, but as much as we could tell them, and uh we asked them to hang in there with us and trust us.
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And uh, and and you know, uh 100% they did that.
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They kept us running.
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So there's kind of a mutual benefit there.
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You know, even places where supply was constrained, they they still maintained our you know, our access to that supply.
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So it was really a fabulous, fabulous show of support from the supplier community and also the retailer community.
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That's great.
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I mean, I'm kind of curious, like how, you know, in in a in a business of physical goods, things like payment terms are so hotly contested because there's cash flow conversion, there's you're taking things on your balance sheet, you're physically handling something.
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How were you able to handle the conversations about the payments and you know how long were suppliers not getting paid for?
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You know, was this like uh because I have my own story that I'm happy to share, but I want to hear how it was for you guys.
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Yeah.
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I think in some cases we were a hundred days in without making a payment.
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Okay.
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You know, some some of our suppliers were absolutely cash businesses.
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And, you know, I'm thinking specifically about the charcoal industry and what we call hog fuel, but it's basically wood scrap and sawdust and that sort of thing.
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That was a cash business.
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And if you're not able to pay, they they can't afford to deliver to you for free.
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And so that material is going to go someplace else.
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So, you know, there were some suppliers that we knew are uh more tied to a cash cycle where you know we found a way with limited resources to you know cut some checks and move some money.
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But for the vast majority of our other suppliers, we asked them to hold.
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And, you know, again, just I I would just say in terms of payment terms, there was just a lot of grace given between our real retail customers, you know, the Walmart, Targets, Home Depot, Costco's of the World, Krog Republics, also with our supplier community, just a lot of grace given.
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And, you know, I take it back to this relationship that we built over time, the trust we had in each other, the belief we had in each other.
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And uh, you know, we we just went on like that.
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And it was, I don't know that I'd ever anticipated what it would be like if we got in that situation.
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Yeah, no, it makes a ton of sense.
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It's funny because I when I was at Tesla, we were ramping the Model Three.
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We did not have uh issue with uh with a uh a hack or a system outage, but we our ramp was slower than we forecast it in EDI and an automotive, you know, you have a big penalty for suppliers if they don't ship.
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We didn't have a penalty if we reduced our EDI, like, hey, we're gonna be at 5,000 vehicles per week in three months.
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Surprise, it's actually 2,000 vehicles per week.
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And so the suppliers, they they'd staffed up, assuming that that was credible demand and they had a bunch of temp labor that they had brought in.
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And so then it became a balancing act of how can we do like release the valve strategically with the right suppliers, you know, because some suppliers were like, hey, if we don't get, you know, please accept more parts than the new EDI says because that's just what we need to survive.
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And if that was credible, then what we would do is we'd accept them, but then we would run out of inventory space.
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And so we had at one point during the Model 3 ramp tractor trailers, you know, like truck trailers just full of parts that we couldn't put into our warehouse that were just sitting in the Tesla parking lot where employees usually parked.
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So there's some crazy stories about the about the early days in Tesla.
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You mentioned something called a BCP, and if I'm not mistaken, that's a business continuity plan.
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Is that correct?
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Yeah, that's one of our 10,000 supply chain well business acronyms.
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Yes, business continuity plans.
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And you know, the thing about that is we we were diligent about writing down the workflows and writing down the processes and actually practiced in some cases what would happen if we ever had to implement them.
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The tricky part, and you know, when I talk to people about their cyber attack, because I think it is a case of when it's going to occur, not if it will occur, nobody contemplates having to activate all of their BCPs at the same time.
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And that's essentially what we did.
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Nor do they contemplate it happening for an extended time period.
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You know, most of us think, well, you know, we're we'll be down for six hours, we'll be down for 12 hours, we'll be down for a day, day and a half, and that's endurable in a lot of different ways.
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But when you're down for literally weeks and then months, it's a whole, whole different story.
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And so that's the that's the practice regimen that I think a lot of us have to go through to make sure we are ready when that occurs.
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Yeah.
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And what's typically inside of a business continuity plan and how I guess how like where are they stored?
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How much work goes into them?
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How do you validate that they're right in advance?
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And then how quickly do they how much shelf decay is there?
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Like, is a business continuity plan from you know 10 years ago still valid when you dust it off and say, Oh, shoot, we have to put this into action?
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Yeah, um, last question first, it depends.
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If your customers have changed requirements, then obviously some of your OTC business continuity plans are going to change.
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If you or your key suppliers, all the way from tier one, tier two, tier three on the procurement side, right on through to your transportation partners, and somebody has changed technology in a significant manner.
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You know, that part of the business plan has to be rewritten and rethought.
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Inside of those business plans is a it's basically a catalog of the workflows for that process.
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And uh, you know, so it's everything from the first step to the last step and and all in between written up by your subject matter experts and others who are part of that process.
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And, you know, when you write them and and then practice them, the practice actually tells you whether what you wrote has a good chance of working if you have to put the thing into play.
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But the real trick is making sure that the subject matter experts are right in the middle of the early organizing and documentation of those workloads, how things work, who does what to who, when do they do them, what's the timing.
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Because in many cases, you're trying to replace digital assets with with human, you know, with human effort.
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It's the decoder ring to translate whatever that process was using your digital capabilities to just pure, you know, pure human activity.
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No, it makes a ton of sense.
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I mean, it is really interesting.
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Uh, you know, it's or it's actually sort of funny.
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There's there was a hack of my uh my university this morning.
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So I got this crazy email from I can actually even share my screen.
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I mean, it's just coming through.
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It's like a we got hacked, and I got sent, you know, three emails.
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And I don't want to show you the email because it's graphic, but like pen hack, you know, it's yeah, the daily Pennsylvanian.
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It was basically a security bridge that got sent to effectively every every alumni.
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And it's just, it's just uh, you know, now it's this is big news.
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I mean, this is as of about an hour ago, I just got all these emails.
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So it's it's really topical.
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It's crazy this stuff is happening.
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And, you know, it's funny because I I think one of our first uh conversations was about Georgia Tech, because our CTO, my co-founder Don, my business partner, is a tech alum as well.
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So there's a lot of connections there.
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Well, you know, the the attacks are getting much more sophisticated, you know, all the way from the personal ones that show up as a text message or something in your inbox to, you know, they they used to be really clunky, bad syntax, poor grammar, misspell words, graphics, it just didn't look quite right.
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But now they've gotten a lot, a lot better, a lot more sophisticated.
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It's uh it's it's a real challenge for individuals and enterprises to keep up.
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Yeah.
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How have you had this issue before where so you know with supplier, you know, because I feel like so somebody tricks me into giving them a hundred dollar gift card.
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You know, that that that happens in our business.
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We've every time a new person joins Light Source without fail, they get an email to their inbox that says, What's your sell?
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This is Spencer.
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And then sometimes people don't check, and then they give them the cell phone, then they get a text on this random number, and it says, Hey, can we can you buy, can you do me a favor, buy some Apple gift cards as a gift for the team?
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And then I had this situation.
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Sometimes people catch it, sometimes people don't, and they've bought the gift cards.
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One time a guy said, Hey, I'm gonna be late to the team meeting.
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I'm I'm running your special favor.
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I was like, I don't like the sound of this.
00:16:28.480 --> 00:16:29.440
I don't remember.
00:16:29.600 --> 00:16:32.480
Like, can you remind me of what favor you're talking about?
00:16:32.720 --> 00:16:34.159
In like the gift cards, right?
00:16:34.240 --> 00:16:36.960
I'm like, I was like, stop what you're doing right now.
00:16:37.120 --> 00:16:38.320
This is totally not me.
00:16:38.480 --> 00:16:47.759
And now we have to tell people, it's like funny, like they onboard and all things in light source, and then I have to also onboard them onto this idea that hey, by the way, I don't need gift cards from anything.
00:16:47.919 --> 00:16:50.720
Like, if I'm gonna need gift cards, I'll do it myself, you know?
00:16:50.879 --> 00:16:51.759
But it is really interesting.
00:16:51.840 --> 00:17:01.039
But a hundred dollar Apple gift card, way different than you know, potentially like a million-dollar transaction as part of a normal buying process from a from a business.
00:17:01.200 --> 00:17:08.400
So, I mean, you know, how do you, you know, you have to be 10,000 times more careful when you're thinking about payments to suppliers.
00:17:08.480 --> 00:17:10.319
I mean, has that ever been an issue that's come up?
00:17:10.480 --> 00:17:19.279
Have you had fraud risks and things like that when suppliers provide or someone pretending to be supplier provides, you know, banking info or or banking info updates?
00:17:19.440 --> 00:17:21.359
You know, has that has that come across your desk?
00:17:21.599 --> 00:17:22.559
Yeah, it it has.
00:17:22.720 --> 00:17:23.200
It has.
00:17:23.359 --> 00:17:25.279
There were a couple that happened fairly recently.
00:17:25.440 --> 00:17:27.440
I think there might be some litigation around a lot of them.
00:17:27.519 --> 00:17:42.720
So I'm not gonna speak in, but you know, I think the trick for all of us is as enterprise leaders, it's the preparation, it's the awareness, it's the sense of urgency that you want to imbue on the members of your team that this is this is real and it's legitimate.
00:17:42.799 --> 00:17:51.839
You know, the the impersonating the CEO or the CFO or some other executive for gift cards is it's it's a well-known ruse, but it it still trips people up.
00:17:52.000 --> 00:18:01.839
And yeah, it might only be a hundred bucks this time or a thousand bucks next time, but that lack of attentiveness to do your accompany cybersecurity by every single member of the company.
00:18:01.920 --> 00:18:03.200
This is not just an IT thing.
00:18:03.279 --> 00:18:21.119
This is anybody who's got an email address, anybody who's got a mobile phone with a company, company number or access to company systems, even in our plants for for we did an audit of our plants looking at all the SCADA systems, you know, the the ways that you can activate or get into any piece of equipment.
00:18:21.359 --> 00:18:24.640
And you know, we found more vulnerabilities than we thought we had.
00:18:24.720 --> 00:18:30.640
Now, none of those ever got activated, but you know, you got to shore up all those things because you never know where the next threat's gonna come from.
00:18:31.279 --> 00:18:32.400
No, it makes a lot of sense.
00:18:32.559 --> 00:18:37.440
My hope is that the thing the scary thing for me is that AI is getting so good with voice recognition.
00:18:37.519 --> 00:18:52.559
I had a friend of mine, she posted on Instagram saying that she had got, she was like, I have to tell people about this because it was like uh it was someone had impersonated her mom's voice calling her from her phone, her mom's phone, saying, like, oh, I you know, I need a payment for something.
00:18:52.640 --> 00:18:57.599
And uh, and she posted on Instagram saying, Hey, look, even I'm like a well-educated, thoughtful person.
00:18:57.759 --> 00:19:00.240
I'd gotten all these trainings as part of my work.
00:19:00.400 --> 00:19:02.480
I was so close to being tricked on this.
00:19:02.559 --> 00:19:03.920
I just need everyone to know.
00:19:04.160 --> 00:19:12.799
And so my hope is that technology, though, can be used not just to create the the false, you know, the nefarious activities, but also be used to catch them too.
00:19:12.880 --> 00:19:15.759
I mean, it's sort of like uh an arms race, right?
00:19:15.839 --> 00:19:19.599
They can get it, can get they can get better at uh cyber attacks.
00:19:19.759 --> 00:19:21.680
Maybe we can get better at cybersecurity.
00:19:21.759 --> 00:19:41.759
And so maybe if we transition over to the world of technology, I you know, one thing that you that's been really interesting to see since you transitioned out of Clorox is uh you've been advising several sort of next generation SaaS and AI companies and you know, a few that you've you know, obviously I love our conversations, a few like CatQ and Pop Capacity and Varisen AI.
00:19:41.920 --> 00:19:46.240
So I'm I'm just kind of curious how's how's it been, you know, advising these kinds of companies?
00:19:46.400 --> 00:19:46.960
Has it been fun?
00:19:47.039 --> 00:19:47.920
What's the experience been?
00:19:48.079 --> 00:19:48.799
What have you learned?
00:19:48.880 --> 00:19:50.400
What do you feel like you've been able to teach?
00:19:50.640 --> 00:19:57.920
My stepdaughter, who's a third year at Alabama, Sunday afternoon, my wife and I get a text from her where she goes, I just woke up from a nap.
00:19:58.160 --> 00:20:00.960
She's in a five-bedroom, multi-story townhome.
00:20:01.119 --> 00:20:06.240
They don't always lock her door, and she said, I just woke up from a nap, and this guy is sitting at the end of my bed.
00:20:06.319 --> 00:20:13.759
And she sent us a picture of her room with a mirror, her dresser, and this guy, and she goes, I think he's homeless.
00:20:13.839 --> 00:20:15.519
I've seen him in the area before.
00:20:15.680 --> 00:20:16.720
What do I do?
00:20:16.960 --> 00:20:20.799
And her mom is freaking out, texting as fast as her thumbs will go.
00:20:20.960 --> 00:20:23.599
Get out of there, get out of there, get out of there, yell for help.
00:20:23.680 --> 00:20:25.279
She came back, nobody's home.
00:20:25.440 --> 00:20:29.279
I'm picking up the phone, getting ready to call Tuscaloosa 911.
00:20:29.440 --> 00:20:32.640
All of a sudden, there's this huge laughing emoji coming back.
00:20:32.720 --> 00:20:35.200
She says, Never mind, this is AI, it's not real.
00:20:35.440 --> 00:20:37.279
You did that to us to your point.
00:20:37.359 --> 00:20:39.440
It was so realistic and lifelike.
00:20:39.759 --> 00:20:41.519
And she just put a few words to it.
00:20:41.680 --> 00:20:43.119
We had no way to verify it.
00:20:43.279 --> 00:20:44.079
We're going crazy.
00:20:44.319 --> 00:20:50.480
Well, to your point about how realistic it is, and maybe the arms race will allow their defenders to catch up.
00:20:50.559 --> 00:20:51.039
I hope so.
00:20:51.200 --> 00:20:52.640
That's an insane story, Rick.
00:20:52.720 --> 00:20:58.160
I mean, that's that's by the way, that's like that would give, you know, that would give me a heart attack.
00:20:58.240 --> 00:20:58.880
You know what I mean?
00:20:58.960 --> 00:21:00.720
Like that would be a that wouldn't be a joke.
00:21:00.799 --> 00:21:01.759
That would be a medical bill.
00:21:01.839 --> 00:21:02.480
You know what I mean?
00:21:02.640 --> 00:21:03.839
Like, oh my goodness.
00:21:04.079 --> 00:21:11.119
Now, I thought where you were going with that story, by the way, was that it was, you know, someone who was trying to scam you guys.
00:21:11.279 --> 00:21:15.200
And that would have been that would have been one, I mean, that you know, that story's crazy.
00:21:15.279 --> 00:21:29.920
One step crazier would have been if they somehow used a photo from you know her Instagram or Facebook and the modified it, the spoofed the number, sent it to you, said, Hey, he needs like, can you, you know, send him a Venmo or Cash App for 100 bucks?
00:21:30.079 --> 00:21:34.319
He says he'll leave, you know, like that would be you know, one step even crazier, you know.
00:21:34.559 --> 00:21:36.960
You you could imagine that's probably happening right now.
00:21:37.039 --> 00:21:39.599
That wasn't the case here, but there was something else.
00:21:39.759 --> 00:21:45.759
You know, you asked the question about the founders and CEOs of supply chain technology companies I'm advising.
00:21:45.920 --> 00:21:50.319
And it's been such an interesting, you know, 15, 18 months.
00:21:50.480 --> 00:21:51.680
I I've learned a lot.
00:21:51.759 --> 00:21:53.359
I think I've contributed a good bit.
00:21:53.519 --> 00:21:59.759
But what I what I love about it is the sort of in every case, the intelligence of these individuals.
00:22:00.319 --> 00:22:06.079
The capability they're building that is deriving real benefit for their customers.
00:22:06.240 --> 00:22:09.440
Their features and benefits are creating significant value.
00:22:09.599 --> 00:22:15.119
And as a customer of some of these companies, you don't have to be like leveraged by this massive ERP.
00:22:15.279 --> 00:22:18.319
These are great standalone single point solutions.
00:22:18.400 --> 00:22:28.079
And I think a lot of people are moving to that sort of best in breed thinking versus, you know, let me buy every single suite of, you know, your favorite ERP, name, you know, name one of them.
00:22:28.240 --> 00:22:39.119
I find a lot more people are responsive to these easier to install, easier to connect with, shorter time to value, shorter time to implementation solutions.
00:22:39.359 --> 00:22:46.880
And that's the thing that I've really been trying to help emphasize with these companies, not only the pitch and the message and the clarity of that, but also the time to value.
00:22:47.039 --> 00:22:54.480
You know, if you're sitting in the chair I was sitting in for a number of years, I'm always looking for solutions that bring me extraordinary value.
00:22:54.559 --> 00:23:00.240
And the faster I can get to those, it sounds kind of simple, but in a lot of cases, like, well, how, you know, how long does it take to connect?
00:23:00.319 --> 00:23:02.000
I don't, you know, nine months, 12 months.
00:23:02.079 --> 00:23:04.000
Well, that's that's just massively too long.
00:23:04.160 --> 00:23:08.400
It needs to be, you know, weeks, if not a month or two for the integration.
00:23:08.559 --> 00:23:11.200
That's something that all these companies are bringing to the party.
00:23:11.279 --> 00:23:19.119
And I just find it really energizing to talk with them about their solutions and how they're going about kind of improving upon what they've already built.
00:23:19.839 --> 00:23:20.799
It makes a lot of sense.
00:23:20.880 --> 00:23:34.720
I'm kind of curious, you know, was there ever a time in when you're in the sea where you thought about, hey, I see an opportunity for myself that like, you know, I need to, I mean, I need to find someone who's, you know, strong at coding, but like we would use this.
00:23:34.799 --> 00:23:35.839
I'd be the first customer.
00:23:35.920 --> 00:23:36.960
I know 15 others.
00:23:37.039 --> 00:23:38.799
You know, did that thought ever cross your mind?
00:23:39.039 --> 00:23:41.119
Yeah, I don't think quite that way.
00:23:41.279 --> 00:23:51.519
I was always a better consumer of the tech and understanding how the dots connected to solve problems I had, that was really, that was really the vast majority of my focus.
00:23:51.599 --> 00:23:52.799
And I think you and I have talked before.
00:23:52.960 --> 00:23:54.960
Clorox had such a technology debt.
00:23:55.119 --> 00:24:04.079
So many basic things that were, you know, just didn't work right, or were were really legacy systems or legacy capabilities that had to be fixed.
00:24:04.160 --> 00:24:10.319
It I didn't really have time to think about like sort of that that very leading, yeah, like your your capability or why source.
00:24:10.400 --> 00:24:12.319
I didn't have time to think about that necessarily.
00:24:12.480 --> 00:24:14.640
There were there were just a lot of other things to attend to.
00:24:14.880 --> 00:24:16.079
No, it makes a ton of sense.
00:24:16.240 --> 00:24:24.160
Well, I guess my question then, you know, following up on this would be is there something today that you are wishing somebody would build, but you're not seeing?
00:24:24.319 --> 00:24:24.880
Oh, there you go.
00:24:24.960 --> 00:24:27.839
You got the the product placement even in the in the cup.
00:24:30.480 --> 00:24:32.240
I'll think of the light source cup.
00:24:32.400 --> 00:24:32.799
You know what?
00:24:32.880 --> 00:24:34.880
I think did Megan end up sending you gear?
00:24:34.960 --> 00:24:37.599
I think we we had a whole she did, yeah.
00:24:38.160 --> 00:24:39.119
Okay, great, great.
00:24:39.279 --> 00:24:40.559
Was it a good care package?
00:24:40.640 --> 00:24:43.440
I I should have double checked to make sure she would send you high quality stuff.
00:24:43.519 --> 00:24:43.920
Okay, good.
00:24:44.240 --> 00:24:47.519
Yeah, I've already had it on out and about, and it's uh it looks great.
00:24:47.599 --> 00:24:48.000
Yeah.
00:24:48.319 --> 00:24:49.440
Awesome, awesome.
00:24:49.599 --> 00:24:50.960
Well, I take great pride in it.
00:24:51.039 --> 00:24:55.920
I I I take an irrational amount of pride in our gear, and I I sourced these hats myself.
00:24:56.000 --> 00:24:57.440
So and I'm really specific.
00:24:57.599 --> 00:25:01.039
People are, you know, people say, Oh, we can we can do these hats or whatever.
00:25:01.119 --> 00:25:05.680
I'm like, nope, it has to be this exact model, sandwich brim, the whole nine.
00:25:05.839 --> 00:25:07.519
I want metal hardware, I want structure.
00:25:07.599 --> 00:25:08.799
I don't want a trucker hat.
00:25:08.880 --> 00:25:11.839
So you know, I've got strong strong views on it.
00:25:12.000 --> 00:25:18.640
But yeah, I'm kind of curious anything that you you wish was being built, but you've not seen yet, and or you're not sure if it's being built.
00:25:18.960 --> 00:25:22.240
There are probably a couple of things, and and both in the procurement space.
00:25:22.400 --> 00:25:31.119
One is, you know, as a manufacturer, sometimes it's really hard to get past your tier one supplier to understand who their two and three and maybe four is.
00:25:31.200 --> 00:25:31.440
Yeah.
00:25:31.599 --> 00:25:47.759
Not not so much for negotiating leverage, although I guess that's a that's a possibility, but in this world of sustainability, making sure you're compliant with you know child labor laws in the US and so on and so forth, it's just you you need to have more visibility to those transactions and who those actors are.
00:25:48.000 --> 00:26:06.720
I guess that kind of goes along with the second part, which is just the the veracity of a supplier's claims about the source of their materials, where where that raw material packaging material is coming from, you know, are they conflict materials, uh, you know, countries where business should not be being pursued?
00:26:06.960 --> 00:26:11.119
All those things can be a little bit difficult to uh to understand at the right level.
00:26:11.279 --> 00:26:17.440
And I at the moment there's some pressure on that, but not as much as I think there will be in in the coming years.
00:26:17.680 --> 00:26:18.799
Yeah, it's interesting.
00:26:18.960 --> 00:26:33.519
I mean, the struggle with uh the tier twos is that the tier ones don't often want to share that information because of the concern that it could be used for negotiating leverage or getting, you know, nobody wants to share their pricing, you know, they just want to tell you about the cost, but not the price, you know?
00:26:33.680 --> 00:26:39.039
And so, and and I think the the challenge for me is I wonder like, is technology the solution?
00:26:39.359 --> 00:26:44.480
Because if people aren't doing that today manually, they're not getting that visibility today manually.
00:26:44.720 --> 00:26:46.400
Will technology be able to get there?
00:26:46.480 --> 00:26:56.480
And so when you've interacted with suppliers and asked them, hey, we want tier two visibility, you know, what have been the challenges in doing that prior to the idea of having technology take a look?
00:26:56.720 --> 00:26:58.720
Yeah, I think there could be a technology solve.
00:26:58.880 --> 00:27:02.559
You know, I I think it's just as simple as, hey, don't you don't need to worry about that.
00:27:02.640 --> 00:27:03.519
We'll worry about that.
00:27:03.599 --> 00:27:06.160
You know, we're we're gonna handle our business and you handle yours.
00:27:06.319 --> 00:27:12.640
There's been a little bit of a separation there that arm's length that they have wanted to, you know, they wanted to ensure remains.
00:27:12.880 --> 00:27:24.799
And uh I think over time, as maybe manufacturers get more pressure for retailers, definitive clarity in that space, that will trickle through the rest of the supply chain and pass the tier ones.
00:27:25.039 --> 00:27:25.440
Interesting.
00:27:25.599 --> 00:27:36.880
And is that coming from the retailer perspective as a customer that wants to advertise sustainability to their end consumer, or is it more like regulatory government requirements?
00:27:37.279 --> 00:27:39.440
Well, it depends where you're operating.
00:27:39.599 --> 00:27:45.039
So if you and I were sitting in Europe right now, uh it would be a much more regulatory compliance.
00:27:45.119 --> 00:27:52.400
You're compelled to provide a lot more information, a lot more clarity around your sourcing activities and so forth.
00:27:52.559 --> 00:28:00.400
Here in the US, I think it turns into more of a a retail selling story or a brand seller story about the sustainability of the product.
00:28:00.480 --> 00:28:06.720
And to be able to say those things legitimately, you got to be able to back those claims up, or at least you should you should be able to do that.
00:28:07.039 --> 00:28:08.319
Should be able to do that, right?
00:28:08.480 --> 00:28:13.440
You know, I guess the question is always, you know, like to what degree are people willing to pay for sustainability?
00:28:13.680 --> 00:28:32.240
I don't I'm I can't I don't I actually don't know the answer to this question, but I will say that I very rarely in our customer base see times where people are quoting out multiple suppliers and are saying, hey, we're gonna go with a higher cost supplier for other reasons beyond performance of the supplier.
00:28:32.559 --> 00:28:37.279
I can think of 0.0 times when I am aware that that's happened.
00:28:37.599 --> 00:28:46.960
I mean, honestly, you know, it you you ask people if they're interested in sustainability and reducing waste and reducing uh items that go to a landfill.
00:28:47.039 --> 00:28:48.720
Everybody goes, yep, check that box.
00:28:48.880 --> 00:28:49.440
Absolutely.
00:28:49.599 --> 00:28:52.319
And then the next question, are you willing to pay a little bit more for that?
00:28:52.480 --> 00:28:53.119
Absolutely not.
00:28:53.359 --> 00:28:53.920
Absolutely not.
00:28:54.079 --> 00:28:54.400
Yeah.
00:28:54.559 --> 00:28:59.839
I I just I just keynoted a conference with Millennium Alliance in Munich, and it was great.
00:28:59.920 --> 00:29:05.200
And I I was on uh I had the keynote, but then they also asked me to uh moderate a panel the next morning.
00:29:05.359 --> 00:29:11.039
And on the panel, we actually came to this topic, and I really didn't know what the conversation was going to be.
00:29:11.119 --> 00:29:19.119
But one of the gentlemen there was from Kraft Heinz Europe, and he said exactly what you just said and I said people want sustainability, they're not willing to pay for it.
00:29:19.279 --> 00:29:29.359
And even in a market where sustainability is a more sophisticated construct and there's a lot more regulatory behind sustainability efforts, they're still not willing to pay for it.
00:29:29.519 --> 00:29:39.680
Until there's some collaboration between industry, regulators, government, and you know, waste waste removal companies, we're gonna have a really tough time.
00:29:39.759 --> 00:29:48.240
There's a lot of material aggregating it, capturing it, making it a cost effective to reprocess it and put it into a condition where a manufacturer could use it.
00:29:48.400 --> 00:29:50.880
That's just that that doesn't happen to a great extent.
00:29:51.200 --> 00:29:52.079
Yeah, it's true.
00:29:52.319 --> 00:29:52.960
It's true.
00:29:53.200 --> 00:30:00.000
I mean, there are some rare examples where there is an alignment between economics and sustainability.
00:30:00.240 --> 00:30:07.039
And I was talking to somebody who leads the sustainability practice at Rockwell Automation.
00:30:07.279 --> 00:30:23.519
And she was telling me that one product area that they have is they not just build new automation systems, they will also take the old ones from themselves and from other competitors, and they have a whole remanufacturing business line.
00:30:23.680 --> 00:30:28.079
And so that was the first, that was one example of probably many where it's like, okay, interesting.
00:30:28.160 --> 00:30:33.680
So there is a circular economy aspect, it's cheaper because you're reusing if you can repair and reuse.
00:30:33.839 --> 00:30:37.039
And also there's the environmental impact and waste is more significant.
00:30:37.119 --> 00:30:38.559
I mean, less less significant.
00:30:38.880 --> 00:30:41.279
The other example I can think of is Tesla itself, right?
00:30:41.359 --> 00:30:50.000
I mean, nobody, to my knowledge, bought a Tesla because it was a well, purely because it was more environmentally friendly.
00:30:50.160 --> 00:30:55.039
I mean, they buy it because it's a great car, and that was our goal is can we build the best possible car?
00:30:55.200 --> 00:31:00.799
And then if it just happens to be uh better for the environment, that's a uh a good thing to do.
00:31:00.960 --> 00:31:07.680
And our mission was to transition the world to sustainable energy or rather accelerate the world's transition to sustainable energy.
00:31:07.759 --> 00:31:14.319
But the Nissan Leaf existed previously, sustainability focused vehicle, no sales, right?
00:31:14.480 --> 00:31:16.400
And so you have to make it cool.
00:31:16.480 --> 00:31:31.839
And then you start to think well, actually, if you were to look at a first principles basis today, and we were to like, let's say we were to design a car from the ground up today with the knowledge we have now, but imagining that cars never existed, it would be we would never build an internal combustion engine.
00:31:31.920 --> 00:31:32.720
That would be so silly.
00:31:32.799 --> 00:31:41.039
It'd be like, so you're telling me that we're gonna harvest dinosaur bones, we're gonna refine it, then we're gonna explode it like 8,000 times a minute in order to move forward.
00:31:41.200 --> 00:31:43.359
We can't just use a battery in an electric motor.
00:31:43.519 --> 00:31:46.240
And you'd be like, no, the explosions, that's what we want.
00:31:46.319 --> 00:31:49.440
And so you'd never design an internal combustion engine today.
00:31:49.599 --> 00:31:51.599
So I think it was just sort of a better car.
00:31:51.680 --> 00:31:58.880
And it just so happens that you, you know, coat the coat the dog pills with peanut butter and people feel like they're eating candy, but they're getting vegetables, you know.
00:31:59.119 --> 00:32:00.559
For a lot of things, that's not the case.
00:32:00.640 --> 00:32:07.039
And so I wonder, like, you know, and the other challenge is that it's like, you know, we live in a in a capitalist society.
00:32:07.359 --> 00:32:19.680
And if and if one company says, hey, we're gonna be virtuous and we're gonna do something that's more expensive for us, and another company doesn't, is the company that goes for cost, you know, first and foremost, are they gonna be in an unfair competitive advantage?
00:32:19.839 --> 00:32:22.960
Is there a disincentive to actually do the right thing on this area?
00:32:23.200 --> 00:32:33.440
And so when I go down this line of thinking, that's where I get to the place where I think maybe it's not the individual's responsibility, maybe this is a governmental responsibility because they have to create an even playing field.
00:32:33.519 --> 00:32:38.240
I don't want the folks that are focusing on sustainability to be at a disadvantage to the folks who are not.
00:32:38.319 --> 00:32:44.640
So why not just say, hey, look, here's the regulatory requirement or here's like a universal tax on carbon or something.
00:32:44.799 --> 00:32:52.720
You know, it gets very political, but you know, take it away from the from the individual to make that decision or feel compelled to make that decision, you know.
00:32:52.880 --> 00:32:58.240
But I'm I'm curious if any of this is ringing true to you or any of this is sort of triggering you on some other thoughts.
00:32:58.559 --> 00:33:02.960
Well, you know, where where it takes me is the uh the Clorox brand Birch Bees.
00:33:03.200 --> 00:33:12.400
95 to 99% all natural, verifiable, and the target shopper for that product absolutely loves it.
00:33:12.559 --> 00:33:18.640
Well, I what it made me think about was how well do these manufacturers and brand owners know their customers?
00:33:18.720 --> 00:33:27.200
And how can they appeal to their sensibilities around a sustainability aspect without having to have it regulated in, if you know what I mean?
00:33:27.279 --> 00:33:30.240
It's like, are the marketers being influential enough?
00:33:30.400 --> 00:33:36.480
Or is there enough thought going into the product design so that you know waste is being minimized?
00:33:36.559 --> 00:33:40.880
You know, one idea that I think has never really kind of taken hold the way it could have is refills.
00:33:41.519 --> 00:33:45.519
Walk down your home care aisle and look at all the full bottles of something or other.
00:33:45.599 --> 00:33:51.119
You know, Clorox is the share leader there, and we've tried refills, Wreckett's tried refills, I think Unilever has.
00:33:51.200 --> 00:33:54.480
I mean, everybody's tried refills and the consumer just won't go for it.
00:33:54.559 --> 00:33:55.359
And why is that?
00:33:55.519 --> 00:33:57.279
It's not that much more difficult.
00:33:57.440 --> 00:34:03.039
It's an obvious reuse of a very functional container that you bought originally.
00:34:03.200 --> 00:34:14.320
And so, like, how how do we solve those kinds of challenges where there's already a pretty obvious solution that the marketing group hasn't been able to convince the shopper that this is something important to them?
00:34:14.480 --> 00:34:20.159
I, you know, I don't know why that is, but uh I do know that's a challenge that we have, and I think it's something that we could take on.
00:34:20.239 --> 00:34:32.239
And could there be more, you know, I'm I'm never I'm never a fan of necessarily more regulation, but I think some collaboration between, as I said before, regulators, waste removal companies, manufacturers, and consumers.
00:34:32.320 --> 00:34:38.719
Like we got a note from our uh refuse removal company when we lived in our in our house, and they said, Hey, stop separating the glass.
00:34:38.960 --> 00:34:40.880
We're no longer collecting a recycling glass.
00:34:41.119 --> 00:34:46.480
Easiest thing is to recycle and reduce to a material consumed in the manufacturing process.
00:34:46.639 --> 00:34:48.960
And there just there wasn't any incentive.
00:34:49.039 --> 00:34:49.840
There was no money it.
00:34:49.920 --> 00:34:50.960
And they're like, Yeah, don't bother.
00:34:51.039 --> 00:34:53.119
We're not we're not doing it, so don't worry about it.
00:34:53.440 --> 00:34:53.679
Wow.
00:34:53.840 --> 00:34:54.800
I've heard this before.
00:34:54.880 --> 00:35:04.960
I've heard that a lot of times, even here in San Francisco, people have told me that the recycling separation very often is just to make you feel good, but actually that it gets mixed back together.
00:35:05.039 --> 00:35:08.320
And I'm like, I hope that's not, I really hope that's not the case.
00:35:08.559 --> 00:35:13.760
But, you know, my other hope is that if it is separated, eventually the technology will catch up to solve it.
00:35:13.840 --> 00:35:18.960
Like, you know, like with electric cars, there's always this complaint that people would have, you know, people will be really smart about it.
00:35:19.039 --> 00:35:30.880
They'd say, Oh, but think about in the Tesla, you know, we have, you know, one, we have mining that goes into materials, and then we have it's it the coal coal is being used to power so much of the grid.
00:35:31.119 --> 00:35:34.159
So it's actually not an electric car, it's a coal-fired car.
00:35:34.239 --> 00:35:37.280
And that was like for 10 years, like the way people thought about it.
00:35:37.360 --> 00:35:48.719
But look, if you don't transition over to having something that can consume electricity, then when you are able to move the grid more towards solar and more toward nuclear, you actually have the ability to do it.
00:35:48.880 --> 00:35:52.320
So I I am I you know, I think that it's okay if even the system's not perfect.
00:35:52.400 --> 00:35:59.679
Like I would like to continue separating my recycling under the hope that one day they continue, they actually find better ways to mitigate it.
00:35:59.760 --> 00:36:03.519
And you know, what's been amazing is I don't know if you followed the the journey of JB Straubel.
00:36:03.679 --> 00:36:09.360
He's the the chief technology officer, a former CTO from Tesla, started a company called Redwood Materials.
00:36:09.440 --> 00:36:20.719
And what they're doing is they're taking the rare earth metals and lithium and nickel out of uh spent electric vehicle battery packs for re-refining material and then reputting them into new vehicles.
00:36:20.800 --> 00:36:26.480
Because not like the cobalt like evaporates, it's still in there, it's just it needs to be remanufactured chemically.
00:36:26.639 --> 00:36:31.679
And so, you know, I think there are a lot more circular opportunities, but I do think the idea of refills is very interesting.
00:36:31.760 --> 00:36:39.840
Have you seen the the companies that do like powderized soaps and powderized tablets where you throw them in water to reduce the amount of logistics?
00:36:40.079 --> 00:36:44.159
You're not shipping, you know, you're not shipping heavy, heavy liquids that weight out.
00:36:44.400 --> 00:36:45.119
Yeah, I have.
00:36:45.199 --> 00:36:48.719
And uh, in fact, a new opportunity, and this is in cosmetics.
00:36:48.880 --> 00:36:49.920
My wife showed this to me.
00:36:50.079 --> 00:36:53.920
She women are using face cleaners all the time, depending on how much they be.
00:36:54.079 --> 00:37:01.119
So she's got this one little pack, and it literally is a dehydrated square of it, looks like a piece of gauze.
00:37:01.360 --> 00:37:06.000
You put it in your hand, you add water, it immediately dissolves into kind of a sudsy, soapy.
00:37:06.159 --> 00:37:07.039
It's brilliant.
00:37:07.119 --> 00:37:07.280
Yeah.
00:37:08.000 --> 00:37:12.559
There's I don't know how many of them there in in one pack, but it weighs about four ounces.
00:37:12.639 --> 00:37:21.119
So, you know, it's super light to ship, but really effective, single use, and dissolves and you know, goes right into the you know, the main wastewater treatment stream.
00:37:21.199 --> 00:37:27.119
So I think there, I think there are a lot of places where more more good innovation and more good thinking is sort of yeah.
00:37:27.199 --> 00:37:42.960
I feel like that's a place where you could, I mean, you know, coming from your cachet and experience in the CPG space from Clorox, you could probably have a pretty lasting impact on that, you know, if you could find the right folks to back who are doing something with returnable packaging or doing something with tablets.
00:37:43.119 --> 00:37:49.119
I I do feel like it is possible that sometimes, by the way, it's the right idea at the wrong time.
00:37:49.199 --> 00:37:52.800
And, you know, sometimes it's like, hey, we tried that 10 years ago, it didn't work.
00:37:52.960 --> 00:37:54.880
Well, wait a second, we try it again now.
00:37:55.119 --> 00:37:59.679
Same, you know, same thing, new environment, new mentality, new information set.
00:37:59.840 --> 00:38:02.880
I I do believe that people are are open to changing their minds.
00:38:02.960 --> 00:38:08.719
And so so I wouldn't let the the failure of the past prevent the DFM, the experiment from being run again, you know.
00:38:08.880 --> 00:38:10.079
Yeah, I'm 100% with you.
00:38:10.159 --> 00:38:26.480
And if it that Kingsford story I told you at the very beginning of our talk, yeah, that had been tried five years before, 10 years before, but they did it a different way and they didn't figure out how to solubilize the sawdust because you have to heat it to get the sawdust to absorb the water.
00:38:26.639 --> 00:38:31.119
Well, one of the engineers, you engineer, same problem, uh, but figuring out how to do that.
00:38:31.199 --> 00:38:39.119
And all of a sudden we're able to create create more natural wood content in the briquette than we ever could before, solving several different problems.
00:38:39.280 --> 00:38:41.360
So it was uh yeah, I mean, you're you're right.
00:38:41.440 --> 00:38:48.719
Sometimes the idea it's time is not there, you put it on the shelf, but you got to come back to it because good ideas, there'll be a time for them at some point.
00:38:48.880 --> 00:38:50.159
Yeah, absolutely.
00:38:50.320 --> 00:38:52.239
Well, Rick, I I know we're at time.
00:38:52.400 --> 00:38:55.280
I just want to say thank you so much for joining the podcast.
00:38:55.599 --> 00:39:03.519
I always love our conversations and they always take a really interesting, productive, sometimes unproductive turn, and those are both great.
00:39:03.599 --> 00:39:08.320
Um, and I'm glad we're able to record a little bit of this and share it with some audience and whoever cares to listen.
00:39:08.400 --> 00:39:08.960
So thank you.
00:39:09.199 --> 00:39:11.360
Spencer, thank you so much for the invitation.
00:39:11.519 --> 00:39:12.880
Um, I love talking with you.
00:39:12.960 --> 00:39:18.400
And you know, it was absolutely a thrill when we ran into each other accidentally in Chicago six months or something.
00:39:19.280 --> 00:39:23.280
I came upstage, I walk out the door, and I see this guy in a baseball.
00:39:23.679 --> 00:39:27.039
I'm like, remember that?
00:39:27.280 --> 00:39:30.239
Yeah, it was just uh just a very happy coincidence.
00:39:30.559 --> 00:39:31.599
It was a great coincidence.
00:39:31.679 --> 00:39:36.079
And you caught me in the the uh in the the the heat of the moment.
00:39:36.239 --> 00:39:37.920
We were up next about to present.
00:39:38.000 --> 00:39:41.599
I was with the the two uh the two uh panelists on the panel.
00:39:41.760 --> 00:39:49.920
I was moderating, uh uh Pierre and uh Pierre Mitchell, who's a well-known analyst in our space, and uh Anika, one of our customers.
00:39:50.079 --> 00:39:53.519
And so we're doing like the last minutes, 30 minutes of prep quickly.
00:39:53.599 --> 00:39:55.519
We're about to be on stage, about to be live.
00:39:55.679 --> 00:40:01.199
And then I see you and I'm like, oh my goodness, this is worth you know, pausing, pausing this and uh and saying hello.
00:40:01.360 --> 00:40:02.400
So that was really fun.
00:40:02.559 --> 00:40:03.199
That was really fun.
00:40:03.280 --> 00:40:07.280
So I I mean, I'm sure I'll run into you as you can continue to do more of these conferences, you know.
00:40:07.519 --> 00:40:08.239
That sounds great.
00:40:08.320 --> 00:40:09.599
I'll look forward to it.