A CEO’s Perspective on Intelligence

In this SCIP IntelliCast episode, we sit down with IDEX CEO Andy Silvernail.  Andy and SCIP CEO Cam Mackey talk about the role of competitive intelligence in supporting key strategic decisions, how CEO’s needs for decision support are evolving, and what competitive strategy and intelligence pros can do to help our organizations make decisions to best serve customers, reduce strategic risk, and drive profitable growth. 

Transcript

Cam Mackey - SCIP (0:01)
Hi, I'm Cam Mackey with SCIP. It's my pleasure today to introduce Andy Silvernail, Chairman and CEO of IDEX Corporation. IDE is a really unique and rare type of company. It's nimble and entrepreneurial. Yet it has sales well over $2 billion. And literally 1000s of products, that do anything from help sequence the COVID-19 genome, to saving lives on our roads every day through the Jaws of Life. Andy has led this unique organization for over 10 years now. He's helped build a different kind of company, one grounded in servant leadership rather than top down hierarchies. Employee engagement has risen significantly, but so have shareholder returns. Somehow through this impressive growth path, IDEX has retained its speed, agility, and its scrappiness. It's a great story, and we're delighted to welcome Andy to SCIP IntelliCon to share it. Andy, welcome.

Andy Silvernail - CEO (0:54)
Thanks, Cam, I appreciate it. It's really nice to be included here and invited to talk about intelligence and strategic intelligence. I think it's a really important topic and one that we have taken very seriously. We do come at things differently than a lot of businesses. We have a tendency to deeply segment our businesses, and to get to a point of impact where we understand the application of the market and the customer really deeply. And so while we're not doing a lot of what I'll call big picture analytics (we don't have a staff of economists or anything like that), we get really deep into the practical aspects of intelligence. And I think it's a differentiator for us. We have for a long time, we've been on this journey. We call it "Going Right". Years ago, we put a graphic up at our at our annual leadership meeting. And we said, Hey, you know, when companies get to be our size, they tend to do one of two things. And then we showed a fork in the road. And that fork in the road, turning left is kind of a classic big company, where you start to put a lot of process in place and, and you end up with bureaucracy. And you do that fundamentally, because you don't think that the people can make the leap themselves. And so you're going to manage that leap through process. We've made the really important decision to "Go Right", which is a people centric, highly entrepreneurial company that allows you to be nimble. But to do that, you've got to know the markets that you're in, you've got to understand your competitors, you got to understand your customers, you have to understand the problems of the world, and you got to kind of "Get Muddy", right, you got to get deep into this stuff. You can't do these things from a corner office or the ivory tower, you really got to have to get into it. And I think that's what makes us unique. So again, thank you for inviting me, I'm glad to participate. I'm excited to engage with the folks here.

Benefits of Deep Segmentation

Cam Mackey - SCIP (2:47)
That's great, Andy, and I'm gonna borrow that phrase "Get Muddy". It's a good one. You mentioned a little bit about the entrepreneurial and customer focused approach at IDEX, where you get to know your markets really well. So maybe tell us a little bit about how you structure this function of market or competitive intelligence? It sounds like you don't have a top heavy corporate organization, but how does it actually work in the business?

Andy Silvernail - CEO (3:12)
So we do it by business, and even within a business suite. Just so everyone understands, we've got about 45,businesses within IDEX. So 45 unique businesses that we have acquired and built over the years. We have businesses that are over 100 years old, actually, some that are 110 years old. And we have some that are quite new that we've actually built from from scratch. So when we think about this, we go through a process, an analytical process called 80/20. Think of that Pareto principle where you're segmenting down through your business lines, and you're trying to understand how value really flows to the customer, right? What does the customer want? And then we try to align resources around that that value flow for the customer. Either a business line leader, a product manager, or a marketing manager is going to have the principle intelligence responsibility for understanding the competitive landscape and the customer landscape. What we try to do is make it so an individual can really have terrific line of sight, so they're not trying to look at 1000s of products or hundreds of products. They're trying to understand an application set and go really deep into it. I always start with the classic Porter's Five Forces. That's one of the things we ask people to use. I think it's probably the single best framework of competition. And if you think about that, so for the folks in the audience who are familiar with that. It's a concept that's been around a long time, but it's looking at how power is distributed through any kind of competitive environment. What's happening with the customer, what's happening with the supplier, what's happening with new entrants, what's happening with people who are in the market today and maybe what's happening with disruption. So if you kind of think of it as a star, that's how these forces are coming together. We ask those people who are in that application area of focus to really deeply understand as many facts that you can get, as much quantitative information, provable facts that you can get to understand that environment. And that, to me, is always a great place to start. Because that tells you how much of the profit pool you're likely to claim, and how much you are unlikely to claim and whether or not you really want to be in that business at all. What we've found is that within any application or sub segment, when we're a #1 or #2 provider for these highly engineered and very difficult problems, we tend to have the ability to extract a significant amount of power or profits from that profit pool. So if you don't understand the segmentation, where you really sit, and if you don't understand what the forces are that determine who gets which pieces of the profit pool, you're shooting in the dark. You've really got to get down to that level of intelligence, and starts really with that kind of analytics.

Curious about Five Forces?

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Information - Commoditization vs. Value-Added
Cam Mackey - SCIP (6:21)
It sounds like you're looking at those functions as ways to contribute financial value back to the business rather than just, "What report did you write for me lately?" So you're really kind of measuring them by "brass tacks" of contributed value?
Andy Silvernail - CEO (6:37)
You know Cam, it's everything. And I know, one of the questions that's out there in people's minds in this forum is, you know, how important am I to the organization? And frankly, this is a role that can either be incredibly valuable or complete waste of time. And it comes down to how important does the organization think the role is? Right? So therefore, are you in the mud? Are you in the mix? It depends on how much people are willing to dig in, and really roll their sleeves up. Because, if you think about most competitive intelligence, or most market intelligence that's out there, people want to rely on reports, data from publications and whatnot. And the reality is, is that there's only a couple of markets, a handful of big markets, where that sort of data is available. But in most markets, it doesn't exist. There may be pieces of data, but the real value is in getting in, right really getting in there and understanding. Because then you have what's what I call asymmetrical information. So if you think about how you win, you need to know more than the competition. And if you know more than competition, you're going to be able to develop new products, enter new markets, positioning ourselves in ways to create more value for customers that therefore they'll pay you for. In these in these markets, where it's very hard to find that information, there's a tendency to actually not want to do the hard work. And what's interesting is, this is the place where all the value is, all the value is in these places where you can get asymmetrical information. You can know a lot more. Let's take the semiconductor market. Well, everybody has the same information. So therefore, it's a commodity. Yeah. So if we can get a product marketer or a marketing manager, whichever job that is a business line leader, if they can get really deeply in there with the customer, understanding that customers problem and the issues, you can create enormous value and incredible competitive differentiation.
How to Communicate to Drive Action
Cam Mackey - SCIP (8:57)
Yeah, that's fantastic. With AI and big data, there's an incredible opportunity for us to tame this huge amount of data that you say it's in some ways a commodity. There's an opportunity there, but there's still a role for getting to know your markets and your competitive landscape. Primary research, right, where you've got to get in there. It takes time, it takes relationships and takes investments but the outcome can be really rich. So if you're a busy guy at your level, especially where you don't want to read through a lengthy PowerPoint deck, you want to know the "so what" or "what do I do now"? How do you like to receive information that impacts IDEX's growth strategy? What is it? Is it a visual and is it a conversation? What is useful for you?
Andy Silvernail - CEO (9:48)
It's going to depend a little bit and the reason I say that is you have to be careful about being too dogmatic. So let me come at this from the angle of the consume, a CEO, or a business president. But also from the angle of the producer, so your audience here today. I'm going to get information from a lot of sources. That's going to be sometimes very formal, so a strategic plan presentation, that's gonna be a PowerPoint, that's going to be a discussion, right, it's gonna be there. But then I'm going to be visiting businesses or meet with customers. And it's going to be much more informal. It's going to be kind of in the flow, and you're going to get both of those. So someone in my shoes, you're always trying to triangulate. And what I mean by that is you're trying to look at sources of information. And the combination of information sources is what provides insight. That's what's interesting. When you're working with somebody who is an expert in market or competitive intelligence, etc., you want these discussions first and foremost, to be focused, right? They can't be long winded, theoretical, not to the point. These things have got to be to the point. So you may think of the old elevator speech right now. So when you're going to that consumer, whoever your customer is in this regard, you want to know the points that you want to make. And so you want to have the thesis or the conclusion, you want it really tight. And then supporting evidence, that you can really get in. And then how you came to that conclusion, which I think is really, really, really important. Because sometimes you get somebody who sounds really smart. They're able to talk about their information, and they start digging in. You ask "well, tell me about the process of getting that information." Be thoughtful about how you went about it, because that is meaningful, right? If you read it in a journal, and it's somebody else's regurgitated information, it's once again a commodity, and that can be valuable, if connected to something else. So be really sharp and be thorough about that elevator speech and supporting elements to it. And when you're in a formal discussion, imagine you're pitching something for new product development. Let's just imagine that for a second. And you've got to get in there. And the question you have to answer is: Why are you going to win? Right? So why are you going to be better than competition? Why does the customer care if you win, right? How much value are you going to create for that customer? And then how do you go about the win? Right? So you've got to walk through that. And oftentimes, I see a presentation where somebody will say, "I've got this great new Gizmo. It has these features and benefits. And we want to invest x, hundreds of 1000s or millions of dollars into it. And here's our execution plan." And they never once really stopped and said: "This is the need. There is actually a need; there's value to be captured by solving the need, and here's how we're going to solve that need better than anybody else, in a defensible way." Often, people go all the way down to the "here's the gizmo", and the gizmo is great. But it only matters if those other questions are answered, really thoroughly.
Building a Culture of Empowerment
Cam Mackey - SCIP (13:30)

So I'm going to take your your elevator pitch concept here. Let's say I am a product manager or business line manager. I've done all my homework like you say, I think I've got the the pitch down pat, and not just jumping to features and benefits really thinking about the market need that it solves, and how we can win. That takes a lot of professional competence, right, to come up to the CEO of a multi billion dollar organization and say "Hey, Andy, here's what I think we should do. Here's how the market is going to reward us." Any advice on how to create that culture that empowers people to have that confidence to come up to you?
Andy Silvernail - CEO (14:17)
First and foremost, the attitude of the organization starts at the top. You can think of it as a pyramid or an upside down pyramid. I'm going to talk about a pyramid first and then I will talk about an upside down pyramid. In most organizations, the organization thinks of the CEO as the customer. At a lot of organizations that's how they think of it, right? The CEO is sitting at the top of the pyramid, and the organization kind of comes down. But that's a broken culture. Because if you think of the CEO as the customer, then you're not thinking of the real customers. If you flip that around, you take that whole thing and you flip it around. And now at the top is the base of the upside down triangle, and feeding that is the customer. And then coming down that triangle is the CEO at the at the bottom. The CEO is the servant; everybody else's customer in the front line. The people in the front line are the most important people in the business because they're touching that customer every single day, and they're fighting with that competitor every single day. So culturally, that's a big thing. The reality is, is most of the people who are listening to us today, they don't have the influence today to change it. But I would encourage you, as your careers grow, and you have those positions, we get to make those decisions. I implore you to make them. Really make those decisions. Because what happens is now you've opened up possibility. And so what I try to do is I try to have everyone understand how important they are to the organization and their role and how they individually connect to the mission. And then if I'm viewing them as my customer, and my job is to enable you to do your job, all kinds of things open up. That behavior leads to some really important things. It means going and seeing. Physically going with people to see. It means when somebody has insight to really, really, really listen. And sometimes it's hard for us all to listen. When you have a job like the one I have, it's actually really easy to stop listening, because very few people tell you that you have to listen. And so you've got to continue to do that. The one thing I'd say also to everybody here listening is recognize the importance that you have to an organization. And let me give you an example. One of the goals that we have at IDEX is to grow two percentage points faster than the underlying markets. We're generally in global industrial markets, and we have some things in Health and Science, and we have some things in municipal. But across our revenue base, we're basically in that 3% long term growth world. If you can grow at 5%, and if you think about what that means compounded over a decade, that's a really big deal. And the only way you grow at that rate, the only way it happens, is doing the stuff we're talking about today. You have to have unique insights. You've got to turn that into new markets that you can penetrate,. You've got to have new products that you can bring to market. So without everyone here listening, you can't do that. And that's worth billions of dollars in value for our owners or shareholders to be able to do that. And we've done that at IDEX; we've changed that. So if you went back 10 years ago, we were barely growing faster than our underlying markets. And today, we are consistently organically growing a couple of points above our markets. We also acquire businesses and if we can help them get their growth engine going, that's worth a ton of value. Don't forget how important you are to the organization you can't crack this nut, you can't win if you don't have this kind of capability to outgrow markets.

Tips for Being a Solo CI Manager

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Cam Mackey - SCIP (18:26)
That it's a really empowering message. One of the challenges that we face as market and competitive intelligence professionals is that we're often smaller shops. One of the great opportunities is how can you leverage your colleagues within the company to be your internal intelligence network. It's everyone's job. You're looking at it through the lens of customer intimacy. What can we do to bring that voice of market or voice of customer back to the organization so that we can profitably grow? The pessimist in me, though, has a question. Given that IDEX has this decentralized operating model, how do you make sure that sales and marketing and strategy find connections and bridge conversations where there should be some, so that you're thinking about growth in a holistic way, without making it too bureaucratic and kind of killing what makes IDEX such a great company?
Andy Silvernail - CEO (19:30)
You mentioned a bunch of functions at corporate, we actually don't have them. That is okay. At corporate we have finance, which we have to obviously from an SEC perspective. We have some some basic things around compliance and legal and stuff like that. But we actually made the choice years ago to decentralize some things that had started to get centralized in the company. The reason we did that is because people can't have two bosses. I think it's very hard when you start to put multiple matrixes in place, I think it's very hard for people to understand what they're responsible for or who they're responsible to. And so we've actually pushed that stuff to make sure it's at the point of impact. It's close to businesses. That was a really important choice that we made just because of that, because we want people to be as close to customers as they can possibly be. That's what we want. And we want to empower them to do that. So if you're a marketing leader at IDEX, there's no way I know anything about what you're doing better than you do. There's just no chance. Now I might be able to help you with some insights, or I might be able to ask some good questions, or maybe I can open a door somewhere to help you out. But my job is to is to enable people; that's my job. One thing relative to doing that job as a marketing leader, or market intelligence leader is don't think you're on an island. Even if you're just one person, say you're product manager of a single product line, and you don't have anybody reporting to you and you feel very lonely. One thing I would encourage people to do is help get a cross functional team. Build a cross functional team that actually goes to the customer together. That's a very powerful team thing, when you bring someone from manufacturing, someone from supply chain, someone from engineering, and together, you go and are seeing these opportunities and problems hands on. That's a very powerful insight. When you come back to the organization, you're not the lone wolf going, "Hey look at me, I've got an insight." You've got a group of people who have seen it together, and by the way, they've seen it from different perspectives. And so they're bringing different experiences, and capabilities to bear on what that problem looks like. And so when you actually start to solve that problem, and go after that opportunity, you have buy in, you're not having to get buy in by convincing people. And you have really some different perspectives of how to look at this stuff.
Impact of Digital Transformation
Cam Mackey - SCIP (22:11)
I love how prominent the voice of the customer is, in your thinking, and at IDEX's culture. Yes, you're a manufacturing company, but obviously, you've been really thoughtful in how you incorporate services around that. As we all know, the digital revolution is here. There's this great quote from the CEO of Microsoft that says that, we've seen two years of digital transformation happen in two months, thanks to COVID. And so digital is a huge opportunity for the customer experience. Talk me through your thinking about the opportunity side of that, but also threats. Where companies you never competed with, might compete with Google all of a sudden, for example. So how do you think about that, as you scan the market for opportunities and risks?

Impact of COVID on CI

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Andy Silvernail - CEO (22:59)
First of all, I recognize that the future is now so to speak. You have to admit that it's here, and that COVID did accelerate a lot of things. I cannot think of a business or a product that we have today, that won't have some level of intelligence in the future. We make a band clamp. So think of, literally, a clamp that holds something together. You say to yourself, well, geez, that's a simple product. Its a piece of metal. It has a lot of applications. For example, an airbag. It has to be perfect, right? That amount of tension, that it's actually clamping, it has to be perfect. And so you if you have a tool that can tell you its tension, which we do, that's an advantage. And that's a simple product. And then we have all the things that are going into into genetic sequencing, which are, you know, way past that. Every product and every business we have, will have a level of intelligence at some point in the future. So, you know, that's a huge opportunity. Because when you solve problems like that, and you have that kind of information, the stickiness of the business goes up dramatically. We use Microsoft for our systems. I don't know how we'd ever not use Microsoft. I mean, I don't want to tell them that. But that network effect is very powerful and it's increasing everywhere. So the opportunity is to be a leader around that. If you're the leader, and you have an installed base, it's very hard for customers to walk away from that big installed base as long as you're servicing the problem and you're answering their issues. And it's very hard for competitors to come in and supplant you. It's very difficult to do. So the opportunity is just enormous to get this right. And then the opportunity to innovate goes through the roof, right, once you have information. One of the problems that we have in so many businesses that we are in is that a lack of information, stops you from doing a lot of things well. With the amount of information that can be gathered (how a product works in process, or how a customer really is interacting with that product), that changes everything from a new product development, new application development, new service development, etc. It changes everything. This story is kind of a famous story, in my own mind. A few years ago, I was in South Africa. And I was at a chicken rendering plant. So anyone tells you that being a CEO isn't sexy, right? Here I am in their control room - imagine what a control room looks like in a chicken rendering plant. They were having some problems with a pump. They're getting some information, but they really didn't have good information. I'm thinking to myself, wow, there's going to be a day, when we're gonna be able to tell exactly what is happening to pump number eight, right in this plant. You're going to make that plant so much more efficient, reducing the number of breakdowns they were wrestling with, not just because of our product, but anything. The ability for predictive maintenance, the ability to therefore take that information and develop the next generation product is going to be awesome. If you're on the forefront, you're going to be the winner. Going back to the Five Forces...if you think of the Five Forces as who has power, you're going to have power. And if you don't, the flip side is you're going to go out of business. In my line of work that happens very slowly because of the installed base. But in reality, if you decide you're not going to be part of the digital revolution, in five or 10 years, you're gonna you're going to lose market share constantly, and then you're going to wake up, and you're gonna realize your business is a third of the size that it was. And so it's this incredible opportunity and this this massive threat all at the same time, and you can't ignore it or you'll be impaired.
Cam Mackey - SCIP (27:27)
It's a powerful point. Every other week or so there's a new number from McKinsey or other organizations that say there's going to be x trillion connected devices. Including clamps. So there's a lot of digital exhaust out there, whether it's from your own products, you know, suppliers, customers, etc. That raises the issue of creating a culture of where the associates, the employees are making decisions, informed by data, rather than just "this is how it's always been", or a gut feeling. How do you make that transition towards a data driven decision making culture? Where do you see that progressing? What have you found that's worked well at IDEX?
Andy Silvernail - CEO (28:13)
It's a little bit generational. I think that's the reality. I've got two college age kids and one high schooler, and their comfort level with information with real data, in a digital format is high. They're natives; they've never known anything different. They're very comfortable. I think there's a recognition that we as an organization have a responsibility for those who aren't as comfortable to help get them comfortable. So there's almost kind of a reverse mentorship. That has to happen to some degree. I's not about waiting for that group of people to retire - you don't have that long, not at all. I'll just give you a simple example. When I started my career, I got out of business school and I went to work for Danaher Corporation. Even before that, when I was a financial analyst, right out of college, I'd go and walk manufacturing floor. You had single access machine tools. You had machine tools, but they were single access machine tools, and pretty much everything was analog, right? Now, we're in the midst of a major upgrade and one of our facilities in the Midwest, and we're putting in a bunch of machining centers. And these things are awesome. And these are multi access, all digitized. This is the kind of job that someone's going to be paid really well to do. If they're an expert there, they can have a really great career. A "machinist" isn't really a machinist anymore. They're kind of a computer scientist. They really are. It's awesome. Technology is shifting everywhere, so getting people comfortable with that and comfortable with information, is just the way it is, right? The the ship has already sailed. If you're not on that ship, it's going to be a very painful moment.
Cam Mackey - SCIP (30:36)
We've talked about some of the forces that are transforming IDEX and the markets you serve, whether it's a heightened focus on the customer, digital transformation, or demographics. What are your final thoughts to market and competitive intelligence professionals? How can we rise to meet the challenge of that changing reality where things are moving faster than they ever have before? Where what worked yesterday won't work today? What can we do to position companies like IDEX and executives like you to meet that opportunity, but also address the threats?
Andy Silvernail - CEO (31:15)
I think it's the training, development, and comfort level with "getting dirty". That's the key. Your jobs are massively valuable if you are actually the keeper of the facts. You really know what's going on. And the only way to really know what's going on, is to be with that customer very deep. Understanding that competitor very deep at a primary level. It is the primary research that creates the insights. That's really the biggest thing. Then, if you are the person who understands that you hold the keys to the kingdom to these companies' success, have the confidence. Sometimes you can feel like, where do I work? Where do I add value? Am I valuable? Does anybody care? If you have unique competitive insights that are data driven, fact-based, you are the keeper of the kingdom. it's a game changer for most organizations. There are very few industries or marketplaces where there is that high level high quality information. Therefore, there's an opportunity to really differentiate, differentiate for your company, but also different differentiate for yourself, if you just think about your own career and building your career. If you think about who ends up running most of these companies, people tend to come from one side or the other, either operationally or commercially, and then becoming President. I love people who come out of Ops, because they tend to bring discipline and things like that. But even they can't be successful until they can make that leap over to really deeply understanding customer needs to bringing those insights that turn into innovation. So, the people who are listening to this, we rely on you being an expert. Have confidence that you are an expert. Have confidence that you are changing the game.

Cam Mackey - SCIP (33:23)
That's a fantastic, inspiring, and powerful message. And one that the SCIP audience greatly appreciates. We'd like to thank you for being so generous with your time and everything that you and the team at IDEX, Andy. You make great contributions to all our lives every day. And I encourage you to keep up the great work and let us know how we can support you.