Episode 125: Calculated Risks, Bold Moves with Frank O’Connell

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This is The WealthAbility® Show with Tom Wheelwright. Way more money, way less taxes.

Tom Wheelwright:

Welcome to the Wealth Ability Show, where we’re always discovering how to make way more money and pay way less tax. Hi, this is Tom Wheelwright, your host, founder and CEO of Wealth Ability.

So there’s a lot of discussion in the world today about disrupting, about making bold moves. We’re going to learn today how to make bold moves without taking all the risk of throwing everything at it and actually doing it the smart way. And we have the expert on the bold move. Our guest is Frank O’Connell. Frank has an amazing background. I’ll let him share that with you. But thanks for joining us today, Frank.

Frank O’Connell:

Thank you, Tom. Thanks for inviting me.

Tom Wheelwright:

So if you would, just give us a little, your background, because you’ve got an amazing one.

Frank O’Connell:

Well, I’ve moved 20 times across the country and back again, running and turning around countries. But I’ve had a lot of fun and I’ve been fortunate. I’ve been involved with big brands like Reebok and SkyBox and Mattel and Gibson and Indian Motorcycle and all these different industries. But Tom, they only call me in when there’s a problem. Nobody calls me up and said, “Oh God, we got a company’s really running well and growing like me. Would you come in and step in as CEO?” So, no, I always come in when it’s really important to take risks and be bold to get these companies turned around.

Tom Wheelwright:

Got it. So you have a little different view of a bold move and what a bold move means. Can you define how you see a bold move, as opposed to feeling like you have to completely disrupt an industry?

Frank O’Connell:

Yeah. For me a bold move is first, it’s not something that’s marginally going to move the needle. It’s something that’s got the potential to really change the company and, maybe in some cases, change the industry. And a lot of the situations I’ve been in, I really needed bold moves to really get the companies into a very profitable position. I always look at it, if it was easy and you took very little risk, the incumbents would’ve already done it. So when I come in, it’s doing things other people only thought about doing, but were never willing to take the risk to do.

Tom Wheelwright:

How do you go about that? First of all, how do you discover what bold move you need to make? Because it’s not going to be the same in every company at every time. So how do you start? How do you decide what bold mood do I need to make?

Frank O’Connell:

Normally, everything with me and how people ask me, how were you able to move from industry to industry, all revolves around the consumer and insights into the consumer, because that’s the mindset I really have got to be able to change. So for example, let’s take Reebok. When we invented the pump, we had a phenomenal new piece of technology, but again, we were up against Nike and we had to come up with some kind of advertising campaign that was as bold as the product. So that’s where I worked with the agency and came up with the bungee jumping commercial, which is the two jumpers go off to the bridge, one wearing Nikes, one wearing Reebok, and only the eye of the Reeboks comes back, and oh my God, everybody said, every mother in the country, Frank is going to call you about this.

And I said, “Great.” One of the three big networks refused to run it. That was an incredible breakthrough because we got millions and millions of free advertising. So that’s one. Now the second one was, and I’ll talk about mitigating risk. In in the trading card business, we had this company called SkyBox, and it was a turnaround. Had lost $80 million. We had licenses in NBA, NFL, and whatever. So on the NFL license, I happened to be in David Stern’s office, the commissioner of the NBA. And he said, “Frank, go to your television.” And that’s when Magic Johnson announced he was HIV positive. I did a piece of research both with mothers and with children and he, at that point, was seen as a hero. So I signed him on, and I could have never afforded him, but I signed him on and he did a phenomenal commercial with his son. He did trading card sets the Dream Team. It spun the company totally around, but that was unquestionably quite a risk.

Tom Wheelwright:

So that was definitely a bold move. So you talk about using data and looking at the customer. So what kind of data are you looking for? How do you go about gathering that data and how do you go about finding what the customer will respond to?

Frank O’Connell:

Yeah, well, it’s kind of interesting and I do it the reverse. Every time I take a company, take over a company, I’d go to the bottom. I go first to the point at which the consumer’s buying a product. So I spend tons of time in retail stores, talking to consumers and customers who are really handling the product. And you get a kick out of this. But in the food business, of course, we would go to cocktail parties and I would ask the hostess, “Would you mind if… Could I look in your cupboard?” To see what brands she was buying, et cetera. So I do a very basic… And then I use all of the products and the competitive products and I force my management teams to do it.

Then I start in more sophisticated research, doing… And I get right on the cutting edge, segmentation studies that break the markets down, all sorts of motivational work. I get deep into the research of understanding what is the position in the consumer’s mind my product is fulfilling. What is the benefits? And then I springboard off of that into a whole new process of product development.

Tom Wheelwright:

Interesting. So wow, how to unpack all this. So when you’re looking at, let’s say, you were looking at business… Now you tend to go into businesses that have had big failures and you’re turning them around. If you were a business that was not in failure, but maybe you were in an industry that was in danger of failure. I’ll give you an example. My industry is a perfect example. The CPA industry, where I think the CPA industry is in a huge danger. They’re in danger for technology reasons, they’re in danger for a lack of new blood coming in. What would you tell a company that was not unsuccessful, but what kind of bold moves they would need to make to become extraordinarily successful?

Frank O’Connell:

And I definitely use a process. I am huge on strategic planning. So normally what I do is I bring in a consulting firm because most companies don’t have that capability to do the analytics and study industries. And so I bring them in and the first thing we do is look at our industry, whether it’s a service industry or a product, and they have them tear it apart. Who are all the competition? What’s the customer? What are the trends? And a lot of what I spend time on is exactly what you’re talking about. It’s just not what’s happening now. What do I anticipate is going to happen in the future? And particularly because technology is such a big factor. So then we kind of map out where we are, my company is, and where the industry is heading. And then I go into a very creative process, which is creating alternative strategies.

And I always say, you can never end up with a better output than the creative strategy you created on the front end. So we create alternative strategies and then we evaluate those strategies, try to pick the best strategies, and then we put an executional plan behind it and track it. And if we make mistakes, which you’re going to do, I use what I call a quick error correct these days. If you use a piece of technology, it’s going to kill you, we got to move. So I use a process, but in the end, creativity is a big part of it in innovation.

Tom Wheelwright:

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Now you said something there that I thought was really interesting in making those minor adjustments, because you’re talking about a bold move, but when we look at, say, good to great, where we talk about rifle shots, right? Are you sending out a cannon ball or are you taking those rifle shots, adjusting, before you send out the cannonball?

Frank O’Connell:

No. Yeah. We will. You know what? It depends on how much time I’ve got. So in some of these cases, if I see they’re going to run out of cash in the next year or so, I got a short runway, I got to take my best shot, big bull shot to begin with. If not, if I’ve got runway and time, I’ll take the single rifle shots and we’ll guide it along. Then we’ll see we got a clear path, we’ve done enough pre-testing, we know that our concept is probably going to work, then I’ll pour the capital into it.

Tom Wheelwright:

Got it. So it does sound like you’re able to… When you have enough runway, you can mitigate the risk by, first of all, developing the strategy, then you’re making the adjustments a little bit of time until you see that yes, this is going to work, and then you take the big plunge.

Frank O’Connell:

Correct. In this environment now, we used to do… I run big companies and I’d go in and they’d have a five year plan and a strategy and we’d review it once a year. God, now you’ve got to review your strategy once every three months and be willing to make much more radical changes than you ever dreamed of in short spans of time. And then does it work? Does it not work? Move again.

Tom Wheelwright:

So this involves a lot of risks. So how do you get… I mean, I realize you’re going in, they’re going, “We have nothing to lose here.” And that may be the case, but what about when they do have something to lose and they’re going, “I’m not sure I want to take that risk.” How do you convince because you’re coming in doing something they only thought of doing, right? You’re doing something that they’ve… Yeah, we’re just not ready to take that leap. How do you get a company to take that leap?

Frank O’Connell:

Yeah, good point. And it makes a big difference whether it’s a public company or a private company, as you know. And it’s easier in a private company, because I’ve got fewer people to convince and I can move more swiftly. In a public company, it’s quite different. So one of the most critical parts is the board. So I really have got to educate and convince the board and bring the board along the whole thought process with me and have them convinced that we really need to take this risk. But I also use strongly very well known outside consulting firms because they do incredible in-depth work. They’ve got credibility, they can do studies, and also help us put together risk mitigation that quite frankly we wouldn’t think of in the company. So your board, strong outside consulting firm, and whatever are really important to help convincing the company do. And then we have to put the public story together. So I have to be very good as a CEO, you know, when I go and tell… Or I’m on Bloomberg or whatever, I got to be very convincing to thousands or millions of investors.

Tom Wheelwright:

So that is really interesting. So part of what you’re talking about, I hear, is really getting the numbers right. And part of it, I love that you’re bringing outside consulting firms because I’m going, okay, you don’t have to know how to do it yourself. You just have to say, this is what we need to do. And now we can have help getting that together. But they also can help getting the numbers together.

Frank O’Connell:

Instantly. We use very strong financial analysts, all sorts of firm tax experts. I mean, we bring them all in, because a lot of that stuff you don’t think of as a CEO or your team has no exposure with is extremely important. And particularly as the big changes in the laws and everything else. So yeah, I’m just a strong believer in bringing in the experts.

Tom Wheelwright:

I love that. Okay, you decide as a business leader, as a CEO, smaller company, say not a public company, I want to make some bold moves, because I want to make some big strides. I don’t want to just limp along here. And I’m a little concerned about what the economy’s doing. I’m a little concerned about interest rates. I’m a little concerned about what customers are going to do once they run out of pandemic funds. And so how do you actually build that strategy and put that together so that you can then take that bold move?

Frank O’Connell:

Now you’re talking much more about a smaller company?

Tom Wheelwright:

Smaller company. Yeah.

Frank O’Connell:

And that’s where when I come in with my experience and they often bring me in to help, so I try to use a lot of my experience to help guide them. But the other thing I always look for is, is there a best practices case someplace in this industry? Somebody’s probably done it right. What can we learn from them so that we can kind of prove that our concept and this risk we’re about to take has got a pretty decent probability of being successful.

Tom Wheelwright:

I like that. So now you’ve got along, but sometimes you come into a no win situation. Sometimes you go, you know what, it’s not going to work. How do you deal with that?

Frank O’Connell:

All right, well I’ll tell you, and I describe it am my book, Jump First, Think Fast. I describe probably one of the best is Gibson greeting cards. So Gibson was a smaller player, probably about a 10% share of the greeting card business, between Hallmark and American Greetings. And so I went into basically grow the company, and we did all sorts of radical, innovative things. I cut our costs by outsourcing, laying off 500 print people, and outsourcing all of the printing to whole new high-speed technology. I outsourced all of the creative development of the art and the verse. They had a hundred people inside the company doing this, who had gotten old and didn’t understand, oh, there’s a 50% divorce rate, four grandparents, and different humor. So I outsourced that and really increased our creative stuff. We built new brands because our brand wasn’t going to be right for young people.

So we made a whole bunch of moves. It got great support from getting the product in retail. But what was happening was American Greetings and Hallmark were… You have contracts for the space in stores and you pay up front. 100 stores would be into the millions for that shelf space, solely for your brand, over a period of time. They were just outbidding me. I mean, they were buying my shelf space, regardless of the performance of the product and the consumer. And they were just squeezing me, squeezing.

I said, “Uh oh.” Went to my board, did the analysis, and said, “Look, this is going to continue on and we’ve tried everything. I can’t find a solution. This has turned into a banking business, not a consumer product business.” I said, “We need to get this company sold.” And so I went and eventually was able to sell it to the… I even tried to buy out an electronic greeting card company way early on, but I just went to the board and said, “Look, let’s sell this company before we lose more value for the shareholders.” And we did. We sold it to American Greetings.

Tom Wheelwright:

Wow.

Frank O’Connell:

So you do get there. I am a believer. If you get into a situation you know aren’t going to win, better move. Yeah.

Tom Wheelwright:

Don’t be a Kodak and let the whole thing fall apart on you, huh?

Frank O’Connell:

Yes.

Tom Wheelwright:

I like it. So if you could give a privately owned company three steps or three words of advice, what would they be?

Frank O’Connell:

And this is what I frequently find. One, get a strategic plan. Put together a strategic plan where your backers and you’ve got everybody aligned and you’ve got a very clean path forward. Then you want to really translate that into metrics and accountability in terms of your organization. The second one is, there is absolutely no substitute for talent, particularly in a small company. And I’ve done my own startups where I have made mistakes and you can’t… In a small organization, you’ve got to have the right people and you’ve got to be willing to make tough decisions to make sure to get them and get them in place. And the third one was you’re always raising capital. So you always got to be working on, have I got enough juice?

Tom Wheelwright:

Good point. We do find, of course, as accountants, we see the business failures a lot and we find that more businesses fail for lack of capital than anything else.

Frank O’Connell:

Other thing I’ll tell you, and I address it a lot in Jump First, Think Fast. I watch everybody does studies on failures in startups. But I remember, and Harvard does a lot of great studies, but when I remember from years back, Harvard did a study and they said one of the principle reasons that entrepreneurs fail is for lack of a plan because they probably have never been through that process.

Tom Wheelwright:

Got it. I love it. So the book is Jump First, Think Fast. I love that. And if we want more information about what you’re doing, where would we go, Frank?

Frank O’Connell:

Oh yeah. Well, you go to our website, jumpfirstthinkfast.com. There’s a lot on my LinkedIn page, all sorts of articles and we’re-

Tom Wheelwright:

Awesome.

Frank O’Connell:

… publishing all sorts of leadership things and views on current subjects.

Tom Wheelwright:

Awesome. So thank you so much, Frank. Frank O’Connell. Jump First, Think Fast, and just remember, when we strategically make a bold move, I like that combination. It’s a strategic move. We think of bold moves as sometimes erratic moves, but what I keep hearing is, it’s strategic. So we get that strategic plan together, we get the talent together, we make sure we got the metrics, and, of course, we’re always making sure that the capital is continuing to come in, to flow in, so that we can actually fulfill that strategic plan. When we do those bold moves, we’re always going to make way more money and pay way less tax. We’ll see you next time.

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