3 things the logistics industry can learn from Brad Jacobs’ new book
Brad Jacobs, serial entrepreneur and executive chairman of XPO Logistics, launched his book on Monday, enticingly titled, “How to Make a Few Billion Dollars.” In this, his first book, Jacobs describes the many good and sometimes painful lessons he has learned through his tenure of building billion-dollar companies out of fragmented markets.
Jacobs provides diverse insights, encompassing advice on transforming one’s mindset as well as highlighting the dynamic interplay between technology and human development. He questions traditional ideas of success and presents strategies for achieving substantial goals.
Related: Building products mark the spot for Brad Jacobs’ new focus: QXO
With his past decade of experience focused on building a highly competitive, highly lucrative family of logistics companies, Jacobs provides three authentic lessons valuable for all transportation and logistics professionals.
Plan to invest in technology
Jacobs expands on a conversation with his mentor Ludwig Jesselson, past president and CEO of Philipp Brothers, in which Jesselson explains that business success often hinges on accurately identifying and capitalizing on major trends.
He points out, and indexes at the end of the book, a 2 million-year-old megatrend that has accelerated its influence: technology.
While mistakes happen in integrating technology into a business model, Jacobs’ experience has shown that “if you want to make a lot of money in almost any industry, plan to invest heavily in technology.”
“Is there a technology threat or opportunity or both? For example, are there ways to automate business processes and drive customer service higher at a lower cost of labor?” he writes, while unwittingly pointing out the lowering margins seen by logistics providers pushing these businesses to maximize output to drive savings to shippers while making employees’ time valuable.
Jacobs also steers the technology conversation to the possibilities for AI in several industries, including those within the supply chain.
“Humans are waning and computers are waxing — that’s the single biggest trend I see. Any business that ignores this trend is likely to get smacked in the face,” he says.
Still, Jacobs understands that adopting technology isn’t easy.
“One of the difficult things about spotting tech trends is not a lack of information — it’s that the implications can be so big that people have a hard time getting a mental grasp on them.”
So how do logistics companies know where to adopt technology?
Jacobs’ suggestion is simple: Ask your customers.
“One effective way to spot a new trend is to ask your customers what their dream tech would look like, assuming anything is feasible and cost isn’t a factor. That removes any psychological blocks,” he says.
After those conversations, Jacobs’ teams at XPO, warehousing spinoff GXO and freight brokerage spinoff RXO would assess the expenses and potential returns associated with each idea, strategically budgeting for affordability while prioritizing initiatives that promise the highest returns. “It’s a disciplined process that also allows for innovation,” says Jacobs.
He explains that even more so than his other endeavors, XPO’s growth focused on the industry’s need for innovation.
“I created XPO in 2011 to capitalize on the truck brokerage opportunity with three powerful levels of scale, data science and automation, and I prioritized investing heavily in tech out of the gate.”
He maintained this thought process while building GXO and RXO — at which he says 96% of loads tendered have a digital component or are touchless transactions.
Overall, he believes logistics companies should be looking to automate everything.
“The importance of that, within the context of this chapter, is that we got the big trend right in our industry a dozen years ago, when it was far less apparent than it is today,” said Jacobs.
Teamwork makes the dream work
Throughout the book’s 200 pages (not including almost 40 more pages of educational tools including books to read and interview questions to steal from the entrepreneur), Jacobs spends the majority of his time acknowledging the human aspect of running a business.
This expands through book themes including the importance of company culture in M&A deals, hiring personalities and even company meeting structures.
Launching two spinoffs from XPO, he says, “required enormous grit from the team, and an astounding brain trust of collective wisdom,” acknowledging that building a team of smart, hard-working people with different backgrounds and opinions is necessary for scale.
Related: 5 takeaways from XPO’s Brad Jacobs at Future of Freight Festival
He used the leadership from XPO, GXO and RXO to showcase how all three businesses are running successfully but led by individuals from different backgrounds and educations.
The ability to understand people’s differences while working on a common cause can lead to powerful growth.
“On one hand, I want go-getters with big egos on my team — self-confident winners who are out to conquer the market and make a bundle,” he said. “At the same time, they need to genuinely respect others. Even a hint of arrogance can be a red flag. … ‘Can this person think dialectically?’ That is, are they capable of thinking from multiple perspectives, and reconciling streams of information that seem to flow in different directions.”
Once you have built your team, how are you keeping that team together?
This is a pain point often seen in logistics jobs as technology begins to come into play: How is your incentive structure built for loyalty and continuous business improvement?
This is where the billionaire points to the most effective tool in his book: compensation.
In an industry where noncompetes are sneaked into employee contracts, “We are family here” is preached as a cultural identity, and Jacobs keeps it real.
“Not a single one of [our 174,000 employees] shows up to work because they want to make money for Brad Jacobs. They come because they want to make money for themselves and their families — to buy a house or put their kids through college or fulfill an even bigger dream,” he explained.
That is why the entrepreneur is known to overpay, to keep A talent loyal to their work. Yet, Jacobs recommends incentivizing roles appropriately.
“I’ve been careful to align incentive structure with company goals. … If a salesperson’s commission depends only on revenue, it gives them free rein to bring in new customers that may or may not fit well into the company’s operational capabilities. That can impair efficiency and negatively impact customer service, margin, and overall profit.”
Jacobs says this has been a historical problem for the industry.
“This has been a strategic decision I made as a CEO — to pay like the big corporations and break out of the ‘penny-wise and pound-foolish’ mentality that has kept the transportation industry at the lower end of the compensation scale. This has allowed XPO to compete at the highest level for talent.”
Lead with love
Often entrepreneurs’ books come with a thousand ways to address business problems. Yet, Jacobs opens his book with a lesson on love and empathy, while describing ministering his daughter’s wedding.
“So what’s love got to do with making a few billion dollars? It has a lot to do with getting your brain in the right place to make good decisions. Fast-paced business environments swing between ups and downs, with many stressful interactions. Love is an expansive emotional state that allows you to neutralize conflict and get everyone to a better place,” he said.
Related: Jacobs leading takeover of software company as he readies next move
Jacobs gives several “durable love vibe” ideas for leading a company, including one-on-one “gratitude conversations”, in which a leader expresses gratitude for another employee.
He explains that the natural human reaction to stress is to get mad and down on ourselves. It’s something he says we “inherited from our hunter-gatherer ancestors.” But as a CEO, and one who is good at making billions of dollars, it’s your job to encourage people to embrace those problems.
“Life can be uncomfortable, but you can accomplish a lot if you can figure out how to reframe the uncomfortable things in ways that allow you to utilize them.”
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