Eric Kish, CEO of Nanoramic Laboratories is in the studio during this “National Advisory Showcase” segment to talk about scaling businesses effectively.
Please excuse any typos in this hasty transcript.
George Walden: Hello, Texas. This is George Walden, your host. Matt and Jay couldn’t be with us today, but I’m with a special guest and we’re gonna go right into it. I’m here today with a very interesting man. If learn a little bit about his history, you’re gonna find out this man and his past has actually served in two militaries. That’s a unique background in and of [above] itself. He is also a practical CEO. He is an author. He is a speaker, and he does business education for business owners. We’re gonna talk to him today. Welcome, Eric Kish.
Eric Kish: Thank you for having me.
George Walden: Oh, this is gonna be fun. You know, you’ve just written a book that’s called From Five to Fifty to Five Hundred. It’s about scaling a business.
Eric Kish: Yes.
George Walden: So tell us how we scale our businesses today.
Eric Kish: So it’s interesting. People think of scaling business as when I say about scaling business, they think they have to find financial resources, human resources, etc. I try to convince them this is the wrong way to approach it. The first thing you have to do is to create an organization that can adapt to whatever’s thrown at her. If you do that, the advantage of it would be that you would be able to keep your costs down while your revenue goes through the roof which is where you make money in scaling.
The opposite of this I call choking. When you hit an inflection and your first reaction is to throw money at it, your cost will start growing faster than revenue. It’s a vicious circle. Sometimes you cannot stop it. I’ve seen many companies going under because of that.
So that’s my teaching. My teaching is you want to prepare your organization for that moment, but when they will face an inflection point, not even knowing what that inflection point will be. So you want to create a type of [offer-grant] on organization that will adapt to whatever is thrown at her at that particular moment. That’s called adaptive capacity.
George Walden: So that’s very cultural.
Eric Kish: It’s very cultural.
George Walden: Orientation. So where did you learn this? What was the background that drove you to come up with this?
Eric Kish: Two things happened to me in my life. One is I served in the IDF for almost ten years. That’s where I learned what a leader should do. The other one is in sports. I actually played water polo for ten years. I was in the national team. I saw what a coach needs to do to create winning teams. Guess what, they’re not very different. The army and the athletics.
I learned very fast that you as a CEO, as a practical CEO, if you really wanna succeed in scaling organizations, you have to be a coach. One thing a coach cannot do is play the game. People don’t understand this. It’s very easy to play the game, be a player on the field, but being a player on the field will not multiply organizational energy. As a coach, you can multiply organizational energy. It’s very interesting a coach cannot do anything while the game is being played. He has no power. His only power stops until the game starts. That’s where the coach is the one that has to create adaptive capacity for his players so they can play the game without him, and that’s what I practice.
George Walden: Fascinating. Fascinating. So why don’t you give me an example of a situation like that. We were talking about a refinery that you actually got involved with and turned around. This was a great story.
Eric Kish: Yes, so. That was 2001. It was actually privatization. We boarded for 7 million dollars. It was bankrupt, it was a time when refining business was under the water. We inherited 3,600 employees, which is unusual for a refinery because they’re automated today. You run refineries: 300 people. We didn’t have much money because every bank in town had a report from [Anston] Young saying that that refinery will never survive.
It was very hard for us to actually get money. We didn’t have the alternative of throwing money at the problem. Of course when you start turning around a company, everything falls apart. The first six months are just chaos. Pure chaos. You need to look through the fog. You need to understand that the people that are there are extremely valuable because of their experience. It’s maybe not their fault that the refinery went under. You want to turn around the refinery with the same people that you found there. I’ve found that very engaging for me and very valuable for me.
My job was not to run the refinery, my job was to create this adaptive capacity in my people’s minds. Adaptive capacity for me is basically being adaptive to anything that is thrown at you. You have to take decisions without calling your boss.
George Walden: I love that. You were telling us a story about a reactor that actually went offline.
Eric Kish: So interesting, crazy times. I’m CEO for like nine months. Then September 11th happens. All the refining business goes upside-down. We decide to stop for a major revamp. In about five days through the revamp, we have this 20 story tower that cracks under water pressure. It’s like an eggshell. We’re looking at this tower and we are just appalled because that tower was the only thing that was extracting sulfur out of gasoline, and if you don’t extract sulfur out of gasoline you cannot sell it.
We call every engineering company in the world and they told us it takes twelve months to make a new reactor. Maybe another four-
George Walden: It probably cost a lot of money to do that.
Eric Kish: It will cost five, six million dollars.
George Walden: Which you don’t have.
Eric Kish: Which we didn’t have anyway. We realized we have to think completely out of the box here. The same guys, all the guys that were running the refinery, they were so wise. They knew exactly what the problem is. Even without asking me, they started to search for alternatives. They knew from their past experience that somewhere in the country on the other side, there was a petro chemical plant that used towers that were similar and maybe they’re still around. So they actually flew across the country in the weekend to check it out, and they found out that these towers are still there, but they’re owned by gypsies, which by the way control the scrap metal trade in Southeastern Europe. I have to negotiate with their boss which is called Bulibasha, which is like a tribe leader. I say okay, let’s go there and see what I can do. Of course I have to drink and smoke for about three days and trade horses and whatever you have to do in order to negotiate with the gypsy leader. At the end of the three days, instead of one tower, I find two. I buy both of them for 20% of the price of a new one.
Now, of course they were not perfect. So now we have to figure out how we make this work. Four days later, we have the towers in our courtyard, and our engineers, I don’t know how, figure out a way to put them up and I’m ending up six months later with four times more de-sulfurization capacity than before which makes me the most competitive refinery in the region.
George Walden: Amazing.
Eric Kish: Yeah, so from a total disaster, I’m actually coming out … this phenomenal refinery which we [IPLed] later for 450 million dollars.
George Walden: What a terrific story. Now tell us, if we want to learn more about your background, want to learn about the book, how do people find you?
Eric Kish: You can find me at erickish.us. This is my author’s website. That is where I’m launching my new book, Five to Fifty to Five Hundred: How to Run and Build Scalable Organizations. And also, you can find me on Medium. So I have a publication on Medium called The Business Navigation Framework. I publish an article every week.
George Walden: Of course we’re gonna have this all available to you on our website. Just follow up with us, we’ve got to go pay some bills. This has been a lot of fun. Thank you, Eric.
Eric Kish: Thank you.
Sponsored in part by:
George Walden is a Managing Director and Principal in Corporate Finance Associates’ Houston office with twenty-five years experience as a middle-market investment banker. George is a member of CFA’s equipment industry practice group and an expert in the precision machining industry with special emphasis on manual machining, CNC precision machining, and gun drilling services and has been responsible for several industry-leading transactions. You can learn more about George HERE.