Mohawk's Bill Kilbride: Focus on Leadership
Interview by Kemp Harr
Bill Kilbride grew up in Long Island but moved south to attend Tennessee Wesleyan College, which he chose at that stage in his life for its access to the outdoors, liberal arts education program and small class sizes. At Tennessee Wesleyan, Kilbride majored in business management and met John Thornton, who went on to start American Rug Craftsmen.
After college, Kilbride spent 20 years in financial services in New York City where he left his mark—moving from private banking (where his client base included the families of some of America’s most influential people); to serving as the first vice president of corporate planning for Dean Witter Financial Services; and developing and launching a major credit card brand, which was a new model for credit at that time. However, with young children in tow, Kilbride and his wife Mary, a CPA and financial analyst, were ready to get out of the city, raise their kids in a more family-friendly environment and embrace a new challenge. In 1992, Thornton convinced Kilbride to leave his office on the 74th floor of the World Trade Center and head south once again to serve as president of American Rug Craftsmen, which was acquired by Mohawk Industries in 1993. Today, he is both president of Mohawk Home and chief sustainability officer for Mohawk Industries. Kilbride and his family live in Chattanooga.
Q: How were you able to make the transition from the financial world to the flooring industry?
A: In New York I was lucky enough to lead change within some of the largest financial corporations in North America. Several were quite bureaucratic, others, like the New York Stock Exchange, were actually quite entrepreneurial. I learned a great deal about how to be an entrepreneur in a big corporation but was fortunate to gain a keen understanding of how big corporations work and how to make them work, so that in the 22 years I’ve now spent in the flooring industry with a company growing as quickly as Mohawk, I understand the different phases of business and can apply that experience here.
That said, selling products instead of services was a big change. After my first day at American Rug Craftsmen, when I watched a day’s work loaded into the back of a truck and shipped out, it was a very different feeling for me.
Q: How has the rug industry changed during your tenure, and what impact will this change have on the viability of the market?
A: I believe that any change in any market is driven largely by the ultimate consumer. We used to focus on the rug merchant—what he or she might like. We counted on the buyer to understand what would sell in his stores. But, in the 21st century, we focus keenly on what the end-consumer wants with regard to color, pattern, value, price, performance, construction, size, durability and more. As a manufacturer, you have to be wired in to what the trends are. To do that, we look at upholstery fabric and clothing, and go shopping at retailers that are trend leaders. We also do a lot of research through social media to get in the consumer’s head. We’ll post a picture and ask what our followers think about the sizing of the elements, the colors, the axis.
The days when we’d load up in a van and lay a few rugs across a conference room table, where the rug merchant would say, “I like the red. Can I get it in blue too?” are gone. Today, when we go visit a major customer, and we’re doing a presentation, they’ll have their trend people in the room, their product development people, their buyer, their planner, their financial analyst. Now they’re asking us, “Can you create a product to match this piece of wallpaper for a theme we’re doing in our home fashion area?”
Within Mohawk, we pull people from commercial, residential and Mohawk Home and look at trends holistically throughout the company. We spend a lot of time leveraging the assets that we have here at Mohawk.
We talk about global marketplace and often that’s interpreted to mean sourcing and selling, but I define that also to include the diversity of the consumers in North America. Products today have to appeal to the rapidly changing diverse cultures and backgrounds of the American consumers. Twenty-two years ago, we sold rugs that could stay in a retailer’s assortment for five years or more. Today, the shelf life of a fashion product like rugs is probably less than one year. The Internet has fundamentally changed retailing forever, and the market has changed because the consumer has changed.
Q: Why do you think area rugs sales are so strong among furniture retailers? What can floorcovering retailers do to capture more of that market?
A: Pairing the sale of an area rug with a furniture sale is logical, since it assures that the rug selection will coordinate with furniture style, color and fabric. However, updating a room by selecting just a few pieces, rather than a full renovation, creates an opportunity to sell a rug separate from furniture. It is an easy renovation, unlike repainting or spending what could be a thousand dollars or more on a full room of new furniture.
For the floorcovering retailer, being successful requires commitment to the category by the retailer and commitment by the supplier to the retailer’s success. It won’t work without both. To sell rugs requires a commitment to the real estate, the required inventory, to knowledge of the product; to the ownership of the category by the retailer; and a complete understanding of the requirements of the consumer. The supplier must commit to providing product knowledge, a view of consumer trends, the position of supplier competition, to the highest levels of service and sales support. What won’t work is a rug rack sitting in the back of the store with little human energy given to committing to this component of the floorcovering business.
Q: I’ve been told that the consumers in the Millennium generation are more focused on low-end, take-and-toss home furnishings. Do you think that will change as they get older?
A: My view of the Millennium generation is slightly different. Because of the economic environment we’ve lived in for the last seven or eight years, I think the Millennium generation is choosing very carefully how, where, and on what to spend their dollars. If “low-end” home furnishings offer value, that’s what they’ll buy. They know how long they expect the product to last and perform. I do believe the Millennium generation is, perhaps, more concerned about our environment than other generations, hence I think repurposing at the end-of-use is more likely than throw-away.
True, when it’s worn out, it’s worn out, and that’s part of the value equation. But I see comments on social media indicating that customers are concerned about end of life, so we’re asking ourselves, is there a role we should be filling here? The consumer isn’t ready to pay more for a recycled or recyclable rug, but they are interested in companies that practice sustainability.
I also believe that, as the generation ages, the value equation changes. Census data shows that there are more single-person households at clusters of ages. We know the retired population is growing rapidly now. As the Millennium generation ages, regardless of what their lifestyle becomes (singles, couples, families, extended families), the value they assign to their living spaces will grow in importance, and they’ll find the products to deliver that new higher value.
Q: Two of the biggest growth factors for area rugs are the ongoing trend toward more hard surface flooring and the outdoor living movement. What has Mohawk Home done to maximize these two growth opportunities?
A: Our plans have been to position ourselves in front of the customer when she is ready to make the purchase decision by having a strong presence in each of the channels of distribution. At the same time, we continue to invest in our brands, so we are the recognizable product of choice across those channels.
Q: Pricing for rugs within the mass merchants has continued to fall, and this impacts their gross margin dollars. What is driving this insanity, and is this really what the consumer wants?
A: All merchants must offer the right product at a value-oriented price for their customers, whether that’s a $29 rug or a $2,900 rug. I read many of the consumer comments coming to us through our Internet sites and find that consumers who’ve bought our $29 rug at a mass retailer are often as happy with that purchase as the consumer who bought a $2,900 rug at a flooring dealer. It’s all about the value proposition within the unique customer base. At Mohawk, we commit to delivering the value paid for the product chosen and have a full array of products in an effort to have a solution to each value quest for which each consumer may be searching.
Q: Karastan is the best-known brand in the rug business. What is Mohawk doing to maintain the brand awareness among consumers?
A: Mohawk invests significant dollars in marketing Karastan: print, trade, advertising support, and more—very little has changed in the investment level for this premium brand. We constantly study where the investment should be made across all the right brand awareness and investment opportunities. Constant product development is required to keep all products relevant to consumers. We continue to enhance the assortment of Karastan branded rugs to enable it to hold its position as the best-known brand in the rug business. Jeff Bezos at Amazon said, “All business needs to be young forever. If your customer base ages with you, you’re Woolworth’s.” So our goal must be to keep Karastan young for the changing consumer. We do that through marketing directly to today’s consumer in shelter magazines and producing Karastan-branded product, which matches the highest premium value equation for which they’ll pay.
In the ’60s, ’70s and ’80s, people bought things that they planned to have for the rest of their lives. Today, telling a customer that they will pass down a rug to their kids sounds like a joke. After all, it might not even be what the customer wants in a couple of years. This affects value. We have to consider, how long does a customer want the product to last, and how does that impact the style? The best sellers in the Karastan line before are still the best sellers today. But as we create new products, we have to remember that the old $1,200 price point is now the $700 price point, and we have to ask ourselves, “what represents the best $700 value today” to be comfortable that we’re investing as we should? The product must conform to the consumer’s expectations of value. That’s what Cadillac did. We are doing the same thing and being rewarded for it. Karastan is the best machine-made rug from America—that’s what we’re still talking about.
Q: Rugs are a cash-and-carry item, making them the easiest floorcovering product to sell over the Internet. How has this changed the channel dynamics of the rug market? Where do you think this trend will end up?
A: The National Retail Federation says that 20% of retail sales will be done through the Internet in 2014. The Internet and ecommerce has significantly changed the channel dynamics of the rug market. We have a product that is traditionally cash-and-carry. However, the consumers didn’t really want to cash-and-carry room-sized rugs, so the larger rugs began to lose presence in the retailers. The Internet made it possible to order all rugs, including the largest sizes, with fast shipping timelines. Retailers now offer more sizes, more patterns, different value equations and fast delivery through the Internet, significantly expanding from the assortment offered in their brick-and-mortar stores. Floor space in stores doesn’t govern the assortment limits any more. Then, as you know, virtual retailers without physical locations sprouted up doing more of the same.
This retail trend toward convenient, low-effort shopping is here for good and will constantly change. Manufacturers have to make a decision: whether to follow this trend across new channel dynamics or to focus on the various niche channels they’ve historically supplied.
Q: I know that you wear another hat at Mohawk, as chief sustainability officer. As the largest flooring company in the world, how is Mohawk setting an example for the rest of the industry with regard to sustainability?
A: At Mohawk, we look at sustainability differently than not just our competitors but lots of other corporations of our size. We look at sustainability with a heavy inclusion of waste reduction. By December 31, 2013, we will have ten plants operating on zero waste. They won’t need a dumpster anymore. It took six months to get the first plant to zero waste, to get employees to engage in what was possible, to change the culture of the company. The next nine were easier.
We also have a strong emphasis on the people part. Mohawk does a lot in the way of employee wellness. We have clinics in our facilities. And we’re focused on helping the communities where we live and operate.
Product is what everyone thinks about, but that’s what we talk about least because that’s how we conduct business every single day, through systems like our Greenworks plant that turns recovered drink bottles into polyester. We’re currently working to find an end-use for recycled polyester.
It’s my fourth or fifth year in this role, and I have 20,000 people helping me. We’re doing things that are really simple that no one thought a company of this size could achieve.
Q: When John Thornton sold American Rug Craftsmen to Mohawk, you stayed in the business, and John cashed out. Who made the wisest decision?
A: I think we both did. John is the best entrepreneur I’ve ever known, and his accomplishments across the 20 years since the sale prove that out. At the same time, I’ve had the chance to take a young business, which will soon celebrate its 30th birthday, and steer its growth to becoming, arguably, the largest rug company and part of the largest floorcovering company in the world.
Q: As you look back over your career, what achievement are you the proudest of?
A: I was proud to be part of Mohawk when it became a Fortune 500 company, and I am proud that we are about to surpass $7 billion in sales. At the end of the day, it’s all about people, and I’m probably proudest of the role Mohawk has played, partially through me, in the lives, careers and families of thousands of associates who make it happen here each day year after year. I wouldn’t change a thing.
Q: What advice do you have for the young people who are following your footsteps into this industry? What is the equation for success?
A: Although career expectations and plans for today’s young people have changed dramatically since I was entering the workforce, my advice remains the same. Follow your passions; if you don’t enjoy what you’re doing, it really isn’t a career. Balance your work life with your personal life because if you don’t, both sides suffer, and you’ll be less than you can be in both. Learning can never end—plan on that. Require yourself to give 110% to everything you launch into; the rewards are limitless. Understand the importance of both urgency and patience. Understand that people skills are of key importance in the DNA of leaders; constantly develop them.
I have a daughter who is graduating from college this spring. She’s really worried about what she’ll do after graduation. The other day when we were talking, she asked, “How do I sell myself?” And I said, “Bingo! That’s what it’s all about.” I learned during my time on Wall Street that there are really no buyers in this world; we’re all sellers. We sell a product, a concept, an opinion, and we are constantly selling ourselves. A buyer buys because he’s ultimately selling or counting on selling. Today’s young people should understand the difference. If they don’t, they’re going to be buying $29 rugs for a long time.
Copyright 2013 Floor Focus
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