Cutting tools: A 20th-century business moves into the 21st century

Marcus Ralston, ARCH Cutting Tools Vice President – Operations and Development, is an organizational leadership expert with a special background in business development and organizational change.

Throughout his career of more than 25 years, he has focused primarily on developing and implementing strategic sales and service models, effective channel management, customer advocacy, and innovative direct marketing implementation.

ARCH CEO Eli Crotzer and ARCH Cutting Tools President Jeff Cederstrom brought him into the organization in late 2018 to lead the evolution of ARCH within the cutting tool industry and make it a 21^st-century industry leader.

In this three-part story, he explains his outlook regarding the three key milestones of that evolution – pivoting for customers in today’s market, building the organization from the inside to succeed, and building the cutting tool workforce for the 21^st century.

Part 1: The industry today -- Pivoting for customers, and the impact of COVID-19

The cutting tool industry is what some may call a “dinosaur.” While it’s true that much of the industry is driven by a demographic and a generational culture that might be described as “old school,” I think it’s more accurate to say that ours is a 20^th-century business competing in the 21^st century.

What does that mean? I think the traditional focus has been on selling the tools themselves, but not so much on the technology and innovation behind them or on the services that can now be provided in support of those tools. We need to emphasize the technical, more complex aspects of our work; that should be the work that is highlighted. We should be getting the first pass at that work, which might otherwise be offshored as a standard proactive in companies’ current business models. But now that our customer base is broader and demanding a higher level of quality and consistency, and service, we need to evolve and become more engineering-services-driven.

Several factors are changing things, however. Certainly, how our customers’ businesses are changing has an impact. They’re competing – selling their products – in an environment that demands more innovation and technology and faster turn-around time, all at a lower cost. And of course, all this is needed without sacrificing quality and meeting whatever regulatory standards that may apply to their products and industry. Those are a few critical factors that drive the need for the cutting tools industry to evolve, but we’re currently living through what may be one of the biggest factors.

COVID-19 is radically changing how we do business – right now. We have had to rethink how we manufacture; we’ve had to reinvent our marketing and sales strategies, and we’re learning new ways to nurture our customer and partner relationships.

The concept of ‘sales’ has changed

Decades ago, sales representatives in our industry worked from their cars and hotel rooms, carried briefcases full of collateral, lugged product sample cases, and, while they were on the road, kept in touch with the office and customers by payphone.

Even when we began to turn the corner 15 or 20 years ago and started using mobile phones and laptops, compared to other industries like software, technology, and aerospace, our industry was still a decade behind regarding how we did business. Even now, utilizing real-time video meetings to deal with the limitations of the current pandemic, with our social media programs to engage customers and our application of some digital technology in ordering and service providing, we’re still a decade behind.

We’re still trailing industries outside the manufacturing industry vertical in the full implementation of e-marketing, digital experiences, and all the technology channels available today to drive sales, enhance the customer experience, and nurture those customer relationships. In many ways, we're stuck in that “old school,” 20^th century thought processes.

Fast forward to today and our experiences working through COVID-19. Suddenly our workforce can’t mobilize. Our salesforce can’t meet customers. They lose that face-to-face personal interaction, and that means a pivot from the traditional selling strategy. When you can’t look the customer in the eye, shake their hand, and say, “this is who we are, this is our value, this is what we can do for you,” you need to find other ways to deliver that message and manage the relationship. 

One interesting thing is that our customers are working under the same limitations during all this, so there is a real opportunity to look for unconventional solutions. Additionally, we’re experiencing a sort of contraction of the industry – partly because of the pandemic, but I think other factors are driving that, including the economy.

Through all this, we’ve demonstrated that we can drive the sales process and the marketing process in a very cost-effective manner. In sales, we immediately focused on the necessary education. We trained our sales team in the latest digital tools, not only in reaction to the immediate crisis but proactively so that they would be prepared for the future selling environment. On the marketing side, we took the significant step of launching our Centralized Distribution Center (CDC). The CDC provides ARCH Cutting Tools customers quick, convenient access to the very best general machining and high-performance cutting tools on the market when they need them. Customers appreciate this because they’re feeling the pressure and constraints of the COVID-19 crisis too. This forward-looking approach helps them do business during a very trying time. Progressive, innovative initiatives like these position us to evolve internally, establishing new methods and processes to ensure our market success.

Part 2: In a crisis -- Evolving and improving internally
The COVID-19 pandemic has forced us to explore some new approaches to how we do business in the cutting tool industry. The personal relationships with customers and partners will always be most important, but by embracing modern digital technology, we’ve been put into a position to be cost- and time-efficient in how we maintain those relationships, and we’ve begun to close the gap with other industries in our processes and our approach. We learn how to build and maintain customer relationships with and through our technical resources instead of looking at them as a temporary substitute for regular face-to-face meetings. 

In a contracting market like this one, it’s never easy to operate, but my perspective is – let’s take this opportunity to reinvent ourselves; to drive the evolution that is necessary to become a 21^st-century business. And we have been.

We are developing programs to drive sales growth and to strengthen our relationships with customers and key partners while limiting the size of our salesforce and limiting the related costs we incur – especially for travel. By training our sales team in the latest digital tools, we prepare them for the future selling environment and help them become more efficient and productive. We’ll never get away entirely from in-person sales, but we have learned that we can develop and maintain important relationships without every meeting being face-to-face. And we’re finding that customers are open to that and appreciate it because there are also greater demands on their time, and use more technology every day to manage those demands.

Further, we’re making certain our selling partners are efficient and productive. We’re training our distributors to be authorities in our products and our customers’ businesses; so that through that insight and understanding, we strengthen our customer relationships with each transaction.

Using old methods in a new way

Similarly, we’ll never get completely away from printed materials; it’s still a necessity but not as much as it used to be, especially if relationships are managed digitally. Customers are getting more accustomed to finding what they need online and are open to digital contacts and interactions.

There’s a door opened by this crisis to be creative, and there are a lot of customers and partners out there who have increased their creativity to meet the demand, so it’s opened our business to a lot of creative thinking about how we do business moving forward.

We’re finding there is now an openness in our industry to researching what they need digitally – they’ve raised their awareness and are using technology. This is partially in reaction to the pandemic restrictions, but it’s also driven by fundamental changes in how manufacturing does business today. So, in that regard, we’re already there – we have that option in our Centralized Distribution Center (CDC). As I referenced in my discussion regarding pivoting to meet customer demands, we have invested in building an industry-leading comprehensive catalog, and now those products available to our customers quickly and conveniently – digitally – through our CDC. It’s a single-point-of-contact ordering approach that saves our customers valuable time. 

When the crisis of this pandemic hit, a lot of our industry competitors viewed this limited direct access as a challenge, and with much negativity; but I saw an opportunity, I asked, “how can we leverage this?”

Now, at our corporate- and the board-level, we’re starting to contemplate, “well, we’ve been really successful when we’ve been doing business in this ‘COVID bubble,’ so we ask ourselves, “how can we improve and transform our business so that all areas incorporate new strategies to meet the needs of modern consumers?”

The more progressive our business and our industry becomes, the more success we will have with our customers and partners.

Innovative approaches: New thinking

Progressive, innovative marketing is critical to success. Traditional approaches and even venues won’t necessarily provide the same return on investment as in the past. In this crisis, we reexamined our investment in trade shows.  Now, because of COVID-19, there is no IMTS. But we – the ARCH Cutting Tool leadership team – had already created a plan to reinvest the money in a more intimate relationship with customers. Suddenly, we were ahead of the game, with many other digitally-driven ways to engage customers that provide the same – or better – return on our investment. That’s an example of how the ARCH leadership is progressive and open to change and flexibility.

From the customer standpoint, if we’re going to embrace this digital world and this telecommuting, the customer engagement is so terribly important that we need to find innovative and creative ways to manage these relationships digitally/remotely – by the right people. People who thrive in that environment.

What’s different about ARCH than any other business I’ve worked for – especially in the cutting tool business – is we’re very decentralized, including our leadership structure. I can work from home or on an airplane – anywhere. Our leaders model our flexibility for adaptive office environments, versus traditional brick and mortar. And this is not just a COVID-19 necessity. ARCH Cutting Tools has a legacy of this remote work approach, with our leadership and experts dispersed throughout the country. This unique dynamic within our corporate leadership culture has led to a very successful business, and it’s getting even better because of the digital revolution that we’re now embracing.

Research indicates that a decentralized workforce, made up of the right individuals and relying on the available digital tools, often devotes more time overall because they are flexible to attend to personal issues between work assignments; this flexibility enhances productivity. Old school bosses (20^th century) think “work/life balance” means “I don’t want to be here.” They believe that there is less devotion to the job if there are still concerns about personal issues. The reality: When “the job” cares about them, workers care about “the job.”

That leads to an additional opportunity for us to evolve. Our industry is undergoing a transition in which there is less demand for standard tools and a greater demand for specials – customers, because of the demands on their business, are demanding more innovation at the spindle – more technically engineered tools. A critical step to meet this demand is evolving a modern workforce to meet modern customers' needs.

Part 3: An aging industry -- Cultivating the next generation workforce

The cutting tool industry is dealing with the very real challenge of an aging workforce. Baby Boomers, the people in our industry with most of the institutional knowledge and skills, are retiring at a rapid rate. According to a January 2020 report by the U.S. Bureau of Labor Statistics, our industry's median age is about 49 years old – we need to be recruiting and training and retaining younger people—a lot of them.

In comparison to other industries, there are few young people choosing to join our industry. We are going to quickly be experiencing a talent gap – a real labor shortage in many critical skills. The more progressive our industry becomes, the more success we will have attracting younger workers in every discipline.

Attracting engineers is particularly problematic. Colleges and universities promote four-year engineering programs with the promise of work with organizations like NASA or in high-tech, and that graduates are destined to become creative designers and engineers with many of those opportunities available to them. The reality is, they graduate and get into the workforce and realize that there are not enough of those “glamor” high-level, exciting design/engineering opportunities. But there are opportunities – plenty of them – in manufacturing industries like cutting tools.

Young engineers who look at other manufacturing industry segments, including automotive and tier-one suppliers, will look to cutting tools – if we make the environment attractive.

One thing missing from our business is an internship or apprentice program. Not just the traditional trade segments – Apprentice, Journeyman, Master – but an approach that’s cross-discipline: engineering, sales, marketing; having a true career path for all the talent in our business – that would make it much more attractive because attracting younger workers in every discipline is important to making ours a progressive, aspirational industry. That engineering talent shortage is reflected in the other disciplines critical to our industry, too, including sales and skilled trades.

I look forward to a day, not long from now, when young engineers, or machinists, or sales and marketing professionals see their friends going to work at ARCH Cutting Tools, and they want to be a part of it as well. We will create this word-of-mouth among the prospective talent – this is a very tribal, grass-roots approach to developing talent in our business, but it’s effective.

There’s a lot of risk to organizations with the aging workforce. It’s also essential to manage the knowledge transfer from your senior employees to new employees and stay engaged while recruits work through the transfer and become comfortable with their new responsibility.

Surviving adversity, recruiting through it

Since I’ve been in the business, we’ve experienced some significant downturns; in 2007-08 and even a few years ago, there was a situation in which it’s easier to cut the workforce to normalize profitability than to make other changes. It’s perceived as the quickest way to rationalize the bottom line.

But what really happens is that often the highest-compensated individuals, the ones who’ve been around the longest and who have the most knowledge and are the most experienced and talented, are separated. Even if they’re temporarily laid off, they tend not to come back. When you have these big dips – and we face another one because of COVID-19 – it’s prudent to protect your talent. You may not get new talent, but it’s important to keep and develop your “middle talent.” They are the ones who know enough that they don’t have to start from square one, but they’re not ready to take the full responsibilities of a more senior employee.

I think we’re looking at challenges regarding the talent shortage that also are about the question “What’s the allure of corporate work?” not just “Why work in the cutting tool industry?” Do I want to go to work in a company with all the bureaucracy and a system that may not value me? From a cultural perspective, that’s got to change, and I think some progressive companies are mining talent that way, but they’re a minority. The ARCH Cutting Tool legacy culture works to our advantage in that respect. We have progressive leadership that embraces flexibility, and throughout our organization, we have managers who create an environment that promotes an entrepreneurial approach to work.

Attracting the right workers

There’s been a paradigm shift. In the past, when you interviewed for a job, you were interviewing with the organization. What can this business do for me as an individual contributor? What’s the pay, benefits? But now interest is moving toward quality of life, the concept of “work/life balance” is important to the next generation workforce – flexibility in their working hours, concerns about pursuing their own interests, and how much are they empowered if they come to work here? You have young, very talented people, and typically you stick them behind a desk. That doesn’t motivate them.

Our industry needs the perspective, if we’re going to attract that generation, we need to think like that generation and pursue them the way they want to be pursued.

Why? Because the success of a company depends on the success of its employees.

If you can establish a culture that involves camaraderie and allows you to move through the organization very efficiently, with opportunities and promotions, you know that’s where new talent – modern talent – will see value in the organization. The new generation of workers has a reputation as job hoppers, but I think that’s an oversimplification. I believe what they’re looking for is an ongoing challenge and the opportunity to try something new. You can create an environment that attracts those “job hoppers” too. You give them the opportunity to keep them moving within the organization and show them that there’s room for personal growth.

Selecting the right people – that’s near and dear to my heart. Traditionally, we don’t measure candidates for their cultural fit; we measure them by what we see on paper. Maybe they don’t have all the skills or experience they need, but that can be learned; but if they are open-minded and flexible and can work independently, you can work with that and develop them. But if you bring in someone who looks like they have the right skills but cannot work within the culture, you’re doomed to failure.

What matters is the results of the workforce. You can make the work attractive – you can work from home, you can be flexible, as long as the results are there. They can focus on what they need to accomplish, not how many hours they have to work. Investment in the workforce also is a powerful benefit. Again – what matters is the results; they’ll take ownership and deliver. They’ll take an entrepreneurial approach and treat their job like it’s their business, and that’s good for our company.

ARCH Cutting Tools is ahead of the curve now. We’re faster, we’re nimbler and more flexible – and we are becoming more progressive in how we approach our business and our customer and partner relationships. We’re also strategically building the right workforce for the future. Our goal is to thoroughly prepare internally to succeed externally – as a progressive 21^st Century business.