01: MAGNET CEO Ethan Karp on Innovation in the Face of Adversity

On the kickoff episode of A Life of Climb Podcast, MAGNET CEO Ethan Karp shares how his organization pivoted to mobilize thousands of manufacturers in Ohio to make life-saving PPE supplies during the COVID pandemic. He shares how the experience taught him about the power of relationships to make lasting change. Then Ethan’s mentor and Vistage Chair Cheryl McMillan joins me to discuss how she helps leaders to prepare for the unexpected.

View all episodes >> A Life of Climb: The CEO’s Journey Podcast 

TRANSCRIPT

Sam Reese (00:21):
Welcome to the first episode of A Life of Climb podcast. I’m your host, Sam Reese, CEO of Vistage, the world’s largest CEO coaching and peer advisory organization for small and mid-sized businesses.

Sam Reese (00:33):
Every month, I attend my Vistage CEO peer advisor group meeting with 15 other CEOs and business owners. We leave ego at the door and we put our biggest challenges and opportunities right on the table. We pressure-test our solutions with peers, and yes, we call each other out.

Sam Reese (00:49):
Bringing those learnings to other leaders of small mid-sized businesses is really the inspiration behind this whole podcast series, A Life of Climb. This is a podcast by CEOs for CEOs. It’s a celebration of high-integrity leaders who are growing their businesses and actively supporting their families and communities, really in the face of sometimes extraordinary challenges.

Sam Reese (01:13):
Each episode of this podcast will be broken down into two blocks. Our first block, we call it the summiting story, where we’ll be taken inside the personal leadership journey of a CEO and this conversation will be guided by the Vistage Chair who served as their mentor on the climb. In our second block, we expand the perspective in what we call the 10,000-foot view.

Sam Reese (01:35):
Today, we’re joined by Ethan Karp, who led a remarkable effort to transform his organization in the face of COVID. He’ll take us inside that experience with Vistage Master Chair, Cheryl McMillan.

Sam Reese (01:47):
Then later I’ll join Cheryl to talk about her perspective as the guide for Ethan on this journey. And we’ll break down the leadership lessons that CEOs can apply to their unique situations. Thanks so much for joining us. Now, here’s Ethan and Cheryl.

The summiting story: Vistage Chair Cheryl McMillan and the leadership journey of CEO Ethan Karp

Cheryl McMillan (02:03):
I’m Cheryl McMillan. I’m a Master Chair with Vistage International. I’ve been a chair for 16 years. I describe a chair’s role as encompassing many roles. Sometimes I’m a confidant, sometimes I’m a supporter, sometimes I’m a master question asker, sometimes I’m a kick in the butt. So it’s really about determining what does my member need now most at this time.

Ethan Karp (02:38):
I’m smiling because of the kick-in-the-butt role, all of our members would agree with this. And I think half of the members in the group are specifically in the group because Cheryl holds them accountable in a way that no one else does.

Ethan Karp (02:51):
I’m Ethan Karp, CEO of MAGNET, Manufacturing Advocacy and Growth Network. We are a nonprofit located in Cleveland serving all of Northeast Ohio and our mission is to strengthen an economy that relies on manufacturing.

Ethan Karp (03:06):
The United States relies on manufacturing but in Northeast Ohio, 50% of the economy relies on the 20% of manufacturing jobs. Literally one out of every two jobs. So what we do is we actually go in and help do hands-on consult for companies. So we’re a service business, nonprofit mission.

Ethan Karp (03:24):
We go help them design machines and adopt the latest technologies. We help them think through operations plans and marketing plans. And then we do this thing with the community where we bring folks together to help solve these really, really intractable workforce issues that no single company can solve themselves.

Ethan Karp (03:40):
The beautiful part of Vistage is I’ve both learned about manufacturing and how manufacturers think, and on the other hand learned from my service organization peers how to run a more high-performing organization.

Ethan Karp (03:50):
So we are definitely weird in that way, but we have all the same problems and issues plus perhaps a few more because I just have so many stakeholders in the world that we have to deal with. And you’ll hear about many of them that came into play as we were responding dealing with the crisis in PPE.

MAGNET’s business pivot

Cheryl McMillan (04:08):
Let’s go back to COVID. When you guys started this journey of making the PPE equipment, it was relatively early in the shutdown. I know there was a lot of uncertainty business-wise if businesses were going to survive. People were scared of the disease, if they were going to get it. Hospitals were being overwhelmed. So it was a very, very scary time.

Ethan Karp (04:38):
It was absolutely terrifying for everyone. I think that for many jobs were third on the list of physical safety. Can I go outside? Can I go to the grocery store? Is my business going to get shut down and will it open again? Are grocery stores going to have toilet paper? That was what was happening at this time and everybody was watching the news from all their governors of when they were going to shut down.

Ethan Karp (05:01):
New York City at this time was already being overrun and their hospitals had totally filled up. So anybody thinking about the country was thinking about the massive death toll that could happen. Anybody who was thinking of their own physical safety was thinking, “And if I get sick, I can’t go to the hospital. What do I do?”

Ethan Karp (05:17):
One of my vice presidents came to me and said, “Hey, Ethan, well, one of the hospitals wants me to 3D print a ventilator part.” And we do know 3D printing, but we do not know hospitals, but there’s a big hospital asking us to 3D print.

Ethan Karp (05:31):
Well, I didn’t think anything of it, but thank goodness I said, “Sure.” One of our values, one of our cultural elements is personal growth and this person coming to me seemed to have passion around it. I said, “Absolutely.”

Ethan Karp (05:43):
It was totally an offhanded yes. What an impactful yes it was, because it was about five days after that that we started seeing the newspapers of the PPE shortage in New York City. And we saw nurses wearing garbage bags. And that’s when we said, “Why can’t we make some of this stuff?”

Ethan Karp (06:03):
And it was not a week later that the state was shut down, all of our work stopped, and we repurposed our entire staff to focus on responding to what eventually became known as the Ohio Manufacturing Alliance to fight COVID-19, a massive statewide collaboration across dozens of nonprofits to retool, remake, refocus a huge manufacturing base to make all of the life-saving PPE that was going to be required over those very dicey first few months.

Cheryl McMillan (06:39):
So this is where all of the foundation that you built with all of the relationships came in play. So how did you mobilize all those organizations in a short period of time? Because it was thousands.

Ethan Karp (06:56):
Literally in my garage we’re making a website, we’re passing this to Ohio Alliance and the governor announces it to everyone and says, “If you’re a manufacturer and you can help go to this website.” 2000 manufacturers later, our entire team are triaging, “How can you help? What supplies do you have?”

Ethan Karp (07:13):
Meanwhile, we’re talking to the FDA and we’re part of the governor’s task forces and all of these different pieces that come together to say, “How do we actually get real products out?”

Ethan Karp (07:25):
We were getting information by the moment’s notice. This group needed something. That group needed something. We were putting press releases out that the governor was reading off the next day, and you know that pressure of doing something like that. You mess one line up, get one thing wrong, have one company be told something wrong. There were high stakes going and we made mistakes. We screwed up.

Ethan Karp (07:44):
But that inner circle of trust, because we had it, people said, “No, that’s okay. I know you. All is good.” That was how we pulled this thing together. Relying on these core of folks with relationships to the governor’s office, to our manufacturers, to each other to make something really impactful happen, and we did.

15 million pieces of PPE

Ethan Karp (08:01):
15 million pieces of PPE were just directly made by the manufacturers that we created pipelines for. We created a million plastic face shields in five weeks. And for those of you [who] think, “Oh, there were lots of face shields everywhere.” I agree. That was the easiest thing to produce, but to make a million of them in five weeks required that we didn’t 3D print them.

Ethan Karp (08:23):
We were making them at very competitive prices by actually 3D printing molds. We had to use university resources and nine different companies had to make molds at the same time. They worked over Easter. I remember this so vividly, people saying that this is a holy mission for them to work over the holiday, passing the molds from one company to the other that we were coordinating so that they could get these life saving devices out.

Ethan Karp (08:49):
When the state needed to reopen another Vistage member, actually, in our group was the one who I tapped who has a dental laboratory. He was the one who we talked to and said, “Can we get a whole bunch of 3D printers to your shop so you can 3D print the nasal swabs when we get from our connection with another relationship the exact print so that the day it comes out, we can be the first out of the gate.”

Ethan Karp (09:13):
In fact, we stripped the 3D printing company of all of its printing capabilities to make these nasal swabs because we bought them early and this very pioneering Vistage member actually took the risk on it and he started making hundreds of thousands of nasal swabs, which is the reason why Ohio was able to open.

Ethan Karp (09:31):
We sent tanker trucks worth of hand sanitizer all across the state to community groups. The cotton face masks are still being made in the millions right now from automated equipment that we designed and built during the height of this pandemic. That was after we realized that it was unsustainable to use 1700 Amish workers that hand make masks. It was both too slow and just a logistical supply chain nightmare. This is what we accomplished.

The 4 essential things manufacturers need

Cheryl McMillan (10:02):
I’m going to stop you right there. Can you talk about then the impact on Ohio’s economy just from the masks? About how you move some manufacturing business back to Ohio permanently?

Ethan Karp (10:16):
Manufacturers need four things. They need talent. All right. Look, we’re doing lots of stuff, it’s really complicated. They need technology and automation because that is what allows us to reshore products. That’s when Biden talks about bringing back jobs. It’s going to happen because we are able to have technology that advances us.

Ethan Karp (10:36):
Third thing I talk about is new products and innovation. And the fourth thing I talk about is the leadership. Innovation rank among the lowest of priorities of manufacturers in January of 2020 by a multi-hundred-person survey that we take every year.

Ethan Karp (10:52):
And literally three months later, companies like this mass producer were totally retooled, making millions of pieces of personal protective equipment. And they were doing it because we designed the automation for them that was able to do it at a price competitive to overseas.

Ethan Karp (11:09):
And that means they can continue making masks, assuming we need masks, but certainly in the meantime, although the market is being flooded now back with overseas products, it’s the state of Ohio and others are purchasing locally made masks because they’re price competitive with this technology.

Cheryl McMillan (11:23):
Well, I remember when we were right in the middle of all of that, without you paying attention to the foundations of the business, you could have never taken advantage of this opportunity. You built the culture, you had the right team in the place, you worked on yourself and you worked on your skill of collaboration with many, many different organizations.

Cheryl McMillan (11:50):
And all of that came together in COVID that allowed you to make that sudden shift and help all those people that you helped, not only the first responders with the PPE, but by bringing jobs back, more manufacturing into Ohio, to stay. So after experiencing COVID and the pivot that you did, what do you think is next for you?

Ethan Karp (12:26):
I think the organization realizes how much good it can do because even though there’s thousands of companies and we’re a small organization, we know that what we saw happen in COVID and producing PPE, if we could do that for something like technology, Northeast Ohio, Cleveland, the nation would be in a better spot. So it gives us that hope, it gives us that excitement that we can do amazing things when we work together.

Part Two – The 10,000 Foot View

Sam Reese (13:40):
Welcome back. We’re talking with Cheryl here in this segment that we call the 10,000 Foot View. This is where we really try and understand various perspectives from the members that we deal with, and we’ve been talking with Cheryl and her member, Ethan. Cheryl, when you first started working with Ethan, he seems like such an interesting person. Tell me about him.

Cheryl McMillan (14:01):
Well, Ethan is definitely unique because he’s very intelligent. It was his first role leading an organization. He came from McKinsey as a consultant and he came into a turnaround. So he had to figure out how to put the basics, all of the foundation back in a business.

Sam Reese (14:25):
What were some of the things Ethan faced right away that made it such a difficult task?

Cheryl McMillan (14:30):
Well, changing the culture. I mean, that’s always difficult. And then figuring out how to start putting the right people in the right place. Who do I do first? What’s the best pace to do that? It’s not like everybody can wave a magic wand and suddenly all the perfect staff’s are in place.

Sam Reese (14:54):
I wish. It does not work that way, does it?

Cheryl McMillan (14:56):
No. And it can’t be done all at once because it’s too much of a change for the organization to figure out where to start and how fast to do it. And then at the same time while he’s doing that is what kind of culture does he want to build? And how does he start to do that?

Sam Reese (15:15):
When you talk about this thing that happened in his business, I see this big event where suddenly this big idea comes from one of his people, his VPs on this 3D printer for a ventilator part, which wasn’t part of the core business.

Sam Reese (15:28):
And I love how humble he is when he says, “I wasn’t even paying attention. I sort of nodded and said, ‘Yes.’” What was it about the culture? Because when he says it, it just makes it sound so basic. But I think there’re so many cultures that idea would never be brought up. What was it about the culture that allowed somebody to bring it up?

Cheryl McMillan (15:44):
Well, he had worked very, very hard and he continues to work hard on building the culture. So first of all, he made it safe for people to bring wild ideas and give him pretty direct feedback. That was already in place. There was no fear from the staff about approaching him on anything.

Cheryl McMillan (16:07):
So he built the foundation with the culture so there was safety in challenging, safety in giving him feedback, safety in new ideas. And then the other part is, as he started to see that his personality was driven by external validation, he could manage that. And so he wasn’t personally threatened with somebody challenging him. So I think it was the combination of those two things that made that possible.

Sam Reese (16:36):
When you think about this crazy last year with COVID, I wonder how you were advising your members on this in terms of 2001 and 2009. How did this feel different? Because that’s what was coming to me right when it happened. I had been a CEO during both of those periods.

Cheryl McMillan (16:52):
Well, I’d like to say it’s my great foresight, but it’s not.

Sam Reese (16:58):
We’ll call it. That let’s say that’s it.

Disaster recovery plan scenario

Cheryl McMillan (17:00):
Okay. So in the fall of 2019, things were going really, really well for everybody. So I came in on an executive session and I said, “We’re going to do an exercise. Let’s assume you wake up tomorrow and 20 to 30% of your business is gone, what would you do?”

Cheryl McMillan (17:19):
So I put them in groups and they started working out the different components of the plan, the financial plan, the communication plan, how are they going to address customers in the market? So I think that it’s those exercises that help them think that way so they’re not caught by surprise.

Cheryl McMillan (17:42):
And we talked about when they went through seven and eight what did they learn, what worked, what didn’t work, what would they do differently. So we brought all those together in a discussion and it wasn’t… Six months later who knew they’d need that.

Sam Reese (18:01):
Pulled off their disaster recovery plans out from that session.

Cheryl McMillan (18:04):
Right. But I think it’s always good to have an idea of if a crisis happens, how are we going to react. When it’s created in a time where there’s clarity, there’s no pressure, you can think about it. And so got that in place and can tweak it when the crisis hits. But if we have to come up with what are we going to do in the middle of the crisis when emotions are high and decisions need to be made quickly, it’s much more difficult.

Sam Reese (18:37):
We noted how, if somebody’s vulnerable, it’s amazing how quick trust is connected, right? Because we can all get there. Is that something you see as a requirement for CEOs to really get to the point of helping each other out, we’ve all got to be vulnerable?

Cheryl McMillan (18:52):
Absolutely. First of all, that’s how people are going to connect when they see that their leaders are real, including all their fears, all of their weaknesses. By sharing that it makes it safe for others to share the same thing. And we see them as human, not just this robot who never has any feelings and is always putting on the face.

Cheryl McMillan (19:19):
And I think as far as getting the most out of Vistage, it only happens when people are vulnerable and put their most sensitive and vulnerable issues out there.

Sam Reese (19:32):
Seems like such a challenge as a Chair with that being the fact of how you bring the best out of people, because it seems like CEOs sort of come purpose-built to not do that. To start with, just as you described, their personality, “I’ve got it handled, don’t worry. I’m invincible.” How did you get him to that point? I mean I know that’s what’s so unique about Vistage, how did you get him there? That’s what our Master Chairs are the best at.

Cheryl McMillan (19:57):
Just start asking him questions. And I might share some things personally so they can see I’m doing it to make it safe for them to do it. So it’s role modeling the vulnerability and then I just start asking questions.

Cheryl McMillan (20:14):
And a lot of times it’s just this flood gate opens up because they’ve never had anybody to share all of the challenges of being a leader, because it really is lonely on the top, and now they’ve found at least one person who they can share everything with. And the exciting of being able to do that with other members in the same position is like a relief.

Tying personal purpose and values into your company 

Sam Reese (20:42):
At Vistage, we talk about how leaders are whole people, what we are saying the person at the office has to be the same person as they are at home, otherwise that dissonance creates all sorts of stress in their life. You talked about this with Ethan’s connected his company culture to his own personal journey to mental and physical health, right?

Cheryl McMillan (21:02):
Mm-hmm (affirmative). Right.

Sam Reese (21:02):
Can you expand on that a little bit? Because it sounds like that’s a theme for you to really help people bring that together.

Cheryl McMillan (21:08):
When a member says, “I really want to put into a company purpose,” then I go back and I start with, “Okay, so imagine that you’re 90 years old. You’re sitting on your front porch and you’re looking out, the beautiful scene and you’re thinking ‘I really had impact. I really made a difference. What did you do?’”

Sam Reese (21:35):
Great question.

Cheryl McMillan (21:36):
I want to know what’s important for them personally, and then identify some of their personal values and I’ve got a checklist they can go through to get them thinking. And then it’s like, “How can you tie your personal purpose and values into the company?”

Cheryl McMillan (21:59):
Because that connection is what creates meaning and fulfillment in leaders. If they can see every day, like me, the purpose of helping people become better leaders. If I couldn’t see that every day, I wouldn’t be near as fulfilled as I am. And it goes to the same thing with the leaders’ personal purpose. They’ve got to be able to see every day that connection to that personal purpose.

Sam Reese (22:30):
And when you say they’ve got to be able to see that, tell me more about that. Is that because that’s where they get inspiration, that’s where their focus is, that’s where their skills are? How would you describe that?

Cheryl McMillan (22:39):
It’s where the meaning comes from and it’s where the personal and the professional come together so they can be authentic and it reduces the stress of being who they are not.

Sam Reese (22:52):
Reduces the stress of being who they are not. That should be on the wall of every CEO leadership training program. Cheryl, thanks so much for your time today. Great wisdom, great insights. And it’s clear that you take a lot of joy in the success of your members. I really appreciate your time today.

Cheryl McMillan (23:13):
Well, thank you for asking me and I always love bragging about the accomplishments of my members.

Sam Reese (23:20):
Thank you for joining us on this first episode of A Life of Climb podcast and special thanks to Ethan and Cheryl for sharing their insights. This is only the start of the journey we’ll be taking together, so please subscribe to follow the podcast to get all of the latest episodes. Visit vistage.com/podcast for more resources to support you on your own leadership journey.

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