Say what you will about his monetarist economic policies, Nobel Prize winner Milton Friedman got it right when he said Jack LeVan would make a good businessman. Of course, at the time, that wasn't necessarily what LeVan wanted to hear. It was the 1970s, and LeVan, newly accepted as Friedman's graduate advisory student, had visions of pursuing academic glory. But after Friedman steered him to business school, LeVan went on to earn an MBA at the University of Chicago and he's never looked back.
In the intervening years, LeVan has put his knowledge of theoretical microeconomics to the test, first as a marketing and strategy consultant; later as a C-level executive. Currently the CEO of voice-recognition specialist Vocollect in Pittsburgh, Pa., LeVan previously served as CEO of SCS Corp., which markets radio-frequency identification (RFID) products. Before that, he was a senior vice president at Zebra Technologies Corp., where he led an ambitious global expansion. During his tenure, Zebra, which provides bar-code label systems, grew from a $120 million business to a $450 million NASDAQ-traded company.
Mitch Mac Donald, DC VELOCITY's editorial director, recently caught up with LeVan to talk about microeconomic principles, voice technology and the overselling of RFID in the early years.
Q: How did you end up where you are? Lots of kids want to be firemen or doctors, but not many aspire to be logistics professionals.
A: A Probably the biggest transition for me from a career point of view was my shift from academia to business, and that happened to me fairly early on. As a graduate economics student, I was fortunate enough to be the last advisory student accepted by Milton Friedman before he retired from teaching. It sounds like a compliment, but in fact he's the guy who suggested that as an economist, I would make a pretty good businessman.
Q: That was some pretty straight advice from a pretty smart guy.
A: It sure was. But my training wasn't wasted. Throughout my professional career I've been struck by just how robust the principles of microeconomics are. I've tended to gravitate to what's now called business to business, but which used to be called industrial markets. Not to oversimplify, but the economics of capital business-to-business investments are very different from the purchase decisions you and I make as consumers.Whether we like to admit it or not, we might buy a car for reasons that have very little to do with the true economic value-add. Industrial buyers tend not to do that.
Jumping over a lot of interim steps, I ended up in a senior position at Zebra Technologies. To me, Zebra was a microcosm of everything I believed about the creation and marketing of industrial products. That is, if you provide a product or service—or a combination of the two—that generates true economic value-add, your company will succeed. What struck me at the time I joined Zebra is that industry in general, and retail in particular, had come to appreciate that in any market—good, bad or indifferent— logistics excellence represented a potential source of competitive advantage.
The obvious example is Wal-Mart. Companies like Wal- Mart that have found ways to use technology and improve the flow of goods profit in two ways: They improve their own operating results and they improve the retail experience. So I guess that's a long way of saying that, for me, there was a very short path from the sort of compelling intellectual integrity of theoretical economics to real-world professional business decisions about investing in and improving supply chain efficiency.
Q: You're saying that if you have a solid value proposition to bring to a market and if you've got faith in the product, the market should come to you, right?
A: Yes, but there are a lot of other variables that wrap around that. Particularly in the technology field, you have to find the customers or sets of customers who are going to recognize the value you provide. You also need to have backers who have more patience than the typical private investor now has to let a technology mature. Assuming a little bit of luck in those areas, I don't think there is any purer market than the industrial market for logistics because, in the end, you either deliver economic value-add or you don't. If you don't, you may get a contract or two, but as a business you're not going to be successful. That's something I discovered while I was at Zebra, but my thinking was certainly influenced by my having spent a year in the RFID field.
Q: You were at Zebra in the early '90s, just about the time we started to hear a lot of noise about logistics as a source of competitive advantage. Was Zebra ahead of that curve?
A: I think what struck me when I joined Zebra was that it was a company built on the founding principle of innovative application of technology, not necessarily high technology. What really put the company on the map was a very smart product development team led by Ed Kaplan, the chairman, who recognized that compliance bar-code labeling was going to become a major factor in the market. Nobody knew how big a factor, but Zebra was smart enough to say, "Gee, people are really going to depend upon this; we'd better find a more reliable, high-performance way of printing than dot matrix printers."
But you're right; when I got there, Zebra was starting to look beyond the first set of users—the ones who needed a product right now for a straightforward application—and consider ways to expand the technology's applications. I guess it was, not to be immodest, part of my role there to say, "Well, look, let's break this down. If a compliance bar code means that a retailer gets more of what it expects more frequently, then what else does it do?" The core functionality is better information more quickly—in those days, not always in real time, but certainly more quickly.What else can we do with that information? Where else does it create value? I was by no means a pioneer, nor were we necessarily at Zebra, but we were well enough positioned in that we ran a lot of focus groups. I ran quite a few focus groups with IT and logistics people. I guess then they were called MIS, not IT.
Q: Right, and the logistics people were probably called traffic managers.
A: Yes, the shipping guys. We talked a lot about how far forward and backward in the value chain technology can be applied to improve the accuracy and velocity of the flow of goods. By no means was that a profound or unique insight, but it was a pretty important one, and it led us to ask people who lived that life about getting better information more quickly and where it helps them speed up the flow of goods.
Q: A lot of folks become fixated on the technology, but that's not really the end game, is it?
A: No, not at all. I'm just finishing up a white paper to that point, looking at the three eras of technology-driven productivity improvements in the supply chain. In each case, the supply chain has been the beneficiary of technology that certainly wasn't targeted for logistics applications. The first era was data processing: basically a bunch of clerks with punch cards. The information was collected manually, then at the end of the day, people punched cards, and a card reader put the information into the computer. While that sounds primitive today, in the early '60s, it was a measured step forward in improving inventory accuracy.
The next major technology-driven era was the one ushered in by compliance bar coding. The bar code's ability to provide information eliminated a lot of extraneous steps in terms of both people and time, and it offered a means of returning information to managers who could then make decisions more quickly.
I think we're now entering the third era. For want of a better term, we call it the "hands-free, eyes-free," or "taskintegrated" era.We call it that because the potential exists— using what voice technology brings today and what RFID promises down the road—to merge real-time information with work. This new era is hands-free, eyes-free because workers don't have to carry anything, they don't have to put anything down, and they aren't burdened by any equipment that's not integrated into the task. They can talk and listen their way through information-dependent work—and eventually they'll be able to "hear" what an RFID tag says.
Q: You're saying there's no need to follow up each action with paperwork. The worker simply dons the headset and the application functions automatically as he or she goes about the daily routine, correct?
A: Exactly. It's completely integrated into the work and therefore more productive. Because it's easier to do, it's not only more productive, but also more accurate. So coming back to your point, which I think is a good one, the supply chain has always benefited, not necessarily by innovating technology for its own sake, but by finding opportunities to apply technology that was developed for other purposes. Bar codes and voice recognition have a whole host of applications beyond the warehouse. So does RFID, which is also used for tracking animals and collecting tolls and paying for gasoline. Ultimately, people who work in the supply chain who appreciate how huge the economic opportunity really is find ways to apply the technology.
Q: It seems that a lot of these emerging technologies over the past 10, 15, and in the case of bar codes, 30 years saw their first application in retail operations. That sector seems to consistently be at the forefront when it comes to applying new technologies. Is that your experience as well?
A: Yes it is, absolutely. Again, it's probably the economist in me, but I think it has a lot to do with where the retail industry can generally go to get an economic result. Most retailers have very thin margins at the point of sale. They're continually applying new technology in the store, but they generally have more to do with the service experience, with increasing the chances that a sales clerk will be able to be responsive. That is all good stuff and no doubt improves revenue, but the real opportunity for economic value-add for retailers is before the stuff ever gets to the store shelves. I am by no means unique in observing that, but it's pretty clear to me that it's basic microeconomics: The opportunity to get a good return is based on accelerating the velocity by which you move goods from producer to consumer.
Q: So retailers have more obvious opportunities to exploit emerging technologies than other sectors do?
A: I think it's partly that, but I think it's also the concentration of buying power. A large retailer, and we can certainly point to several primary examples, is almost a market segment by itself.
Q: Like a Wal-Mart?
A: That's a big one, yes. Some of them are like an entire nation! What that represents is the opportunity for a smaller provider of technology to get off the ground, if you will, because a major retailer has sufficient leverage to say, "Look, here's my problem." That ultimately is how great innovation happens and how technology gets applied in any market. Somebody solves a problem. Retailers are really good at saying, "Here's my problem. If you solve it, I will buy your stuff. If you're selling stuff that doesn't solve my problem, leave me alone; I have no time for you."
Q: You're now a staunch advocate of voice technology. How does that fit with the recent explosion in RFID? Can the two happily co-exist? Do you think voice offers some advantages that RFID can't match?
A: I came here directly from an RFID company. I'd like to be able to say I was clever enough to see what has become apparent now with the intersection of voice technology and RFID in the hands-free, eyes-free world. What really became apparent to me is that I had gotten into the kind of situation I don't like to be in. That is, I felt I was participating —not explicitly, but just because I was in the RFID industry—in what I absolutely detest, which is the misrepresentation of a technology's capability.
Q: Over-promising?
A: Exactly. I not only detested it, but it was really bad business, particularly in contrast with my time at Zebra where, whatever else you may say about that company, we tried to provide products that did at least as much as they were represented as being able to do. I made a decision specifically to leave the RFID industry, not because I didn't think it was interesting technology or felt it wouldn't develop into a meaningful market. I just couldn't separate our little company, and therefore my personal credibility, from the overwhelming hype that was surrounding RFID in late 2000, early 2001—even before this last wave. I just didn't want to be part of that.
Coincidentally, at about that same time I met these guys at Vocollect, who had clearly solved the problem.When I met with them, we didn't talk about voice technology per se, the way you do when you meet somebody in RFID. When you talk with RFID guys, you ask each other, "What read distances are you getting, and how many tags can you handle in the field, and what is your accuracy, and what is your yield?" and all the stuff that technologists love to talk about. When I met the Vocollect people, they talked about what their technology was already doing successfully in the field. I thought to myself, "This is something I want to be part of."
Q: Sounds like you saw a much clearer connection of the dots between the technology's potential and its application.
A: Yes. Vocollect has been around since 1987, so the founders have been plowing these fields for 15 years. They would be the first to say that, for maybe the first dozen years of the company's life, we had the technology and pursued markets, but we pursued some dead ends.What really turned this company around certainly wasn't my arrival; it was the recognition that the repeatable work done manually in the supply chain represents a huge opportunity for voice if it can be properly applied.
Q: A lot has changed in the past three to four years, though, with regard to RFID. Any regrets that you may have left the field just as it was about to go big time?
A: I'll cycle all the way back to your question about how I got here and was it because of the RFID-voice connection. Since I arrived at Vocollect, I've found my background at Zebra and my year in the RFID field to be quite helpful. But what really counts is my knowledge of the current state of RFID, not the prospective state of RFID, where you can read 25 tags instantly with 100 percent reliability. In combination with a voice terminal, RFID provides a very real potential for further accuracy improvements and productivity gains because, simply put, the most natural way for a worker to read a tag—and I think we can agree there are going to be workers in the DC for a while longer—is literally to hear what the tag says. Why introduce a display or any other feature that distracts the worker when you've got all the benefits of RFID? As long as you bring an RFID reader module in relatively close proximity, you are going to get the message. It's not digital information, so why not turn it into voice output? It was, frankly, unintentional, but it turns out that my RFID experience going back to Zebra where we did the early work on the printer and coder and then in the RFID company helped me bring expertise to this space and to Vocollect: a combined vision of how the two technologies complement each other.
Q: It sounds like it's continually evolving.
A: Absolutely. That is a good point. It is continually evolving, so we are very careful. These are not just theoretical concepts. We are working on proof of concepts with some very large retailers. We are very clear when we work with them that we're not going to waste time on applications they'd like to have if we don't believe the current state of the RFID tag supports them. What we do say is that we will work closely with you to make certain we have qualified the nature of the applications so that today's tag at today's cost and today's performance is compatible with what you want to do. Since some of our users now have thousands of voice terminals, it is a good opportunity for them to leverage an investment they've already made.
Your term "evolving" is a really good one. Every week we learn new things, and we experience new things about readers, body-worn readers, technology—all complicated problems. With time, these problems will be solved, but we don't want to solve them at the expense of a customer who thinks they have already been solved.
Q: Let's shift gears. I'd like to get you to do some visioneering. Imagine, if you would, the logistics professionals coming to work five years from now, 10 years from now, 15 years from now. Do you see anything that would be profoundly different about their daily operations as compared to today?
A: Well, I guess it depends on how you define "profound." I see a lot of difference in degree as to the quality and precision of the information they'll have at their disposal. I fully expect that one of the next sources of value-add in the supply chain will be anything having to do with making labor more efficient. That's going to be very important for the next 10 years.
Q: If you were able to offer logistics professionals one piece of advice, what would it be?
A: Pay a lot of attention to the "care and feeding" of the workers in the supply chain. What has become clear to me over the years is that when it comes to the distribution center, the cross-dock facility or even a manufacturer's shipping dock, there is an observable difference in the way people are taken care of—in terms of their equipment, their training, and their safety—that translates into economic results.
We've seen some companies where workers are viewed as dispensable and interchangeable. The productivity of their operation reflects that. It is not for me to judge the business model, but I personally wouldn't want to work in a place like that.
The companies we work with that really are world-class when it comes to chalking up great results for efficiency are doing it in part because of technology, but in significant part because they recognize the importance of training, safety and retention of good people. It may sound ironic coming from a guy who is peddling technology, but what I would say is to take really good care of people and give them the tools and the training they need and keep them satisfied so that you're not re-training and re-tooling every six months.
