A Bit of Optimism - The Ultimate Infinite-Minded CEO with Trek Bicycle CEO John Burke

Episode Date: May 28, 2024

The jump from $250 million to $2 billion in revenue doesn't happen overnight. Over 25 years, John Burke transformed Trek Bikes into a global powerhouse — one mom-and-pop bike store at a time.The key to John's success is simple but powerful. Create value for others first, and you too shall be rewarded. John and I discuss why the best way to win isn't to focus on "winning," but to focus on "play," and how the principles of The Infinite Game have guided his leadership. And he tells me why creative leadership is exactly what's missing in American government.This...is A Bit of Optimism.To learn more about John and his work, check out:his book, A Bold Plan For AmericaTrekBikes.com 

John Burke is hands down one of my favorite CEOs. He leads Trek Bikes, one of the most celebrated bicycle makers in the world. What I love about John is how he focuses not on growing his own business, but how he obsesses over helping his customers, the shops that sell his bikes, grow theirs. Not only has he helped countless small business owners achieve more than they ever have before, his put others first mentality also helped transform his own family-owned business into a $2 billion global powerhouse. These days, John is still obsessing over how he can help people, his customers, his employees, and even our country. This is a bit of optimism.

You are one of the most talented CEOs I've ever met, meaning not only are you good at leading people, but your obsession with how you get things done is truly a talent. How long have you been CEO? 25 years. What were sales when you took over, just out of curiosity? 250, 300, somewhere around there. What is it today?

Oh, it's somewhere around 2 billion. Okay. 250 million to 2 billion. I mean, that's astonishing. Most of your customers are mom and pop bike shops, right? Yeah. What sort of margins are they working on? Could be 3%.

Could be break even. People get in the business because they love bicycles. And if they break even and pay themselves a wage, they're happy. So you're looking at these people who are doing break even or very small margins in their business. And you thought, well, if I just help you grow your business, I'm not going to ask anything in return. You can buy any bicycle brand you want.

I'm going to help you grow your business. I'm not going to ask anything in return. You can buy any bicycle brand you want. I'm going to help you grow your business. What are some of the things that you discovered and that you did for them? Yeah. So, I mean, you know, one of the things we like to do is we like to find out what our customers' biggest problems are, and then we like to help fix them. One of the things we do is we take a look at all the data, what their worthy rivals are doing, so that we can point out, this is what you're doing. This is what stores that are really well run. This is what they're doing. So right out of there,

we call it a financial health checkup. So right there, I'm delivering value. You do this checkup gratis. This is our favor to you. We're going to do a financial health checkup on your business. Yeah, and bike shops usually don't have a lot of resources, so they don't have the money for training or they don't have the money for support.

But that's something that we can put together. We made a huge investment in a training program for sales, for mechanics. We even put together a leadership program. We provide this program for our retailers. We add value. So that's one of our philosophies is we're going to try and figure out what your problems are and how can we solve your problems. If you don't know where you're going, you're never going to get there. And a big part of it is let's just put together a plan. What does great look like and how can we get there? I love this. So the more you help people with no expectation of anything in return, you're just helping them build their businesses. Turns out when they feel the love, they want to buy more Trek bicycles from you.

Yeah, you know, it might be a little underplayed that we don't ask for anything, but we certainly don't go into it saying we're not going to help you unless you do 50% of your business with us. You know, we go out there and we say we're going to help you improve your business and make your business successful. And if we can do that, I'm sure you'll reward us. And they do every time. So how do you incentivize your sales team that they become obsessed with helping your customers grow their businesses rather than obsessed with making more sales? I was on a plane coming back from Japan once. There was a documentary. It was on guarding the tomb. The tomb of the unknown soldier, this is. Tomb of the unknown soldier. In order for you to do this, you've got to be able to do this,

this, this, this, and this. The standards were super clear. I was blown away. And I get back and I get the head of sales and I sit down and I go, we're watching this together. So we watched this and I go, what'd you get out of this? He says, our expectations are not as clear as guarding the tomb. And I go, that's exactly it. So we came up with an incentive structure for our salespeople called guard the tomb. And it details out,

these are the eight things you need to do to be successful. And a lot of those things are making sure your dealers do this training, making sure you go through and analyze your financial statements, and then come up with a plan to help you win. If you get to a certain level, then you get recognized and rewarded for that. How many things are on your list that contributes to your score, which contributes to your salary? I think it's seven. And sales used to be on the list and then sales got taken off the list. So sales is even on the list. Sales isn't on the list. So you get compensated on sales. You still have to sell.

Right, right. But what you really want to do is you want to win the green jacket. You want to score high on what your job is. Year in and year out, that's how you progress that track is if you do your job. Say more about that. So what do you mean by the green jacket? And what do you mean by do your job? Because if I'm in accounting, I'm doing the books. I'm doing my job. If I'm in sales, I'm making sales. I'm doing my job. So what do you mean by do your job? Because, you know, if I'm in accounting, I'm doing the books. I'm doing my job. If I'm in sales, I'm making sales. I'm doing my job. So what do you mean by do your job?

Okay, so this is, I'm going to learn it all. I don't come up with, I mean, I have very little original content. And I interviewed Nick Saban. And I go, can you tell me about your process? Who's Nick Saban? He's the coach of Alabama. And they were going to play Ohio State. And Ohio State was 10-0. And they were going to play Ohio State. And Ohio State was 10-0.

And they were going to get killed. And Ohio State knew it. And a guy walks into his office. He goes, we're playing the wrong game. He goes, we're trying to win. We shouldn't be doing that. What we should be doing is running every play to perfection. Because if we run every play to perfection, we will do just fine.

You know, it's okay. We got nothing to lose. They're probably going to fire me anyways. So we go out there and we tell the people at practice, we're not going to pay attention to the crowd. We're not going to pay attention to the scoreboard. All we're going to do, all I expect from each and every one of you is on every play you run the play to perfection. Game ends, biggest upset of the year. And that's how he became the most successful coach of all time is he doesn't care about the score. He runs the play to perfection.

And, you know, one of the big influences you've had on me is the infinite game. That goes right with the infinite game. It's like, yeah, we want to sell stuff. But the way we do that is we run the play to perfection, is we help our customers be incredibly successful. If we can do that, then we will earn business. Yeah, yeah. It's a very interesting and powerful nuance,

right? Which is the cause and the effect. People fixate on the effect. They fixate on the score. They fixate on the result. They fixate on the end state. As you said, you have to know where you're going, right? You at least have to know the path that you're on. But the obsession isn't the end state. The obsession is the things you'd need to do on a day-to-day basis or a play-to-play basis, in this case, to get to the end state. So of course, end state for you is a successful business, thriving. You get to pay your people well. You have money to reinvest in the business. Of course, that's an end state that you value. But instead of fixating on the end state and incentivizing blindly,

which is do whatever you need to do, stab people in the back, lie, cheat, steal to get to end state, i.e. more sales. Because that's what happens. That's what happens. You're saying, no, heads down, and I'm going to teach you how to do the play, and we're going to practice, and you're going to do it again and again and again and again.

And the more that you are good at making the plays, everything else falls into place. True. That's a very, very subtle and powerful nuance that I think is lost on most people, whether they're playing sports or whether they're playing business. When you hear the statement, run the play to perfection, it begs the question, what's the play? To be able to step back and be able to tell people, this is the play we're running. We're running this play. In some areas of the company, we're in the seventh inning. In other areas of the company, we're in the second inning, but in all areas of the company, we are playing. I have two questions, two sides of the same coin. A CEO who you admire, who you've stolen from them, stolen techniques or ideas? Oh, Will Gadara.

We love Will Gadara. What did you steal from Will? I mean, that book is one of the best books of all time. Unreasonable Hospitality, I agree. One of the best books of all time. I just think his whole comment that we're going to make this the best restaurant in the world, it is going to be really hard. Will you join me? Question mark. Yeah. That's been incredibly powerful. And then I just think his whole view of the customer journey, not reviewing the customer journey, but interrogating

the customer journey. I think that's really good stuff. Your point, which is when people think about customer journey, they think come in the store look around or in your case meet sales reps try out the bikes make decision look at numbers buy you know but will was obsessed with that guy's like where they look where they walk how they ask for things where they sit where they hang their coat that guy's's obsessive. He is obsessive. And that guy is off the charts smart. So when you interrogated your customer experience, walk me through some of the crazy detail that you've articulated that you're looking to tweak. I was having this conversation with a retailer and I said,

have you interrogated the customer journey? He's like, I don't really understand that. And I first ask him, I go, how's your experience with a customer bringing in their bike for service? I go zero to five. He goes, five? It's awesome. I'm like, okay. And I go up to the whiteboard.

I go, let's just talk about the customer's journey who's looking to service their bicycle. Goes to the website, drives to the store, parks the car, unloads the bike, wheels the bike in, is greeted by the staff, wheels the bike to service, has the bike written up on a service ticket and leaves? What would you score your customer journey now? And he goes, a two. If you have those glasses on, which say you're going to interrogate the customer journey and you are going to be the best in the world. That's not a five. And I think most people, the mistake they make is they think the customer journey begins when you say, hey, I'd like to service my bike, please.

Neglecting the fact that all these other steps have taken place that are all part of actually that customer deciding to bring their bike and to get it serviced. You have to consider, as you said, the whole journey from the moment the customer says, I need to get my bike serviced to the moment they get home and put their bike back on the leaning up against the wall. That's the whole journey. When they shut the restaurant down, they came up with 132 steps. Yeah, I remember. Isn't that crazy? It's crazy.

Imagine what a world we would live in, an economy level and a business level, if Wall Street applied extreme pressure on companies to obsess about the customer. You know, there are certain companies that do, and they're really good at it, but I don't understand why more don't. Well, we do understand. It's the difference between short-term incentive structures and long-term incentive structures. We understand it entirely. Yeah. Okay. But this is the problem in the government, the inability to make decisions that are in the best long-term interest of the country. You know, one of my favorite stories is about Eisenhower. And

somebody once asked Eisenhower how he made all these difficult decisions as president. They said, it's really not that hard. He goes, I just asked myself one simple question. What's in the best long-term interest of the United States? And then I do that. It would be remiss of me to end this conversation without at least a brief discussion about how much you care about this country and your desire to help it get itself back on track. I think most of us can at least agree the wheels are wobbly. And we know that success is no indication of stability.

Being rich or big doesn't make you strong. Indeed, big companies have failed. And indeed, empires have fallen. Almost always, it's because of we don't have any leaders who are making decisions in the best long-term interest of the United States. And that here we are with this amazing country and nobody running for the highest office in the land has a plan. All these businesses that have plans, and yet the organization that we all depend on the most doesn't have a plan. I think our government is creatively bankrupt. And you never hear these candidates talking about what would they do to improve the very government that they hope to lead? Crickets. And to your point, which is, what are the plays? I think

you're touching on something that's bigger and more insidious. And you sort of said it, which is, we have a government that more than anything is lacking in creativity. And I would argue that that is not unique to government. I would argue that, you know, what you have in business today is a lack of creativity because the short-term interests, you don't need a lot of creativity for short-term interests. And one of the sacrifices you make when you go from infinite minded to finite minded is you inherently lose your creativity because you don't need to be creative to make a quarterly earning. You just don't.

Or win the next election. Or win the next election. There's no creativity required. But long-term, very distant, uncertain futures require massive amounts of creativity. One of the things I love about America is the blind optimism. So one of my favorite stories about America is we celebrate our independence on July 4th, 1776. Incorrect. That is when we signed the Declaration of Independence. favorite stories about America is we celebrate our independence on July 4th, 1776. Incorrect.

That is when we signed the Declaration of Independence. The Revolutionary War continued for another seven years. America didn't, quote unquote, win its independence. It wasn't recognized as an independent freestanding nation until September 3rd, 1783 with the Treaty of Paris. But in typical American fashion, we don't celebrate the date we won our independence. We celebrate the date we thought about our independence uh-huh right and it's that blind naivete and optimism that is so magical about this nation but the flip side is we've all been subjected to the propaganda of our own nation that we are constantly telling ourselves that we're the best at everything we have the best nation the best democracy the best military the best health're the best at everything. We have the best nation, the best democracy, the best military, the best healthcare, and it's a complete work of fiction.

Totally. Which is there's room to be better in absolutely everywhere, and in some of it, it's actually objectively bad. And I think it's okay to be optimistic and naive, but let us be clear there's room for improvement. You know, all the signs are there. I mean, just take a look at the national debt. Take a look at where we are with climate change. Take a look at where we are with nuclear weapons. Take a look at the healthcare system. Take a look at social security. It's a target rich environment.

I mean, now's the time. Let's back, hold on, hold on. So why didn't you run for office? I actually thought about it. And, you know, I'm not a Republican. I'm not a Democrat. And I came to the conclusion, I'm like, can't win. And so I said, you know what, I'm going to get all my ideas out there. And maybe I can be more effective being a concerned citizen. I still believe this. On the fifth anniversary of the passing of Steve Jobs, somebody asked Tim Cook, they said, what was the greatest lesson of Steve's life? And he goes, that's easy. Steve believed that people lived in a box and that they were capable of so much more.

And I really believe that there are so many amazing people in this country and around the world. Amazing people who really care. And I think that through chaos comes change. And I think we're going through a very chaotic period. And I'm hopeful that all the good people, and there's a lot of them, are going to stand up and they're going to have higher expectations for their selves, their leaders and their country. And I really think we can use this crisis to kind of write the direction of the country. That's what I hope. John, that is your entire life story right there, which is you recognize that all your people and your customers lived in boxes. And all you did was either expand that box or open the box and

allow them to try things and do things that they never thought possible. You've demonstrated it in your own company. You've proven it with how you've unleashed creativity and great business savvy in your customers. And now what you're asking our nation and each of us to do is to open up the boxes and help each other be creative and think for the long-term value. And what is the best long-term thing we can do for our country and our world? Do that. Exactly. Tell me a specific story or a specific

customer that if every customer or career was like this one thing, you'd be the happiest person alive. I'll give you one, but I would ask for a second. Okay. There's traditional trade shows. Everybody goes to trade shows. We're now back in the late 80s. And we would go to trade shows. You go to Vegas, you put up a stand, you have all your wares and people come and look at them and you take some orders. And I thought that was goofy. And I'm reading a book at the time and it was about Digital Equipment Corporation, Ken Olson. He thought trade shows were a losing proposition. And so they had their own trade show in Boston and they invited all their customers.

And so we decided we were going to do that. And we were a young company and, and we didn't do a whole lot of business, but we decided we were going to invite all our customers to come to Wisconsin and we were going to do our own trade show. And we did. And it was all these customers coming together. And it was Trek really showing the partnership we had with our retailers and that we were going to

work hard for them. And I will never, ever forget that day. It was fish jumping into a boat like I have never seen. You know, another example I was going to tell you about is, you know, we were doing pretty good business in Europe and we were looking at Japan and everybody was like, well, you can't do business in Japan. And I flew over there and I couldn't find any good distributors. And I'm like, screw it, we're going to do it on our own. And over the last 30 years,

that's been one of our most successful markets because of Japan, we went into China and we went into Korea and we went into Australia, But nobody did business in Japan. And challenging yourself has been something we've done a pretty good job of. Tell me an early specific happy childhood memory, something I can relive with you. Okay, well, I was riding my bike to the ball field one day, and I'm going down this really big hill, and I started to pedal, and there was nothing. And so I looked down, and the chain came off.

But as I'm looking down, I crash right into the back of a parked car. And I go flying over the car, and I end up on the hood of the car. And this family's having a picnic across the street. And they come running over to save me. And I was fine, and I got on my bike, and I went to the ball field. And I always remember that. And what is it about that memory that you have such a warm feeling? And what is it about that memory that you have such a warm feeling?

Most people don't have a warm feeling about crashing a bike that's basically come apart against the back of a parked car. What was it about that that has, dare I say, such warm feelings? I don't know. I think it's because I've always been kind of, my childhood was kind of like right between the lines. And maybe that's because it was a little outside the lines. Here's what I hear, which is the bike actually came apart like the the chain fell off the bike and we have any kid that's been in that experience and i definitely can it is terrifying

okay because other than brakes you got nothing right and as you said as you took your eye off the ball you crashed but the amazing thing was took your eye off the ball, you crashed. But the amazing thing was you got back on the bike and you went to the ballpark. Right. Yeah. In other words, sometimes we crash. Yeah. The thought of the crash is scarier than the crash. Yeah. All the reasons not to go into Japan is because the actual crash is not as bad as what we think could happen. Or the first one, which is, let's just stay in our lane. Let's just stay in the lane. Let's just do the trade show. We know we get a few sales. We got to be out there, quote unquote, in the market.

We can't do our own. That's never been done before. But the thought of the crash and all the things that could go wrong, what's the worst that can happen? You lose a bunch of money and nobody shows up to your trade show. And I think what I find fascinating about you is where other people are spending all their time mitigating what would happen if the crash happens or what would happen if it doesn't go well, you're already on the bicycle down the hill. and where you thrive as a leader is really pushing people to just give it a whirl and that's all you're doing for people is you're equipping them you're playing the as you said you're going to play the play 100 that's one of the reasons why i absolutely love you as a ceo which is you do not for one second believe your company is the best.

You do not believe you're the best. It's an obsession with better. Every day. The infinite game. And we care about our results here. We really do. But we're playing a much bigger game. And I've said it. My goal is for Trek to be an iconic company that lasts for 100 years made up of level five leaders driving level five minibuses. That's what drives me is the legacy. You, my friend, are magic. If you enjoyed this podcast and would like to hear more, please subscribe wherever you like to listen to podcasts. please subscribe wherever you like to listen to podcasts.

And if you'd like even more optimism, check out my website, simonsenic.com, for classes, videos, and more. Until then, take care of yourself, take care of each other. A Bit of Optimism is a production of The Optimism Company. It's produced and edited by Lindsay Garbenius, David Jha, and Devin Johnson. Our executive producers are Henrietta Conrad and Greg Rudershan.