“I only see one market, and it’s global,” says Ridge, president and CEO. “I prefer to say that we are a global company headquartered in San Diego, Calif.”
A strong global vision has been one of the keys to his success in transforming WD-40 from a company with a single product to a firm that successfully operates in the worldwide marketplace with multiple brands.
Growing a company like WD-40 was a challenge that not many CEOs would want to take on. Consider the scenario: There was the brand dominance of the product, a lubricant used in most households, which had been on store shelves for more than 40 years.
That product positioning had garnered strong margins, and when combined with fairly conservative expense management, the company had consistently produced a nice return for shareholders with little risk. Expansion would require changing the company’s philosophy, increasing investments, taking more risk and potentially breaking something that was not already broken.
Ridge had been with WD-40 for almost 10 years before being named CEO. He had worked in international marketing at the firm, and coming from inside the company had its advantages.
He was familiar with the company culture and the obstacles to expanding the firm’s stagnant sales, and he used that knowledge in creating his growth plan.
“Our shareholders had been used to making a profit, and I knew that they wouldn’t take too kindly to giving that up, so I had to move more slowly and strategically,” says Ridge.
“The first thing I had to do was work on transforming the company into a learning culture,” says Ridge. “The employees had been used to the same style for 29 years, and within the company, information was power. There were silos of knowledge out there, and unconsciously, people were holding onto it. It was impacting sales because hidden in there was the knowledge of what was working and not working in the international markets.
“I needed people to learn to share this information and learn that they could do that without repercussions so we could move forward.”
Ridge had to teach people to not be afraid to fail and he had to earn their trust by showing that he would not take adverse action if they tried something new without success. He knew that time and his actions would handle one part of the challenge, but he had to coax employees to begin stepping out on the limb.
“I initiated a monthly reward contest for providing the best new idea or tip,” says Ridge. “The first month, I only received a couple of entries, but as people started to see that it was safe, we got more and more.”
There was also an incentive. The employee who submitted the best new idea that first year won a trip to visit all of the company’s operations and locations around the world. As Ridge demonstrated that he was open to new ideas, he began to earn the staff’s trust. He further demonstrated his commitment by offering another prize at the end of the second year, and once he was armed with the information that he needed and employees that were no longer risk-averse, he was ready to take on the world.
Expanding the brand
Ridge’s first expansion moves were designed to find additional opportunities to spread the sales of WD-40 by establishing new markets and increasing the channels in which the product was sold. He prioritized the expansion into countries that offered a lower cost of entry in order to deliver a quick turn to profitability.
“I would wait until the new channel became profitable before expanding again,” Ridge says. “That was usually six months.”
To plot his moves, Ridge used a decision-making grid populated with data gathered by his team. The team began by mapping the market, looking at where competing products had market share and where those products were distributed and exposing the gaps that WD-40 could fill.
He avoided mistakes by knowing that his mapping data was accurate and by meeting potential business partners face-to-face.
“By going to their place of business, I show them that I have both passion for the business and that I care,” says Ridge.
He verifies his data by checking out the situation on the streets.
“I like to use what I call the ‘Columbo technique’ for validating mapping data,” says Ridge. “Most CEOs would fly in to town, go to their hotel and then the distributor would meet them for dinner there. The next day, that CEO flies out of town.
“I arrive in town, check in to the hotel and hit the streets. I’m out verifying the data in the heat or the rain 130 to 150 days per year, kicking the tires and going store to store. If a distributor tells me that he has space for the product, I want to see it. If I understand that automotive retailers do not have a similar type of lubricant on the shelf, I want to see it for myself.”
When expanding into new outlets within your channel, you also have to be prepared to explain the strategy to your existing customers.
“One of the obstacles to channel expansion is that the people within your existing channel relationships don’t like it when you begin offering your product elsewhere,” says Ridge. “You have to be able to take the heat.”
Ridge says he has honed a three-pronged formula for success in channel expansion.
“Start with the right product to open up multiple trade channels,” says Ridge. “Be able to cope with the pressure your existing trade channels will put on you and continue to provide a strong value proposition for them, and learn from your previous mistakes.
“In some places, we also had to unseat a competitor. We weren’t the market leader in Germany when we started. Today we are.”
The numbers suggest that more than a few competitors have fallen. In the nine years under Ridge’s leadership as CEO, WD-40 product sales have increased 80 percent.
When barriers to entry were too great, Ridge looked to acquisitions to generate growth.
“In Spain and France, 3-IN-ONE Oil was a competitor to WD-40 with a strong market share,” says Ridge. “In this case, we bought versus fought. This gave us the opportunity to buy the culture and the market share.”
That 1995 acquisition increased distribution in 17 countries. Ridge says the key to successful acquisitions is following a set of beliefs and practices.
“I believe that we are in the squeak, smell and dirt business,” he says. “I don’t make acquisitions unless they eliminate a squeak, a smell or dirt.”
When it comes to new product acquisition, Ridge looks for products with strong brand dominance that complement the company’s existing suite of offerings and then evaluates the product’s channel gaps.
“I look for brands that offer us the opportunity to expand the channel for that brand and our other products,” says Ridge. “If they have underrepresented channels, then we will make that acquisition.”
Such was the case in 1999, when WD-40 acquired Spot Shot, a brand of instant carpet stain remover. The product was mainly sold in supermarkets and drugstores. Ridge expanded into hardware, automotive and club stores, increasing sales of the product to a new customer base.
Focus on research
With his conservative plan, Ridge says that initially he did not want to put the WD-40 brand at risk by placing it on new products. The next phases of growth have come from the reinvestment of increased profits into research and development that has produced new products and packaging that leverage both the WD-40 brand and the larger distribution system.
From 2004 to 2006, Ridge has increased annual R&D spending from $1.5 million to almost $4 million to develop new products.
Ridge is relying on the strength of the learning culture to make certain the company is ready for the R&D phase. He has improved the opportunities for employees to continue their education and their willingness to take risks and innovate.
“I continually work to develop an infrastructure that will drive the continuous learning process and a culture that drives the business by developing people,” says Ridge.
To facilitate continuous education, Ridge has structured monthly lunch-and-learn sessions and introduced his a leadership academy to develop new talent. He further supports his philosophy of learning through his own Web site portal , “The Learning Moment,” a collection of resources and stories that reinforce his ideas on leadership.
Taking a page from his initial success in behavior change through sharing ideas, Ridge has encouraged innovation by building a project marketing team called Team Tomorrow, which is charged with increasing revenue from the newly developed products by $100 million over a three-year period that commenced in 2005.
When he’s not developing new products, he’s finding increased market share by offering new packaging and uses for the old, reliable WD-40 formula. The firm recently began marketing the lubricant in a “travel size” called the WD-40 No-Mess Pen.
The end result of Ridge’s efforts has been a total transformation of the company. Since taking the CEO position in 1997, Ridge and his team have moved the company’s annual sales from $100 million with 70 percent coming from domestic sales of WD-40 to $263 million in 2005. They are projecting sales of $285 million in 2006 with 56 percent of that coming from WD-40 sales outside of the United States.
The job hasn’t been easy, but Ridge never tried to do it alone. The transformation came about from a commitment to not only change but also to learn.
“I believe that you have to show people how to get an A, not just mark their papers,” says Ridge. “It can be a little bit of tough love. You have to define for people what getting an A means, like delivering the product on time 98 percent of the time, then you have to show them how to achieve that. You continue to define the difference between an A and an A+, benchmark the outcomes and hold them accountable. Put a process in place that allows people to measure, learn and react.
“I think in order to be successful, you have to be candid, you have to win trust and you have to be a man of your word who treats people right.”
HOW TO REACH: WD-40, www.wd40.com