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Show 144 – Unicorn Interviews – James Taylor – ELMS

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The 22nd in our series of episodes of the csuite podcast that we’re recording in partnership with the European PR Agency Tyto and their Own Without Borders podcast, where we are interviewing leaders of unicorn companies to find out about the key issues, pain points and challenges that start-ups face and how they can address them with a strategic approach to marketing and communications.

Russell Goldsmith and co-host, Tyto’s Founder, Brendon Craigie were joined online from Detroit, by James Taylor, CEO (at time of recording) and Co-Founder of Electric Last Mile Solutions (ELMS). Founded in 2020 to deliver commercial electric vehicles, ELMS went public in June 2021 via a special purpose acquisition company (SPAC), and now has a market cap more than $1bn.

Background

James explained that ELMS is about all-electric not hybrid, and the particular focus on the last mile links to urban delivery and urban utility. He said they are singularly purposed on short distance deliveries or even service calls that have short duty cycles. The vehicles are focused only in the commercial market, which means they customise them to exactly what their clients are going to use them for. James was the CEO of Hummer and the President of Cadillac and said he left General Motors around the bankruptcy period, and for the last 10 or 12 years he’s worked in various start-ups in the electric vehicle space.  

James referred to ELMS or any start-up as like cracking a code or a Rubik’s Cube. He explained that they landed on their concept, business model and proposition and it feels unique and niche. He said start-ups are never guaranteed and mostly have the odds against them. James said that the business formula they’ve constructed has a high probability of success, in what he called the ‘tsunami of new electric vehicles’ that are coming to the market. He explained that this market is quite different, these aren’t exotic luxury cars, they aren’t for individuals and they’re not for Hollywood movie stars. He said that these are the meat and potato tools of any business trade that allows commerce to occur every day.

Leadership

James discussed so-called serial entrepreneurs, who establish companies and go from company to company, and undoubtedly pick up more and more experience. He said although he’s made enough mistakes, at least this one solved the ones he’s aware of and the ones he’s seen across his last four or five ventures. James said that those mistakes could be personal mistakes, structural mistakes, ownership of the company or the investors that come in, who he said can be unfriendly and raid companies. He described a very sad occurrence with a company he thought would be very successful until an investor came in and wiped them out. James thinks there’s a lot of competition that comes out of nowhere, and that it’s important to keep an eye out and beware and don’t assume everybody has good intentions.

He said there are many lessons to learn along the way, referring to the US show Shark Tank, whether they’re selling a lemonade stand or doing what we do, the first question is ‘what’s your product and does anybody want it?’. He adds that a lot of businesses start with a push system that says, ‘I think I’m going to create a market’ and one of the expressions James said they used to use at GM when they were looking at new product opportunities was ‘Is this an answer to a question nobody’s asking?’. He added that you can sometimes be leading a market, using iPhone as an example, he said we didn’t know we wanted iPhones, we didn’t know we needed little handheld computers, but here they are in everybody’s hand. He said you can invent some markets, but within the car business, if it doesn’t exist, there might be a good reason why it doesn’t exist, and to go through a very expensive product development program to launch the vehicle, and oh look, nobody wants it. The biggest fundamental in all those learnings is to make sure to start out with at least a shot because this is a probability game, and whenever you do start-ups, you’ve got to have at least a chance.

James said some others are ‘Is your product sound and is there a customer demand? Is there a market? After that, there are all kinds of details that can be done either well or messed up. He said the most important thing at the beginning of the process is asking ‘do you have a really good line of sight on a high market demand that when you finish all the tough parts, raising cash, executing, you know somebody’s at the other end of that and can’t wait to get your product?

James spoke about the top learning curves from GM and Hummer and said that not everyone can make hardware but there are lots of new entrants in the vehicle industry all the time, from foreign locations or existing competitors. He said to look at the differentiation of success and the profit margin and how much of that is the hardware itself – four wheels and a tin box, and that without the badge, how identical are 90% of the vehicles. He explained that putting a Porsche badge on the front of the exact same vehicle as Volkswagen, which they do, means they can charge another $30,000 and make people much happier. So, the brand, brand image, brand loyalty, brand reputation is incredibly powerful and, in many cases, the difference between making money and not making money, James said.

Brand Image

James explains that as a new brand they are being very realistic and honest, as they are still in that convincing phase, attracting new customers and convincing them to take our product. He said that it’s somewhat easier to convince your customers on the commercial side of things, as it’s a business asset, it’s a tool and it either does the job or it doesn’t. It goes far enough; the range is adequate, or it isn’t. These are all rational, asset-based financial decisions, unlike retail business, whereby it’s 80% emotional because you like the brand, you like the colour, you like the styling, you like the dealer. He said going through the final shakeout is way more irrational and emotional that it is pragmatic and a business decision. James said in their case, they must present the business case to these potential customers, here’s the story – ‘this vehicle is going to do what you need it to do, and it’s less lost’. He said it’s kind of that simple but a lot more complicated behind that. To make a proposition to a current fleet owner, he’ll say, ‘look I can drop your costs by 30%, are you interested?’ and then it’s pretty hard to say ‘No thanks. I’m good’. He said customers are intrigued by how they would do that, the new technology, the fact that these vehicles run at lower costs than the vehicles in the current fleet, and as these are replaced, business is going to be more competitive. That’s a little hard to resist he said. He explains that on the second level, they want to know how these vehicles work because they’ve never seen one or even driven one, so the second hurdle is getting them used to it, whilst understanding the products capabilities and developing trust in the brand, trust that we’re going to do our side of it as a company and trust in the product itself. James explained that the way they differentiate the current, gas driven vehicles is cost.

Overcoming challenges

James discussed the progress they’ve made through the pandemic and the chip shortage which has brought the supply side of the auto industry to its knees. He said if you look at the last year and a half, in a high-level sense, and see annual demand, and imagine it’s one hundred, just for the sake of the conversation, that would be a normal, steady-state replacement rate for new businesses buying delivery vans. James said, that then all of a sudden, the supply side went down to 20% or 30%, meaning that 80% that has been replenishing fleets, and adding to new businesses, that was gone. He explained that all businesses started drawing down the inventory, and then the inventory ends up at zero. He said he was at a company last week, and a dealer said to him ‘Look out here, typically my lot would be 400 vehicles, and I have four’. He said that there is a huge supply exceeding demand issue, regardless of whether the vehicle is gas or electric, and then combined with e-commerce increasing. He added that demand is going from steady state, from 100% to 120% to 140%, and supply is at 10% to 15% of history. But even though there is this gigantic hole in this delivery van market, new entrants come in, instead of Amazon, say Walmart now says, ‘I’m coming in’, and Target does the same. James explained that all of these new players want to deliver a food or want to deliver packages, and of course as consumers we have become accustomed to pressing a button and it’ll show up at the door tomorrow, with or without pandemic, people are now used to this, so you have an enormous amount of unmet demand. He said they were fortunately able to walk in and say, they had the extra hardware and the incremental supply, and customers were interested in talking to them, regardless of propulsion.

James explained that the second factor that helped was the positive momentum for the EV industry, when he started 10 years ago, he would have to go into a fleet guy and convince them to look at this, but batteries cost a fortune and there were almost no EV’s on the road. He said people were like Tesla who? But if you fast forward 10 years, Tesla has broken the ice, people are comfortable and electric vehicles work. They charge, they go down the road, and they don’t break down every hour. He discussed how the cost has dropped, as there was a 50% premium for an electric vehicle, and people didn’t want to pay it just to be environmentally responsible, but now they’re much more interested in the adoption. He said the large companies have very aggressive ESG goals that they’re either volunteered or mandated to take on, and upon looking through their company, noticing that if you’ve got a large fleet, that’s one of the fastest switches that you can flip to make a big headway into your carbon footprint.

Unicorn Status

James said that luck and timing works in this business, and their story is one of those good examples, when they were trying to raise in August 2020, they considered the traditional routes of series A, B, C private funding, and maybe working towards to an IPO. But they also looked at some joint ventures with other companies that were already in this space, but he said along came the SPAC’s tsunami, where everybody was jumping in. James said the disadvantage of a SPAC, is that a three-year process is jammed into six-months. He said that the advantage is, in six months, the company goes from zero to having a few million in the bank, which in the big picture, is much less pain than going through a typical IPO process. James explained that he’s been on the other path, where he’s raised 20 million, burnt it, raised 20 million, burnt it, and constantly in the market, constantly meeting with bankers, constantly running out of money and constantly almost missing payroll. James added that it’s easier to attract talent if there’s a few hundred million in the bank.

James explained that unicorn status helped them back their branding, it made people see they were real, because it’s a public company, there’s money in the bank, we’ve got real hardware that’s driving down the street and real engineering people in the office. He said the customers also don’t feel like they’re rolling some dice, like with a lot of start-ups. He said that all of these factors, especially SPAC, makes them very real to their customers.

Semiconductor shortage in the market

James has been in the industry a long time and said that the fact one commodity can bring an entire industry to its knees is phenomenal. He said car companies wrestle this all the time if they’ve allocated their wheels to Brazil, and suddenly there’s an issue, which means that model and that plant is down. Although, he said an entire industry being shut down by one commodity is extremely rare and unprecedented, but they’re doing everything they can, imagine reprogramming their hardware boxes to adapt to new chips. James explained that they’re moving chips from vehicle A to B to try to protect the higher-margin products. He said that where he is in Detroit, driving up by 75, he can see huge farmer fields with all those vehicles parked, waiting for the day where a chip shows up so somebody can run out, put it in a vehicle and off it can go. James added that it’s devastating because dealerships have no product on the lots, and those poor sales guys have nothing to sell, if you order a car, it’s a two- or three-month lead time.

James said one of the advantages of their business model is what they call ‘Knock-down kits’, CKD, completely knocked-down, it’s often done with many large OEM’s that go to a new country and market. James said in an oversimplified sense they take the existing vehicle, break it all down into its parts, put it in a box, ship it off to the country, set up an assembly plant, put it back together, call it Lego and off the vehicle goes. He explains that it’s crucial to adapt it to that local market, when he worked at Cadillac, they started off by breaking down the Cadillacs where they were based, shipped it to China and put it back together. Then over the years, they started localising the parts, with it becoming more and more of a home-grown unit, with a full assembly plant. James said, think of Toyota coming to us, the very first Camry came over with the Japanese Camry and now there’s huge assembly plants localised in the U.S. He said in their case they’ve found product in Asia and China that’s already in the market, which has been sold in the market for several years, the software bugs, durability, suspension, and things like that have been worked out. James said, we bring those over in kits and then do the final assembly here, but add in all the US specific requirements, the safety system, all the airbags and steering wheel airbags, all of those have to be brand new and have a completely different set of regulations than in both Europe and China. He explained that the advantage they have is that the chips are already in those vehicles going down the line in China today, on those assembly plants, and they’re leveraging their current vehicle bills. He added that this means they don’t have chip issues in models that they’re bringing over, so neither do they.

Future of ELMS

James said he believed there was a lot of hype, promises and power points in the car industry, and that these factors have helped manufacture some of the very high-value companies, but that their actual execution is a long time away. The car business takes a long time to stand up and what they’re focusing on now is, execution, getting vehicles out and scaling the plant. He explained that initially they are starting with low volumes of 50 to 100 a month, to make sure the plant level, manufacturing level and quality systems are all working properly. Then they will start increasing that volume, so that from the investors, shareholders, and customers standpoint they can see ELMS is not just an aftermarket low volume converter, but a true OEM. James summarises that the first step for 2022 will be scaling up and producing significant volumes. James explained that from a publicity and communications standpoint, they’re focused on gaining some large brands so they can have customer testimonials mainly. If they catch a couple of very big brands, big fleet managers and big fleet companies that adopt their product, then word will get out very quickly. He thinks it’s a small world that these guys live in, and he’s sure that lateral growth will spread like wildfire once the word is out that they’ve taken their product, it works and it’s reliable. James said he thinks the simplest answer is scale.

Business to business

James talked about the theme of B2B, and that in terms of real-world evidence, brand perspective and differentiation has to be earned from the customer backwards. He thinks customers have a pretty low tolerance on lack of performance, and they aren’t forgiving. In the early days when people receive a Tesla that doesn’t work, the software doesn’t work, and the quality’s no good, if someone is a tech fanatic or an early adopter then they have a lot of tolerance for an imperfect product. He said they muscled their way through those early years and are now of course much better, but likewise on their front they have to deliver reliable products and demonstrate cost savings. Otherwise, customers aren’t going to repeat buy, expand their fleets or tell the other fleets.

He explained that there is a lot of scepticism in the fleet side of businesses that they’re going to be able to achieve their reliability targets, especially with Ford coming in with their transits. In Europe, there are already commercial vehicles, so it isn’t brand new, but in ELMS particular case, they have a lot of experienced people here who have plants, that have been making vehicles for 20 years. But James said the most important differentiating factor for their brand, is that the brand is going to be known as reliable.

Company culture

James said it’s complicated to define culture because of how much that’s just organically grown by doing the right things versus making a culture announcement and telling everybody what the culture is. He thinks it’s crucial to put all the right enablers in place and then it happens, or it doesn’t, based on their actions at senior leadership. They can set the tone and direction for that, but the culture they’re trying to achieve is pragmatic and un-hyped, and low-key because of the intensity there. He thinks good start-ups have a constant view of survival, there’s nothing you can’t for granted. Having come from GM, which they thought was the safest place on Earth, to then going bankrupt, James said he doesn’t think there’s any safe haven anywhere anymore.

James explains it’s crucial to have that attitude where everybody’s coming to the game every day and fighting towards survival. He said that everyone’s hired for a specific purpose, they deliver what they said they’ll deliver, and they are competent in delivering that. There’s no place to hide in a big company, from personal experience he said there are often lots of people who are pretty average or less and find places to hide through a whole career, and then retire happy as if they actually did something, when in reality they didn’t do anything but were never exposed. James believed this is a very visible culture and compared it to a sports team, whether it’s a football/soccer team or whether it’s an American football team. He thinks they’re paid a lot of money to run out and catch the ball, and if they don’t catch the ball three or four times, what happens… they trade them, and it doesn’t come down to whether they’re a nice guy or if they tried really hard or their mother’s sick. He said it comes down to them not catching the ball, and that’s all that matters. They want to have a performance culture where employees see it as ‘you hired me, my job is this and I did it, you should be happy with me, you should pay me well, it’s pretty simple’. He said all the rest of it is important but also ought to be a given, such as the right benefits and happy people, but their priority is for people to deliver, so the company can deliver. James referred to American football being like a metaphor for business, in the sense that crazy things happen, there are so many teams that haven’t lost in three years and for example Ohio State lost, even though everyone thought it couldn’t happen, it did, they weren’t the best team.  

James thinks human capital is so important, and that if a CEO got one answer to pick out of plant by capital, physical capital machines, locations, markets, and human capital, the differentiator is human capital. Which is why sports is so evident, because in sports all they’ve got is human capital, it’s all about people on display and it’s the same thing in a company. He said you must have the right human capital or you’re not going to be the best team.

Internal Communications

James thinks it comes down to humility, approachability, and access. He said in their office they’re small now, with only 150 people, but use some of the old techniques of management, by walking around, stopping by, asking questions, dropping into meetings unannounced, and to be accessible and to be seen. Him and his senior staff spend a lot of time together and hopefully if queried, they’d be able to articulate what our vision and mission are. He thinks that he can also fall into a trap of taking that for granted, that the message is being adequately filtered down to the lowest people in the organisation, and it’s a mistake to assume that. He said repetition, repetition, repetition is needed for delivering the message and personally delivering it as opposed to assuming that announcing it in a staff meeting will mean that it’s going to make it all the way to the right person or right ears. So, reinforcing it in these meetings with the rationale, outcomes and why’s as opposed to just posters on the wall, ensures everybody gets it.

Discussing a principle, he learnt from one of his mentors along the GM journey, he said that they were talking and putting together presentations, which they’re always doing, because they’re selling a proposal, a budget or something. They were going through it, and he said it was too complicated, and then the line he said to him was ‘if you can explain this to your mother, Sunday night at dinner, then you got it’. So many of the communication pathways, especially internally, are so complicated, and lose the audience again and again, and it’s common to take for granted that they’re operating with your level of information, background, education, or all of the different variables. James said he keeps the message really simple and consistent, while repeating it, and doesn’t assume that as it was said that it’ll to stick to the wall, whether that’s internally or externally, a lot of it is the same formula.

External Communications

As the external representative of the business, James explains that he will look in the mirror and say ‘How come? Why is that?’ and thinks there is a bit of natural selection process involved, and if you get to leadership levels you have to be a good communicator. It’s an essential and critical role, and in big companies if someone isn’t a good communicator, they just don’t advance, because it’s a critical skill. He said maybe it was luck or timing, but he was put into a lot of jobs where it wasn’t optional, like the Cadillac job for instance, involved a huge number of public appearances. Practice makes perfect, and a skill isn’t developed without practice, and fortunately he had good training and lots of experiences that over time made him comfortable in that environment. He said he knows plenty of super-smart people that ended up in senior positions, and had never had to be in public communication, so never had a chance to practice it, and were nervous or not good at it.

Biggest communications challenge

James discussed the communications challenges he has faced, and said that with him being a public company CEO, he’s constantly under a microscope, and even his interview on this episode could be listened to by the SEC. They can say that information has been given away that isn’t public. He explained that every word that’s said is immediately scrutinised, which can consequently lead to public CEO’s not wanting to be involved in external communications because the risk is too high. He said bigger companies tend to have such manufactured press releases and earnings releases, everything is pre-written and pre-scripted. They take very few interviews because the risk is too high, and they just end up sending PR guys or other people to do their talking for them and take limited engagements. He admitted that he’s not currently practising that just yet.

James said that General Motors is a very conservative company in a good way, as they had a lot of help in understanding what to say, not to say. Staying on the safe side of the line and anticipating those as you’re talking, so you don’t get yourself in trouble. He said he wouldn’t name any names, but that a few SPAC leaders in the US, that didn’t come through that kind of system and didn’t have experience, got themselves in trouble and have since lost their jobs. He explained this is because they shouldn’t have said what they said, and didn’t catch themselves in time, didn’t think about it, weren’t trained, weren’t experienced or whatever the cause is. But CEO jobs can literally be lost overnight if they aren’t careful, he said he’s had lots of practice and hopefully he’ll stay on the right side of that line.

He said sometimes he looks back over transcripts and thinks ‘Damn, why did I say that?’ but he has a pretty tough partner, his co-founder. James will think he’s nailed one, and then his co-founder will listen back to the cut and ask ‘Why did you say that? How come you didn’t remember to add this and embellish this point?’. So, he said they’re pretty hard on themselves, especially post-mortem, to see if things could have been done better, to hone their skills like good sports guys do, when they look back at their game tapes. He added that luckily, he hasn’t got in any significant trouble costing him a job or career, and that he likes to get close to the line by being honest and transparent. By saying it like it is and not being overstuffed or too corporate, which he thinks plays well with journalists.

James explained that the good parts of being a founder and CEO is that he’s able to put a face on the company and it’s human, it’s not a corporate line, companies’ line or companies release, it’s his. It’s important to establish relationships with all these key communications because it’s vital for a company, especially a new one. He said he wants it all to be done well, ensuring they have the multiplier effect of getting the right audiences and all the tools in the business to get their message out. He added that they are still kind of a best-kept secret.

What advice would you give to your old self?

James said he often gets this question frequently from younger people, wanting to know how he made his career so successful, as if he had some sort of manual for it, like go here and go there, but a lot of it just happens to you. He said similarly to sports, there’s some sort of magnetic connection that happen if you’re good at something, and you get attracted to it and then get better at it. He compliments his parents and admits he thinks he was born with the knack; he’ll ask his mother and she’ll say that he had the gift of the gab before he could talk. He likes talking, and always has, so it became a natural skill. His advice is to identify the areas of communications to focus on and practice, practice, practice. Find opportunities to work on, as it isn’t different than sports or muscle building. He said study it and look at it as science, to know what works and what doesn’t. Then get yourself in places to be able to keep getting better at it, just like sports, it’s all about practice, practice, practice. He said the other thing is that there are still some days when he walks out like ‘Okay, I’m nervous as hell’ and even those guys at the World Cup or Super Bowl do. He said when Tom Brady walks out in the field, he’s sure a little nervous, it’s the big day. So, he doesn’t live fear free going into things, but he throws himself in those circumstances and trusts his training. Don’t shy away from the opportunities for big time venues, big time opportunities, to be in that space and take them on.

James said going back to the earlier days, he was maybe a bit reluctant to take on some of the big speaking opportunities or big communication opportunities. But he thinks just wait in there and treat it like sports and to flex those muscles. He explained, that when they announced their company he said, ‘I count this like an engagement and then we got married’. He said in the SPAC process, it’s a merger process, the company isn’t being founded, somebody else already has one and they’re merging into them. But when they made the announcement, he spoke to Phil LeBeau on CNBC, and it was 7 o clock in the morning, they’d been up all night finishing all of the agreements, and it’s freezing in Detroit. James is standing in the parking lot and he said ‘Hey, good morning Phil’ but he explained if anyone knows Phil LeBeau, on a good day he’s going to respond with ‘Hey Jim, good to see you’, but on a bad day James said ‘it’s like what the hell were you thinking and he attacks’ and it’s hard to know which way he’s going to come from. He said days like that are stressful and you’ve just got to roll with that, but if ‘you’ve got it pre-trained then you’re going to survive the battle’. He added not all communications are fun, they can be extremely stressful and extremely damaging, but the key is to train like any sport and be ready for game and go do it.