Thrive Ep 45: Age of ENLITENment: COO Scott Damon Shares How ENLITEN Drives Strategy At Bridgestone

Great to be back, Keith. Love the new setup here. Kind of was expecting cigars and bourbon, a little Joe Rogan, but well, we'll settle for coffee. This is the start in the morning; when we finish in the afternoon, you never know what that coveted afternoon will bring when we wrap up. I didn't want to... I wanted your voice to be full and pure for the entire conversation, but we'll get there.

Well, I would say if you look at Global Bridgestone, I think we spent the last three years probably tackling three things. One, we laid the foundation for growth, certainly that's the Sustainable Solutions company, basically broadened our offering beyond tires to tire-centric solutions and tapping our feet into mobility solutions. The big thing I think we also did is we basically tried to tackle negative legacies, try to get back to basics, you know, making tires, selling tires. And I would say the third thing you saw globally from the company was just kind of cleaning up our footprint, businesses that didn't tie into that strategy, etc. So manufacturing locations that weren't as effective or businesses that didn't fit the strategy all kind of exited our portfolio, so to speak. But over those three pillars, I would say we've accomplished a lot globally. And if you dive into BSAM, certainly we've all dealt with just a tumultuous three-year supply chain issues, a cyber incident which hadn't happened when we last talked. I think the only thing we didn't face in that three-year period was a biblical plague, and despite it, we got a lot of wood around everybody. We're okay, exactly, no locust here. But in general, I would say if you look back, all those factors, we've accomplished probably more than the company ever thought we could. I mean, we're having record profit years. We've taken businesses like BSRO to two consecutive years of profit growth that we'd never seen. Our consumer replacement visit has doubled what we've done in 2019. Retreading is on a trajectory that's just fabulous. Our AG business has recovered from a 10-year drought, so to speak. I mean, just example after example of successes that you would look back and say despite all that we faced, the stress and the wear and tear on the organization, I don't know if we would accomplish much more than we did.

Yeah, I think it's balanced. And I think the global CEO would use the term 'tackling negative legacies,' and that's really what he meant: let's get back and make sure we have laser focus on being great at that, and then we actually have to set up a vision and a strategy to help us move not just with that but beyond that to be competitive in the future.

All right, well, the first thing I would say when I think about this is our North Star that Paulo has laid out: foundation's vision, Sustainable Solutions company, business ABC business, so tires, tire-centric solution, mobility, and then team. That's still very sound. And we hear the term Enlighten business strategy and then we hear the term Enlightened technology, so I'll try to separate them. So Enlightened business strategy: we just, if we think about those four portfolios, you're thinking about them in a vertical way, right? So Enlighten the business strategy is really more internal so that we get our organization thinking about it horizontally, so the entire value chain from the materials we buy to the products we make, design and make through R&D, to how we ship them to customers, the solutions beyond the tire that are going to help us in the sense, think-act part of the digital transformation, how we measure that and feedback that loop back to procurement and R&D. That's a horizontal look at the value chain when it comes to how we go to market. And each of those consumer, TBR, specialty, diversified can be looked in a lens of how that matrix vertically works across Enlighten horizontally. Now where I would say from a customer side that can be confusing, it's even confusing to our people, but it's really calibrating the company on Enlighten so that we think about it from the view of premium, solutions, sustainability. So an example of that as we operate internally would be: all right, our procurement team is working on a journey of making sure we deliver Dantatsu product performance but have a complementary sustainable material component to that. As we make the tires, we certainly would make them in a factory that's more sustainable, more intelligent, digitally. And again, working our way down to our sales and our BMS teams, taking products that are embedded with sensors that can basically talk to vehicles in the connected car park, capturing data, informing the user, helping them be more productive and cost efficient. And all the way down the value chain, it's just calibrating the organization on an Enlightened business strategy. Now from a customer lens, when you see the side of the tire, I would say Enlighten is just more the tech stack. So what are the material components that are going to define the performance criteria that kind of meet our targeted, I guess, aspirational goals in terms of performance and sustainability? So that could be the traditional ones you think about with tires: rolling resistance, tread wear, wet traction, but now you throw in an EV component of PSR and it's noise and it's percent CO2 that you're basically contributing as the vehicle moves. So you have other aspects of the tech stack that you're designing to solve for both the performance of the tire and the sustainability aspect on how we're measuring the tire. I don't know if that simplifies it enough for the team, but that's how I think.

Right, and so it also has add-ons. So like I might have an embedded tire sensor right that will also connect to one of our fleet management software systems. So again, the product customer sees Enlighten, but your Enlightened business strategy is touching all aspects of the business.

Yeah, so I would say you know where we're trying to simplify manufacturing is we basically make a carcass, it has a belt package and a tread. So we would like in a common size an application to have a consistency in the material approach for that carcass and that belt package. And so a good example in consumer: if you're making a touring tire or if you're making something in the all-terrain segment of light truck tires, we want to have commonality in the tire size there, so the materials will be sustainable circular materials, they'll have a functionality that is consistent in that application, but will differentiate based on certain segments with the tread pattern itself. So to your point, how are we trying to simplify things? We don't want to customize every component, every material going into every tire size; that complicates things and typically happens in original equipment. And you'll see a convergence of our product line in Enlighten where that module one, module two, or that carcass by size and application is converging on commonality and simplification, but the tread pattern, the design of the pattern, the way we mix the materials, the new materials coming in will be very different based on the application segment of the product. So again, Enlighten, that's what we're trying to tackle there: the simplification in manufacturing of those first modules and basically the differentiation on that third module. But a conversion, so whether it's an OE or replacement, etc., it's a simpler process, simpler way to do things than we do it today.

But again, remember the portfolio on consumer is premium with basically a car park that will be all EVs, right? So you are going to have some consistency there. Of course we will design for replacement and then tune for OE with the tread pattern. That's the strategy. But again, a tread pattern and a material that you're using in that tread for the Ford F-150 Lightning EV is vastly different than a Tesla Model 3, right? So you're going to solve for different things. But of course with EV, I would say there's consistency that we have to look at in a new world where the vehicles are heavier, the wear on the tires will be more accelerated, the noise in the cabin has to be addressed with some kind of noise abatement, we're using sponge, and of course we're designing it so that the tire can digitally talk to the vehicle. So all those things are in that suite that the OEs will all want, but that electric vehicle or hybrid electric vehicle, we're going to move towards that pace in consumer.

Well, I think for one, I think we're moving to a world that's converging towards fleets. And so I think it lends itself well to a world where you probably have less SKUs, you're trying to solve for things like productivity, cost, safety, and certainly the sustainability aspect. You're looking at products that need to be reused several times, so the retread aspect which right now sits in commercial but we're clearly seeing it moving into last mile delivery vans and the consumer space. So all those things should give you confidence that this strategy will play out well. But even in a fleet of one or a consumer's car today, we compete in the premium space today. We don't solve every customer's need at the value side of the equation; we try to, but again I think it's really around keeping ourselves at a certain share of premium but allowing us a more creative way to solve the problems there long term. So there's always going to be a space in the premium space, and I think in the consumer world on individual cars, we're going to be set with this because this is going to keep helping us add value there, add value to OEs, and as we converge on what I would call a fleet vacation, shared mobility, people in shared transit, this is going to move to a fleet model like we have in commercial, and these things set up quite well for that.

Well, there's already products rolled out in Europe, and I would say next year in consumer for us two big products: Turanza EV. So if you have a touring line, if you're running a Model 3, Model S, we've got five sizes launched originally but many more coming out. What we're really bringing out is our own EV line in a touring segment that has Enlightened technology. And probably the most exciting, you hear Paulo and Ricardo talk about, is basically the Potenza Sport All Season. So we've had to refresh an old line and it's doing quite well in Tire Rack, but this really encompasses our state of the art. We have a new ultra-high body ply that's a ultra-high tensile body ply going into this for riding handling. We got some new technology in the tread and the pattern, and it's going to be, I think, 90 sizes or plus. I don't even know if I have that right, but it's just we're covering every segment of high performance products with an all-season flavor, and it will be a big product launch for us next year in consumer. But that's just the start. I think we have a commercial steer tire coming out in 2024, and we're methodically upgrading the product line over the next six years with a large percentage of it being Enlightened technology.

Well, I think we talked a little bit about manufacturing too. I mean, you obviously are deep into that world, and there's been big announcements of investments that a lot of our Americas facilities in the last maybe 18 months, in Canada, the US, into Latin America as well. How much does Enlighten and the strategy play into that pretty significantly? But I guess what do all of those announcements also, how do they all connect to this conversation? Yeah, I would say the big, I mean, I guess what I would structure for us on capital for manufacturing is we're going to spend over three billion dollars over the next three years. Always bring in the fun facts, we like it. Yes, I know. But that's double what we spend on capital and manufacturing in any given year. So you're basically doubling our capital investment over this MVP to add capacities, but the really structure around complementing what's going to be necessary for the technology and Enlighten. So we'll complete our sixth tandem mixer installation. There's a lot of extrusion technology to complement the Enlightened technology we have to produce. There's a lot of tire assembly technology. So to your point, in that capital, it isn't just capacity add for volume, but it's got to complement the technology and capabilities for manufacturing to produce the products that are going to fit into this suite of Enlightened technology. So big numbers, a lot to get done in three years, but of course it complements that roadmap.

Oh, obviously we're doubling down on retread. I would say in the tire-centric solution or our new vision, it's at the epicenter of that. Probably over the last 12 to 13 years we've had negative keggers on retread, so it's been declining like soda. The last two years that trend is reversed. So you could say what's driving it? I think this pivot to basically the impact of public companies and their impact on their carbon emissions and what retreading can do there has kind of made a lot of companies rethink that that weren't already considering it. So that's certainly one to help. I also just think in terms of the available supply of product in the market, it kind of drove retreading back to the forefront. So in the Americas, to your point, two good years of turning that trend around. I think we had the largest volume we've had since 2015 or 16 this year, and next year we will produce and sell more retreading volume than we have since 1999. So that's back before Bandag was acquired by Bridgestone. And when you talk about the customer side and sustainability, I always tell Paulo, you remember that old Barbara Mandrell song 'I Was Country When Country Wasn't Cool'? We were sustainable before sustainable was cool with retreading. So a lot of focus in the Americas to drive it, and we drive the globe on this. So obviously BMS has to set up a lot of structural changes in Europe to drive that, but a lot of tailwinds for retreading and we want to take advantage of it.

Well, yeah, I would say we cross our fingers, you know, we expect a volatile year in demand, but I would say ocean freight capacity, raw material capacity, just in general the supply chain has become less volatile and I think more stable. So we're hoping this year to have a more consistent year in terms of managing supply and demand, and our team really needs that. So I'm definitely wishful thinking that it will be better than the last three, and certainly adaptable. But I think one of the things that our global CEO and Paulo respect about the organization is yet the world is going to be more volatile, and we've got to be more flexible and agile. So we need to balance people's personal space, personal time dealing with this, but I'm really proud of what our team's done with not the best of systems to address it in general. But overall, I expect things to be a lot better than they've been the last three years.

Well, I would say we got to bring this vision to life. So I think we've put a lot of pieces in place to try to accelerate. So we formed a new BMS organization. We like to think the supply chain is stable. We've got to deliver on the capital I just talked about in manufacturing to set us up for success as we exit this decade. I think BSRO, like I said, here we are looking at BSRO on two years of record profits, so we're basically saying how do we add new stores, how do we refresh this, how do we look at the offering different, whether it's Firestone Direct, whether it's EV charging stations, you name it. I just think there's so much momentum in this strategy that we've basically lit small fires on that are going to culminate into something much larger. So I think people should be excited about now. Of course we have to sequence and plan how we do things, we've got to measure things, but I think there's a lot of reasons to believe that we're going to be successful despite where the market goes, just based on what we've built.

Appreciate it, Keith, thanks so much.