XPO Logistics is technically a transportation company. But XPO Logistics CEO Brad Jacobs puts technology first, and urges you to, too.
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Twenty years ago, successful CEOs didn't even need a computer. These dinosaurs asked secretaries to print their email. Leaders who don't prioritize tech now, though, are doomed, Jacobs told Investor's Business Daily. And that goes for companies not in the tech sector.
Case in point is Jacobs' own XPO Logistics (XPO). It's a Greenwich, Conn.-based technology company disguised as a shipping company. Many of its 100,000 employees are tech professionals. The company invested roughly $550 million in 2019 on tech advancements. Its drones, autonomous vehicles and machine learning help its 50,000 customers speed goods from one point to another.
And Jacobs' tech focus is working. Shares of XPO are up more than 550% since he formed the company and took over as chairman and CEO on Sept. 2, 2011. That blasts past the 170% gain of the S&P 500 during that time. The gain also makes the SPDR S&P Transportation ETF (XTN) look like it's standing still with a 200% increase.
And under Jacobs' leadership as XPO Logistics CEO, revenue soared more than 6,500% to north of $18 billion. The company is also now profitable, on track to earn roughly $400 million this year, while it lost money in 2012. Amazingly, this is Jacobs third home run company for investors, following hits in industrial rentals and waste management. The string of successes puts Jacobs' net worth at $2.1 billion, says Forbes.
How'd he do it? Putting tech first.
XPO Logistics CEO: Prioritize Technology
XPO is a transportation company. But put planes, trains and trucks out of your mind.
The company has robots that know when it's time to charge their batteries. They slide up to a charging station when needed. And this coming spring, XPO will open an automated, 638,000-square-foot distribution center in Leicestershire, England, that XPO calls "the warehouse of the future."
The company partnered with the Massachusetts Institute of Technology. The result? Next year, XPO will unveil its Innovation Lab in High Point, N.C.
Jacobs, 63, has long been an early adopter. He was one of the first with a high-definition, flat-screen TV. And yes, that means he hosted Super Bowl parties in the early 1990s. His first TV cost 30 times what a much bigger and better TV costs today.
"Back in the 80s, I bought one of the first mobile phones for $4,500," he said. The best phones today are four times cheaper and double as a camera, recorder, calendar, watch and music system. Jacobs sees no reason why that trend won't continue in all industries, including the giant and growing global market for transporting goods.
"Consumers will get products in their hands almost right away," he said. The future will be the same as the past — better-quality products at lower prices. Autonomous trucks will be common to highways in 10 years, he predicts.
Don't Let Industry Barriers Limit You
Jacobs' interest in tech has vaulted him into the world's club of billionaires. That's a club few join anymore without an intensely steeped focus on technology.
The XPO Logistics CEO might have once described the company as the Uber (UBER) of the supply chain. XPO matches businesses large and small to transportation companies that move product by air, ocean, rail, and through warehouses. Indeed, XPO has a suite of apps for shippers not unlike the Uber app. But Uber threw a wrench into that comparison by entering the freight marketplace in September, so Jacobs declines to mention his new competitor in polite elevator conversation.
"Some people call us the Google (GOOGL) of logistics," Jacobs said. "Knowing where the goods are, where they need to go, and where there are shortages or gluts, gives us a big edge."
Leverage Your Know-How Into Growth
Jacobs turns information into insight. He uses it to formulate strategy for its 11,000 trucks and 202 million square feet of warehouse space. "Skate to where the puck is going," not where it's been, he said, recalling the words of hockey great Wayne Gretzky. "Envision what customer needs will be in the future, not what their needs are today."
Technology is to the leader what skates and quadriceps are to the skater. Tech gets companies to the puck faster and cleaner. For example, a trucker who uses the Drive XPO app has in his palm a tool that tells him where the most money can be made based on where his truck is located. He can weigh spot rates, driving conditions and other factors before making a bid on a job.
Experts say tech knowledge not only builds a company's profits, it builds efficiency into the economy.
It's never been more important to be first, says Kevin Maney, founding partner of Category Design Advisors and co-author of "Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets."
"Company leaders have to think in a new way," Maney said. "They have to do everything they can to clearly dominate the category or risk being almost irrelevant."
Be Aggressive, But Under Control
Gretzky skated with controlled aggression. Jacobs recommends the same in business. He has started 250 companies, led 500 mergers and acquisitions and has raised more than $25 billion in debt and equity financing.
Prior to launching XPO, Jacobs also founded equipment rental firm United Rentals (URI) in 1997 and served as CEO until 2003. United Rentals, like XPO, was one of the best stocks of the 2010s. And Jacobs has similar success consolidating the waste industry, too.
"Sadly, there have been a few good acquisitions that slipped away," Jacobs says. "I was too risk-averse to pull the trigger. I wasn't bold enough."
Build A Diverse Team And Experience
Jacobs was a student of jazz and classical piano, as well as math, before dropping out of college in 1976. He left college to broker oil contracts after OPEC led an embargo that spiked prices.
His broad experiences guide him to motivate employees. Is leadership more like conducting an orchestra or letting employees freelance their own jazz? That depends, he says. "You want an all-star team. (And) you want virtuosos. You want both a Miles Davis Quartet and the London Philharmonic," he said.
Building the right team is key, he says. "The quality of the talent is more important than strategy or the way the organization is managed," he said. "I'm not minimizing the importance of the leader, but the band members are more important than the conductor."
One of the first things Jacobs does each morning is follow XPO employees on the Workplace by Facebook (FB) online tool to see if any concerns are bubbling up. Leaders unfamiliar with this technology may wait days, weeks or forever to know if there are problems in the ranks, he says.
Know How To Improvise
Technology feeds the culture of improvisation, says the XPO Logistics CEO. The job is "to create an environment where people are trusted and respected. When you create a safe place, people think and act differently and better, and suggest new approaches and ideas," he said.
Jacobs says the only way to tamp down employee insecurity is with honest and complete information. He says XPO Logistics promotes communication between top level and midlevel management and between management and front-line employees. Lines of communication are also open between the company and vendors and customers.
The company's headquarters have walls made of glass. If everyone can see each other, it greases conversations.
"In short, we communicate, communicate and communicate more," Jacobs said. He recommends that all leaders take a course in active listening.
Know Your Vision Is Never Done
CEOs must anticipate change, the XPO Logistics CEO says. But the pace of change is faster now.
Reading helps Jacobs keep his edge. Three books Jacobs recommends include, "The Singularity is Near: When Humans Transcend Biology," a book about A.I. and the future of humanity by futurist Ray Kurzweil. Another helpful read is "Shoe Dog," a memoir by Nike (NKE) co-founder Phil Knight that chronicles the company's struggles.
And then, "Logistics Clusters," by supply chain expert Yossi Sheffi, who explains why some cities have developed logistics clusters and others have not.
But the biggest lessons will be dictated by evolving technology, and keeping up with it, Jacobs says."Our significant investments in technology are creating tailwinds across our operations," he said. "We're very focused on the size of the prize."
XPO Logistics CEO Jacobs' Keys
- Took over as the transportation company's chairman and CEO in September 2011. He's upped the company's investment in advanced technology, putting it squarely in the middle of the economy's sweet spot.
- Overcame: The challenges of integrating more than a dozen independent logistics companies to form XPO Logistics.
- Lesson: Put technology at the center of your goals. That's the future.
- "You want an all-star team. (And) you want virtuosos. You want both a Miles Davis Quartet and the London Philharmonic."
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