Keeping water and energy flowing: A Q&A with Paul Kennedy, Dakota Supply Group's new CEO
Editor’s note: Paul Kennedy is the new CEO of Dakota Supply Group, a Fargo, N.D.-based distributor of products and services serving the plumbing, HVAC, electrical, utility, communications, waterworks and automation trades.
In this interview, Prairie Business talks to Kennedy about DSG, his career, and the impact technology and the Internet are having on even age-old industries such as plumbing.
After high school, you spent four years in the Navy and became a cryptologic technician. What did you learn about leadership and life from the military?
It was a great experience. I got up to E-5 in the course of four years and became a supervisor at a young age.
And as I reflect back on that time, one thing that really strikes me is that I learned a lot about people, and how this is a great big country with diverse wants and needs and life experiences – and that to maximize people’s abilities, you need to understand where they're coming from.
I remember that distinctly because I grew up on the East Coast, so I’d never really spent time with anybody from the Midwest or West Coast or the South. And all of the sudden, I was in this potpourri of people with different life experiences.
Plus as a young manager, I had to manage people who were older than me. That took some getting used to as well.
Also, as you get exposed to a lot of different managers in the service, you pick up on traits and think, “Hey, I sure as heck don’t want to be like that guy,” or “Now, over there is a leader whose got some character and leadership traits that I really admire.” And I’ve definitely tried to incorporate those lessons into my life.
What would some of those negative and positive examples be?
On the good side, it would be somebody who took the time to earn my respect, rather than just demanding that I give them that respect. In other words, it would be a person who took time to get to know me and understand where I was coming from. That made me want to go and be all that I could be for that leader.
On the flip side, it would be somebody who not only felt “rank has its privileges,” but also took that to the wall. So, regardless of what the job was, it was always, “Hey, I outrank you,” rather than trying to promote that team influence and team effort.
After the Navy, what came next?
After I left the Navy, I moved with my wife – who was also in the Navy, and whom I’d met there – to Bemidji, Minn., where she's from.
And that's where I got into the plumbing business: I went to work for one of her uncles, who was a plumbing contractor in Bemidji.
Did you start on the ground floor?
I did. I’d been in the intelligence industry, but as you can imagine, there was not much market for that in Bemidji, Minn. But my wife and I had just decided that Bemidji was where we were going to call home; and because I didn't have a job, I went to work for her uncle, who was in the plumbing business. And that's how I started in the trades.
Was it a plumbing supply company?
It was a plumbing contracting company. My first job was pumping septic tanks. So I worked in the field for a couple of years, and I ended up helping to manage the office for the business.
Then I went to work on the wholesale side as an outside salesman for a company in Park Rapids, Minn.
Then I was hired by Westburne Supply, a plumbing/heating/electrical distribution company. They were a Canadian company, but they had a branch in Bemidji, and I became the branch manager.
I got promoted, moved to Fargo with the same company, and ran the branch business in Fargo.
Westburne was acquired in 2001 by Ferguson, which is a global leader in plumbing, HVAC, and waterworks distribution. And eventually, I became Ferguson’s VP for the North Central United States.
A few years and a few moves later, my wife and I moved to Ontario, and I took over the plumbing business for Wolseley Canada, which was Ferguson’s sister company in Canada.
What was it about plumbing and heating supply that kept your interest?
It just got into my blood. By the time I became a senior executive, I think I had a unique perspective, because I’d started out on the contracting side. And I’d worked my way up though contracting and into distribution – small branch management, outside sales, and into a senior executive role.
How has the Internet changed the supply end of the industry?
The Internet is both one of our biggest challenges and biggest opportunities. And it’s not just Amazon, but also companies that are competing more directly in our space – because, as you know, Amazon is more of a supply-chain and technology expert than it is an electrical, plumbing and heating expert.
So, understanding where where we can differentiate ourselves is critical to our success.
In DSG’s case, I really think our value proposition is the technical and product-specific expertise – what I call the “last mile” supply chain and other value-added supply-chain solutions that we can provide.
For example, I was in our Sioux Falls and St. Paul branches over the past few weeks, and I saw how we’ll unpack light fixtures from their packaging, then slide them into carts to make them easier for the contractor – our customer – to install once the fixtures get to the worksite.
So we’re coming up with those solutions that maybe an Amazon can't.
The other piece is Amazon and others’ technology investment, which has forced all of us in every industry to raise our game. So, as a B2B e-commerce site, we want our contractors to be able to go online at a time that is convenient for them to get the information they need to better manage their business.
That's the type of customer experience that we've got to provide.
Tell us about Dakota Supply Group.
In a nutshell, we are a leading distributor of electrical, plumbing, HVAC, utility, communications and waterworks products and services.
That’s the kind of work we do. But how we do it is, I think, even more special: We’re in 33 locations spread across Montana, North and South Dakota, Minnesota and Wisconsin. And our real key is that we’re employee owned, with roughly 700 employee owners.
We’re an ESOP, and that defines our level of engagement. Every day, every employee not only feels empowered, but also has the burden of being an owner. That comes into daily decision-making, as it pushes all of us to make sure we're doing all we can to take care of the customer and drive our business forward.
So DSG’s typical customers are plumbers, electricians or other contractors who are looking for specialized materials?
Right. And they can come to one of our counters, they can call, they can email, they can fax, they can go online. There are lots of different ways for us to engage with them.
What's next in plumbing and heating?
Innovation and technology are driving our products, including from the Internet of Things – Internet-connected light bulbs, lighting controls, thermostats that anticipate when you're going to be home and learn your daily routine, and so on.
So innovation is a driver, even in a field as ancient as plumbing?
Absolutely. Think of it this way: It used to require five or six gallons of water to flush a toilet, but over the past 20 years, that's now down to 1.2 or 1.6 gallons.
Think of the hydraulic design behind that. How do you clear what needs to be cleared while using only 25 percent of the water that used to be required?
There's a lot of design that goes into that, and into the piping systems that support it.
So that's one piece. The other piece is the construction of the product. Twenty-five years ago, most water piping was copper tube. Today, it’s cross-linked polyethylene or PEX pipe. That means reduced costs, lighter weight, better durability, fewer connections and less chance of leaks.
It must be something to have watched that evolve over your career.
If you've stayed in a newer hotel, you may have noticed the shower and thought, “Boy, I’m able to get a good shower from this, even though it’s using much less water than showers used to.” These days, it’s 1.5 gallons per minute or 1 gallon per minute out of a showerhead, vs. some of the old showerheads, which might have been 5 gallons per minute.
Same thing on the lighting side – the dynamics of LED lights. In many cases, they’re providing a better lighting experience while also drawing a significantly reduced power load and giving off less heat.
It’s very similar to computers, when you think back to how computer memory can be not only doubled but also made ever smaller in size. The leaps and bounds in plumbing, electrical or heating aren’t as quantum as that. But they are still pretty darn dramatic – and that makes this a very exciting time.