Episode 16 : Do You Play The Game Even When You Lose?

Posted by Robert Isherwood on Dec 4, 2020 5:23:00 PM
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Robert Isherwood CEO of AMBAC International shares the company's strategy of choosing to keep going even when the going gets tough. The team's tenacity and involvement with The Great Game of Business® have helped them remain innovative and connected as a team during high-stress times.

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Episode with guest: Robert Isherwood

CEO Of Ambac International

(This episode was recorded in July of 2020.)


Key Episode Take-Aways:

1. People make good decisions if they have access to good information. (click to jump to this topic below)  Because here's the bottom line: people will make good decisions and they will contribute amazing things if they have access to good information, and they understand the deal.

2. Psychological ownership is a totally different deal. (click to jump to this topic below)  Psychological ownership buys you those unbelievable passes for the win of the Game. I'm still not used to it, you know, and I've been a Great Game open-book company for a while now, a couple of years, and I'm in the community a lot now. And I still hear these, I still am amazed by it.

3. Things go in the direction they're pointed - keep people's eyes up to move forward. (click to jump to this topic below)  Most things go in the direction they're pointed. So if you can keep people's eyes up, right? If you're focusing on problems, and you're focusing on what you can't do, and you hear it in people's language, like "Uh, we're probably not going to win that one." Well, guess what? It's no surprise if you end up in a ditch. 


Continue scrolling to read the full episode transcription.

Announcer  0:00  

Welcome to the "Change the Game" podcast, where we share stories of open-book management and highlight capitalism at its best. Thank you for tuning in to the 16th episode of the "Change the Game" podcast with special guest Robert Isherwood. This episode was recorded during the 2020 COVID-19 pandemic crisis. Here's your hosts, Rich Armstrong and Steve Baker.

Steve Baker  0:24  

Welcome to the "Change the Game" podcast, where we unite organizations that are changing the game by doing business differently. I'm Steve Baker, Vice President of the Great Game of Business. And here is my co-host and president of the Great Game, and co-author of an amazing new book, "Get in the Game," by Rich Armstrong and Steve Baker, available where fine books are sold. Mr. Rich Armstrong, how are you this morning?

Rich Armstrong  0:50  

Good morning, Steve.

Steve Baker  0:53  

Good. I'm in the mood for a long introduction. So you better buckle up, baby. On this podcast, we're seeking out those inspirational stories of how people are changing the Game with business and how the Great Game principles play a role in that and how capitalism is really at its best when people do so. What lessons did people learn through their experience? What is the big takeaway that you, the listener, can get from the guest and start implementing in your organizations today? You see, our community believes that business has the potential to make a positive difference in this world and boy, do we need it now more than ever. Great Game of Business organizations empower people to pursue their dreams and benefit our society as a whole and, Rich, that is capitalism at its best. So today, we've got a really interesting theme. This Black Swan will be our trophy. And we've got a really cool guy on with this: the CEO of AMBAC, Robert Isherwood. We're going to introduce him in a minute.

In the spirit of the Black Swan, I went back to the book, Nassim Nicholas Taleb's "Black Swan" from 2007, which by the way, predicted the housing crisis--and this pandemic, if you can believe that, a book from 2007. And I just saw him on an interview  on Bloomberg--we can talk about that in another podcast--but very interesting stuff; you should read the book. Here's the quote: "We tend to treat our knowledge as personal property to be protected and defended." That's just a thought-provoking quote for you. Are you doing that? I tend to do that. I think as leaders, we've got to make sure that this knowledge is for everybody. And that's what makes Great Game different. 

So let me introduce Robert. Robert Isherwood is the CEO of AMBAC International. And this organization was formerly American Bosch, and they've been manufacturing and supplying diesel fuel injection systems and other components for heavy duty commercial and military applications for over 100 years. So AMBAC is employee-owned; they're open-book, they won a 2019 All Star Award. Robert started out in the ad business with DDB in Chicago. He got an MBA from Georgia Tech. He studied at Dartmouth and Beijing University. But here's the big secret: he also got a BS at Texas A&M in photography. So now it's a photographer, an artist, [and] a musician. Welcome to this Harvard Business podcast!

Robert Isherwood  3:16  

Thank you for having me on. This is fantastic. I am so excited and--I got to admit--a little nervous. But let me tell you, I became involved with AMBAC International. And I was, and I still am, just so excited about it. It's just a fantastic team. It's a great company. And honestly, I started off thinking--and I  just want people to see and act the way I see them; I want them to see each other the way I see them. I just love the team. But I was on fire, right? I'm the new CEO, my very, very first day on the job. I'm up early and out the door. I was headed to a meeting with our then largest customer by far and away. We knew he had some issues. It wasn't like I was completely Pollyannish in my point of view, but I jumped on the airplane and fell asleep, actually, on the airplane.

I woke up to a loud bang; out the window on the row of my airplane is the East River and chunks of ice floating on the river. And I realize I'm sitting on the river. We just crashed. So my very first day on the job, I was in a plane crash. So thank God, no one got hurt. The flight crew and the emergency services were fantastic and everyone on the plane was saved from what could have been a terrible situation. But I figure that my career as a CEO of a big-time 100-year-old defense contractor and in the glory days was about 90 minutes and I slept through most of it. [Laughter.] 

That kind of set the tone for my first few days and my first year as CEO. So we were in the process of--our customer was transitioning to a new technology that meant that we were going to lose that piece of business. I got back to the shop, back in the game, was meeting with people and Pete Marriott, our controller, said, "You know, we're pretty low on cash." So we had nothing. I mean, we had no product line, we had no innovations in the pipeline, we were running out of cash. And Pete said to me--I'll never forget the look on his face--he said, "I hope you have a plan." And I didn't have a plan. I had nausea. And that  was it.

Steve Baker 4:51

In conversations that we've had, you said that, at that time, you kind of needed a better way to get the marketplace into people's minds. How did you do that? 

Robert Isherwood 5:49

Yeah, so manufacturing in the USA is a tough business. And AMBAC international had gotten behind the product innovation curve. And so our products largely, our portfolio,  was yesterday's news; it was old technology. And what was happening was that inside the company, the culture was suffering, and the team and the people were really suffering. The reason why was because they had become disconnected [from] the marketplace. They just didn't know. I mean, they had the capacity and the capability to respond. But they didn't have the information; they weren't part of the thought process. They didn't have knowledge of the marketplace, they weren't involved in decision- making.

As a result, they were disconnected from customer success. And here's the results, right? So we were in a terrible situation, losing 90 percent of our top line. So we had a huge top-line problem. And so I went out on the road, doing anything I can to try to save the ship in a sense, meeting customers, and I'm bringing home stories. And by stories, I mean numbers. So I'm bringing home, here's what's going on, here's what our customers are telling us, the good, everything, the unfortunate, the bad stories, what I was seeing at trade shows, what our competitors are doing. I'm just bringing home stuff. 

And then I start inviting people to come into the plant. And I would invite anybody who was sitting around in the airport lounge or something, to come to the plant and see and meet the people. I was trying to do sales. I am a terrible salesperson, but here's what  started happening; it was really cool. We would get people into the shop, and the guys on the shop floor would close the deals. So they were getting that eyeball to eyeball contact, that relationship with the people, from the customer to the people on the shop floor. And that's what started bringing the marketplace to the people, in a sense.

1. People make good decisions if they have access to good information.

Going on trips, I would drag people with me out to visit customers, so I was bringing the people out to the customer. Because here's the bottom line: people will make good decisions and they will contribute amazing things if they have access to good information, and they understand the deal. That's what happens, right? And as a leader--and whether you're a leader at home, or in a business or in the community--your job is to educate and elevate the people around you. And one way to do that is to show them how their contributions matter, really matter, to their success.

Rich Armstrong  8:17  

Robert, that's really cool, and it really does represent the basic principles of the Great Game of Business, right? And you self -implemented the Great Game of Business. Can you give us a little bit of a sense of what that journey was like? 

Robert Isherwood  8:30  

Yeah, sure. Actually I got fired doing that. But let's take a quick step back for just a second. So our sales manager at the time said, "I know this guy, and he says a lot of the same kinds of things that you say. And he wrote a book, by the way, so you might be interested in reading the book. So the book was "The Great Game of Business" by Jack Stack and Bo Burlingham. And I read it, and I was completely fascinated by the story. And I honestly didn't believe it was true. I thought it was a great book. But it wasn't real. 

So I sort of coerced my way or badgered my way into the shop floors of Great Game companies, SRC included, but also non-SRC companies. And what I saw on the shop floor, talking to the men and women who were actually making the product, really impressed me. And that's really what sold me on the whole thing. You know, I met a forklift operator who knew what his inventory terms were. And he knew why it mattered. I met a technician at a high-tech company, non-SRC company, who had significant  material input into his company's technology and capital plan. That I thought was so cool.

So I come home, all fired up about this idea. And I say, "Here's what we're gonna do, guys. This is genius, right?" And I'm trying to self-implement. In doing that, I learned two things real fast. One of them I learned, I didn't understand how [to do it] at all; I had no idea, but I had all the enthusiasm in the world. And the other one is I wasn't really communicating the “why” very effectively. 

So I took a step back and realized I needed help. I fired myself from the job and invited in Kevin Walters from Great Game. And he has a heart of gold, he really does. But he also has a huge amount of experience in business, in businesses in crisis. And so the design team formed around him. And then within 90 days, they were just on fire. They were taking things down and making notes. By the way, we are a business, right? So the mini-games that they implemented in the first 90 days paid for the cost of the implementation. At the end of our first fiscal year as a Great Game company, AMBAC posted an 851 percent increase in profit, productivity was up 21 percent, sales were up 20 percent.

And you can't do that in manufacturing. This is not a rapid pivot type of industry, right? There were no new machines. There were no magic tools. There was no genius in the corner office. None of that. The only variable that changed was the implementation. There was electricity in the air, people were feeling it, they were on fire. It was super, and it was just magical. And I was so proud of the team on their max bonus first year out of the gate.

Steve Baker  11:15  

That's nice. So AMBAC's first year in the Game, first full year, you got some incredible financial results, but also cultural change. I know you've talked about that a lot and you were even chosen as Rookie of the Year in our All Star awards in 2019. You know, it's all high-fives of bonuses and awards, then what happened? 

Robert Isherwood  11:41  

Yeah, so then it got real. We were incredibly honored and completely surprised, honestly, to be named Rookie of the Year. But it was a blast. It was huge, it was so fantastic. And the design team went to Dallas for the conference. And I was so proud to be able to accept the award with the design team on behalf of the whole company. But we knew we were behind on our plan that year. It was going to be a tough year, right? Tough is what we do, right?

We have tough years all the time. The design team put together a mini-game, and it was really a Hail Mary pass for the win, but they delivered. I mean, they really delivered on that mini-game. And we were so close. But at the end,  Murphy's law came and bit us. So the Wednesday before the close of our fiscal year, we believed we were on plan to pay a max bonus. The first Wednesday of our new fiscal year, seven days later, we found out we were... nada. We were at zero. So we went from max bonus to zero in seven days.

Steve Baker  12:53  

What happened? What was the event? What was it and then how did your team handle it? But also, how did Robert Isherwood handle it? I mean, that's got to be a--

Robert Isherwood  13:05  

Yeah, so the Murphy's Law problem that we had was several critical shipments that we had to make, right at the end of the year. This is a little bit the way our year goes; it tends to be real back-end stacked. They were supposed to go out and for various reasons, they weren't able to go out. So that's what happened. Now in the huddle, that's a really tough day, right? So the announcement was made, there was going to be no bonus. The year ahead was looking pretty bad, to be honest. Everybody was shocked and angry. I mean, they poured on the coals, and they did deliver what they needed to deliver, to win. And so they were angry. They were frustrated. It was bad. 

Here's what happened: for me, when you're winning and you're setting up to pay max bonus, and the team's winning awards, it's fantastic. It's intoxicating. I mean, what it does, it's so cool. I knew people were going home, the year prior, where they were getting the max bonus, and they were paying off credit card debt. They were paying off school loans. What it was doing to the families and the community around us was phenomenal. And then I knew what was happening when we weren't going to pay. I knew the miss meant that men were going to go home and tell their families there was no bonus. There was going to be no celebratory dinner. We were setting them up for a tough year. And you know, I hate to lose.

Steve Baker  14:40  

Well, everybody hates to lose. Even just as saying, "Winning's fun, but you've learned nothing in the winner's circle." Pretty good stuff.

Robert Isherwood  14:49  


Steve Baker  14:49  

This has been your mantra as you started to attack the problems and also the kind of morale issues you might have had. Tell us about that. 

Robert Isherwood  14:57  

Yeah, so before that was over, right, so let's say 20 or 30 minutes into it, people who were not “at fault” stepped up to take responsibility. You know, one person laid claim to it and said that they were going to do what they had to do so that would never happen. Another guy, one of the guys that works with us, who works on the shop floor--he's a machinist--he said, "I'm not here to get a bonus. I'm here to build a great company." I mean, the tune totally changed in those moments. And then, in a stroke of leadership genius that I was just awed by, Pete Marriott, who's our controller and he's kind of the captain of the design team in a way, he and the design team led the whole company, basically, through the Great Game of Business book in an open-book, discussion format, chapter by chapter, concept by concept.

And they got a chance to talk about why the Game matters, how we play, what's in it for them, all those kinds of things. And in that format, you know, a lot of really good questions but really hard questions got asked and answered. So in manufacturing, by the way, we make money when the machines are running. It’s enormously expensive to take the entire production team and sit them down to go through a book club, week after week after week.

So it's not the obvious thing to do, right? When production is running low and the chips are down, what do you do? You throw on over time, you put people to work, you make them miss their Sundays. That's not what the design team did. It wasn't obvious, but it was the right decision. And it was really smart. The leadership they showed was fantastic. So it was a rough lesson, but we learned so much. And I think it left us a much better company at the end of the day.

Rich Armstrong  16:48  

What's kind of interesting, really, in those hard times, is where you see the ownership come out. It sounds like you've seen people really taking ownership and really testing these practices. You're already an employee-owned company. In fact, I think you were an employee-owned company prior to the Great Game of Business. 

Robert Isherwood  17:07  

Long before that.

Rich Armstrong  17:08  

So there's a little bit of a misconception about employee ownership that, hey, it's a little bit of a magic pill; you become employee-owned, and everybody starts thinking and acting and feeling like owners. Can you talk a little bit about that journey and then implementing Great Game later, after employee ownership?

2. Psychological ownership is a totally different deal.

Robert Isherwood  17:25  

Employee ownership, in fact--so we're an ESOP company. So the fact of employee ownership buys you not much. It maybe buys you something, but not much. Psychological ownership is a totally different deal. Psychological ownership buys you those unbelievable passes for the win of the Game. I'm still not used to it, you know, and I've been a Great Game open-book company for a while now, a couple of years, and I'm in the community a lot now. And I still hear these, I still am amazed by it.

So here's a thing, just a quick story that I was reminded of recently. We had a new employee and a bunch of us were going out to a trade show; this is pre-COVID. So the new gentleman who was working with us came to me, typical corporate expense stuff--you know, you go to your boss, and you say, "Hey, boss. Where should I stay? How much can I spend? What's our expense policy?" And I said, "I don't know. It's your money; spend it however you think you need to."

And he kind of got this really confused look on his face, and he wandered off. So we're going to Vegas. I just authorized him to get the king suite at the Palace. Right? What did he do? He spent the next couple of hours scouring the internet for the best possible deal he could get. I mean, he got a phenomenal hotel. So that's a little thing. 

On the income side, it happens with the same sorts of things. We had a customer that accidentally shipped us the wrong part. Well, one of the guys on the line said, "You know, we can make something out of that." And we did and we returned it to the customer with a little note: "By the way, if you're interested in this new product line, give us a call." Well, they did. So we got that product line. And then that led to a series of innovations that changed the business strategy for us where we're now into business strategy conversations with our customers that we would have never been before. So those kinds of things--that's psychological ownership. 

In the factory right before we got on the podcast, I was looking at some reports. And I discovered in the reports that our overhead absorption rate is growing at about 8 percept kegger. Meaning, for people who aren't familiar with manufacturing, our fat-to-muscle ratio... we're getting stronger by 8 percent compounded every single year since we went Great Game. So we are 8 percent stronger than we were last year. Next year we will be 8 percent stronger than that. So small changes all over the company, because people really have a stake in it--as you say, a stake in the outcome--they understand what's going on and they can pull the right levers. Those tiny little changes add up to some startlingly huge numbers.

So we have 50 employee owners that are generating sustained gains, day after day after day. And by the way, nobody told them to do that. I did not send some genius memo that inspired people to do that. None of that. Everyone at AMBAC, and I mean, every one of them, has the opportunity and the information that they need to make a big difference. That's it. So a company that's employee owned, is not necessarily psychologically owned. Psychologically-owned--maybe it's a matter of semantics. And I'm sure people in the chat are going to have questions and they're not going to understand. But it makes a big difference. It makes a very big difference.

Rich Anderson 18:40

What really comes through, Robert, is your leadership philosophy, and how you're bringing that out in people. And you talk a little bit about the need for a certain leadership approach, really bringing out some ownership thinking. And you actually describe it, which is kind of interesting. You describe it as very counterintuitive compared to what we've been taught. Can you talk a little bit about that? What do you mean by counterintuitive?

Robert Isherwood 21:20

Yeah, so you would not be wrong to have grown up with the belief and to get a great big business degree in a great big business school with this idea that leaders are strong and powerful and all-knowing, and we're going to lead the team and we are going to boldly go where no man has gone before, out in front, carrying the banner, rah rah. Right? That's the model we've been taught. That's what we see. And that's what you believe. 

And honestly, here's what really happens: what really happens as a leader in a company--not just to me, but other people I've talked to--is you feel weak, you know  you don't know, you don't have the answers, you got nothing. You wake up at two o'clock in the morning, scared out of your mind, in a puddle of cold sweat. That's the reality. That's what it means. If you care about your people, that's what that means. So here's the thing. As a leader--and this, by the way, applies in business, I think it probably also applies in lots of contexts. I know it applies at home, I know it applies in community organizations.

As a leader, you have some options, right? So one option you can choose is that command and control style, the captain in charge of the ship. And this may or may not work in the short term. It may actually work in the short term, but in the long term, it's suicide. Right? It's a death sentence. Because it's based on a fundamental assumption, that's incorrect. The fundamental assumption that's incorrect, is “they” right? In my world of manufacturing, it's the guys on the shop floor; in landscaping, it's the guy pushing the lawn mower. "They," right? Whoever the "they" are in your world. They don't know.

They probably can't know. They're probably not smart enough to know. Because if they were smart enough to know, they would be management. They would have a desk and they would have the carpeted floors. Right? That's a model. And it's a crock, right? Everybody knows it's a crock. It's garbage. But it is so seductive, that you fall for it. You do. I have in the past, and I know other people that would. 

On the flip side, it's the servant-based leadership model, or the team-based leadership model, which I have to say I subscribe to wholeheartedly. But for any human being to answer your question directly, it is very difficult to do. It's really a gut punch to do that. And the reason is because you get to stand up in front of the room and tell everybody you don't have any ideas. You got nothing. Right? And so you face in yourself this fear of public humiliation, you're giving out a ton of information--and we share our information widely. And, you know, people could use it against us. So you have this question of betrayal in your mind. And it's just a leap here. And it's instinctive. But fear is a liar. And that's the thing I think that everybody should remember. 

So sometimes in the course of business events, you get the stuffing knocked out, right? So that happens, and if you're a command and control organization, it's probably gonna happen a lot faster. So you find yourself face down in the dirt. You just got kicked down, and you got nothing left. So then you got to choose this vulnerable option, because that's all you're gonna do. You're about to announce mass layoffs or something. You are completely exposed at that point. Well, you got an opportunity in that moment. And the opportunity is, if you open your eyes, while you're laying face down in the dirt, you will see there are diamonds in that dirt.

Steve Baker  24:44  

That's another great quote I'm gonna have to grab. Rich, you can see why I'm talking to Robert, I'm going, this is why I needed that quote, "We tend to treat our knowledge as personal property to be protected and defended." And here Robert is refuting that whole idea and saying, "Yeah, we shouldn't do that because good leaders--I mean, who knows the job better than the person doing the job? And I do have to ask a question that I haven't ever asked you before, Robert.

o you think the fact that you walked away from an airplane crash--do people hold you as some sort of deity? Or is there a cult that has followed you? Because someone out there is asking that question of, that might be what it is; maybe it's not open book! Are you indestructible? 

Robert Isherwood  25:25  

Maybe it was the plane crash or something? Paula Laurie], my dearly beloved, she will tell you the truth: I am not... I got nothing, you know? [Laughter.] The house is a wreck. I live like a normal person. There's no magic.

Steve Baker  25:44  

But that's good. That's what Great Game community folks are all about:  the fact that we are just people. But we're all people. And what if we actually treated them like adults and gave a shot? So right now, you believe AMBAC is positioned better now than ever to take on new challenges and opportunities. We're certainly in a bunch of challenges now. So you know, tell me why you say that you're in a better position.

Robert Isherwood  26:11  

We found out, when we missed the gain share bonus that year.... that being tough is what we do. Well, guess what? Every company has problems. That's just part of life. That's the deal, right? So when the market's hot and everything's moving fast and the S&P's posting double-digit gains, anyone can make money, and everyone does. Right? So that's easy money. But today, we're faced with an economy where your entire sales pipeline can go to zero in one phone call.

And we're all sitting in that moment. So for AMBAC, why I say that we're better positioned than we ever were, is partly because we went through those rough patches, but partly because we're operating from the fundamental position that business is a team sport and everybody's on the team. Everybody's on the team. So the Great Game of Business, open-book management, has given us the ability where we have 50 employee owners--50 CEO-level strategists--that get together every Wednesday at 1pm, and if anybody's interested, I'd be happy to send you a link and you can watch it happen live. We go through the numbers, we look at real data, we solve problems, and we co-create our future. That's a really good position to be in. I don't know what the market is going to do. But I do know that we will respond. And probably before the hour is out.

Rich Armstrong  27:32  

Hey Steve, there's a question from our panelists that--maybe it's backing up just a little bit, and I apologize for this--but maybe it's something we overlooked. How did you become a CEO?

Robert Isherwood  27:45  

Mmm, yeah, almost by mistake.

Steve Baker  27:47  

What were you doing before?

Robert Isherwood  27:49  

Before I was CEO I was the CTO of 22Squared Advertising and my background is in the technology of media and publishing and the internet world and all that space. Now, my personal career, as a technologist in that world, was bringing technology into these wonderful companies with really great people who really didn't get the technology, right? I'm 50, so I entered the job market right around the same time that computers entered publishing, and that's what I did: I taught the master craftsmen of the day how to take advantage and apply their skills that they had to the technology. 

I became involved with AMBAC International through a family connection. My father was actually CEO before me, and my uncle was CEO. And they invited me in to take a look at the company after my father passed, and to decide what to do with the company. And we could have gone a lot of different directions. But I got to know the people, and I got to know the people on the shop floor. And, I've said this so many times, but I just want people to see them the way I see them. And for them to see each other the way I see them. Because it's something, I mean, if you haven't been, you've got to come see it. It's such a great bunch of people. So that was it. I just wanted to do something.

Steve Baker  29:08  

Robert, come do some manufacturing! It's easy. [Laughter.]

Robert Isherwood  29:14  

Actually, it was more like, "Uh-oh. What are we gonna do now?" "I don't know; call Robert. He's a pretty smart computer guy. Maybe he's got some ideas."

Rich Armstrong  29:27  

{Laughter.} It certainly sounds like you've had a little small turnaround for sure. Maybe a big turnaround. Speaking of turnarounds, one of the things you had mentioned to me earlier was that, after looking at the Great Game of Business practices, that it can actually be a pretty good vehicle for turnarounds and that you've actually built that a little bit into your planning process. Can you talk a little bit about that?

Robert Isherwood  29:55  

Oh, yeah, sure. It is in our 10-year plan, actually. So when you look at the performance data, and I read a lot and I try to immerse myself in the data as much as possible, you see that open-book companies in general--and Great Game in particular--you see some really startling numbers of performance with these kinds of companies compared to their industry peers. And so that tells me, you know, the numbers say that it's a really good thing.

So now, if you find an opportunity or you see an opportunity where you have a company that's in a transition, or maybe they've run aground or whatever is happening--and there's a lot of bad stories, especially in this market--but they've got a good team, and they got good basic business fundamentals, with that, you've got something. So if the team is willing, and the leadership has the right core values, I would take that bet. In fact, I did take that bet with AMBAC International. And I'm so proud of the outcome that that team has shown. That is really smart. That is magic. And that's the long term plan. Now I'm just giving our long-term corporate strategy away.

Rich Armstrong  31:10  

[Laughter.] Maybe they'll get it a little bit easier.

Steve Baker  31:16  

Exactly. Well, so there are questions coming in about your background and how your background influenced you as a leader. I'm going to save those for a minute. Because I want to stay where we're at, just for a little bit longer, and ask the question: so you've got this vision, you've got someplace to go; what do you think is going to happen next? And what do you think--right now, as we're recording, we're in the summer of COVID-19. When do you forecast a recovery to begin?

Robert Isherwood  31:48  

So I'm looking at the second or third quarter of '21, and I think it's dependent upon the virus really, and the vaccine and the possibility of a second wave, which I think we're starting to see as well. And then the second-order effects, the economic effects from that. So I think there's a huge amount of uncertainty and volatility in the marketplace. So it will be resolved. And as it's resolved, I'm looking at about a year before the economy starts functioning normally.

Now, what's going to happen is, and national governments across the globe are going to have to stop, at some point, all the funding that they're pouring into the economy. And after that, I think, is when we really start seeing economic second-order effects. Right now the economy, I think, is being artificially propped up in a sense. 

Like I said, I read a lot, and ITR Economics is putting out some very interesting information that both gives you, as they put it, reasons to smile and reasons to frown. I think that leads to, in my mind, an uneven, somewhat stop-and-start recovery. For AMBAC International in particular, on the plus side, we're looking at customers with about a 20 percent drop in sales. On the dark side, we're looking at some customers that we're seeing somewhere around a 100 percent drop in sales. So we're looking at a pretty tough market as well. Manufacturing tends to be a little bit laggy, because we’re still fulfilling contracts we got pre-COVID. The pipeline is where we're starting to see some problems. Now, that's the bad news.

There's some really good news, like we talked about. It's an unstable marketplace. And that unstable marketplace opens up opportunities. And if you can keep your head on your shoulders while everyone else is losing theirs, you can move and you will find some really awesome opportunities

Steve Baker  33:36  

A little Kipling reference there.

Robert Isherwood  33:39  

Yeah, right..

Rich Armstrong  33:41  

Robert, you inserted there earlier that you have a 10-year plan. It's been interesting, because even before the pandemic, there was a lot of talk out there about, you know, the end of planning. There's so much change in the world, why do you plan anymore? Why don't you be more agile and respond to what's happening in the world? I'm sure with all the pandemic stuff that that kind of thinking has just been supported. But you've got a 10 year plan. So why plan? With all this change, why have a 10 year plan?

Robert Isherwood  34:18  

Well, I'll tell you, it is a lot easier to stay on the road when you're looking a long way down the road. Right? Organizations, people, things in life, tend to move in the direction that they are pointed. And so planning in part is about pointing in the right direction and looking [all the way down the road]. But also it's about making sure everybody is involved in the creation of the plan, that they have co-authorship of the plan, or complete authorship of the plan. Because it's a whole lot easier to get everybody pulling on the same end of the rope when it's their rope. There's a lot of value in just that.

Now the agile model of--in my days in technology and software, Agile was a big deal and I appreciate it as a software development model. As a business strategy model, it's a little bit different. It's like driving your car staring in the rearview mirror. And so if you're driving your car staring in the rearview mirror, you're gonna hit something. And so your Agile pivot becomes, "Oh my god, we just hit a fire hydrant. We're no longer in the car business. Now we're in the salvage business. We pivoted." Well, congratulations. But if you were looking out the window, you might have missed the fire hydrant.


Rich Armstrong  35:25  

Wow, good analogy.


Robert Isherwood  35:25  

Yeah, I think that's it. Now planning, by the way, is upside planning and downside planning. So you have your A plan, and you have your B plan. So what happens if the major customer leaves, what happens then... those are the downside plans. But also, I personally think that companies should run like environments run, at about 85 percent of capacity, maybe 80 percent of capacity, meaning you've got topside potential of unallocated resources of time and people and energy that you can take advantage of this market. Now, that's a planned move, right? It looks like a pivot but you planned to pivot. 

You know, something I learned, actually, from Great Game and Jack Stack in particular, is that Black Swans and these kinds of moments are entirely forecastable. You just keep your eyes on the road; every 10 years, there's a Black Swan. We don't know what the Black Swan is going to be-and I totally learned this from Jack and I'm ripping him off--but we don't know what the Black Swan is going to be. But we know it's going to be there. So what are we gonna do about it?

Rich Anderson 35:26

Well, speaking of Black Swan, you talk about the Black Swan award. What is the Black Swan award?

Robert Isherwood

Yeah, the Black Swan award...actually, here. I'll show you what... you can see it on the screen - we got it, right? The Black Swan award.

Rich Armstrong  36:46  

Embrace it.

Robert Isherwood  36:48  

Embrace it. That's exactly right. So you know... I get so excited; that's why I brought the T-shirt with me. This is so cool. Because fear is a liar, right? So COVID-19 started breaking out in our local area, and we didn't know what it was going to mean for us. Nobody knew. I still don't know what it's going to mean for us. But actually, I was watching some of the early things, and the toolkit that Great Game put out. And so what I did is I just started over-communicating, and I started sending out emails. The first thing was emails about CDC guidelines, and that we're implementing all the CDC guidelines to make sure people are safe, right? So I sent out a bunch of long-winded emails about that. 

And then I started sending out information where it had a simple four-level scale--red, yellow, orange, green--the scale of where we are on our sales forecast, our cash forecast, and our profit forecast. That was it. And then Pete Marriott and the design team and a lot of other people started educating, what is that number? What does that number mean? What does it tell? Nobody, by the way, issued an edict that we were going to do anything. There was none of that.

But in those emails, I started talking about a Black Swan opportunity. So in Black Swans, as we all know, the market becomes unhinged. And I know, and I was telling people, I have 100 percent belief in the idea that if you have a healthy team, and you've got a healthy balance sheet, you've got options. So in part it becomes about protecting the people and then protecting the company. And then, in other words, this is the way I signed off all the emails during this timeframe: "This is your moment. You own it. This Black Swan will be our trophy."

Steve Baker  38:31  

I love that. And I love the fact that you personified it, you made it real in the form of a t-shirt, and you just owned that. I love the fact that you keep bringing out this idea that we consider our mantra, people support what they helped create, and I wrote down a few things that you've talked about.

And when I called you about being on the podcast, I was interrupting you during a very heated cornhole tournament. What was happening at that time? What was going on when you were hurling bags of beans or whatever at the target?

Robert Isherwood  39:28  

Heather, by the way, was doing a great job of carrying me on that thing, but we were  losing and we didn't make it past the first round. But she was a great teammate. We had a heck of a lot of fun. What we were doing, with some socially distanced barbecue and games out on the front lawn, in the sunshine, we were celebrating that we were shooting Black Swans out of the sky. To be honest, that's what we were doing. The team rallied around the idea and the education that we were providing. We were starting to see the turnaround. We were starting to see some security in our long-term future, and some opportunity opening up. 

3. Things go in the direction they're pointed - keep people's eyes up to move forward.

Now, that's something I think is really important to point out--especially in the middle of a pandemic, and COVID, and all the stuff that's going on. There are a lot of great hopeful stories, in AMBAC and in many places in the economy, and it's easy to become afraid and discouraged, and you know, to be watching the headlines and shut down. It's easy to do, and it's obvious. But like I said, most things go in the direction they're pointed. So if you can keep people's eyes up, right? If you're focusing on problems, and you're focusing on what you can't do, and you hear it in people's language, like "Uh, we're probably not going to win that one." Well, guess what? It's no surprise if you end up in a ditch. 

But you know, every staff meeting, we begin the first agenda item on the staff meeting, is good news. So we go around the horn and we talk about what good things happened in each area of the company. And every single week--every single week--there's a healthy, long list of good things that are happening. That's how we begin the staff meetings. For example, we ship [above plan], so if we have what we call a million-dollar month, we ship above plan, we have ice cream. And we look forward to it. It's important to stop, and you have to do this consciously, stop, look for the good news. Look for the opportunities for wins. Your huge successes are built upon a long series of small wins. So find them, pull them out, celebrate them. Buy people ice cream, because there's always a lot more good news than most people realize.

Steve Baker  41:35  

Got to bring it out.

Robert Isherwood  41:37  

Yeah. And it's up to you to do that.  Because it's not going to happen organically.

Steve Baker  41:47  

So it's probably a good time to bring in a couple questions. I know Rich and I have more questions for you, but let's bring in some from the community. Mike is asking, "How did Beijing University make you a global leader?" Good question.

Robert Isherwood  42:05  

As part of my MBA program, which was in international business, we did visits to other countries where we talked about business in other countries. So as part of that program, I did a stint, or a development class, about China and doing business in China. We also went to South America and had a lot of international experiences. How did it change? AMBAC is called AMBAC International for a very important reason.

A very significant percentage of our sales is global. And our supply chain is global. From a leadership point of view, the thing that I learned pretty quickly in those experiences is, business is a universal language. And human beings all have business. And essentially, the nuances may change, but the core is the same.

Steve Baker  43:07  

Yeah, to this day, I still show a Chinese balance sheet when I teach at conferences, because I'm like, "Can you read it?" And people are like, "No." And I say, "Balance." And they go, "Oh, yeah." So it crosses all the boundaries. Bo's got another question for us, and, by the way, just to make you really nervous, this is Bo Burlingham, co-author of the original book, "The Great Game." You can tell Bo is a pro because he's asking one question, but I'm counting three actual question marks within it. So hang tight. Here we go. Bo asks, "How did your previous career affect the way you work at AMBAC?

Robert Isherwood  43:50  

So I had the good fortune in my previous career, in media technology and stuff of being a technologist, through the dot-com bubbles, right? And there was one catastrophic one that everybody knows about, but there were actually a few other aftershocks that happened after that. And I had the chance to live through that. And I had the chance to work with men and women who were really the paragon creators in that world, some of the most creative and dynamic people, writers and artists. And so I learned a lot. But one thing I learned is that a fantastic team, genius-level artists, the top people winning awards in their industry, can collapse in a heartbeat, if the fundamentals are not correct. 

I also, and similarly in another environment, I saw a leader come into our company, and completely rebranded the company, it was [Richard Ward at Westwing 22Squared], rebranded the company, relaunched it under a different premise based upon relationships and based upon teamwork. And it did tremendous things, so I got a chance to see that as well. So you know, I saw collapse, I saw rebirth. I was part of the management team that did both collapsing and reversing. And I got a lot of battle scars from them. 

Steve Baker  45:11  

Yeah. So Bo continues with--I'll kind of combine these two into one question and then Rich, I'll turn it back over you. He asks, "Given how dire the overall situation was when you came in to AMBAC, did the overall strategy change? And what is the strategy now?"

Robert Isherwood  45:34  

When I first went to AMBAC, the overall strategy was praying that we were going to get a purchase order. That was the strategy. So yeah, it changed a lot. Now we have one. The central core of our strategy now is that we manufacture and re-manufacture heavy duty power components for our hometown heroes. For the men and women that drive fire trucks, for soldiers, for Marines, for the guys that empty my trash bin every week, for the community of people that we depend upon. These are heavy duty people running heavy-duty machines.

And our desire is to be able to fuel their work, it’s to be able to contribute to that, Strategically, we've decided that we're not going to be a big company; that's not in the cards. We're going for the best. Now, interesting that Bo Burlingham asked that question, because I completely stole that idea from his work at Small Giants. And I just loved that. And so thank you very much, Bo, for that, by the way. You informed something that was deep in my heart and gave me words for it. So that is where we're going. It's to be the very best at being able to fuel the work of our hometown heroes.

Steve Baker  46:52  

Well said. 

Rich Armstrong  46:53  

Yeah, that's interesting. Well, you may have already answered this question. I had this kind of churned up because, you know, Steve talked earlier that, the themes, the movement behind this whole podcast is about changing the Game, right, really doing business differently. How are you changing the world, Robert? How are you changing the Game?

Robert Isherwood  47:19  

Yeah, me personally. So recently, I was invited, and I'm so excited, to become an internal coach for Great Game of Business. And I think it's fantastic. And it sounds a little bit weird, but when you're inside the open-book management world after coming from the closed-book management world, you see how things could be, right? You see people, like people in my company, that are paying off all their family's debt. That dramatically changes the arc of the community. And you start to get to see that. So now that we've had some real wins, we invite local business people into our huddles  and stuff like that all the time. I just want people to see this happen; this is the way the sausage is made, and it's really actually a magical process.

Because personally, for me, I think that business is the only true generator of wealth there is. And it is the best generator of health and wealth for people. And I always tell people, "My goal for you is to be happy, healthy, wealthy." I believe business has the tools to do that. And we are the generator of that. I mean, just think about it. Most people in their lives,  financial stress is the number one thing that's going on. The pain and suffering, divorces, the breakups of communities, happens around financial stress.

Well, what would happen if people had a solid understanding of the finances--basic, but a good solid understanding of the financials? What would their lives be like if they had job security? What would communities be like if businesses were stable and responsible? So this has become my professional passion. Fifty families at AMBAC International right now are about to celebrate Fourth of July weekend, and they're going to do a lot of great things, and they're not going to worry about their job. What if we did that with 500? What if I had 10 companies of 50 people who were doing that? [What about 5,000? That becomes too much. I know I sound like some kind of crazy person.] But that's the goal. 

Rich Armstrong  49:26  

It's actually you know, Robert, it's interesting how you teed that up, because you said, you'd seen it within a certain environment. A lot of people feel like this is stuff that hasn't happened and we need to do this. But there's a lot of companies out there doing it today, right? Like yourself, to get people more exposed to [the idea] that there is a better way of doing them.

Steve Baker  49:41  


Robert Isherwood  49:49  

Yeah. I just don't know how to articulate it very well. If you can get everybody the right data and you can get them involved in the decision-making process, I promise you, your decision-making quality is going to go up by an order of magnitude. You're gonna see amazing things happen in your business. But then they take it home, and they start changing the dynamic at home, and they take it in their community. And then community organizations are well funded. And you know, there are community organizations that are Great Game. There are governments that are Great Game, and you start seeing that stuff happening. And you talk to the people, and I know them personally, in some cases, and, you know, it's a different deal. It's just a different deal.

Steve Baker  50:38  

Well, along the lines of Rich's question is a question that's come in from MD. I'm gonna read you the question and then ask you to tweak it just a little bit. What do you feel was the turning point in your company? And I'd like to add on a little bit, because just what you said, what if we could do it with 500, 5,000, 5 million and our big BHAG is to transform 10 million lives in 10 years. The only way we do that is to pay it forward to teach, to talk, to share the idea of that. So what was the turning point in your company? Because I think that informs everything you're talking about.

Robert Isherwood  51:16  

That's a really good question. I think probably the turning point in the company.... so the  turning point for me, as I spoke about, was going out and meeting, you know, not Great Game people, not salespeople, [but]  guys that were running forklifts that understood business. But then coming home and trying to talk about that to the company, it didn't really work. Like I said, I was not doing a great job of communicating. But when Kevin came in, and the turning point in the company was, I think they started making changes, and I  supported them 100 percent. And they started making changes, they started taking ownership of small things. And they started seeing like, "Oh, wow, that actually worked." And then they would do a little more, and make that work, too. And then, you know, we'd miss a game, and oh, that didn't work, but let's try it again. And so the turning point in the company happened in small conversations on the shop floor and in the break room and stuff like that. 

Now, when you actually saw it happen? The day that I knew that AMBAC was irrevocably forever--and I'm grateful--a Great Game company, was when we missed gain-share bonus. We're a great company not because we put up good numbers; we're a great company because we recover. And in that huddle, the dynamic changed from anger and blame to responsibility, and affirmative positive action in the right direction. I knew that at that point, I was irrelevant. Nobody could have gotten in the way. Fifty people were charging 100 percent at a goal. Good luck. getting in their way.

Steve Baker  53:09  

Easy to stop one guy; hard to stop 100. 

Robert Isherwood  53:12  

That's right. That's what I learned from Jack. But you know, I've seen that happen.

Steve Baker  53:17  

It's inspiring, isn't it?

Robert Isherwood  53:19  

Yeah, it is. It really is. It is awe-inspiring. But to me, it's fun, because it is so accessible. Like, why are you not doing this? Please call me, come to AMBAC, I'll invite you to a Zoom. You can watch it happen. It's not some kind of smoke and mirrors, or magic pixie dust thing. It's just simple education and elevation of the people around you.

Steve Baker  53:47  

Nice, nice. Well, we can't actually endorse this, but anyone who survives an airplane crash like you did probably know something we don’t. That's the way I see it in movies, anyway. So we don't recommend it. But we'd like to hear that. 

Robert Isherwood  54:06  

Yeah, I would not suggest that.

Steve Baker  54:08  

Not recommended. We've had a ton of fun. We're really enjoying it. But we are coming up to our final minutes. I have one last question to wrap this up. And that's one that we ask everybody that comes on the podcast. Robert, what's the one thing every single person listening should know or do?

Robert Isherwood  54:28  

Well, you should go on greatgame.com and get the toolkit and read it. But a little bit deeper, because I knew this question was coming. I want you to get a big fat marker, a big fat black marker, and I want you to write on the wall of your bedroom or your bathroom mirror or your office, whatever it is: Fear is a liar. I know and I'm really proud of the community. I know you guys are doing the right thing to keep the people around you healthy, and I know you're doing the right thing to keep your businesses healthy and I'm really excited. I want to applaud you for that. You wouldn't be listening to this podcast if you weren't doing that. But now it's time to take your show on the road. Right? I mean, go for it. This is your moment. You own it.

Steve Baker  55:07  

Fear is a liar on the mirror. Gold, man. I love it. Well, Robert Isherwood, man, you are so fun to talk to. I appreciate it a lot. 

Robert Isherwood  55:17  

Thank you very much. This has been great.

Steve Baker  55:18  

We had a great time talking with you. I wrote down a quote from what you said early on. You said, "The mini games in the first 90 days paid for your full implementation with Kevin."

Robert Isherwood  55:30  


Steve Baker  55:31  

I think that's an amazing thing. So it's a perfect opportunity for me to pimp our new Any Game toolkit, now available at greatgame.com because if you're struggling, and a lot of people are right now, you're probably looking for ways to either cut costs or drive sales today--not next week, but today. So why not let your team help, right? People support what they help create. And this kit is exactly what's gonna happen. The average mini-game last year provided a 60 times return on investment. So what I'd recommend is greatgame.com, check out the new mini-game toolkit. That's everything you want: rapid financial growth and lasting cultural change, all in 90 days. So if you're dealing with rapid growth, which a lot of people are, this is your opportunity to reinforce the behaviors that will help you continue to scale.

So again, Robert, we sure appreciate you so much, love your stories, and we could probably talk for hours. Let's keep the conversation going. Be sure to send your questions, your best practices, your ideas, your challenges, your victories. Ladies, Gentlemen, we sure appreciate you. We'll see you next time. Have a great weekend.

Rich Armstrong  56:38  

Thank you guys.

Topics: All-Star Awards, Employee Ownership, Great Game Coaching, engagement, Community

About The Podcast

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Hosted by Rich Armstrong and Steve Baker the Change the Game podcast highlights true life stories of organizations influencing positive change by doing business differently. They’re teaching people how business works and closing the gap between the haves and have-nots. It’s capitalism at its best. Inside each episode, you’ll discover stories of entrepreneurs who are Changing the Game.

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