TOP CEO: Leaf Home - 'The Innovation Conundrum' (with Jon Bostock)

Ben Kaplan  00:00

Hey, this is TOP CEO. The show about CEOs making tough decisions featuring CEOs from startups, scale ups and fortune 500 enterprises. TOP CEO is a business school case study, telling the story behind the story, and what you can learn from it from those who have faced the fire and come out the other side. Welcome to the TOP CEO podcast.

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Jon Bostock  00:30

Ultimately, the consumer looks at technology to answer the key questions that they have around products and services. And then potentially we've removed our people from the process.

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The Detective  00:43

Imagine you're the CEO of Leaf Home, a home improvement company, a Beom of entity whose life blood flows through the arteries of 80% of American zip codes.

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Jon Bostock  00:55

I ultimately believe the homeowner is the one that chooses whether or not we win. And so everything we do ultimately has to make them feel really good about working with us and about having us be a part of their home.

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The Detective  01:10

Your business model is simple. from Gaza protection and safety enhancements, purifying water solutions, you are a one stop shop for the complexities of sustaining a home in the modern world. Yet, as you assumed the helm and menacing shadow loomed over this thriving entity, an existential threat of oversteering. With technology.

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Jon Bostock  01:37

I see the last mile is such a strength. I see technology is such an enabler of that I struggled to see how we could have converted the model and executed in the same way knowing that ultimately we rarely lose based on the Word of the homeowner and whether we delighted the customer or not.

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The Detective  01:54

Despite the allure of becoming a tech driven platform, you found the company straying from its essence. What made LIFO special was its people, your employees were becoming mere cogs in a machine, a cultural shock echoing ominously in the hearts of a devoted workforce.

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Jon Bostock  02:12

When there is less friction for the homeowner and makes our work easier. I think everyone in the company wants to deliver on the promise. And what we're showing them is using technology, having systems and processes in place that are powered by that ultimately allows us to do our jobs more efficiently.

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The Detective  02:29

Can you strike a balance between maintaining the integral human touch and riding the waves of technological advancement? Is the aging population clinging to their familiar homes and opportunity? Or an unforeseen hurdle? And as the demand for new and transformative products grow? Can the speed of your innovation keep pace? Or will it lag behind?

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The Detective  02:58

This is the story of Jon Bostock. CEO of Leaf Home. And this is the innovation conundrum.

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Ben Kaplan  03:13

Jon, take me back to August 2022. You're the new CEO. You're in a budget planning cycle for the next year. And you're faced with this choice because a lot of the budgets you're reviewing are oriented toward becoming a technology first company. But you have some hesitations with absolutely

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Jon Bostock  03:34

look, our goal. Our mission at Leaf Home is to make home ownership easy. And we are ultimately faced with a question which is can technology provide a more frictionless experience over the people that we had used in the past. So Leaf Home had been built on this idea that it was powered by people. So we deliver great solutions in over 80% of zip codes in the US. And for the most part that growth was fueled by people who not only can tell the story of leave home products, but also can install the product. So we had built a model that was very friendly to the homeowner that was very consistent, but ultimately use technology to power people. And the question that we were faced with is should we invest a lot of money to ultimately convert the company into being a digital first entity, which ultimately means you rely more on technology? Ultimately, the consumer looks at technology to answer the key questions that they have around products and services. And then potentially we've removed our people from the process to

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Ben Kaplan  04:48

give a little context on that one at this point owned by private equity since 2016. You came from the private equity company and decided to focus your time and energy specifically on Don't leave home and then to you're looking at potentially going public market conditions, you're you know, you got your finger to the winds, you're looking to see when is it favorable? Is it now? Is it not? Now? Maybe we wait, maybe not. So as part of this decision, all of those factors are pushing forward, you'd already experienced tremendous growth, but you're trying to figure out what's next? And would it be fair to say that when you're looking at a valuation in the market, in general, you want a higher valuation than a lower valuation. technology is an enabler of that. If you look at the typical company in the stock market, one that is more technology enabled, generally has a higher multiple in terms of value. So take us through that process and thinking because it's not just can I make this company run better and grow? You have other factors that are influencing the decision?

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Jon Bostock  05:46

Yeah, absolutely. And you're right. I mean, look, going public is obviously an event that helps the company quite a bit from an optionality standpoint, access to capital, future growth, etc. As we evaluated whether going public was right for us, certainly, we had to contemplate how strategy impacted a potential valuation. And to your point, more often than not technology matters. Ultimately, I look at it and say, does it deliver on the promise for the customer, because you can certainly use technology as an interface. But if that interface doesn't provide value for the consumer, you simply have technology for technology, say, what we said is, can we use technology to power a model that's built by people. So in other words, when you look at home ownership, and you know that there's a wide range of challenges in the home, based on the age of home, the dynamics of the infrastructure within the home, ultimately, people can deliver on. So if you can build a technology, system and process that allows you to deliver on that promise more efficiently. Not only are you using technology appropriately, but you're delivering for the customer, I personally believe this, the most valuable customers have a value proposition that delivers on the customer that is looking for that knee. And so in other words, the more customer value that you deliver on, the more valuable your company will be. So

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Ben Kaplan  07:13

ultimately, you're taking a longer term view of this in the sense that, yes, technology is kind of sexy. And if we're more technology able, people may like that. But ultimately, if we're building something of value, it's because we're adding value to customers. And then by extension, the customers become more valuable to us and assessing us. So we have to focus on the IPO. But then also really, we have to be building long term value. Yeah, that's

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Jon Bostock  07:38

absolutely right. And what I would say is, look, technology can work if your supply equals your demand, and vice versa. So in other words, a model like Uber as an example, when there's readily available drivers, when you can sit on on a corner on point A wanting to get to point B. And there's a whole host of drivers that are ready and capable to get you there that really works when you rely on technology and you send someone to the home. And ultimately, you can't deliver on that promise that creates a point of friction, we as leave home because we are powered by people, we know the capabilities of those people, we know how to train those people, we know how to identify issues that exist in the home. And so as we build our model, our ultimate model is, as I said, to make home or ship easy. That means all the products and services today will expand. And so technology needs to be able to meet the issue of supply and demand. So the more complex of a situation you're facing, you do need people therefore you need technology to power them. And

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Ben Kaplan  08:39

complicated the situation at this time was that you were new in the CEO role. When you're new in the CEO role, I've interviewed a lot of CEOs, you usually want to try to listen to people get a consensus, yes, you may have the power to just say we're doing this or we're not doing this, but you might not want to flex it right away. And you want to people that buy in and reach decision with you. So how did that complicate things because you're looking at changing a direction. And I think there was already that, you know, $50 million in investment technology plan that you might undo that probably a lot of people worked hard on to get in place. So how did that factor into your thinking before we get to your decision? Yeah,

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Jon Bostock  09:20

so a lot of people did work very hard to ultimately develop the plan that was that was currently in place that we obviously change. But for me, it's very easy in any new situation I go into, I look at who are we delivering the promise to in this case, it was clearly the homeowner and so I took time to really understand the challenges that homeowners were facing and not only how our product fit really well for them today. So homeowners face issue with moving water away from the home. Our core gutter and gutter protection products solves that number one consumer issue we fix it so the That's one part of the equation. But as you really listen to homeowners about their concerns, their frustrations, their fears moving forward, homes get older, every single day, every single year, as we know, 90% of homeowners are living in homes that are 20 plus years old, it is very, very difficult to be a homeowner. And so when you listen to the customer, you listen to the homeowner, what you hear is, they ultimately want to rely on a human being that can give a high degree of level of trust. And so when trust matters, when simplicity matters, on time and on pace, you start to realize that technology can't just live in between the consumer and some solution that may or may not to live on the promise. Ultimately, we need humans to feel like in their environment, they can trust us. And we need the homeowners to feel like we're providing something that meets their needs, on pace and on time. So it was very easy for me to assess the situation and say, Look, if we're going to build this company for the long term, we ultimately have to deliver for the customer. And in order to do that, we need to have our technology, power people who they can trust. And we do that over and over and over again. So if we're going to manage that customer experience, we're gonna make sure that it's repeatable, the same process where the body of home five years ago, and you called us five years later, or you told a neighbor about us, and we showed up at the doorstep that needs to be repeatable. And most technology platforms simply come and serve as the conduit between the homeowner and this fragmented world that sits on the other side. And it's simply a marketplace. And what we said is, look, we need to make sure there's too much at rest for the Hallmark, we need this repeatable process. And it seems when you took a consumer first approach, that decision didn't seem as daunting to pivot that direction. And I really knew that technology could be used to enable a better process and more support of our people than

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Ben Kaplan  12:09

not, what would have been the alternative would the alternative been, you would have become a two sided marketplace that matches up consumers and consumer needs and I got some drainage problems, and I need to get this water going elsewhere. And then you have local providers that you're going to bring into the fold and match up and pair them up because this person can do their need. But then you were concerned that we might not know exactly what their need is. And the match might not be great is that what being a technology first would have been? Well,

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Jon Bostock  12:36

there are certainly a lot of business models out there that just serve as a digital interface that advertise in the front end that they could provide any home services, and then they rely on others to bid on the backend. So if you're a plumber, and you're Ben, you're looking for leads, you could go to those digital first sites, and you can get a lead and go out and serve it. Well, we the ultimately seen is that the really good home service providers, the local, do not rely on digital first platforms. And the reason for that is they stand by their work they do right by the customer. And ultimately, they drive their business through word of mouth. But the key of that is that they do very quality business. And the reason why they don't need those leads from the digital interface companies is because they're doing a great job that delivering on the promise and that fuels all their business. So when we looked at our business, what we said is we need that national footprint, but we need to be local at scale. And so the way that we can do that is to replicate all the things that consumers love about dealing with a local business. So the name you can trust in the market, you can see them out on the soccer field, you know that they're a real human being, if you have an issue, they could come back and back it up. What we said is we want to replicate that local seal in a scalable manner. We want to use technology to power that. That's a very different approach. Because ultimately, what we're saying is we can train people, we can take our team and we can show them not only how to install new products and services at a sell those how to talk to a homeowner a way that ultimately reduces anxiety delivers on this idea that we can make homeownership easy, we can build technology to allow for that. So it makes the process easier. It makes scheduling easier, makes install easier. The whole thing is built around that it's just a completely different philosophy. And so it really is fueled by this idea that the alternative isn't that great. Anybody can do it. Ultimately, what you need to make sure is that is that quality and repeatability is on the back end, because that is what the homeowner wants.

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Ben Kaplan  14:43

Before we go into what happens after you make the decision. What's the nature of it, maybe final question is when you look at a lot of companies, they sort of have a DNA that is unique to them, which is just they're good at certain things right. So you have some companies that are innovation first companies Right, they're really going to be innovative, they're going to push the envelope. We have some companies that are process driven companies. I mean, they're really good at doing complex processes. And if you're going to be FedEx or something like that, right, you got like complex logistics that you have to do. And you can be technology enabled, but they're process oriented, you have some that are really customer, people, first companies, and he have some that are really unique, because you could have some design question is, do you think if you would have gone the technology first sort of pivot? Could you have done it? It's hard to change your DNA to be an not a technology company and become one. Lots people have failed trying to do that? What do you think?

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Jon Bostock  15:37

You know, I think it would have been really risky, because our strength is the last mile. Our strength is really that when you look at our ability to tell the story about whether it's a water product that we offer, a bathroom solution, whether it be a walk in tub, or a bathroom renovation, our gutter gutter protection system, we offer a range of products and services. Really what I heard from homeowners and what I've observed as the strength is in the last mile is not only telling the story, helping the homeowner understand the breadth of opportunity and options, but the ability to deliver it and install it in a frictionless way. And this idea of being on time and on pace really matters. We all live very busy schedules. And I really struggle to imagine how technology could have either replace that, or found others in the marketplace that could deliver on it. And so for me, I really fundamentally believe this idea that our magic is being in the market, our magic is being able to talk to a homeowner like a homeowner, and explain solutions in a way that's authentic and real and connect the dots for them. I really, really struggle to imagine how was one click, I would have got five different bids, and then ultimately delivered on it. I see technology as being something that can really power our model in a much different way. And so I see the last mile is such a strength. I see technology is such an enabler of that I struggled to see how we could have converted the model and executed in the same way knowing that ultimately we win or lose based on the Word of the homeowner and whether we delighted the customer or not.

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The Detective  17:37

Jon, as steward of Leaf Home faces a daunting challenge to plunge into a digital first model, or remain true to the company's people oriented roots. The allure of technology looms, promising higher market valuation and a pathway to going public. But Jon, a newly minted CEO recognizes the true adversary the risk of prioritizing technology at the expense of their unique people driven home owner centric service. Jon opts for revolution of the surrender. Technology in his vision isn't the enemy. It's an ally, the challenge to wield technology as a tool for enhancing their model rather than replacing the human touch, all while battling internal resistance and managing the risks of an attempted tech pivot. But now, the saga of transformation begins.

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Ben Kaplan  18:48

Jon, what was the context for when you actually made the decision? Was there friction? That was their pushback? And then what happened in the aftermath? Take us through the actual details.

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Jon Bostock  18:59

Yeah, so look, at it closely matters. Communication really matters. Anytime you're driving change in an organization. What's critically important is context, clarity, and consistency. So as long as you provide an organization with the context of why you're making a decision, clarity around the benefits of that decision, and then consistency of approach, you ultimately can drive change in the organization. So one of the first things we did was explained why we're going in this direction, explain why we're doubling down on this concept of being powered by our people, and then ultimately talking about how technology will be used. I believe the company is very energized by where we are today. Not only are we energized because we have a clear direction. We have had the context we've had the clarity around it and the consistency of messaging. But if you look at the really challenging market that we're in today, which which candidly, We didn't know where we would be, if you think about when this decision was made last fall, and where we are today, the market is wildly more very volatile. When we look at our peers, as an example, a lot of our peers are struggle, where I think we're differentiating is the fact that we are closer to the consumer. So we're a direct to consumer business, we show up on the doorstep, a lot of our peers are not, they either go through distribution, or they work through another model, whereas their digital their digital interface, and they rely on supply and demand of available resources. Ultimately, it's it's us in the market. And when you look at that performance, we're doing better than our peers. So I have to believe that the company is not only feeling great about the fact that we made the decision that we doubled down on it, and obviously provided the context, the clarity, but also the fact that we're now delivered, and the fact that we're doing better than peers in the market, those things matter. Ultimately, the feedback from consumers is very, very positive. And so what we went back to what has made this company really, really successful, the only shift is not changing the direction, but using technology to actually make what we done better. And so I feel really good about where we're at the decision that was made, how it's ultimately driving more success in the future.

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Ben Kaplan  21:25

How do you think about not turning this into Back to the Future? What I mean by that is, we're turning back, but this is what our roots are. So we're going back to that, how do you continue to push it forward? And we want a better version of that? Because obviously, you know, you come from private equity, we don't want to stay stagnant. We want to grow. We're trying to get to a milestone, maybe going public is still out there on the horizon. You haven't done it yet. But it could be how do you try to communicate that we're rolling this back this technology first approach, but we're not rolling back the company overall, we're still moving forward?

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Jon Bostock  21:57

It's an awesome question. Because when you say that it had been powered by its people, then you're doubling down on the concept, you do have to worry about reverting back to ways that may not have a lot on systems and processes. Ultimately, I think you have to show the company where the value in the processes, and we have to reinforce the need to have systems and processes, what I always say is we've got to be in spec. And so what you hear from me a lot is a great customer experience ultimately means that it's repeatable, the only way to repeatable is to have systems and processes that allow us to do it. And the value prop is obviously that we can do our jobs faster and better. When there's less friction for the homeowner, there's ultimately less friction for the install team, there's less friction for the salesperson and makes our work easier. I think everyone in the company wants to deliver on the promise. And what we're showing them is using technology, having systems and processes in place that are powered by that ultimately allows us to do our jobs more efficiently. I think every single one of us wants to make it easier for home or we're homeowners ourselves. And so this idea is one that I think can scale. This idea is one that people can get around. And as we look forward, what we see is more disruption. So more products and services that we're able to offer. And we can do it because we're able to scale using our model. So in the previous model, we were really constrained by what we could do and what we understood how to install or service. Now, because we use technology to be more efficient, we can ultimately deliver on many more solutions. So we can talk about things that we haven't talked about before, whether it be category and beautification, whether it be a category and comfort or core, which is infrastructure, we can deliver on a lot of different home categories, and ultimately make the company wildly successful in the process. How

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Ben Kaplan  23:57

does this factor in then with like budget, originally, you came in, because you're looking at the budget for next year, and you see a big line on technology, you start rolling that back, you start redeploying it to other things, because that doesn't mean you're not spending on technologies that might be the nature of it is different and how you're going to do it. Where does all the rest of that money go? How do you invest it in sort of doubling down on the people first approach? What happens to that budget process after you make this decision? Well,

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Jon Bostock  24:25

any any budget process is one that should be aligned around creating the most value for the company. So the way that I've always approached budget planning is look at payback. And our job is to deliver great returns for our investors. And so when you start with that idea, ultimately you say how can we get a great return on our technology investment for us? It meant using technology to power people that to your point that obviously leaves capital that can be deployed elsewhere. You have to rack and stack what matters for us we chose to launch Whole new vertical. And so we're in the process now of launching a brand new category that will ultimately deliver on a great promise for consumers. We are not in it today. But that's a great example of reallocating money allowed us to grow in a different way. And so, ultimately, in any, as I said, in any budget process, you have to rack and stack, ultimately, what will deliver the most value in the most return for the stakeholders of the company? Well, and

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Ben Kaplan  25:30

it sounds like in sort of assessing the growth opportunities, you're like, do we change the nature of the company we are to drive growth, because hey, if we're technology powered, maybe we can do that real efficiently. And we can drive up margins, and we can do things? Or do we double down on what it is? Now that kind of distinguishes stuff and try to expand into either more verticals or more markets, right? If you're in 80%, of the zip codes are going to get the other 20% Or not? Or are we going to stay in the zip codes? We are but we're just going to instead of offering these services, now I got two hands the services I can give you. And we're going to drive growth that way. And it sounds like you decided that that was closer to your core of what was executable and was ultimately a less risky proposition overall, to enable growth. Yeah,

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Jon Bostock  26:17

I think so though, I really look at it as a strategic advantage. So I could argue that the path of of less risk was through technology. I think, really building a model that is extraordinary is one that can deliver on this repeatable process. And so certainly there are areas that risk was shifted. But being more disruptive, being more transformational as it relates to new business does carry risk, I think it is just shifting the the way that we look at risk. Again, I ultimately believe the consumer is the one the homeowner is the one that chooses whether or not we win. And so everything we do ultimately has to make them feel really good about working with us and about having us be a part of their home,

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Ben Kaplan  27:16

as there starts to be some headwinds in macro economic conditions inflation, this notion of are we in a recession? Are we not in a recession? Are we almost in a recession? Is it sort of a recession? Is it a recession in certain sectors, but not others? And how does that add a challenge influence your thinking and your direction? As you point out, you didn't necessarily foresee that coming at the time you're making the decision? Yeah,

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Jon Bostock  27:42

look, we're at a very interesting intersection of where our business sits. So on one hand, the fact that there is friction in the marketplace with selling and buying homes is good for us. And I'll give a few examples. People want their homes to last longer. And water is a major issue, as I've talked about, moving water away from the home not only helps with siding, foundation issues, etc. So our gutter and gutter protection product, actually, we're seeing an uptick, and we're seeing more demand, because people are staying in the home and they may have sold it and looking to solve issues. That's one side of the equation. Another side of the equation is people are aging in place at a faster rate because of the friction in the marketplace with your interest rates, the ability to sell the ability to buy. So folks who are living in a two bedroom home as an example, that we're having trouble getting up the stairs, we're actually seeing an uptick in the stair lift program. And so it's really interesting, we're diversified company. And if you look at our new products and services are emerging verticals like water, a tremendous amount of market feedback around forever chemicals and water. We have water solutions that purify and clean water in the home. And so we've got great growth with new products and services that were added that are really driven by macro trends that are outside of the broader narrative around a difficult economy. So look, if we were Realtors right now I think I'd have a different a different narrative if we were an entity that brokers mortgages, a different narrative, I think we've got products and services that fit a very unique intersection of the marketplace. And based on the dynamics we've now seen the products do really well in growth periods, and candidly do really well in times that are more challenging for homeowners than not.

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The Detective  29:43

A massive decision looms overhead to steer the company into a future dominated by digital or stay true to its core as a people first business.

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The Detective  29:55

Tensions escalate, as the implications of this decision could revolution denies the business or endanger its core ethos. This is a struggle of identity of the very soul of the company. Amidst the turbulence, Jon takes a stand. He communicates a resolute vision to his team, leave home will not lose sight of what made it special. It will remain a beacon of human interaction in a world leaning ever so heavily into the arms of technology. The answer was doubling down on being a People Powered company. But what does the future hold? For Leaf Home.

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Ben Kaplan  30:49

Jon, where do you see this all heading in the next three years? Where would you like this to go? Where do you think you end up in a company and where you hope to go as your strategy gets fully realized,

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Jon Bostock  31:01

we've got a beautiful field Support Center in Cleveland, Ohio that supports 1000 people in the company, we're a company of scale, and we're in a percentage that goes as I mentioned, ultimately, what we want to do is make sure we have meaningful products and services in meaningful categories in all of those zip codes. So if you look at today, our flagship Leaf Filter product is in most of our territories, we're obviously growing our water business or safety business are enhancing businesses rapidly in those zip codes. Ultimately, we want to create more. So we really see three main parts, one being comfort, one being beautification, the other being infrastructure, we want to have an anchor product and service categories within those. Because what we want Leaf Home to represent is this idea of a brand that can truly make homeownership easy. And so when you start thinking about what do you need to deliver on to make that happen, you do need to have meaningful products and services with each of those anchor categories. So really, over the next three to five years, we're focusing on the expansion of that, as I mentioned, we just are in the process of launching our next vertical, we started in January, we're already selling today. So shows you just how fast our model can support really transformative thinking and disruptive thinking as it relates to new categories. What

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Ben Kaplan  32:26

is the biggest challenge to your success? Now? What is the part that if you're going to execute your role at a really high level? What's the obstacle, the challenge, what's the thing that you're going to have to figure out overcome to move forward?

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Jon Bostock  32:40

Yeah, you know, the market is, as you as you suggested, moving so fast. And I think the role of the CEO is one that we have to drive that transformation. And for me, as I've observed companies that are like this, that are growing fast, that are disrupting, we really have two worlds, one side of the world is we have to drive operating rigor, we have to drive operating excellence, we have to make sure that we hit our numbers, and we stay in spec. On the other hand, we need to be very disruptive. And we need to be very entrepreneurial, and we need to move fast. And so managing this push and pull managing these two separate worlds becomes really, really critical to do. And so what we try to do is set up parts of the business, that operating think in different ways, really try to drive not only operational excellence on one side, but being as disruptive as possible. On the other. What I remind everyone is, we want to be one of the best companies and most transformative companies out there. It's on our shoulders to do that. So there's a lot of empowerment, so empowering people to get things done, reminding people that there are a leader who ultimately has to drive operational excellence, and really pushing the organization to think in a different way. I really believe that we can't just stay behind and say, look, it's been successful, and we're going to continue to do it. I think we have to reinvent ourselves every single fact. And so it's pushing the company to do that it's pushing the company to put the homeowner front and center and make everything we do, dependent on that. 

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The Detective  34:22

Leaf Home have wrestled with a colossal question to transform into a digital first entity, or stay the course as a people powered business. In a landscape where technology often takes center stage. This CEO chose a different path. They remain rooted in their people first ethos, seeing their strength in the last mile. The intimate, trust based interaction with our customers are the waters of change when navigated with precision. clear, consistent communication kept the crew on board rather than becoming complacent, they leverage technology as an enabler, not as a replacement, refining processes and widening their offering without sacrificing their human connection. The funds once destined for a tech overhaul found purpose in launching a new product vertical, further strengthening their position in the market. This serves as a potent reminder that progress doesn't always require transformation. Sometimes, it involves understanding, embracing, and amplifying our poor strengths, enriching the lives of those we serve. And with that, it's case closed

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The Detective  35:46

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