Transforming The Supply Chain Through Corporate VC With Liz Ward, Part 2

 

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Welcome to another episode of The 7 in 7 Show with Zack Ellison, which features full length interviews with the world’s leading investors in innovation.

Episode 10 of Season 2 features Liz Ward, VP of ZEBOX America, an international supply chain accelerator focused on connecting large corporations to innovative startups to solve the most pervasive problems impacting global supply chains.

Prior, Liz held several leadership positions at tech enabled freight brokerages such as Transfix and Convoy. Before venture, she was an executive and minority owner at Ward Transport & Logistics, a Top 25 LTL carrier in the U.S. and was a founding member of Price-Tran LLC, an asset-based trucking company revolutionizing the way freight is priced.

Liz launched her career at Booz Allen – where she consulted with domestic and foreign intelligence and law enforcement agencies to disrupt and dismantle illicit supply chains, most notably the global heroin trade. She graduated with honors from Lehigh University with a B.S. in Supply Chain Management and is an active advisor and investor to startups.

In this episode, Zack Ellison and Liz Ward discuss:

1. How the ZEBOX Model Solves Vexing Supply Chain Challenges
2. Supply Chain Innovation Through Corporate Venture Capital
3. Choosing the Right Investment Partners: A Key to Success
4. The Future of Work in Supply Chain Management
5. Venture Debt: A Minimally Dilutive Financing Tool for Startups
6. AI’s Transformative Impact on Global Supply Chains
7. Driving Sustainability and Decarbonization in Supply Chains

Transforming The Supply Chain Through Corporate VC With Liz Ward, Part 2

Welcome And Introduction

Welcome to episode 10B, second half of the interview with Liz Ward. We’re talking about transforming the supply chain through corporate VC.

A question for you, because many founders don’t go into business saying, “I’m going to have the best cap structure and optimize my cap table on day one.” They’re focused on the business. How do startups get connected to great CFOs? How do they vet them?

The sooner you start, the better. I always go back to the saying, “Begin with the end in mind.” That’s how I’ve always operated my entire life. I had a vision when I was ten years old of what I wanted to be when I grew up. Every five years or so, I’m looking five years forward. A lot of people don’t understand what I’m doing because I’m playing five years ahead. They don’t realize it until five years later. That’s how you need to think if you’re truly going to be a disruptor as a startup in any sector. It doesn’t matter. You have to be thinking 5 or 10 years ahead, but you also have to optimize.

I’ve said this many times before, we are essentially the sum of all the decisions we make. Where we get to in life is based on every little decision we make every single day. You can’t say, “In ten years, I want to do X,” but then not start moving towards that by making decisions that will get you there. I think with all startups, the advice I would give them is to start very early. I don’t mean when you’re at like friends and family round necessarily, but maybe vet early.

When you’re getting to that stage where you’re contemplating doing a raise of angel capital, for instance, and you might be selling 10% or 20% of your company. That’s material. That’s a very relevant decision that can have repercussions for many years. I think once the smart founders have proven that they have an idea that could become a business and they start to get some traction, they would be very wise to reach out to folks in the industry and find the right advisor.

 

 

They don’t necessarily need to hire a CFO at an early stage, but they should be consulting with CFOs that have built companies and scaled them in the past. There’s plenty of consultants out there that can do this. Finding the right one is about reaching out to folks in your industry, like seeing who works at different funds, or talking to other founders to see who they’ve used. If you start with the end in mind and you have a 5 or 10-year plan for your capital table, and then you integrate that into the operational plan as well. That’s where there’s some great synergies. If you have both of those optimized, you’re going to probably be successful.

We should do a webinar with you and our startups.

It’d be fun. I’d love to. Let’s switch gears a little bit. I wanted to ask you, is there anything that you’re thinking about in the market? It could be in supply chain, innovation, AI or capital raising. Anything that you’re thinking that you think others might be missing that’s important.

I’m going to say something that’s obvious maybe or maybe not. I’m thinking deeply about ways to speed up corporate innovation because there’s a lot of interest. There’s a lot of money and startups. Everyone wants to be a founder but it goes back to the commercialization problem that we talked about. There’s not enough buyers necessarily, an appetite, or buyers with the agility to change and to move.

I’m thinking very deeply about corporate innovation and ways of even how you incentivize everyone in your company to want to try new things and want to do new things, want to test different ideas, and toss different ideas out there. How do you create a culture around that? This is hard to do, but it’s more this entrepreneur motion that is very ripe for success, especially now.

I think it goes beyond the quarterly objectives or the annual incentive structure. There needs to be a lot of creativity involved in how you motivate change behavior to fire this thing up. The corporations have great bones, and it’s a perfect testing ground to innovate. Also, given their scale, the impact is so much greater.

I think a lot about this, too, because I’ve worked at three huge financial firms that each have more than a trillion dollars in assets. In the course of working at those firms, I also was the counterparty to basically all the biggest financial institutions in the world, certainly anyone in the US that I interfaced with for many years, over a decade.

Challenges Of Corporate Innovation In Large Companies

The takeaway I had from that experience, which led me to start my own company, was that the bigger the company, the less innovative it will be. Most of the Fortune 500 type companies at that time were doing almost nothing when it came to innovation. They would talk about it but having been on the inside of them, their ability to innovate was essentially zero, or slightly above that, but very low.

My view at the time was, “These are great folks to sell businesses to, but they’ll never innovate anything internally.” They’ll basically use their big cash coffers to go out and buy whatever looks interesting in the space. I think that’s changing, to your point. It sounds like the next revolution is corporate innovation. Do you have any thoughts on what some of the best models might be for these huge companies that haven’t innovated historically?

I can tell you the story of ZEBOX. Our parent company is named CGM. They are one of the most profitable companies in Europe. They are one of the third-largest container shipping companies, and the fifth-largest logistics providers in the world. They’ve amassed their growth through all sorts of acquisitions, especially over the last ten years. It’s a second-generation, family-owned, and family-operated company. Rodolphe Saadé is second generation. He’s the chairman and CEO.

The impetus of ZEBOX was him looking around the four walls of CMA CGM thinking, “How do we create this agile innovation environment inside the company as it continues to grow into this behemoth?” I think it starts at the top, the willingness, and the appetite for this at the top. There are all sorts of ways that companies can innovate.

The smart Founders know once they’ve proven their idea has traction, it’s wise to reach out to the right people in the industry for guidance. Share on X

You mentioned a couple, but I see this like another idea with the zombie apocalypse startups, it’s co-partnering and co-innovating with corporations in a very focused way. I see this happening. I also see the venture building happening as well. The venture studio building, this motion taking off inside the corporation for problems that corporations have. They just haven’t found the right solution yet. They’re thinking, “How do we build one ourselves?” There are all sorts of great founders that are probably perfect to help them build within. There’s great talent now. There are all sorts of ways. I go back to the power of incremental innovation of how do you just get a little bit better than yesterday?

It doesn’t have to be this disruptive innovation type of thing for it to be innovative, whether it be robots in the warehouse or autonomous X, Y, and Z. You can start with just automating your billing process. It’s like this mindset of just a little bit better and so much of it is like self-improvement. You know how you think about self-improvement, it’s incremental. Over time, it leads to big results and it creates this wave of energy and momentum that’s all going towards some direction that you’re excited about.

It’s funny because one of my friends, who’s in my doctoral program at University of Florida, works for one of the major car manufacturers. We were talking about basically autonomous vehicles, where the big manufacturers are and getting there. He said, “You don’t realize it yet, but everything we’re doing is incrementally moving towards autonomous driving.”

In the sense that if you think about the newer cars that have come out in the last couple of years, they have all these features that are helping assist the driver. They’re letting you know when you cross over into another lane and having cameras when you back up. In the old days, there was no camera. You had to look behind you. Also, some cars now can basically self-park.

These are all little things that are getting us used to being assisted. Eventually, when we go from that to the next stage and when we go fully autonomous, it won’t be a big deal because we’ll already be almost there. Over the next ten years, that’s what all the manufacturers are doing. It’s a sneaky way of socializing us and getting us used to this so they can just say, “Now autonomous cars are fully here.” That’s that.

I’m thinking of cruise control. That was so close.

If you’ve got cruise control and the lane assist that’s beeping every time you move off, and you’ve got self-parking or autonomous parking, and the cameras behind you, you’re already 50% there. It’s not that much further to go. I just thought that was interesting in terms of how it’s systematic.

You’re bringing up something that’s important with autonomy, which is the use case. You talk about drone delivery, for instance. Drone companies are getting very clear on what is the use case for this. I think that’s the key for autonomy. To say, all things are going to be autonomous, I don’t know if we want that, frankly, given all the cybersecurity concerns, which are very real. It’s a very hard problem to solve, but to your point, it’s incremental, and we’re getting a little better than yesterday.

Speaking of that, how do you view artificial intelligence in terms of how it’s going to affect the supply chain or the economy more broadly?

We’re talking about innovation. I view it as two buckets. It’s the incremental and then the disruptive. It certainly is a buzzword. Frankly, it’s been around for a long time. Your ARI reminds me of artificial intelligence, applied real intelligence. The incremental stuff, I think a lot of this is like voice and natural language processing. A lot of the RPA like bots taking care of automating small tasks, whether it be data entry or invoicing reconciliation and some of those are more incremental things.

You have more disruptive AI tech, which is the humanoids, the robots inside the warehouse that are like they’re human. There’s a lot of great progress in that area too. Again, it’s a little bit further out, but it still is all in the nature of AI. That’s going to be a great disruptor once it happens, especially in the supply chain. There is a lot of messy, dull, dirty, dangerous stuff in the supply chain. Using AI to enable as a human enabler and not a replacer is how we all should be thinking about it.

 

What can we take off some of these roles, these jobs? They’re not going to replace the job, but they will augment some of the functions inside that job that aren’t necessarily desirable or aren’t a great fit for a human to do. That frees up a lot of time to think through how best to utilize the human. I view AI as this great human enabler that’s there to empower the people, because the people run our supply chain with the help and support of technology.

Is there any low-hanging fruit in the supply chain where you think AI will have the biggest impact?

We’re seeing a lot with predicting demand and automating. As I said, a lot of those are routine tasks in the customer service function as well as training. You think of a lot of the generative AI, like the ChatGPT. Imagine that internally inside your customer service or as a training function for employees to use. Especially in supply chain, because every customer has their own way of working and billing, different freight, and different ways of moving it.

There’s a lot of details involved. I see AI accelerating these departments that are trying to manage it all. As a result, that’s where the highest attrition normally is too, which is no surprise. When have you talked to someone who visited a call center and they left saying, “I want to get a job there. That looks like so much fun.” That never happens. There’s a lot of low-hanging fruit inside these very manual, intensive departments or functions.

AI’s Role In Predictive Pricing And Demand Forecasting

You hit on a couple of things that resonate with me. One of them is predicting demand and also, relatedly predicting pricing. This is something that I’ve spent on as a fixed income investor and as a bond trader. In fact, before I started ARI, I was looking at joining a startup that was using machine learning and AI to predict where bond prices would go next. It’s taking all the data out there and saying, “Based on everything we know, what’s the likely next price of each bond in the market?”

I’ve always thought about predictive pricing because pricing is driven by supply and demand. That’s literally what drives pricing. Having that capability by leveraging AI to more accurately predict, when is there going to be demand, and how much is that demand going to be? Therefore, what can we charge for our services? I think will enhance margins potentially considerably.

That’s one thing I think a lot about. The other thing you hit on too is automating routine or riskier tasks. Whether it’s HR where it’s routine, boring, and people quit, or it’s risky because it’s in a warehouse or somewhere along the supply lines where there could be potential for humans to get hurt. You want to try to take those and utilize AI and robotics essentially as much as you can.

The other thing that I think is interesting is education and being able to train people more effectively. When I say education, I’m not thinking about a four-year degree necessarily, but when you start a new job, as I think everybody knows, most of the learning as a professional occurs on the job. It’s not what you learned in undergrad. It’s what you are learning on the job every day. There’s usually a pretty steep learning curve in the beginning.

From my own experience, I always felt like the first nine months were challenging. By the time I got to a year, I felt like I had mastered that job. It didn’t matter if people had been doing it for 15 or 20 years. I’m like, “Nine months is going to be hard for me. After a year, I’m going to be equal to the person who’s been doing it for twenty years.” If I’m running a company, who’s been doing the same thing for twenty years. They have twenty years of experience technically, but they have twenty years of one year of experience. It’s literally that same one year repeated twenty times.

The value that they’re adding is very high. You’re paying them a lot of money because they’ve got twenty years in a seat. You could go out and hire somebody else who, in 9 to 12 months, can probably do that job 95% as well. Maybe just as well and maybe even better. What I’ve been thinking a lot about is how can we utilize AI to help employees on-the-job training get up that learning curve faster and also leverage a lot of information that historically was in the heads of the senior people. There was all this institutional knowledge that was in the heads of all the senior people, and didn’t share it that effectively.

There was a way to share it effectively.

In any business, getting just a little bit better every day leads to big results over time. It’s not always about disruption; sometimes it’s about incremental innovation. Share on X

It wasn’t that they were being selfish or greedy. It was more that, to your point, they didn’t have the tools to effectively take all that institutional knowledge and transfer it to the next generation or transfer it to the junior employees or the lower-wage employees. With AI and other automation tools and technology, you can take all that institutional knowledge, or the majority of it, and you can basically get it into the minds of the people that historically were not accessing it. To me, that is going to increase productivity immensely. There might be fewer jobs, or roughly the same amount of jobs, but each person in each seat is going to be much more effective and efficient.

I also think the folks that have the years of experience are incredibly valuable because you think about the accuracy of information. You can train someone to do a job, a function to perform tasks, but what’s the barometer for the quality and the accuracy of that information? It’s not just the speed and the velocity of it. It’s going to be interesting, but I agree with you. The training component is huge, especially in complicated industries like the supply chain, where there’s a lot of moving parts. It’s high stress. Not the most desirable jobs necessarily, but hopefully, AI can help change that.

I want to transition to talk about founders in particular, and you work with many founders. You continue to work with many great founders. You’ve always been good at working with people and identifying what they do well in areas where they can improve, and then helping them get there. You’re the perfect person to talk to about this. I wanted to ask you what you think the best founders tend to have in common? Are there certain traits that they share?

I think good founders have a heightened sense of self-awareness and are very humble, which makes them good people to grow and build teams, where they have this mindset where they want to give it back to the people. They want to create opportunities for their folks to grow and explore, but they’re cool with not getting all the credit.

It’s maybe more comfortable for them to do it. I think that folks that are genuinely curious, natural problem solvers. We mentioned it early on with getting obsessed with your customer and the pain that they go through and finding ways to solve it. Having that natural curiosity is so important with the side of empathy as well.

There’s this sense of grittiness where you’re focused and you want to succeed at all costs. I shouldn’t say all costs, but you have this sense of spirit of this building motion inside you where you got to see it come to fruition. You’re so excited and motivated to do it, and that transcends into your culture too and your productivity, your employees, and the quality of what you do. I would say the grittiness, the curiosity, and the heightened self-awareness with a dose of humility.

The Importance Of Grit And Persistence For Founders

I think those are great. If I were to rank them, I would put grittiness at the top/relentless/persistent/resourceful/resilient. They’re all kind of the same thing to. In other words, you have to be all in. I like this idea of burn the ships behind you. Once you’ve set your path, people will often say, “What if it doesn’t work out?” I’m not thinking about that. I don’t think about that.

I think about all the things I need to do so that it does work, and I’m never going to stop until I get there. I believe you have to have that mindset, because if you’re always hedging yourself and you’re not all in on what you’re doing. You’re probably not going to get there. You have to be crazy, in a sense.

You have to say, “I am willing to bet everything on this. I believe in myself to a degree that very few people do.” This is always balanced with this idea of humility, because you have to be incredibly confident and technically, definitionally overconfident in order to be a founder and a great one. I’ve said this many times, if you look at the numbers, you would never start a company because most companies fail. Only very few make it big. You have to be overconfident in the sense that you believe you can do something that others have never done and that very few people are able to accomplish.

I always say the fact that the most confident people are the most humble people, because they don’t need the validation, and the external stuff. It’s within. They don’t need to project. People tend to want to align themselves with folks like that. They want to root for them. They want you to be successful in a way.

One other thing you said with the relentlessness, I would also say to you that it’s okay to recommend it to take a pause just a second to figure out, “Why am I doing what I’m doing? Is this aligned with what I want to do and what I’m meant to do in this lifetime? Does it bring me a sense of joy? Do I feel like I’m making a difference in how I’m spending my time?” Which is our most precious resource, our time.

 

If it’s not, it’s okay. It’s all like a puzzle. It’s like one experience leads to the next. You needed that experience to go from here to there. I also think it’s okay to give yourself a little grace and to pause and be like, “Let’s set an assessment very objectively. What’s working and what’s not?” If you feel like the business model is working and that adds value, go.

That makes total sense. Another thing I’ve been thinking about a lot too in terms of the current fundraising environment. If you’ve got a lot of options of companies to invest in, if you’re a VC, who do you want to work with? How do you identify the right founders? To me, it’s like a signaling process because the information is so imperfect that you’re never making decisions based on a lot of hard data in the startup ecosystem.

A lot of folks make decisions the best way they can, which is a lot of it has to do with intuition and heuristics that they have in terms of what’s worked in the past. Rules of thumb is another way to describe heuristics. One of the things that I wrote about in a column for Built In, which is a website for founders that are scaling businesses. It’s basically ten things that founders can do to put their best foot forward and more effectively signal that they’re a good company to invest in.

Essentially, it’s like ten fundraising strategies, but it’s not about fundraising. It’s about putting your best foot forward so that you’re an attractive person that VCs want to invest in. I’m curious what you think of some of these. This is the top ten list. This is geared towards raising capital, but it’s applicable to pretty much anything, I think. The first is be prepared. Know your data, your company, your plan, and your ask.

Another is, be accurate. There’s a lot of numbers that are going to be off in the startup ecosystem. Most numbers don’t mean that much. We were talking about earlier with TAMs that are in the billions or trillions of dollars that aren’t even close to reality. My view is that VCs and other investors are going to find founders more attractive if they’re accurate in their assessment of what their company is doing now and what it’s going to do in the future.

In other words, instead of saying, “I’ve got this amazing vision that’s going to revolutionize the world and make a trillion dollars.” Say, “Here’s what I think I can realistically do.” That’s number two. Be truthful should be first on the list. Being truthful I think is very important because if you don’t have integrity, then nothing else matters. There’s a lot of people that inflate to the point of almost lying about what they’re doing or what they’re capable of doing. I don’t think that comes off well in this environment.

It causes problems down the road.

That was number three, and then be reliable. Do what you say you’re going to do. If you say you’re going to do X, then do X, and be responsive. This is important. It’s so easy to do, but also so easy to screw up. If you’re getting a call or an email from a potential investor, get back to them. Acknowledge their email or their call, even if you don’t have the deliverable ready for them.

Those are the top five, and then be accessible. Make your team accessible. Be pleasant, because if you’re an investor and you can invest in a hundred companies that are all roughly equivalent in terms of their potential return. Do you want to work with a jerk or do you want to work with somebody that’s nice to be around? I would say be humble. That was on the list as well, so what you already said.

Be appealing. When I say be appealing, that’s saying leverage the good things that others are saying about you and the FOMO effect, the fear of missing out. Have references that you can introduce potential investors to. Have good people saying good things about you. That makes you appealing as an investment if other reputable people are saying, “We like this company, this founder and this team.” I think that resonates.

Last but not least, be brave. When I say be brave, make the ask. Don’t be afraid to say, “We could use twice as much money as you’re offering and here’s why it’s going to be put to good use.” A lot of are so happy to get anything that they don’t make that. When I was a bond trader, I had some very good mentors. One of whom was the most successful bond salesman on Wall Street.

He said, “You have to make the ask. You have to ask the customer or you have to ask the counterparty for what you want, because if you don’t, how can they fulfill it?” Those are some of the things I was thinking about in terms of what founders can do immediately to be more appealing. Going back to your view on founders. What do you think are some of the problems that they all share? Irrespective of industry, they share the same problems.

One trait great Founders have is a heightened sense of self-awareness. The best leaders are humble and driven by creating opportunities for others. Share on X

Common Mistakes Founders Make In Team Building

It’s on the team building side, potentially. Although, we work with more Series A startups, and it’s not like we’re investing in them. We’re not privy to the team building part of it, but I sense that it’s generally a tough thing to do. Whether you’re a startup or not, it’s hard managing people. Choose your words wisely. All the buzzwords and the chit-chat, get focused, and take fewer meetings so you can prepare for the meeting. Be focused with your message.

There’s a lot of gimmicky wasted time and airspace with folks that are into the buzzwords, and they’re not communicating with a clear common sense. In with language that’s easily understandable. We were talking to a company, and they use the term, like F-ton, like the fuck-ton. We’re like, “What are you talking about? Come on.” I think the communication part is important.

Knowing your why and truly why you’re starting this thing. Is it to get rich? If it’s to get rich, probably don’t do it. There are other ways to get rich. If that’s important to you, what need are you solving? How painful is it? I would say those are the common mistakes. The team building is the communication and the fundraising. I think folks have a hard time managing their own capacity, and they get burnout. That’s for anyone that’s successful, frankly. It’s also important to not create a culture that leads to burnout.

There’s some semblance of balance, which is important. I would say it’s not one thing that founders do. The one thing that upsets me the most is that they don’t know their audience. They don’t know why they truly exist and why the business that they’re building is so important to X, Y, and Z customers. It’s just the basic stuff, and they’re not able to provide that secondary or tertiary level of detail. That was my biggest frustration and a most common mistake.

I realized we’ve been talking so long that we’re out of time. I know you have a big meeting that you have to get to.

Closing Remarks And Thanks

We have some folks coming in from the government, which is so cool. There’s a lot of cool things happening in the government on the innovation front.

I wish we had more time to talk about it because that’s a very interesting area in terms of dual-use technology that can be used for government applications, but also for civilian applications. We’ll have to do this again sometime, for sure.

Thank you, Zack. Thanks for having me.

Thank you. It’s been great having you on. For those reading, thank you for the show. We had Liz Ward who is an expert in supply chain and the VP of ZEBOX, which is one of the coolest incubators and accelerators out there. Thanks again, Liz, for joining.

Thank you.

 

Important Links

• Zack Ellison on LinkedIn
• Applied Real Intelligence (A.R.I.)
• 7 in 7 Show with Zack Ellison on Apple
• 7 in 7 Show with Zack Ellison on Spotify
• 7 in 7 Show with Zack Ellison on YouTube
• 7 in 7 Show with Zack Ellison on Amazon Music
• Liz Ward on LinkedIn
• ZEBOX America
• Mercury Fund
• Built In
• CMA CGM
• Rodolphe Saadé on LinkedIn
• 7 in 7 Show Disclaimer