87. Don’t Lose Top Talent Due to Outdated Technology! (with Stephan Fulop, Chief Product & Technology Officer of DSG)

Karthik Chidambaram: Welcome to a new episode of the Driven by DCKAP Podcast. Stephan Fulop is the Chief Product and Technology Officer at the Dakota Supply Group (DSG).

His impressive career spans retail, healthcare, and e-commerce. From being a Senior Vice President at Optum to driving digital transformation at Target. 

Stephan, welcome to the show. Really excited to be talking to you today. Tell us about the Dakota Supply Group (DSG).

Stephan Fulop: Yeah, so we're an industrial distributor. We're over 125 years old. We're 125 years young, as we like to put it. And we're kind of special in the industry. We're in eight segments, so we have our core segments of electrical and HVAC and plumbing. And then we also serve sewer water while water works. But probably one of the biggest things about us is we're employee owned and we're a hundred percent employee owned.

So every single employee within the organization owns a piece of the company. And that's super important to us as an organization, but it's also the leadership and the individuals. 

Karthik Chidambaram: And being employee owned really helps with the culture, right? Because you feel as though being a part of the owner of the company. And that goes a long way. 

Do you see the difference because you worked at Optum and you worked at Target and now at DSG, so do you see the difference in the impact? 

Stephan Fulop: It's immensely different. I think from an employee perspective, it's the empowerment to help us make decisions and have a conversation with us.

From an executive level, it changes your decision making right at, at Optima, a Fortune Five Hundred, I know I have shareholders, but I don't see the shareholders on a regular basis. With DSG, I look, I walk outta my office and I see my shareholders sitting around me, and it really kind of centers you on. 

What are the decisions you're making to create value for the organization and value to the individuals, because that's what they're there for, right?

It's not only their salary, but also how do they get that retirement account from the ESOP? And how do they build wealth for the next generation that's coming. 

Karthik Chidambaram: And you are one of the shareholders as well? 

Stephan Fulop: Yeah, I'm fortunate enough that we actually made some changes last year. It was gonna take me two years to join the ESOP, and now we join when you first joined the company.

So I was able to join 18 months early. I mean, that was, that was huge for me and, and huge for all of our employees that we're sitting there waiting to get that and waiting for the value to see it. It really puts it in perspective when you start. 

Karthik Chidambaram: And DSG is headquartered in Fargo. That's where you guys started. But then you have offices across the US.

Stephan Fulop: So we're founded in Fargo. We're actually headquartered in Plymouth, Minnesota, and we're everywhere from Montana to Michigan. So we're a Midwest company. 

Karthik Chidambaram: So you worked at, you have had a very impressive career. Right? So tech, you know, is very impressive. Worked at Optum Healthcare and then you also worked at Target, you know, completely different companies.

And then now you joined DSG, you know, distributor, right? 

Stephan Fulop: Yep. 

Karthik Chidambaram: So how is that experience working at Optum and Target, and how are you applying those learnings at DSG? 

Stephan Fulop: You know, it's funny because it's, you know, when you look at digital, one digital in the Minneapolis market is really small. Digital and industrial distribution is very small.

So it's in, it's interesting. You know, you learn a lot about the technology and the consumer and putting the consumer at the center of everything. So that really transforms where I'm at with industrial distribution and, and it's super important to me that we're exceeding the expectations of our customers.

But even better than that, we're exceeding the expectations of our employees, right? Because they're using digital systems, they're looking at screens. And as much as we wanna focus there, you know, from a healthcare perspective. I learned a lot, you know, whether it's regulatory or work, working across the aisle in a large organization, right?

It's bringing people along, you know, having the conversation, that understanding where you're going and why you're going there so that it's not just you pulling along. That to me, actually helped me a ton in DSG because being employee owned. If we can guide and give the vision of where we're heading, the employees buy in really quickly and start joining us on that, on that mission.

Karthik Chidambaram: And you help drive digital transformation at Target. Mm-hmm. And also at Optum, right? So, I mean, I use target.com, you know, I mean, I like it, right? So, I mean so it makes it easy, right? So the adoption. On the B2C is faster. Right. And then, you know, hey, whatever we need, right? And if we are mad, then we really tell Target, Hey, you know, we don't like it.

Right? So we tell Target like that. Right. But then how do you see the technology adoption amongst your employees at DSG and also your customers? 

Stephan Fulop: You know, we're seeing the entire organization shift. You're seeing a lot of new folks coming into the organization that are so used to technology, they don't really think about it.

And what's interesting is when they come into the walls of the organization, we're trying to train them to not have the same expectations that they've had before, right? Because their expectations of technology and their personal life is all the way up here. And that's where we want to keep them when they come through the door.

We don't want them to say, okay, because you're working industrial distribution, we're a little, you know, that industry's a little behind the technology. Don't expect this low bar. Mm-hmm. Keep your expectations where you would expect it as an individual outside these walls. Mm-hmm. And help us push the organization there.

Because they're used to Instacart, they're used to DoorDash, they're used to all of these things that are at their fingertips. That's what we want to give them internally and make them more efficient and allow them to serve our customers better. 

Karthik Chidambaram: And are you able to make progress to that level in terms of; are you able to get those experiences translated? 

Stephan Fulop: We're starting to, right. The last 18 months I've been in the organization is really laying the foundation of the technology stack and making it flexible and making it, you know, so you can actually adapt it. And now we're at the moment where we're starting to change those experiences for our customers and employees.

Karthik Chidambaram: And you talked about being employee owned. And also about experiences, right? So it's not just don't come with a low bar, you know, expect really, really big things. So I think that's really well said. You talked about setting the bar really high. And you talked about also being employee owned and there's also changing workforce dynamic, right?

So, because a lot of people in digital distribution are retiring and a lot of new people are coming. So is that also helping you in a way?

Stephan Fulop: It is helping us. It's helping us in two ways. One, the new people coming into the organization expect technology and everything else. But what's also interesting is the people that are starting to retire from the organization, that technology is able to start storing the information that's been in their head.

So if you think about a customer coming in to look for a product, the person behind the counter for 20 years knows exactly what that product is in the system. He's probably written the description of it, and he's trained countless people coming through. Well, the moment that person retires, all that knowledge is lost.

But now you have systems with AI and other learning where you can start using those individuals as they retire to start training. And it really kicks the leg up for the people coming through the door that have to learn these things to start with. 

Karthik Chidambaram: And what are some of the initiatives you're doing on that front, right?

Because I think whatever you're doing there can actually help a lot of distributors out there because everybody is pretty much on the same board and they have the same problem. Right. So what is that you are doing at DSG, let's say, you know, there is a retiring workforce and there's a lot of knowledge, wealth of knowledge.

You're just getting that data and training the system. So how are you doing that?

Stephan Fulop: Yeah. We're not asking 'em to do anything different. We're asking 'em to look at a different screen. We're asking 'em to look, use something that's far more efficient so they can do their jobs better. In the meantime, we're also learning from them.

Right? So it's, it's a win-win. We're not, we're not simply asking them to give us the information that's been in their head and they've been within the organization for years. Sure. We're just asking them to say, okay, here's a new system. Can you use it? Can you help us? Can you, does it make your job more efficient?

Right. In the end, it's learning and it's helping us as an organization, but it. The goal is not to do that. That's the outcome of it. The goal is to say, Hey, can I make you 20% more efficient so you can serve customers better? Right. We're not in the business of taking people's jobs or looking to reduce we're, we're looking at ways to say, okay.

How can you be more effective in your job and do more of the value added services for our customers and less of the mundane everyday tasks? 

Karthik Chidambaram: I really like that approach. Right? So it's not like you have to do anything differently. Mm-hmm. You just use a different system and in the process you capture the information and then that becomes like a training set for the new people joining.

You know? I think that looks like a great strategy here. 

Stephan Fulop: Yeah. I mean, we've started, a lot of the stuff we do now are pilots, uhhuh. Before it was really, we tried to launch. Whole scale across the organization and it really didn't go very well. And what we've done now is to said, okay, who are our pilot programs and how do we get the learning and the training and, and get the systems ready to go.

Mm-hmm. And then leverage those people to train the rest of the organization because they become the advocates. 

Karthik Chidambaram: And you talked about, I mean, in a way, this is ai, right? So you talked a little bit about AI on how you are training the systems and the models and everything, right? So what other AI. Tools are you using or how is the adoption within DSG?

Stephan Fulop: What's funny is we're seeing more adoption than we even thought, right? If you look at the systems and the diagnostics that we have in the networks, we're seeing AI tools being used across the organization. So it's not new to our employees, right? Our employee owners are out there finding ways to do things, and they're doing it.

What we're trying to do is harness that. So it's sales order automation, right? How do, how do we make it more efficient than entering orders on a regular basis? We're talking about forecasting. How do we start using AI forecasting? Because it really is a probability engine, right? It isn't quite, it doesn't quite reach that scale of being a reasoning engine.

But it's a probability engine that needs to be trained. So we, how do we bring that in? Whether it's data warehousing to put all of our data in so that we're not talking across systems anymore, but trying to create that holistic picture and then start pulling pieces and parts. But they're very use case specific ai.

So it's not just AI across ai, it's what is the business problem, the specific business problem we wanna solve, and how do we solve that? And what is AI playing in that? And then how do you review it? Because you still need that human review. I talk about it like it's my toddler toddler, she's eight, but she thinks she knows everything, right?

And every kid does. And that's exactly what AI thinks. It thinks it knows everything until you say, that's a really bad idea because they've trained this thing unlimited knowledge. And now you've got someone to reflect on and say, you know what? That's not quite what it means. Let's tweak it. 

Karthik Chidambaram: Yeah, that's a great example, right?

Just like how you teach a toddler, you keep teaching the system and then, you know, it really gets better. Mm-hmm. And then also just the toddler, you know, as he or she grows up, they, they realize, Hey, okay, you know, I've made mistakes. Let me fix it. Mm-hmm. So they, I also say, Hey, you know what, okay, I've made mistakes.

Let me fix it. Yeah. 

Stephan Fulop: Yep. Yeah. And it's, it's great. I mean, that's what I tell my team too. We're gonna make mistakes. We're not perfect. We're gonna do the best we can. We're gonna know when we make a mistake, we're gonna fix it as fast as possible. We're gonna move forward, but we learn something from it.

It's not just a mistake and someone gets scolded forward. It's a learning moment, and you just keep pressing forward 

Karthik Chidambaram: And talking about technology investments, right? This is a question a lot of distributors have. Mm-hmm. Especially mid-size distributors, right? So when it comes to investing in technology, sometimes technology is expensive.

So how do you look at that? You know, how do you look at a technology investment? Let's say you're going to invest in a new technology. So what is, what is your expectation? 

Stephan Fulop: I typically have the expectation that it's gonna pay for itself in six to 12 months, right? It used to be you'd sign a three year contract and expect a three year contract would be ROI, positive.

It's moving so fast and there's so many things popping up with the efficiency gains and all the rest. Like, if you can't really prove a business case for six to 12 months and enact it with a proof of concept and everything else, keep looking. You haven't solved the right problem, right? You've solved the symptom of the challenge and not the right problem.

'cause the right problem will start presenting itself. Yeah, it's 

Karthik Chidambaram: so ghetto. ROI in six to 12 months, you 

Stephan Fulop: know, that's the goal. It takes longer that, 

Karthik Chidambaram: you know, that's a problem. 

Stephan Fulop: Yeah. If it takes longer than that, there's something wrong and then there's something wrong. Either in the processes you put in place or the technology that you're, you're trying to solve with the problem and learn quick, right?

Mm-hmm. You'll always solve, sign a long-term agreement, right? Once you get there, but then it's how do you get to that knowledge of it's actually gonna produce what you need it to produce. 

Karthik Chidambaram: And typically, right. So what percentage of my total revenue should be invested in technology? You know, as a distributor?

Stephan Fulop: I think it all depends. I mean, there's the infrastructure, which I'm gonna say is that, you know, five or 6%, that's the run the business every day. And then there's the growth pillars, which could be five to 10%, depending on what ROI you're looking for. If you're growing in a particular, you know, segment or if you're trying to push a particular agenda.

We just launched an e-commerce site, you know, a new e-commerce site 12 months ago. It took a significant lift to get that out the door. And then that investment comes down and now it's generating, its ROI and so it's gonna ebb and flow, but I, I typically think between five and 6% for just straight infrastructure, if not a little bit more, depending on what you've got.

If it's old systems, it's probably gonna cost you a little more for maintenance. But then kind of what's your investment strategy to move forward. 

Karthik Chidambaram: Absolutely. And you talked about e-commerce, right? So do you see a lot of adoption from your customers in terms of e-commerce as well? 

Stephan Fulop: We're starting to see it.

We're starting to see it because people want the simplicity of it. We're dealing in an industry where people are on the run, they're mobile, right? Mm-hmm. They don't necessarily have time to come into the branch constantly or when they come into the branch. They just want their stuff and they can get back on the road, right?

Mm-hmm. Especially some of the larger customers, they don't necessarily want their plumbers sitting around for an hour waiting. They would rather have someone have ready with will call and send it through. So we're seeing adoption of desktop still. We're seeing adoption from a mobile web. We're starting to see strategies within the organization for a native app.

Because that's a very different strategy from a consumer facing perspective of what an app does versus what a mobile responsive website does. 

Karthik Chidambaram: And you recently won the Epicor Distribution Champion Award. Congratulations. 

Stephan Fulop: Thank you. 

Karthik Chidambaram: So tell us about that. Right? So how does it make you feel? Or why were you selected?

Stephan Fulop: Yeah. We've been on Epicor since 2021, I think. We were on Minn before. You know, because we're in so many different segments, so we're on Eclipse because of that, they've got multiple different offerings for different ones. I think Profit 21 is really their electoral distribution line. For us, eclipse was the right choice because of the breadth of offering that we have, but it does everything from our sales order.

Entry to accounting to now that they've integrated in 25 1, their logistics company, it's a one all in one package and we're still learning stuff about it. So that's the best part about it, is we're still learning how to use it better, be more effective in it. We're actually looking at a deeper partnership with them of how do we continue that momentum.

So that we can optimize it. 

Karthik Chidambaram: No. Yeah. Yeah. You talked about sales, auto automation, e-commerce, you know, Epicor and all that. Right? So yeah, it's, it's very interesting you say that, right? Because that's exactly what the DC cap integrator does as well. So we make systems talk to each other, automated, right? So let's say an auto is placed on e-commerce, you know, just flows into the eclipse ER Okay?

And, you know, two way sync, you know, so it's really interesting. That you use all these systems, you know, so that's great. There's a lot of talk about AI taking away jobs and that's more prominent, especially in distribution. So what are you seeing there and what are your thoughts? 

Stephan Fulop: You know, I, I, I follow kind of the similar thought process as the CEO of Nvidia, right?

It's, it's not AI that's gonna take someone's job. It's someone that uses AI that's gonna take your job. I was actually out running this weekend and as I'm running this person on eBike comes flying by me. And at first I thought, oh, that's kind of lazy, right? You're not really getting exercise. You're out and you're everything.

And then I kind of reflected on it. I'm like, that's the equivalent of one of my employees using ai, right? I'm out here running and that person just flew by me far more efficiently and they're gonna go a lot longer than I am. So how do I harness that mentality as I talk to my employee base of this is what we can do together?

Karthik Chidambaram: Yeah. I really like that analogy, but I also think, you know, so you still need to run, right? 

Stephan Fulop: You do. You still need the exercise. Yeah. I'm not, I'm not discounting the exercise, but when you get tired on the big hill and that bike kicks in. That's a little easier. Totally. 

Karthik Chidambaram: I think that's, that's a great analogy though.

You know what I mean? Yeah. Right. So use ai, but it's not just ai. Mm-hmm. You know, you need the human capital and the human work 

Stephan Fulop: there. You still need the skills. You still need the knowledge. You still need the drive. 'cause you certainly can't teach that. AI just enhances all of those things when you put it in a package.

Karthik Chidambaram: Well said. DSG also does a lot of work in terms of empowering the young workforce. Mm-hmm. You know, you open education centers and also you're opening a new facility in Fargo. Tell us about the work you're doing there. 

Stephan Fulop: Yes. We actually have our new corporate headquarters slash distribution center opening in Fargo.

And it's a big facility. I think it's 120,000 square feet total now. And it's super important to us 'cause that's where we were founded Ass Fargo. On top of that, we also have a scholarship program. We know that people are retiring from the trades faster than people are coming into the trades, and our goal is to continue to foster that.

One of our core beliefs is building futures. And so our job is to not only build futures for the organization, our employee owners, but also the futures of our communities and our tradespeople. So we offer scholarships once a year for people that are going to trade school. 

Karthik Chidambaram: And how can people apply for these scholarships and what kind of people can apply for these scholarships?

You know, who's your target market? 

Stephan Fulop: I mean, we're totally open. That's the best part, right? As long as you're going into some form of trade the scholarship of applications are available and information is on DSG supply.com. You'll find it there. And I mean, go ahead and apply. 'cause we, because we span from Michigan to Montana, there's a number of opportunities that we can do across the board.

Karthik Chidambaram: And there's also a big opportunity in this space. Right. So it's not just about technology and science, you know, there's also a big need for tradespeople. Yes. And let's say, you know, if I'm not too good at math and science, hey, you know, I can always be good at a trade. And that's what you guys are trying to empower.

Correct. 

Stephan Fulop: A hundred percent, right? We're trying to, we're trying to empower the next generation to take the jobs that are needed, right? Mm-hmm. You can, you can go to college if that's what you choose to do, but then there's this entire other area that is underserved that needs help, and our job is to try and figure out a way to fill it.

Because I mean, our country needs it. Our population needs it. Every city needs it. I mean, there's nothing you can do without these tradespeople. 

Karthik Chidambaram: So the theme of this podcast is driven, right? So how are you driven? 

Stephan Fulop: I tell my team this all the time. I have no quit in me. And I, I have a goal, I wanna shoot for it, and I, I'm just gonna go get it.

You know, if I look at where we want to be in three to five years, our business is growing, right? Our customers are super happy. We have one screen for all of our employees. Right. For me, I just have that internal drive. I, I've owned my own businesses before I was an entrepreneur. I know what it takes to get it done.

That's one of the reasons I love DSG is it's very entrepreneurial. Right. It's, it's my decision and we go get it, but we socialize it and we we figure it out. 

Karthik Chidambaram: You talked about one screen. Can you tell me about that? 

Stephan Fulop: Yeah, so it's a, it's a learning that I got burned in my brain from healthcare, because most of these organizations grew by acquisition.

When you call into the healthcare company to get information, they're typically looking at anywhere from 15 to 20 screens, depending on what information you're asking for, and they're trying to piece it all together. I'm pretty sensitive to that as I look at our employee experience in internally, I don't want to create that same experience.

So as you think through, okay, we're gonna launch AI here, we're gonna do these sales order entries here, we're gonna do this here. Somehow you have to wrap all that. And the goal would be eventually to have that in a single screen where it's nice and clean for employees to leverage and do their jobs really well.

Karthik Chidambaram: I really like that. Right? So because I do something called the one page talk. Let's say I meet with a team, right? Anything we wanna see, right? Mm-hmm. Everything's gotta be on that one page. And no, no more than a page. You know, I didn't like this approach. Yeah.. 

Stephan Fulop: Yeah. I mean your, your mind, your mind on a webpage can only do three or four things, right?

Absolutely. If you think about your UX team and what they're gonna tell you, they're gonna tell you what are the top three things you want someone to do on this one page. Mm-hmm. Because any more, they get lost. 

Karthik Chidambaram: And I would like to end with this question. What is something you are reading right now or something you're listening to?

Stephan Fulop: So I'm reading Necessary Endings right now, which is a great book. If you haven't read it, the concept is everything has seasons and it's, there's, they talk about a Rose Bush. And in order for Rose Bush to really grow, you have to, you have to trim it. Right, but it's not just trimming for the sake of trimming.

You have to be strategic on which branches are using more and which answers, and then the rows will actually bloom. Competing in the age of AI is a great one. It centers on the data sharing amongst an organization. Atomic Habits is another one that I just finished. I tend to read a lot just because that's my interest and when I'm on the road there's a lot of just books on tape 'cause it's my downtime. But yeah.

Karthik Chidambaram: So you like listening to audio books or you like to read, or? 

Stephan Fulop: I do both. Yeah. It depends on where I'm doing and where I'm going. If I'm in the car for a number of hours, I'll throw an audio book on and then it'll be good to go. 

Karthik Chidambaram: Stephan, thank you so much. It's been great chatting with you. Thanks for sharing all your learnings. Really appreciate it. 

Stephan Fulop: Yeah, thanks for having me. This was fantastic. I appreciate it.